EANS-Adhoc: RHI AG Provision resulting from the valuation of a long-term
energy supply contract has a negative effect on earnings in 2015 and leads to
improvements in the following years - dividend remains unchanged
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annual result
12.02.2016
Current incidents at the site in Porsgrunn, Norway, are forcing the Management
to make a more conservative estimate regarding future production volumes. In
addition, the grade concept for finished products provides for an increased use
of external raw materials as a result of the significant drop in raw material
prices. This has the following effects on the financial statements of 2015: as
the so-called "own-use exemption" no longer applies, the long-term energy supply
contract concluded in 2011 has to be qualified as a financial instrument in
accordance with IAS 39. The valuation of the complete term of the contract until
the end of the year 2023 at market price level leads to a non-cash provision of
roughly EUR 58 million at the end of the year 2015. In the following years, this
provision will be reversed and will lead to the corresponding improvements in
earnings.
Business Development
The RHI Group's revenue amounted to EUR 1,752.5 million in the past financial
year, after EUR 1,721.2 million in the year 2014. The decline in revenue in the
Steel Division in Europe, the Middle East and North Africa was nearly
compensated by a good business development in India and South America as well as
positive currency translation effects resulting from the devaluation of the euro
against the US dollar. In the Industrial Division, the year-on-year increase in
revenue by 8.5% is, among other things, attributable to higher project
deliveries in the glass and environment, energy, chemicals business units. At
the same time, the cement/lime business unit benefited from a positive
development of the construction sector in North America.
The operating EBIT decreased from EUR 141.9 million in the previous year to EUR
124.1 million in the financial year 2015. While the operating EBIT of the Steel
Division declined due to a weaker margin development in Europe and the Middle
East as well as negative product mix effects resulting from decreasing volumes
in the electric arc furnace segment, the Industrial Division benefited from
better utilization of fixed costs following an increase in revenue, improved
margins in the glass business unit and several major repairs carried out in the
nonferrous metals business unit. The Raw Materials Division's lower contribution
to earnings is attributable to weaker capacity utilization at the raw material
plants resulting from declining volumes in the electric arc furnace segment. In
addition, the operating EBIT was affected by negative currency translation
effects of EUR 8.9 million from the measurement of balance sheet items, which
are recognized under other expenses.
EBIT amounted to EUR 37.5 million in the past financial year and includes a full
write-down of the plant in Porsgrunn, Norway, amounting to roughly EUR 23
million and the plant in Falconer, US, amounting to roughly EUR 8 million as
well as negative effects on earnings of roughly EUR 58 million related to the
change in valuation of a long-term energy supply contract concluded in the year
2011. In addition, a provision totaling roughly EUR 3 million was formed for the
closure of the plant in Clydebank, Scotland. This is contrasted by positive
effects of roughly EUR 6 million from the reversal of provisions after the sale
of the premises at the site in Duisburg, Germany, as well as lower closure costs
at the Kretz site, Germany.
Profit after income tax thus amounted to EUR 17.6 million in the financial year
2015 after EUR 52.5 million in the previous year. Earnings per share declined
from EUR 1.28 to EUR 0.40.
Financial and Asset Position
Net cash flow from operating activities increased from EUR 72.4 million in the
previous year to EUR 175.4 million in the past financial year. This development
is, among other things, due to the reduction of working capital by EUR 38.3
million compared with the level at the end of the year 2014. Net cash flow from
investing activities amounted to EUR (47.2) million in the past financial year
and included payments related to the sale of securities due to surplus coverage
of the legally required provisions for pensions of two companies amounting to
roughly EUR 11 million as well as payments from the sale of a 2.6% share in a
German residential property company amounting to roughly EUR 3 million. Free
cash flow, defined as the total of net cash flow from operating activities and
net cash flow from investing activities, rose from EUR 11.3 million in the year
2014 to EUR 128.2 million in the year 2015 among other things because of the
reduction of working capital. The balance sheet total of the RHI Group decreased
from EUR 1,860.5 million at the end of 2014 to EUR 1,804.5 million at the end of
2015, primarily because of the reduction of working capital and lower financial
liabilities. The RHI Group's equity amounted to EUR 491.4 million at December
31, 2015 after EUR 493.9 million in the previous year. The equity ratio improved
from 26.5% to 27.2% in the year 2015. The consolidated statement of financial
position at December 31, 2015 shows net debt of EUR 397.9 million (previous
year: EUR 466.9 million).
