2024 Full Year Results

27 February 2025

RHI Magnesita N.V.

("RHI Magnesita" or the "Company" or "Group")

2024 Full Year Results

Resilient margin and cash flow performance in very weak market conditions

RHI Magnesita, the leading global supplier of high-grade refractory products, systems and solutions, today announces its final results for the year ended 31 December 2024 ("2024" or the "Year").

1. Adjusted figures are alternative performance measures "APMs" excluding impairments, amortisation of intangibles and exceptional items to enable an understanding of the underlying performance of the business. Full details are shown in the APM section.

2. 2024 Net debt includes leases of €77 million (2023: €70 million), as required by IFRS 16. For further details see Note 37 of the consolidated financial statements.

3. Pro Forma Adjusted EBITDA is used to assess financial gearing and includes a full year of Adjusted EBITDA contribution from any businesses acquired during the year.

4. Recommended final dividend of €1.20 per share, subject to AGM approval on 7 May 2025. Full year dividend of €1.80 per share includes the interim dividend of €0.60 per share paid to shareholders on 26 September 2024.

Operational and strategic highlights

· Operational efficiency and cost discipline delivered robust margin performance despite historically weak end markets

· Acquisition of Resco for enterprise value of €391 million completed on 28 January 2025 brings total deal value of M&A completed since December 2021 to €1.2 billion

· M&A closed in 2023 contributed €77 million to 2024 Adjusted EBITDA, in line with guidance of c.€80 million

· Customer service KPIs including net promoter score and PIFOT ("Process In Full and On Time") reached record highs

· Sustainability commitment demonstrated by record recycling rate of 14.2% (2023: 12.6 %), driving annual CO2 emission savings of 1.8 Mt compared to 2018 levels

· Outsourcing agreement with Capgemini from December 2024 to deliver shared service centre efficiency gains

Financial highlights

· Sales volumes 1% lower in the base business, excluding contribution from M&A, with continuing softness in end market demand especially in industrial markets

· 6% lower pricing matched a 6% reduction in cost of goods sold per tonne as pricing was reduced to protect market share

· Adjusted EBITA of €407 million (2023: €409 million) within guided range of €400-€410 million, supported by strong trading in Q4 and margin of 11.7% (2023: 11.4%), comprising record high refractory margin of 10.9% and continued weak raw material contribution of 0.8%

· Total net adjustments to EBITA of €125 million (2023: €31 million) driven by costs of Group wide programmes aimed at improving operating efficiency and future profitability through (i) €52 million expenses relating to digital transformation and business process improvements, and (ii) plant network optimisation, including €29 million impairment of Brazil assets in connection with Resco and €25 million closure costs at Mainzlar

· 103% cash conversion supported by €115 million release of working capital, due to efficient management of inventory and receivables as well as deflationary cost development

· Net debt reduced by €53 million to €1,251 million (2023: €1,304 million) after €58 million of M&A, including prepayments of €44 million for Resco acquisition and €5 million acquisition of Refrattari Trezzi

Outlook and guidance

Refractory demand remains weak, with no recovery in end market demand visible. Falling domestic demand of customer industries in China results in exports of steel and other materials from China, reducing customer output in most world markets and therewith reducing refractory usage. 2024 was a relatively strong year for higher margin non-ferrous metals and glass projects due to the timing of customer investment projects. However, markedly lower capex investments by these industrial customers will reduce demand in 2025, offsetting forecasted growth in steel refractory demand in India, West Asia & Africa. Revenue performance in 2025 year to date and the outlook for H1 is weak, driven by low volumes in steel and pricing pressure in particular in cement and non-ferrous metals.

The Adjusted EBITA performance in 2025 is therefore expected to be modestly above 2024 levels including the acquisition of Resco. Adjusted EBITA is expected to be weighted approximately 45% in the first half and 55% in the second half of the year.

Stefan Borgas, CEO said: "RHI Magnesita has delivered another resilient financial performance despite very weak market demand in most markets around the world. At €407 million, Adjusted EBITA was within our guidance range of €400-€410 million, reflecting the expected strong performance in the fourth quarter for which I offer my congratulations to the team. We continue to prioritise safety above all - this is a core value for us.

We have now completed the Resco transaction, the largest single acquisition we have undertaken since the combination of RHI and Magnesita in 2017. In our US business we can finally fulfil our customers' requests for significantly higher local production. Investments into the enlarged production network are being prepared in detail by our merged team in the USA.

We expect to incur network optimisation expenses in Europe and Brazil as a result of plant footprint adjustments following the Resco acquisition and other M&A transactions completed in 2022 and 2023. Total restructuring costs of €60 million and capital expenditure of €40 million are planned over the period 2025-27. This will deliver €10 million of EBITA benefit in 2025, €20 million in 2026 and €30 million per annum thereafter. Our strategy to grow through acquisition in the fragmented refractory industry, building on our strengths as a technology and sustainability leader, is proving to be a solid approach to generating value for shareholders. We will continue to manage the business conservatively throughout the ongoing downturn in demand whilst delivering on our strategic objectives to generate long term value."

For further enquiries, please contact:

Investors: Chris Bucknall, Head of Investor Relations, +43 699 1870 6490, [email protected]

Media: Hudson Sandler, +44 020 7796 4133, [email protected]  

Conference call

A presentation for investors and analysts will be held on 27 February 2025 starting at 8:15am UK time (9:15am CET). The presentation will be webcast live and details can be found on: https://ir.rhimagnesita.com/. Alternatively the webcast can be accessed using the following link:

https://www.investis-live.com/rhimagnesita/67adc364242e93000e3ae4ae/hapetf

A replay will be available on the same link shortly after event.

About RHI Magnesita

RHI Magnesita is the leading global supplier of high-grade refractory products, systems and solutions which are critical for high-temperature processes exceeding 1,200°C in a wide range of industries, including steel, cement, non-ferrous metals and glass. With a vertically integrated value chain, from raw materials to refractory products and full performance-based solutions, RHI Magnesita serves customers around the world, with over 20,000 employees and contractors in 65 main production sites (including raw material sites), 12 recycling facilities and more than 70 sales offices. RHI Magnesita intends to leverage its leadership in terms of revenue, scale, product portfolio and diversified geographic presence to target strategically those countries and regions benefiting from more dynamic economic growth prospects.

The Group is listed within the Equity Shares (Commercial Companies) category ("ESCC") of the Official List of the London Stock Exchange (symbol: RHIM) and is a constituent of the FTSE 250 index, with a secondary listing on the Vienna Stock Exchange (Wiener Börse). For more information please visit: www.rhimagnesita.com

FORWARD LOOKING STATEMENTS

This announcement contains (or may contain) certain forward-looking statements with respect to certain of the Company's current expectations and projections about future events. These statements, which sometimes use words such as "aim", "anticipate", "believe", "intend", "plan", "estimate", "expect" and words of similar meaning, reflect the directors' beliefs and expectations and involve a number of risks, uncertainties and assumptions which could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement. Statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The information contained in this announcement is subject to change without notice and, except as required by applicable law, the Company does not assume any responsibility or obligation to update publicly or review any of the forward-looking statements contained in it and nor does it intend to. You should not place undue reliance on forward looking statements, which apply only as of the date of this announcement. No statement in this announcement is or is intended to be a profit forecast or profit estimate or to imply that the earnings of the Company for the current or future financial years will necessarily match or exceed the historical or published earnings of the Company. As a result of these risks, uncertainties and assumptions, the recipient should not place undue reliance on these forward-looking statements as a prediction of actual results or otherwise. The Company has no obligation or undertaking to update or revise the forward-looking statements contained in this announcement to reflect any change in its expectations or any change in events, conditions, or circumstances on which such statements are based unless required to do so by applicable regulations. The numbers presented throughout this announcement may not sum precisely to the totals provided and percentages may not precisely reflect the absolute figures, due to rounding.

CEO REVIEW

Safety, resilience and progress

Weak end markets continued to impact the business in 2024. The contribution from M&A, operational excellence and network efficiencies supported relatively stable revenues, margins and profitability. We continue to execute on our three strategic pillars of reducing costs, expanding our business model and growing in markets where we are underrepresented.

Health & Safety

Health and safety is our absolute priority and I am saddened to report that two fatal incidents occurred at our production sites in H1 2024. Health and safety improvements have been prioritised at all levels of management; together we are undertaking a complete review of our safety standards, culture, leadership and key serious injury and fatality risks.

During the year we established the RHI Magnesita HELP fund, a registered association in Austria focused on providing immediate financial assistance to individuals and families affected by workplace safety incidents across our global network. I am proud to say that the HELP fund has been funded primarily through voluntary contributions from RHI Magnesita staff, with a matching contribution from the Company. From these sources the HELP fund raised over €800,000 in its first year and payments to qualifying recipients have already commenced.

Operational excellence

Operational excellence underpins our customer offering, our industrial operations and financial performance. The work to drive improvements is translating into tangible benefits in both of these areas. Our main KPIs in 2024 were PIFOT ("Process In Full On Time") and net promoter scores in customer surveys. Both of these achieved record highs in 2024. Other operational indicators and inventory management metrics also showed improvements, contributing to a reduction in working capital and strong cash flow conversion this year.

Our digital transformation is well underway, consisting of a group-wide replacement of the core operating systems (including ERP) alongside a redesign of our core business processes, all focused on improving customer experience. In Q4 we entered into a business process outsourcing agreement with Capgemini which will result in broader career opportunities for our shared service centre colleagues, deliver cost savings and, most importantly, lead to sharper execution of the critical processes which are the foundation of our ability to deliver for our customers more reliably. We will be investing over €100 million into this platform to deliver greater value to customers and more effective integration of acquisitions.

4PRO

R&D and the new '4PRO' service offering are critical to deliver improvements to our customers. Constantly improving world-leading refractory performance is reliant upon continuous adaptation of existing solutions according to customer needs and the development of new technologies that will deliver the next iteration of product performance improvements, and efficiency gains in our own manufacturing processes. I am pleased to report strong growth in sales of robotics solutions for automated lining repairs in 2024 and exciting new developments in production techniques with high potential for sustainability, cost and performance improvements. Our offering in this area has been consolidated under a central function offering Advanced Technologies to ensure that we can move our customers up the margin curve to higher value added products and services.

During 2024 we expanded our solutions contract offering under the 4PRO brand. 4PRO represents a holistic approach to high-performance refractory applications, based on closer collaboration with customers seeking continuous improvement in production techniques as well as the pursuit of sustainability objectives and circular economy initiatives.

Strategy update

Our M&A-led growth strategy delivered strong results despite headwinds from weak market conditions. The six acquisitions completed in 2023 contributed Adjusted EBITDA of €77 million, in line with guidance of c.€80 million. During 2024 we completed the acquisition of Refrattari Trezzi, expanding our recycling activities in Europe.

In the US, we reached agreement on the acquisition of Resco Group in April 2024 and successfully completed the transaction on 28 January 2025, for a final deal value of €391 million. This acquisition is a major step forward for our North American business. Resco's strengths in the petrochemical, cement and aluminium industries are complementary to our existing business and will provide opportunities in these market segment worldwide by leveraging RHI Magnesita's global footprint. The much larger US plant footprint will allow us to accelerate our 'local for local' production strategy, onshoring significant manufacturing activity into the US and shortening supply chains. Resco is the largest acquisition we have undertaken since the combination of RHI and Magnesita in 2017 and I am excited about the prospects for our future growth in this dynamic and valuable refractory market. The new team is fired-up!

We remain committed to our strategy to allocate capital to growth via M&A. We note that there have been other transactions in the sector in 2024, with Shinagawa's acquisition of Gouda Refractories Group and Vesuvius PLC's purchase of Piromet in Türkiye. During 2025 our focus will be primarily on network optimisation, the integration of recent acquisitions and reducing net debt, with any additional M&A likely to be limited in scope.

We expect to incur network optimisation expenses in Europe and Brazil as a result of plant footprint adjustments following the Resco acquisition and other M&A transactions completed in 2022 and 2023. Total restructuring costs in the base business of €60 million and associated capital expenditure of €40 million are planned over the period 2025-27, to deliver €10 million of EBITA benefit in 2025, €20 million in 2026 and €30 million per annum thereafter.

Our people

Our greatest strength lies in our people. Every contribution matters and strengthens our collective success, increasingly also from colleagues joining RHI Magnesita as a result of M&A. We continue to learn more about our industry, identifying new opportunities and benefitting from the expertise of talented teams and individuals as we integrate acquired businesses.

Sustainability

Sustainability means the protection and preservation of resources for future generations. Our Company traces its origins back to 1834. Today, as the leading global supplier of refractories, which are essential for the creation of basic building materials for modern life, we can be certain that our industry will remain essential for many years to come. Refractory production is CO2 intensive and RHI Magnesita has pioneered new technologies for reducing CO2 emissions. Our journey to recycle secondary raw materials increasingly requires the development of cutting edge technologies, which are now in industrial testing. In 2025 we will be piloting a CO2 re-mineralisation technology together with MCi Carbon. Further progress requires engagement with suppliers to adopt low-carbon energy sources.

Our customers are amongst the highest emitters of CO2 globally and are undergoing their own transformation to decarbonise. When developing new production technologies they are increasingly turning to RHI Magnesita as their preferred partner for refractory solutions. We have now won five major contract awards for green steel projects; this will be an important source of high value-add business going forwards.

RHI Magnesita has produced sustainability statements according to ESRS for the 2024 financial year. Having completed a lengthy double materiality assessment and complied in full with the disclosure requirements, the Group is of the view that the outcome of the ESRS process is not beneficial to stakeholders. ESRS places an unreasonable burden in terms of financial cost and other corporate resources which cannot be deployed to actual sustainability improvements. RHI Magnesita urges relevant regulators and legislators to look again at the way that ESRS has been implemented in practice to allow companies to redirect resources from reporting to action. We note that the European Commission has proposed a revision to ESRS through its Omnibus Directive and we hope for improvement.

Financial performance

Our financial performance was resilient considering the challenging end market conditions, which saw a decrease in sales volumes of 1% in the base business and 6% lower pricing. The contribution from M&A and operational efficiency delivered stable revenues and Adjusted EBITA of €407 million (2023: €409 million) with margin increasing to 11.7% (2023: 11.4%). It is a sign of our strong operational performance that we were able to maintain margin in a falling price environment, despite lower vertical integration contribution and the additional burden from high fixed cost under-absorption due to shrinking volumes.

