RHI Revenue Down in 2016 First Quarter
the RHI Group’s revenue, at approximately $437.1 million, was lower than revenue of the same period of 2015.
Due to a weaker business development of the Steel and Industrial Divisions, the RHI Group’s revenue, at €389.7 million (approximately $437.1 million) in the first quarter of 2016, was lower than revenue of the same period of 2015, at €424.1 million (~ $475.7 million), and lower than revenue of the last quarter at €440 million ($493.5 million). The operating earnings before interest and taxes (EBIT) amounted to €30.3 million (~ $34 million) in the first quarter of 2016 vs. €34.5 million (~ $38.7 million) in the same period of 2015, and was also lower than in the fourth quarter of 2015, at €32.7 million.
While the Raw Materials Division increased its operating EBIT compared with the first quarter of 2015 due to better utilization of the raw material production capacities, the operating EBIT of the Steel and Industrial Divisions decreased due to declining revenues. In comparison with the fourth quarter of 2015, the Steel Division increased its operating EBIT significantly, among other things due to a positive development in Europe and North America as a result of an improved product mix. The decline in the operating EBIT of the Industrial Division can be explained by the high number of project deliveries at the end of the year. The operating EBIT margin of the RHI Group, at 7.8% in the first quarter of 2016, was lower than in the comparative period of 2015, at 8.1%, but exceeded that of the previous quarter, at 7.4%.
The EBIT includes a negative net effect from the power supply contract in Norway. Here, financial liabilities of roughly €1.9 million (~ $2.1 million) were reversed through profit and loss due to own use and the sale at market prices; however, due to a decline in electricity future prices, a negative non-cash effect on earnings of roughly €5.1 million (~ $5.7 million) had to be recognized.
Equity amounted to €486.8 million (~ $546 million) at the end of the first quarter vs. €491.4 million (~ $551.2 million) in the previous quarter. This development is due to a reduction of the actuarial interest rate to determine pension and termination benefit obligations predominantly in Austria and Germany, among other things. Working capital, which consists of inventories, trade receivables less trade payables and prepayments received, was reduced from €532.6 million (~ $597.4 million) at the end of last quarter to €516.4 million (~ $579.2 million) due to lower receivables. Free cash flow amounted to €22.1 million (~ $24.8) in the past quarter vs. €12.4 million (~ $13.9 million) in the same quarter of 2015. As a result, net debt dropped from €397.9 million (~ $446.3 million) at the end of the year 2015 to €378.9 million (~ $425 million).
The number of employees declined slightly from 7,898 at the end of 2015 to 7,876.
For the full year 2016, the board of the RHI Group still expects revenue (2015: €1,752.5 million; ~ $1,965.7 million) below and operating EBIT (2015: €124.1 million; ~ $139.2 million) at the level of the past financial year, provided that the macroeconomic environment and exchange rates remain stable, with the first half of 2016 slightly weaker than the second half of the year. The expected decline in revenue in the Steel Division is related especially to an expected slowdown of the business development in South America and a highly competitive environment. In the Industrial Division, a weaker nonferrous metals and cement business could cause a decrease in revenue.
Due to the development in the customer industries, RHI is currently working on further optimizing the plant structure, which could lead to an adjustment of production capacities in Europe in the current financial year. In addition, different cost measures have been defined in the sales and general administrative departments. The planned continuation of the reduction of working capital should support the generation of free cash flow and lead to a further reduction of net debt.
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