Jul. 28, 2021 - RHI Magnesita, the leading global supplier of refractory products, systems, and solutions, today announces its results for the first half year 2021. The company reports strong revenue momentum supported by high customer demand, offset by margin headwinds due to supply chain disruptions.
● Demand recovery continues with order book visibility into 2022 and sales volumes tracking ahead of management expectations.
● Material global supply chain challenges in H1 2021 resulted in significant delays and higher freight costs.
● Pricing pressure arose from additional supply chain costs and higher prices for externally purchased raw materials. This is to be passed on to customers through price increases in the second half of the year.
● RHI Magnesita is on track to achieve 2021 guidance of €310 million Adjusted EBITA with earnings weighted towards the second half, as expected.
● Strategic initiatives remain on track to deliver €140-€160 million of run rate EBITA contribution from 2022.
Commenting on the results, Chief Executive Officer, Stefan Borgas, said: “RHI Magnesita has successfully navigated significant challenges in the first half of the year caused by a sharp rebound in customer demand against a background of delays and cost increases in the global supply chain. Throughout, we have prioritized the sourcing and delivery of products for our customers. We have re-established our inventory levels and are now able to benefit from stronger market conditions and price increases contracted for the second half of the year. We are continuing to progress our cost saving initiatives and are also seeing real benefits from our sales strategies.”
Overview
The health and safety of all employees is RHI Magnesita’s top priority. The company follows a preventative approach to workplace safety and consistently achieves low injury rates. COVID-19 remained a challenge during the last months. RHI Magnesita assisted its employees and their families by issuing medical supplies and covering the cost of vaccination, when available. The total recordable injury frequency rate slightly increased to 0.6 per 200,000 hours worked (H1 2020: 0.5).
Revenue for the first half of 2021 was €1,200 million, an increase of 2.5% compared to the first half of 2020 on a reported basis. RHI Magnesita has navigated the significant challenges resulting from the COVID-19 pandemic and ensuing supply chain disruption and has progressed its longer-term strategic initiatives to build a stronger business as end markets recover.
RHI Magnesita’s ability to respond to the marked uptick in demand was hindered by industry-wide sea freight challenges. These included significantly reduced reliability of freight and elevated freight costs, and contributed to reduced raw material supplies, logistical difficulties, and long lead times. Mitigating actions have been implemented to meet strong contracted customer demand in H2, including increased inventory levels of both finished goods and raw materials, and the implementation of refractory price increases, including pass through of freight surcharges.
Sustainability is fundamental to RHI Magnesita’s long term strategy. The €50 million R&D investment towards CO2 reduction technologies is progressing well. The company commenced a partnership with Calix Limited to develop a Calix Flash Calciner at an RHI Magnesita site for the capture and storage of CO2.
Good progress has been made towards achieving the use of secondary raw material target of 10% by 2025, with use of secondary raw material increasing to 6.1% in H1 2021 (FY 2020: 5%). Engagement with customers on this topic is constantly improving.
Update on strategic initiatives
● RHI Magnesita has started to experience material benefits from its strategic initiatives in 2021 with an EBITA improvement of €23 million from ongoing cost saving initiatives.
● Regarding the company’s Production Optimisation Plan, at Hochfilzen, Austria, dolomite raw material production is on schedule to commence in Q4 2021, and the kiln installation is ongoing.
● At Radenthein, Austria, additional automated presses and unmanned vehicles have been installed, with further investments towards capacity expansion on track for completion in H2 2022.
● In Brumado, Brazil, earthworks and foundations are on track to complete by end of 2021, ahead of the new rotary kiln installation.
● In Contagem, Brazil, new presses are in commissioning and have started to deliver benefits, with the full upgrade due to complete in H1 2022.
● Capacity is being increased at Urmitz, Germany, with the installation of a new tunnel kiln, which commenced in H1 2021.
● RHI Magnesita continued to progress its sales strategies in H1 2021, developing the solutions model, increasing sales of flow control products, and targeting new markets. Digital products, services and heat management solutions are supporting sales growth or retention in each of these areas.
Outlook
Sales momentum has continued to build for the second half of the year, with a strong order book reflecting increased contracted demand from customers in the steel, cement, glass, and non-ferrous metals industries. Refractory margins are expected to improve in the second half-year as price increases are implemented against a backdrop of higher raw materials prices, strong demand for refractory products and as adjustments for additional freight costs are passed on to customers. Overall, RHI Magnesita remains on track to achieve 2021 guidance of €310 million Adjusted EBITA, with earnings weighted towards the second half.
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