RHI Magnesita cheers merger as sales and profits surge

RHI Magnesita, the Austro-Brazilian refractory product specialist, has hailed a year of “progress and transformation” after a surge in revenues saw it swing back into the black.

The FTSE 250 company said that adjusted 2018 revenues rose 21% to €3.08bn, which reflected increased volumes and improvements in raw material pricing. There had also been “significant growth” in China and India, it added.

Adjusted earnings before interest, tax and amortisation were ahead 81% at €428.1m, while pre-tax profits were €246m, against a loss a year earlier of €5.9m.

A dividend of €1.50 a share has been proposed, a 100% increase on the previous year.

Chief executive Stefan Borgas said it had been a year of “tremendous progress and transformation”, adding: “This was our first full financial year as a new company and I am delighted by the significant amount that we have achieved.

"Underpinned by the strength of the markets in which we operate we have reported very strong financial results [and] successfully delivered on our integration plans.

“While some uncertainties exist in the macroeconomic outlook for 2019, robust customer markets in the medium term – albeit with some uncertainty in the short term – and positive trends in raw material pricing support our expectations to deliver modest organic revenue growth with improved operating margins.”

RHI Magnesita, which specialises in high-grade refractory products and systems, was created in 2017 when Austria’s RHI and Brazil’s Magnesita Refratarios merged. Further deals have not been ruled out, however, with the company noting that it had the “flexibility to pursue acquisition opportunities in growth markets”.

Harry Philips, analyst at Peel Hunt, said: “A strong set of results from RHI Magnesita demonstrably prove the merits and potential of the merger. Ahead of plan, synergies have transformed the margin profile while a rapidly deleveraging balance sheet opens up significant optionality in terms of capital allocation headed by dividends and M&A.

“Going into 2019, we are increasing our EBITA number to €460m from €435m, underpinned by further synergy savings of €20m and a recovery of €20m from the operational issues."

Peel Hunt increased its price target stock to 7,000p from 6,500p following the results.

RHI Magnesita also announced on Wednesday that it was seeking a secondary listing on the Vienna Stock Exchange. The decision has been prompted by the UK’s decision to leave the European Union, the company said.