Rhi Magnesita Nv · LSE:RHIM
Rhi Magnesita Nv — FY2019 Earnings Presentation
38 slides from Rhi Magnesita Nv's earnings presentation, Apr 1, 2020
Slide 1: RHI Magnesita 2019 FY Results
8 RHI MAGNESITA 1April 2020
Slide 2: Agenda
3 Ag e n d a RHI MAGNESITA @ Introduction and highlights 2 | Finance review & Strategic review and outlook 2019 FY Results | April 2020
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Slide 4: 2019 financial highlights
3 RHI MAGNESITA 2019 financial highlights Resilient performance in difficult markets Revenue Adjusted EBITA Adjusted EBITA margin Adjusted EPS €2.9bn ws €408m ws 14.0% AA1Obps' €5.57 asx per share Operating FCF? Working capital intensity Net debt to adjusted EBITDA Available liquidity* €359m 18.3% 2
Slide 5: Safety
Safety Continuous improvement in Lost Time Injury Frequency Rate (LTIF) 3.9 3.4 3.0 27 1.7 1 il 0.4} 13 14 15 16 17 2011 «12 2019 FY Results | April 2020 3 RHI MAGNESITA Key focus areas identified to further improve and reach our goal of zero-accidents * Increased focus on safety at customer sites —
Slide 6: 2019 operational highlights
3 RHI MAGNESITA 2019 operational highlights Resilient performance in difficult markets * Continued improvement of refractory margins Industrial division: continues to perform strongly — revenues up 3.6% at constant currency, gross margin up to 27.7% « Steel division: weak end markets and customer de
Slide 7: Our 2025 Sustainability targets
Our 2025 Sustainability targets n ° Significant further opportunity to develop customer solutions to minimise energy consumption and CO, emissions Reduce by 15% per tonne by 2025! Energy Reduce by 5% per tonne 2025 NOx and SOx emissions t Reduce by 30%2, starting with China by 2021 B nd Recycling In
Slide 8: Financial review
8 RHI MAGNESITA Financial review
Slide 9: Profit and loss
Profit and loss Overview 2018 Change €m 2019 2018 Change at vs constant constant currency currency Revenue 2,922 3,081 (5.2%) 3,126 (6.5%) Gross profit 77 737 (2.6%) 756 (6.2%) Gross margin (%) 24.5% 23.9% 60bps 24.2% 30bps Adjusted EBITA 408 428 (4.6%) 448 (8.9%) Adjusted EBITA margin (%) 14.0% 13.
Slide 10: 2019 revenue bridge
2019 revenue bridge €m 44 3,081 3,126 -48 -264 jolomite supply issue + Weak steel market backdrop and destocking of customers + Low margin volume losses related to price increases 3 RHI MAGNESITA 143 2,922 143 “58 | aoe | i Programme ______ : Constant currency adjustment 2018 revenue 2019 FY Results
Slide 11: 2019 EBITA bridge
3 2019 EBITA bridge Ri MAGNESITA €m 448 mie Successful turnaround in 3 of the 4 plants with 428 -94 408 = operational issues Plant in Hagen will 94 {© Weaker revenues ' €94m | + Lower fixed cost iebsorptions 67m! Tot 2018 adjusted Constant 2018 adjusted Additional Operational Volume Price and mix St
Slide 12: Working capital management
Working capital management Delivered improvements in H2 2019 Working capital intensity Inventory a Accounts receivable! 21.0% 18.3% sey 642 sil 525 2018 HI 2019 2019 —@ % of L3M annualised revenue HB Working capital (€m) Note: 1) Accounts receivable calculated as trade receivables plus contract asse
Slide 13: Cash flow overview
Cash flow overview 3 RHI MAGNESITA Post operating cash flow items €m 88% cash conversion f 408 | — — 359 -17 Adjusted EBITA Working capital Changes in Capex Depreciation Operating other assets cash flow and liabilities! Note:1) Changes in other assets and liabilities as presented in the statement of
Slide 14: Further strengthening of the balance sheet
