Rhi Magnesita Nv · LSE:RHIM
Rhi Magnesita Nv — Investor Day (November 2017)
55 slides from Rhi Magnesita Nv's investor day presentation, November 2017
Slide 1: The driving force of the refractory industry
The driving force of the refractory industry Analyst presentation November 2017 RHI Magnesita Analyst Presentation
Slide 2: Disclaimer
Disclaimer The consolidated financial statements to subscribe for or purchase any securities, presented here are consistent with the and neither any part of this presentation nor criteria of international accounting standards any information or statement contained - IFRS issued by the International
Slide 3: Agenda
Agenda 9:30 Introduction 12:00 Q&A Refractory industry overview —— RHI Magnesita overview Building a global leader in refractories 12:30 Lunch —— 10:30 Q&A —— 10:45 Coffee break —— 11:00 Strategy Financials —— 3 RHI Magnesita Analyst Presentation
Slide 4: Compelling investment case
Compelling investment case Solid strategy and Best market position with 15% market share, clear leadership in Americas, Europe 1 and Middle East with broadest value-added solution offering competitive Opportunity to develop and leverage technology across regions and portfolio advantages Highest leve
Slide 5: Today's presenters
Today’s presenters Name and position Professional background Stefan Borgas ⬢ Mr. Borgas was appointed CEO at RHI on December, 2016 and currently acts as CEO of RHI Magnesita and member of CEO the Executive Management team ⬢ From 2012 to 2016, he was president and CEO at Israel Chemicals Ltd. ⬢ Betwe
Slide 6: Refractory industry overview
Refractory industry overview RHI Magnesita Analyst Presentation
Slide 7: Refractories are critical to all high-temperature industrial processes
Refractory Industry Overview Refractories are critical to all high-temperature industrial processes ⬢ Refractories are critical consumable or Main end markets investment goods for high-temperature €20 billion worldwide industry manufacturing processes ⬢ Fireproof materials consumed whilst ◼ Steel 7%
Slide 8: Refractories are continuously consumed during finished goods production
Refractory Industry Overview Refractories are continuously consumed during finished goods production Key industries Applications Replacement Costs Refractory characteristics Steel Basic oxygen-, 20 minutes to ~3.0% Consumable product electric arc furnace 2 months casting ladles Systems and solutions
Slide 9: A complex range of tailored refractory products are required for each application
Refractory Industry Overview A complex range of tailored refractory products are required for each application Bricks Example of refractory application for steel ladle 2 3 1 Permanent lining 2 Non-basic, 3 Basic, ex. ex. Alumina Mag-Carbon 4 1 Monolothics and pre casts 5 6 8 4 Mixes 5 Pre Castables
Slide 10: RHI Magnesita overview
RHI Magnesita overview RHI Magnesita Analyst Presentation
Slide 11: Providing everything, for everyone, everywhere
RHI Magnesita Overview Providing everything, for everyone, everywhere €2.5bn 10,000 14,000 2016 pro-forma revenue Customers served globally Employees spread over 37 countries 35 180 Main production sites across Countries shipped worldwide 16 countries 13 €25m Raw material sites Annual investment in
Slide 12: Adding value through a full suite of products and services
RHI Magnesita Overview Adding value through a full suite of products and services Iron Ore Steel Refining Facility Technology Flow Solutions Coal Control Injection Natural Electric Arc Gas Furnace Direct Reduction Coal Scrap Basic Oxygen Continuous Furnace Casting Blast Coke Oven Furnace Full Line L
Slide 13: Serving blue chip clients in every industry
RHI Magnesita Overview Serving blue chip clients in every industry Steel Cement Glass Metals Serving 1376 Serving 800 Serving 650 Serving 1060 of 1250 plants1 of 1537plants1 of 900 plants1 of 2000 plants1 1ex-China 13 RHI Magnesita Analyst Presentation
Slide 14: Optimally positioned to reach clients everywhere
RHI Magnesita Overview Optimally positioned to reach clients everywhere Europe 28% North America 22% APAC 17% MEA-CIS 13% South America 20% Production facilities + More than 70 sales Raw material sites offices worldwide % revenues 14 RHI Magnesita Analyst Presentation
Slide 15: Driving client performance improvements
