Results of the third quarter 2015, EBIT affected by the devaluation of the Brazilian real in the amount of € 10.4 million

In the first nine months of the year 2015, the RHI Group’s revenue was up 4.6% on the comparative period of 2014 and amounted to € 1,312.5 million. Revenue of the Steel Division rose by 3.3%, mainly because of positive currency translation effects and a strong business development in India and South America. The Industrial Division’s increase in revenue by 9.8% compared with the first nine months of the year 2014 is amongst other things due to higher project deliveries in the business units glass and environment, energy, chemicals.

The operating EBIT of the RHI Group amounted to € 91.4 million in the first nine months of the current year. Compared with the operating EBIT of € 100.1 million in the same period of 2014, this corresponds to a decline by 8.7%. While the Industrial Division benefited from a better utilization of fixed costs resulting from the increment in revenue, an improved margin situation of the glass business unit and several major repairs in the nonferrous metals business unit, the operating EBIT in the Steel Division decreased due to a weaker margin development in Europe and in the Middle East as well as negative product mix effects related to a volume decline in the electric steel segment. The Raw Materials Division’s lower contribution to earnings is attributable to weaker capacity utilization at the raw material plants related to the declining volumes in the electric steel sector. The operating EBIT margin decreased from 8.0% in the first nine months of the year 2014 to 7.0% in the current financial year.

Q3/2015
In the third quarter of 2015, revenue of the RHI Group declined by 14.1% compared with the second quarter of 2015 and amounted to € 410.5 million. This is attributable to seasonally weaker business activities in Europe during the summer months, a weak business development in the electric steel segment in the Middle East in the Steel Division and to lower project deliveries in the business units environment, energy, chemicals as well as glass.

The operating EBIT amounted to € 22.8 million in the past quarter and declined primarily due to negative exchange rate effects related to the valuation of balance sheet items in the amount of € 10.4 million, which predominantly resulted from the devaluation of the Brazilian real and are recorded under other expenses. The market environment of the Steel Division is characterized by an aggressive export strategy of Chinese producers resulting from weak domestic demand and high excess capacities. Accordingly, this led to high pressure on steel prices and thus on manufacturers’ profitability and subsequently also on suppliers. Due to the lower fixed cost structure compared with integrated steel plants, the Chinese exports have a negative impact especially on the utilization rates in the electric steel segment. This caused a negative effect on the development of sales volume of the Steel Division in this important customer segment. In the financial year 2014 the Steel Division generated revenue of roughly € 275 million in the electric arc furnace segment compared with revenue of roughly € 110 million in the basic oxygen converter segment. Important products for the electric steel industry are hearth construction and gunning mixes. In this segment, RHI has its own raw materials, which are mined at the Austrian sites in Breitenau und Hochfilzen. Consequently, the decline in sales volume additionally resulted in a weak capacity utilization of the raw material plants.

Despite a significant decrease in trade payables in the third quarter of 2015, the positive trend of working capital reduction continued. Net cash flow from operating activities rose to € 91.8 million in the first nine months of the year 2015, after it had amounted to € 40.1 million in the comparative period of 2014. Net debt declined from € 466.9 million at the end of 2014 to € 445.6 million at September 30, 2015 due to the positive cash flow development.

Outlook
The difficult economic framework conditions in many customer industries lead to uncertainties regarding the delivery of refractory products and the completion of customer projects by the end of the year, thus making it more difficult to plan the refractory business. Nevertheless, RHI still expects an increase in revenue by more than 3% for the year 2015. Due to negative exchange rate effects related to the valuation of balance sheet items of € 10.4 million in the third quarter of 2015, reaching an operating EBIT margin of roughly 8% is becoming increasingly challenging.