Rhi Magnesita Nv · LSE:RHIM
Rhi Magnesita Nv — Investor Presentation (November 2024)
54 slides from Rhi Magnesita Nv's investor presentation, November 2024
Slide 1: RHI Magnesita Investor Presentation
RHI Magnesita Investor Presentation November 2024 2024 Half Year Results | August 2024 1
Slide 2: Content
Content 1 Introduction to RHI Magnesita 2 HY 2024 financial results 3 Appendix 2024 Half Year Results | August 2024 2
Slide 3: Refractories are essential for our modern world
Refractories are essential for our modern world Concrete Copper Steel Glass Aluminium 1,500°C 1,350°C 1,760°C 1,650°C 1,250°C 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 demands ~3 Kg of refrac
Slide 4: Refractory applications by customer industry
Refractory applications Customer industries1 Main application Lifetime and costs Refractory characteristics Part of customers’ operational Steel 20 minutes to 2 months expenditure Basic oxygen furnace, 69% of revenues Electric arc furnace, ladles, flow control c.3% of customers’ costs Systems and so
Slide 5: Leading global supplier of refractories
Leading global supplier of refractories Example - Electric Arc Furnace (“EAF”) refractories Key product ranges Roof centre piece Bricks Mixes 63% of product revenue 25% of product revenue Average selling price Average selling price c.€1,500 per tonne c.€900 per tonne Injector area Slag door area Flo
Slide 6: Financial highlights FY 2023
Financial highlights FY 2023 Cash generative, stable margins, M&A growth and c.3x covered dividend Revenue 2023 Adjusted EBITA 2023 Adjusted EBITA Adjusted operating Adjusted EPS margin 2023 cash flow 2023 2023 €3.6bn €409m 11.4% €413m €4.98 8% 7% (20)bps 166% 3.4% Market capitalisation Net Debt Div
Slide 7: End markets and customer industries
End markets and customer industries 2024 Half Year Results | August 2024 7
Slide 8: Raw material and refractory process overview
Raw material and refractory process overview 2024 Half Year Results | August 2024 8
Slide 9: Global refractory production network
Global refractory production network Regional finished goods production - local versus imports Europe finished goods exports % value by destination region, 2023 % imported % produced in region North America 38% Asia & Australasia 22% Africa 16% India 9% South America 8% NME 5% China 2% Europe &Türki
Slide 10: Raw material vertical integration
Raw material vertical integration Key raw material sites and shipment routes 2023 Extent of vertical integration Key % raw materials sites and shipment routes 2023 % % Magnesite-and dolomite-based (basic) Internal raw materials raw material volume 64 8 28 External raw materials Total volume of raw m
Slide 11: Brumado, Brazil
Brumado, Brazil 2024 Half Yearraw Magnesite Results | August 2024 materials 11
Slide 12: Hochfilzen, Austria
Hochfilzen, Austria 2024 Half Yearand Magnesite Results | August 2024 dolomite raw materials 12
Slide 13: Capital allocation framework
Capital allocation framework After maintenance capex and dividend, M&A, organic investments and buybacks compete for capital Leverage target 1.0 - 2.0x and up to c.2.5x for compelling M&A opportunities M&A pipeline presents opportunity to continue consolidation of the refractory industry Resilient m
Slide 14: M&A growth opportunity
M&A growth opportunity Strengthening a global leadership position in the refractory industry USA Europe India China Areas of focus for P-D Refractories Refrattari Trezzi Jinan New Emei future M&A Resco Group 1 Dalmia GSB ✓ East Asia Chongqing SORMAS MIRECO ✓ Middle East Hi-Tech Seven DBRL ✓ Alumina
Slide 15: Low carbon steel opportunity
Low carbon steel opportunity Transition to EAF, DRI and ESF is a strong positive growth driver for RHI Magnesita Tonnes of CO2 per tonne of steel 1. Electric smelting furnace (“ESF”) is required to be paired with a Direct Reduced Iron (“DRI”) furnace for 97% of global iron ore supply that does not m
Slide 16: Our performance in context
Our performance in context RHIM has navigated the recent downturn in steel production without margin decline, whilst executing significant M&A at the bottom of the refractory market EBITDA margin Global China COVID-19 Energy World Steel Production YoY change financial crisis downturn crisis 19.0% 17
Slide 17: Investment case
Investment case (i) EBITDA and free cash flow comparable to FTSE 100 peers; (ii) highest free cash flow yield in the sector; (iii) compelling M&A growth story; (iv) high operational gearing to market recovery EBITDA 20231 Free cash flow 20231 Free cash flow yield 1 RHI Magnesita €m €m 7 Nov 2024 2 F
Slide 18: 2. HY 2024 financial results
