Current incidents at the site in Porsgrunn, Norway, are forcing the Management to make a more conservative estimate regarding future production volumes. In addition, the grade concept for finished products provides for an increased use of external raw materials as a result of the significant drop in raw material prices. This has the following effects on the financial statements of 2015: as the so-called “own-use exemption” no longer applies, the long-term energy supply contract concluded in 2011 has to be qualified as a financial instrument in accordance with IAS 39. The valuation of the complete term of the contract until the end of the year 2023 at market price level leads to a non-cash provision of roughly € 58 million at the end of the year 2015. In the following years, this provision will be reversed and will lead to the corresponding improvements in earnings.
Business Development The RHI Group’s revenue amounted to € 1,752.5 million in the past financial year, after € 1,721.2 million in the year 2014. The decline in revenue in the Steel Division in Europe, the Middle East and North Africa was nearly compensated by a good business development in India and South America as well as positive currency translation effects resulting from the devaluation of the euro against the US dollar. In the Industrial Division, the year-on-year increase in revenue by 8.5% is, among other things, attributable to higher project deliveries in the glass and environment, energy, chemicals business units. At the same time, the cement/lime business unit benefited from a positive development of the construction sector in North America.
The operating EBIT decreased from € 141.9 million in the previous year to € 124.1 million in the financial year 2015. While the operating EBIT of the Steel Division declined due to a weaker margin development in Europe and the Middle East as well as negative product mix effects resulting from decreasing volumes in the electric arc furnace segment, the Industrial Division benefited from better utilization of fixed costs following an increase in revenue, improved margins in the glass business unit and several major repairs carried out in the nonferrous metals business unit. The Raw Materials Division’s lower contribution to earnings is attributable to weaker capacity utilization at the raw material plants resulting from declining volumes in the electric arc furnace segment. In addition, the operating EBIT was affected by negative currency translation effects of € 8.9 million from the measurement of balance sheet items, which are recognized under other expenses.
EBIT amounted to € 37.5 million in the past financial year and includes a full write-down of the plant in Porsgrunn, Norway, amounting to roughly € 23 million and the plant in Falconer, US, amounting to roughly € 8 million as well as negative effects on earnings of roughly € 58 million related to the change in valuation of a long-term energy supply contract concluded in the year 2011. In addition, a provision totaling roughly € 3 million was formed for the closure of the plant in Clydebank, Scotland.
This is contrasted by positive effects of roughly € 6 million from the reversal of provisions after the sale of the premises at the site in Duisburg, Germany, as well as lower closure costs at the Kretz site, Germany.
Profit after income tax thus amounted to € 17.6 million in the financial year 2015 after € 52.5 million in the previous year. Earnings per share declined from € 1.28 to € 0.40.
Financial and Asset Position Net cash flow from operating activities increased from € 72.4 million in the previous year to € 175.4 million in the past financial year. This development is, among other things, due to the reduction of working capital by € 38.3 million compared with the level at the end of the year 2014. Net cash flow from investing activities amounted to € (47.2) million in the past financial year and included payments related to the sale of securities due to surplus coverage of the legally required provisions for pensions of two companies amounting to roughly € 11 million as well as payments from the sale of a 2.6% share in a German residential property company amounting to roughly € 3 million. Free cash flow, defined as the total of net cash flow from operating activities and net cash flow from investing activities, rose from € 11.3 million in the year 2014 to € 128.2 million in the year 2015 among other things because of the reduction of working capital. The balance sheet total of the RHI Group decreased from € 1,860.5 million at the end of 2014 to € 1,804.5 million at the end of 2015, primarily because of the reduction of working capital and lower financial liabilities. The RHI Group’s equity amounted to € 491.4 million at December 31, 2015 after € 493.9 million in the previous year. The equity ratio improved from 26.5% to 27.2% in the year 2015. The consolidated statement of financial position at December 31, 2015 shows net debt of € 397.9 million (previous year: € 466.9 million).
