TIDMRHIM
RNS Number : 6196R
RHI Magnesita N.V.
01 July 2020
RHI Magnesita N.V.
("RHI Magnesita" or the "Company" or the "Group")
TRADING UPDATE
RHI Magnesita N.V. (LSE: RHIM), the leading global supplier of
refractory products, systems and solutions, today provides an
update on current trading and measures being taken in response to
the COVID-19 pandemic, ahead of the publication of its Half Year
Results on 5 August 2020.
Summary
The business has responded well to the challenges presented by
COVID-19. Whilst volumes have declined significantly in the second
quarter 2020, in-line with our customers' volumes, the business
remains resilient, particularly with regards to liquidity. In
addition, we are continuing to take action to accelerate the
delivery of our strategy and to strengthen the business for the
longer term.
Challenging environment in Q2 2020
The primary focus of the business has been on the health and
safety of employees, customers and business partners. The Company
has also continued to supply customers seamlessly and maintained a
fully functioning supply chain.
Consistent with our expectations at the time of the Q1 2020
Trading Update on 5 May 2020, there has been an unprecedented
slowdown in customer activity and a significant fall in demand in
May and June. This effect has caused a material drop in RHI
Magnesita's revenues across both the Steel and Industrial divisions
in the second quarter (down almost 20% versus Q1 2020, in line with
our scenario planning). Within our business units, Cement and Steel
MEA/Asia have remained resilient, offset by further weakness in
Steel Europe, Steel South America and Steel India. Activity levels
are likely to remain subdued through July and August, with limited
visibility beyond this period.
Raw material prices fell over the first four months of the year,
due to over-supply from China. There has been some stabilisation in
prices in May and June and at current raw material prices the Group
continues to derive a positive margin from its backward
integration.
Focus on cash preservation and cost management
Against the challenging backdrop of COVID-19, mitigating actions
continue to be taken to minimise the financial impact, and the
business has moved swiftly to implement cost management and cash
preservation measures. These include, the temporary closure of
three plants in Europe and one plant in Mexico, the introduction of
short time working arrangements in some plants, the deferral of
EUR45 million of capital expenditure in 2020, no 2019 final
dividend being paid, and other fixed cost reduction actions. These
measures have resulted in the successful delivery of further
short-term cost savings in Q2 2020.
Accelerating strategy implementation
The Group is continuing to progress its longer-term strategic
initiatives. Embedding the learnings from COVID-19 and the
potential for a slower recovery in global economies, management
believes there is scope to both accelerate and increase the
anticipated benefits. These initiatives build on the strategic
themes previously outlined, of:
-- increased regionalisation, to match supply with local demand,
supported by greater decentralisation and local
decision-making;
-- increased flexibility in the cost base by reducing the proportion of fixed costs; and
-- increased digitalisation, particularly to support the solutions business model.
In particular, management:
-- is well advanced in lowering non-operational costs, reducing
the scale of the first three levels of management by 20%, effective
1 August 2020; and
-- has identified opportunities to extend the Group's Production
Optimisation Plan, which will increase the previously anticipated
EUR40 million of EBITA benefits, due by 2022.
Further details of these initiatives will be provided with the
Half Year Results in August.
Strong financial position
The Group continues to have a strong focus on working capital
management, especially inventories and accounts receivable. Working
capital reduced in the second quarter, although partially offset by
lower levels of working capital finance. The Group continues to
have a strong financial position with a resilient balance sheet,
liquidity of EUR1.1 billion, no material debt maturity before 2023
and significant headroom under its net debt to EBITDA covenant.
Conference call
The Company will host a conference call at 8.00am this morning
to discuss the trading update. The conference call details are: +44
20 3936 2999, with the access code: 405255
Or join by webcast:
https://www.investis-live.com/rhimagnesita/5ed61fe11e16cc0a000ecb85/uems
Further information:
Investors: Guy Marks, Head of Investor Relations +44 7932 013357
guy.marks@rhimagnesita.com
Press: Matt Denham, Teneo + 44 7825 735596
About RHI Magnesita
RHI Magnesita is the leading global supplier of high-grade
refractory products, systems and solutions which are critical for
industrial high-temperature processes exceeding 1,200degC in a wide
range of industries, including steel, cement, non-ferrous metals
and glass. With a vertically integrated value chain, from raw
materials to refractory products and full performance-based
solutions, RHI Magnesita serves customers around the world, with
around 13,000 employees in 35 main production sites and more than
70 sales offices. RHI Magnesita intends to leverage its global
leadership in terms of revenue, scale, product portfolio and
diversified geographic presence to target strategically those
countries and regions benefitting from more dynamic economic growth
prospects.
Its shares have a premium listing on the London Stock Exchange
(symbol: RHIM) and are a constituent of the FTSE 250 index. For
more information please visit : www.rhimagnesita.com
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END
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