Rhi Magnesita Nv · LSE:RHIM
Rhi Magnesita Nv — H1 2019 Earnings Presentation
34 slides from Rhi Magnesita Nv's earnings presentation, Aug 12, 2019
Slide 1: H1 2019 Half year results
H1 2019 Half year results 12 August 2019
Slide 2: Disclaimer
Disclaimer Financial information contained herein, as well as other operational information, were not audited by independent auditors and may include forward-looking statements and reflects the current views and perspectives of the management on the evolution of macro- economic environment, conditio
Slide 3: Agenda
Agenda 1 Highlights 2 Financial review 3 Operational and strategic review 4 Summary and outlook 5 Appendix 3
Slide 4: Highlights
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Slide 5: H1 2019 highlights
H1 2019 highlights €1.5bn 2.2%1 1.1x 0.1x2 3 H1 2019 revenue Net debt/adjusted LTM EBITDA 15.2% 140bps1 21.0% 560bps2 H1 2019 adjusted EBITA margin Working capital intensity €234m 12.3%1 €0.50 H1 2019 adjusted EBITA Interim dividend per share €3.00 17.6%1 H1 2019 adjusted EPS Notes: 1) Compared agai
Slide 6: H1 2019 operational highlights
H1 2019 operational highlights Robust performance in H1 2019, despite difficult end markets Strong performance from the Industrial Division Uncertainty increasing in steel markets o Lower volumes and selective market share loss in the Steel Division in Europe and North America o Partly driven by cus
Slide 7: Prioritising safety
Prioritising safety Our goal is to build an industry leading safety culture with zero accidents Improving safety performance Continued focus on safety Intensive ‘Safety First’ campaign is yielding benefits Lost Time Injury Frequency (“LTIF”) rate 1.7 further reduced by 28% compared to 2018 22 sites
Slide 8: Financial review
Financial review 8
Slide 9: Profit and loss overview
Profit and loss overview Revenue of €1,541 million up 1% on a constant €m H1 2019 H1 2018 Change H1 2018 Change at vs currency basis driven by: constant constant currency currency o Strong growth in Industrial Division o Slightly softer Steel Division performance Revenue 1,541 1,508 +2% 1,524 +1% o
Slide 10: H1 2019 revenue bridge
H1 2019 revenue bridge +1% Pricing 2018 (€m) 126 Revenue 1,541 17 1,524 Volume 1,508 -109 FX 2017 reported revenue FX 2017 Revenue on constant currency basis H1 2018 FX impact H1 2018 at Price/mix Lower volumes H1 2019 constant currency 10
Slide 11: H1 2019 adjusted EBITA bridge
H1 2019 adjusted EBITA bridge Price, mix and synergy benefits partially offset by lower volumes and spend on strategic initiatives (€m) Pricing 2018 +3% Revenue 35 10 Volume 234 19 228 -31 -7 209 FX 2017 reported revenue FX 2017 Revenue on constant currency basis H1 2018 FX impact H1 2018 at Synergi
Slide 12: Working capital
Working capital Some working capital expansion in H1, which will be partly recovered by year-end Working capital intensity Accounts payable 15.2% 15.1% 14.4% 463 503 440 20.9% 21.0% H1 2018 FY 2018 H1 2019 15.4% Accounts receivable 11.8% 11.4% 8.9% 640 642 511 361 296 349 H1 2018 FY 2018 H1 2019 H1
Slide 13: Cash flow overview
Cash flow overview Free cash flow reduced by working capital increase and Magnesita minority acquisition (€m) 71 234 -118 -9 129 -50 -28 68 -33 -3 21 -45 Adjusted Depreciation Working Changes Capex Operating Cash tax Net financial Free cash Restructuring Magnesita Free EBITA capital in other free ca
Slide 14: Capital structure
Capital structure Business continues to reduce leverage despite impact of IFRS 16 lease accounting Net debt to LTM EBITDA (€m as of 30 June 2019) 2.6x 1.9x 1.6x 1.2x 1.1x 669 58 936 751 741 639 611 553 588 357 389 455 At merger FY 2017 1H18 FY 2018 H1 20191 Net Debt LTM EBITDA Net Debt / LTM EBITDA
Slide 15: 2019 technical guidance
2019 technical guidance Synergy benefits: €10m in H1 2019, further €10m P&L benefit in H2 2019 (cumulative €110m by 2020) Operational turnaround: €20m P&L benefit in H2 2019 (cumulative €40m by 2020) continuing traction in Q2 2019 Capital expenditure: €50m in H1, planned spend in H2 of €100m (totall
Slide 16: Operational and strategic review
Operational and strategic review
Slide 17: Robust organic growth capacity, alongside inorganic expansion potential
Robust organic growth capacity, alongside inorganic expansion potential Delivering through-cycle growth – 1-3% organic and 1-3% through acquisitions Core / existing markets Supported by global High market share in Further technical and R&D Product & Europe / Americas penetration into capabilities pr
Slide 18: H1 performance overview
H1 performance overview Pricing Volume Revenue Steel division Europe North America South America MEA-CIS Asia Industrial division Cement/Lime Project businesses 18
Slide 19: Industrials division – performing strongly
Industrials division – performing strongly Revenue (€m)1 Strong performance with revenue up 12% +12% Encouraging growth across MEA and the Americas with very strong performances from the Cement and Project businesses 464 413 Cement & Lime revenues grew by 17% on a constant currency basis to €184m; w
Slide 20: Steel market analysis
Steel market analysis What is really going on? Crude steel production Impact in H1 2019 vs H1 2018 Region refractory RHIM change (%) industry impact European Union (2.5%) Other Europe (8.0%) Steel North America 1.4% Overall Production South America (3.0%) Inventory reduction Reduction Middle East 4.
