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RHI and Magnesita to combine to create a leading refractory company

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Preliminary results 2016

Tue Mar 14 11:00:00 CET 2017

The RHI Group’s revenue amounted to € 1,651.2 million in the past financial year compared with € 1,752.5 million in the year 2015. This decline is primarily attributable to the continued moderate steel production and lower project deliveries in the business segments outside the steel industry.  

The operating EBIT amounted to € 123.2 million in the past financial year and was maintained at the level of 2015 despite weak markets and one-off costs of roughly € 12 million related to the planned combination with Magnesita. This positive operating business development is predominantly attributable to the good earnings situation in the Steel Division, the improved operating EBIT in the Raw Materials Division due to good capacity utilization at the Austrian raw material plants and cost reductions in all areas of the company.

EBIT amounted to € 116.1 million in the past financial year and includes a full impairment of the assets of the two production sites for fused cast products for the glass industry totaling € 8.0 million. Moreover, negative effects on earnings of € 4.6 million from the deconsolidation of the US subsidiary RHI Monofrax, LLC following its sale and € 4.8 million related to the social plan for personnel cuts and the reorganization of the production portfolio at the Norwegian site in Porsgrunn are included. In contrast, a positive effect of € 10.1 million resulted from the measurement of the power supply contract in Norway.  

Finance costs amounted to € (21.2) million in the year 2016 and the tax rate was 28.3%. Profit after income taxes amounted to € 75.9 million and earnings per share to € 1.86.

Financial and asset position
Due to the further reduction of working capital by roughly 13% and the good operating performance, free cash flow of € 109.8 million was generated and net financial liabilities were reduced from € 397.9 million in 2015 to € 332.8 million in 2016. Net financial liabilities correspond to roughly 1.8 times the EBITDA of the year 2016. The RHI Group’s equity amounted to € 524.0 million at December 31, 2016 compared with € 491.4 in the previous year. The equity ratio improved from 27.2% to 29.2% in the year 2016.

Steel Division
The Steel Division’s sales volume rose by 4.9% from roughly 1,152,000 tons in the previous year to roughly 1,209,000 tons in the past financial year. This is primarily attributable to a significant expansion of business in the basic mixes segment, the most important segment in terms of volume. In addition to a major contract in Ukraine, the improved utilization of electric steel plants also contributed to this development. Revenue declined by 2.6% from € 1,099.9 million in the previous year to € 1,071.4 million despite the increase in sales volume, above all due to product mix effects. This is attributable to a weaker business development in South America, Europe and China and to the extension of the product portfolio by lower-performance products. Although these products support the development of sales volume and margins, they lead to lower revenue because of the lower price level. The operating EBIT improved from € 64.3 million in the previous year to € 76.2 million in the past financial year due to better utilization of the production capacities and a positive margin development in nearly all regions. It includes external costs of roughly € 8 million for the financial year 2016, which are related to the planned combination of RHI und Magnesita.

Industrial Division
Sales volume in the Industrial Division declined by 3.4% compared with the previous year and is attributable to lower deliveries in nearly all business units. Revenue dropped by 12.4% from € 614.6 million in the previous year to € 538.6 million. In the cement/lime business unit, these reductions result from the lack of new construction projects and a declining construction industry in China, and in the glass business unit from the sale of the US subsidiary RHI Monofrax, LLC in June 2016. In the environment, energy, chemicals business unit, a major contract in the coal and petroleum coke gasifier segment in India delivered in the previous year was not compensated. The decline in revenue in the nonferrous metals business unit is based on weaker demand in the important copper and nickel segment. The operating EBIT dropped from € 65.0 million in 2015 to € 44.5 million in the past financial year due to lower deliveries and the resulting weaker utilization of production capacities. It includes external expenses of roughly € 4 million in the year 2016, which are related to the planned combination of RHI and Magnesita.

Raw Materials Division
The Raw Materials Division’s external sales volume rose significantly from roughly 297,000 tons in the previous year to roughly 342,000 tons in the past financial year. The increase by 15.2% is above all attributable to the increase in the sale of raw dolomite in Italy, which makes a large contribution in terms of volume. However, due to the low price per ton, the contribution in terms of value is minor. Revenue decreased by 2.4% from € 272.6 million in the previous year to € 266.0 million in the past financial year. The operating EBIT turned around from € (5.2) million to € 2.5 million in the past financial year, mainly because of the good capacity utilization at the two Austrian raw material plants, which predominantly produce basic mixes for the steel industry, especially for the use in electric arc furnaces. This is an immediate effect of the Steel Division’s increase in sales volume in this product segment by more than 9% compared with the previous year to more than 500,000 tons.

Outlook
In its forecast published in January 2017, the International Monetary Fund expects global economic growth of 3.4% in the current year after 3.1% in 2016. However, there is considerable uncertainty regarding the effects of the policies of the newly elected US government. Although the environment in the advanced economies improved in the second half of 2016, the pace of growth in the emerging markets will continue to exercise a significant influence on the global economic situation. Based on a study of mid-November 2016, the research institute CRU expects steel production in China to decline by roughly 2% in the year 2017 and steel production outside China to grow by an ambitious 6%. The emerging markets are also among the main drivers in this area. Based on these estimates, RHI expects a more positive market environment in 2017. The focus will stay on the generation of free cash flow in the current financial year in order to reduce net debt further. RHI is currently working on meeting the conditions precedent to the successful closing of the planned combination with Magnesita and is preparing the integration of the two companies. In the context of these activities, external costs will be incurred. The Management Board of RHI AG intends to propose a dividend of € 0.75 per share to the Annual General Meeting on May 5, 2017, the same as in the previous year.