Steel Division Sales volume of the Steel Division declined by 7.5%, from roughly 1,246,000 tons in the previous year to roughly 1,152,000 tons in the past financial year. This is primarily attributable to weaker linings business in the electric arc furnace and ladle segments. Revenue declined by 0.8%, from € 1,108.8 million in the previous year to € 1,099.9 million. The decrease in revenue in Europe, the Middle East and North Africa was compensated by a good business development in India and South America as well as positive currency translation effects resulting from the devaluation of the euro against the US dollar. The operating EBIT dropped from € 93.1 million in the previous year to € 64.3 million in the past financial year due to lower utilization of the production capacities and negative product mix effects.
Industrial Division Sales volume of the Industrial Division amounted to 443,000 tons in the financial year 2015, thus remaining largely constant compared to the prior-year level of roughly 440,000 tons. Revenue rose by 8.5%, from € 566.6 million in the previous year to € 614.6 million. One of the reasons is a major contract in the environment, energy, chemicals business unit in the petroleum coke gasifier segment in India. In addition, several major repairs postponed by customers in the previous year were carried out in the glass and nonferrous metals business units. Moreover, the cement/lime business unit benefited from a positive development of the construction sector in North America. As a result of higher revenue and better margins in the nonferrous metals business unit as well as savings realized in the glass business unit, the operating EBIT increased from € 48.6 million in the year 2014 to € 65.0 million in the past financial year.
Raw Materials Division External sales volume of the Raw Materials Division increased significantly from roughly 182,000 tons in the previous year to roughly 297,000 tons in the past financial year. The increase by 63.2% is primarily attributable to the sale of raw dolomite. While these sales contribute a large share to volume, the effect in terms of value is small as the sales prices per ton are low. Revenue decreased by 10.1% from € 303.3 million in the previous year to € 272.6 million in 2015. This is due to both lower internal demand by the Steel Division, especially in the area of basic mixes, and to a decline in external demand resulting from the insolvency of a customer in Italy. The reduced demand by the Steel Division results from a decline in sales volume in the electric arc furnace segment by roughly 12%. In this product segment RHI has its own raw materials, which are mined at the Austrian sites in Breitenau and Hochfilzen. Consequently, the decline in sales volume also led to poor utilization of the raw material plants. The operating EBIT dropped from € 0.2 million to € (5.2) million in the past financial year due to the weak capacity utilization.
Outlook In its forecast published in January 2016, the International Monetary Fund expects global economic growth of 3.4% in the current year after 3.1% in the year 2015. Three key factors influence this outlook: slower economic growth in China as a result of the reorientation of the economy – with the objective of strengthening domestic consumption and reducing dependence on foreign investments and exports –, lower energy and raw material prices as well as a gradual tightening of the monetary policy in the US. According to a study of early December 2015, the research institute CRU expects a decline in steel production in China by roughly 1% for the year 2016 and an increase in steel production by roughly 2% outside China. Based on these assumptions, RHI expects revenue (2015: € 1,752.5 million) below and an operating EBIT (2015: € 124.1 million) at the level of the past financial year, with the first half of 2016 slightly weaker than the second half of the year. The expected decline in revenue in the Steel Division is related especially to an expected slowdown of the business development in South America and a highly competitive environment. In the Industrial Division, weaker nonferrous metals business could cause a decrease in revenue. Due to the development in the customer industries, RHI is currently working on further optimizing the plant structure, which could lead to an adjustment of production capacities in Europe in the current financial year. In addition, different cost measures have been defined in the sales and general administrative departments. The planned continuation of the reduction of working capital should support the generation of free cash flow and lead to a further reduction of net debt. The Management Board of RHI AG intends to propose again a stable dividend of € 0.75 per share to the Annual General Meeting on May 4, 2016.