2. HY 2024 financial results 2024 Half Year Results | August 2024 18
Slide 19: M&A offsets lower volumes and pricing
M&A offsets lower volumes and pricing Resilient margins, strong cash conversion and M&A offset weaker demand M&A revenue offsets price and volume decline Revenues, € million Revenue increased 1% to €1,728 million as 8% M&A 1.716 8% 1.728 contribution offsets 3% lower sales volumes and 4% lower prici
Slide 20: Health & Safety
Health & Safety A core value at RHI Magnesita Improvement in injury rates since 2018 A tragic fatal incident occurred at one of the Group’s plants in China in June ⁃ The Group has commenced a wide-ranging global TRIF LTIF review of safety procedures, risks, preventive measures and safety culture, wi
Slide 21: H1 2024 financial highlights
H1 2023 financial highlights EBITA margin impacted by lower raw material contribution. Strong cash conversion at 123% Revenue Adjusted EBITA Adjusted EBITA Adjusted operating Cash Conversion margin cash flow €1.7bn €190m 11.0% €233m 123% 1% constant currency (5)% (60)bps 2% 9.1ppt M&A Adjusted EBITD
Slide 22: Steel business overview
Steel business overview Gross margin improved vs H1 2023, pricing prioritised over market share Revenue 1,2 Steel revenues decreased by 1% compared to H1 2023 and by 6% €m compared to H2 2023 23.0% Global steel demand in all regions excluding India declined in H1 21.6% 22.6% 2024 due to weakness in
Slide 23: Steel segment performance by region
Steel segment performance by region M&A drives strong volume growth in Europe and China/East Asia, India temporarily lower China & East Asia Steel Segment Revenue H1 2024 €120m Europe, CIS &Türkiye 29% North America 22% 24% €280m 19% North America €329m 6% India, West Asia & Africa 2% €1,185m Europe
Slide 24: Regional steel production trends
Regional steel production trends Continued downturn in developed markets as China exports surplus production NAM: stable situation with weak SAM: stable domestic output Europe & Türkiye: no recovery outlook YoY despite increased imports forecast in 2024 12 5 24 Monthly steel production, million tons
Slide 25: Industrial business overview
Industrial business overview Sequentially lower revenues, gross margin declined to 27.2% from strong H1 2023 Revenue Revenues increase 2% to €543 million compared to H1 2023, €m but declined 6% from H2 2023 29.0% 27.2% ⁃ Strong performance in Europe +33% and India +16%, 26.5% driven by M&A -6% Exclu
Slide 26: H1 strategic update
H1 strategic update Stefan Borgas, CEO
Slide 27: Ongoing expansion opportunity
Ongoing expansion opportunity Strengthening a global leadership position in the refractory industry USA Europe India China Areas of focus for P-D Refractories Refrattari Trezzi Jinan New Emei future M&A Resco Group 1 Dalmia GSB ✓ East Asia Chongqing SORMAS MIRECO ✓ Middle East Hi-Tech Seven DBRL ✓ A
Slide 28: Local for local strategy
Local for local strategy Resco acquisition seeks to reduce imports by growing NAM local manufacturing presence % imported % produced in region (FY 2023) Resco acquisition now subject to phase 2 antitrust review1, completion expected end H2 2024 or early 2025 ⁃ Will increase local production in US an
Slide 29: Sustainability leadership
Sustainability leadership Continued increase in recycling rate delivers significant CO2 savings Use of secondary raw material Recycling now 13.2% despite dilution from new M&A, 15% target for % of total raw material used 2025 maintained 12.6 13.2 10.5 ⁃ New business unit established to pursue extern
Slide 30: MCi Carbon
MCi Carbon Promising technology to create saleable materials through CO2 remineralisation MCi technology creates saleable products through the remineralisation of CO2 emissions Ore samples for remineralisation testing obtained from RHI Magnesita sites and nearby external sources Demonstration plant
Slide 31: Green steel opportunity
Green steel opportunity RHI Magnesita has the capability to develop new technologies for decarbonisation Over 20 green steel projects are in various stages of SMS contract award development worldwide Open Bath Furnaces (“OBF”) are to be installed by SMS group as the Multiple technologies are being d
Slide 32: H1 financial review
H1 financial review Ian Botha, CFO 2024 Half Year Results | August 2024 32
Slide 33: Profit and loss summary
Profit and loss summary Adjusted EPS growth of 2.2% as lower net finance charges offset reduced Adjusted EBITA margin €m H1 2024 H1 20231 Change Reported revenue and Gross profit broadly flat as M&A Revenue 1,728 1,734 -0.3% contribution balanced out lower volumes and pricing Gross profit 416 414 0.
