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Preliminary results 2013 (ad hoc)

25. February 2014

Business Development In a persisting difficult market environment, the RHI Group’s sales volume fell by 6.0% from 1,850,000 tons to 1,739,000 tons due to weaker steel business in Europe and the Middle East, declining volume in the business unit cement and a lower number of new construction projects in the business unit environment, energy, chemicals.

Revenues amounted to € 1,754.7 million in the past financial year after € 1,835.7 million in the year 2012. The decline in revenues, which at 4.4% was slightly more moderate than the decline in volume, was primarily attributable to the contribution to revenues by the 69.6% share in the Indian company Orient Refractories Ltd., which was acquired in late April, and improvements in the product mix.

The operating result before restructuring effects dropped significantly from € 164.4 million in the previous year to € 126.8 million in the year 2013. This development was caused especially by difficulties in the fusion line in Porsgrunn, Norway, which burdened the operating result with more than € 30 million, and weaker capacity utilization of the production plants resulting from the decline in sales volume. The operating result also includes write-offs totaling € 6.5 million for the engineering and the steel construction of the investment project in Brazil, which was stopped, and negative currency effects of € 16.9 million.

The restructuring result of € (15.7) million includes net proceeds from the termination of the US Chapter 11 proceedings amounting to € 76.0 million on the one hand, and restructuring expenses of € 24.7 million for the closure of the site in Duisburg, Germany, an impairment of € 65.3 million based on the revised assumptions for the plant in Norway and a write-down of € 1.7 million resulting from product and process optimizations at the raw materials plant in Dashiqiao, China, on the other hand.

EBIT in the past financial year amounted to € 111.1 million after € 167.6 million in the year 2012. The EBIT margin fell from 9.1% to 6.3% in 2013.

The profit for the year thus amounted to € 63.4 million in 2013 after € 113.5 million in the previous year. Earnings per share declined from € 2.85 to € 1.57. The Management Board of RHI AG will propose a dividend of € 0.75 to the Annual General Meeting on May 9, 2014.

Financial and Assets Position Net cash flow from operating activities increased from € 161.1 million in the year 2012 to € 171.5 million in the year 2013 due to net cash inflow of € 24.8 million resulting from the termination of the US Chapter 11 proceedings.

After the record level realized in the previous year, net cash flow from investing activities decreased from € (165.9) million to € (125.1) million in the year 2013, which primarily resulted from the increase in self-supply with raw materials, with a positive effect from the sale of non-current assets and land in Turkey, Germany, Austria and Chile, which added up to € 6.9 million (previous year: € 8.6 million).

The balance sheet total of the RHI Group declined by 6.8% from € 1,849.6 million in the previous year to € 1,724.0 million in the year 2013, which was primarily attributable to a decrease in non-current assets resulting from an impairment made for the plant in Porsgrunn, Norway, and to repayments.

The equity of the RHI Group amounted to € 485.5 million at December 31, 2013 compared with € 482.1 million in the previous year. As a result of the lower balance sheet total, the equity ratio rose from 26.1% to 28.2% in the year 2013.

The consolidated statement of financial position as of December 31, 2013 shows net financial liabilities of € 422.9 million (previous year: € 418.5 million). That corresponds to roughly 1.6 times the EBITDA of the year 2013.

Steel Division In a challenging market climate, sales volume of the Steel Division declined by some 5% year-on-year to 1,187,000 tons due to weaker business in Europe and the Middle East. In contrast, revenues were maintained nearly constant at € 1,097.5 million after € 1,112.7 million in the previous year due to the initial consolidation of the 69.6% share in the Indian Orient Refractories Ltd. (ORL), which was acquired in late April, and improvements in the product mix. The operating result amounted to € 64.4 million in the past financial year after € 54.0 million in the comparative period and includes write-offs of € 6.5 million for the engineering and the steel construction of the investment project in Brazil, which was stopped. The operating result margin rose from 4.9% in the previous year to 5.9% and reflects the focus on sustainable profitability.

Industrial Division Sales volume in the Industrial Division dropped by roughly 7% compared with the previous year to 439,000 tons due to a decline in the number of construction projects in the business unit environment, energy, chemicals and decreasing volume in the business unit cement. The decline in revenues from € 673.9 million in the year 2012 to € 619.0 million in the year 2013 is primarily attributable to weak demand in the business units glass and environment, energy, chemicals as well as the fact that a major project in the ferrochrome segment was delivered in the previous year. The operating result dropped significantly from € 91.8 million to € 70.2 million in the year 2013 due to a shift in product mix. Consequently, the operating result margin fell from 13.6% in the previous year to 11.3%.

