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RHI Magnesita first half profit down as costs outweigh rising revenue

26th Jul 2023 10:15

(Alliance News) - RHI Magnesita NV on Wednesday said first half profit fell despite rising revenue, as various costs increased, while expressing an "uncertain" outlook for the company looking ahead.

In the first half of 2023, the Vienna-based supplier of refractory products said pretax profit fell 22% to EUR111.4 million from EUR142.4 million a year earlier.

This was despite revenue rising 8.8% to EUR1.73 billion from EUR1.59 billion, as various costs increased.

Costs of sales rose 8.2% to EUR1.32 billion from EUR1.22 billion, general and administrative expenses rose 23% to EUR162.5 million from EUR131.8 million, while net finance costs more than doubled to EUR51.3 million from EUR22.0 million, among other rising costs.

RHI Magnesita noted steel revenues rising 5%, reflecting an 8% volume reduction in line with subdued market demand globally, more than offset in the period by strong pricing.

"In the first half of the year we continued to experience challenging conditions in the steel market as a result of low demand volumes in all geographies with the exception of India," said Chief Executive Officer Stefan Borgas.

"However, I am pleased to report that the resilience of our business model and strategy has been demonstrated by strong pricing, sector diversification, the delivery of material benefits from our strategic sales initiatives and a growing contribution from acquisitions."

Industrial divisional performance benefitted from strong pricing recovery and later cycle nature of project business, RHI Magnesita explained to deliver gross margin of 29% versus 26% a year earlier, "highlighting benefits" of sector diversification.

RHI Magnesita still declared an increased dividend, up 10% to EUR0.55 per share from EUR0.50 a year earlier.

Looking ahead, RHI Magnesita said outlook for key end markets "remains uncertain", with order books "suggesting continued weakness" into the second half. It said pricing is currently resilient but competitive pressure is expected in the remainder of the year.

It expects net debt to earnings before interest, tax, depreciation and amortisation to remain above 2.0 times at the end of 2023 as the group "further executes on its M&A pipeline", in line with its guidance range.

On Monday, Ignite Luxembourg Holdings Sarl, a company indirectly managed by Rhone Holdings VI LLC, on Monday said its offer for shares in RHI Magnesita closed on Friday last week with acceptances for 9.4 million shares, a 19.95% stake.

Rhone back in May had offered to buy 14.1 million shares at GBP28.5 per share in cash. This would have been a 29.9% stake. Rhone said at the time it wanted a non-controlling minority stake in the FTSE 250 company.

Late in June, RHI Magnesita said it was advised by Barclays Bank PLC and Peel Hunt LLC that the offer undervalued the company, citing an average target price of research analysts of 3,073 pence per share.

Shares in RHI Magnesita were up 0.8% to 2,892.00p each in London on Wednesday morning.

By Greg Rosenvinge, Alliance News reporter

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