RHI Magnesita improves margins as end markets remain solid
Updated : 09:17
RHI Magnesita, a supplier of heat-resistant products for use in furnaces, incinerators and the like, said it had continued to improve margins while its end-markets remained "solid".
The Vienna-headquartered FTSE 250 company, created by the 2017 merger of Austria's RHI with Brazilian rival Magnesita, said raw materials prices remained stable since the significant price rises in the second half of 2017.
RHIM said its integrated model was continuing to benefit from this "structurally changed environment" as China's government controls reduce raw material output, which is expected to continue in the longer term.
The benefits of last year's merger are expected to product synergies of at least €60m this year, rising to €110m by 2020.
Effects of the US-China trade skirmish continued to be observed but RHI said is has to date "been cushioned from any significant impact from these developments by its diversified production base and client base".
Directors have completed the purchase price allocation process, which reviewed the fair value of fixed and intangible assets, and now expect total depreciation of roughly €125m and amortisation of €25m in the financial year 2018 and in subsequent years. Including the full impact of these adjustments, first half adjusted EBITA was €209m, rather than the €218m initially reported, implying an adjusted EBITA margin of 13.8% rather than 14.5%.
"The strong trading performance reported to date in 2018 continues, supported by solid demand from the Group's end markets, the benefits of raw material integration and the realisation of synergies. Therefore, save for the PPA-related adjustments, management expectations for full year 2018 operating results remain unchanged."
Broker Peel Hunt noted that global steel production is up 4.7% year-to-date with North America notably strong being up 9% in September while Europe is a little slower, which is characterised by European production being up 0.2% in September compared to +1.3% year-to-date. In the Industrial division, nonferrous has performed well, cement/lime continues to be held back by reduced dement production in China while process was flat.