Refractory Market

RHI AG
A World Leader in Refractories Technology
August 2016
Index
Market & Company
Strategy
Key financials
Annex
2 28
Market & Company
Refractories
Indispensable for industrial high-temperature processes
Refractory Market
Competitive landscape
Market size by customer industries
Selected market players by refractory revenues
Glass
Cement
~7%
~8%
Nonferrous
Metals
~10%
Steel ~60%
Energy,
Chemicals
~15%
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)*
> € 20 bn
€ 0.0 bn
€ 0.5 bn
€ 1.0 bn
* listed
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
€ 1.5 bn
€ 2.0 bn
Market & Company
Different kind of refractory products
Selected Raw Materials
Refractory Linings
Magnesite ore
Bricks
Mixes
Linings
Flow Control & Functional Products
Dead-burned magnesia
Fused magnesia
4 28
Slide gates
Nozzles
Purge plugs
Shrouds
Market & Company
Comprehensive offering of
products, services and solutions
Key industries
Steel
Cement /
Lime
Applications
Basic oxygen-,
electric arc furnace,
casting ladles
Rotary kiln
Replacement
Costs*
Refractory characteristics
Consumable product
20 minutes to
2 months
~1.5%
annually
~0.5%
Systems and solutions for complete
refractory management
Demand correlated to steel output
Investment goods
Longer replacement cycles
Nonferrous
Metals
Glass
Copperconverter
Glass furnace
1 – 10 years
up to 10 years
~0.2%
~1.0%
Customized solutions based on the
specific requirements of various
industrial production processes
Complete lining concepts including
refractory engineering
Wide areas of application
Energy /
Environment /
Chemicals
Project driven demand cycles
Secondary
reformer
5 – 10 years
~1.5%
* 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.
5 28
Market & Company
Market leader through global presence and
comprehensive portfolio with broad customer base
Customer Industries
Global Market Coverage
RHI Group – 2015 external revenues
RHI Group – 2015 revenues by region
RHI Group
Raw Material 2%
57% Emerging
Markets
Cement 13%
21%
Nonferrous 9%
Western Europe
USA & Canada
Australia & Japan
13%
Eastern Europe
Industrial 35%
27%
Asia
South America
& Mexico
Middle East
& Africa
Steel 63%
43% Developed
Economies
15%
11%
CIS
7% 5%
1%
Glass 8%
EEC 5%
Division Steel
21%
28%
14%
9%
22%
12%
14%
22%
17%
14%
8% 5%1%
6 28
Division Industrial
6% 5%
2%
Market & Company
Development of revenues
Steel
Industrial
in € million
in € million
1,200
1,200
2011
2012
2013
2014
2015
2011
1,000
1,000
800
800
600
600
400
400
200
200
0
2013
2014
2015
0
Europe
7 28
2012
Asia /
North M. East / South
Pacif ic America
CIS
America
Total
Cement / Nonf errous
Lime
metals
Glass
Energy /
Chemicals
Total
Market & Company
EAF and BOF Crude Steel Production
Regions ranked according to
EAF production share in 2015
#1 Middle East
#2 Africa
#3 North America
#4 India
#5 Europe
#6 South America
#7 Asia excl. India & China
#8 CIS
#9 China
92%
68%
61%
55%
42%
33%
33%
27%
13%
EAF share
in global crude steel production
World
World w/o China
RHI revenue & volumes
in BOF and EAF (FY 2015)
1995 2005 2015
€ 500m
500 kt
33%
34%
€ 400m
400 kt
€ 300m
300 kt
€ 200m
200 kt
32%
40%
28%
43%
World w/o China CAGR 1995-2015
EAF steel production: 2.3%
BOF steel production: 0.8%
much stronger long-term growth in EAF
€ 100m
BOF EAF
BOF EAF
Revenue
Volumes
€ 0m
100 kt
0 kt
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
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 2015
 32 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
9 28
Selected key customers
Steel
Cement
Glass
Nonferrous
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
10 28
in million tons
1H/16
1H/15
y/y
2Q/16
1Q/16
q/q
China
World ex China
thereof EU28
thereof US
thereof India
World
399.5
395.3
82.7
40.1
46.4
794.8
404.0
405.9
88.1
40.0
45.2
809.9
(1.1)%
(2.6)%
(6.1)%
0.2%
2.7%
(1.9)%
208.6
200.6
41.6
20.4
23.5
409.2
190.9
194.7
41.1
19.7
22.9
385.6
9.3%
3.0%
1.2%
3.6%
2.6%
6.1%
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
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120%
100%
Ordinary Portland
Cement (China)
80%
60%
40%
12/14
06/15
12/15
06/16
120%
Zinc
Lead
Lead
Aluminium
Aluminum
Zinc
Copper
Nickel Copper
Nickel
100%
80%
60%
40%
12/14
06/15
12/15
06/16
120%
100%
Natural Gas (NYMEX)
Crude Oil (WTI)
80%
60%
40%
12/14
06/15
12/15
06/16
Source: Bloomberg
Index
Market & Company overview
Strategy
Key financials
Annex
12 28
Strategy
Strategy 2020
Market challenges
Strategic answer
Reduced global growth with significant
regional differences
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
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
175
150
125
100
75
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.
