RHI AG A World Leader in Refractories Technology. August 2016

Transcription

1 RHI AG A World Leader in Refractories Technology August 2016

2 Index Market & Company Strategy Key financials Annex 2 28

3 Market & Company Refractories Indispensable for industrial high-temperature processes Refractory Market Market size by customer industries Competitive landscape Selected market players by refractory revenues Nonferrous Metals Cement ~10% ~15% Energy, Chemicals ~8% Glass ~7% > 20 bn Steel ~60% * listed Vesuvius (UK)* RHI (AT)* Magnesita (BR)* Imerys (FR)* Krosaki (JP)* Shinagawa (JP)* Magnezit (RU) ANH (US) Morgan (UK)* Refratechnik (DE) Chosun (KR)* Puyang (CN)* Minteq (US)* Resco (US) IFGL (IN)* 0.0 bn 0.5 bn 1.0 bn 1.5 bn 2.0 bn Refractory products protect furnaces against thermal, mechanical and chemical stress Base raw materials are Magnesite and Dolomite due to their high melting point 3 28

4 Market & Company Different kind of refractory products Selected Raw Materials Refractory Linings Magnesite ore Bricks Mixes Linings Dead-burned magnesia Flow Control & Functional Products Fused magnesia Slide gates Nozzles Purge plugs Shrouds 4 28

5 Market & Company Comprehensive offering of products, services and solutions Key industries Applications Replacement Steel Basic oxygen-, electric arc furnace, casting ladles 20 minutes to 2 months Costs* ~1.5% Refractory characteristics Consumable product Systems and solutions for complete refractory management Demand correlated to steel output Cement / Lime Rotary kiln annually ~0.5% Investment goods Longer replacement cycles Nonferrous Metals Copperconverter 1 10 years ~0.2% Customized solutions based on the specific requirements of various industrial production processes Glass Glass furnace up to 10 years ~1.0% Complete lining concepts including refractory engineering Wide areas of application Energy / Environment / Chemicals Secondary reformer 5 10 years ~1.5% Project driven demand cycles 5 28 * Although refractory products account for less than 2% of the production costs of customer industries, they are crucial to the quality of the products manufactured.

6 Market & Company Market leader through global presence and comprehensive portfolio with broad customer base Customer Industries RHI Group 2015 external revenues Global Market Coverage RHI Group 2015 revenues by region RHI Group Steel 63% Raw Material 2% Industrial 35% Cement 13% Nonferrous 9% 57% Emerging Markets Asia South America & Mexico Middle East & Africa Eastern Europe CIS 21% 13% 11% 7% 5% 27% 15% 1% 43% Developed Economies Western Europe USA & Canada Australia & Japan Glass 8% Division Steel Division Industrial EEC 5% 21% 28% 22% 22% 14% 9% 8% 14% 5% 1% 12% 14% 17% 2% 6% 5% 6 28

7 Market & Company Development of revenues Steel in million Industrial in million 1, , ,000 1, Europe Asia / Pacific North America M. East / CIS South America Total 0 Cement / Lime Nonferrous metals Glass Energy / Chemicals Total 7 28

8 Market & Company EAF and BOF Crude Steel Production Regions ranked according to EAF production share in 2015 EAF share in global crude steel production RHI revenue & volumes in BOF and EAF (FY 2015) #1 Middle East 92% m 500 kt #2 Africa 68% World 33% 32% 28% #3 North America 61% 400m 400 kt World w/o China 34% 40% 43% #4 India 55% 300m 300 kt #5 Europe 42% World w/o China CAGR #6 South America 33% 200m 200 kt EAF steel production: 2.3% #7 Asia excl. India & China 33% BOF steel production: 0.8% 100m 100 kt #8 CIS 27% BOF EAF BOF EAF #9 China 13% much stronger long-term growth in EAF 0m 0 kt Revenue Volumes Market environment EAF steel plants with lower fixed costs structure than integrated steel plants Chinese steel exports lead to shutdowns esp. in the EAF segment (EAF production in 2015 n World excluding China down 4.6% vs. 1.8% in BOF) 8 28 Impact for RHI (sales volume in EAF segment down 12% yoy) Lower EAF steel production has a disproportionately high impact on capacity utilization at RHI plants (esp. hearth and gunning mixes) RHI has its own raw materials for hearth and gunning mixes; decline in sales volume results in weak capacity utilization of the raw material plants