Preliminary Unaudited Key Figures 2015
|in € million
|Sales volume (thousand tons) Steel Division Industrial Division Raw Materials Division Revenues Steel Division Industrial Division Raw Materials Division External revenues Internal revenues EBITDA EBITDA margin Operating EBIT 1) Steel Division Industrial Division Raw Materials Division Operating EBIT margin Steel Division Industrial Division Raw Materials Division 2) EBIT Steel Division Industrial Division Raw Materials Division EBIT margin Steel Division Industrial Division Raw Materials Division 2) Net finance costs Share of profit of joint ventures Profit before income taxes Income taxes Income taxes (in %) Profit for the year Earnings per share in € 3)
||1,892 1,152 443 297 1,752.5 1,099.9 614.6 38.0 234.6 140.0 8.0% 124.1 64.3 65.0 (5.2) 7.1% 5.8% 10.6% (1.9)% 37.5 63.4 58.9 (84.8) 2.1% 5.8% 9.6% (31.1)% (19.3) 9.2 27.4 (9.8) 35.8% 17.6 0.40
||1,868 1,246 440 182 1,721.2 1,108.8 566.6 45.8 257.5 199.4 11.6% 141.9 93.1 48.6 0.2 8.2% 8.4% 8.6% 0.1% 109.3 91.4 34.9 (17.0) 6.4% 8.2% 6.2% (5.6)% (32.7) 8.2 84.8 (32.3) 38.1% 52.5 1.28
||1.3% (7.5)% 0.7% 63.2% 1.8% (0.8)% 8.5% (17.0)% (8.9)% (29.8)% (3.6)pp (12.5)% (30.9)% 33.7% (2,700.0)% (1.1)pp (2.6)pp 2.0pp (2.0)pp (65.7)% (30.6)% 68.8% (398.8)% (4.3)pp (2.4)pp 3.4pp (25.5)pp 41.0% 12.2% (67.7)% (69.7)% (2.3)pp (66.5)%
||488 269 136 83 440.0 257.8 171.2 11.0 49.9 (2.3) (0.5)% 32.7 13.6 24.3 (5.2) 7.4% 5.3% 14.2% (8.5)% (53.9) 12.7 18.2 (84.8) (12.3)% 4.9% 10.6% (139.2)% (3.3) 2.5 (54.7) 16.3 29.8% (38.4) (0.98)
||502 311 132 59 466.5 293.6 162.7 10.2 62.6 51.8 11.1% 41.8 27.9 18.2 (4.3) 9.0% 9.5% 11.2% (5.9)% 11.9 27.7 5.7 (21.5) 2.6% 9.4% 3.5% (29.5)% (10.3) 2.5 4.1 (3.2) 78.0% 0.9 0.01
||(2.8)% (13.5)% 3.0% 40.7% (5.7)% (12.2)% 5.2% 7.8% (20.3)% (104.4)% (11.6)pp (21.8)% (51.3)% 33.5% (20.9)% (1.6)pp (4.2)pp 3.0pp (2.6)pp (552.9)% (54.2)% 219.3% (294.4)% (14.9)pp (4.5)pp 7.1pp (109.7)pp 68.0% 0.0% (1,434.1)% (609.4)% (48.2)pp (4,366.7)%
1) EBIT before losses of derivatives from supply contracts, impairment losses and restructuring effects
2) based on internal and external revenues
3) basic and diluted
|Preliminary key figures in € million
|Balance sheet total Equity Equity ratio (in %) Investments in PP&E and intangible assets Net debt Gearing ratio (in %) Net debt / EBITDA Working capital Working capital (in %) Capital employed Return on average capital employed (in %) Net cash flow from operating activities Net cash flow from investing activities Net cash flow from financing activities
||1,804.5 491.4 27.2% 80.8 397.9 81.0% 2.8 532.6 30.4% 1,176.5 2.3% 175.4 (47.2) (124.4)
||1,860.5 493.9 26.5% 76.2 466.9 94.5% 2.3 570.9 33.2% 1,225.2 6.5% 72.4 (61.1) 24.6
||(3.0)% (0.5)% 0.7pp 6.0% (14.8)% (13.5)pp 0.5 (6.7)% (2.8)pp (4.0)% (4.2)pp 142.3% 22.7% (605.7)%
Gearing ratio: net debt / equity Working Capital: Inventories + Trade receivables and receivables from long-term construction contracts – Trade payables – Prepayments received Capital Employed: Property, plant and equipment + Goodwill + Other intangible assets + Working Capital Return on average capital employed: (EBIT – Taxes) / average Capital Employed