Rhi Magnesita Nv · LSE:RHIM
Rhi Magnesita Nv — Q3 2018 Earnings Presentation
37 slides from Rhi Magnesita Nv's earnings presentation, November 2018
Slide 1: The driving force of the refractory industry
The driving force of the refractory industry Q3 2018 Trading Update pack November, 2018
Slide 2: Disclaimer
Disclaimer The consolidated financial statements subscribe for or purchase any securities, and presented here are consistent with the neither any part of this presentation nor any criteria of international accounting standards information or statement contained herein - IFRS issued by the Internatio
Slide 3: Q3 Overview
Q3 Overview
Slide 4: Q3 2018 - summary and outlook
Q3 2018 - summary and outlook Good trading performance in Q3 – continuing positive trends seen in H1 2018 Robust end-markets Strong customer response to the Group’s full portfolio and solution offering Stable raw material pricing Ongoing delivery of the merger synergies Continued margin progression
Slide 5: Resilient business model with little volatility across the cycle and low level of commoditisation
Resilient business model with little volatility across the cycle and low level of commoditisation Historic Gross Margin¹ Basic Materials RHI Magnesita 40% Markets 30% ⬢ Commoditized ⬢ Lower volatility 20% in cost due to Raw ⬢ Price takers of 10% significant Materials key raw vertical RHI Magnesita m
Slide 6: Continued EBITA margin progression, driven by synergies and backward integration
Continued EBITA margin progression, driven by synergies and backward integration H1 2018 margin bridge EBITA margin progression 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 1.013.8% 2.7% 13.8% 2.0 0.8 0.8 0.7 0.6 1.7 0.6 11.4% 0.9% 1.3% 9.6% 8.9% H1 20172 Synergies3 Volume3 Pricing3 H1 20
Slide 7: Increased synergy potential to be realised by 2020
Increased synergy potential to be realised by 2020 €110m ⬢ At least €60m synergies in the 2018 P&L and €110m in synergies to be achieved by 2020 ⬢ Expected total cash restructuring costs are projected to be €110-130m, with €75m of cash outflows disbursed SG&A during 2018 ⬢ Interest expenses reduced
Slide 8: Background on RHI Magnesita
Background on RHI Magnesita Q3 2018 Trading Update
Slide 9: Providing everything, for everyone, everywhere
Providing everything, for everyone, everywhere 10,000 14,000 Customers served globally Employees spread over 37 countries 35 180 Main production sites across Countries shipped worldwide 16 countries 13 €37m Raw material sites Annual investment in Research in 4 continents 9 Q3 2018 Trading Update
Slide 10: Compelling investment case
Compelling investment case Clear strategy and Strong market position with 15% global market share, clear leadership in Americas, 1 strong competitive Europe and Middle East with broadest value-added solution offering Opportunity to develop and leverage technology across regions and portfolio positio
Slide 11: Refractories are critical to all high-temperature industrial processes
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 protecting clients’ production
Slide 12: Refractories are continuously consumed during finished goods production
Refractories are continuously consumed during finished goods production Key industries Applications Replacement % of clients’ Refractory characteristics costs Consumable product Steel Basic oxygen-, 20 minutes to ~3.0% electric arc furnace 2 months Systems and solutions for casting ladles complete r
Slide 13: A complex range of tailored refractory products are required for each application
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 Monolithics and pre casts 5 6 8 4 Mixes 5 Pre Castables Functional products 7 9 6 Sli
Slide 14: Adding value through a full suite of products and services
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 Linings Service Limeston
Slide 15: Serving all blue chip clients in every industry
Serving all 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 15 Q3 2018 Trading Update
Slide 16: Globally positioned to reach clients everywhere
Globally positioned to reach clients everywhere Europe 23% North America 24% APAC 20% MEA-CIS 15% South America 18% Production facilities + More than 70 sales Raw material sites offices worldwide % revenues (2017) 16 Q3 2018 Trading Update
Slide 17: Strategy
Strategy Q3 2018 Trading Update
Slide 18: Build a global refractory leader with a distinctive customer proposition based on technology and cost competitiveness
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 Cost competitive and safe Worldwide presence with strong production network supported local organ
Slide 19: High market share in Europe and Americas with opportunities in India, China and CIS
High market 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 India Market Share 100m tonnes LOW Other CIS Asia China 4
Slide 20: Extend market position in high quality applications and strengthen non-basic mixes and functional products
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 ladles Basic Products
