Rhi Magnesita Nv · LSE:RHIM
Rhi Magnesita Nv — H1 2022 Earnings Presentation
51 slides from Rhi Magnesita Nv's earnings presentation, Aug 1, 2022
Slide 1: Investor presentation
Investor presentation 1 August 2022
Slide 2: Agenda
Agenda 1 Introduction 2 H1 update 3 Financial review 4 Strategic initiatives 5 Summary and outlook 6 Q&A 7 Appendix 2022 Half Year Results | August 2022 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
Refractory applications Customer industries Main application Lifetime and costs Refractory characteristics Part of customers’ operational Steel 20 minutes to 2 months expenditure Basic oxygen furnace, 70% of revenues Electric arc furnace, ladles, flow control c.3% of customers’ costs Systems and sol
Slide 5: Customer and end user markets
Customer and end user markets % of 2021 revenue by BU % share of RHIM revenue by end market 13% Construction YoY (%) 1 6.0% 4.8% 4.5% 45% 2021 2022 2023 Vehicle production YoY (%) 1 71% 12.1% 17% 8.6% 5.1% 2021 2022 2023 10% Industrial production YoY (%) 1 6% 15% 7.4% 3.9% 3.7% 10% 8% 5% 2021 2022 2
Slide 6: Global leader in a highly fragmented market
Global leader in a highly fragmented market Growth opportunity through consolidation Global market share Regional market share % 1 Total market size: 10.5% Others c.€20bn South America 65 Africa 50 15% 10% North America 40 34% Middle East ex-Iran 40 Medium & small 4% Chinese companies India 25 4% 3%
Slide 7: Raw material and refractory process overview
Raw material and refractory process overview 2022 Half Year Results | August 2022 7
Slide 8: Vertical integration benefits
Vertical integration benefits Our magnesite raw material assets are amongst the lowest cost globally DBM 98: Indicative cost curve EBITA margin contribution Eskisher Brumado RHIM assets Vertical integration margin Global DBM assets (non RHIM) Refractory margin 2022 Half Year Results | August 2022 8
Slide 9: Solutions contracts
Solutions contracts RHI Magnesita can offer full heat management solutions to its customers Client benefit ✓ Reduced downtime ✓ Lower refractory consumption ✓ Lower energy and other raw materials consumption ✓ Higher productivity and cost savings RHI Magnesita benefit ✓ Market share gains ✓ Higher c
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 Solutions contracts are: % of Group revenue ⁃ c.5-7 years long, us
Slide 11: EAF transition in the steel industry
EAF transition in the steel industry Use of EAF technology is key to reducing CO2 emissions Existing process Tonnes CO2 per tonne of steel1 Future process EAF Steelmaking by region 2022 Half Year Results | August 2022 11 1. Using renewable electricity. With non-renewable electricity, DRI-EAF (Nat ga
Slide 12: H1 Update
H1 Update Stefan Borgas, CEO
Slide 13: Pricing and market share gains
Pricing and market share gains Price and volume growth drive higher revenues and margins Customer demand remained strong through H1 Price increases pass through higher costs € million Price increases of €293 million exceeded cost increases of €233 million ⁃ Group revenue +33%, constant currency +25%
Slide 14: Health and safety
Health and safety Focus on prevention and leading indicators LTIF and TRIF remain low Sustained improvement ⁃ LTIF 0.2 (H1 2021: 0.2) in injury rates since 2017 ⁃ TRIF 0.6 (H1 2021: 0.6) 1.5 Health and safety initiatives in 2022 1.0 ⁃ Improved tracking of leading indicators and near misses ⁃ Hand sa
Slide 15: Financial highlights
Financial highlights Revenue 1 Adjusted EBITA 1 Adjusted EBITA margin Cash returned to shareholders €1.6bn €188m 11.8% €47m 32.8% 47.0% 110bps Operating Cash flow 2 Capex Working Capital Net debt to adjusted intensity 3 EBITDA 4 €(76)m €58m 29.3% 2.7x 38.5% (36.7)% 10.8ppt 0.5x 1. Denoted on a repor
Slide 16: Steel business overview
Steel business overview Steel revenue increased by 35% to €1,150 million, +26% Revenue1 (€m) constant currency 22.4% RHIM steel volume growth of 4% materially ahead of 21.5% 21.6% market (WSA global steel production -5%, ex-China -3%) +35% 1,150 Group steel gross margin 90bps higher compared to H1 2
Slide 17: Steel performance by region
Steel performance by region Market share growth and pricing power RHIM Steel Division North Ameri ca Revenue H1 2022 Europe/CIS/Turkey Wes t Asia/India/Africa South America Chi na/East Asia RHIM North America Europe /CIS /Turkey China and East Asia 11% €327m €281m €121m 28% 16% €1,150m 26% 23% 14% 2