Slide 21: Steel division – resilient performance
Steel division – resilient performance Revenue (€m)1 Steel Division revenues were down by 3%; Global steel -3% production ex China declined by 0.3% vs the same period last year 1,111 1,077 Weaker revenue performance in Europe, reflective of the overall steel market, with some market share loss Offse
Slide 22: Operational issues: update on plants
Operational issues: update on plants Four plants in Europe during H2 2018 faced operational issues: Management focused on improving performance at sites that faced challenges in H2 2018 Sustainable improvement of delivery performance achieved by changing plant leadership teams, applying best practic
Slide 23: Backward integration – a key strategic advantage
Backward integration – a key strategic advantage Key benefits of low cost backwards integration Margin development vs raw material pricing Security of supply Raw material cost (indexed to 100) Adjusted EBITA % o 70% of Magnesite and Dolomite sourced internally 600 20 Superior geologies enabling tail
Slide 24: Raw material outlook
Raw material outlook Raw material prices (indexed to 100 in Jan 2016)1 Outlook 600 Raw material prices have reduced significantly in H1 2019 driven by reduced orders, in line with the decreasing steel market demand 500 o Magnesia prices have decreased in H1, with some grades decreasing by 30% 400 o
Slide 25: Summary and outlook
Summary and outlook
Slide 26: Clear and compelling investment case
Clear and compelling investment case Clear strategy and Strong market position with 15% global market share (30% ex-China), clear market leadership in Americas, Europe and Middle East with broadest value-added solution offering 1 strong competitive Opportunity to develop and leverage technology acro
Slide 27: Summary and outlook
Summary and outlook H1 2019: progress and success Strong performance in Industrials, offsetting weaker Steel markets Encouraging market response to price rise programme across the portfolio Continued growth drivers from Asia, especially China and India Good margin performance, despite less supportiv
Slide 28: Appendix
Appendix gi | ib uh I villa F t ny t De Money tenons
Slide 29: Impact of foreign currency movements
Impact of foreign currency movements EBITDA sensitivity in H1 2019 H1 2019 exchange rates ∆ in EBITDA Opening Closing Average vs € Unit 1€= (€m) rate rate rate USD +1 cent 2.14 USD 1.14 1.14 1.13 CNY +0.01 yuan -0.08 CNY 7.87 7.82 7.66 BRL +0.10 real 0.99 BRL 4.44 4.35 4.36 INR +1 rupee 0.31 INR 79.
Slide 30: Combined selected financials per currency
Combined selected financials per currency Revenues COGS and SG&A EBITDA Other Other INR Other INR 7% 1% INR 10% 9% 5% 4% EUR BRL 10% 11% BRL 12% 43% EUR 48% EUR BRL 16% 64% USD1 34% 26% USD1 USD1 Note: 1) USD exposure includes CNY, which is c.4% of total H1 2019 revenues and c.10% of CoGS + SG&A 30
Slide 31: Reconciliation of adjusted earnings
Reconciliation of adjusted earnings Reported Adjusted €m 1H19 Adjustment items 1H19 EBITA 227.9 6.3 234.2 Amortisation (14.2) 14.2 - Net financial expenses (45.3) 9.7 (35.6) Share of profit of joint ventures (3.8) 9.6 5.8 Profit before tax 164.7 204.4 Income tax (43.5) (5.6) (49.1)1 Profit after tax
Slide 32: Net financial expenses
Net financial expenses Detailed overview (€m) H1 2019 Recurring Non-recurring Interest income 3.5 3.5 – Interest expense (19.4) (19.4) – Foreign exchange (9.5) (5.8) (3.6) Other financial expenses (19.9) (13.8) (6.1) Total (45.3) (35.6) (9.7) Interest expense Net interest expenses from banks amounte
Slide 33: Cash flow reconciliation
Cash flow reconciliation €m H1 2019 Free cash flow (as per page 13) 20.6 Other net investment and finance activities 13.4 Reported statutory cash flow 34.1 FX average rate translation to closing rate (6.5) Change in net debt 27.6 33
Slide 34: Impact of IFRS 16
Impact of IFRS 16 H1 2019 1 Jan 2019 (€m) (€m) Right of use assets 58.0 62.0 Balance sheet Lease liabilities (58.2) (62.0) Equity adjustment (0.2) 0.0 Depreciation (6.6) Other expenses 6.8 Profit and loss EBIT 0.2 statement Interest expense (0.4) Profit before tax (0.2) Cash flow from operations 6.8