Adjusted EPS increased to €5.32 (2023: €4.98) and cash generation was strong at 103%, contributing to a reduction in net debt of €53 million to €1,251 million and gearing of 2.3x (2023: 2.3x), in line with our target range.

Outlook

The short-term outlook for our industry remains weak and we must be ready to respond with fast decision making. China's necessary and clearly communicated economic transition is the most significant factor affecting industrial markets worldwide including refractory markets. The long term outlook for future-oriented commodities and materials such as copper, aluminium and glass remains strong. However, project demand in the industrial segment is expected to decline in the near term.

Should any recovery in refractory demand occur, RHI Magnesita is well positioned to benefit due to its high levels of operational gearing and vertical integration capability. During this extended downturn, we have greatly increased our customer base through the acquisition of 12 businesses with a total deal value of €1.2 billion and we are seeing real benefits from synergies as these acquisitions are integrated into our network. Against this backdrop, we continue to believe that adaptability, discipline and innovation will deliver long-term success.

FINANCIAL REVIEW

Reporting approach

The Company uses a number of alternative performance measures ("APMs") in addition to measures reported in accordance with IFRS Accounting Standards as adopted by the European Union ("IFRS"), which reflect the way in which the Board and the Executive Management Team assesses the underlying performance of the business. The Group's results are presented on an "adjusted" basis, using APMs that are not defined or specified under the requirements of IFRS, but are derived from the IFRS financial statements. The APMs are used to improve the comparability of information between reporting periods and to address investors' requirements for clarity and transparency of the Group's underlying financial performance. The APMs are used internally in the management of our business performance, budgeting and forecasting. A reconciliation of key metrics to the reported financials is presented in the section titled APMs.

All references to comparative 2023 numbers in this review are on a reported basis, unless stated otherwise. Figures presented at constant currency represent 2023 translated numbers against average 2024 exchange rates as disclosed in Note 3 to the Consolidated Financial Statements. All reported volume changes year-on-year are excluding mineral sales.

Revenue

The Group recorded revenues of €3,487 million, a 1% decrease from 2023 revenues of €3,529 million on a constant currency basis. This was primarily driven by 6% lower average pricing and a 1% decline in base business sales volumes, offset by 6% growth in revenues from acquisitions completed in 2023.

On a reported basis, the decrease in revenue was 2% (2023: €3,572 million), reflecting the depreciation of certain currencies against the euro (Chinese yuan, Indian rupee, Brazilian real, Turkish lira, Canadian dollar) which reduced revenue generated from those geographies in euro terms. The foreign exchange impact on revenues was €43 million.

Against a backdrop of weakness in the key end markets of construction and automotive, steel revenues decreased to €2,373 million, representing a 4% decline on a reported basis (2023: €2,461 million) and a 3% decline in constant currency terms (2023: €2,434 million), accounting for 68% of Group revenue in 2024. The primary driver behind the decrease in steel revenues for the financial year 2024 was pricing. Soft end market demand also impacted sales volumes in North and South America. Exports of surplus steel from China negatively affected pricing and refractory demand from domestic steel producers in most geographies, in particular in India.

Industrial revenues were stable at €1,114 million (2023: €1,111 million) and increased by 2% in constant currency terms (2023: €1,094 million), outperforming steel revenue growth, supported by M&A. Cement & Lime revenues decreased by 12% to €376 million (2023: €424 million), while Non-ferrous metal revenues declined by 12% to €247 million (2023: €281 million). The primary factors contributing to the decline in cement, lime, and non-ferrous metals were weaker end markets in China and South America. Revenues in the glass business increased by 19% to €217 million (2023: €182 million), mainly driven by a strong contribution from 2023 M&A. Revenues from industrial applications increased by 46% to €210 million (2023: €143 million), also due to M&A.

During 2024 the Group re-assessed its criteria for the timing of revenue recognition for shipments delivered by sea freight with third-party carriers. From 2024, control of refractory products is determined to transfer when the carrier issues shipping documents that allows the customer to redirect or otherwise control the shipped refractory products. Group revenue in 2024 increased by €42 million (and gross profit by €10 million) as a result of this revised accounting policy. For further details refer to Note 3 of the Financial Statements, 'Significant Accounting Policies, Judgements and Estimates'.

Cost of goods sold

Cost of goods sold decreased by 3% to €2,639 million from €2,715 million in 2023, primarily due to a reduction in raw material costs. The cost of purchased raw materials fell by 7% to €1,058 million (2023: €1,139 million). Plant-related labour costs increased by 16% in 2024, rising from €452 million to €523 million, mainly due to acquisitions and salary increases to offset inflation. After a period of disruption and high inflation in 2023, freight and energy costs decreased by 11% and 10%, respectively, in 2024 as both markets stabilised. Spending on general supplies, including pallets, packaging, and spare parts were broadly flat at €169 million (2023: €170 million).

During 2024 the Group re-assessed its criteria for inventory provisioning in light of sustained improvements in its inventory management. Re-valuation of stock previously written off, which is now deemed to be saleable at market price, resulted in an €11 million reduction in cost of goods sold. For further details refer to Note 3 of the Financial Statements, 'Significant Accounting Policies, Judgements and Estimates'.

Raw material prices

Refractory raw material prices decreased in 2024 compared to 2023, with the price of high-grade dead burned magnesia ("DBM") from China decreasing by 6% and by 1% on average for medium-grade DBM from China. Lower raw material prices usually result in lower finished goods pricing for refractories worldwide, as production costs for non-vertically integrated competitors are reduced. The main driver for the decrease in DBM pricing was oversupply, combined with lower customer demand for refractories globally. Fused alumina, a raw material that the Group does not produce and which constitutes only a small portion of the Group's overall raw material requirements, experienced a significant price increase towards the end of 2024, in line with the increase in alumina prices in the fourth quarter.

Gross profit

The Group recorded gross profit of €848 million (2023: €857 million), a decrease of 1% on a reported basis and 4% in constant currency terms. Gross margins increased by 30bps to 24.3% (2023: 24.0%). Although refractory pricing in the base business reduced by 8%, input costs reduced further, primarily due to lower prices for externally purchased raw materials as well as lower energy and freight costs.

Selling, general and administrative expenses ("SG&A"), were €435 million, a 3% decrease compared to the previous reporting period (2023: €449 million), attributable to stringent cost management, lower personnel expenses and reduced hiring levels.

Depreciation increased by 2% to €136 million (2023: €134 million) and in 2025 is expected to be around €150 million including Resco.

Amortisation of intangible assets amounted to €39 million in 2024 (2023: €44 million) and is expected to be approximately €35 million in 2025, subject to the purchase price allocation exercise relating to the acquisition of Resco Group.

Adjusted EBITDA

The Group recorded Adjusted EBITDA of €543 million, flat compared to the prior year (2023: €543 million). Adjusted EBITDA margin increased to 15.6% (2023: 15.2%) an increase of 40bps, reflecting higher gross margins and a decrease in SG&A expenses. Adjusted EBITDA margin decreased by 60bps on a constant currency basis.

Adjusted EBITA

Adjusted EBITA remained broadly flat at €407 million, compared to €409 million in 2023 on a reported basis, as the contribution from M&A and lower input costs offset weaker pricing and mix effects. Adjusted EBITA from businesses acquired in 2023 was €65 million (or €77 million of Adjusted EBITDA), broadly in line with guidance.

Adjusted EBITA margin increased to 11.7% (2023: 11.4%) as M&A contributions, supported by lower input costs and SG&A reduction.

Vertical integration contributed a record low 0.8ppts of the Group's overall Adjusted EBITA margin of 11.7%. Whilst this contribution is lower than the 1.7ppts contribution in 2023, primarily due to the decline in the market prices for refractory raw materials, the contribution was still positive meaning that the Group is able to source its own raw materials more cheaply than buying in the market. Lower raw material prices negatively impact the calculation of the contribution from the Group's raw material assets, which is based on the theoretical cost of acquiring those raw materials in the open market.

The Group's refractory business contributed a historic high of 10.9 ppts towards the total Adjusted EBITA margin of 11.7%, an increase of 120 bps compared to the 9.7 ppts contribution in 2023. Refractory margin was supported by lower input costs, the benefits of M&A synergies and structural cost reductions resulting from the Group's strategic cost-saving initiatives.

Adjusted EBITA and Adjusted EBITDA both exclude €125 million of net expenses from adjusted performance (2023: €31 million), including Software as a Service costs (largely on new SAP ERP), Mainzlar Plant closure costs and impairment of Hexa Contagem Project, consequent on Resco acquisition as set out in 'Items excluded from adjusted performance' below.

The Adjusted EBITA performance in 2025 is expected to be modestly above 2024 levels including the acquisition of Resco.

Items excluded from adjusted performance

In order to accurately assess the underlying performance of the business, the Group excludes certain items from Adjusted EBITA. Sizeable charges in the year have been driven by Group wide programmes aimed at improving operating efficiency and future profitability through business process improvements and plant network optimisation.

In 2024 the total net adjustments to EBITA amount to €125 million, including:

• €14 million of amortisation of onerous contracts imposed by EU as part of the merger with Magnesita.

• €9 million related to the disposal of the Dashiquiao plant in China.

• €6 million related to receivables previously written down to zero.

• €3 million of other miscellaneous income.

• €(52) million of expenditure on digital architecture, previously guided as capital expenditure. Spending on Software as a Service is classified as an expense in IFRS and cannot be capitalised as would normally be the case with capital expenditure. The Group incurred charges of €39 million on the ERP upgrade in 2024 and €7 million reclassified from 2023 and €6 million on logistics and supply chain planning software upgrades. Investments in digital architecture are expected to deliver value through cost savings and margin improvement, planning and operating efficiencies and improved working capital management.

• €(39) million amortisation in intangible assets arising at the time of the merger with Magnesita.

• €(29) million non-cash impairment of fixed assets in Brazil, where the second stage of the Hexa Contagem expansion project will not be advanced following the acquisition of Resco and intended transfer of production capacity to the US. The impact of this impairment was considered as part of the business case for the acquisition of Resco.

• €(25) million provision for restructuring expenses at the Mainzlar, Germany plant, to be paid in 2025 following the announced closure of the plant in line with the Group's original Production Optimisation Plan and after an assessment of surplus production capacity in Europe.

• €(12) million of expenses related to investments in and losses from the disposal of special Argentinian government bonds.

Net finance expenses

Net finance expenses, which includes interest payable on borrowings net of interest income on cash balances, gains and losses relating to foreign exchange, pension expenses, present value adjustments, factoring costs and non-controlling interest expenses, decreased to €42 million (2023: €100 million).

Net interest expenses remained stable at €39 million (2023: €38 million) comprising interest expenses on borrowings of €61 million (2023: €58 million) and €22 million of interest income on cash balances on deposit (2023: €20 million).

Foreign exchange gains of €11 million were recorded in 2024 compared to foreign exchange related losses of €30 million in 2023, mainly driven by US dollar strength in Q4, weakness in the Brazilian Real and Mexican Peso and a €(1) million hyperinflation adjustment related to Argentina (2023: €3 million).

Other net financial expenses amounted to €14 million (2023: €32 million) including factoring costs of €10 million (2023: €12 million), pension charges of €12 million (2023: €12 million) and present value adjustments of €7 million (2023: €8 million). Net financial expenses in 2024 also benefitted from a non-cash gain of €22 million due to the revaluation of the Group's obligation to purchase the remaining stakes it does not already own in Jinan New Emei and Chongqing.

Guidance for net interest expenses including Resco in 2025 is €60 million. Guidance for other adjusted net financial expenses is €30 million, resulting in €90 million of adjusted net finance expenses guided for 2025.

Taxation

Total tax for 2024 in the income statement amounted to €46 million (2023: €62 million), representing a 23% reported effective tax rate (2023: 27%).

Reported profit before tax amounted to €200 million (2023: €233 million). Adjusted profit before tax amounted to €347 million (2023: €317 million), with an adjusted effective tax rate of 24% (2023: 24%). Adjusted items include non-taxable IFRS revenues related to put option valuation and sale of fixed assets in China, as well as non-deductible legal restructuring costs.

The adjusted effective tax rate guidance is between 23-25% for 2025.

Profit after tax

On a reported basis the Group recorded profit after tax of €154 million (2023: €171 million), profit attributable to shareholders of €142 million (2023: €165 million) and earnings per share of €3.01 (2023: €3.50).

Adjusted profit after tax increased to €263 million (2023: €241 million) and Adjusted earnings per share was €5.32 (2023: €4.98). A full reconciliation of EBITA to EPS and Adjusted EBITA to Adjusted EPS can be found in the table below. Items excluded from Adjusted Profit after tax included €17 million of net financial expenses mainly arising from the revaluation of the Group's obligation to purchase the remaining stakes it does not already own in Jinan New Emei and Chongqing.

Profit attributable to shareholders is stated after deducting non-controlling interests of €12 million (2023: €6 million) mainly arising from RHI Magnesita India Ltd., in which the Group holds a stake of 56%.

Guidance for non-controlling interest expense in 2025 is approximately €15 million.

Financial guidance and outlook

Refractory demand remains weak, with no recovery in end market demand visible. Falling domestic demand of customer industries in China results in exports of steel and other materials from China, reducing customer output in most world markets and therewith reducing refractory usage. 2024 was a relatively strong year for higher margin non-ferrous metals and glass projects due to the timing of customer investment projects. However, markedly lower capex investments by these industrial customers will reduce demand in 2025, offsetting forecasted growth in steel refractory demand in India, West Asia & Africa. Revenue performance in 2025 year to date and the outlook for H1 is weak, driven by low volumes in steel and pricing pressure in particular in cement and non-ferrous metals.

The Adjusted EBITA performance in 2025 is therefore expected to be modestly above 2024 levels including the acquisition of Resco. Adjusted EBITA is expected to be weighted approximately 45% in the first half and 55% in the second half of the year.

An increasing trade tariff environment may protect customers in certain jurisdictions and benefit refractory producers with local for local production in the short term but risks a medium-term negative impact on global trade.

Sales volumes in the base business are expected to remain flat. Adjusted EBITA margin is guided to be stable at approximately 11.5%.

Gearing will rise in the short term due to the completion of the Resco transaction but is expected to reduce back within the targeted range of c. 2.0-2.5x Pro Forma Adjusted EBITDA by the end of 2025. Capital expenditure on fixed assets will be reduced to €145 million (below depreciation of approximately €150 million), in favour of continuing to invest in our digital transformation, which will incur costs of approximately €35 million per year over the three-year period 2024-26. Capex associated with the integration of Resco is expected to be €30 million, spread over the next two financial years.

