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In the first nine months of 2016, the RHI Group’s revenue dropped by 6.5% compared with the same period of 2015 and amounted to € 1,227.3 million. In the Steel Division revenue declined by 4.6% due to a weaker business development in South America, Europe and China and the opening of the product portfolio to lower-performance products. These products support the sales volume and margin development, but lead to lower revenue due to the lower price level. In the Industrial Division the decrease in revenue of 11.3% compared with the same period of 2015 is among other things due to lower deliveries in the cement/lime and environment, energy, chemicals business units.
Despite the decline in revenue, the operating EBIT rose by 7.2% from € 91.4 million in the first nine months of 2015 to € 98.0 million in the current financial year. This development is primarily attributable to a positive earnings situation in the Steel Division due to favorable product mix effects and better utilization of the production capacities resulting from the increase in sales volume. In addition, the operating EBIT of the Raw Materials Division improved due to good capacity utilization at the Austrian raw material plants, which predominantly produce basic mixes for the steel industry, especially for the use in electric arc furnaces. Overhead cost savings also supported the earnings development. In contrast, the Industrial Division’s operating EBIT was lower than in the previous year due to a decline in revenue. The RHI Group’s operating EBIT margin increased from 7.0% in the first nine months of 2015 to 8.0% in the current financial year.
EBIT amounted to € 101.1 million in the first nine months of 2016 and includes negative effects on earnings of € 4.6 million from the deconsolidation of the US subsidiary RHI Monofrax, LLC following the sale to the German private equity fund Callista, and € 3.6 million related to the social plan for staff layoffs and changes in the production portfolio at the site in Porsgrunn, Norway. In contrast, a positive effect of € 11.3 million resulted from the measurement of the power supply contract in Norway.
Free cash flow amounted to € 75.5 million in the first nine months of 2016, after € 74.8 million in the comparative period of 2015. Net debt declined from € 397.9 million at the end of the financial year 2015 to € 364.0 million at September 30, 2016. The number of employees decreased from 7,898 at the end of the year 2015 to 7,568.
Q3/2016 In the third quarter of 2016, revenue dropped by 9.9% to € 397.1 million compared with the strong second quarter of 2016. This is attributable to seasonally weaker business in Europe during the summer months and a weaker business development in the Middle East in the Steel Division as well as a decrease in project deliveries in the environment, energy, chemicals, and nonferrous metals business units.
As a result of declining revenues, the operating EBIT dropped from € 39.9 million in the second quarter of 2016 to € 27.8 million in the past quarter. In addition, external expenses of € 3.7 million related to the planned combination of RHI and Magnesita incurred in the third quarter of 2016 had a negative impact on the earnings development. These expenses totaled € 3.9 million in the first nine months of 2016.
EBIT amounted to € 32.5 million in the third quarter of 2016 and includes costs of € 3.6 million for the social plan and the changes in the production portfolio as well as positive net effects from the power supply contract in Norway. Based on own use, the sale at market prices and an increase in electricity future prices, financial liabilities of € 8.3 million were reversed. Income tax expenses in the past quarter were positively influenced by the reversal of a provision of € 6.3 million related to a tax audit in Turkey.
Outlook For the full year 2016, the Management Board of the RHI Group expects revenue below the level of the past financial year if the macroeconomic environment and exchange rates remain stable. The operating EBIT margin is expected to reach roughly 8%, adjusted for external expenses related to the planned combination of RHI and Magnesita, which corresponds to an increase by roughly one percentage point compared with the previous year.
Should the current evaluation regarding the optimization of the plant structure provide first decision-relevant results in the fourth quarter of 2016, this may lead to non-cash impairment losses of a maximum of €10 million. The planned continuation of the reduction of working capital and different cost measures in the sales and general administrative departments should support the generation of free cash flow and lead to a further reduction of net debt.
|in € million||9M/16||9M/15||Delta||3Q/16||2Q/16||Delta|
|Operating EBIT 1)||98.0||91.4||7.2%||27.8||39.9||(30.3)%|
|Operating EBIT margin||8.0%||7.0%||1.0pp||7.0%||9.1%||(2.1)pp|
|Profit before income tax||92.0||82.1||12.1%||29.1||39.1||(25.6)%|
|Profit after income tax||64.0||56.0||14.3%||25.1||24.1||4.1%|
1) EBIT before expenses from derivatives from supply contracts, impairment and restructuring effects