Rhi Magnesita Nv · LSE:RHIM
Rhi Magnesita Nv — Investor Presentation (March 2022)
56 slides from Rhi Magnesita Nv's investor presentation, March 2022
Slide 1: RHI Magnesita Investor presentation March 2022
8 RHI MAGNESITA Investor presentation March 2022
Slide 2: Introduction
Introduction FY 2021 update Financial review Summary and outlook Q&A © 2] © )} strategic initiatives @ © @ Appendix 2. Investor Presentation | March 2022 3 RHI MAGNESITA
Slide 3: Refractories are essential for our modern world
3 Refractories are essential for our modern world RI MAGNESITA Concrete Copper Steel Glass Aluminium 1,500°C 1,350°C 1,760°C 1,650°C 1,250°C N (NON 1 tonne of STEEL 1 tonne of CEMENT 1 tonne of GLASS 1 tonne of ALUMINIUM 1 tonne of COPPER demands ~10-15 Kg demands ~1 Kg demands ~4 Kg demands ~6 Kg d
Slide 4: Refractory applications
oa. ZS Refractory applications RHI MAGNESITA Customer industries Main application Lifetime and costs Refractory characteristics Steel @ 20 minutes to 2 months * Part of customers’ operational 70% Basic oxygen furnace, 3% of cust cost expenditure © GIKEREMIEE tole ow ance CH OF CUSLOMETS' COSTS Syste
Slide 5: Customer and end user markets
3 Customer and end user markets nl MAGNESITA % of 2021 revenue by BU % share of RHIM revenue by end market Construction YoY (%)! 6.0% a 2021 2022 2023 Vehicle production YoY (%)! 12.1% 2021 2022 2023 Industrial production YoY (%)' 2021 2022 2023 7.4% 1. Source: timate 5 Investor Presentation | March
Slide 6: Global leader in a highly fragmented market
3 Global leader in a highly fragmented market RHI MAGNESITA Growth opportunity through consolidation Global market share Regional market share %' Total market size: Cc. €20bn South America Africa North America VESUVIUS 34% y Middle East ex-lran Nesium anal {7 Po te companies : K Europe/CIS/Turkey sa
Slide 7: Raw material and refractory process overview
3 Raw material and refractory process overview RHI MAGNESITA Raw material production Heat management solutions Dae oo 2 Se ll! ep lad £ a ° co i> oa porn o Logistics ne > a Disposal —s Recycling 7 Investor Presentation | March 2022
Slide 8: Vertical integration benefits
Vertical integration benefits 3 RHI MAGNESITA Our magnesite raw material assets are amongst the lowest cost globally DBM 98: Indicative cost curve Eskisher Brumado HB RHIM assets Global DBM assets (non RHIM) 8 Investor Presentation | March 2022 EBITA margin contribution RHI standalone | RHI Magnosit
Slide 9: Solutions contracts
3 Solutions contracts Al MAGNESITA RHI Magnesita can offer full heat management solutions to its customers Client benefit v Reduced downtime v Lower refractory consumption v Lower energy and other raw materials consumption Y Higher productivity and cost savings RHI Magnesita benefit v Market share g
Slide 10: Heat management solutions
Heat management solutions Growing our solutions offering @ RHI Magnesita’s unique global footprint, service offering and comprehensive product range allows it to offer full heat management solutions to its customers @ Solutions contracts are: — c.5-7 years long, usually renewed on expiry — Offered a
Slide 11: EAF transition in the steel industry
EAF transition in the steel industry 3 RHI MAGNESITA Use of EAF technology Is key to reducing CO, CHAISSpORSs > Oxygen pre PCO, fe Bs 20F (Basic Oxygen Furnace) 1.600°C Future process > Iron ore po PHO > Hydrogen : va oun oR! (Direct Reduction) 1.400°C. 11 Investor Presentation | March 2022 Pron ore
Slide 12: Strategic initiatives targets
Strategic initiatives targets Internal investment programme to deliver significant cost savings and sales benefits Cumulative EBITA improvement €million' @ Cost saving initiatives: El Sales strategies — Production Optimisation Plan Hl Cost initiatives — SG&A savings 150 - 170 @ Sales strategies: — S
Slide 13: Production Optimisation Plan
3 Production Optimisation Plan RI MAGNESITA Projects completing and ramping up in 2022/2023! Site Completion IRR Payback Goal date period Hochfilzen 6 Consolidate European dolomite production into single low-cost site, Austria Cw GAO OVeES reduce costs, extend asset life Radenthein 9 Increase output
