Magnesita, the world's leading supplier of refractory products, systems and services, recently announced its first half of 2019 (as of June 30). “I am pleased to announce that RHI Magnesita’s financial performance in the first half of 2019 was strong,” said Magnesita CEO Stefan Borgas. “Despite the sluggish end market, our industrial sector has performed very strongly, offsetting the steel sector’s A slightly weak performance under challenging market conditions."
The uncertainty in the steel market continues to increase. The results of the first half of the year showed that the steel market in Europe and North America had a lower sales volume and a selective decline in market share, in part because of the destocking of customers after the strong steel market in 2018.
“In this case, we have seen the benefits of geographic and market diversification, as well as the advantages of our company's operating platform. So far, the company's strategic initiatives have offset the adverse effects of these challenges, including the company's development strategy. It has produced results, especially in the industrial sector and throughout Asia, and has ensured price increases,” explains Borgas.
The growth market is still strong. Magnesita's revenue in China increased by 17% and won its first major solution contract. Income in India has increased by 16%.
Despite the low level of support for raw materials, the company's profits performed well.
The additional 20 million euros synergy target for 2019 will be steadily achieved. In 2018, there was a poor operating performance of 40 million euros and it is planned to recover 20 million euros in 2019. The four factories involved are currently progressing as expected. Part of the working capital expansion in the first half of 2019 is expected to be partially recovered before the end of the year.
Financial summary
Magnesita has a vertically integrated value chain that serves customers in virtually every country, from raw materials to refractory materials to complete performance-based solutions. The company is highly geographically diverse and has more than 14,000 employees in 35 major production sites and more than 70 sales offices worldwide. Magnesita intends to leverage its global leadership in revenue, scale, product mix and geographic diversity to strategically develop in countries and regions with strong economic growth prospects.
Revenue of 1.541 billion euros, an increase of 2.2% year-on-year (revenue of 1.508 billion euros in the first half of 2018), reflecting the strength of the US dollar, strong performance in the sector and weak performance in the steel sector.
Adjusted earnings before interest, taxes and amortization (EBITA) was €234 million, an increase of 12.3% (200.9 million euros in the first half of 2018) due to further synergies (10 million euros in the first half of 2019) and The industrial sector has shown strong performance.
Continued adjusted EBITA growth of 15.2%, compared with the same period last year (13.8% in the first half of 2018), increased by 140 basis points, in line with the company's strategy.
EBITA's growth brought free cash flow from operations of 129 million euros (€136 million in the first half of 2018), offset by a working capital outflow of €118 million (mainly accounts receivable and accounts payable)
The financial position remained good with a net debt of 1.1 x EBITDA (1.2 x EBITDA for FY18), despite the previous payment of €45 million for the acquisition of Magnesita and the impact of changes in IFRS 16 leasing accounting standards ( The impact amount is 58 million euros)
According to the dividend policy of the board of directors, an interim dividend of 0.50 euros per share was declared.
Outlook
Magnesita expects that market uncertainty will continue in the second half of 2019, market visibility is poor, and customer inventories may decrease. “However, the response we have taken, the initial benefits from the price increase announced in April, and the company’s industrial sector have consolidated our confidence in further development. As a result, management’s expectations for full-year operating results remain No change," Borgas said.
About Magnesita
Magnesita is the world's leading supplier of advanced refractory products, systems and solutions. In industries such as steel, cement, non-ferrous metals and glass, these products, systems and solutions are essential for industrial high temperature processes exceeding 1200 °C. Magnesita has a vertically integrated value chain that serves customers in virtually every country, from raw materials to refractory materials to complete performance-based solutions. The company is highly geographically diverse and has more than 14,000 employees in 35 major production sites and more than 70 sales offices worldwide. Magnesita intends to leverage its global leadership in revenue, scale, product mix and geographic diversity to strategically develop in countries and regions with strong economic growth prospects.