The Group expects to incur network optimisation expenses in Europe and Brazil as a result of plant footprint adjustments following the Resco acquisition and other M&A transactions completed in 2022 and 2023. Total restructuring costs in the base business of €60 million and associated capital expenditure of €40 million are planned over the period 2025-27, to deliver €10 million of EBITA benefit in 2025, €20 million in 2026 and €30 million per annum thereafter.

Working capital

Working capital decreased to €865 million (31 December 2023: €980 million) driven by inventory reduction, lower accounts receivable and higher payables.

Working capital intensity, measured as a percentage of the last three months' annualised revenue, decreased to 23.4% (31 December 2023: 24.4%). Accounts receivable intensity was 12.9% (31 December 2023: 11.9%), accounts payable intensity was 15.5% (31 December 2023: 12.4%) and inventory intensity increased to 26.1% (31 December 2023: 24.9%).

Inventories decreased to €962 million (31 December 2023: €1001 million), due to lower input costs, reduced inventory volumes and inventory improvement measure implemented at plants acquired in 2023.

Accounts receivable decreased slightly to €474 million (31 December 2023: €477 million), reflecting lower pricing. Accounts receivable is calculated as trade receivables excluding factoring plus contract assets less contract liabilities and downpayments received, and a full reconciliation can be found in the APMs section. 

Accounts payable increased to €572 million (31 December 2023: €498 million) due to extended payment terms and higher value raw material purchases in the second half.

Working capital financing, used to provide low-cost liquidity and support the Group's commercial offering to customers, was €289 million on 31 December 2024 (31 December 2023: €298 million), comprising €237 million of accounts receivable financing (factoring) and €53 million of accounts payable financing (forfaiting). Working capital financing levels vary according to business activity, and the Board has set an internal limit of €320 million on its use.

Working capital intensity is targeted to be approximately 24% in 2025.

Other assets and liabilities

Cash flows from other assets and liabilities amounted to €(93) million (2023: €(12) million) comprising, indirect and other tax rebates of €4 million (2023: € 14 million), employee pension pay outs and pension provision movements of €(22) million (2023: €(19) million), employee variable remuneration and employee-related provisions of €(24) million (2023: €29 million) and other cash flows of €(51) million (2023: € (36) million). The €53 million difference in variable remuneration and employee related provisions is due to a relatively high staff bonus payout in 2024 relating to 2023 performance, compared to a lower bonus payout in 2023.

Capital expenditure

The Group incurred €145 million of capital expenditure (2023: €180 million), of which €65 million was maintenance related (2023: €86million), €68 million was expansionary capital expenditure (2023: €74 million) and €12 million of maintenance and integration capital expenditure was incurred at newly acquired businesses (2023: €19 million).

Capital expenditure in 2025 is expected to be around €145 million. Maintenance capital expenditure in the base business is expected to be approximately €75 million, with expansionary capital expenditure of €55 million and maintenance and integration capital expenditure in newly acquired businesses of €15 million. Spending of approximately €35 million on digital infrastructure projects will be expensed in accordance with IFRS and will not be capitalised.

Acquisitions

In April 2024 the Group announced its intention to acquire Resco Group, a US based producer of alumina monolithics and wide range of basic and non-basic refractories, for an enterprise value of up to $430 million. The transaction completed on 28 January 2025 for an enterprise value of $410 million, or c.€391 million.

In June 2024 the Group announced the €5 million acquisition of Refrattari Trezzi, a recycling specialist in Italy, expanding its recycling footprint in Europe. Refrattari Trezzi has been combined into the Group's existing MIRECO joint venture, increasing the Group's share in MIRECO to 55% (2023: 51%).

The Group incurred €58 million of cash outflow relating to acquisitions in 2024, including €44 million of prepayments for the intended acquisition of Resco, €5 million for the acquisition of Refrattari Trezzi, €3 million for the purchase of the remaining 49% stake in Seven Refractories Cyprus not already owned by the Group, a €3 million deferred payment for Jinan New Emei and €3 million purchase of additional stake in P-D Refractories.

Cash flow

Adjusted operating cash flow increased to €419 million (2023: €418 million) representing cash flow conversion from Adjusted EBITA 103% (2023: 102%), supported by the €115 million release of working capital.

Free cash flow decreased to €225 million (2023: €258 million), mainly due to higher interest and restructuring expenses.

Cash income tax payments increased to €69 million (2023: €60 million) and net interest paid also increased to €71 million (2023: €56 million), as a result of higher average interest rates and borrowings.

Cash dividends paid in 2024 amounted to €87million (2023: €77 million) and the cash change in Net debt was an increase of €80 million compared to a decrease of €41 million in 2023.

Financial position

Net debt decreased to €1,251 million, comprising total debt of €1,750 million, leases of €77 million and cash and cash equivalents of €576 million.

Total leases of €77 million (2023: €70 million) are included in the Group's Net debt position as required by IFRS 16.

The Group's gearing at the year-end was 2.3x Net debt to Pro Forma Adjusted EBITDA (31 December 2023: 2.3x).

Available liquidity at 31 December 2024 was €1,376 million, comprising undrawn committed facilities of €800 million and cash and cash equivalents of €576 million.

Out of the total gross debt of €1,750 million, 98% is denominated in euro. The floating to fixed ratio of the gross debt is 27% floating to 73% fixed and the weighted average cost of debt as of 31 December 2024 was 2.96%, including swaps.

The Group will seek to maintain the ratio of Net debt to Pro Forma Adjusted EBITDA within the guided range of 2.0-2.5x or above for periods of compelling M&A.

Return on invested capital

ROIC is used to assess the Group's efficiency in executing its capital allocation strategy, which is aimed at enabling organic growth, disciplined M&A and shareholder returns. ROIC is an APM, see the APM section for full details of how ROIC reconciles to IFRS metrics.

Under the APM definition, ROIC was 9.8% in 2024 (2023: 10.7%) based on Average Invested Capital of €3,043 million (2023: €2,854 million) and NOPAT of €298 million (2023: €305 million). ROIC generated by the Group's raw material assets was 3.5% (2023: 8.9%) and ROIC from the refractory business was 11.0% (2023: 11.0%). The main drivers of the decrease in ROIC were the increase in Average Invested Capital to €3,043 million (2023: €2,854 million) as a result of M&A transactions completed in 2023 and the reduction in contribution from the Raw material assets, due to low market prices for refractory raw materials. The Group intends to carry out a network optimisation over the period 2025-27 following M&A completed in the previous three years, reducing invested capital.

Returns to shareholders

The Board's capital allocation policy remains to support the long-term Group strategy, providing flexibility for both organic and inorganic investment opportunities and delivering attractive shareholder returns over the medium term. These opportunities are assessed against a framework of strategic fit, risk profile, rates of return, synergy potential and balance sheet strength.

In 2024, the Group invested €68 million in expansionary capital expenditure in the base business and €12 million in the integration of newly acquired businesses. Maintenance capital expenditure was €65 million. A further €391 million was agreed to be allocated to the acquisition of Resco.

Following the strong profitability, cash generation and strategic progress delivered in 2024, the Board has recommended a final dividend of €1.20 per share for the full financial year, and €85 million in aggregate. This represents a dividend cover of 3.0x Adjusted earnings per share. Subject to approval at the AGM scheduled for 7 May 2025, the final dividend will be payable on 12 June 2025 to shareholders on the register at the close of trading on 23 May 2025. The ex-dividend date will be 22 May 2025. Together with the interim dividend of €0.60 per share paid on 26 September 2024, the recommended final dividend represents a full year dividend of €1.80 per share in respect of the 2024 financial year.

The Board's dividend policy remains to target a dividend cover of below 3.0x adjusted earnings over the medium term. Dividends will be paid on a semi-annual basis with one third of the prior year's full year dividend being paid at the interim.

OPERATIONAL REVIEW

Steel overview

Supplying refractory products and services to the steel industry accounted for 68% of RHI Magnesita's revenues in 2024 and the Group retained its leading position globally with a c.13% market share, or c.20% excluding China and East Asia. Refractory products are required to protect steel making equipment from extremely high temperatures of up to 1,800°C, chemical corrosion and abrasion. Refractory product applications include iron making (blast furnace or direct reduction), primary steel-making (basic oxygen furnace or electric arc furnace) as well as ingot and continuous casting. New applications are under development for production of green steel and the Group was awarded five contracts for such projects in 2024. RHI Magnesita offers a complete range of products and solutions for the steel making process. The lifespan of refractory products in the steel making process can range from hours to months depending on the application, for example a slide gate is a consumable item that may need to be replaced every four hours whilst the lining of a primary steel making furnace could require re-lining at six month intervals. Refractory consumption in steel making is therefore classified as an operating expense by steel producers and usually accounts for around 2-3% of operating costs, on average.

Steel segment revenues decreased by 4% to €2,373 million (2023: €2,461 million) and by 3% in constant currency terms (2023: €2,434 million) as a 3% increase in sales volumes supported by M&A was offset by 6% lower pricing. Excluding M&A, the base business increased shipped volumes by 1%, a strong performance compared to World Steel Association data which indicates a decrease of 0.9% in global steel output in 2024.

Global steel demand decreased in the key markets of China and North America in 2024 but grew in India, West Asia & Africa, Europe and South America. Domestic production in some markets was displaced by exports from China where domestic consumption of steel reduced by approximately 6% and production by approximately 3%. The approximate 3% gap represents the increase in exports, which increased from approximately 90 million tons in 2023 to approximately 120 million tons in 2024.

Industrial overview

RHI Magnesita is a leading supplier of refractory products and services to customers in the cement and lime, non-ferrous metals, glass, energy, environmental and chemicals industries. These Industrial customers accounted for 32% of Group revenues in 2024 and have longer replacement cycles compared to Steel customers, ranging from one to 20 years. Refractories are classified as capital expenditure by Industrial customers and represent between 0.2% and 1.5% of total costs over the life cycle of a facility. RHI Magnesita has a c.25% market share globally in cement refractories, c.20% market share in non-ferrous metals applications, c.19% in the glass industry and c.5% in other industrial applications such as energy, environment, chemicals and foundry.

Industrial revenues were stable at €1,114 million (2023: €1,111 million) and increased by 2% in constant currency terms, with shipped volumes increasing by 11%, supported by M&A, whilst average pricing reduced by 9%.

Cement & Lime revenues reduced by 12% to €376 million (2023: €424 million), representing 11% of Group revenues in 2024 as pricing reduced by 7% and sales volumes reduced by 4%. Strong growth in sales volumes in Process Industries of 101% and Glass of 19%, mainly resulting from M&A, were offset by the 4% decline in the larger Cement & Lime segment and 9% lower Non-ferrous metals sales. The Non-ferrous metal business remained the highest margin segment for the Group, with a gross margin of 44% in 2024 (2023: 42%).

Minerals

The Group sourced 42% of its raw material needs by value, in line with its vertical integration strategy. Raw materials not utilised internally are sold in the open market and reported under Minerals within the Industrial segment, generating revenues of €65 million in 2024 (2023: €80 million). Mineral sales volumes declined by 11%, coupled with lower market prices for raw materials, leading to a reduction in revenue.

Regional business units

In 2023 RHI Magnesita established an operational governance structure consisting of five regional business units, which continued in 2024. Managing the business through a regional structure enables the Group to serve its customers better through faster local decision making and improved accountability, supporting our local for local production strategy.

Europe, CIS & Türkiye

Europe, CIS & Türkiye revenues increased by 3% to €926 million (2023: €894 million), or by 5% in constant currency terms. Average price per tonne declined by 11% due to end market weakness in construction and automotive and a changing product mix, but this was more than offset by a 17% increase in shipped volumes due to the full year contribution from M&A completed in 2023. Excluding M&A, base business sales volumes reduced by 2% and price per tonne was 14% lower, with revenues reducing by 15%.

Gross profit increased by 10% to €195 million (2023: €177 million), as higher gross margins of 21.1% (2023: 19.8%) were supported by the contribution from higher margin businesses acquired in 2023 and a reduction in the key input costs of energy and purchased raw materials. In the second half of the year, a significant increase in alumina prices drove up costs for acquiring alumina based refractory raw materials and disruption in the global graphite supply chain also resulted in cost increases.

Steel revenues decreased by 1% in constant currency terms on 7% higher shipped volumes, as M&A delivered volume growth despite subdued customer demand. Steel production in the European Union increased by 2.6% and in Türkiye by 9.4% according to WSA data, reflecting recovery from a low base in Europe and strong growth and relative stability in Türkiye compared to the surrounding region. Whilst steel output in the European Union increased year on year, producers continue to face a combination of deteriorating prices, rising costs and low demand relative to historic levels. These factors led some customers to reduce capital expenditure in favour of running repairs and to increase sourcing of cheaper imported refractories. The challenging market conditions for steel customers also resulted in the delay of some green steel projects, but these were temporary postponements and not cancellations.

Industrial segment sales volumes increased by 40% and revenues by 15% in constant currency terms, supported by a full year contribution from process industries focused P-D Refractories. Whilst volumes in Cement & Lime and Non-ferrous metals reduced by 15% and 23% respectively, this was more than offset by a 49% increase in Glass sales volumes and 216% increase in Industrial applications, mainly due to M&A. Waste to energy is a strategic growth focus within Industrial applications where the Group was able to increase market share in both maintenance and greenfield project support. Sales of digital products increased, including laser technologies for refractory evaluation at customer sites. Such products are already widely in use in the Cement & Lime segment and are now gaining traction with Non-ferrous metals and Industrial applications customers.

The Europe and Türkiye region has benefited from significant inorganic growth in recent years with the addition of MIRECO, Sörmas, Dalmia GSB, Seven Refractories and PD Refractories in 2022 and 2023. Regional leadership have been focused on the integration of each of these businesses and the achievement of synergy targets. MIRECO delivered strong growth in recycling rates, Sörmas prepared for the initial adoption of the Group's new ERP system and the Bochum plant previously owned by Dalmia GSB completed necessary legal, financial and operational integration processes during the year. Certain Seven Refractories businesses now form RHI Magnesita's new Alumina Monolithics business unit and synergy realisation is on track, despite low demand conditions. Network optimisation in Europe is expected to be required to fully realise the synergy benefits of M&A completed in the last three years.