Slide 18: Industrial business overview
Industrial business overview Industrial division revenue increased by 28% to €444 million, +23% constant currency Revenue1 (€m) ⁃ Gross margin 60bps higher than H1 2022 26.8% 25.3% 25.9% Stable performance in Cement/Lime ⁃ Price increases offset lower volumes with +28% some winter repair season deli
Slide 19: Sustainability leadership
Sustainability leadership Step change in recycling rate following creation of Joint Venture with Horn & Co Higher recycling volumes driven by improving customer engagement and better sourcing of secondary raw materials, Use of secondary with rate increasing to 9.3% (H1 2021: 6.1%) raw material % of
Slide 20: Joint Venture with Horn & Co
Joint Venture with Horn & Co Europe’s largest source of reclaimed refractory material RHI Magnesita has entered into a Joint Venture with Horn & Co (51% share) Horn & Co sources refractory scrap from iron, steel, glass, lime, cement and non-ferrous metal plants Crushing, grinding and drying takes pl
Slide 21: Horn Joint Venture: Automated sorting of secondary raw materials
Horn Joint Venture Automated sorting of secondary raw materials 2022 Half Year Results | August 2022 21
Slide 22: Mitterdorf: Opening of recycling centre
Mitterdorf Opening of recycling centre 2022 Half Year Results | August 2022 22 April 2022
Slide 23: Financial review
Financial review Ian Botha, CFO
Slide 24: Profit and loss summary
Profit and loss summary High revenue and margin growth versus weaker H1 2021 €m H1 2022 H1 20211 Change Gross profit increased to €373 million (H1 2021: €272 Revenue 1,594 1,200 32.8% million) as price increases restore absolute profitability and margin Gross profit 373 272 37.5% Gross margin (%) 23
Slide 25: H1 2022 revenue bridge
H1 2022 revenue bridge €293 million price increase delivers revenue recovery €m 293 -34 12 1,594 50 73 1,273 1,200 H1 2021 Constant H1 2021 revenue Volume Price increase Revenue mix Strategic H1 2021 Revenue currency on a constant initiatives revenue adjustment currency basis 2022 Half Year Results
Slide 26: H1 2022 EBITA Bridge
H1 2022 EBITA Bridge Increased volumes and strategic savings offset by mix and supply chain cost inflation €m 293 24 233 2 188 17 128 9 137 H1 2021 Constant H1 2021 EBITA Sales Price increase Mix Higher costs Other H1 2022 EBITA currency constant volume EBITA adjustments currency increase 2022 Half
Slide 27: Cost outlook
Cost outlook Further cost inflation expected from energy and labour Cost of Goods Sold Raw material outlook Energy outlook Li kely to maintain elevated levels Energy s upply risk in Europe due to Russia/Ukraine conflict. Cost inflation in energy, labour, raw material and freight Rebased to 100 135 2
Slide 28: Raw material prices
Raw material prices Prices increased and held higher levels year-on-year Raw material prices1 High grade DBM (97% - China) Rebased to 100 Medium grade DBM (90% - China) High grade DBM (95% - Europe) RHIM weighted average DBM % movement from 30 June 2021 % movement from 31 December 2021 (13)% 6% (0)%
Slide 29: EBITA margin restored to 11.8%
EBITA margin restored to 11.8% Pass through of raw material, freight and energy costs RHI standalone RHI Magnesita H1 H2 2021 H1 2022 2021 Refractory EBITA (€m) 91 108 134 13.9% 14.0% Vertical integrated EBITA 11.5% 11.8% 37 45 54 (€m) 11.0% 9.7% 5.0% 5.5% 2.4% 3.2% 3.4% 7.7% Increasing market price
Slide 30: Working capital
Working capital Increased working capital in H1 due to higher inventory value and accounts receivable, expected to reduce in H2 Working capital balances Working capital intensity Inventory Inventory increase caused by (after Working Capital Finance) higher value stock, volumes 33.6% 33.5% reduced in
Slide 31: Net debt, gearing and liquidity
Net debt, gearing and liquidity Modest reduction in net debt over H2 2022 expected, with gearing towards 2.0x Leverage of 2.7x4 above target range of 0.5-1.5x Net debt and liquidity (€m) ⁃ Working capital remains at elevated levels to ensure 2.6x 2.7x security of supply for customers 2.1x ⁃ Target t
Slide 32: Strategic initiatives
Strategic initiatives Stefan Borgas, CEO
Slide 33: Sales strategies update
Sales strategies update Flow Control revenue Solutions contracts € million and % of Group revenue % of Group revenue 16.9% 15.6% % of Group revenue Flow Contol revenue1 249 203 Product plus service Product only 29% 32% Solution H1 2021 H1 2022 H1 2021 H1 2022 India China € million and % of Group rev