RHI Magnesita Overview Driving client performance improvements Equipment/Application Service Starting point End game Improvement Client A (Integrated) Basic Oxygen Furnace (B.O.F.) Refractories 1,900 heats 7,200 heats +385% Assembly 145 h 40 h 3.8X faster Blast Furnace Runners 1,600 h 330 h 4.8X fas
Slide 16: Solutions that maximise efficiency and margins
RHI Magnesita Overview Solutions that maximise efficiency and margins Example: Full Line Service A single basic oxygen furnace (BOF) demands different types One key objective for Full Line Service clients is to develop of refractories designed according to their distinct physical and refractories th
Slide 17: Tailor-made products and services that drive performance and cost savings
RHI Magnesita Overview Tailor-made products and services that drive performance and cost savings Example: Implementing Gas Purging in Electric Arc Furnaces for High-Alloyed Steelmaking Stainless steel production has significantly different EAF process conditions compared to low-alloyed steelmaking d
Slide 18: Experienced management team with solid financial and strategic background
RHI Magnesita Overview Experienced management team with solid financial and strategic background Executive Management Team Joined Background Stefan Borgas 2016 ⬢ Former CEO of Israel Chemicals Ltd and Lonza Group CEO ⬢ Several management positions at BASF Octavio Lopes 2012 ⬢ Former CEO of Magnesita
Slide 19: Premium UK listing and corporate governance
RHI Magnesita Overview Premium UK listing and corporate governance Listing in the UK underscores the RHI Magnesita’s international scope ⬢ Listed in the Premium Market in the London Stock Exchange ⬢ Strong commitment and full adherence to the UK corporate governance code RHIM ⬢ Majority independent
Slide 20: Building a global leader in refractories
Building a global leader in refractories RHI Magnesita Analyst Presentation
Slide 21: A strategic combination that captures synergies and drives efficiencies
Building a global leader in refractories A strategic combination that captures synergies and drives efficiencies Establish leading market position Leverage technology capabilities ⬢ Complementary asset portfolio ⬢ Enhanced value-added products and solutions best ⬢ Transaction to support regional fit
Slide 22: The industry's largest dedicated research team
Building a global leader in refractories The industry’s largest dedicated research team, pushing the boundaries of what is possible We drive innovation in every aspect of our Global research team of 270+ employees, of which 98 have masters and PHDs, working out of 2 research hubs and 3 business, fro
Slide 23: On-site technical experts consult, develop and deliver innovative solutions directly to clients
Building a global leader in refractories On-site technical experts consult, develop and deliver innovative solutions directly to clients 340+ technical engineers across 90 countries, working on-site with clients to provide custom-made solutions, installation support, recycling, post-mortem analysis
Slide 24: Incremental synergies reaching run-rate of €70m by 2020
Building a global leader in refractories Incremental synergies to be phased over three years, reaching a recurring run-rate of €70m by 2020 €70m SG&A Procurement Production network & SCM Other 2018 2019 2020 Cash restructuring costs of €50m to €90m 24 RHI Magnesita Analyst Presentation
Slide 25: Synergy opportunities across a range of business activities
Building a global leader in refractories Synergy opportunities across a range of business activities SG&A ⬢ Rationalization of sales network ⬢ Streamlining corporate management and back-office ⬢ Ramp-up of shared service centers Procurement ⬢ Best sourcing prices in overlapping countries and spend c
Slide 26: Additional 'below the line' synergies are expected post-integration
Building a global leader in refractories Additional ‘below the line’ synergies are expected post-integration Key metrics Opportunities Capex ⬢ Footprint optimization and plant closures/sales to reduce capex requirements €124m1 ⬢ Assets sales to lighten capital requirements without affecting client s
Slide 27: Strategy
Strategy RHI Magnesita Analyst Presentation
Slide 28: Build a global refractory leader with a distinctive customer proposition