Slide 21: Top solution provider in the industry, investing in innovative technologies and digitalization
Top solution provider in the industry, investing in innovative technologies and digitalization Continue investing in R&D Develop into a system 1 to create products, which 3 supplier based on R&D, have a distinct competitive partnerships and selective advantage by costs or by acquisitions and gain 50
Slide 22: The industry's largest dedicated research team, pushing the boundaries of what is possible
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, from materials, robotics and Big Data, cente
Slide 23: On-site technical experts consult, develop and deliver innovative solutions directly to clients
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 and more. A combination of… …ensures cust
Slide 24: Cost competitive and safe production network supported by lowest cost G&A services
Cost competitive and safe production network supported by lowest cost G&A services ⬢ Reduce conversion & logistics costs and optimize FX changes tactically through the most efficient usage of the global production footprint ⬢ Run the lowest cost G&A services to support the daily business ⬢ Strictly
Slide 25: Unrivalled competitive advantage through vertical integration, in multiple sites
Unrivalled competitive advantage through vertical integration, in multiple sites 1.6 million 70% tonnes of raw vertical integration in materials produced dolomite and magnesite and Main raw material sites per year 50% for all raw materials Certainty of supply High quality materials Cost competitiven
Slide 26: Synergy opportunities across a range of business activities
Synergy opportunities across a range of business activities Opportunities 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 categories ⬢ Beneficial scal
Slide 27: Additional 'below the line' synergies are expected post-integration
Additional ‘below the line’ synergies are expected post-integration Opportunities Capex ⬢ Footprint optimization to reduce maintenance capex over next 2-3 years ⬢ Shift overall capex towards higher share of value & growth projects Working Capital ⬢ Reallocate production and shorten supply chain ⬢ Re
Slide 28: Financials
Financials Q3 2018 Trading Update
Slide 29: 2017 adjusted pro-forma revenue breakdown
2017 adjusted pro-forma revenue breakdown Total revenue: c.€2.7 bn by industry1 by geography ◼ North America 46% Cement / Lime ◼ Europe ◼ Asia Pacific ◼ South America ◼ MEA-CIS Non Ferrous Metals 26% Other Process Industries 28% 15% 26% 24% 18% 74% 23% 20% ◼ Industrial ◼ Steel 1 Revenue split consid
Slide 30: Adjusted pro-forma results
Adjusted pro-forma results Revenue (€m) EBITA (€m) 11.4% 13.8% +11% 9.1% 9.6% +25% +38.7% +79.3% 2,409 2,677 1,210 1,508 1,259 1,369 304 219 208 116 2016 2017 H1 2017 H1 2018 2016 2017 H1 2017 H1 20181 1: H1 2018 considering final PPA adjustment Leverage (€m) Working Capital Intensity2 (€m) 2.4 27.8
Slide 31: Capital structure
Capital structure Solid credit profile and commitment to de-leveraging the current business On 3 August 2018 the Company successfully raised a new unsecured US$600 million 5-year term loan and multicurrency revolving credit facility Capitalisation Table € millions Proceeds of the new facility will b
Slide 32: Capital strategy
Capital strategy Dynamic capital allocation over time, supporting long term strategy, providing flexibility for market opportunities and increasing shareholder returns Dividends Shareholder Returns Share buybacks Delever Operating Cash Flow Sustainability Capex Capital Allocation Drivers: ⬢ Growth p
Slide 33: Compelling investment case
Compelling investment case Clear strategy and Strong market position with 15% global market share, clear leadership in Americas, 1 strong competitive Europe and Middle East with broadest value-added solution offering Opportunity to develop and leverage technology across regions and portfolio positio
Slide 34: Appendix
Appendix Q3 2018 Trading Update
Slide 35: Integrated offer overview
Integrated offer overview ⬢ RHIM launched a tag-along offer to Magnesita’s minority shareholders on the same terms and conditions as that made to the Control Group: ⬢ Cash + shares: R$445.6m1 + 5 million shares ⬢ Cash only: (i) R$31.091 or (ii) R$35.56 per Magnesita share whichever is higher (amount
Slide 36: EBITDA Sensitivity on an annualised basis
FX EBITDA Sensitivity on an annualised basis H1 2018 Exchange Rates ∆ in EBITDA vs € Unit 1€= Closing rate Average rate (€m) USD +1 cent 4.30 USD 1.16 1.21 CNY +0.01 yuan -0.24 CNY 7.70 7.70 BRL +0.10 reais 2.12 BRL 4.49 4.08 INR +1 rupee 0.58 INR 79.78 79.13 36 Q3 2018 Trading Update
Slide 37: Alternative performance measures
Alternative performance measures In general, APMs are presented externally to meet investors' requirements for further clarity and transparency of the Group's underlying financial performance. The APMs are also used internally in the management of our business performance, budgeting and forecasting.