9 Market & Company RHI at one glance Sales Production Headquarter Technology centre Mines and raw material production Key facts RHI is a vertically integrated global provider of highgrade refractory products, systems and services Revenues of 1,753 million and operating EBIT of 124 million in productions sites and more than 60 sales offices with roughly 8,000 employees (>150 in R&D) Global partner for over 10,000 customers in more than 180 countries Technology leadership with close to market R&D facilities and tailor-made products Selected key customers Steel Cement Glass Nonferrous 9 28

10 Market & Company Market Environment Steel Steel global crude steel production down 1.9% vs. 1H/15 -) global crude steel production declined in all important regions worldwide with the exception of India and the US -) despite a gradual economic recovery in Europe, steel production in the European Union fell by 6.1% (esp. the United Kingdom saw a strong decline of roughly 36% following the closure of the steel plant in Redcar) -) the stable steel production in the US reflects the effectiveness of the anti-dumping duties (introduced early 2016) but up 6.1% in 2Q/16 vs. preceding quarter -) after the slump in 1Q/16, global steel production recovered in the 2Q/16 as prices picked up significantly (prices for hot rolled coil had plummeted dramatically by roughly 40% in 2015) -) especially in China it turned out that capacities which had allegedly been shut down are quickly restarted as soon as a certain price level is reached -) after a new record volume of roughly 112 million tons of steel had been exported from China in 2015, exports increased by roughly another 9% in 1H/16 vs. 1H/15 in million tons 1H/16 1H/15 y/y 2Q/16 1Q/16 q/q China (1.1)% % World ex China (2.6)% % thereof EU (6.1)% % thereof US % % thereof India % % World (1.9)% % 10 28

11 Market & Company Market Environment Industrial Cement weak economic situation and regional excess capacities cause lower repair activities in China the downturn of the construction industry and declining property prices are burdening local producers capacities are currently only expanded in North America Nonferrous metal prices marked new multi-year lows at the beginning of 2016 as a result of the market turbulence caused by the concerns regarding economic growth of China however, they recovered in the course of the year Glass market environment still characterized by low level of investment activities, excess capacities and ongoing market consolidation Environment, Energy, Chemicals permanently low oil price causes a challenging market environment in the oil and gas conveying industry 120% 100% 80% 60% 40% 12/14 06/15 12/15 06/16 120% 100% 80% 60% 40% 12/14 06/15 12/15 06/16 120% 100% 80% 60% 40% 12/14 06/15 12/15 06/16 Ordinary Portland Cement (China) Zinc Lead Lead Aluminum Aluminium Copper Zinc Nickel Copper Nickel Natural Gas (NYMEX) Crude Oil (WTI) Source: Bloomberg

12 Index Market & Company overview Strategy Key financials Annex 12 28

13 Strategy Strategy 2020 Market challenges Reduced global growth with significant regional differences Strategic answer Selective business expansion with a focus on growth regions and attractive market niches Competitive pressure due to a focus of customers on their operating costs Differentiation through technology leadership and top-class service in strategic segments Increasingly volatile demand by customers Alignment of the operating set-up to structural market changes Low price level for raw materials and basic materials Raw material integration completed focus on balancing in-house supply / external purchases Targets 2020 Revenue to roughly 2.0 to 2.2 billion without acquisitions EBIT margin of more than 10% Return on capital employed of more than 12% All business units should at least earn their cost of capital and generate positive free cash flow 13 28

14 Strategy Selective business expansion with a focus on growth regions and attractive market niches India as a strong growth driver 200 The IMF predicts the most dynamic growth in the advanced economies for the US (2.5%), and in the emerging markets for India (7.5%) ORL CAGR of 15% excl. ORL acqusition These two countries were already the two largest markets for RHI in the year 2015, with revenue totaling 186 million in India and 165 million in the US. Based on this strong presence, RHI should benefit disproportionately from the development in these regions and gain further market share Steel consumption (kg per capita) Non-basic mixes and a further expansion of the flow control business are considered strategically attractive market segments EU28 EU28 USA Brazil Russia India China 14 28

15 Strategy Differentiation through technology leadership and top-class service in strategic segments RHI continuously aligns its offer to specific customer requirements. This means differentiation based on technology leadership and service in strategically important segments: develop into a complete system supplier based on R&D, partnerships and selective acquisitions offer packages from ladle to the mold in the steel industry extend automation using machines, manipulators and sensors connect customer processes with RHI systems in line with the Industry 4.0 approach For price-sensitive customer segments, the offer will be extended based on the use of lower priced raw materials and a higher degree of product and service standardization