Slide 14: Summary and investment case
Summary and investment case The leader of the global refractory industry « We are undergoing a significant strategic transformation — Production Optimisation Plan to rationalise production footprint — Strong growth in new markets of India, China and Turkey — M&A consolidation opportunity « We are a
Slide 15: FY 2021 update
8 RHI MAGNESITA FY 2021 update Stefan Borgas, CEO
Slide 16: Revenue growth offset by higher costs
Revenue growth offset by higher costs 3 RHI MAGNESITA Strong revenue recovery offset by higher costs due to global logistics disruption Revenue and volume recovery € million, kt 2,325 2,357 — Volume aloes I Revenue 2019 2020 2021 Price increases offset by higher costs € million 2020 Price Costs Othe
Slide 17: Health and safety
3 Health and safety a MAGHESITA Health and safety is a core value at RHI Magnesita @ LTIF and TRIF remained low in 2021 Slight increase in injury rates — LTIF 0.18 (2020: 0.13) in FY 2021 — TRIF 0.60 (2020: 0.45) 24 * The rate of occupational injuries increased slightly in 2021: 2.0 — Some staff ret
Slide 18: Financial highlights
Financial highlights 3 RHI MAGNESITA Inventory levels and net debt increased to ensure customer deliveries Revenue! Adjusted EBITA' Adjusted EBITA margin €2.6bn €280m 11.0% tT i6% Box B70)bps Cash returned to shareholders Capex Working Capital intensity* €167m €252m 23.5% P 315% PB oi% BP 740bps 1.
Slide 19: Steel division overview
3 RHI MAGNESITA Steel division overview Revenue growth rate ahead of the market, offset by higher costs ; « Steel division revenue +16% driven by growth in new markets Revenue (€m) and Brazil, +20% constant currency 23.1% 23.4% @ RHIMsteel volume growth 16% materially ahead of the market —_— 285% (W
Slide 20: Steel division performance by region
Steel division performance by region Growth in market share in key growth markets due to strategic investments China and East Asia ‘ €206m poo Qe Europe/CIS/Turkey m €474m 23% 26% 1% 12% rm Owe = RHIM South America India/West Asia/Africa? €279m €359m 2021 versus 2020 % I Steel production (WSA) HB RR
Slide 21: Industrial division overview
Industrial division overview 3 RHI MAGNESITA Revenue growth of 6% with stable gross margins Revenue (€m)' 27.7% 26.4% 26.1% 344 689 729 273 322 ne 416 407 Hl Cement/Lime Hl Industrial projects 2019 2020 2021 —® Gross margin (%)! 2021 Full Year Results | February 2022 Industrial division revenue incr
Slide 22: Sustainability leadership
3 Sustainability leadership Ri MAGNESITA Considerable progress in sustainability initiatives * Increased recycling rate supported by improving customer Use of secondary raw material : A % of total raw material used engagement and sourcing of secondary raw materials * Ongoing €50 million R&D investme
Slide 23: Untreated refractory containing secondary raw material
Untreated refractory containing Secondary Raw Material reated refractory
Slide 24: R&D leadership
R&D leadership ai MAGNESIA Nano graphite coated refractories save energy and improve performance * Tested at two customer sites in Brazil as proof of concept in 2021 @ Will be rolled out to seven customers in 2022 in the Americas * ‘Magnano’ process converts carbon black into nano graphite coating o
Slide 25: Financial review
8 RHI MAGNESITA Financial review lan Botha, CFO
Slide 26: Profit and loss summary
Profit and loss summary Top line growth offset by margin pressures €m 2021 2020! Change Revenue 2,551 2,259 12.9% Gross profit 584 550 6.2% Gross margin (%) 22.9% 24.4% (150)bps Adjusted EBITA 280 260 7.7% Adjusted EBITA margin (%) 11.0% 11.5% (50)bps Finance charges (19) (71) (73)% Adjusted Profit
Slide 27: 2021 revenue bridge
3 2021 revenue bridge Ai MAGNESITA Strong revenue growth driven by recovery from COVID-19 and price increases €m 291 i Hi 2021 Wl H2 2021 2020 Constant currency 2020 revenue ona Volume growth Product mix Price increase 2021 revenue adjustment constant currency basis programme revenue 27 Investor Pre
Slide 28: EBITA bridge