3 RHI MAGNESITA Further strengthening of the balance sheet Net debt (€m as at 31 December) * Net debt of €650m includes 2.6x se , — Factoring of €223m (2018: €230m) * - Forfeiting of €67m (2018: €86m) a eee 1.2x 808 _ Gao *® Cash and undrawn committed facilities increased to WM 554 €1.1bn — Undrawn
Slide 15: Capital expenditure
3 RHI MAGNESITA Capital expenditure Capital expenditure (€m) * Maintenance capex reducing to €95m longer-term (€85m in 2020) 215 — Further efficiencies from smaller production footprint @ 40 Zz 156 10 ES ge 150 * Additional capex supports To 46 3 70 30 ay 45 ile) — Small, fast payback projects eg le
Slide 16: Business improvements
Business improvements * Final phase of 2020 synergies were predicated on procurement savings — Current raw material pricing and lower activity has negated this in short-term — Now expecting no further synergies in 2020 - €90m achieved to date is a significant performance (+29% on original target) ®
Slide 17: Margin progression
Margin progression ZS RHI MAGNESITA Refractory margin continued to improve; contribution from Backward Integration reduced in H2 % RHI standalone : RHI Magnesita 6 i HI H2 FY 14 : 13.9% 14.0% 2019 20192019 Refractory 2 EBITA (Em) en eiccad Backward 10 integrated 88 57 145 : EBITA (€m) 8 Backward int
Slide 18: Raw material prices now at long-term average levels
3 RHI MAGNESITA Raw material prices now at long-term average levels Rebased to 100 * Magnesia prices have reduced up to 500 2019 % movements c.70% from their peak prices in 2018 — Supply of magnesia in China 400 continues to increase — Weak demand from end markets has 300 exerted further downward pr
Slide 19: Capital allocation
Capital allocation # Leverage of 1.2x net debt EBITDA within target range of 0.5x — 1.5x — Supported by strong liquidity position of c.€1.1bn * Cash management is a focus in the short-term # Selective organic and inorganic investment in-line with strategy * Despite the Group's strong financial posit
Slide 20: Strategic review and outlook
yo ee 8 RHI MAGNESITA Strategic review and outlook
Slide 21: Merger now complete
3 RHI MAGNESITA Merger now complete RHD Keyfiguesém 2014 2015 2016 Average _ S Revenue 1,721 1,753 1,651 1,708 RHI MAGNESITA Adjusted EBITDA 210 189 195 198 Key figures €m 2016! 2017! 2018 2019 Adjusted EBITDA(%) 12.2% 10.8% 11.8% 11.6% RAS 2,409 2.677 3,081 2.922 Adjusted EBITDA 310 389 553 554 M m
Slide 22: Divisional review — Steel
Divisional review — Steel Revenue (€m) and gross margin (%) 2019 performance « Reduced refractory volumes — Customer destocking coupled with weak steel demand, 23.1% 23.7% 23.1% particularly in Germany and Italy — Exit of Iranian business 22M - Ss ket share loss derived f Price M it 1,913 2,018 ome
Slide 23: Divisional review — Industrial
Divisional review — Industrial Revenue (€m) and gross margin (%) 28.5% 27.7% 24.2% 873 904 763 462 Fem 440 fe Hi Hi 2017! 20182 20192 —@ Gross margin (%) Notes: 2019 performance * Cement/Lime up 6.3% year-on year — Benefitted by growth in demand ex-China and positive growth in construction activity
Slide 24: Near-term strategic focus
Near-term strategic focus Execute cost reduction » RHI MAGNESITA @ Production Optimisation Plan launched in November fully on track — Hagen closure in Hl 2020 — Trieben downsizing inH2 2020 — Radenthein automation and modernization project on plan, with civil works planned to start in H2 2020 @ Work
Slide 25: COVID-19 response
COVID-19 response Fast moving and uncertain position — Focus on health and safety of our employees and customers @ Global and regional Corona Task Forces in place to manage the situation — Focus on production and supply chain to ensure customer deliveries @ Production footprint — China: production f