Strategy: overview Build a global refractory leader with a distinctive customer proposition based on technology and cost competitiveness to ensure manufacturing of essential materials for the world Markets Competitiveness Worldwide presence with strong Cost competitive and safe local organizations a
Slide 29: Aim to achieve worldwide market coverage with strong local organizations
Strategy: markets Aim to achieve worldwide market coverage with strong local organizations and significant market positions ⬢ Dedicated strategy for China with focus ⬢ Focus on organic growth in India (high ⬢ Drive organic growth in the mid term on growing locally, to achieve sustainable quality dem
Slide 30: Strong share in Europe and Americas with opportunities to occupy 'white spaces'
Strategy: markets Strong share in Europe and Americas with opportunities to occupy ‘white spaces’ in India, China and CIS RHI Magnesita revenue by region vs market size Steel Production South America HIGH MEA 800m tonnes Europe North RHI Magnesita America Market Share India 100m tonnes LOW Other CIS
Slide 31: Well-positioned to tap expanding refractory demand in India
Strategy: markets Well-positioned to tap expanding refractory demand in India ⬢ India became the 3rd largest steel ⬢ An ambitious government program aims ⬢ Per capita consumption should increase producer in the world after a decade of to reach 300m tonnes of steel from 63kg (2016) to 160kg solid gro
Slide 32: Move to high-value added solutions in China
Strategy: markets Move to high-value added solutions in China China Market Dynamics Despite lower overall steel demand outlook for 2030, steelmakers are converging to high-value added solutions in order to improve margins ⬢ Long-term chinese market consolidation is expected to lead to shift towards
Slide 33: Extending existing comprehensive portfolio further into customer segments
Strategy: portfolio Extending existing comprehensive portfolio further into customer segments designed for performance RHI Magnesita has the broadest and deepest portfolio in the industry, covering basic, non- basic and functional products and services in High high performance segments. ⬢ Extend cur
Slide 34: Extend market position in high quality applications and strengthen non-basic mixes
Strategy: portfolio Extend market position in high quality applications and strengthen non-basic mixes and functional products Portfolio Main Applications Opportunity ⬢ Great capability and logistics: Production in all continents and short lead-time to everyone, everywhere ⬢ Steel: converters and la
Slide 35: Top solution provider investing in innovative technologies and digitalization
Strategy: technology Top solution provider in the industry, investing in innovative technologies and digitalization Continue investing in R&D Develop into a complete 1 to create products, which 4 system supplier based on have a distinct competitive R&D, partnerships and advantage by costs or by sele
Slide 36: Cost competitive and safe production network supported by lowest cost G&A services
Strategy: competitiveness Cost competitive and safe production network supported by lowest cost G&A services ⬢ Create a sustainable competitive cost production base through the most efficient usage of the global production footprint ⬢ Run the lowest cost G&A services to support the daily business ⬢
Slide 37: Unrivalled competitive advantage through vertical integration
Strategy: competitiveness Unrivalled competitive advantage through vertical integration, in multiple sites Raw material Production sites Annual production Brumado – Brazil Eskisehir – Turkey Standard DBM Hochfilzen – Austria ~760 k tonnes 90%-97% Drogheda – Ireland Breitenau – Austria 1.6 million to
Slide 38: Financials
Financials RHI Magnesita Analyst Presentation
Slide 39: Resilient business model
Financials Resilient business model Historic Gross Margin¹ Basic Materials RHI Magnesita 40% 35% 30% ⬢ Commoditized ⬢ Low volatility in 25% cost due to Raw ⬢ Price takers of 20% significant Materials key raw 15% vertical material inputs 10% integration 5% RHI Magnesita 0% 2007 2008 2009 2010 2011 20
Slide 40: Combined revenue breakdown
Financials Combined revenue breakdown Revenue1 by Industry Total Revenue by Geography ◼ South America 42% Cement / Lime ◼ North America ◼ Europe ◼ MEA-CIS 27% Nonferrous Metals ◼ Asia Pacific 31% Other Process Industries 17% 20% 28% 13% 22% 72% 28% ◼ Industrial ◼ Steel 1 Revenue split considers only