The Mainzlar plant in Germany will be closed in 2025 and the Group may consider further plant footprint optimisation in Europe following recent M&A.

North America

Revenues in North America decreased by 5% to €852 million (2023: €894 million) or by 4% in constant currency terms, due to a 1% reduction in sales volumes and 3% lower average pricing.

Despite lower revenues, the region grew Gross profit by 5% to €263million (2023: €250 million) as margins were successfully increased to 30.9% (2023: 27.9%) due to effective cost management and resilient pricing in Cement & Lime and Non-ferrous metals.

Steel volumes reduced 2% and pricing by 3% resulting in 4% lower revenues, whilst gross margin expanded to 30.7% (2023: 28.3%). Utilisation rates in US steel mills remained low, at approximately 76% in 2024 and reducing below this level at the end of the year following the US election in November. North America steel output according to WSA data declined by 4.2% in 2024 whilst RHI Magnesita estimates that output from its customers in the region reduced by 6%, compared to the 2% decline in sales volumes. The Group continues to build out its product offering and secured agreements with three additional tap hole clay customers during the year. In the electric arc furnace segment, a contract for refractory supply including an automated robotic solution for gunning repair was awarded in Canada, by a large customer converting to EAF from BOF steel production. Other robotics contracts were awarded in the US, including multiple new tundish cage solutions.

Industrial sales volumes saw greater variation across segments with a weak Cement & Lime result more than offset by strong trading in Glass and Industrial applications, resulting in an overall increase in sales volumes of 1%. Higher pricing in Non-ferrous metals and reduced input costs were the key drivers of the increase in Industrial Gross margin to 31.7% (2023: 27.0%). Cement and concrete production in the US reduced by 8% and was the main driver of a 13% reduction in Cement & Lime refractory sales volumes. The Group continued to expand its offering to a broader range of customers and was awarded a contract for aluminium furnace design and refractory supply, the first of its kind in the region.

Inventory management was a key focus to minimise working capital and finished goods inventories were successfully reduced despite falling customer demand over the year. PIFOT and net promoter scores in customer surveys remained close to all-time highs.

The integration of Seven Refractories' US sites is largely complete, with a new tap hole clay line now commissioned at Plant Huron. RHI Magnesita agreed to acquire US based Resco in April 2024 and the acquisition completed in January 2025. The integration of Resco into the Group's North American business and the realisation of planned synergies will now be the primary focus for regional leadership.

The US increased its recycling rate to a new high of 14.2% (2023: 8.3%). New health and safety reporting structures and a 'stop work' system were implemented at the Pevely and York plants.

India, West Asia & Africa

Revenues in the India, West Asia & Africa region decreased by 2% to €744 million (2023: €762 million) or by 2% in constant currency, as a 4% increase in sales volumes was offset by a 6% decline in average pricing due to increased competition and product mix changes. Base business sales volumes, excluding the full year contribution from 2023 M&A, increased by 2% with similar pricing pressure and mix impacts.

Gross profit reduced by 17% to €155 million (2023: €187 million) as gross margins reduced to 20.8% (2023: 24.5%), caused by the 6% reduction in average pricing on relatively stable unit costs.

Steel revenues decreased by 7% to €541 million (2023: €582 million) with a 1% increase in sales volumes offset by an 8% decrease in prices, as the full effect of pricing pressure fell on the Steel segment whilst Industrial pricing was stable. The main cause of pricing pressure in Steel was the impact of surplus low-priced imports from China entering the Indian market due to weakening demand in China. Steel gross margins compressed to 19.2% from 22.8% in 2023, mostly as a result of competitive pricing pressure, which outweighed the benefit of a 4% improvement in unit costs.

Domestic steel production in India grew by 6% in 2024 according to WSA data, however imports from China and Vietnam increased to partially satisfy growth in local demand. In India the Group remains well positioned to benefit from new DRI, blast furnace and coke oven projects under construction and customers have reacted positively to the growth strategy in iron making, DRI furnace refractories and pellet production. In the Middle East some new steel projects were postponed due to current unfavourable market conditions but this was offset by new business growth in induction and reheating furnaces in Iraq, Saudi Arabia, Libya and Africa. The Group secured three new solutions contracts in India and three in the Middle East, alongside two contract renewals outside India.

Industrial revenues increased by 13% to €203 million (2023: €180 million) reflecting a 13% increase in sales volumes on stable pricing. The main driver of the increase in revenues was the Cement & Lime segment, where sales volumes increased by 15% and revenue by 17%, with new demand coming from greenfield and brownfield cement projects in India and North Africa. Non-ferrous metals, the second largest segment in the region by revenue and gross profits, saw a 22% decrease in sales volumes offset by 18% higher pricing, translating to an overall 9% decrease in revenues.

Industrial gross margin decreased to 24.9% (2023: 30.3%) as costs increased by 7%, mainly due to high prices for alumina-based raw materials and a change in product mix towards alumina-based refractory sales. Margins improved in Non-ferrous metals and Glass but declined in Cement & Lime and Industrial Applications.

Capacity utilisation remained at a low level, with space to grow in line with forecast customer demand increases. One plant at Bhilai was closed and production transferred to Rajgangpur, in line with the M&A integration strategy. Supply chain reliability and efficiency was good throughout the year.

South America

Revenues in South America decreased by 9% to €473 million (2023: €522 million) or by 6% in constant currency terms, as shipped volumes reduced by 3% and pricing declined by 7%. Gross profit reduced by 3% to €142 million (2023: €146 million) supported by an increase in Gross margin to 30.0% (2023: 28.0%), driven by lower input costs.

Steel revenues decreased by 8% to €362 million (2023: €393 million) driven by a 1% decline in shipped volumes and 7% lower average pricing. The decline in sales volumes was slightly below the movement in steel production for the region, which increased by 0.6% in 2024 according to WSA data. Steel gross margin increased to 28.5% (2023: 24.5%) as the impact from lower pricing was more than offset by an 11% improvement in unit costs. New long-term contracts were signed with key customers and revenue derived from long-term contracts increased to 70% of the total for the region in 2024.

Industrial revenues decreased by 13% to €112 million, with a 6% decline in sales volumes and 7% lower average price per tonne. Volume decline was most pronounced in the Non-ferrous metals segment, with no new greenfield projects occurring during 2024 against a strong comparative in 2023. Pricing weakness was most evident in Cement & Lime.

Industrial segment Gross margins reduced to 35.2% (2023: 38.7%) as the 7% decline in average pricing was only partially offset by 2% lower costs.

During the year the Brumado rotary kiln project was completed and ramped up production. The project will reduce costs and increase operational flexibility considerably at this strategically important and globally significant raw material site.

A write down of assets in Brazil of €29 million connected to the completion of the Resco transaction has been recognised in the 2024 financial results, reflecting the network optimisation which will result in transfer of production capacity into the US.

China & East Asia

Revenues in China & East Asia increased by 2% to €426 million (2023: €418 million) as strong sales volumes in Steel offset volume decline and lower pricing in the Industrial segment. Excluding the contribution from M&A, revenues in the base business declined by 8%, mainly due to lower pricing and 2% lower shipped volumes. Gross margins were stable at 21.0% (2023: 21.0%) as pricing pressure was matched by reduced input costs. Gross profit increased slightly to €89 million (2023: €88 million) reflecting the revenue increase and stable margins.

Steel refractory sales volumes excluding M&A increased by 5%, representing a strong relative performance compared to WSA data for China which indicates a 1.7% decline in steel output in 2024. Shipped volumes of refractories in East Asia excluding M&A increased by 6%, also outpacing overall steel output growth in the region although this was largely due to the restart of a key customer site that had been suspended in 2023.

Industrial sales volumes decreased by 5% driven by weaker demand in construction and reduced consumption of glass refractories, partially offset by robust Non-ferrous metal demand in China. Lower pricing resulted in Industrial revenue decline of 9%, as weak Cement & Lime results were offset by strong demand for Non-ferrous metals refractories in China. Industrial gross margin in the region reduced to 27.3% (2023: 28.0%) as price weakness outpaced the reduction in input costs.

The Group's priority in its China & East Asia business continues to be a sustainable increase in margins to levels that are closer to the average for the Group worldwide. The Group's strategy is to focus on higher value-added products and services to differentiate against lower quality competing suppliers.

ALTERNATIVE PERFORMANCE MEASURES (APMs)

Definitions of APMs used by the Group are set out below. The purpose and usefulness of each APM and a reconciliation to the nearest IFRS equivalent measure, or a reference to a reconciliation appearing elsewhere in this document. In general, APMs are presented externally to meet investor and analyst requirements for clarity and transparency of the Group's underlying financial performance. APMs are also used internally in the management of the Group's business performance, budgeting and forecasting. APMs are non-IFRS measures which enable investors and other readers to review alternative measurements of financial performance, but they should not be used in isolation from the main financial statements. Commentary within the Annual Report, including the Financial Review, the Consolidated Financial Statements and the accompanying notes, should be referred to in order to fully appreciate all the factors and context affecting the Group's financial performance. Readers are strongly encouraged not to rely on any single financial measure and to carefully review the Group's reporting in its entirety.

Performance APMs

Adjusted EBITDA

Adjusted EBITDA is a key non-IFRS measure that the Executive Management Team (EMT) and Directors use internally to assess the underlying financial performance of the Group and is viewed as relevant to capital intensive industries. The ratio of Net Debt to Adjusted EBITDA is used as a measure of financial gearing.

Adjusted EBITDA is defined as EBIT, as presented in the Condensed Consolidated Statement of Profit or Loss, before amortisation, depreciation, and Excluded Items (see definition below).

Pro Forma Adjusted EBITDA

Pro Forma Adjusted EBITDA is used to assess financial gearing and includes a full year of Adjusted EBITDA contribution from businesses acquired during the year.

Adjusted EBITA

Adjusted EBITA is a key non-IFRS measure that the EMT and Directors use internally to assess the underlying performance of the Group.

Adjusted EBITA is determined consistently with Adjusted EBITDA, but includes depreciation expense of property, plant and equipment to reflect the wear and tear cost and future replacement of productive assets.

Adjusted EPS

Adjusted EPS is a key non-IFRS measure and one of the Group's KPIs. Adjusted EPS is used to assess the Group's underlying operational performance, post tax and non-controlling interests on a per share basis.

This measure is based on Adjusted EBITA after finance income and expenses, taxes, share of profit or loss from associates and joint ventures and non-controlling interest. Share of profit or loss from associates and joint ventures is adjusted to exclude impairments and gains or losses recognised on disposals.

Adjusted EPS excludes finance income and expenses and certain foreign exchange effects, that are not directly related to operational performance. This includes the non-cash present value adjustments for the Oberhausen provision.

Taxes are calculated by applying the effective tax rate normalised for restructuring expenses and impairments.

Excluded items

Items that are excluded in arriving at the Group's Adjusted measures of Adjusted EBITA, EBITDA and EPS include:

Other income, other expenses and restructuring expenses as reflected on the Consolidated Statement of Profit or Loss as well as gains and losses within interest income, interest expenses and other net financial expenses that are non-recurring in nature and not reflective of the underlying operational performance of the business. Excluded items include restructuring related provisions, costs in relation to corporate transactions and other non-recurring costs. The tax impacts of the above Excluded Items are also adjusted for.

Cash flow performance measures

Adjusted operating cash flow and Free cash flow

Adjusted operating cash flow is a key non-IFRS measure used by the EMT and the Directors to reflect the operational cash generation capacity of the Group before the cash impacts of Excluded Items (see definition above).

Adjusted operating cash flow is defined as Adjusted EBITDA adjusted for working capital items, changes in other assets and liabilities and capital expenditure and other non-cash items, such as share based payments. This APM is reconciled to Net Cash flow from operating activities as follows:

1. As reflected in the Consolidated Statement of Cash Flows

Free cash flow is determined from the IFRS measures of Net cash flow from operating activities, net cash used in investing activities and net cash (used in)/provided by financing activities and excludes the cash impacts of purchases and disposals of business and subsidiaries, dividends paid to equity shareholders of the Group, share capital transactions with shareholders, proceeds and repayment of borrowings and current borrowings and repayment of leases.

Free cash flow is reconciled to Cash changes in Net debt in the table in the 'Cash flow and working capital' section. Cash changes in Net debt is reconciled to Change in cash and cash equivalents in the Net Debt APM reconciliation.

Balance sheet

Liquidity

Liquidity comprises cash and cash equivalents, short term marketable securities and undrawn committed credit facilities.

1. As reflected in the Consolidated Statement of Financial Position

Net Debt

Net Debt is the excess of current and non-current borrowings, associated debt derivatives for which hedge accounting is applied and lease liabilities over cash and cash equivalents and short-term marketable securities. The Board uses this measure for the purpose of capital management. A reconciliation of Net Debt is included in Note 33 to the Consolidated Financial Statements.

1. As reflected in the Consolidated Statement of Cash Flows

Working capital

Working capital consists of inventories plus trade receivables and other receivables minus trade payables and other payables. Working capital intensity provides a measure of how efficient the Company is in managing operating cash conversion cycles. It is measured as Working capital divided by trailing three-month revenues (annualised) and is expressed as a percentage.

Return on invested capital ("ROIC")

ROIC reflects the annualised return on invested capital of the Group. ROIC is calculated as NOPAT (net operating profit after tax) divided by average invested capital of the year.

1. As reflected in the Consolidated Statement of Profit and Loss

2. As reflected in the Consolidated Statement of Cash Flows

3. As reflected in the Consolidated Statement of Financial Position

4. NOPAT divided by average invested capital of the year

GLOSSARY

Consolidated Statement of Profit or Loss for the year ended 31 December 2024

Consolidated Statement of Comprehensive Income for the year ended 31 December 2024

Consolidated Statement of Financial Position as at 31 December 2024

Consolidated Statement of Cash Flows for the year ended 31 December 2024

Consolidated Statement of Changes in Equity for the year ended 31 December 2024

1) This mainly comprises the effects of the acquisition of non-controlling interests of Seven Refractories' Group and P-D-Refractories as well as the final adjustments to the purchase price allocations of Seven Refractories' Group and P-D Refractories, both completed in 2024.

1) Mainly relating to the recognition of the financial liability and derecognition of the non-controlling interests related to the acquisition of Jinan New Emei, the recognition of the non-controlling interests related to the acquisition of Seven Refractories Group as well as P-D Group and the impacts of the fair value changes resulting from the completion of purchase price allocation related to the acquisition of Sörmaş.