16 Strategy Alignment of the operating set-up to structural market changes The current market environment is characterized by: structural excess capacities in many customer industries an aggressive export strategy of Chinese steel producers volatile demand patterns pressure on the market prices Therefore it is necessary to keep stringent control over costs along the entire value chain and aligning production capacity to local demand. EMEA Americas Revenue generation compared to production capacities per region Revenue Production capacities RHI is working on further optimizing the plant structure, which could lead to an adjustment of production capacities in Europe in Asia In addition, several cost measures in the sales and general administrative departments have been defined. 0% 10% 20% 30% 40% 50% 60% 70% 16 28

17 Strategy Raw material integration completed focus on balancing in-house supply / external purchases Access to and availability of high-quality raw materials are decisive because of their significant influence on refractory product performance (e.g. basic mixes in EAF) Price development of fused magnesia and dead-burned magnesia (in US-Dollar per ton) USD per ton Raw material accounts for 60% of the total production costs at RHI. Roughly 70% of the global magnesite deposits are located in China, North Korea and Russia. RHI therefore considers the access to its own raw materials a strategic competitive advantage and has invested in increasing the level of self-supply with magnesia raw materials in recent years. Today, RHI considers the target of strategic raw material integration accomplished. The priority is balancing the strategic use of internal magnesia supply and external purchasing and selling options FM DBM 17 28

18 Index Market & Company overview Strategy Key financials Annex 18 28

19 Key financials Margin development per Division million 1H/16 1H/15 y/y 2Q/16 1Q/16 q/q 4Q/15 3Q/15 2Q/15 y/y Steel Revenues (5.6)% % (2.8)% 1, ,108.8 Operating EBIT % % % Margin 8.7% 7.0% 1.7pp 9.6% 7.8% 1.8pp 5.3% 4.0% 5.8% 3.8pp 5.8% 8.4% Industrial Revenues (14.4)% % (18.1)% Operating EBIT (35.8)% % (37.5)% Margin 7.6% 10.2% (2.6)pp 8.1% 7.1% 1.0pp 14.2% 6.8% 10.6% (2.5)pp 10.6% 8.6% Raw Materials Revenues (2.1)% % % thereof external % % % thereof internal (6.1)% % (2.2)% Operating EBIT 2.5 (3.0) 183.3% (43.8)% (5.2) 3.0 (1.5) 160.0% (5.2) 0.2 Margin* 1.7% (2.0)% 3.7pp 1.2% 2.3% (1.1)pp (8.5)% 4.6% (2.1)% 3.3pp (1.9)% 0.1% Group Revenues (8.0)% % (7.8)% 1, ,721.2 Operating EBIT % % % Margin 8.5% 7.6% 0.9pp 9.1% 7.8% 1.3pp 7.4% 5.6% 7.1% 2.0pp 7.1% 8.2% * Margin on the basis of total internal and external revenues

20 Key financials Financial key figures Annual development millions Revenues 1, , , , ,758.6 EBITDA Operating EBIT Profit from continuing operations EBITDA % 8.0% 11.6% 14.9% 12.5% 11.6% Operating EBIT % 7.1% 8.2% 7.2% 9.0% 8.4% Profit from continuing operations % 1.0% 3.1% 3.6% 6.2% 6.9% Cash flow from operating activities Cash flow from investing activities (47.2) (61.1) (125.1) (165.9) (105.5) Cash flow from financing activities (124.4) 24.6 (112.8) Financial liabilities net Gearing ratio (in %)* 81.0% 94.5% 87.1% 87.1% 82.4% Net debt / EBITDA Balance sheet total 1,805 1,861 1,724 1,850 1,690 Equity ratio (in %) 27.2% 26.5% 28.2% 26.0% 26.0% Return on capital employed (in %)** 2.3% 6.5% 7.3% 11.6% 14.5% Market capitalization Diluted earnings per share (in ) Price-earnings ratio (diluted) Dividend per share (in ) * excluding pension liabilities ** (EBIT-taxes) / average (property, plant and equipment + goodw ill + other intangible assets + w orking capital)