Slide 41: Combined revenue and operating EBITA
Financials Combined revenue and operating EBITA Revenue (€m) 2,632 100 +9% 2,681 2,521 2,532 1,259 1,369 2015 2016 2H16 + 1H17 1H16 1H17 revenue generated by the businesses divestitures Operating EBITA (€m) 9.9% 10.9% 9.4% 9.9% 8.4% 260 149 226 236 125 2015 2016 2H16 + 1H17 1H16 1H17 Oper. EBITA mar
Slide 42: Combined financial highlights
Financials Combined financial highlights 2015 2016 1H16 1H17 2H16 + 1H17 Revenue 2,681 2,521 1,259 1,369 2,632 COGS -2,032 -1,867 -932 -1,000 -1,935 Gross Profit 649 654 327 369 697 Selling -237 -230 -112 -124 -242 G&A -198 -209 -96 -115 -228 Operating EBITA 226 236 125 149 260 Operating EBITA margi
Slide 43: Combined cash flow
Financials Combined cash flow Strong cash flows from operations supported by synergies and organic growth opportunities 384 363 353 52 34 262 218 216 147 357 331 329 124 118 75 49 55 39 45 43 -5 2015 2016 2H16 + 1H17 Working Capital and other Operating EBITDA CAPEX Interest Tax 43 RHI Magnesita Anal
Slide 44: Capital structure
Financials Capital structure Solid credit profile and commitment to rapid de-leveraging Liquidity and ⬢ Strong cash position, sufficient to cover amortizations for the next 2 years Duration ⬢ Comfortable 5yr average duration, with perpetual bond representing ~25% of net debt Leverage ⬢ Deleveraging
Slide 45: Debt structure
Financials Debt structure Syndicated Term & ⬢ €267m drawn on closing Revolving Loan ⬢ Additional €110m available for Magnesita Integrated Offer €477m ⬢ Additional €100m revolving facility available ⬢ Spread: Margin grid from 60bps – 275 bps (~180bps at current leverage) ⬢ Maturity: 2022 (fat tail am
Slide 46: Capital strategy
Financials Capital strategy Dynamic capital allocation over time, supporting long term strategy and shareholder returns Committed Dividends Shareholder Returns Progressive Dividends Share buybacks Operating Cash Delever Flow Sustainability Capex Capital Allocation Drivers: Investment ⬢ Key performan
Slide 47: Combined selected financials per currency
Financials Combined selected financials per currency Majority of EBITDA generated in stable currencies Revenues COGS and SG&A Net EBITDA per currency Other Other Other INR 8% 9% 2% 9% BRL USD1 12% USD1 BRL 14% 30% 35% INR 4% EUR 24% INR 3% 65% USD1 41% 44% EUR EUR Pro-forma 2016 Pro-forma 2016 Pro-f
Slide 48: Amongst the leading FTSE 250 industrial companies
Financials Amongst the leading FTSE 250 industrial companies Revenue (€ Bn) 3.7 2.6 3.7 2.5 2.0 1.7 2.6 1.7 2.5 1.2 1.2 1.1 1.1 1.0 1.0 2.0 0.8 0.8 0.7 0.6 1.7 1.7 0.6 Smiths RHI Weir imi Vesuvius Spectris Morgan Halma Spirax Bodycote Rotork Renishaw Magnesita EBITA (€ mln) 637 317 280 260 256 253 2
Slide 49: Compelling investment case
Financials Compelling investment case Solid strategy and Best market position with 15% market share, clear leadership in Americas, Europe 1 and Middle East with broadest value-added solution offering competitive Opportunity to develop and leverage technology across regions and portfolio advantages H
Slide 50: Taking innovation to 1200ºC and beyond
Taking innovation to 1200ºC and beyond RHI Magnesita Analyst Presentation
Slide 51: Appendix
Appendix RHI Magnesita Analyst Presentation
Slide 52: Integrated offer overview
Appendix Integrated offer overview ⬢ RHIM will launch a tag-along offer to Magnesita’s minority shareholders on the same terms and conditions as that made to the Control Group: ⬢ Cash + shares: €117m + 5 million shares ⬢ Cash only: €8.19 per Magnesita share (amounting to €205m) ⬢ Maximum cash consid
Slide 53: Merger-control remedies
Appendix Merger-control remedies In June 2017, the European Commission has cleared the Transaction, subject to the divestment of the following assets/business: Marone, Italy Lugones, Spain Oberhausen, Germany ⬢ Marone and Lugones comprise RHI’s entire dolomite ⬢ Oberhausen comprises Magnesita’s enti
Slide 54: Operating EBITA reconciliation
Appendix Operating EBITA reconciliation Prospectus PDF Pages 2015 2016 1H16 1H17 2H16 + 1H17 144 & 107 Statutory EBIT -28.7 235.2 118.1 49.2 166.3 107 RHI - Result of derivatives supply contracts 58.0 -10.1 -3.0 1.2 -5.9 107 RHI - Impairment losses 31.2 8.6 0.0 7.2 15.8 107 RHI - Income from restruc
Slide 55: Find out more at rhimagnesita.com
Find out more at rhimagnesita.com RHI Magnesita Analyst Presentation