Slide 34: H1 2024 revenue bridge
H1 2024 revenue bridge M&A contribution offsets volume and price driven decline in base business revenues €m 1,734 1,728 18 1,716 47 133 74 H1 2023 Revenue FX effect H1 2023 Revenue at Sales volumes Price and mix M&A H1 2024 Revenue constant currency 2024 Half Year Results | August 2024 34
Slide 35: H1 2024 EBITA bridge
H1 2024 EBITA bridge Volume, price and mix impacts exceeded benefits from reduced input costs and M&A €m 207 200 6 13 190 19 5 2 74 118 74 H1 2023 FX effect H1 2023 Sales volumes Price and mix COGS mix Input costs Fixed cost Other M&A H1 2024 EBITA EBITA at and other absorption completed EBITA const
Slide 36: Record refractory margin of 10.2ppts
Record refractory margin of 10.2ppts Low raw material prices persist, vertical integration margin 0.8ppts RHI standalone RHI Magnesita Consistent margin resilience, minimum 11% since merger 13.9% 14.0% Vertical integration margin declined to 0.8 ppts due to low raw material prices and 11.5% 11.5% 11
Slide 37: Cost detail
Cost detail Lower input costs for refractory producers, but freight and some raw materials increasing Cost of goods sold €m Raw materials Energy DBM prices low compared to 2022 but up off low base in H1 24 Gas prices normalized, oil price stable Rebased to 100 1.274 Rebased to 100 1.200 1.211 DBM 97
Slide 38: M&A financials H1 2024
M&A financials H1 2024 M&A EBITDA in first half of €34 million, on track for full year guidance €80 million Base business vs Group EBITDA 2024 EBITDA from M&A guidance €80m1 H1 2024, €m 80 258 Synergy target of 224 30-50% mostly 35 34 delivered within first two years Base Business M&A EBITDA H1 2024
Slide 39: Working capital
Working capital Reduced by €46m YoY to €894m, reflecting inventory reduction over L12M and higher AP Working capital balances % of L3M annualised revenue Inventory % of L3M annualised revenue 29.1% 28.2% 28.2% 26.0% 24.3% 25.3% 1,053 869 997 1,250 1,183 1,037 940 894 H1 2023 H1 2024 excluding M&A H1
Slide 40: Capital expenditure
Capital expenditure Guidance unchanged, digital upgrade investment to be classified as Other Expenses H1 2024 capex was €68 million, H2 weighting expected 252 Brumado project now completed and in ramp up Of the €30 million guided for M&A capex, €10 million is 180 recurring maintenance capex in new a
Slide 41: Cash flow
Cash flow Record half year operating cash flow in H1 2024, supported by working capital release Adjusted operating cash flow and cash conversion Net debt bridge Dec 23 - Jun 24 €m1 €m 1,304 102% 111% 101% 123% 1,274 88% 40% 20 -84% 438 147 39 413 359 59 H1: €(80)m 290 H2: €230m 49 86 233 36 155 Work
Slide 42: Net debt and gearing
Net debt and gearing Pro forma leverage maintained within guided range for M&A; significant available liquidity Net debt and liquidity Pro forma leverage of 2.4x4 (H1 2023: 2.1x), within target gearing €m 2.3x 2.4x range 2.1x Leverage expected to be controlled within 2.0-c.2.5x range in 2024 Liquidi
Slide 43: Q3 trading update and 2024 guidance updates
Q3 trading update and 2024 guidance updates Strong execution in exceedingly challenging demand environment P&L HY 2024 guidance1 Q3 updates 9M revenues in in line with the prior year Base business slight decline in Base business flat volumes, volumes, Revenues (i) Volumes M&A full year effect adds u