21 Key financials Financial key figures Quarterly development millions 2Q/16 1Q/16 4Q/15 3Q/15 2Q/15 Revenues EBITDA (2.3) Operating EBIT Profit from continuing operations (38.4) EBITDA % 13.0% 11.1% (0.5)% 9.7% 10.7% Operating EBIT % 9.1% 7.8% 7.4% 5.6% 7.1% Profit from continuing operations % 5.5% 3.8% (8.7)% 2.8% 4.9% Cash flow from operating activities Cash flow from investing activities (8.7) (8.4) (30.2) (14.9) 7.3 Cash flow from financing activities (50.5) (3.9) (56.8) 17.2 (27.1) Financial liabilities net Gearing ratio (in %)* 79.6% 77.8% 81.0% 82.6% 81.7% Net debt / EBITDA** Balance sheet total 1, , , , ,869.6 Equity ratio (in %) 26.7% 27.0% 27.2% 29.3% 29.4% Return on capital employed (in %)*** 1.9% 1.6% 2.3% 6.0% 6.1% Working capital Working capital (in%)**** 29.5% 30.1% 30.4% 33.3% 33.5% * excluding pension liabilities ** EBITDA trailing tw elve months *** (EBIT-taxes) trailing tw elve months / average (property, plant and equipment + goodw ill + other intangible assets + w orking capital) **** Working capital / (trailing tw elve months revenue)

22 Key financials Development and maturity profile of debt Net Debt in million Debt Maturity Profile in million Debt Cash Q/

23 Key financials Historic development of cash flow relevant items Capex in million Working Capital in million 186 Acquisitions Investments Q/

24 Key financials Outlook Outlook FY 2016 Despite the challenging market environment, the Management Board of RHI AG is increasing the outlook due to the positive earnings development in the first half of the year. Consequently, an operating EBIT margin of roughly 8% is expected for the full year 2016, which corresponds to an increase by roughly one percentage point compared with the previous year. 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

25 Index Market & Company Strategy Key financials Annex 25 28

26 Annex The RHI share Shareholder Structure RHI share performance > 25% MSP Foundation, LIE > 5% Chestnut Beteiligungsgesellschaft mbh, GER* > 5% Silver Beteiligungsgesellschaft mbh, GER* < 65% Free Float * Voting rights are exercised jointly. Calendar & Information Results for the 3rd Quarter 2016 November 8, 2016 Number of shares issued 39,819,039 ISIN AT Portion of index (June 30, 2016) 1.55% of ATX Average daily turnover value 1H/16 (Vienna) 1.3 million Market capitalization (June 30, 2016) 687 million Dividend per share

27 Annex Illustrative refractories production process Raw material mining: magnesite Firing in the rotary kiln 1,800 C Mixer Packaging UNSHAPED REFRACTORY PRODUTCS Press max. 3,200 t Heat treatment max. 350 C Quality assurance Packaging UNFIRED REFRACTORY PRODUTCS Press max. 3,200 t Firing in the tunnel kiln max. 1,800 C / 3 days Quality assurance Packaging Logistics FIRED REFRACTORY PRODUTCS Recycling or disposal in accordance with the law Removal Use Installation EXAMPLE STEEL INDUSTRY Customers: steel industry cement & lime industry nonferrous metals industry glass industry energy & chemical industry Pig iron is turned into steel LD converter

28 Thank you for your interest in RHI! RHI AG, Investor Relations Simon Kuchelbacher, CIIA Wienerbergstrasse 9, 1100 Vienna, Austria Phone: +43 (0) , Important notice: This document contains forward-looking statements based on the currently held beliefs and assumptions of the management of RHI AG ( RHI ), which are expressed in good faith and, in their opinion, reasonable. These statements may be identified by words such as expectation or target and similar expressions, or by their context. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, financial condition, performance, or achievements of RHI to differ materially from the results, financial condition, performance or achievements express or implied by such forward-looking statements. Given these risks, uncertainties and other factors, recipients of this document are cautioned not to place undue reliance on these forward-looking statements. RHI disclaims any obligation to update these forwardlooking statements to reflect future events or developments. This document may use terms which are non-ifrs financial measures. These supplemental financial measures should not be viewed in isolation as alternatives to measures of RHI s financial condition, results of operations or cash flows as presented in accordance with IFRS in RHI s consolidated financial statements. For definition of these supplemental financial measures, a reconciliation to the most directly comparable IFRS financial measures and information regarding the usefulness and limitations of these supplemental financial measures please contact the RHI Investor Relations team ([email protected]). No information contained in this document constitutes or shall be deemed to constitute a basis for investment decisions or an invitation to invest or otherwise deal in shares of RHI. Additionally, the Disclaimer/Terms of use of the RHI group s websites shall be applied