RHI Discusses Improved Results in 3rd Qtr (posted 11/5/09)
Following the worldwide recession that characterized the business development in the first half of 2009, the economy started to bottom out in most of the RHI Group’s customer markets at mid-year. This resulted in some positive effects on RHI’s customer industries, especially in the Steel Division. In the Industrial Division, no significant recovery was tangible by the end of September. Capacity utilization of the Raw Materials Division was in line with the demand for basic materials in the RHI Group.
The restructuring measures introduced in the first half of the year were consistently implemented, so that the resulting cost improvements had an effect on the result for the first time in the third quarter. Consequently, the RHI Group generated an operating result of €32.8 million (approximately $48.4 million) in the first three quarters, despite the ongoing difficult economic climate. Profit in the first nine months of 2009 was down 26.3% compared to the same period in 2008, and amounted to €900.2 million (~ $1.3 billion).
Performance in the third quarter was better than the second quarter. Revenues amounted to €295.7 million (~ $436.5 million), compared to €288.7 million (~ $426.2 million) in the 2008 quarter, and EBIT was €11.4 million (~ $16.8 million), compared to €7.3 million (~ $10.8 million).
RHI’s Steel Division benefited from the recovery in world steel output and generated revenues of €179.0 million (~ $264.2 million) in the third quarter of 2009, up 18% from last year’s third quarter. Due to the weak market performance in the first half of the year, revenues declined by 33.6% in the first nine months of 2009.
In RHI’s Industrial Division, the situation continued to be very subdued overall in the third quarter of 2009. At €387.7 million (~ $572.3 million), the Industrial Division’s revenues for the first nine months of 2009 fell short of the prior-year figure, which was €446.8 million (~ $659.6 million). Revenues in the Raw Materials Division in the first three quarters of 2009 dropped by 30.8% compared to the same period in 2008 because of lower volumes and a decline in price levels.
RHI has established a corporate strategy, through 2015, to make RHI the most profitable group in the industry and to expand the number-one position further. The strategy provides for increased flexibility and an optimization of production capacity to match future market and demand developments. This goes hand-in-hand with a transfer of production capacities from the stagnating customer markets of Europe and North America to the emerging markets of Asia. Through a consistent reduction of fixed costs, all existing plants in the Western industrialized countries will be maintained. Individual plants or parts of plants, however, will be shut down until the economy picks up again.
The new concept will require investments of roughly €15 million (~ $22 million) in the coming years. In addition, non-recurring costs of roughly €5 million (~ $7 million) will be incurred in the context of staff cuts, with a focus on Europe and North America.
Depending on the further development of the world economy, demand in the Steel Division is expected to stabilize further, and the order level in the Industrial Division is expected to improve in the coming months. As there will be no more non-recurring restructuring costs, and the cost effects resulting from capacity adjustments are now taking full effect, the RHI Group expects that its results should improve in the fourth quarter of 2009.
For additional details, visit www.rhi-ag.com.