Despite the sharp decline in sales and earnings due to the corona crisis, the listed refractory group RHI Magnesita does not decrease the other way around.
Cost reductions continue and reduce 540 employees worldwide, including 450 this year. In Austria, after the closure of Trieben (Styria), the company continues to have 1,800, globally there are about 13,000.
The group plans to invest 150 million euros this year, a similar amount as in 2019, said CEO Stefan Borgas in an APA interview on Wednesday. In 2021, it would be over 200 million euros. Do not reduce investments, but try to make them countercyclical. A postponement of investments, which is seen at the top of the lockout of EUR 45 million, is not necessary in view of the secured liquidity and the high profitability even with lower sales, says Borgas.
Investments are also under way in Austria, such as the well-known EUR 40 million for the dolomite quarry in Hochfilzen (Tyrol) and EUR 50 million for the world̵
On the other hand, such plant expansions or modernizations oppose site closures around the world, for example in Trieben or in Hagen, Germany. Such measures in the Group’s production network may also continue in the future to strengthen other locations, including Hochfilzen and Radenthein. Short-term work plays almost no role in the group, a total of only 700 people work full-time, of which about 200 in Austria.
Sales and administration see a savings potential of 30 million euros in 2021, after 10 million euros this year. For example, fewer management levels are required, which also enables faster decisions. The group’s thinning was identified from four different perspectives: it can take a year, two or three years before demand reaches pre-crisis. global trade flows are regionalized; volatility will generally increase; and the importance of digitization will increase.
Even at the currently noticeably lower level of activity, RHI Magnesita Group is clearly resistant to the crisis thanks to its good liquidity and stable net debt. Liquidity recently amounted to EUR 1.1 billion, net debt was EUR 666 million at the end of June (one year ago: EUR 669 million, end of 2019: EUR 650 million). The cash conversion rate, a measure of the success in the ratio between cash flow and net profit, is 70 percent.
With significant financial strength, RHI Magnesita is well equipped to take advantage of growth opportunities as markets improve: “Thanks to resilience, we are open to further acquisitions,” said the CEO. At the moment, the competitors rather want to think about whether they should not be able to enter RHI Magnesita, ie. if they should merge with it. There is nothing in the pipeline, but the number of such calls has increased.
In June this year, sales of RHI Magnesita decreased by 22.7 percent in constant currency due to lower customer demand due to COVID 19 to EUR 1.171 billion. Steel sales decreased by 22.4 percent and industrial sales by 23.5 percent. Operating profit (EBITA) was halved to EUR 133 million (-45 percent). With the production optimization plan that was communicated in 2019, you stay on course, it said on Wednesday in the half-year report. As a result, EBITA should be improved by EUR 40 million by 2022.
The level of activity will remain subdued during the third quarter. July was no better than June, Borgas said. August and September would be a little better, but without much hope. The fourth quarter should be slightly better again, but not yet comparable to the previous year; there will still be something to gnaw on in the lockdown sections, even without a possible second corona wave.
From Brazil, the head of the Austro-Brazilian firepower group reported that the steel industry there has started strong again and its production has increased sharply – benefited from the weakening of the real currency, the real. “As a result, the steel industry in Brazil has gained a lot of competitiveness,” which RHI Magnesita also benefits from, Borgas said: “In Brazil, the steel industry makes up two thirds of our customers.”
The RHI Magnesita share originally won on Wednesday in Vienna, but could not keep the listings. In the end, there was a loss of 1.06 percent of 28 euros in the board.
(Conclusion) sp / pro