Slide 26: Summary and outlook
Summary and outlook * 2019 — Integration completed — Continued growth in new markets — Resilient performance in difficult markets — Strong cash flow generation in H2 — Strong balance sheet and liquidity *® 2020 — Market outlook is very uncertain o Challenging H2 2019 market environment has continued
Slide 27: Resilient business model with a clear strategy
Resilient business model with a clear strategy 3 RHI MAGNESITA Resilient margins with further potential in refractories ®@ Stable and growing Refractories margin, at 9% in 2019 (c.40Obps higher than 2016) @ Further €95-115m EBITA upside by 2022 from management initiatives @ Additional margin contrib
Slide 28: RHI MAGNESITA
RHI MAGNESITA
Slide 29: Appendix
RHI MAGNESITA Appendix
Slide 30: Technical guidance for 2020
3 RHI MAGNESITA Technical guidance for 2020 * Total capital expenditure: €150m — Maintenance capex: €85m — Additional project capex: €65m o Production Optimisation Plan: €45m o Sales Strategies: €10m o Small fast payback projects: €10m * Depreciation: €145m * Amortisation: €25m * Net interest expens
Slide 31: Impact of foreign currency movement
3 RHI MAGNESITA Impact of foreign currency movement EBITDA sensitivity 2019 exchange rates SS oo USD +1 cent 3.25 USD 1.12 1.12 CNY +0.01 yuan (0.11) CNY 7.81 7.73 BRL +0.10 reais 0.44 BRL 4.51 4.41 INR +1 rupee 0.28 INR 79.9 78.8 2019 FY Results | April 2020
Slide 32: Reconciliation of adjusted earnings
3 RHI MAGNESITA Reconciliation of adjusted earnings cn EBITA 300 108 408 Amortisation (26) 26 2 Net finance costs (75) 14 (62) Share of profit of joint ventures 1 10 a] Profit before tax 200 358 Income tax! (51) (23) (74) Profit after tax 149 284 Effective tax rate 25.5% 20.6% Non controlling intere
Slide 33: Net finance costs
3 RHI MAGNESITA Net finance costs €m FY 2019 Recurring Non-recurring Interest income 91 91 - Interest expense (28.4) (28.4) - Foreign exchange (17.2) (13.6) (3.6) Other net financial expenses (38.7) (28.8) (9.9) Net finance costs (75.2) (61.7) (13.5) Interest income and expense: * Net interest expen
Slide 34: Strong balance sheet position
Strong balance sheet position ail WAGNESITA €m -51 639 (8%) | 650 588 -359 a lease obligations Cash losses fromderivatives (14) Foreign exchange effects and others (24) Net debt Operating Cash tax Netfinancial Dividends paid Restructuring Share buyback — Magnesita Others Netdebt IFRS16Leases Net deb
Slide 35: Cash flow reconciliation
Cash flow reconciliation Adjusted EBITA Working capital Changes in other assets and liabilities Capex Depreciation Operating free cash flow Cash tax Net interest expense Restructuring and transaction costs Magnesita minority acquisition Dividend pay-out Share buyback Free cash flow Prepayment of leg
Slide 36: Strong debt maturity profile
Strong debt maturity profile Amortisation schedule (€m as at 31 December 2019)! » RHI MAGNESITA 1,067 600 600 401 300 467 on 40 72 45 62 a 7 a Liquidity 2020 2021 2022 2023 2024 2025 2026 IFRS 16 Leases Mi Amortisation Mi Cash i) Undrawn RCF Notes: 1) Revolving credit facility increased to €600m in
Slide 37: Balanced and dynamic capital allocation
3 RHI MAGNESITA Balanced and dynamic capital allocation enabling long term growth & shareholder returns * Progressive dividend policy Shareholder: Targeting 3.0x dividend cover over Returns medium-term Net operating Leverage cash * Share buybacks when appropriate * Maintain robust financial position
Slide 38: Disclaimer
» RHI MAGNESITA 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 enviro