Slide 44: Appendix
Appendix 2024 Half Year Results | August 2024 44
Slide 45: H1 2024 EBITA - Adjusted items
H1 2024 EBITA - Adjusted items Restructuring costs (9) Digital architecture update (15) Plant closures (3) Disposal of Argentinian bonds (9) M&A related costs (7) M&A related costs (7) €m Oberhausen provision 5 Other (2) Others (3) FX gains from disposal of assets 9 Other Operating Expenses Total 16
Slide 46: Cash flow reconciliation
Cash flow reconciliation €m H1 2024 H1 2023 Adjusted EBITDA 258 265 Share based payments - gross non-cash 5 4 Working capital changes 86 41 Changes in other assets and liabilities (47) (18) Investments in PPE, IA (68) (63) Adjusted operating cash flow 233 228 Income taxes paid (36) (24) Cash effects
Slide 47: Net financial expenses
Net financial expenses €m H1 2024 H1 2023 Net interest expenses (19) (18) Interest income 14 9 Interest expenses (32) (27) FX effects 14 (15) Balance sheet translation 23 (23) Derivatives (9) 8 Other net financial expenses (8) (19) Present value adjustment (4) (4) Factoring costs (5) (5) Pension cha
Slide 48: Reconciliation of adjusted earnings
Reconciliation of adjusted earnings Items excluded Items excluded Items excluded from adjusted EPS: from adjusted H1 2024 H1 2023 from adjusted H1 2023 (€m) H1 2024 performance adjusted reported performance adjusted EBITA1 174 16 190 184 16 200 ⁃ €(15)million of expenses relating to digital architec
Slide 49: Impact of foreign currency movement
Impact of foreign currency movement EBITA sensitivity in H1 2024 2023 add H1 2024 exchange rates Appreciation vs EUR Depreciation vs EUR Increase / Increase / H1 2023 H1 2023 H1 2023 H1 2024 (decrease) (decrease) Opening Closing Average Average Unit in EBITA (€m) Unit in EBITA (€m) EUR: Rate Rate Ra
Slide 50: Return on invested capital
Return on invested capital Group ROIC1 H1 2024 H1 2023 Average Invested Capital (€m) 3,056 2,780 NOPAT (€m) 136 154 ROIC (%) 8.8% 11.1% Vertical integration ROIC H1 2024 H1 2023 Average Invested Capital (€m) 495 466 NOPAT (€m) 6 17 ROIC (%) 2.6% 7.3% Refractory ROIC H1 2024 H1 2023 Average Invested
Slide 51: Guidance detail
Guidance detail P&L Q3 2024 update HY 2024 guidance 2023 actual Base business slight decline in volumes, Base business flat volumes, M&A full year effect Revenues (i) Volumes 3% revenue decline from volumes M&A full year effect adds up to 5% adds 10% 13% revenue growth from pricing and Revenues (ii)
Slide 52: M&A strategy in progress
M&A strategy in progress 10 acquisitions completed since December 2021 in key target geographies and product segments Europe/Türkiye China All acquisitions have been focused in a priority product segment or target Industrial geography Consideration: €46m Non-basic Revenue: €41m Consideration: €5m Ea
Slide 53: Important notice
Important notice 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, con
Slide 54: Investor Relations
Investor Relations Chris Bucknall Head of Investor Relations and Sustainability +43 699 1870 6490 | chris.bucknall@rhimagnesita.com Biko Hüster Investor Relations Manager +43 699 1870 6128 | biko.huester@rhimagnesita.com investor.relations@rhimagnesita.com RHI Magnesita Kranichberggasse 6 1120 Vienn
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