Raw Materials Division Revenues of the Raw Materials Division amounted to € 274.4 million in the past financial year after € 237.6 million in the year 2012. Of this total, deliveries to the Steel and Industrial Divisions of the RHI Group accounted for € 236.2 million and external customers for € 38.2 million (previous year: € 188.5 million and € 49.1 million respectively). The operating result dropped from € 18.6 million to € (7.8) million in the year 2013 as a result of difficulties in the fusion line in Norway. Consequently, the operating result margin fell from 7.8% in the previous year to (2.8)%.

Outlook Provided that the macroeconomic environment remains stable and exchange rates do not change in 2014, RHI expects an increase in revenues by roughly 3% compared with the year 2013 and an operating result margin between 8% and 9% including the negative effects from Norway in the range of € 15 to 20 million. The RHI Group will make investments totaling approximately € 75 million in the year 2014.

Preliminary key figures in € million   2013 20121)   Delta
Balance sheet total 1,724.0 1,849.6 (6.8)%
Equity 485.5 482.1 0.7%
Equity ratio (in %) 28.2% 26.1% 2.1pp
Investments in PP&E and intangible assets 89.4 167.9 (46.8)%
Net debt 422.9 418.5 1.1%
Gearing ratio (in %) 2) 87.1% 86.8% 0.3pp
Net debt / EBITDA 1.6 1.8 (0.2)
Working capital 481.0 479.6 0.3%
Working capital (in %) 27.4% 26.1% 1.3pp
Capital employed 1,138.8 1,181.8 (3.6)%
Return on capital employed (in %) 7.3% 11.6% (4.3)pp
Net cash flow from operating activities 171.5 161.1 6.5%
Net cash flow from investing activities (125.1) (165.9) 24.6%
Net cash flow from financing activities (112.8) 47.8 (336.0)%

1) adjusted 2) without non-current personnel provisions

Preliminary key figures 2013

in € million   2013 2012   Delta   4Q/13  4Q/12   Delta
Revenues 1,754.7 1,835.7 (4.4)% 456.6 463.0 (1.4)%
Steel Division 1,097.5 1,112.7 (1.4)% 278.7 264.7 5.3%
Industrial Division 619.0 673.9 (8.1)% 170.9 186.9 (8.6)%
Raw Materials Division
     External revenues 38.2 49.1 (22.2)% 7.0 11.4 (38.6)%
     Internal revenues 236.2 188.5 25.3% 58.1 44.3 31.2%
EBITDA 261.6 229.4 14.0% 43.3 48.4 (10.5)%
EBITDA margin 14.9% 12.5% 2.4pp 9.5% 10.5% (1.0)pp
Operating result 1) 126.8 164.4 (22.9)% 18.0 31.8 (43.4)%
Steel Division 64.4 54.0 19.3% 7.1 3.8 86.8%
Industrial Division 70.2 91.8 (23.5)% 19.7 26.7 (26.2)%
Raw Materials Division (7.8) 18.6 (141.9)% (8.8) 1.3 (776.9)%
Operating result margin 7.2% 9.0% (1.8)pp 3.9% 6.9% (3.0)pp
Steel Division 5.9% 4.9% 1.0pp 2.5% 1.4% 1.1pp
Industrial Division 11.3% 13.6% (2.3)pp 11.5% 14.3% (2.8)pp
Raw Materials Division (2.8)% 7.8% (10.6)pp (13.5)% 2.3% (15.8)pp
EBIT 111.1 167.6 (33.7)% (53.0) 33.3 (259.2)%
Steel Division 97.3 50.1 94.2% 3.3 5.1 (35.3)%
Industrial Division 86.8 91.8 (5.4)% 17.7 27.1 (34.7)%
Raw Materials Division (73.0) 25.7 (384.0)% (74.0) 1.1 (6,827.3)%
EBIT margin 6.3% 9.1% (2.8)pp (11.6)% 7.2% (18.8)pp
Steel Division 8.9% 4.5% 4.4pp 1.2% 1.9% (0.7)pp
Industrial Division 14.0% 13.6% 0.4pp 10.4% 14.5% (4.1)pp
Raw Materials Division (26.6)% 10.8% (37.4)pp (113.7)% 2.0% (115.7)pp
Financial results (29.8) (21.3) (39.9)% (1.9) (6.6) 71.2%
Result from associates 8.0 5.3 50.9% 2.8 0.9 211.1%
Profit before income taxes 89.3 151.6 (41.1)% (52.1) 27.6 (288.8)%
Income taxes (26.6) (38.1) 30.2% 13.6 0.3 4,433.3%
Income taxes (in %) 29.8% 25.1% 4.7pp 26.1% (1.1)% 27.2pp
Profit from continuing operations 62.7 113.5 (44.8)% (38.5) 27.9 (238.0)%
Profit from discontinued operations 0.7 0.0 100.0% 0.7 0.0 100.0%
Profit for the year 63.4 113.5 (44.1)% (37.8) 27.9 (235.5)%
Earnings per share in €
Continuing operations 1.55 2.85 (0.97) 0.71
Discontinued operations 0.02 0.00 0.02 0.00

1) before restructuring effects