RHI Magnesita announces the finantial results for 2023

2024-03-01

Mar. 1, 2024 - RHI Magnesita, the leading global supplier of refractory products, systems and solutions, announces its results for the financial year 2023. RHI Magnesita delivered a strong financial performance in 2023 despite challenging market conditions. Revenue was €3,572 million, increased by 8% mainly driven by contribution from acquisitions, offsetting a demand driven 5% decline in sales volumes in the base business. The company delivered a 7% increase in Adjusted EBITA to €409 million (2022: €384 million), as M&A, cost saving initiatives and resilient pricing offset the underlying weakness in customer demand. Adjusted operating cash flow increased by 166% to €413 million.

During the year, RHI Magnesita made significant progress on both its M&A strategy and delivering the strategic cost savings and sales initiatives targets that were set in 2019. The results reflect the stepwise improvements in operations, prioritising the needs of customers at all times, sustainability leadership, acquisitions and strategic delivery.

Commenting on the results, Stefan Borgas, CEO RHI Magnesita, said: “During a period of historic low demand from customers and low raw material prices, RHI Magnesita has demonstrated good resilience. This was achieved by the focused investments of the past years into improving productivity in our global production network, by the contributions of the newly acquired businesses and by providing innovative solutions for our customers in many regions and markets. The energy of our customers and the passion of our employees and business partners will continue to support these three value drivers in the next years. In the longer term we are committed to developing technologies to reduce or eliminate CO2 emissions from our production process and to assist our customers in reducing their own emissions, which will require significant capital investments.”

Market leadership position established in India

During the year, RHI Magnesita made significant progress on its M&A strategy with the completion of six acquisitions in high priority geographic or product markets, bringing the total number of businesses acquired since December 2021 to nine. The customer offering was broadened through acquisitions in the alumina-based refractories, process industries and flow control segments. M&A contributed €56 million of Adjusted EBITDA in 2023, significantly exceeding guidance of c.€40 million.

RHI Magnesita has now established a market leadership position in India, the world’s fastest growing major refractory market, with nine production facilities and a broad-based refractory business serving both steel and industrial customers. The acquisitions of Hi-Tech in Jamshedpur and the Indian refractory business of DBRL have substantially improved RHI Magnesita’s regional footprint. The expanded plant network and immediately available low-cost production capacity in India will increase RHI Magnesita’s competitiveness in the region for both local sales and potential new export opportunities in West Asia, Africa and the Middle East.

A continuation of the M&A strategy to further complement the global business is underway, with a focus on complementary product areas and geographies in which RHI Magnesita is under-represented.

Ongoing focus on operational excellence and business agility

The investments RHI Magnesita has made in its production network since 2019 combined with further actions taken in response to global supply chain and energy market volatility in 2022 have created a more agile and responsive business. The ongoing focus on operational excellence, planning, logistics, inventory management and customer satisfaction are the key foundations of the improved operating performance that has been delivered in 2023.

Customer surveys reported strong improvements in the company’s net promoter score. Working capital intensity was reduced to 24%, with inventories held at the optimal level to ensure reliable deliveries to our customers. Consistency and reliability were the foundations for maintaining pricing, even whilst input costs have been falling across the refractory industry. To further improve operations, increase productivity, reduce inventory and improve customer experience, RHI Magnesita will rebuild its business processes and radically modernise its digital architecture over the next three years. This will further improve RHI Magnesita’s operational delivery capabilities and customer service.

Sustainability performance

RHI Magnesita remains committed to investing in the development of new technologies to deliver decarbonisation, to offering customers low or zero CO2 footprint refractory products and providing them with information to make sustainable procurement decisions. During 2023, RHI Magnesita decided to invest a further €5 million in MCi Carbon, an Australia based developer of mineralisation technology which can efficiently bind CO2 into saleable solid carbon-negative materials, permanently removing emissions from the atmosphere. The viability of this technology is already being assessed at RHI Magnesita’s operational sites in Europe. The company is also conducting nine other pilot projects and trials of alternative technologies to progress on its decarbonisation pathway.

A core element of RHI Magnesita’s strategy is to be the sustainability leader in the refractory and refractory raw materials industries. The company committed to six sustainability targets to be met by 2025 which are in alignment with the UN sustainable development goals. RHI Magnesita is progressing well in each of the target areas, although further work is now required to maintain improvements in energy consumption and CO2 intensity following the recent acquisitions.

2024 Outlook

Construction and transportation industries are the main drivers of customer demand and both end markets remain subdued at present in all geographies except India. Investment projects, especially in the glass and non-ferrous markets have peaked in 2023 and deliveries will decline in 2024 and beyond. RHI Magnesita has taken pre-emptive action to preserve margins and is well positioned to increase output into a recovery, with significant operational gearing and fixed cost absorption benefits to be realised when customer demand returns. The timing of such recovery remains uncertain. Production is planned to increase in 2024 to match sales volumes, as inventory coverage ratios are now at target levels. Sales volumes in the base business excluding M&A in 2024 are assumed to be in line with 2023, whilst the full year effect of 2023 M&A should increase shipped volumes in 2024 by up to 10%.

Overall, RHI Magnesita has navigated significant challenges in 2023 whilst also continuing to build a stronger business through M&A and efficiency improvements.

The full year annualisation of earnings from M&A plus synergies will support financial performance in 2024 and beyond as these new businesses are being integrated into the global network.