1. Authorisation of Consolidated Financial Statements and Statement of Compliance with the IFRS Accounting Standards

The Consolidated Financial Statements of RHI Magnesita N.V. and its subsidiaries (collectively referred to as "RHI Magnesita" or "the Group") for the year ended 31 December 2024 were approved and authorised for issue by the Board of Directors on 26 February 2025 and will be submitted for adoption to the Annual General Meeting ("AGM") in May 2025. RHI Magnesita is a public limited company incorporated under the laws of the Netherlands (naamloze vennootschap), having its official seat (statutaire zetel) in Arnhem, the Netherlands, and its office at Kranichberggasse 6, 1120 Vienna, Austria. It is registered with the Dutch Trade Register under number 68991665 and listed on the London Stock Exchange, with a secondary listing on the Vienna Stock Exchange (Wiener Börse).

The Group is a global industrial group whose core activities include the development and production, sale, installation and maintenance of high-grade refractory products and systems used in industrial high-temperature processes exceeding 1,200°C.

The Consolidated Financial Statements of the Group have been prepared in accordance with IFRS Accounting Standards as adopted by the European Union. The Consolidated Financial Statements also comply with the financial reporting requirements included in Title 9 of Book 2 of the Dutch Civil Code.

The accounting policies that follow have been consistently applied to all years presented, except where otherwise indicated. With the exception of specific items such as derivative financial instruments, plan assets for defined benefit obligations, financial assets measured at Fair Value through Profit or Loss (FVPL) or Other Comprehensive Income (FVOCI) and financial liabilities measured at FVPL, the Consolidated Financial Statements are prepared on a historical cost basis.

Certain comparative figures in the Consolidated Financial Statements and accompanying Notes have been revised to conform to the current year presentation as a result of certain improvements in presentation. These improvements include:

· Presentation of defined employee benefit liabilities in the Consolidated Statement of Financial Position in a single line item labelled 'net employee defined benefit liabilities'. Previously, these were presented in separate line items, namely 'provisions for pensions' and 'other personnel provisions'.

· Presentation of the effects of translating the financial statements of foreign operations and subsidiaries with a functional currency other than the Euro into the Group's presentation currency in the Consolidated Statement of Comprehensive Income in a single line item. Previously, these were presented in separate line items, namely 'unrealised results from currency translation' and 'unrealised results from net investment hedge and foreign operations'.

· Purchased emission rights which represent the permission to emit specified tons of carbon dioxide (CO2) in a specified time period have been reclassified to Inventories in the Consolidated Statement of Financial Position. Previously, these were presented as trade and other current receivables. Due to this reclassification the comparative figure for inventories increased by €5 million and the comparative figure for trade and other current receivables decreased by the same amount.

· Realised gains and losses from settled foreign currency forward contracts have been reclassified to the cash flow from operating activities in the Consolidated Statement of Cash Flows. Previously, these were presented as part of the cash flow from financing activities. Due to this reclassification, the comparative figure for cash flow from financing activities decreased by €5 million and the comparative figure for cash flow from operating activities increased by the same amount.

· The number of reportable segments increased from two to five and the disclosures were extended to match the new segment reporting structure. Refer to Note (5) for further details.

The financial year of RHI Magnesita N.V. and the Group corresponds to the calendar year. Subsidiaries with a financial year different to the Group, due to local legal requirements, provide financial information to allow consolidation consistent with the Group's financial year. The Consolidated Financial Statements are presented in Euros, and all values are rounded to the nearest € million, except where otherwise indicated. The Group has availed of the exemption provided by section 264 paragraph 3 HGB of the German Commercial Code for the following entities: RHI Urmitz AG & Co. KG (Mülheim-Kärlich), RHI Magnesita Sales Germany GmbH (Wiesbaden), RHI Refractories Site Services GmbH (Wiesbaden), RHI Magnesita Deutschland AG (Wiesbaden), RHI Magnesita Wetro GmbH (Puschwitz) and RHI Magnesita Bochum GmbH (Bochum). According to this provision, the mentioned companies are exempt from preparing statutory financial statements, where required by the German Commercial Code, since they are included in the Consolidated Financial Statements of the Group.

The Consolidated Financial Statements consolidate the Financial Statements of RHI Magnesita N.V. and its subsidiaries. Subsidiaries are consolidated from the date on which the Group obtains control, including when control is obtained via potential voting rights, and continue to be consolidated until the date that control ceases.

The financial information of subsidiaries is prepared for the same reporting year as the parent company, using consistent accounting policies. When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in the Statement of Profit or Loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in Other Comprehensive Income (OCI) in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This treatment may mean that amounts previously recognised in OCI are recycled through the Statement of Profit or Loss. Intercompany balances and transactions, including unrealised profits arising from intragroup transactions, are eliminated in full. Unrealised losses are eliminated in the same way as unrealised gains except that they are only eliminated to the extent that there is no evidence of impairment.

Non-controlling interests represent the equity in subsidiaries that is not attributable, directly or indirectly, to the Group's shareholders.

Please refer to the Company Financial Statements of RHI Magnesita N.V. for a list of the Company's subsidiaries, joint ventures and associates in which it holds more than 20%. Please refer to page 304 for more detail.

In considering the appropriateness of adopting the going concern basis in preparing the Consolidated Financial Statements, the Directors have assessed the potential cash generation of the Group and considered a range of downside scenarios that model different degrees of potential economic downturn, using the same model performed for the viability assessment. This assessment covers at least 12 months from the date of approval of the Consolidated Financial Statements.

The scenarios considered by the Directors include a severe but plausible downside and a reverse stress test which determines the level of EBITDA that could breach the financial debt covenant of the Group's principal borrowing facilities. Further mitigating actions within management control would be undertaken in such scenarios, including but not limited to: working capital and SG&A reduction, deferring capital expenditure, or reducing or cancelling the dividend, but these were not incorporated in the downside modelling.

The Directors have also considered the Group's current liquidity and available facilities. As of 31 December 2024, the Consolidated Statement of Financial Position reflects cash and cash equivalents of €576 million (2023: €704 million). In addition, the Group has access to a €600 million (2023: €600 million) Revolving Credit Facility (RCF), which is currently undrawn and not relied upon for the purpose of the going concern assessment. In 2024 and the previous reporting period, the Group complied with the financial covenant of the Group's principal borrowing facilities (refer to Note (27)).

In the scenarios assessed and taking into account liquidity, available resources and before the inclusion of all mitigating actions, the Directors consider it is appropriate to continue to adopt the going concern basis in preparing the Consolidated Financial Statements for the period ended 31 December 2024.

2. Impact of new financial reporting standards and interpretations

Management has assessed the impact of new or amended IFRS Accounting Standards as adopted by the European Union effective on or after 1 January 2024. Except for the amendments to IAS 7 and IFRS 7 including new disclosure requirements for the Group's existing liabilities related to supplier finance arrangements and their effects on the Group's liabilities, cash flows and exposure to liquidity risk, management assessed that the application of these has not had a material impact on the Consolidated Financial Statements for 2024. Refer to Note (31) for the new disclosures on the Group's existing supplier finance arrangements.

Furthermore, management has assessed the impact of new or amended IFRS Accounting Standards issued by the IASB that have not yet become effective. No new or amended IFRS Accounting Standards have been adopted early. Except for newly issued IFRS 18, the potential impact of which is currently being assessed, management does not anticipate any significant impact on the Consolidated Financial Statements in the period of initial application after the adoption of these amendments.

IFRS 18 'Presentation and Disclosure of Financial Statements' was published in April 2024 with the aim to enhance comparability of financial statements. The key changes introduced by IFRS 18 relate to the structure of the Consolidated Statement of Profit or Loss, disclosures related to management-defined performance measures (MPMs), aggregation and disaggregation of information disclosed in the Notes and minor changes in the Consolidated Statement of Cash Flows. IFRS 18 will replace existing guidance in IAS 1 'Presentation of Financial Statements' and some of the guidance in IAS 7 'Statement of Cash Flows'. IFRS 18 becomes effective for financial years beginning on or after January 1, 2027. European Union endorsement is still pending.

IFRS 18 introduces a defined structure for the Consolidated Statement of Profit or Loss including five categories, namely operating, investing, financing, income tax and discontinued operations. Entities are required to classify their expenses and income to these categories mainly based on the main business activities and additional guidance provided by IFRS 18. In addition, according to IFRS 18 two subtotals must be presented on the face of the Consolidated Statement of Profit or Loss after the first two categories (i.e. operating profit or loss and profit or loss before financing and income tax).

IFRS 18 stipulates new disclosure requirements related to alternative performance measures that meet the definition of MPMs according to IFRS 18. According to the new guidance, disclosures related to MPMs include, but are not limited to, a reconciliation from the MPMs to the most directly comparable IFRS 18 specific subtotal or total presented in the Consolidated Statement of Profit or Loss need to be disclosed in a single note within the Notes.

A review of the impact of IFRS 18 is being undertaken, and the impact of adopting the standard will be determined once this review has been completed. In particular the classification of expenses and income to the five P&L categories and the introduction of (new) subtotals will require an assessment at general ledger account level per legal entity. In addition, the impact of the MPM related disclosures requires an assessment of which of the Group's alternative performance measures meet the definition of MPMs according to IFRS 18 and how they can be reconciled to the most comparable IFRS 18 specific total or subtotal. Therefore, the impact of adopting IFRS 18 cannot be reliably estimated until this work is substantially complete.

3. Significant Accounting Policies, Judgements and Estimates

Business combinations are accounted for using the acquisition method. The identifiable assets acquired, and liabilities assumed, including any contingent consideration, are recognised at their fair values at the acquisition date. The amount of the purchase consideration and value of non-controlling interest on acquisition, if any, above the fair value of assets and liabilities is recognised as goodwill. A bargain purchase gain, if any, is recognised within other income immediately. Transaction costs related to a business combination are expensed as incurred. The acquisition of a non-controlling interest in a subsidiary and the sale of an interest are accounted for as transactions within equity unless they result in the loss of control. Sales of interests accounted for as equity transactions also include share issues in subsidiaries which dilute RHI Magnesita N.V.'s share in the subsidiary's net assets and where the dilution does not result in the loss of control. The difference between the purchase consideration or sale proceeds after tax and the relevant proportion of the non-controlling interest, measured by reference to the carrying amount of the interest's net assets at the date of acquisition or sale, is recognised in retained earnings as a movement in equity attributable to the shareholders of RHI Magnesita N.V.

Where the Group acquires less than 100% of shares in a business combination, there is an accounting policy choice whereby non-controlling interest is either reflected at the proportionate share of the acquired identifiable net assets (excluding goodwill) or at fair value. This accounting policy choice can be exercised individually for each acquisition. If a non-wholly owned subsidiary of RHI Magnesita N.V. is the deemed acquirer in a business combination, goodwill is measured either as the excess of the full consideration transferred plus non-controlling interests, if any, over the acquired identifiable net assets or as the excess of RHI Magnesita N.V.'s share in the consideration transferred plus non-controlling interests, if any, over the acquired identifiable net assets. This accounting policy choice can be exercised individually for each acquisition too. For business combinations achieved in stages, the Group's previously held equity interest is remeasured to fair value at the acquisition date. Any gains and losses arising from such remeasurement are recognised in profit or loss.

Net assets of subsidiaries not attributable to the shareholders of RHI Magnesita N.V. are shown separately in equity as non-controlling interests.

As part of a business acquisition or subsequently, the Group may enter into agreements with non-controlling interests in the form of a call option, a put option or a forward contract to acquire the outstanding shares. A call option provides the Group with the right to acquire the outstanding shares not already owned, while a written put option allows the non-controlling interest to sell their shares to the Group. A forward contract creates a commitment for the Group to purchase and for the non-controlling interest to sell the outstanding shares at a later date. The option or forward price may be based on an earnings multiple such as EBITDA subject to contractual limits, if any, or may be fixed and exercisable at a future date. A financial liability is recognised on the written put option or forward contract at the present value of the estimated redemption amount. Where the option is assessed to result in the non-controlling interest transferring the risks and rewards of ownership to the Group, on acquisition, the financial liability forms part of the purchase consideration with no value assigned to non-controlling interests. For fixed price call and put options or fixed price forward contracts, the risks and rewards of ownership relating to the outstanding shares are assumed to have transferred to the Group.

Where the risks and rewards of ownership under the option or forward contract are not transferred to the Group, the financial liability is not considered as part of the purchase consideration and a non-controlling interest is recognised on acquisition. The financial liability is initially recognised against equity attributable to shareholders of RHI Magnesita N.V. Subsequently, the Group derecognises the non-controlling interest to the extent that it is equal or less than the financial liability, against equity attributable to shareholders of RHI Magnesita N.V.

The subsequent measurement of the financial liability is conditional on the nature of the underlying cash consideration. If the option or forward contract will be settled at a fixed cash consideration, the financial liability is subsequently measured at amortised cost. If the option or forward contract will be settled at a variable cash consideration (e.g. EBITDA multiple or similar profit or loss measures) the financial liability is subsequently measured at FVPL. Fair value changes resulting from the remeasurement of the financial liability are reflected within other net financial expenses.

If a financial liability is recognised for an option or a forward contract over outstanding shares, dividends paid to non-controlling interest are reflected as an expense within other net financial expenses unless there is a contractual right to reduce the financial liability. Dividend payments to non-controlling interest without such a financial liability reduce the non-controlling interests presented in equity without impacting the Consolidated Statement of Profit or Loss.

Goodwill may also arise upon investments in joint ventures and associates, being the surplus of the cost of investment over the Group's share of the net fair value of the identifiable net assets. Any such goodwill is recorded within the corresponding investment in joint ventures and associates.

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets, liabilities and contingent liabilities of a subsidiary at the date of acquisition. Goodwill is initially recognised at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill recognised as an asset is reviewed for impairment at least annually.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Mining rights were recognised in the course of the purchase price allocation for former Magnesita Group and are amortised based on the depletion of the related mines. Depletion is calculated based on the volume mined in the period in proportion to the total estimated economically viable volume.

Customer relationships arise from the acquisition of business and are measured at assigned fair values on acquisition, less accumulated amortisation and impairments. These intangibles are amortised on a straight-line basis over their expected useful lives.