3 EBITA bridge RHI MAGNESITA Increased volumes, price increases and strategic cost savings offset by significant cost inflation €m Sales strategies 13 Ww Cost strategies 36 Sea freight (68) Air freight (12) Raw materials (69) Energy (34) 257 Fixed cost absorption __31 (152) 2020 FX 2020EBITA Salesvo
Slide 29: Refractory margins impacted by higher costs
3 Refractory margins impacted by higher costs RI MAGNESITA Time delay to pass on price increases to customers : . 2021 RHI standalone : RHI Magnesita 2020 Refractory EBITA (€m) 205 199 13.9% 14.0% Vertical 55 81 integrated EBITA (€m) Increasing market price of raw materials leads to higher raw mater
Slide 30: Raw material prices
3 Raw material prices a MAGHESITA 30 Indexed 9 Feb 2017 — 23 March 2022 600 500 400 300 200 [~~ 100 2017 u 2018 u 2019 y 2020 y 2021 2022 Medium grade DBM (90% - China) =—=High grade DBM (95% - Europe) ===High grade DBM (97% - China) ===Fused Alumina Brown (China - 95%) ‘Alumina futures Investor Pre
Slide 31: Freight
Freight 3 RHI MAGNESITA Largest category of cost inflation with additional adverse effects on inventory, network efficiency and customer order fulfilment Freight Freight as a % of COGS 550, Shanghai shipping exchange 500 Containerized freight index 450 400 350 +209% 2021 vs 2020 300 250 2019 2020 20
Slide 32: Energy
Energy 3 RHI MAGNESITA Significant increase across all key energy sources European natural gas . t) * The key benchmark prices for the Energy by type. Netherlands TTF 22% Group are European natural gas, ° 1600 of 2021 energy costs! European power and global oil prices Contiriiers 1.400 Hl Coal and c
Slide 33: Raw materials
Raw materials Higher raw material price environment benefits vertical integration margin but increases costs for externally purchased raw material Raw material prices 2020-21 Rebased to 100 190 180 170 160 150 140 130 120 110 100 90 80 70 +39% 2021 vs 2020 Ta Mat Way ul” Sep Nov en Mar May dul "Sep
Slide 34: Price increases realised in Q4
Price increases realised in Q4 3 RHI MAGNESITA Margins restored in Q4 due to delayed benefit of price increases Q4 revenue and margin momentum 12.5% 1.2% 10.0% 9.8%! 700 500 300 Il Revenue 100 © EBITAmargin Q1 2021 Q2 2021 Q3 2021 Q42021 1. €8m EBITA impact from Radentheinkiln maintenance 2021 Full
Slide 35: Working capital intensity above target range
Working capital intensity above target range Ru MAGNESITA Response to supply chain challenges required significant additional inventory Working capital balances Inventory 33.6% Inventory increased by €500 million to meet strong customer demand 007 ee ee 211% 20.6% 809 capital finance Working capital
Slide 36: Gearing increased due to inventory build
3 Gearing increased due to inventory build PI MAGNESITA Inventory levels to remain elevated for duration of supply chain disruption Net debt and liquidity @ Leverage of 2.6x net debt : EBITDA is above targeted range of (€m) 0.5-1.5x ___ ee a HB Liquicity’ @ Inventory levels expected to remain high d
Slide 37: Strategic initiatives
8 RHI MAGNESITA Stefan Borgas, CEO
Slide 38: Strategic initiatives targets
3 Strategic initiatives targets RI MAGNESITA Benefit of cost and sales initiatives increased and delayed by one year Cumulative EBITA improvement € million’ I Sales strategies Hl Cost initiatives 120 30 84 18 35 90 ak @ 2022 target increased but delayed until 2023 — 90% of original cost target and 6
Slide 39: Production Optimisation Plan update
3 Production Optimisation Plan update RI MAGNESITA Minor delays to Brumado, Contagem and Radenthein - project economics remain attractive Site Completion Delay Payback Goal date period Hochfilzen Consolidate European dolomite production into single low-cost site, Austria Cw OVeES reduce. costs, exte
Slide 40: Rotary kiln complete
Rotary kiln complete February 2022
Slide 41: Tunnel kiln inauguration
==, “Ss 2 = Tunnel kiln inauguration November 2021 — C + = =| [— SS RHI MAGNESITA t »,) | _ o> i
Slide 42: Sales strategies update
Sales strategies update Flow Control revenue € million and % of Group revenue 16.9% 16.9% 15.3% oe —@ % of Group revenue Hl Flow Contol revenue 2019 2020 2021 India € million and % of Group revenue 10.0% 8.6% 8.3% —® % of Group revenue Hl Indiarevenue 255 2019 2020 2021 42 Investor Presentation | Ma
