RHI Magnesita Reports Strong Financial Performance in 2017
The revenue increase reflects sales growth in both the steel and industrial divisions, supported by strong industrial production globally.
RHI Magnesita recently announced its financial performance for 2017. Adjusted pro-forma revenue for 2017 reached almost €2.7 billion (approximately $3.3 billion), an 11.1% increase over the adjusted pro-forma revenue of €2.4 billion (~ $2.9 billion) achieved in 2016. The increase reflects sales growth in both the steel and industrial divisions, supported by strong industrial production globally.
“In addition to the cross-border merger, RHI Magnesita recorded a strong operating performance in the financial year, which is attributable to the company’s efficient operations, improving macroeconomic environment and the engagement of all employees worldwide,” said Stefan Borgas, CEO, regarding the first joint annual results.
The reported statutory results, which consolidate 10 months of results for RHI and two months of results for RHI Magnesita (meaning the consolidated financial statements only include two months of results of Magnesita Refratários) include reported group revenue amounting to €1.9 billion (~ $2.3 billion), up by 17.9% over the previous year as a result of growth in the previously mentioned steel and industrial sales, as well as and the consolidation of Magnesita revenues from November 1, 2017. Reported revenue from Steel Division totaled €1.3 billion (~ $1.6 billion) in 2017, while the Industrial Division’s revenue amounted to €577.6 million (~ $714.1 million).
Adjusted pro-forma sales to steel totaled €1.9 billion (~ $2.3 billion), up by 14.2% over 2016 adjusted pro-forma sales. Performance was largely driven by a 5.3% increase in world steel production in 2017. In addition, RHI Magnesita’s growth initiatives reportedly evolved constructively, especially in the U.S., Brazil and India, where deliveries growth surpassed underlying steel market growth.
Adjusted pro-forma revenue for the Industrial division grew by 2.6% in 2017, to €658.8 million (~ $814.7 million), compared to €642.1 million (~ $794.1 million) in 2016. Growth was led by the cement segment, especially in the second half of the year. The raw material crisis in China also influenced the demand for refractories, as some customers anticipated orders to secure supply. Despite recovering metal prices in 2017, there were virtually no greenfield projects in the nonferrous segment in the year, thus reducing most of the business to standard repairs with very few major new relining activities.
Demand for refractories from the glass industry improved during the year, especially from flat glass, as some projects came online during the year. For the container glass segment, demand remained nearly flat year-over-year. Finally, sales to the environment-energy-chemical (EEC) segment were flat compared to the previous year, as oil and gas prices have not recovered yet to a level that would trigger substantial new investments.
The refractory raw material markets suffered a dramatic change after the Chinese government enforced stricter environmental controls that caused temporary and permanent closures of raw material facilities during the year. This measure caused a significant imbalance between supply and demand and, consequently, Chinese-sourced raw material prices skyrocketed. Prices for the two main magnesite-based raw materials, dead-burned magnesia (DBM) and electro-fused magnesia (EFM), from China have more than doubled during the year and remain well above historical levels. This environment created significant challenges for all refractory producers and forced price adjustments across the supply chain. Moreover, the environment created scarcity of important raw material for the refractory industry across the globe. RHI Magnesita’s vertically integrated business model, with high-quality raw material sources, reportedly allowed the company to ensure supply to its customers while managing to maintain competitive costs.
For additional information, visit www.rhimagnesita.com.