50
25
0
2005
Based on this strong presence, RHI should benefit
disproportionately from the development in these
regions and gain further market share.
600
500
2010
2015
Steel consumption
(kg per capita)
400
300
0
EU28
14 28
China
India
Russia
Brazil
100
USA
200
EU28
Non-basic mixes and a further expansion of the flow
control business are considered strategically attractive
market segments.
CAGR of 15% excl.
ORL acqusition
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.
15 28
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.
RHI is working on further optimizing the plant structure, which could lead
to an adjustment of production capacities in Europe in 2016.
In addition, several cost measures in the sales and general
administrative departments have been defined.
16 28
Revenue generation compared to
production capacities per region
Revenue
EMEA
Production capacities
Americas
Asia
0% 10% 20% 30% 40% 50% 60% 70%
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).
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.
Price development of fused magnesia and
dead-burned magnesia (in US-Dollar per ton)
1.000
USD per ton
900
800
700
FM
600
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.
500
DBM
400
300
200
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.
17 28
100
0
2003
2006
2009
2012
2015
Index
Market & Company overview
Strategy
Key financials
Annex
18 28
Key financials
Margin development per Division
€ million
1H/16
1H/15
y/y
2Q/16
1Q/16
q/q
Steel
Revenues
Operating EBIT
Margin
542.3
47.4
8.7%
574.4
40.0
7.0%
(5.6)%
18.5%
1.7pp
286.4
27.5
9.6%
255.9
19.9
7.8%
11.9%
38.2%
1.8pp
Industrial
Revenues
Operating EBIT
Margin
265.4
20.3
7.6%
309.9
31.6
10.2%
(14.4)%
(35.8)%
(2.6)pp
141.8
11.5
8.1%
123.6
8.8
7.1%
14.7% 171.2
30.7%
24.3
1.0pp 14.2%
Raw Materials
Revenues
143.8
146.9
(2.1)%
73.9
69.9
5.7%
60.9
64.8
73.1
22.5
121.3
17.7
129.2
27.1%
(6.1)%
12.3
61.6
10.2
59.7
20.6%
3.2%
11.0
49.9
9.3
55.5
10.1
63.0
2.5
(3.0)
1.7% (2.0)%
183.3%
3.7pp
0.9
1.2%
1.6 (43.8)%
(5.2)
2.3% (1.1)pp (8.5)%
3.0
(1.5) 160.0%
4.6% (2.1)% 3.3pp
(8.0)%
2.3%
0.9pp
440.5
39.9
9.1%
389.7
30.3
7.8%
410.5
22.8
5.6%
thereof external
thereof internal
Operating EBIT
Margin*
Group
Revenues
Operating EBIT
Margin
830.2
70.2
8.5%
902.0
68.6
7.6%
* Margin on the basis of total internal and external revenues
19 28
13.0%
31.7%
1.3pp
4Q/15 3Q/15 2Q/15
257.8
13.6
5.3%
440.0
32.7
7.4%
267.7
10.7
4.0%
294.7
17.2
5.8%
y/y
(2.8)%
59.9%
3.8pp
133.5 173.1 (18.1)%
9.1
18.4 (37.5)%
6.8% 10.6% (2.5)pp
477.9
34.1
7.1%
2015
2014
1,099.9 1,108.8
64.3
93.1
5.8% 8.4%
614.6
65.0
10.6%
566.6
48.6
8.6%
1.1%
272.6
303.3
21.8%
(2.2)%
38.0
234.6
45.8
257.5
(5.2)
(1.9)%
0.2
0.1%
(7.8)%
17.0%
2.0pp
1,752.5 1,721.2
124.1 141.9
7.1% 8.2%
Key financials
Financial key figures
Annual development
€ millions
Revenues
EBITDA
Operating EBIT
Profit from continuing operations
2015
1,752.5
140.0
124.1
17.6
2014
1,721.2
199.4
141.9
52.5
2013
1,754.7
260.7
126.8
62.7
2012
1,835.7
228.7
164.4
113.5
2011
1,758.6
203.4
148.6
120.8
8.0%
7.1%
1.0%
11.6%
8.2%
3.1%
14.9%
7.2%
3.6%
12.5%
9.0%
6.2%
11.6%
8.4%
6.9%
175.4
(47.2)
(124.4)
72.4
(61.1)
24.6
171.5
(125.1)
(112.8)
161.1
(165.9)
47.8
124.4
(105.5)
67.3
Financial liabilities net
Gearing ratio (in %)*
Net debt / EBITDA
397.9
81.0%
2.8
466.9
94.5%
2.3
422.9
87.1%
1.6
418.5
87.1%
1.8
361.5
82.4%
1.8
Balance sheet total
Equity ratio (in %)