Preliminary Key Figures 2016

in € million 

 2016

2015

  Delta

       

  4Q/16

 4Q/15

  Delta

Sales volume (thousand tons)
Steel Division
Industrial Division
Raw Materials Division

Revenues
Steel Division
Industrial Division
Raw Materials Division
     External revenues
     Internal revenues
EBITDA
EBITDA margin
Operating EBIT 1)
Steel Division
Industrial Division
Raw Materials Division
Operating EBIT margin
Steel Division
Industrial Division
Raw Materials Division 2)
EBIT
Steel Division
Industrial Division
Raw Materials Division
EBIT margin
Steel Division
Industrial Division
Raw Materials Division 2)
Net finance costs
Share of profit of joint ventures
Profit before income taxes
Income taxes
Income taxes (in %)
Profit for the year

Earnings per share in € 3)

1,979
1,209
428
342

1,651.2
1,071.4
538.6

41.2
224.8
189.1
11.5%
123.2
76.2
44.5
2.5
7.5%
7.1%
8.3%
0.9%
116.1
76.3
32.0
7.8
7.0%
7.1%
5.9%
2.9%
(21.2)
10.9
105.8
(29.9)
28.3%
75.9

1.86

1,892
1,152
443
297

1,752.5
1,099.9
614.6

38.0
234.6
140.0
8.0%
124.1
64.3
65.0
(5.2)
7.1%
5.8%
10.6%
(1.9)%
37.5
63.4
58.9
(84.8)
2.1%
5.8%
9.6%
(31.1)%
(19.3)
9.2
27.4
(9.8)
35.8%
17.6

0.40

4.6%
4.9%
(3.4)%
15.2%

(5.8)%
(2.6)%
(12.4)%

8.4%
(4.2)%
35.1%
3.5pp
(0.7)%
18.5%
(31.5)%
148.1%
0.4pp
1.3pp
(2.3)pp
2.8pp
209.6%
20.3%
(45.7)%
109.2%
4.9pp
1.3pp
(3.7)pp
34.0pp
(9.8)%
18.5%
286.1%
(205.1)%
(7.5)pp
331.3%


511
300
131
80

423.9
268.2
145.1

10.6
51.7
40.4
9.5%
25.2
13.1
13.9
(1.8)
5.9%
4.9%
9.6%
(2.9)%
15.0
13.2
6.0
(4.2)
3.5%
4.9%
4.1%
(6.7)%
(4.7)
3.5
13.8
(1.9)
13.8%
11.9

0.29

488
269
136
83

440.0
257.8
171.2

11.0
49.9
(2.3)
(0.5)%
32.7
13.6
24.3
(5.2)
7.4%
5.3%
14.2%
(8.5)%
(53.9)
12.7
18.2
(84.8)
(12.3)%
4.9%
10.6%
(139.2)%
(3.3)
2.5
(54.7)
16.3
29.8%
(38.4)

(0.98)

4.7%
11.5%
(3.7)%
(3.6)%

(3.7)%
4.0%
(15.2)%

(3.6)%
3.6%
1,856.5%
10.0pp
(22.9)%
(3.7)%
(42.8)%
65.4%
(1.5)pp
(0.4)pp
(4.6)pp
5.6pp
127.8%
3.9%
(67.0)%
95.0%
15.8pp
0.0pp
(6.5)pp
132.5pp
(42.4)%
40.0%
125.2%
(111.7)%
(16.0)pp
131.0%

 

1) EBIT before losses of derivatives from supply contracts, impairment losses and restructuring effects
2) based on internal and external revenues
3) basic and diluted

Preliminary key figures in € million

  2016

2015

  Delta

Balance sheet total
Equity
Equity ratio (in %)
Investments in PP&E and intangible assets
Net debt
Gearing ratio (in %)
Net debt / EBITDA
Working capital
Working capital (in %)
Capital employed
Return on average capital employed (in %)
Net cash flow from operating activities
Net cash flow from investing activities
Net cash flow from financing activities 

1,792.2
524.0
29.2%
70.8
332.8
63.5%
1.8
465.1
28.2%
1,095.8
7.6%
162.7
(52.9)
(80.7)

1,804.5
491.4
27.2%
80.8
397.9
81.0%
2.8
532.6
30.4%
1,176.5
2.3%
175.4
(47.2)
(124.4)

(0.7)%
6.6%
2.0pp
(12.8)%
(16.4)%
(17.5)pp
(1.0)
(12.7)%
(2.2)pp
(6.9)%
5.3pp
(7.2)%
(12.1)%
35.1%

Gearing ratio: net debt / equity
Working Capital: Inventories + Trade receivables and receivables from long-term construction contracts – Trade payables – Prepayments received
Capital Employed: Property, plant and equipment + Goodwill + Other intangible assets + Working Capital
Return on average capital employed: (EBIT – Taxes) / average Capital Employed