Slide 43: Expansion of capacity & market access in China
Expansion of capacity & market access in China RI MAGNESITA Chongqing plant joint venture * RHI Magnesita has agreed to acquire and fund “RHIM Chongqing Ltd” joint venture — £€5 million purchase consideration for 51% — c.€12 million capital expenditures to be invested in production growth — IRR>25%
Slide 44: SORMAS, Turkey
3 SORMAS, Tu rkey RHI MAGNESITA Completion in H2 2022, competition clearance ongoing * €39 million cash acquisition — Producer of refractories for the cement, steel, glass and other industries in Turkey — FY 2020 underlying EBITDA €6.4 million RAS * Compelling strategic rationale 6 ww, — Growth in k
Slide 45: Appendix
8 RHI MAGNESITA Appendix
Slide 46: 2022 Guidance
3 2022 Guidance RHI MAGNESITA * Total capital expenditure: €190m (includes €12 million investment in Chongqing JV, China) — Maintenance capex: €85m — Project capex: €105m « Depreciation: €125m « Amortisation: €25m * Net interest expense: €25m (excluding pensions of €6m) * Adjusted effective tax rate
Slide 47: Capital allocation
3 Capital allocation RHI MAGNESITA « RHI Magnesita allocates capital to support its long-term strategy, seeking to deliver attractive shareholder returns over the medium term @ 2.6x leverage currently above targeted range @ Organic investments: — €177 million project capex in 2021 — Shareholder retu
Slide 48: Capital expenditure returning to lower levels
3 Capital expenditure returning to lower levels RHI MAGNESITA Capital expenditure (€m) 252 190 1566 015777 Aral 105 130 123 46 86 65 as sie) 2018 2019' 2020? 2021 2022 2023 2024 Project Capex Ill Maintenance Capex 2021 Full Year Results | February 2022 @ Peak capital expenditure in 2021 as we invest
Slide 49: Net debt higher due to capex and inventories
3 Net debt higher due to capex and inventories PHI MAGNESITA Peak of internal investment programme coincides with supply chain disruption Change in net debt (€m) 167 77 75 -389 308 -25, Net debt Adjusted Working Otherassets Temporary Maintenance Netfinance Cashtax Restructuring’. Magnifin Project Ca
Slide 50: Impact of foreign currency movement
Impact of foreign currency movement Impact of foreign currency movement EBITA sensitivity in 2021 2021 exchange rates 3 RHI MAGNESITA Appreciation vs EUR Depreciation vs EUR FY 2021 FY2021 FY2021 FY 2020 Increase / Increase / (decrease) (decrease) Opening Closing Average Average Unit in EBITA (€m) U
Slide 51: Reconciliation of adjusted earnings
Reconciliation of adjusted earnings 2021 Adjustment €m Reported items FY Adjusted EBITA 236 44 280 “poe lll ey a ana Notfinoncecote _ a a9) ‘Share of profit of joint ventures | 100 po x) ; : 9 Profit before tax 289 _19) 270 i eal J eseeseeses a0) . “a9) Profit after tax 250 (28) 222 ako 14%. Leseeec
Slide 52: Cash flow reconciliation
Cash flow reconciliation €m 2021 Adjusted EBITA 280 Working capital (283) Changes in other assets and liabilities (90) Capex (252) Depreciation 109 Operating cash flow (236) Cash tax (39) Net interest expense (25) Restructuring and transaction costs (56) Magnifin disposal proceeds 100 Dividends (71)
Slide 53: Return on invested capital
Return on invested capital Group ROIC Invested Capital (€m) 385 377 NOPAT (€m) 52 61 ROIC (%) 13.5% 16.2% Invested Capital (€m) 1.369 1.919 NOPAT (€m) 149 158 ROIC (%) 10.9% 8.3% 53 Investor Presentation | March 2022 3 RHI MAGNESITA
Slide 54: ESG 2025 targets
ESG 2025 targets 3 RHI MAGNESITA CO, emissions EneToy) Giltetney | NO, and SOx Recycling Diversity Reduce by 15% CO, per tonne of product! by 2025 and aim for alban ses ity in ntins Lorn term Reduce iby 5% pert tonne ai product by 2025 Reduce by 30% by 2027 (vs 2018), starting with China by 2021 Inc
Slide 55: Group history
3 Group history A MAGNESITA History of RHI Magnesita # The history of RHI Magnesita dates back to 1834 and the founding of the Chamottefabrik fireclay factory in Poland (then Prussia) * In 1881, the first magnesite deposit was discovered in Veitsch, Austria @ RHI was formed in 1908 (Austro-American
Slide 56: Disclaimer
3 Disclaimer pil WAGNESITA 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 envir