Results of the first quarter 2017  

11. May 2017


  • Increase in sales volume and revenue driven by improved business conditions
  • Positive start to the year due to higher deliveries and improved capacity utilization
  • Merger control clearance for the planned combination with Magnesita filed for in Europe and Brazil

In the first quarter of 2017, the RHI Group’s sales volume increased by 4.8% compared with the same period of 2016 to roughly 483,000 tons. While the Steel Division recorded an increase by 5.3% due to higher deliveries in Europe, North America, Africa and the Middle East, the Industrial Division’s sales volume rose by 10.4% due to a positive development in nearly all business units.

The RHI Group’s revenue in the first quarter of 2017, at € 418.8 million, exceeded the revenue of the comparative period of 2016, at € 389.7 million, and was slightly lower than in the fourth quarter of 2016, at € 423.9 million.

Operating EBIT amounted to € 37.9 million in the first quarter of 2017, after € 30.3 million in the comparative period of 2016, thus also exceeding the figure of the fourth quarter of 2016, at € 25.2 million. The increase compared with the first quarter of 2016 is among other things due to a friendlier market environment in many customer industries and the related better order situation as well as the resulting higher utilization of production capacities and product mix effects. The operating EBIT margin, at 9.0% in the first quarter of 2017, thus exceeded that of the comparative period of 2016, at 7.8%, and that of the fourth quarter of 2016, at 5.9%. The external costs associated with the planned business combination of RHI and Magnesita incurred in the past quarter total € 3.8 million.

EBIT amounted to € 32.6 million in the first quarter of 2017 and primarily includes a negative net effect from the power supply contract in Norway amounting to € 4.3 million as a result of lower electricity future prices.

Equity was € 555.0 million at March 31, 2017, compared with € 524.0 million at December 31, 2016. This corresponds to an equity ratio of 30.5%. Working capital increased from € 465.1 million at the end of the year 2016 to € 491.3 million at March 31, 2017. This is primarily attributable to higher inventories due to an increase in the order level by roughly 15% compared with December 31, 2016. Free cash flow amounted to € 12.0 million in the past quarter compared with € 22.1 million in the same period of 2016. Net debt declined slightly from € 332.8 million at the end of 2016 to € 325.2 million at March 31, 2017. The number of employees amounted to 7,460 at the end of the past quarter.

Outlook In its forecast published in April 2017, the International Monetary Fund predicts global economic growth of 3.5% in the current year after 3.1% in the year 2016. However, there is considerable uncertainty regarding the impact of the policies of the newly elected US government. Although the environment in the advanced economies improved, the pace of growth in the emerging markets will continue to influence the global economy to a significant extent. Based on a current study, the research institute CRU expects a decline in steel production in China by roughly 1% in the year 2017 and an increase in steel production outside China by an ambitious 5%. Based on these estimates, RHI expects a more positive market environment in 2017. The focus will stay on the generation of free cash flow in the current financial year in order to reduce net debt further. RHI is currently working on meeting the conditions precedent to the successful closing of the planned combination with Magnesita (the “Combined Group”) and is preparing the integration of the two companies. In the context of these activities, external costs will be incurred.

In the past quarter, uncertainties arose due to a shortage in the supply situation of refractory raw materials in China. Striving to improve environmental and safety standards, Chinese authorities introduced stricter requirements and carried out production controls. As a result, many local manufacturers of sintered and fused magnesia had to completely shut down their production in the past quarter. Due to this new situation, market prices are now rising. It can currently not be estimated when this situation will ease. As raw material supply from China is getting less secure, supply concepts are adapted continuously within the RHI Group.

Update on the planned combination with Magnesita RHI filed for merger control clearance with the competition authorities in Brazil at the end of March and in Europe at the beginning of May and expects to have a clearer picture of the outcome of the proceedings around the end of the first half of 2017.

Based on their financial statements for the year 2016, the combined revenue of RHI and Magnesita amounted to approximately € 2.5 billion. RHI has revised its aspirational financial targets1) for the Combined Group in the course of a corporate strategy update. These targets replace any earlier financial targets (which are thus withdrawn) for the Combined Group and include the following. In the medium term, RHI’s aspiration for the Combined Group is to have organic revenue growth in line with the volume growth in its customers’ industries and an operating EBIT margin of more than 12% after capturing the Combined Group’s envisaged net synergies of approximately € 70 million in case of a delisting of Magnesita. RHI’s aspiration for the Combined Group is to pay stable dividends in 2017 and 2018, in line with RHI’s previous years’ payment levels. In the mid- to long-term, however, RHI’s aspiration is to increase dividend payments from the Combined Group, as a result of stronger cash flow generation resulting from synergies, organic growth and de-leveraging of the company’s capital structure.

1) Management’s financial targets are not forecasts and there can be no guarantee that the actual results will resemble the targets in the medium term or mid- to long-term. RHI has not defined, and does not intend to define, “medium term” and “mid- to long-term”, and these financial targets should not be read as indicating that RHI is targeting such metrics for any particular fiscal year.

in € million Q1/2017 Q1/2016 Delta Q4/2016 Delta
Revenue 418.8 389.7 7.5% 423.9 (1.2)%
EBITDA 48.5 43.2 12.3% 40.4 20.0%
EBITDA margin 11.6% 11.1% 0.5pp 9.5% 2.1pp
Operating EBIT 1) 37.9 30.3 25.1% 25.2 50.4%
Operating EBIT margin 9.0% 7.8% 1.2pp 5.9% 3.1pp
EBIT 32.6 27.1 20.3% 15.0 117.3%
EBIT margin 7.8% 7.0% 0.8pp 3.5% 4.3pp
Profit before income tax 30.2 23.8 26.9% 13.8 118.8%
Profit after income tax 18.5 14.8 25.0% 11.9 55.5%


1) EBIT before expenses from derivatives from supply contracts, impairment and restructuring effects