Research costs are expensed in the year incurred and included in general and administrative expenses. Development costs, including internally developed software controlled by the Group, are only capitalised as internally generated intangible assets if the costs can be measured reliably and are expected to result in future economic benefits either through use or sale. Capitalisation will also only arise when the product or process development can be clearly defined and is feasible in technical, economic and capacity terms. For internally developed software controlled by the Group, costs are capitalised when these can be directly and conclusively allocated to individual programmes and represent a significant extension or improvement on existing software. All other internally developed software costs are expensed. Development costs are amortised on a straight-line basis over their expected useful lives of up to ten years, with internally developed software amortised over a period of up to four years. Amortisation is recognised in cost of sales.

These mainly represent purchased third-party software controlled by the Group, land-use rights and patent fees and are recognised when future associated economic benefits are expected to accrue to the Group. These intangibles are initially measured at their acquisition cost and amortised over their expected useful lives.

Where the Group does not have control of cloud-based third-party software, the configuration and customisation costs as well as the recurring service subscription fee are typically expensed in the reporting period the services are received.

The useful lives of the Group's main classes of intangible assets are:

The useful economic lives of intangible assets are reviewed regularly and adjusted if necessary.

The carrying values of other intangible assets are assessed at each reporting period for indicators of impairments. See below for the accounting policy relating to impairment of non-current assets other than goodwill and intangible assets with indefinite useful life.

Property, plant and equipment is measured at acquisition or construction cost, less accumulated depreciation and accumulated impairment losses. These assets are depreciated on a straight-line basis over their expected useful life to their estimated residual values, if any, and from when they are available for use in the manner intended by management.

Construction costs of assets comprise direct costs as well as a proportionate share of capitalisable overhead costs and borrowing costs. If borrowed funds are directly attributable to an investment, borrowing costs are capitalised as a cost of the assets. If no direct connection between an investment and borrowed funds can be demonstrated, the weighted average rate on borrowed capital of the Group amounting to 2.95% (2023: 3.07%) is used as the capitalisation rate due to the central funding of the Group.

Expected demolition and disposal costs at the end of an asset's useful life are capitalised as part of its acquisition cost and recorded as a provision. The recognition criteria are: (i) a legal or constructive obligation towards a third-party and (ii) the ability to reliably estimate future cost.

Land and plant under construction are not depreciated. Depreciation of property, plant and equipment is based on the following useful lives:

The carrying value of property, plant and equipment is assessed at each reporting period for indicators of impairments. See below for accounting policy relating to impairment of non-current assets other than goodwill and intangible assets with indefinite useful life.

The residual values and economic useful lives of property, plant and equipment, are reviewed regularly and adjusted if necessary.

When components of plant or equipment have to be replaced at regular intervals, the relevant replacement costs are capitalised when economic benefits are expected to arise for the Group. The carrying amount of the replaced components is derecognised. Regular maintenance and repair costs are expensed as incurred.

Gains or losses from the disposal of property, plant and equipment, which result from the difference between the net realisable value and the carrying amount, are recognised as income or expense in the Consolidated Statement of Profit or Loss.

A contract, or part of a contract, which conveys the right to control the use of an identified asset for a period of time in exchange for payments to be made to the owners (lessors) is accounted for as a lease. Contracts are assessed to determine whether it is or contains, a lease at inception or when the terms and conditions of a contract are significantly changed. The lease term is the non-cancellable period of a lease, together with contractual options to extend or to terminate the lease early, where it is reasonably certain that an extension option will be exercised, or a termination option will not be exercised. At the commencement of a lease contract, a right-of-use asset and a corresponding lease liability are recognised, except for low-value items or for lease terms of less than 12 months. The commencement date of a lease is the date on which the underlying asset is made available for use. The lease liability is measured at an amount equal to the present value of the lease payments during the lease term that are not paid at that date. The lease liability includes contingent rentals and variable lease payments that depend on an index, rate, or where they are fixed payments in substance.

The lease liability is remeasured when the contractual cash flows of variable lease payments change due to a change in an index or rate when the lease term changes following a reassessment. Lease payments are discounted using the interest rate implicit in the lease. If that rate is not readily available, the incremental borrowing rate is applied. The incremental borrowing rate reflects the rate of interest that the lessee would have to pay to borrow over a similar term and similar security, the funds necessary to obtain an asset of a similar nature and value to the right-of-use asset in a similar economic environment.

In general, a corresponding right-of-use asset is recognised for an amount equal to each lease liability, adjusted by the amount of any pre-paid lease payment relating to the specific lease contract, less any lease incentives, and for any estimated restoration and removal costs. Right of use assets are depreciated on a straight-line basis over the useful life of the leased asset or, if this is shorter, over the lease term. The depreciation on right-of-use assets is recognised in the Consolidated Statement of Profit or Loss. Right-of-use assets are assessed for impairment indicators (see accounting policy on impairment of non-current assets).

Goodwill is reviewed at least annually for impairment. Any impairment loss is recognised as an expense immediately. For the purpose of impairment testing, goodwill is allocated to the individual Cash-Generating Units (CGUs) expected to benefit from the business combination. If the recoverable amount of the CGU is less than the carrying amount of the CGU (including goodwill) allocated to it, the resulting impairment loss is applied first to the allocated goodwill and then to the other assets on a pro-rata basis of the carrying amount of each asset. Reversals of impairment losses on goodwill are not permitted.

Property, plant and equipment, including right-of-use assets and intangible assets are tested for impairment if there is any indication that the value of these items may be impaired. An asset is considered to be impaired if its recoverable amount is less than its carrying amount. In the Group, individual assets do not generate cash inflows independent of one another and assets are combined in CGUs, which largely generate independent cash inflows. These CGUs, which are combined in two strategic business units, Steel and Industrial, reflect the market presence and appearance and drive cash inflows. The organisational structures of the Group reflect these units. In addition to the joint management and control of the business activities in each unit, the sales know-how, the knowledge of the long-standing customer relationships or knowledge of the customer's production facilities and processes further support these units. Product knowledge is manifested in the application-oriented knowledge of chemical, physical and thermal properties of RHI Magnesita products. The services offered extend over the life cycle of products at the customer's plant, from the appropriate installation and support of optimal operations to environmentally sound disposal with the customer or sustainable reuse in the Group's production process. These factors determine cash inflow to a significant extent and consequently form the basis for the CGU structures.

The CGUs of the Steel business correspond to the operating segments Linings and Flow Control. These two CGUs are determined according to the production stages in the process of steel production. Each operating segment included in the Industrial business unit (Cement &Lime, Non-Ferrous Metals, Glass and Industrial Applications) corresponds to a separate CGU. All raw material producing facilities are combined in one CGU named Minerals. The new segment reporting structure, which is disclosed in Note (5), has not changed the composition or number of the Group's CGUs.

The recoverable amount of a CGU is defined as the higher of its fair value less costs of disposal and its value in use (present value of future cash flows). For the purpose of testing CGUs for impairment the Group determines the recoverable amount of the CGUs solely on the basis of value in use. In assessing value in use, the estimated future cash flows of the CGU in its present condition are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks, including country, specific to the CGU.

The cash flows projections used for impairment testing are based on the strategic business and financial planning model of the Group including the 2025 budget, as approved by the Board, and the Long-Term Plan covering a subsequently following four-year period. The terminal value is based on a growth rate derived from the difference of the current and the possible degree of utilisation of the assets. To forecast the CGUs' cash flows, management predicts the growth rate using external sources for the development of the customers' industries and expert assumptions, including forecasts about the regional growth of steel production and the output of the non-steel clients. Growth rates are also influenced by the development of the specific refractory consumption patterns, including technological improvements.

If the carrying amount is higher than the recoverable amount, an impairment loss equivalent to the resulting difference is recognised in the Consolidated Statement of Profit or Loss. If the reason for an impairment loss recognised in the past for property, plant and equipment or for other intangible assets ceases to exist, a reversal of the impairment is recognised in profit or loss. An impairment loss is reversed only to the extent that the CGUs' carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised in prior years.

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. In general, financial instruments can be classified to be measured subsequently at amortised cost, fair value through profit or loss or fair value through other comprehensive income. Classification of financial assets depends on the contractual terms of the cash flows as well as on the entity's business model for managing the financial assets. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

Financial assets are classified as amortised cost, if the contractual cash flows include solely payments of principal and interest and which are held in order to collect the contractual cash flows. If the contractual cash flows include solely payments of principal and interest, but are held to collect both the contractual cash flows and sell the financial asset, then they are classified as fair value through other comprehensive income. If the contractual cash flows do not solely include payments of principal and interest, then they are classified as fair value through profit or loss.

The Group initially recognises securities on the trading date when it becomes a party to the contractual provisions of the instruments. All other financial assets and financial liabilities are initially recognised on the date when they are originated. Financial instruments, except for trade receivables, are initially recognised at fair value. Financial assets are derecognised if the entity transfers substantially all the risks and rewards or if the entity neither transfers nor retains substantially all the risks and rewards and has not retained control. Financial liabilities are derecognised when the contractual obligations are settled, withdrawn or have expired.

Investments in debt securities are subsequently measured at fair value through profit and loss if the contractual terms of cash flows do not solely include payments of principal and interest. Otherwise, they are subsequently carried at amortised cost.

Investments in equity securities, including non-consolidated subsidiaries, are of minor importance and recognised and measured either at fair value through profit or loss, or at fair value through OCI, if the latter option was exercised.

Financial assets at amortised costs are measured by applying the effective interest method.

Trade receivables are recognised initially at the amount of consideration that is unconditional, unless they contain significant financing components when they are recognised at fair value and, depending on the business model, subsequently carried either at amortised cost minus any valuation allowances or at fair value through other comprehensive income minus any valuation allowances for expected or incurred credit losses. Irrespective of the measurement category, any impairment losses are recognised in the Consolidated Statement of Profit or Loss. Valuation allowances for expected credit losses are calculated in accordance with the simplified approach of the impairment model for financial instruments (see accounting policy on impairment of financial assets below).

The Group sells trade receivables to financial institutions in the scope of factoring arrangements on a recurring basis based on its liquidity needs. Prospectively, the extent and the specific trade receivables impacted by future sales cannot be identified. Therefore, trade receivables which qualify for a future sale under the terms of existing factoring agreements are allocated to a portfolio whose objective is collecting the contractual cash flows and selling them. These trade receivables are carried at fair value through other comprehensive income minus any valuation allowances. Whereas trade receivables which do not qualify for a future sale under the terms of existing factoring agreements are allocated to a portfolio whose only objective is to collect the contractual cash flows and are therefore carried at amortised cost minus any valuation allowances.

In factoring arrangements, trade receivables are derecognised where the Group transfers substantially all the risks and rewards associated with the financial assets. Payments received from customers following the sale are recognised in current borrowings until repaid to the factorer.

Cash and cash equivalents include cash in hand, cheques received, cash at banks and short-term cash deposits with an original term of up to three months. Moreover, investments in money market funds exposed to insignificant value fluctuations due to their high credit rating and investments in short-term money market instruments that can be converted to defined cash amounts within a few days at any time, are also reflected as cash equivalents.

Financial liabilities include liabilities to financial institutions and other lenders and are measured at fair value less directly attributable transaction costs at initial recognition. In subsequent periods, these liabilities are measured at amortised cost applying the effective interest rate method.

A financial liability is derecognised when the obligation under the liability is discharged (by payment or legal release), cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. The difference in the respective carrying amounts is subsequently recognised in the Consolidated Statement of Profit or Loss, including any costs or fees.

These liabilities are initially recognised at fair value and subsequently measured at amortised cost. The Group enables selected suppliers to participate in a variety of supplier finance arrangements which include forfaiting and other supplier finance arrangements. Supplier finance arrangements give suppliers the option to receive early payment by selling their receivables to a financial institution at a discount. The Group settles the invoice by paying the financial institution in line with the payment terms according to the supplier finance arrangements. These settlements are presented in the operating category within the Consolidated Statement of Cash Flows. Liabilities subject to supplier chain finance arrangements continue to be classified as trade payables since they represent liabilities to pay for goods or services, are invoiced or formally agreed with the supplier and are part of the working capital used in the Group's normal operating cycle.

Derivative contracts are used in the management of interest rate risk, commodity price risk and foreign currency risk. These derivative financial instruments, which are not designated in an effective hedging relationship, are recognised initially at fair value on the date on which a derivative contract is entered into and subsequently remeasured at fair value with changes in fair value reflected in the Consolidated Statement of Profit or Loss. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

Derivative financial instruments include forward exchange contracts and embedded derivatives in open orders denominated in a currency other than the functional currency of either contracting party, with the assessment made on a case-by-case basis at the respective forward rate on the reporting date. These forward rates are based on spot rates, including forward premiums and discounts. Unrealised valuation gains or losses and results from the realisation are recognised in the Consolidated Statement of Profit or Loss in net expense on foreign currency effects.

Forward purchase or sale arrangements for the physical delivery of non-financial assets that are entered into in line with the Group's expected purchase, sale or usage requirements ('own use') and are normally entered into to hedge the associated price risk are not recognised or measured at fair value. These forward contracts are assessed to be off-balance-sheet executory contracts due to their own use features. If the own use exemption is not met, the forward contracts will be recognised at fair value, with fair value remeasurement recorded in the Consolidated Statement of Profit or Loss.

For derivative financial instruments which are designated as an effective cash flow hedge, hedge accounting is applied. The hedging instruments, used to hedge the underlying items, are measured at fair value with the effective part of the fair value changes recorded in OCI as an unrealised gain or loss. At the time of the realisation of the underlying transaction, the fair value changes of the hedging instrument recognised in OCI is recycled to the Consolidated Statement of Profit or Loss. Ineffective parts of the cash flow hedges are recognised immediately in the Consolidated Statement of Profit or Loss. Where the hedged item is a non-financial asset or liability, the amount accumulated in OCI is transferred to the initial carrying amount of the asset or liability. If the hedged transaction is no longer expected to take place, the accumulated amount recorded in OCI is reclassified to the Consolidated Statement of Profit or Loss. All relationships between hedging instruments and hedged items are documented, as well as risk management objectives and strategies for undertaking hedge transactions. The effectiveness of hedges is also continually assessed, and hedge accounting is discontinued when there is a change in the risk management strategy.

Impairment of certain financial assets is based on expected credit losses (ECL). ECL is defined as the difference between all contractual cash flows the entity is entitled under the contract and the cash flows expected to be received. The measurement of expected credit losses is generally a function of the probability of default, loss given default and the exposure at default.