Slide 34: Leoben Flow control Academy
Leoben Flow control Academy 2022 Half Year Results | August 2022 July 2022 34
Slide 35: Production Optimisation Plan update
Production Optimisation Plan update Rationalise, modernise and reduce production costs, moving capacity closer to our customers Project Status Strategic initiatives aim to generate cumulative annual EBITA contribution of €110 million from cost savings Hochfilzen Majority of projects now complete:
Slide 36: Hochfilzen: Opening of the European Dolomite Hub
Hochfilzen Opening of the European Dolomite Hub 2022 Half Year Results | August 2022 April 2022 36
Slide 37: Radenthein Automation
Radenthein Automation 2022 Half Year Results | August 2022 April 2022 37
Slide 38: Summary and outlook
Summary and outlook
Slide 39: Resilient track record through the cycle
Resilient track record through the cycle The Group has a strong track record of maintaining margins throughout economic cycles Refractories are essential for modern life, a non-discretionary product that is vital for Dotcom crash RHI RHI Magnesita industrial production EBITDA and recession Global fi
Slide 40: Summary and outlook
Summary and outlook The leader of the global refractory industry We are continuing our strategic transformation ⁃ Production Optimisation Plan completion in 2023 ⁃ Strong growth in new markets of India and China ⁃ Successful trial to sales conversions in Flow Control ⁃ M&A progress in Turkey, China
Slide 41: Q&A
Q&A
Slide 42: Appendix
Appendix
Slide 43: Guidance
Guidance Total capital expenditure: €200m ⁃ Maintenance capex: €85m ⁃ Project capex: €115m Depreciation: €125m Amortisation: €25m Net interest expense: €25m (excluding pensions of €6m) Adjusted effective tax rate: 23 - 25 %1 Strategic initiatives in 2023: €150 – 170 million ⁃ Cumulative EBITA benefi
Slide 44: Capital allocation
Capital allocation RHI Magnesita allocates capital to support its long-term strategy, seeking to deliver attractive shareholder returns over the medium term 2.7x leverage currently above targeted range but to reduce in H2 Organic investments: ⁃ €36 million project CAPEX in H1, further c.€80 million
Slide 45: Net debt increase driven by working capital
Net debt increase driven by working capital Change in net debt (€m) 18 10 14 1,238 47 12 36 12 36 266 -4 22 1,014 -245 Net debt Adjusted Working Other assets Maintenance Net finance Cash tax Restructuring Project Dividend M&A 1 FX Other Net debt FY 2020 EBITDA capital and capex charges Capex H1 2021
Slide 46: Impact of foreign currency movement
Impact of foreign currency movement EBITA sensitivity in H1 2022 H1 2022 exchange rates Appreciation vs EUR Depreciation vs EUR Increase / Increase / HY 22 HY 22 HY 22 HY 21 (decrease) (decrease) Opening Closing Average Average Unit in EBITA (€m) Unit in EBITA (€m) EUR: Rate Rate Rate Rate USD -1 ce
Slide 47: Reconciliation of adjusted earnings
Reconciliation of adjusted earnings HY 2022 Adjustment HY 2022 EBITA adjustments: €m Reported items Adjusted ⁃ €4 million relating to write downs in Russia of bad debt and inventory EBITA 177 11 188 ⁃ €2 million adjustment for the Amortisation (13) 13 valuation of Net finance costs (22) 3 (19) the u
Slide 48: Capital expenditure returning to lower levels
Capital expenditure returning to lower levels €200 million capital expenditure expected Capital expenditure (€m) Project Capex in 2022 Maintenance Capex 252 ⁃ Increase of €15 million due to FX; depreciation of the euro against BRL 200 ⁃ Increase of €6 million due to investment in alternative fuels d
Slide 49: ESG 2025 targets
ESG 2025 targets 2018 H1 2022 Base year CO2 emissions Reduce by 15% CO2 per tonne of product by 2025 and aim for 1.8 1.9 (t/t) carbon neutrality in the long term Energy efficiency Reduce by 5% per tonne of product by 2025 2.1 2.0 (MWh/t) NOx and SOx Reduce by 30% by 2027 (vs 2018), China target star
Slide 50: Group history
Group history 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 Magnesite Company) f
Slide 51: Disclaimer
Disclaimer Financial information contained herein, as well as other operational information, were not audited by independent auditors an d may include forward-looking statements and reflects the current views and perspectives of the management on the evolution of macro-economic environment, conditio