Steel Division
Sales volume of the Steel Division declined by 7.5%, from roughly 1,246,000 tons
in the previous year to roughly 1,152,000 tons in the past financial year. This
is primarily attributable to weaker linings business in the electric arc furnace
and ladle segments. Revenue declined by 0.8%, from EUR 1,108.8 million in the
previous year to EUR 1,099.9 million. The decrease in revenue in Europe, the
Middle East and North Africa was compensated by a good business development in
India and South America as well as positive currency translation effects
resulting from the devaluation of the euro against the US dollar. The operating
EBIT dropped from EUR 93.1 million in the previous year to EUR 64.3 million in
the past financial year due to lower utilization of the production capacities
and negative product mix effects.
Industrial Division
Sales volume of the Industrial Division amounted to 443,000 tons in the
financial year 2015, thus remaining largely constant compared to the prior-year
level of roughly 440,000 tons. Revenue rose by 8.5%, from EUR 566.6 million in
the previous year to EUR 614.6 million. One of the reasons is a major contract
in the environment, energy, chemicals business unit in the petroleum coke
gasifier segment in India. In addition, several major repairs postponed by
customers in the previous year were carried out in the glass and nonferrous
metals business units. Moreover, the cement/lime business unit benefited from a
positive development of the construction sector in North America. As a result of
higher revenue and better margins in the nonferrous metals business unit as well
as savings realized in the glass business unit, the operating EBIT increased
from EUR 48.6 million in the year 2014 to EUR 65.0 million in the past financial
year.
Raw Materials Division
External sales volume of the Raw Materials Division increased significantly from
roughly 182,000 tons in the previous year to roughly 297,000 tons in the past
financial year. The increase by 63.2% is primarily attributable to the sale of
raw dolomite. While these sales contribute a large share to volume, the effect
in terms of value is small as the sales prices per ton are low. Revenue
decreased by 10.1% from EUR 303.3 million in the previous year to EUR 272.6
million in 2015. This is due to both lower internal demand by the Steel
Division, especially in the area of basic mixes, and to a decline in external
demand resulting from the insolvency of a customer in Italy. The reduced demand
by the Steel Division results from a decline in sales volume in the electric arc
furnace segment by roughly 12%. In this product segment RHI has its own raw
materials, which are mined at the Austrian sites in Breitenau and Hochfilzen.
Consequently, the decline in sales volume also led to poor utilization of the
raw material plants. The operating EBIT dropped from EUR 0.2 million to EUR
(5.2) million in the past financial year due to the weak capacity utilization.
Outlook
In its forecast published in January 2016, the International Monetary Fund
expects global economic growth of 3.4% in the current year after 3.1% in the
year 2015. Three key factors influence this outlook: slower economic growth in
China as a result of the reorientation of the economy - with the objective of
strengthening domestic consumption and reducing dependence on foreign
investments and exports -, lower energy and raw material prices as well as a
gradual tightening of the monetary policy in the US. According to a study of
early December 2015, the research institute CRU expects a decline in steel
production in China by roughly 1% for the year 2016 and an increase in steel
production by roughly 2% outside China. Based on these assumptions, RHI expects
revenue (2015: EUR 1,752.5 million) below and an operating EBIT (2015: EUR 124.1
million) at the level of the past financial year, with the first half of 2016
slightly weaker than the second half of the year. The expected decline in
revenue in the Steel Division is related especially to an expected slowdown of
the business development in South America and a highly competitive environment.
In the Industrial Division, weaker nonferrous metals business could cause a
decrease in revenue. 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. The Management Board of RHI AG intends to propose again a
stable dividend of EUR 0.75 per share to the Annual General Meeting on May 4,
2016.