Loss allowance is measured for expected credit losses on debt instruments, trade receivables and contract assets measured at amortised cost. The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.

The Group recognises lifetime ECL for trade receivables and contract assets by applying the simplified approach. The ECL on these financial assets are generally estimated using a provision matrix based on the Group's historical credit loss experience for customer groups located in different geographic regions. Forward-looking information is incorporated in the determination of the applicable loss rates for trade receivables. For the Group, the general economic development of the countries in which it sells its goods and services is relevant in determining if the adjustment of the historical loss rates is necessary.

For all other financial instruments, the Group recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.

Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

The Group makes use of the practical expedient for financial instruments with an 'investment grade' rating which are assumed to be of low credit risk and have no significant increase in the credit risk. Under the practical expedient, the expected credit loss is calculated using the 12-month ECL. Among other factors, the Group considers a significant increase in credit risk to have taken place when contractual payments are more than 30 days past due.

The Group assumes that a default event has occurred when trade receivables are 180 days past due unless reasonable and supportable information confirms otherwise. For those financial instruments where objective evidence of default is present, an individual assessment of ECL takes place.

Generally, financial instruments are written off when there is no reasonable expectation of recovering amounts due.

Inventories are stated at the lower of cost or net realisable value as of the reporting date. The determination of acquisition cost of purchased materials is based on the average cost. Finished goods and work in progress are valued at fixed and variable production cost. The net realisable value is the estimated selling price in the ordinary course of business minus any estimated cost to complete and to sell the goods. Impairments due to reduced recoverability are reflected in the calculation of the net realisable value.

In 2024, some of the inputs and assumptions used in the net realisable value calculation in relation to reduced recoverability were revised resulting in lower impairments on inventories. This constitutes a change in an accounting estimate that led to a reduction in the cost of sales of €11 million and a corresponding increase in inventories in 2024 compared to the previous calculation. The impact of this change on future periods cannot be estimated reliably.

Purchased emission allowances are presented as inventory and are initially recognised at cost und subsequently measured at the lower of cost and net realisable value. The consumption of the purchased emission allowances based on the tons of CO2 emitted is recorded as expense in the cost of sales.

Those allowances that the Group received free of charge under the respective EU trading schemes are not recognised in the Consolidated Financial Statements.

To the extent that the CO2 emissions emitted exceed the emission cap under the free of charge and purchased emission allowances, the Group recognises a provision calculated based on the deficit of emission allowances and measured at the market price of emission allowances prevailing at the reporting date.

Provisions are recognised when the Group incurs a legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to meet this obligation, and the amount of the obligation can be reliably estimated.

Provisions for warranties are created for individual contracts at the time of the sale of goods or after the service has been provided. The amounts of the provisions are based on the expected or actual warranty claims.

Provisions for restructuring are recognised once a detailed formal restructuring plan has been developed and announced prior to the reporting date or whose implementation was commenced prior to the reporting date.

The Group recognises provisions for demolition and disposal costs and environmental damages. The Group's facilities and its refractory, exploration and mining operations are subject to environmental and governmental laws and regulations in each of the jurisdictions in which it operates. These laws govern, among other things, reclamation or restoration of the environment in mined areas and the clean-up of contaminated properties. These provisions include the estimated demolition and disposal costs of plants and buildings as well as environmental restoration costs arising from mining activities, based on the present value of estimated cash flows of the expected costs. The estimated future costs of asset retirements are reviewed annually and adjusted, if appropriate.

A provision for an onerous or unfavourable contract is recognised when the expected benefits to be derived from a contract are lower than the unavoidable cost of meeting its obligations under the contract. Provisions are measured at the present value of the unavoidable costs of meeting the obligation under the contract which exceed the economic benefits expected to arise from that contract.

Provisions for labour and civil contingencies are recognised for all risks relating to legal proceedings that represent a probable loss. Assessment of the likelihood of loss includes an analysis of available evidence, including the opinion of internal and external legal advisors of the Group.

Provisions are measured at their discounted settlement value as of the reporting date if the discounting effect is material.

If maturities cannot be estimated, they are shown within current provisions.

Pension plans

With respect to post-employment benefits relating to pensions, a differentiation is made between defined contribution and defined benefit plans.

Defined contribution plans limit the Group's obligation to the agreed contributions to earmarked pension schemes. The contributions are expensed as incurred.

Defined benefit plans require the Group to provide agreed benefits to active and former employees and their dependents.

Pension obligations are measured using the projected unit credit method and is netted against the fair value of the plan assets, if any. If the plan assets are not sufficient to cover the obligation, the net obligation is recognised as a liability. However, if the plan assets exceed the obligations, the net surplus recognised is limited to reductions of future contribution payments to the plan and is presented as other non-current assets in the Consolidated Statement of Financial Position. The Group restricts recognition of the net surplus by applying an asset recognition ceiling where the Group does not have an unconditional right to a refund, assuming full settlement of the liabilities. Changes in the asset ceiling are recorded in OCI.

The present value of defined benefit obligations is determined separately for each plan, annually, by independent qualified actuaries. The present value of future benefits is based on the length of service, expected wage/salary developments and pension adjustments.

The expense to be recognised in a period includes current and past service costs, settlement gains and losses, interest expenses from the interest accrued on obligations, interest income from plan assets and administration costs paid from plan assets. The net interest expense is shown separately in net finance costs. All other expenses related to defined benefit plans are allocated to the costs of the relevant functional areas.

Actuarial assumptions required to calculate these obligations include the discount rate, increases in wages/salaries and pensions, retirement starting age and probability of employee turnover and actual claims. The calculation is based on local demographic parameters.

Interest rates, which are based on high-quality corporate bonds issued with comparable maturities and currencies, are applied to determine the present value of pension obligations. In countries where there is not a sufficiently liquid market for high-quality corporate bonds, the returns on government bonds are used as a basis.

The rates of increase for wages/salaries are based on an average of past years, which is also considered to be realistic for the future, while the retirement age is based on the respective statutory provisions of the country concerned.

Remeasurement gains and losses are recorded net of deferred taxes under OCI in the period incurred.

Other post-employment benefits

Other post-employment benefits include provisions for termination benefits primarily related to obligations to employees whose employment is subject to Austrian law.

Employees who joined an Austrian company before 31 December 2002 receive a one-off lump-sum termination benefit as defined by the Austrian labour legislation if the employer terminates the employment or when the employee retires. It is regarded as a post-employment benefit and classified as a defined benefit plan. The termination payment depends on the relevant salary at the time of the termination as well as the number of years of service and ranges between two and 12 monthly salaries. These defined benefit obligations are measured using the projected unit credit method applying an accumulation period of 25 years. Remeasurement gains and losses are recorded directly in OCI after considering tax effects.

For employees who joined an Austrian company after 31 December 2002, employers are required to make regular contributions equal to 1.53% of the monthly wage/salary to a statutory termination benefit scheme. The Company has no further obligations. Claims by employees to termination benefits are filed with the statutory termination benefit scheme, while the continuous contributions are treated as defined contribution plans and included in the personnel expenses of the functional areas.

This includes service anniversary bonuses, payments to semi-retirees and lump-sum settlements.

Service anniversary bonuses are one-time special payments that are dependent on the employee's wage/salary and length of service. The employer is required by collective bargaining agreements or company agreements to make these payments after an employee has reached a certain number of years of uninterrupted service with the same company. Obligations are mainly related to service anniversary bonuses in Austrian and German group companies. Provisions for service anniversary bonuses are calculated based on the projected unit credit method. Remeasurement gains or losses are recorded in the personnel costs of the functional areas.

Local labour laws and other similar regulations require individual group companies to create provisions for semi-retirement obligations. The obligations are partially covered by qualified plan assets and are reported on a net basis in the Consolidated Statement of Financial Position.

A contingent liability is disclosed, where material, if the existence of the obligation will only be confirmed by future events or where the amount of the obligation cannot be measured with reasonable reliability. A contingent liability is not disclosed if the likelihood of a material cash outflow is considered remote. The Group's contingent liabilities are reviewed on a regular basis.

Income tax expense represents the sum of current tax and deferred tax.

Income tax is recognised in the Consolidated Statement of Profit or Loss, except to the extent that it relates to items recognised in OCI or directly in equity, including tax-related impacts.

Current tax is based on the taxable profit for the period and is determined in accordance with the rules applicable in the relevant jurisdictions and includes taxes relating to prior periods. The liability for current tax is calculated using tax rates and laws that have been enacted or substantively enacted at the reporting date.

Deferred tax is provided, using the liability method, on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences except:

· Where the deferred tax liability arises on initial recognition of goodwill

· Where the deferred tax liability arises on the initial recognition of an asset or liability in a transaction that is not a business combination, at the time of the transaction, affects neither accounting profit nor taxable profit or loss and, at the time of the transaction, does not give rise to equal taxable and deductible temporary differences

· In respect of taxable temporary differences associated with investments in subsidiaries and associates and interest in joint arrangements, where the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future

· For financial instruments which were issued by subsidiaries to non-controlling interests, and which are classified as a financial liability in accordance with IFRS Accounting Standards

Deferred tax assets are recognised for deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which these can be utilised, except where the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit and loss and, at the time of the transaction, does not give rise to equal taxable and deductible temporary differences.

In respect of deductible temporary differences associated with investments in subsidiaries, associates and interest in joint arrangements, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable or increased to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. Deferred taxes of the Group's Austrian subsidiaries are determined at the corporation tax rate which is expected to be applicable when the temporary differences reverse (23.0% if the temporary difference reverses in 2025 or later). Deferred tax assets and liabilities of the Group's Brazilian subsidiaries are measured at 34.0%.

Deferred tax assets and liabilities are offset only when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the current tax assets and liabilities on a net basis or to realise the assets and settle the liabilities simultaneously.

Where tax legislation may not be clear or result in uncertainty, the Group will determine its tax obligations and resulting income tax expense using an approach which it believes has a probable chance of being accepted by the tax authorities based on historical experience, legal advice and communication with the tax authorities, as appropriate. Where the Group adopts an approach to an uncertain tax position that it regards as having a less than probable chance of being accepted by the tax authorities, the income tax expense and resulting income and deferred tax balances are adjusted to reflect this uncertainty using either the most likely outcome method or the expected value method.

The global minimum top-up tax payable under the Pillar Two legislation is recognised as a current income tax expense when it is incurred. In accordance with the temporary exception, the Group does not recognise deferred taxes in respect of the top-up tax under the Pillar Two legislation.

Revenue from the sale of goods and services is recognised at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. Revenue is recognised to the extent that it is highly probable that there will not be a significant reversal of revenue in future periods. If the consideration in a contract includes a variable amount, the Group estimates the amount of consideration to which it will be entitled at inception and limits the recognition of revenue subject to the variability, until it is highly probable that a significant reversal of cumulative revenue recognised will not occur. The Group does not recognise the impact of financing for payment terms as the average credit terms is currently 60 days. At contract inception, the Group identifies the goods or services promised in the contract and assesses which of the promised goods or services shall be identified as separate performance obligation. Promised goods or services give rise to separate performance obligations if they are capable of being distinct. Revenue is recognised as control is transferred, either over time or at a point of time. Control is defined as the ability to direct the use of and obtain substantially all of the economic benefits from an asset.

Unless refractory products are delivered under specific customer contracts, whose transaction price depends on the customer's production output, revenue from the delivery of refractory products is recognised at a point in time, i.e. at the time of transfer of control. Control of the refractory products is typically passed to the customer when physical possession has been transferred. Consistent with this principle, in previous reporting periods, control of refractory products subject to a CFR ('Cost and Freight') or CIF ('Cost, Insurance and Freight') shipping agreement was determined to transfer upon arrival of the cargo at the port of destination. A thorough analysis conducted by management in 2024 due to the Red Sea crisis led to a reassessment of the timing of transfer of control for shipments delivered by sea freight with third party carriers. Accordingly, from 2024, control is determined to transfer as soon as the third-party carrier has issued the shipping document, if any, that allows the customer to redirect or otherwise control the shipped refractory products. As a result of this revised accounting policy, which is applied prospectively due to the immaterial impact on the comparative figures, the Group's revenue and gross profit increased by €42 million and €10 million respectively in 2024.

The transport service does not give rise to a separate performance obligation to which a part of revenue would have to be allocated, as this service is usually performed before control of the products is transferred to the customer.

In consignment arrangements, the Group retains control of the goods generally until a withdrawal of the products from the consignment occurs. Most of the products within consignment arrangements have a high stock turnover rate.

The Group provides services (e.g. supervision, installation) that are either sold separately or bundled together with the sale of products to a customer. Contracts for bundled sales of products and installation services usually comprise of two performance obligations being (i) the promise to transfer products and (ii) provide services which are capable of being distinct and separately identifiable in the context of the contract. Accordingly, the transaction price is allocated based on the relative stand-alone selling prices of the product and service. Revenue from services is recognised over time using an input method to measure progress towards completion of the service as the customer simultaneously receives and consumes the benefits provided by the Group.

Contracts for bundled sales of refractory products and non-refractory products (e.g. machines) provided to the customer free of charge comprise two performance obligations that are separately identifiable. Consequently, the Group allocates the transaction price based on the relative stand-alone selling prices of these performance obligations and allocates revenue to the non-refractory product which is delivered free of charge.

Expected penalty fees from guaranteed durabilities on refractory products are considered as a variable consideration in the form of a contract or a refund liability. However, the estimation of the variable consideration is not subject to a constraint as the Group has significant experience with promising durabilities and as a consequence does not expect significant reversal of revenue recognised in prior periods. All other product warranties issued by the Group guarantee that the transferred products correspond to the contractually agreed specifications and are classified as assurance type warranties. Consequently, no separate distinct performance obligation to the customer exists.

If transfer of goods or services to a customer is performed before the customer pays consideration or before payment is due and is conditional on something other than the passage of time, a contract asset, excluding any amounts presented as a receivable, is recognised.

If a customer pays consideration before the entity transfers a good or service to the customer, the entity shall present the contract as a contract liability when the payment is made.

Contract costs, which are defined as the incremental costs of obtaining a contract, are recognised as an asset where the Group expects to recover those costs, except for those costs which are expected to be recovered within 12 months.

As the term of customer contracts is less than one year, the Group adopted the practical expedient not to disclose performance obligations for contracts with original expected duration of less than one year.