Return on capital employed (in %)**
1,805
27.2%
2.3%
1,861
26.5%
6.5%
1,724
28.2%
7.3%
1,850
26.0%
11.6%
1,690
26.0%
14.5%
717
0.40
44.8
0.75
749
1.28
14.7
0.75
898
1.55
14.5
0.75
991
2.85
8.7
0.75
601
3.03
5.0
0.75
EBITDA %
Operating EBIT %
Profit from continuing operations %
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Market capitalization
Diluted earnings per share (in €)
Price-earnings ratio (diluted)
Dividend per share (in €)
20 28
* excluding pension liabilities
** (EBIT-taxes) / average (property, plant and equipment + goodw ill + other intangible assets + w orking capital)
Key financials
Financial key figures
Quarterly development
€ millions
Revenues
EBITDA
Operating EBIT
Profit from continuing operations
2Q/16
440.5
57.4
39.9
24.1
1Q/16
389.7
43.2
30.3
14.8
4Q/15
440.0
(2.3)
32.7
(38.4)
3Q/15
410.5
39.8
22.8
11.4
2Q/15
477.9
51.3
34.1
23.5
EBITDA %
Operating EBIT %
Profit from continuing operations %
13.0%
9.1%
5.5%
11.1%
7.8%
3.8%
(0.5)%
7.4%
(8.7)%
9.7%
5.6%
2.8%
10.7%
7.1%
4.9%
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
46.2
(8.7)
(50.5)
30.5
(8.4)
(3.9)
83.6
(30.2)
(56.8)
26.9
(14.9)
17.2
43.1
7.3
(27.1)
Financial liabilities net
Gearing ratio (in %)*
Net debt / EBITDA**
373.9
79.6%
2.7
378.9
77.8%
2.9
397.9
81.0%
2.8
445.6
82.6%
2.3
448.9
81.7%
2.3
1,757.2
26.7%
1.9%
1,801.3
27.0%
1.6%
1,804.5
27.2%
2.3%
1,840.1
29.3%
6.0%
1,869.6
29.4%
6.1%
495.1
29.5%
516.4
30.1%
532.6
30.4%
591.6
33.3%
597.7
33.5%
Balance sheet total
Equity ratio (in %)
Return on capital employed (in %)***
Working capital
Working capital (in%)****
21 28
* 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)
Key financials
Development and maturity profile of debt
Net Debt
Debt Maturity Profile
in € million
in € million
618
604
129
548
535
530
467
423
419
398
374
84
75
Debt
Cash
53
38
16
-112
-151
-150
-156
2014
2015
2Q/16
-186
2012
22 28
2013
14
10
4
2016 2017 2018 2019 2020 2021 2022 2023 2024
Key financials
Historic development of cash flow relevant items
Capex
Working Capital
in € million
in € million
186
Acquisitions
Investments
18
571
533
139
480
481
2012
2013
495
123
50
36
168
77
81
77
81
2014
2015
57
89
87
57
2010
23 28
2011
2012
2013
2014
2015
2Q/16
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.
24 28
Index
Market & Company
Strategy
Key financials
Annex
25 28
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
Number of shares issued
ISIN
Portion of index (June 30, 2016)
Average daily turnover value 1H/16 (Vienna)
Market capitalization (June 30, 2016)
Dividend per share
26 28
November 8, 2016
39,819,039
AT0000676903
1.55% of ATX
€ 1.3 million
€ 687 million
€ 0.75
Annex
Illustrative refractories production process
Firing in the rotary kiln
1,800 °C
Raw material mining:
magnesite
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
Pig iron is turned into steel
27 28
LD converter
Customers:
steel industry
cement & lime industry
nonferrous metals industry
glass industry
energy & chemical industry
Thank you for your interest in RHI!
www.rhi-ag.com
RHI AG, Investor Relations
Simon Kuchelbacher, CIIA
Wienerbergstrasse 9, 1100 Vienna, Austria
Phone: +43 (0) 50213-6676, e-mail: simon.kuchelbacher@rhi-ag.com
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 (investor.relations@rhi-ag.com).
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.
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