Preliminary Unaudited Key Figures 2015
2015 2014 Delta 4Q/15 4Q/14 Delta
Sales volume (thousand
tons) 1,892 1,868 1.3% 488 502 (2.8)%
Steel Division 1,152 1,246 (7.5)% 269 311 (13.5)%
Industrial Division 443 440 0.7% 136 132 3.0%
Raw Materials Division 297 182 63.2% 83 59 40.7%
in EUR million
Revenues 1,752.5 1,721.2 1.8% 440.0 466.5 (5.7)%
Steel Division 1,099.9 1,108.8 (0.8)% 257.8 293.6 (12.2)%
Industrial Division 614.6 566.6 8.5% 171.2 162.7 5.2%
Raw Materials Division
External revenues 38.0 45.8 (17.0)% 11.0 10.2 7.8%
Internal revenues 234.6 257.5 (8.9)% 49.9 62.6 (20.3)%
EBITDA 140.0 199.4 (29.8)% (2.3) 51.8 (104.4)%
EBITDA margin 8.0% 11.6% (3.6)pp (0.5)% 11.1% (11.6)pp
Operating EBIT 1) 124.1 141.9 (12.5)% 32.7 41.8 (21.8)%
Steel Division 64.3 93.1 (30.9)% 13.6 27.9 (51.3)%
Industrial Division 65.0 48.6 33.7% 24.3 18.2 33.5%
Raw Materials Division (5.2) 0.2 (2,700.0)% (5.2) (4.3) (20.9)%
Operating EBIT margin 7.1% 8.2% (1.1)pp 7.4% 9.0% (1.6)pp
Steel Division 5.8% 8.4% (2.6)pp 5.3% 9.5% (4.2)pp
Industrial Division 10.6% 8.6% 2.0pp 14.2% 11.2% 3.0pp
Raw Materials
Division 2) (1.9)% 0.1% (2.0)pp (8.5)% (5.9)% (2.6)pp
EBIT 37.5 109.3 (65.7)% (53.9) 11.9 (552.9)%
Steel Division 63.4 91.4 (30.6)% 12.7 27.7 (54.2)%
Industrial Division 58.9 34.9 68.8% 18.2 5.7 219.3%
Raw Materials Division (84.8) (17.0) (398.8)% (84.8) (21.5) (294.4)%
EBIT margin 2.1% 6.4% (4.3)pp (12.3)% 2.6% (14.9)pp
Steel Division 5.8% 8.2% (2.4)pp 4.9% 9.4% (4.5)pp
Industrial Division 9.6% 6.2% 3.4pp 10.6% 3.5% 7.1pp
Raw Materials
Division 2) (31.1)% (5.6)% (25.5)pp (139.2)% (29.5)% (109.7)pp
Net finance costs (19.3) (32.7) 41.0% (3.3) (10.3) 68.0%
Share of profit of
joint ventures 9.2 8.2 12.2% 2.5 2.5 0.0%
Profit before income
tax 27.4 84.8 (67.7)% (54.7) 4.1 (1,434.1)%
Income taxes (9.8) (32.3) (69.7)% 16.3 (3.2) (609.4)%
Income taxes in % 35.8% 38.1% (2.3)pp 29.8% 78.0% (48.2)pp
Profit for the year 17.6 52.5 (66.5)% (38.4) 0.9 (4,366.7)%
Earnings per share in
EUR 3) 0.40 1.28 (0.98) 0.01
1) EBIT before losses of derivatives from supply contracts, impairment losses
and restructuring effects
2) based on internal and external revenues
3) basic and diluted
Preliminary unaudited key figures (in EUR million) 2015 2014 Delta
Balance sheet total 1,804.5 1,860.5 (3.0)%
Equity 491.4 493.9 (0.5)%
Equity ratio (in %) 27.2% 26.5% 0.7pp
Investments in PP&E and intangible assets 80.8 76.2 6.0%
Net debt 397.9 466.9 (14.8)%
Gearing ratio (in %) 81.0% 94.5% (13.5)pp
Net debt / EBITDA 2.8 2.3 0.5
Working capital 532.6 570.9 (6.7)%
Working capital (in %) 30.4% 33.2% (2.8)pp
Capital employed 1,176.5 1,225.3 (4.0)%
Return on average capital employed (in %) 2.3% 6.5% (4.2)pp
Net cash flow from operating activities 175.4 72.4 142.3%
Net cash flow from investing activities (47.2) (61.1) (22.7)%
Net cash flow from financing activities (124.4) 24.6 (605.7)%
Gearing ratio: net debt / equity
Working Capital: Inventories + Trade receivables and receivables from long-term
construction contracts - Trade payables - Prepayments received
Capital Employed: Property, plant and equipment + Goodwill + Other intangible
assets + Working Capital
Return on average capital employed: (EBIT - Taxes) / average Capital Employed
Further inquiry note:
RHI AG
Investor Relations
Mag. Simon Kuchelbacher
Tel: +43-1-50213-6676
Email: simon.kuchelbacher@rhi-ag.com
end of announcement euro adhoc
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issuer: RHI AG
Wienerbergstrasse 9
A-1100 Wien
phone: +43 (0)50213-6676
FAX: +43 (0)50213-6130
mail: rhi@rhi-ag.com
WWW: http://www.rhi-ag.com
sector: Refractories
ISIN: AT0000676903
indexes: ATX Prime, ATX
stockmarkets: official market: Wien
language: English