Cost of sales comprises the production cost of goods sold as well as the purchase price of merchandise sold. In addition to direct material and production costs, it also includes overheads including depreciation charges on production equipment, amortisation charges of intangible assets as well as impairment losses and reversals of impairment losses of inventories. Moreover, cost of sales also includes the costs of services provided by the Group or services received.

This item includes personnel expenses for the sales staff as well as depreciation charges and other operating expenses related to the market and sales processes.

General and administrative expenses primarily consist of personnel expenses for the administrative functions, legal and other consulting costs, expenses for research and non-capitalisable development costs.

Interest income and expenses are recognised in accordance with the effective interest method.

The Consolidated Financial Statements are presented in Euro, which represents the functional and presentation currency of RHI Magnesita N.V.

Consolidated subsidiary financial information is based on the currency of the primary economic environment in which it operates (functional currency).

Financial Statements of subsidiaries which operate in a country whose functional currency is considered hyperinflationary are restated for the changes in the general purchasing power before translation to the reporting currency of the Group and before consolidation in order to reflect the same value of money for all items. Currently only the Financial Statements of the subsidiary operating in Argentina, Refractarios Argentinos S.A, Industrial Comercial Y Minera (I.C.M.), are restated for hyperinflation effects.

The closing balances of the non-monetary items as well as all items of the Statement of Profit or Loss are restated for the changes in the general purchasing power of its functional currency in 2024 as follows. All non-monetary items recognised in the Statement of Financial Position which are not measured at the measuring unit applicable on the reporting date are restated for the changes in the general price index from the later of the transaction date or the first-time application date to the reporting date. Non-monetary items include property, plant and equipment, intangible assets, inventories, and allocated goodwill. Monetary items are not restated. All items of the Statement of Profit or Loss are restated for the changes in the general price index from the date of initial recognition to the reporting date. Gains or losses resulting from the net monetary position are reported in the Consolidated Statement of Profit or Loss in net expense on foreign currency effects. The Financial Statements of Refractarios Argentinos S.A, Industrial Comercial Y Minera (I.C.M.) are therefore reported at the applicable measuring unit on the reporting date.

The price index, IPIM (Internal Index Wholesale Prices), published by the Argentinian National Institute of Statistics and Censuses is applied to determine the changes in the general purchasing power. The following table provides the level and changes of the price index for the current and the previous reporting period:

In individual subsidiaries, joint ventures and associates, transactions in foreign currency are translated into the functional currency at the rate of exchange prevailing on the dates of the transaction. Gains and losses resulting from the settlement of such transactions and the translation of monetary assets and liabilities denominated in foreign currencies into the respective functional currency at the closing rate are recognised in the Consolidated Statement of Profit or Loss as net expense on foreign currency effects. In deviation from this, the Group designates certain intragroup monetary assets and liabilities denominated in foreign currencies such as non-current receivables or loans as part of a net investment in a foreign operation if the corresponding balances are not expected to be settled. In accordance with IFRS Accounting Standards, gains or losses from the translation of these intragroup monetary assets and liabilities into the respective functional currency are recognised in OCI. Non-monetary items, other than those measured at fair value, are carried at historical rates and not retranslated subsequent to initial recognition.

Financial information of foreign subsidiaries with a functional currency different to the Euro are translated as follows:

Assets and liabilities of foreign subsidiaries outside the scope of hyperinflation accounting are translated at the closing rate on the reporting date, while monthly income and expenses as presented in the Statement of Profit or Loss are translated at the respective closing rates of the previous month. Differences resulting from this translation process and differences resulting from the translation of amounts carried forward from the prior year are recorded in OCI without impact on profit or loss. Monthly cash flows are translated at the respective closing rates of the previous month. Goodwill and adjustments to the fair value of assets and liabilities related to the purchase price allocations of a subsidiary outside the European currency area are treated as assets and liabilities of the respective subsidiary and translated at the closing rate.

Following the restatements in accordance with hyperinflation accounting, the assets and liabilities of foreign subsidiaries in the scope of hyperinflation accounting, as well as their income and expenses, are translated at the respective closing rate on the reporting date.

On disposal of a non-Euro functional currency subsidiary, joint venture or associate, the related accumulated foreign currency gains and losses recognised in equity are reclassified to the Consolidated Statement of Profit or Loss. In addition, when monetary items cease to form part of a net investment in a foreign operation or when in case of a net investment hedge the foreign operation is disposed, the currency translation differences previously recognised in OCI are reclassified to the Consolidated Statement of Profit or Loss.

The Euro exchange rates of the currencies of the Group's significant operations are shown in the following table:

1) Arithmetic mean of the monthly closing rates.

4. Climate change and energy transition

In 2019 the Group announced its commitment to reduce Scope 1, 2 and 3 (raw materials) CO2 emissions intensity by 15% by 2025, compared to a 2018 baseline. The Group has adopted a theoretical decarbonisation pathway that is not aligned with a 1.5-degree scenario as set out in the Paris agreement. The below describes how the Group has considered climate related impacts in key areas of the Consolidated Financial Statements and how this translates into the valuation of its assets and measurement of liabilities.

Note (3) includes the significant accounting estimates, judgements and key sources of estimation uncertainties and how those uncertainties have the potential to have a material effect on the Consolidated Statement of Financial Position in the next 12 months. This note describes the key areas of climate impacts that may have longer-term effects on amounts recognised at 31 December 2024.

As disclosed in the Sustainability Statement, climate-related risks faced by the Group include physical and transitional risks. The most material transitional risk impact is expected to be higher operating costs due to an increase in the level or scope of carbon pricing. This risk is most prominent in Europe where the existing system of allowances is to be replaced by the Carbon Border Adjustment Mechanism ('CBAM'), with all free CO2 emission allowances currently expected to be progressively phased out by 2034.

The Group is currently already subject to the first phase ('Transitional Period') of the CBAM. Currently, the Group fully complies with the CBAM regulation on imported consumables made from steel. Management is pursuing a number of strategies to accommodate the additional impact of CBAM to its EU assets, such as considering carbon pricing in our financial planning, actively managing a hedging program to fix future prices related to the forward purchase of emission rights, increasing the use of secondary raw materials, investing in fuel switching, renewable energy and focusing on energy efficiency.

The Group has also identified climate-related opportunities, such as increased demand for its products arising from the transition by its customers to lower-carbon emitting industrial processes and increased demand for refractory products that are produced with a lower-carbon footprint.

The Consolidated Financial Statements are based on reasonable and supportable assumptions that represent management's current best estimate of the range of economic conditions that may exist in the foreseeable future. The Group has decided to use Paris-aligned Mitigation and Hot House World Limited mitigation scenarios to assess the potential impact of climate change on its Consolidated Financial Statements. The largest impact from higher carbon prices as contained in these scenarios is from 2026 onwards. The negative impacts are concentrated within the Group's assets located in Europe whilst opportunities are expected to be global in nature.

The Group is investing in the research and development of new technologies for the manufacturing of refractories which may enable it over the long term to avoid or capture its CO2 emissions and thereby mitigate the impact of higher carbon prices.

The nominal growth rate used in the value in use determination is equal to the long-term rate of growth in steel/cement and/or inflation (depending on the country and business involved) and in any case no higher than the average long-term growth rate of the reference market. The Group has also taken account of the long-term impact of climate change, in particular by considering in the estimation of the terminal value a long-term growth rate in line with the change in steel/cement demand in 2030-2050 based on the specific characteristics of the businesses involved.

The expected CO2 emission costs are considered in the 2025 budget and in the Long-Term Plan, insofar as CO2 emissions are taxed in the respective jurisdictions, and at fixed prices, insofar as fixed price forward contracts to purchase emission rights have been contracted. In the terminal value, these CO2 emission costs are recognised at the same level as assumed in the last year of the Long-Term Plan. Due to planning uncertainty inherent in the Group's climate transition phase which includes the extent to which CBAM will be relevant to the Group's operations, no additional carbon emission costs have been included in the terminal value; that is to say, the phasing out of the free CO2 emission allowances is not included.

In absence of any mitigating action by management, the gross profit could reduce by 31% from 2030, on average across the EU assets, of which 24% would be offset in regions outside the EU in a scenario where the impact of a production shift from Europe to regions outside Europe due to additional carbon tax is analysed in isolation. This scenario would not cause impairment losses for the respective CGUs in their current state due to sufficient headroom.

The Sustainability Statement outlines the theoretical path to complete decarbonisation of the Group's business activities. To achieve this, the Group would need to make significant investments in property, plant and equipment that go far beyond the investments already considered in relation to the committed reduction in Scope 1, 2 and 3 emissions by 2025. At present, neither the investments needed to achieve complete decarbonisation, nor their potential positive effects have been included in the value in use determination since the Group has not committed to complete decarbonisation and alternatives to complete decarbonisation exist.

Additionally, management has assessed the useful lives of property, plant and equipment and these continue to be appropriate due to the limited refractory and other product alternatives available and considering that the customer industries that the Group serves, continue to play a significant part in the transition towards sustainable output and the transition to a green economy.

Management recognises liabilities that are expected to be incurred in relation to rehabilitation and restoration of the mining sites. As of the reporting date, the Group's mines have an expected life between eight and 100 years. The introduction of more stringent legislation could result in our mining operations becoming uneconomical earlier than anticipated, thus affecting the timing of our restoration liabilities. The discount rate used to measure asset restoration provisions is between 8-37 years term, in line with available government bond rates.

Management does not expect any reasonably possible change in the expected timing of restoration of our mines to have a material effect on the Group total provisions, assuming cash flows remain unchanged.

In jurisdictions where new or additional climate change related legislation is enacted, our taxable profits could be affected thereby impacting the recoverability of deferred tax assets. It is expected that sufficient deferred tax liabilities and forecasted taxable profits are available for recovery of the deferred tax assets recognised at 31 December 2024. The assessment of deferred taxes is described in Note (14). For certain deferred tax assets recognised in Brazil, the period extends beyond five years. Currently, no legislation is in place in Brazil that could limit the timing and /, or the extent of the recognised deferred tax assets.

The Group has taken out loans from financial institutions based on terms which are linked to the Group's EcoVadis ESG rating performance. On the reporting date the carrying amount of such ESG-linked financial liabilities amounts to €1,383 million (31.12.2023: €1,512 million). The financing costs may increase or decrease depending on future changes in the Group's ESG rating. The ESG rating is determined by multiple criteria covering not only the climate-related aspects but also sustainability and governance related aspects. A downgrading of the Group's ESG rating below a certain target ESG rating would lead to higher financing costs. Such a downgrade is currently not foreseeable due to sufficient headroom.

5. Segment reporting

The Group's business activities are organised according to the customer industries it serves and by region based on the Group's sales markets. Customer industries are defined as Steel, Cement & Lime, Non-Ferrous Metals, and Process Industries which comprises several customer industries addressing industrial applications. The regions comprise EU & CIS and Türkiye, North America, South America, China & East Asia and India, West Asia & Africa. The management structure including the internal reporting to the Executive Management Team follows this two-dimensional organisation and provides for distinct responsibilities for the customer industry related functions and regional functions.

The customer industry forms the basis for determining the Group's operating and reportable segments. Each customer industry is assigned to one reportable segment. In addition, the business activities subsumed into the organisational unit Minerals are designated as a further reportable segment. The Group therefore has five reportable segments.

The Steel reportable segment aggregates two operating segments, namely Steel Linings and Steel Flow Control, which are named after the two most important product lines. In determining that aggregation is appropriate, judgement is applied which considers the economic characteristics of these operating segments which include a similar nature of products, customers, production processes and long-term average gross margins. The Steel reportable segment provides refractory products with a lifetime ranging from hours to several months, services and technologies that are essential for steel production and the steel-processing industry. The Steel Linings product line comprises refractory bricks in various shapes and chemical compositions, as well as mixes and castables lining the customers' furnaces, ladles, and converters. The Steel Flow Control refractory products are used primarily in the final stages of the steel production process and include specialised refractory products and systems including slide gate systems, plates and submerged entry nozzles. In addition to refractory products, the Steel reportable segment delivers services such as refractory engineering solutions (drawings or design of a Linings concept), installation, supervision, maintenance and recycling. Beyond traditional refractory solutions, a growing portfolio of advanced technologies is offered to customers, including systems, sensors, machinery and digital products.

The Cement & Lime reportable operating segment provides refractory products with a lifetime of one year, services and technologies that are essential to produce cement and lime.

The Non-Ferrous Metals reportable operating segment provides refractory products with a lifetime ranging from one year to ten years, services and technologies that are essential to produce base metals and ferroalloys for the production from primary (ores, concentrates) or secondary (recycling) raw materials.

The Process Industries reportable segment, with its two operating segments Glass and Industrial Applications, provides refractory products with a lifetime ranging from one to twenty years, services and technologies for customers operating in the Glass, Environment, Energy, Chemicals, Foundry and Aluminium Industries.

The refractory products offered to customers in the Cement & Lime, Non-Ferrous Metals and Process Industries reportable segments include refractory bricks in various shapes and chemical compositions, as well as mixes, mortars and castables and other specialised refractory products lining customer industry specific furnace types and aggregates. In addition to refractory products, services such as refractory engineering solutions (drawings or design of a Linings concept), installation, supervision, maintenance and recycling are delivered. Beyond traditional refractory solutions, a growing portfolio of advanced technologies is offered to customers, including systems, sensors, machinery and digital products.

In addition, the Group engages in the sale of internally produced raw materials such as magnesite ore, dead-burned magnesia and fused magnesia within the Group and to external customers to the extent that these are not utilised internally. These business activities are subsumed into the organisational unit Minerals, which is designated as a reportable segment.

The Chief Executive Officer has the responsibility over allocation of resources and evaluates the performance of each operating segment and is therefore the Chief Operating Decision Maker ("CODM") at Group level. Revenue and Gross Profit are the key internal performance measures provided to and used by the CODM to evaluate performance on operating segment level and allocate resources. These are prepared using the same accounting policies as the Consolidated Financial Statements and reported after elimination of any inter-segment transactions.

Each reporting period the appropriateness and decision usefulness of the Group's segment reporting structure is reassessed. This reassessment has resulted in a change of the Group's segment reporting structure which aims to provide a more detailed insight into the financial performance of the Cement & Lime, Non-Ferrous Metals and Process Industries reportable segments, which had formed part of the former Industrial reportable segments until the previous reporting period. The comparative figures have been restated in accordance with IFRS 8 to reflect the new segment reporting structure.

The following tables show the financial information for the reportable segments for the year 2024 and the previous year: