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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Rhi Magnesita N.v. | LSE:RHIM | London | Ordinary Share | NL0012650360 | ORD EUR1.00 (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -5.00 | -0.14% | 3,505.00 | 3,515.00 | 3,525.00 | 3,560.00 | 3,475.00 | 3,475.00 | 11,413 | 16:35:17 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Clay Refractories | 3.57B | 164.6M | 3.4924 | 10.09 | 1.66B |
From Apr 2019 to Apr 2024
TIDMRHIM
RNS Number : 9514X
RHI Magnesita N.V.
16 August 2018
RHI Magnesita N.V.
("RHI Magnesita" or the "Company" or "Group")
UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2018
Delivering Strong Operating Profits and Synergy Upgrades
Hot Features
Premium
Reported Adjustments(1)
--------------------------- -----------------------------------------------
Pro forma
at constant
Adjusted currency
Financial Summary H1 2018 H1 2017 H1 2018 H1 2017
Change
EURm EURm EURm EURm %
-------------------- ----------------- -------- ----------------- ----------------- ---------
Revenue 1,508 855 1,508 1,210 24.6%
EBITA 229 64 218 116 88.2%
EBITA margin 15.2% 7.5% 14.5% 9.6% +490 bps
Profit before tax 97
Earnings per share 1.60
Net debt 741
-------------------- ----------------- -------- ----------------- ----------------- ---------
(1) Further detail on the adjustments can be found in Alternative Performance Measures section
Highlights
-- Revenue of EUR1,508 million, up 24.6% on an organic basis, driven by price increases and volume growth in both Steel and Industrial divisions offsetting higher input costs
-- Adjusted EBITA of EUR218 million, up 88.2%
-- Adjusted EBITA margin of 14.5%, up 490bps from the previous year, driven by margin expansion from both raw material integration and synergies from the merger
-- Working capital to revenue ratio at 21.8% versus 22.2% at the end of H2 2017, despite the significant raw material inflation
-- Integration progressing well with increased synergy guidance: at least EUR60 million in 2018 (from previous guidance of EUR40 million) and EUR110 million on an annualised recurring basis by 2020 (from previous guidance of EUR70 million)
-- Strategic investment of more than EUR20 million in our dolomite-based refractory plant and dolomite mine in China
-- Consolidation of RHI Magnesita's three subsidiaries in India to capture local growth opportunities more effectively and efficiently
-- Net debt reduced from 1.9x adjusted pro forma EBITDA on 31 December 2017 to 1.6x adjusted EBITDA on 30 June 2018
Commenting on the results, Chief Executive Officer, Stefan Borgas, said:
"We are delighted to report strong growth of 25% in the first half and profit growth of 88%. We have seen a continuation of the positive trends we saw in the second half of 2017, the benefits of our high level of vertical integration and the synergies from the merger of RHI and Magnesita in Q4 2017. Continued strong demand from our end markets and price increases drove revenue growth, more than offsetting higher raw material input costs. Our integration plans developed ahead of our plan both in terms of speed of capture and total amount."
"Whilst geopolitical challenges could impact the second half and beyond, we believe our geographically diversified production bases and broad customer profile will insulate the Group to a large extent. Today, we continue to anticipate that full year operating results will accrue the benefits from strong pricing, additional merger synergies and network optimisation."
"Overall, we have achieved strong first half results and management expectations for the full year operating results remain unchanged. We thank our customers for their support and collaboration in times of tight availability, and our employees for all their ideas, efforts and contributions."
There will be an analyst presentation at 8.00am in the Minories Room at the Andaz Hotel, 40 Liverpool St, London, EC2M 7QN. For those unable to attend in person, a conference call will be available. Please visit the RHI Magnesita's website https://ir.rhimagnesita.com/conference-call/.
For further enquiries, please contact:
Guy Marks, Head of Investor Relations
Tel +44 (0) 7741 730681
E-mail: guy.marks@rhimagnesita.com
Stefan Rathausky, Head of Corporate Communications
Tel +43 50213-6059
E-mail: stefan.rathausky@rhimagnesita.com
About RHI Magnesita
RHI Magnesita is the global leading supplier of high-grade refractory products, systems and services which are indispensable for industrial high-temperature processes exceeding 1,200degC in a wide range of industries, including steel, cement, non-ferrous metals, and glass, among others. With a vertically integrated value chain, from raw materials to refractory products and full performance-based solutions, RHI Magnesita serves more than 10,000 customers in nearly all countries around the world.
The Company has unmatched geographic diversification with more than 14,000 employees in 35 main production sites and more than 70 sales offices. RHI Magnesita intends to use its global leadership position in terms of revenue, greater scale, complementary product portfolio and diversified geographic presence around the world to target opportunistically those countries and regions benefitting from more dynamic economic growth prospects.
Its shares have a premium listing on the London Stock Exchange (symbol: RHIM) and are a constituent of the FTSE 250 index.
For more information please visit: www.rhimagnesita.com
OVERVIEW
RHI Magnesita's first half results continue to reflect the positive trends seen in the H217, the benefits of our high level of vertical integration and synergies from the combination. Price increases drove revenue development, more than offsetting higher raw material input costs. Revenue for the six months to June 2018 was EUR1,508 million, 24.6% higher than the comparative period on a constant currency basis (76.4% higher on a reported basis). Adjusted EBITA increased by almost 90% on a constant currency basis, to EUR218 million, with a 14.5% adjusted EBITA margin.
INTEGRATION AND SYNERGIES
Our integration plan has progressed ahead of our original expectations. The company's SAP roll-out is advancing as planned and all former Magnesita European production plants have already been converted to the new platform, a sales and supply chain hub has been operational since 1 August in Rotterdam, and Global Business Services, our shared service centre project, goes live at European sites at the end of 2018.
Not only our planned integration actions have materialized faster, but also additional opportunities have been identified which are fully supported by detailed implementation plans. We expect now to deliver savings of at least EUR60 million in 2018 (from previous guidance of EUR40 million) and EUR110 million in 2020 (from previous guidance of EUR70 million). Approximately, EUR27 million in synergies were reflected in H1 2018 results.
Total one-time costs to implement the synergy opportunities above are expected to amount to between EUR110 million and EUR130 million (from previous guidance of EUR70 million), as costs to achieve the additional synergies are expected to be higher than 1:1. EUR53 million of the synergy costs were expensed in 2017 and EUR5 million in H1 2018. We expect to expense an additional EUR25 to EUR30 million in restructuring costs in the H2 2018 and the balance in 2019. Total cash disbursements are expected to be EUR75 million in 2018, of which EUR28 million have been paid out in H1 2018.
STEEL DIVISION
Adjustments(1)
-----------------------------------------------
Pro forma
at constant
Adjusted currency
Divisional Performance H1 2018 H1 2017
Change
Steel EURm EURm %
------------------------ ----------------- ----------------- ---------
Revenue 1,094 846 29.3%
Gross profit 283 192 47.4%
Gross margin 25.9% 22.7% +320 bps
(1) Further detail on the adjustments can be found in Alternative Performance Measures section
Steel production growth year-over-year was robust, at a 4.6%, most notably in Asia and MEA. RHI Magnesita's deliveries for steel clients have outperformed the respective trends in North America, South America and Europe. Our businesses in India, Central America and Europe were also strong, with deliveries increasing above 10% in the period, and revenue growth of over 30%.
Altogether, revenue for the Steel division was EUR1,094 million during H1 2018, 29.3% higher than the prior year, reflecting the significant outperformance of our deliveries on top of a very strong underlying market as well as the price increases to compensate for raw material inflation. Sales growth has also been supported by the increasing cross-selling initiatives across both products and geographies.
Gross profit for the Steel division amounted to EUR283 million, 47.4% higher than the prior year. Gross margin stood at 25.9% in the H1 2018, 320bps higher than the previous year, as the segment benefitted from both RHI Magnesita's raw material integration and increased sales volumes.
It still remains too early to gauge the effects of the imposition of trade tariffs, yet the Group believes its diversified production base (in 16 countries across 4 continents) and client base (10,000 customer plants in more than 180 countries) will insulate any significant impact from these developments, as long as industrial output on a global basis remains unaffected.
INDUSTRIAL DIVISION
Adjustments(1)
---------------------------------------------
Pro forma
at constant
Adjusted currency
Divisional Performance H1 2018 H1 2017
Change
Industrial EURm EURm %
------------------------ ---------------- ---------------- ---------
Revenue 413 362 14.3%
Gross profit 98 81 21.0%
Gross margin 23.7% 22.3% +140 bps
(1) Further detail on the adjustments can be found in Alternative Performance Measures section
In the Industrial division, our Glass segment had strong performance, with demand developing for projects in the US and Poland. The Nonferrous metals segment is performing in line with management expectations, new projects are yet to pick-up, despite good progress in new copper projects in Africa and Asia. In EEC (Environment, Energy & Chemicals) we see increasing demand in China, Europe and CIS, with the installation business picking up. The Cement/Lime segment is flat, as result of still low capacity utilization in China and Brazil and some market share losses due to pricing. The Minerals segment has benefitted from raw material price increases and supply shortage caused by the stricter environmental enforcement in China. Revenue growth has flattened out as increased refractory demand has caused the Group to use more minerals internally, and consequently have less raw materials available for external sales.
Revenue for the Industrial division was EUR413 million during H1 2018, 14.3% higher than the prior year, as lower deliveries to Cement/Lime and sales of Minerals were more than compensated by higher deliveries to Glass clients and price increases across all segments.
Gross profit for the Industrial division amounted to EUR98 million, 21.0% higher than the prior year. Gross margin stood at 23.7% in the H1 2018, 140bps higher than the previous year. Whilst margin developed positively, further improvement was held back by lower sales of high margin raw materials and lower sizeable project business, especially in EEC and Nonferrous metals.
CASH FLOW AND WORKING CAPITAL
Operating cash flow amounted to EUR136 million which was driven by the substantial increase in adjusted EBITA. Cash conversion was held back by the EUR85 million demand in working capital caused by the 24.6% increase in revenues over pro forma H1 2017 numbers. Nonetheless, working capital intensity improved from 22.2% in December 2017 to 21.4% in June 2018, as strict control on accounts receivables and progress in our payables strategy more than compensated for the inflationary effect in raw material and finished goods inventories.
As anticipated, cash outlays for the merger and restructuring expenses provisioned in 2017 amounted to EUR49 million in the first half (including EUR6 million of capital expenses for the issue of shares, which was accounted for in equity in 2017). Net interest payments on net debt and refinancing costs amounted to EUR35 million in the period and should decrease considerably moving forward after the previously announced planned Perpetual Bond redemption on 20 August 2018. Income tax paid amounted to EUR35 million for the period, with a cash tax rate of 36%. However, the effective tax rate (ETR) was 27% with prepaid income tax and other timing mismatches accounting for the difference between cash flow and the income statement. The full-year cash tax rate and ETR are expected to be between 25% - 30%.
Cash Flow H1 2018
EURm
------------------------------------- -----------------
Adjusted EBITA 218
Working capital -85
Changes in other assets/liabilities -15
Capital expenditures -35
Depreciation 53
------------------------------------- -----------------
Operating cash flow 136
------------------------------------- -----------------
Income tax -35
Net interest expenses -35
Restructuring/transaction costs -49
===================================== =================
Free cash flow(1) 17
------------------------------------- -----------------
(1) Further detail on the adjustments can be found in Alternative Performance Measures section
FINANCIAL CONDITION
Our financial position continues to strengthen, and our deleveraging profile is reinforced by the improving profit, synergies and interest expense reduction.
Net debt reduced from 1.9x adjusted pro forma EBITDA on 31 December 2017 to 1.6x adjusted EBITDA on 30 June 2018, mostly due to the improvement in LTM EBITDA, but also due to the decrease in net debt in the period. Net debt continues to reduce as planned driven by increasing profitability and cash flows, despite the one-off demand on working capital and the mark to market effect on our US dollar liabilities.
In line with the Company's plan to reposition its capital structure to reflect its improved financial position, on 3 August 2018 the Company successfully raised a new unsecured US$600 million 5-year term loan and multi-currency revolving credit facility with a syndicate of 10 international banks.
The proceeds of the new facility will be used to redeem the entire amount of the outstanding Magnesita Perpetual Bonds and prepay other short-term facilities, which will generate significant interest expense savings. The new Term Loan allows the Company flexibility and liquidity to pursue its long-term strategy.
Capitalisation Table H1 2018
EURm
---------------------------------- -----------------
Schuldscheindarlehen 221
OeKB term loan 306
Perpetual bond 128
Other loans and facilities 496
Total gross indebtedness 1,151
---------------------------------- -----------------
Cash, equivalents and marketable
securities 409
================================== =================
Net debt 741
---------------------------------- -----------------
DIVIDS
The Board of Directors believes that a clear and consistent dividend policy is important to shareholders and intends to implement a policy consistent with its status as a U.K. premium-listed, industrial company. This will be communicated later in the year following completion of the Integrated Tender Offer. Consistent with prior years, RHI Magnesita is this year not declaring an interim dividend.
STRATEGIC DEVELOPMENTS
On 26 June 2018, RHI Magnesita announced a strategically important investment in the Chinese market of more than EUR20 million in its site in Chizhou, Anhui Province in China. The Chizhou site includes an extensive dolomite mine and raw material production as well as facilities for the production of high-quality dolomite-based finished products. Successful trials are already underway in the brick plant in Chizhou where it is planned to start production by the beginning of 2019. The raw dolomite mine is planned to resume operation by the end of 2019. Captive supply of raw materials and local production sites grant a significant logistical competitive advantage for the development of regional markets and the securing of growth opportunities in China and the Asia/Pacific region.
On 1 August 2018, RHI Magnesita announced the proposed merger of its three Indian subsidiaries. The merger is designed to optimally position RHI Magnesita's operations in the strategically important Indian market to capture growth opportunities more effectively and efficiently, by combining the strengths and competencies of each company. This merger is part of RHI Magnesita's strategic pillar "markets" which focuses on building a global presence with strong local organizations and solid market positions. India became the third largest steel producer in the world after a decade of solid growth and an ambitious government program aims to reach 300m tons of steel production by 2030, triple the output of 2016. With one strong and integrated local organization, the industry's most comprehensive product portfolio and proven supply and sales capabilities RHI Magnesita India will be optimally positioned to leverage the positive local market developments.
The Integrated Tender Offer for the remaining shares in Magnesita is expected to be completed during H2 2018. As set out in Note 5 of the Financial Statements below, the Group expects substantially all of Magnesita's minority shareholders to tender their shares and opt for the cash plus shares consideration. If 100% of Magnesita's minority shareholders tender their shares and elect for the cash plus shares consideration option, the Group will disburse R$455.6 million, adjusted by SELIC (the Brazilian benchmark interest rate) from 26 October 2017 until the date of the settlement of the auction of the Integrated Tender Offer, and issue an additional 5,000,000 shares.
OUTLOOK
The strong trading performance reported in our Q1 2018 update has continued and our business developed positively in H1 2018, supported by continued strong demand from our end markets, raw material integrations and the accrual of synergies.
Currency headwinds have reduced slightly since the first quarter, with the US dollar strengthening against the Euro and the Chinese Yuan. The Group's revenue and profit growth rates achieved in H1 2018 were higher than we anticipate for the full year, as the H2 2017 results already reflected improved market conditions and some effect on revenues and margins from the pass-through of raw material input inflation. Management believes raw material prices will remain at current elevated levels during the second half.
Overall, management expectations for full year operating results remain unchanged.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group has an established risk management process based on a formally approved framework and regular risk surveys among functional and operational managers aiming at systematically identifying, assessing and mitigating risks and uncertainties in the Group. Material and major risks with potential high impacts on the Group, its results or its ability to achieve its strategic objectives are reviewed regularly by the Board.
The risks considered by the Board to be the principal ones are presented in the 2017 Annual Report which is available on the Group's website at www.rhimagnesita.com. Those risks were reviewed in the course of the regular risk survey and were found to be still relevant for the second half of the financial year: Macroeconomic environment and condition of customer industries, fluctuations in exchange rates and energy prices, volatility of raw material prices, business interruption and supply chain, regulatory and compliance risks, environment, health & safety, risks related to the merger. The board believes that the level of uncertainty regarding the future development of the macroeconomic environment has increased since we presented the 2017 Annual Report due to recent geopolitical events and the adoption of new trade barriers and tariffs by several countries.
The risks may occur independently from each other or in combination. In case they occur in combination their impact may be reinforced. Also, the Group is facing other risks than the one mentioned here, some of them being currently unknown or not considered to be material.
GOING CONCERN
The Group has considerable financial resources together with long-standing relationships with a number of customers, suppliers and funding providers across different geographic areas and industries. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group is able to operate within the level of its current bank facilities without needing to renew facilities expiring in the next 12 months. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully despite the uncertainties inherent in the current economic outlook.
After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Interim Financial Report.
ALTERNATIVE PERFORMANCE MEASURES (APMs)
APMs used by the Group are reviewed below to provide a definition and reconciliation from each non-IFRS APM to its IFRS equivalent, and to explain the purpose and usefulness of each APM.
In general, APMs are presented externally to meet investors' requirements for further clarity and transparency of the Group's underlying financial performance. The APMs are also used internally in the management of our business performance, budgeting and forecasting.
APMs are non-IFRS measures. As a result, APMs allow investors and other readers to review different kinds of revenue, profits and costs and should not be used in isolation. Other commentary within the preliminary announcement, including the other sections of this Finance Review, as well as the Condensed Consolidated Financial Statements and the accompanying notes, should be referred to in order to fully appreciate all the factors that affect our business. We strongly encourage readers not to rely on any single financial measure, but to carefully review our reporting in its entirety.
Adjusted Pro-forma Results at a Constant Currency (unaudited)
Adjusted pro-forma results were prepared as if the combined Group had existed since 1 January 2016 and before the impact of Items such as: divestments, restructuring expenses, merger-related adjustments and other non-merger related other income and expenses, which are generally non-recurring. Pro forma results have also been adjusted to reflect the preliminary purchase price allocation (PPA) related to the acquisition of Magnesita.
Given the changes in capital structure arising from the acquisition of Magnesita, the historical interest, tax and dividend charges are not deemed to be meaningful. As a result, adjusted pro-forma results have only been provided down to EBITA.
Adjusted EBITDA and EBITA
To provide further transparency and clarity to the ongoing, underlying financial performance of the Group, adjusted EBITDA and EBITA are used. Both measures exclude other income and expenses, which contains divestments, restructuring expenses, merger-related adjustments and other non-merger related other income and expenses, which are generally non-recurring.
Operating Cash Flow and Free Cash Flow
We present alternative measures for cash flow to reflect net cash inflow from operating activities before exceptional items. Free cash flow is considered relevant to reflect the cash performance of business operations after meeting usual obligations of financing and tax. It is therefore a measure that is before all other remaining cash flows, being those related to exceptional items, acquisitions and disposals, other equity-related and debt-related funding movements, and foreign exchange impacts on financing and investing activities.
Net Debt
We present an alternative measure to bring together the various funding sources that are included on the Group's Condensed Consolidated Balance Sheet and the accompanying notes. Net debt is a measure to reflect the net indebtedness of the Group and includes all cash, cash equivalents and marketable securities; and any debt or debt-like items, including any derivatives entered into in order to manage risk exposures on these items.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors of the Company, which are listed in the Governance section of the 2017 Annual Report, hereby declare that, to the best of their knowledge:
-- This condensed set of interim financial statements for the six-month period ended 30 June 2018, which have been prepared in accordance with IAS 34 "Interim Financial Reporting", as issued by the International Accounting Standard Board and adopted by the European Union gives a true and fair view ("getrouw beeld") of the assets, liabilities, financial position and profit or loss of RHI Magnesita and the joint enterprises included in the consolidation; and
-- the interim management report gives a fair review of the information required pursuant to regulations 4.2.7 and 4.2.8 of the Disclosure and Transparency Rules (DTR) issued by the UK Financial Conduct Authority and section 5:25d paragraphs 8 and 9 of the Dutch Act on Financial Supervision.
Consolidated Statement of Financial Position
as of 30.06.2018
in EUR million 30.06.2018 31.12.2017(1)
--------------------------------------------- ---------- -------------
ASSETS
Non-current assets
Property, plant and equipment 925.4 987.9
Goodwill 121.8 125.1
Other intangible assets 464.7 507.0
Investments in joint ventures and associates 16.2 21.4
Other non-current financial assets 24.8 25.1
Other non-current assets 19.1 24.2
Deferred tax assets 156.1 179.1
--------------------------------------------- ---------- -------------
1,728.1 1,869.8
Current assets
Inventories 742.4 654.5
Trade and other current receivables 520.7 522.6
Income tax receivables 15.1 13.5
Other current financial assets 13.7 34.1
Cash and cash equivalents 396.6 442.4
--------------------------------------------- ---------- -------------
1,688.5 1,667.1
--------------------------------------------- ---------- -------------
3,416.6 3,536.9
--------------------------------------------- ---------- -------------
EQUITY AND LIABILITIES
Equity
Share capital 44.8 44.8
Group reserves 594.5 572.2
---------- -------------
Equity attributable to the shareholders 639.3 617.0
Non-controlling interests 207.0 220.0
--------------------------------------------- ---------- -------------
846.3 837.0
Non-current liabilities
Non-current financial liabilities 902.2 983.8
Other non-current financial liabilities 49.5 55.5
Deferred tax liabilities 68.4 97.5
Provisions for pensions 296.0 308.7
Other personnel provisions 81.7 82.5
Other non-current provisions 106.5 115.7
Other non-current liabilities 8.3 9.0
--------------------------------------------- ---------- -------------
1,512.6 1,652.7
Current liabilities
Current financial liabilities 248.8 241.8
Other current financial liabilities 22.4 17.4
Trade payables and other current liabilities 710.6 678.2
Income tax liabilities 19.6 16.1
Current provisions 56.3 93.7
--------------------------------------------- ---------- -------------
1,057.7 1,047.2
--------------------------------------------- ---------- -------------
3,416.6 3,536.9
--------------------------------------------- ---------- -------------
1) adjusted to reflect the effects of the updated preliminary purchase price allocation of Magnesita
Consolidated Statement of Profit or Loss
from 01.01.2018 to 30.06.2018
in EUR million for the six months ended 30 June 2018 2017(1)
---------------------------------------------------- --------- -------
Revenue 1,507.6 855.9
Cost of sales (1,126.9) (669.1)
---------------------------------------------------- --------- -------
Gross profit 380.7 186.8
Selling and marketing expenses (75.7) (42.4)
General and administrative expenses (104.8) (64.2)
Other income 23.2 1.6
Other expenses (12.7) (22.9)
---------------------------------------------------- --------- -------
EBIT 210.7 58.9
Interest income 2.5 1.1
Interest expenses on borrowings (27.4) (6.4)
Net expense on foreign exchange effects and related
derivatives (72.2) (9.2)
Other net financial expenses (21.8) (4.9)
--------- -------
Net finance costs (118.9) (19.4)
Share of profit of joint ventures and associates 5.3 6.4
---------------------------------------------------- --------- -------
Profit before income tax 97.1 45.9
Income tax (26.3) (20.2)
---------------------------------------------------- --------- -------
Profit after income tax 70.8 25.7
---------------------------------------------------- --------- -------
attributable to the shareholders 71.6 24.5
attributable to non-controlling interests (0.8) 1.2
in EUR
Earnings per share (basic and diluted) 1.60 0.62
1) adjusted to reflect the changes in presentation
Consolidated Statement of Comprehensive Income
from 01.01.2018 to 30.06.2018
in EUR million for the six months ended 30 June 2018 2017
-------------------------------------------------- ------ ------
Profit after income tax 70.8 25.7
-------------------------------------------------- ------ ------
Currency translation differences
Unrealised results from currency translation (27.3) (17.0)
Deferred taxes thereon 0.0 1.7
Current taxes thereon 0.0 (0.7)
Cash flow hedges
Unrealised results from fair value change 0.4 0.4
Deferred taxes thereon 0.0 (0.1)
Reclassification reserves to profit or loss 0.0 0.3
Deferred taxes thereon 0.0 (0.1)
Items that will be reclassified subsequently to
profit or loss, if necessary (26.9) (15.5)
Remeasurement of defined benefit plans
Remeasurement of defined benefit plans 5.1 (2.6)
Deferred taxes thereon (1.3) 0.7
Items that will not be reclassified to profit or
loss 3.8 (1.9)
Other comprehensive income after income tax (23.1) (17.4)
-------------------------------------------------- ------ ------
Total comprehensive income 47.7 8.3
-------------------------------------------------- ------ ------
attributable to the shareholders 60.1 7.7
attributable to non-controlling interests (12.4) 0.6
Consolidated Statement of Cash Flows
from 01.01.2018 to 30.06.2018
in EUR million for the six months ended 30 June 2018 2017
---------------------------------------------------------- ------- ------
Profit after income tax 70.8 25.7
Adjustments for
income tax 26.3 20.2
depreciation charges 52.7 27.2
amortisation charges 17.8 5.1
impairment losses of property, plant and equipment
and intangible assets 0.0 7.7
income from the reversal of investment subsidies (0.3) (0.4)
(reversals of impairment losses)/impairment losses
on securities 0.1 (0.1)
losses/(gains) from the disposal of property, plant
and equipment 1.5 (0.1)
interest result 41.3 7.6
share of profit of joint ventures and associates (5.3) (6.4)
other non-cash changes 50.7 7.0
Changes in
inventories (82.2) (35.5)
trade receivables (28.1) (0.3)
other receivables and assets (6.2) 0.7
provisions (40.3) (12.4)
trade payables 10.4 4.1
prepayments received on orders 14.6 2.7
other liabilities (11.1) 4.4
---------------------------------------------------------- ------- ------
Cash flow from operating activities 112.7 57.2
Income tax paid less refunds (35.1) (17.4)
---------------------------------------------------------- ------- ------
Net cash flow from operating activities 77.6 39.8
---------------------------------------------------------- ------- ------
Investments in property, plant and equipment and
intangible assets (34.8) (17.2)
Cash inflows from the sale of property, plant and
equipment 1.7 1.1
Investments in/ cash inflows from non-current receivables 0.3 0.0
Investments in securities (6.8) 0.0
Cash inflows from the sale of securities and shares 25.2 0.0
Dividends received from joint ventures and associates 10.5 10.2
Interest received 2.0 1.1
---------------------------------------------------------- ------- ------
Net cash flow from investing activities (1.9) (4.8)
---------------------------------------------------------- ------- ------
Capital expenses for the issue of shares (6.2) (0.9)
Payments to non-controlling interests 0.0 (0.6)
Dividend payments to shareholders of the Group 0.0 (29.9)
Proceeds from non-current borrowings and loans 318.1 0.0
Repayments of non-current borrowings and loans (457.2) (18.0)
Proceeds from current borrowings and loans 150.8 0.0
Repayments of current borrowings and loans (63.0) 0.0
Changes in current borrowings (3.3) (4.2)
Interest payments (37.0) (5.5)
Cash flows from derivatives (14.9) 0.0
---------------------------------------------------------- ------- ------
Net cash flow from financing activities (112.7) (59.1)
---------------------------------------------------------- ------- ------
Total cash flow (37.0) (24.1) ---------------------------------------------------------- ------- ------ Change in cash and cash equivalents (37.0) (24.1) ---------------------------------------------------------- ------- ------ Cash and cash equivalents at beginning of year 442.4 182.9 Changes due to currency translation (8.8) (4.9) Cash and cash equivalents at year-end 396.6 153.9 ---------------------------------------------------------- ------- ------ Total interest paid 36.7 5.5 Total interest received 2.0 1.1 ---------------------------------------------------------- ------- ------ Consolidated Statement of Changes in Equity
from 01.01.2018 to 30.06.2018
Additional
Share paid-in Mandatory Retained
in EUR million capital capital reserves earnings
------------------------------------------- -------- ---------- --------- ---------
31.12.2017(1) 44.8 165.7 288.7 280.5
------------------------------------------- -------- ---------- --------- ---------
Effects of initial application of IFRS
15 (net of tax) - - - (6.0)
Effects of initial application of IFRS
9 (net of tax) - - - 1.8
------------------------------------------- -------- ---------- --------- ---------
01.01.2018 44.8 165.7 288.7 276.3
------------------------------------------- -------- ---------- --------- ---------
Profit after income tax - - - 71.6
Currency translation differences - - - -
Market valuation of cash flow hedges - - - -
Remeasurement of defined benefit plans - - - -
-------- ---------- --------- ---------
Other comprehensive income after income
tax - - - -
------------------------------------------- -------- ---------- --------- ---------
Total comprehensive income - - - 71.6
------------------------------------------- -------- ---------- --------- ---------
Dividends - - - (33.6)
------------------------------------------- -------- ---------- --------- ---------
Transactions with shareholders - - - (33.6)
------------------------------------------- -------- ---------- --------- ---------
30.06.2018 44.8 165.7 288.7 314.3
------------------------------------------- -------- ---------- --------- ---------
1) adjusted to reflect the effects of the updated preliminary purchase price allocation of Magnesita
Additional
Share paid-in Mandatory Retained
in EUR million capital capital reserves earnings
----------------------------------------------- -------- ---------- --------- ---------
31.12.2016 289.4 38.3 0.0 331.0
----------------------------------------------- -------- ---------- --------- ---------
Profit after income tax - - - 24.5
Currency translation differences - - - -
Cash flow hedges - - - -
Remeasurement of defined benefit plans - - - -
Reclassification disposal group classified
as held for sale - - - -
-------- ---------- --------- ---------
Other comprehensive income after income
tax - - - -
----------------------------------------------- -------- ---------- --------- ---------
Total comprehensive income - - - 24.5
----------------------------------------------- -------- ---------- --------- ---------
Dividends - - - (29.9)
Transactions with shareholders - - - (29.9)
----------------------------------------------- -------- ---------- --------- ---------
30.06.2017 289.4 38.3 0.0 325.6
----------------------------------------------- -------- ---------- --------- ---------
Group reserves
----------------------------------------------------
Accumulated other comprehensive
income
---------------------------------------------------- -------
Disposal
Defined group classified
Cash flow benefit Currency as held Equity attributable Non-controlling Total
hedges plans translation for sale to the shareholders interests equity
--------- -------- ------------ ----------------- -------
0.1 (107.7) (55.1) 0.0 617.0 220.0 837.0
--------- -------- ------------ ----------------- -------------------- --------------- -------
- - - - (6.0) (0.6) (6.6)
- - - - 1.8 - 1.8
--------- -------- ------------ ----------------- -------------------- --------------- -------
0.1 (107.7) (55.1) - 612.8 219.4 832.2
--------- -------- ------------ ----------------- -------------------- --------------- -------
- - - - 71.6 (0.8) 70.8
- - (13.6) - (13.6) (13.7) (27.3)
0.2 - - - 0.2 0.2 0.4
- 1.9 - - 1.9 1.9 3.8
--------- -------- ------------ ----------------- -------------------- --------------- -------
0.2 1.9 (13.6) - (11.5) (11.6) (23.1)
--------- -------- ------------ ----------------- -------------------- --------------- -------
0.2 1.9 (13.6) - 60.1 (12.4) 47.7
--------- -------- ------------ ----------------- -------------------- --------------- -------
- - - - (33.6) - (33.6)
--------- -------- ------------ ----------------- -------------------- --------------- -------
- - - - (33.6) - (33.6)
--------- -------- ------------ ----------------- -------------------- --------------- -------
0.3 (105.8) (68.7) 0.0 639.3 207.0 846.3
--------- -------- ------------ ----------------- -------------------- --------------- -------
Group reserves
----------------------------------------------------
Accumulated other comprehensive
income
---------------------------------------------------- -------------------- --------------- -------
Disposal
Defined group classified
Cash flow benefit Currency as held for Equity attributable Non-controlling Total
hedges plans translation sale to the shareholders interests equity
--------- -------- ------------ ----------------- -------------------- --------------- -------
(0.7) (100.3) (49.0) 0.0 508.7 15.3 524.0
--------- -------- ------------ ----------------- -------------------- --------------- -------
- - - - 24.5 1.2 25.7
- - (15.4) - (15.4) (0.6) (16.0)
0.5 - - - 0.5 - 0.5
- (1.9) - - (1.9) - (1.9)
- 1.0 1.7 (2.7) 0.0 - 0.0
--------- -------- ------------ ----------------- -------------------- --------------- -------
0.5 (0.9) (13.7) (2.7) (16.8) (0.6) (17.4)
--------- -------- ------------ ----------------- -------------------- --------------- -------
0.5 (0.9) (13.7) (2.7) 7.7 0.6 8.3
--------- -------- ------------ ----------------- -------------------- --------------- -------
- - - - (29.9) - (29.9)
- - - - (29.9) - (29.9)
--------- -------- ------------ ----------------- -------------------- --------------- -------
(0.2) (101.2) (62.7) (2.7) 486.5 15.9 502.4
--------- -------- ------------ ----------------- -------------------- --------------- -------
Selected explanatory Notes
(1) Principles and methods
The Interim Consolidated Financial Statements as of 30.06.2018 were prepared in accordance with the requirements of IAS 34 "Interim Financial Reporting" and with the International Financial Reporting Standards (IFRS) as endorsed by the European Union (EU).
The Interim Consolidated Financial Statements do not include all information and disclosures required in the Annual Financial Statements and should therefore be read in conjunction with the RHI Magnesita Consolidated Financial Statements as of 31.12.2017. All amounts in the explanatory notes and tables are shown in EUR million, unless indicated otherwise. For computational reasons, rounding differences may occur.
Audit and review by an auditor
The Interim Consolidated Financial Statements as of 30 June 2018 were neither audited nor reviewed by an auditor.
(2) Initial application of new financial reporting standards
With the exception of the changes described below, the same accounting and measurement principles were used as in the previous year:
Effects on RHI Magnesita
Publication Consolidated Financial
Standard Title (EU endorsement)(1) Statements
-------- ------------------------------------ -------------------- ------------------------
New standards and interpretations
---------------------------------------------- -------------------- ------------------------
IFRS 9 Financial Instruments 24.07.2014 No material effects
(22.11.2016)
-------- ------------------------------------ -------------------- ------------------------
IFRS 15 Revenue from Contracts with Timing differences
Customers 28.05.2014/ in revenue recognition
11.09.2015
(22.09.2016)
-------- ------------------------------------ -------------------- ------------------------
IFRS 15 Clarifications to IFRS 15 Timing differences
Revenue from Contracts with in revenue recognition
Customers 12.04.2016
(31.10.2017)
-------- ------------------------------------ -------------------- ------------------------
IFRIC Foreign Currency Transactions No effect
22 and Advance Consideration 08.12.2016
(28.03.2018)
-------- ------------------------------------ -------------------- ------------------------
Various Annual improvements to IFRS No effect
Standards 08.12.2016
2014-2016 Cycle (07.02.2018)
-------- ------------------------------------ -------------------- ------------------------
Amendments of standards
---------------------------------------------- -------------------- ------------------------
IAS 40 Transfers of Investment Property 08.12.2016 No effect
(14.03.2018)
-------- ------------------------------------ -------------------- ------------------------
IFRS 2 Classification and Measurement No effect
of Share-based Payment Transactions 20.06.2016
(26.02.2018)
-------- ------------------------------------ -------------------- ------------------------
IFRS 4 Applying IFRS 9 Financial Not relevant
Instruments with IFRS 4 Insurance
Contracts 12.09.2016
(03.11.2017)
-------- ------------------------------------ -------------------- ------------------------
1) according to EU Endorsement Status Report of 06.07.2018
IFRS 9 "Financial Instruments"
IFRS 9 was published in July 2014 and endorsed by the European Union on 22 November 2016. It is to be applied per 1 January 2018. IFRS 9 includes revised guidance on classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets and new general hedge accounting requirements. The standard replaces existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. RHI Magnesita implemented IFRS 9 per 1 January 2018 using the modified retrospective approach, meaning that the 2017 comparative numbers in the 2018 Interim Consolidated Financial Statements are not restated. The impact of IFRS 9 as of 1 January 2018 amounting to EUR1.8 million was recognised in equity - additional information on that effect is disclosed in the table at the end of Note (2) summarising the effects of the initial application of IFRS 9 and IFRS 15. No reclassifications between different components of equity were required due to the initial application of IFRS 9.
With regard to the revised classification and measurement principles, IFRS 9 contains three classification categories: "measured at amortised cost", "fair value through other comprehensive income" and "fair value through profit or loss". The standard eliminates the existing IAS 39 categories: "loans and receivables", "held to maturity" and "available-for-sale". The resulting effect of the reclassification of the financial assets due to adoption of IFRS 9 was immaterial for RHI Magnesita Group.
Subsequent accounting differences may arise due to the new classification according to IFRS 9. Shares in investment funds that were previously classified as "available-for-sale", with respective changes in fair value accounted for through other comprehensive income, are now classified as "fair value through profit or loss" as the payments made in connection with the funds do not solely constitute payments of principal and interest. Changes in fair value are therefore recognised in profit or loss. In addition, equity instruments from the "at amortised cost" and "available-for-sale" categories were classified as "fair value through profit or loss". No material effect is expected for future periods, although minor volatility may arise due to this new classification.
For the category "measured at amortised cost", IFRS 9 replaces the previously applied incurred loss model under IAS 39 with the expected loss model. The expected loss model implies a 3-stage model for financial assets. Stage 1 is applied when the credit risk has not risen significantly and an investment grade rating exists. Consequently, a risk provision for credit losses expected from possible default events within the next twelve months has to be recognised. Stage 2 is applied when the credit risk of receivables has risen significantly, in which case a risk provision amounting to the expected credit losses that result from all default events over the remaining term of the instrument has to be recognised. Stage 3 is equivalent to default. Concerning receivables with a significant financing component, comprising trade receivables, lease receivables and contractual assets, IFRS 9 permits a simplified impairment approach. When opting for this simplified approach, the risk provision is to be recognised according to Stage 2. Therefore, the expected credit losses are recognised over the remaining term of the instrument. RHI Magnesita Group exercised this option. The initial application effect in equity resulting from the impairment of trade receivables after deduction of deferred taxes amounted to EUR1.8 million, which is shown in retained earnings.
The cash flow hedges recognised as at 31 December 2017 were carried forward starting 1 January 2018 in compliance with the transition provisions.
The following table provides information about the impact of the new IFRS 9 standard only. It states each class of financial assets and financial liabilities as well as the respective carrying amounts under the original category IAS 39 compared to the new IFRS 9 category.
Original Carrying Carrying
measurement Measurement amount as amount as
category category per IAS per IFRS
in EUR million IAS 39(1) IFRS 9(2) 39 31.12.2017(3) 9 01.01.2018
--------------------------------------- ------------ ----------- ----------------- -------------
Interests in subsidiaries not
consolidated FAAC FVPL 0.8 0.8
Available-for-sale investments FAAC FVPL 0.4 0.4
Available-for-sale securities AfS FVPL 12.6 12.6
Available-for-sale shares FAAC FVPL 2.4 2.4
Securities designated as fair
value through profit or loss FAFVTPL FVPL 2.3 2.3
Interest derivatives designated
as cash flow hedges - - 1.5 1.5
Non-current receivables from
disposal of subsidiaries LaR AC 2.6 2.6
Other non-current financial
receivables LaR AC 2.5 2.5
Trade and other current receivables(4) LaR AC 412.5 410.7
Other current financial receivables LaR AC 0.1 0.1
Financial assets held for trading
- securities FAHfT FVPL 32.3 32.3
Financial assets held for trading
- derivatives FAHfT FVPL 1.7 1.7
Cash and cash equivalents LaR AC 442.4 442.4
--------------------------------------- ------------ ----------- ----------------- -------------
Financial assets 914.1 912.3
--------------------------------------- ------------ ----------- ----------------- -------------
Liabilities to financial institutions FLAAC AC 953.0 953.0
Perpetual bonds FLAAC AC 215.3 215.3
Senior notes FLAAC AC 55.6 55.6
Other financial liabilities FLAAC AC 1.7 1.7
Financial liabilities held
for trading - derivatives FLHfT FVPL 40.9 40.9
Liabilities to fixed-term or
puttable non-controlling interests FLAAC AC 32.0 32.0
Contingent consideration for
acquired subsidiaries FLFVTPL FVPL 0.6 0.6
Trade payables and other current
liabilities(5) FLAAC AC 507.0 507.0
--------------------------------------- ------------ ----------- ----------------- -------------
Financial liabilities 1,806.1 1,806.1
--------------------------------------- ------------ ----------- ----------------- -------------
1) FAAC: Financial assets at cost
AfS: Available for sale financial instruments
LaR: Loans and receivables
FAHfT: Financial assets held for trading
FLAAC: Financial liabilities measured at amortised cost
FLHfT: Financial liabilities held for trading
FLFVTPL: Financial liabilities measured at fair value through profit or loss
2) FVPL: Financial assets/financial liabilities measured at fair value through profit or loss
AC: Financial assets/financial liabilities measured at amortised cost
3) adjusted to reflect the effects of the updated preliminary purchase price allocation of Magnesita
4) thereof non-financial receivables per 31.12.2017 and 01.01.2018: EUR110.1 million
5) thereof non-financial liabilities per 31.12.2017 and 01.01.2018: EUR171.2 million
In addition to this table, a change took place for receivables from long-term construction contracts previously accounted for using the percentage of completion method according to IAS 11. These receivables were reclassified from non-financial receivables to financial receivables and are now included in trade and other current receivables in accordance with IFRS 15.
IFRS 15 "Revenue from Contracts with Customers"
IFRS 15 replaces IAS 18 "Revenue" and IAS 11 "Construction Contracts" as well as the corresponding interpretations. RHI Magnesita Group applied the regulations of IFRS 15 by selecting the modified retrospective approach with effect as at 1 January 2018. The cumulative effect of initial application was therefore recognised as an adjustment to the opening balance of group reserves under retained earnings as of 1 January 2018 without restating the comparable period. Changes from the initial application of IFRS 15 arose in the following areas:
Revenue from the delivery of products is recognised at the point in time when control over the products is passed to the customer. Time of transfer of control over the products is determined based on the individual Incoterms rules agreed in the customer contract. The Incoterms rules describe mainly the responsibilities, costs and risks involved in delivery of goods from the seller to the buyer. For the Incoterms rules CPT (Carriage paid to), CIP (Carriage and Insurance paid to) as well as for CFR (Cost and Freight) and CIF (Cost, Insurance and Freight) it was determined, that the time of passing control deviates from the time of transfer of significant risks and rewards. As a result, revenue will be recognised at a later point in time than previously under IAS 18. Therefore, the effect from the initial application of IFRS 15 resulted in a reduction of trade and other current receivables in the amount of EUR28.4 million and in an increase of inventories in the amount of EUR19.9 million. The negative equity effect from the reversal of revenue from the delivery of products, after deduction of deferred taxes, amounted to EUR6.6 million as of 1 January 2018. Additionally, having applied IFRS 15, changes in presentation were necessary for RHI Magnesita Group. Expected penalty fees were previously recognised as provisions, whereas according to IFRS 15 they are considered as variable consideration and therefore shown as either a contract liability or refund liability. Consequently, a total amount of EUR4.3 million was reclassified from current provisions to trade payables and other current liabilities as of 1 January 2018 in the Consolidated Statement of Financial Position. Furthermore, due to the implementation of IFRS 15, receivables from long-term construction contracts in the amount of EUR11.7 million were reclassified to trade receivables within the same item of the Consolidated Statement of Financial Position trade and other current receivables as of 1 January 2018 because RHI Magnesita's right to consideration is unconditional.
The summary of the effects on the individual positions of the Statement of Financial Position from the initial application of IFRS 15 as of 1 January 2018 is shown in the table at the end of this Note.
The following tables show the effects of IFRS 15 for the Consolidated Statement of Financial Position as of
30 June 2018 and the Consolidated Statement of Profit or Loss for the first six months of 2018.
30.06.2018
without
30.06.2018 Adjustments application
in EUR million as reported IFRS 15 of IFRS 15
--------------------------------------------- ------------ ----------- ------------
Inventories 742.4 (17.8) 724.6
Trade and other current receivables 520.7 27.7 548.4
Current assets 1,688.5 9.9 1,698.4
ASSETS 3,416.6 9.9 3,426.5
Group reserves 594.5 7.6 602.1
Equity attributable to the shareholders 639.3 7.6 646.9
Equity 846.3 7.6 853.9
Trade payables and other current liabilities 710.6 (4.8) 705.8
Income tax liabilities 19.6 2.3 21.9
Current provisions 56.3 4.8 61.1
Current liabilities 1,057.7 2.3 1,060.0
EQUITY AND LIABILITIES 3,416.6 9.9 3,426.5
in EUR million for the six months Adjustments without application
ended 30 June 2018 as reported IFRS 15 of IFRS 15
------------------------------------- ----------- ----------- -------------------
Revenue 1,507.6 27.7 1,535.3
Cost of sales (1,126.9) (17.8) (1,144.7)
Gross profit 380.7 9.9 390.6
EBIT 210.7 9.9 220.6
Profit before income tax 97.1 9.9 107.0
Income tax (26.3) (2.3) (28.6)
Profit after income tax 70.8 7.6 78.4
attributable to the shareholders 71.6 7.3 78.9
attributable to non-controlling
interests (0.8) 0.3 (0.5)
Summary of the effects of the initial application of IFRS 9 and IFRS 15
Effects of Effects of
the initial the initial
application application
in EUR million 31.12.2017(1) of IFRS 9 of IFRS 15 01.01.2018
------------------------------------ ------------- ------------ ------------ ----------
Deferred tax assets 179.1 (0.6) 1.7 180.2
Non-current assets 1,869.8 (0.6) 1.7 1,870.9
Inventories 654.5 0.0 19.9 674.4
Trade and other current receivables 522.6 2.4 (28.4) 496.6
Current assets 1,667.1 2.4 (8.5) 1,661.0
ASSETS 3,536.9 1.8 (6.8) 3,531.9
Group reserves 572.2 1.8 (6.0) 568.0
Equity attributable to the
shareholders 617.0 1.8 (6.0) 612.8
Non-controlling interests 220.0 0.0 (0.6) 219.4
Equity 837.0 1.8 (6.6) 832.2
Deferred tax liabilities 97.5 0.0 (0.2) 97.3
Non-current liabilities 1,652.7 0.0 (0.2) 1,652.5
Trade payables and other current
liabilities 678.2 0.0 4.3 682.5
Current provisions 93.7 0.0 (4.3) 89.4
EQUITY AND LIABILITIES 3,536.9 1.8 (6.8) 3,531.9
1) adjusted to reflect the effects of the updated preliminary purchase price allocation of Magnesita
(3) Changes in comparative information
Statement of Financial Position
The Statement of Financial Position per 31 December 2017 was adjusted for the preliminary fair values of the acquired assets and liabilities of Magnesita. The details of the effects are shown in Note (5) Group of consolidated companies under Acquisition of Magnesita in 2017.
Statement of Profit or Loss
In order to improve comparability with other FTSE 350 companies and ensure better understanding of the entity's financial performance, certain items in the Statement of Profit or Loss were reclassified. As of 30 June 2017, the effect on revenue amounted to EUR0.1 million, on gross profit to EUR(11.8) million, on EBIT to EUR9.2 million and on net finance costs to EUR(9.2) million. Commissions in the amount of EUR(11.9) million as of 30 June 2017 were reclassified from selling and marketing expenses to cost of sales and the expenses for strategic and merger related projects (30.06.2017: EUR12.6 million) are now presented in other expenses, instead of general and administrative expenses. This reclassification should ensure better interpretation of these costs. Foreign exchange gains and losses as well as the effects from derivatives were reclassified from other income and expenses to a separate line item in net finance costs which is called "Net expense on foreign exchange effects and related derivatives". This reclassification was done because the majority of foreign exchange effects are incurred due to financing activities, and the effects from derivatives are related to foreign exchange effects.
Additionally, interest expenses on borrowings are now reported as a separate item due to its significance. Other net financial expenses include all remaining financial income and expenses. The information for the previous year was adjusted accordingly.
Consolidated Statement of Cash Flows
Cash flows from derivatives were reclassified from cash flow from operating activities to net cash flow from financing activities because they are related to foreign exchange effects of financing activities. For the first half of 2017 there was no effect from this matter.
Segment reporting
In 2018, RHI Magnesita reorganised its internal structure and reporting. The activities formerly concentrated in the Raw material segment are now split between the Steel and Industrial segment. Each segment serves different customers and generates exclusively external revenue. The gross profit serves the management of the RHI Magnesita Group for internal performance management. The profit of joint ventures and associates, net finance costs and income taxes are managed on a group basis and are not allocated. The information for the previous year was adjusted accordingly.
(4) New financial reporting standards not yet applied
The IASB issued further standards, amendments to standards and interpretations, whose application is, however, not yet mandatory for 30 June 2018. They were not applied early on a voluntary basis. RHI Magnesita's assessment of the impact of these new standards and interpretations is set out below. Other new or amended standards or interpretations are not expected to have a significant impact on the Consolidated Financial Statements.
IFRS 16 "Leases"
The accounting standard IFRS 16, which was issued in January 2016, supersedes IAS 17 "Leases" and the related interpretations and is applicable to financial years beginning on or after 1 January 2019. Accounting for the lessor according to IFRS 16 is comparable to the current regulations. In contrast, accounting will change fundamentally for the lessee with the application of IFRS 16. In future, most leases will have to be recognised as assets and liabilities in the Statement of Financial Position of the lessee, regardless of whether they are considered operating or financing leases under the previous criteria of IAS 17.
RHI Magnesita will apply the standard from 1 January 2019 onwards. From today's perspective, it is estimated that the application of this standard will have a moderate impact on RHI Magnesita's Consolidated Financial Statements in the form of increased total assets and total liabilities. The overall impact is currently analysed in a group-wide project for the implementation of IFRS 16.
According to IFRS 16, a lessee recognises a right of use, which represents his right to use the underlying asset, and a liability from the lease, which reflects the obligation of lease payments. Exemptions are provided for short-term leases and assets of minor value. Moreover, the type of expenses related to these leases will change since IFRS 16 replaces the straight-line expenses for operating leases with a depreciation charge for rights of use and interest expenses for liabilities from the lease. In the Consolidated Statement of Cash Flows, there will be a shift from cash flow from operating activities to cash flow from financing activities since the repayment of leasing liabilities must in any case be shown as cash flow from financing activities.
As a lessee, RHI Magnesita can apply IFRS 16 based on the retrospective method or the modified retrospective method with optional simplification rules; the option chosen has to be applied consistently to all leases of the Group. RHI Magnesita currently intends to initially apply IFRS 16 as of 1 January 2019 by using the modified retrospective approach.
(5) Group of consolidated companies
Compared with the reporting date 31.12.2017, the number of companies included in the group of consolidated companies changed as follows:
Full Equity
Number of consolidated companies consolidation method
--------------------------------- -------------- -------
Balance at 31.12.2017 114 4
Additions 2 0
Retirements and disposals 0 0
--------------------------------- -------------- -------
Balance at 30.06.2018 116 4
On 15 March 2018, the subsidiary RHI Ukraina LLC (100%), based in Kiev, Ukraine, was established and included in the Consolidated Financial Statements as of this date. The purpose of this company is the sale of refractory products and customer service in the Ukraine.
In addition, the subsidiary RHI Magnesita Trading B.V., Rotterdam, the Netherlands, was founded on 9 April 2018 and subsequently fully consolidated. The purpose of this company is the purchase and sale of refractory products.
Acquisition of Magnesita in 2017
On 26 October 2017 RHI Magnesita N.V. via its indirect, wholly-owned subsidiary Dutch Brasil Holding B.V. obtained control in Magnesita Refratários S.A. and its subsidiaries (Magnesita) after acquiring 50% plus one share and corresponding voting rights in Magnesita Refratários S.A..
The preliminary fair values of the acquired assets and liabilities at the acquisition date have been adjusted according to IFRS 3 compared to the previously published Financial Statements over the course of the measurement period. These are presented as follows:
Preliminary
fair value
as reported Updated preliminary
at fair value
31 December Adjustments of net assets
in EUR million 2017 made acquired
------------------------------------ ------------ ----------- -------------------
Property, plant and equipment 439.0 92.3 531.3
Other intangible assets 161.4 297.7 459.1
thereof customer relationships 122.0 96 218.0
thereof mining rights 0.0 190.2 190.2
Investments in joint ventures
and associates 9.9 (9.1) 0.8
Other non-current financial assets 4.3 0.0 4.3
Other non-current assets 16.3 0.0 16.3
Deferred tax assets 49.9 (6.9) 43.0
Inventories 244.7 1.0 245.7
Trade and other current receivables 175.6 (7.4) 168.2
Income tax receivables 9.2 0.0 9.2
Other current financial assets 42.7 0.0 42.7
Cash and cash equivalents 166.2 0.0 166.2
Assets held for sale 33.6 0.0 33.6
Non-current financial liabilities (550.8) 0.0 (550.8)
Deferred tax liabilities (0.3) (109.1) (109.4)
Provisions for pensions (81.0) 0.0 (81.0)
Other personnel provisions (1.5) 0.0 (1.5)
Other non-current provisions (51.7) (62.9) (114.6)
Other non-current liabilities (2.0) 0.0 (2.0)
Current financial liabilities (131.4) 0.0 (131.4)
Current derivative financial
liabilities (0.2) 0.0 (0.2)
Trade and other current liabilities (238.4) (6.8) (245.2)
Income tax liabilities (10.1) 0.0 (10.1)
Current provisions (25.8) (21.4) (47.2)
Liabilities relating to assets
held for sale (9.4) 0.0 (9.4)
------------------------------------ ------------ ----------- -------------------
Net assets 250.2 167.4 417.6
Non-controlling interest (125.1) (83.7) (208.8)
------------------------------------ ------------ ----------- -------------------
Proportional share of net assets
acquired 125.1 83.7 208.8
Goodwill 171.7 (83.7) 88.0
------------------------------------ ------------ ----------- -------------------
Purchase price 296.8 0.0 296.8
The fair values are still provisional as of 30 June 2018 as the valuations of some assets acquired and liabilities assumed have not been completely finalised. The reason for this is the complexity of the acquisition, particularly in valuing property, plant and equipment and intangible assets, further work will be required to complete the valuation. The finalisation of the valuation work required to determine the fair values of the assets and liabilities acquired will be completed within 12 months of the acquisition date, at the latest. The Group expects further fair value adjustments mainly to property, plant and equipment, intangible assets and deferred taxes, as the valuation of items is still on-going.
The remaining preliminary goodwill of EUR88.0 million essentially reflects expected synergies achieved by optimising production capacities and cost structure as well as new business of the enlarged Group. Goodwill is not deductible for tax purposes. No impairment to goodwill or other assets has been recognised since initial recognition.
The table below provides information on the carrying amount of goodwill:
in EUR million ------------------------------------------------------------ ------ Preliminary goodwill recognised per acquisition date as at 31 December 2017 171.7 Adjustments relating to update of business combination fair values (83.7) Exchange rate differences (3.8) ------------------------------------------------------------ ------ Preliminary goodwill recognised per acquisition date as at 30 June 2018 84.2
Non-controlling interests have been measured at their proportionate share of Magnesita's identifiable net assets.
Material adjustments to preliminary fair value estimates since 31 December 2017
Since the previous financial reporting date significant progress has been made in estimating the fair value of property, plant and equipment at a number of production sites in China, South America and Europe. The updated preliminary fair value of property, plant and equipment amounts to EUR531.3 million and was estimated by applying a replacement cost approach. This value is expected to increase over the remaining measurement period because a number of production sites have not yet been apprised, and have been recognised at book value per the acquisition date.
Intangible assets arising from non-patented technology and customer relationships have been recognised in the preliminary purchase price allocation as at 30 June 2018 to the amount of EUR11.5 million and EUR218.0 million respectively. Discounted cash flow models were applied to value these intangible assets. The reason for the adjustment to the fair value of customer relationships was that higher quality information was obtained over the course of the reporting period. The value of the customer relationship is expected to change as it depends on the valuation of contributory asset charges relating to property, plant and equipment. Since the valuation of these assets has not been completed as of 30 June 2018, the valuation of the intangible asset arising from customer relationships cannot yet be considered fully finalised. Any increases in the value of property, plant and equipment compared to the preliminary purchase price allocation will reduce the fair value of the customer relationships to a varying degree because of the associated higher contributory asset charges.
As part of the business combination, the Group has recognised intangible assets for mining rights arising from the mines in Brazil and the USA. The fair value of the mining rights is estimated to be EUR190.2 million. The intangible assets arising from mining rights were valued using discounted cash flow models, based on the life-of-mine plans as at the acquisition date. Expected cash flows are based on estimates of future production, margins, operating costs and forecast capital expenditure. This value is expected to change when the valuation exercise of property, plant and equipment is finalised. The value of PPE items that form part of the mines (but valued separately) shall be deducted from the value of the mining rights in order to avoid double counting.
The total amortisation of the acquired technology, mining rights and customer relationships amounts to EUR9.9 million.
A liability for an unfavourable contract was recognised as at the previous reporting date, the value of which has been adjusted as at 30 June 2018. The liability has an estimated fair value of EUR103.7 million. This value was calculated using a discounted cash flow model based on foregone profits compared to market conditions, the term of the contract, assumptions of future costs and an appropriate discount rate. The Group does not expect significant adjustments to this value, however, it may still not be considered finalised. The provision for an unfavourable contract has been amortised by EUR9.6 million in other income and EUR(5.1) million were accrued as interest expense in the current reporting period.
The Group is required - in accordance with the share purchase agreement (SPA) and Brazilian laws and regulations - to make a mandatory public offer in Brazil which must be addressed to all remaining Magnesita shareholders and must be made on the same terms and conditions as those made available to the Sellers under the SPA, including as to purchase price and form of consideration. The Group decided to combine the mandatory offer with a so-called "delisting tender offer" in an Integrated Tender Offer and has filed with the Brazilian Securities Commission the respective request.
According to the original and subsequent filings, shareholders of Magnesita will have the option of selling each Magnesita share in exchange of
(i) R$17.81, adjusted by SELIC (the Brazilian benchmark interest rate) from 26 October 2017 until the date of the settlement of the auction of the Integrated Tender Offer, plus 0.1998 RHI Magnesita shares or
(ii) a cash-only alternative consideration.
The consideration of the cash-only alternative offer will be the higher of:
(i) R$31.09, adjusted by SELIC from 26 October 2017 until the date of the settlement of the auction of the Integrated Tender Offer, and
(ii) R$35.56, not adjusted by SELIC.
Since the cash plus shares option was equivalent to R$66.58 on 31 July 2018, in light of the RHI Magnesita share price and the exchange rate prevailing on that date, the Group expects substantially all of Magnesita's minority shareholders to tender their shares and opt for the cash plus shares consideration. If 100% of Magnesita's minority shareholders tender their shares and opt for the cash plus shares consideration, the Group will disburse R$455.6 million, adjusted by SELIC from 26 October 2017 until the date of the settlement of the auction of the Integrated Tender Offer, and issue an additional 5,000,000 shares.
The Integrated Tender Offer is expected to be completed during 2018. The difference between the amount paid in the Integrated Tender Offer and the book value of non-controlling interest acquired will be recognised directly in equity.
(6) Foreign currency translation
The Euro exchange rates of currencies important for the RHI Magnesita Group are shown in the following table:
Closing rate Average(1)
Currencies 1EUR = 30.06.2018 31.12.2017 1-6/2018 1-6/2017
---------------------- ------- ---------- ---------- -------- --------
Argentine Peso ARS 32.68 22.93 25.10 16.91
Brazilian Real BRL 4.49 3.96 4.08 3.42
Canadian Dollar CAD 1.54 1.50 1.54 1.44
Chilean Peso CLP 756.01 735.00 737.60 710.87
Chinese Renminbi Yuan CNY 7.70 7.78 7.70 7.41
Indian Rupee INR 79.78 76.40 79.13 71.01
Mexican Peso MXN 22.92 23.56 22.95 21.13
Norwegian Krone NOK 9.48 9.85 9.66 9.13
Pound Sterling GBP 0.89 0.89 0.88 0.86
Swiss Franc CHF 1.16 1.17 1.17 1.07
South African Rand ZAR 15.94 14.75 14.68 14.34
US Dollar USD 1.16 1.20 1.21 1.08
1) arithmetic average of the monthly closing rates
(7) Trade and other current receivables
Trade and other current receivables as presented in the Consolidated Statement of Financial Position are classified as follows:
in EUR million 30.06.2018 31.12.2017(1) ----------------------------------------------- ---------- ------------- Trade receivables 401.5 406.6 Receivables from other taxes 76.8 77.0 Receivables from joint ventures and associates 10.3 12.0 Other current receivables 32.1 27.0 ----------------------------------------------- ---------- ------------- Trade and other current receivables 520.7 522.6
1) adjusted to reflect the effects of the updated preliminary purchase price allocation of Magnesita
(8) Financial liabilities
RHI Magnesita Group optimised its financial structure in the first quarter 2018 and refinanced the syndicated
financial agreement, which was concluded in July 2017, with a new EUR305.6 million 5 year term loan of the Austrian export credit agency (OeKB). Interest rate is floating and is based on the EURIBOR plus 0.75% margin. The refinancing extends the final maturity of the term loan by one year, from June 2022 to June 2023, in order to ensure higher liquidity, including the outflow in connection with the Integrated Tender Offer for the minority shares of Magnesita Refratários S.A.. This new term loan replaces the existing EUR477.2 million syndicated financial agreement for which only EUR266.2 million had been drawn down. Cash inflows from the new term loan in the amount of EUR305.6 million are shown in the Consolidated Statement of Cash Flows in proceeds from non-current borrowings and loans, whereas cash outflows from the redemption of the syndicated loan in the amount of EUR266.2 million are included in repayments of non-current borrowings and loans.
Furthermore, RHI Magnesita redeemed US$100 million of its US$250 million 8.625% perpetual bond early as well as the entire principal amount outstanding (US$63.3 million) of its US$400 million 7.875% Senior Notes due March 2020. Both transactions are included in repayments of non-current borrowings and loans in the Consolidated Statement of Cash Flows.
(9) Provisions for pensions
For interim reports, provisions for pensions are determined on the basis of a forecast for the entire year prepared by an actuary. If there are significant changes in the actuarial assumptions in the course of the year, a remeasurement of the net liabilities from employee-related defined benefit obligations is recognised.
As of 30.06.2018, the increase in the actuarial interest rate in Brazil and in the USA compared with 31.12.2017 led to a decrease in pension obligations of EUR5.1 million and to an increase in equity of EUR3.8 million (after deferred
taxes, including non-controlling interests). The actuarial assumptions of the euro area did not change significantly. As of 30.06.2017, pension obligations increased by EUR2.0 million in the first half of 2017 due to changes in actuarial assumptions. Taking into account income taxes, the Group's equity was reduced by EUR1.4 million.
(10) Trade payables and other current liabilities
Trade payables and other current liabilities included in the Consolidated Statement of Financial Position consist of the following:
in EUR million 30.06.2018 31.12.2017(1) --------------------------------------------- ---------- ------------- Trade payables 463.2 467.7 Prepayments received on orders 38.7 24.1 Liabilities to employees 93.0 99.2 Taxes other than income tax 32.9 23.2 Other current liabilities 82.8 64.0 --------------------------------------------- ---------- ------------- Trade payables and other current liabilities 710.6 678.2
1) adjusted to reflect the effects of the updated preliminary purchase price allocation of Magnesita
(11) Current provisions
Provisions for restructuring costs amount to EUR18.0 million as of 30 June 2018 (31.12.2017: EUR37.6 million) and primarily consist of benefit obligations to employees due to termination of employment. In the current reporting period, the Group utilised EUR18.3 million, recognised EUR3.1 million and reversed EUR3.0 million.
(12) Foreign exchange effects and related derivatives
Net expense on foreign exchange effects and related derivatives consist of the following items:
in EUR million for the six months ended 30 June 2018 2017 ----------------------------------------------------- ------- ------ Foreign exchange gains 81.0 26.6 Gains from related derivative financial instruments 0.5 8.8 Foreign exchange losses (123.6) (42.3) Losses from related derivative financial instruments (30.1) (2.3) ----------------------------------------------------- ------- ------ Net expense on foreign exchange effects and related derivatives (72.2) (9.2)
The net expense on foreign exchange effects and related derivatives results mainly from the devaluation of the Euro and Brazilian Real against the US Dollar, affecting both intercompany and third-party loans, accounts payable and accounts receivable.
(13) Income tax
The tax rate of the first half of 2018 amounts to 27.1% (1-6/2017: 44.0%).
(14) Segment reporting
The key figures of the operating segments for the first half of 2018 and the first half of 2017 are shown in the
tables below:
in EUR million for the six months
ended 30 June 2018 Steel Industrial Group
-------------------------------------- ------- ---------- -------
Revenue 1,094.1 413.5 1,507.6
Gross profit 277.6 103.1 380.7
EBIT 210.7
Net finance costs (118.9)
Share of profit of joint ventures
and associates 5.3
-------------------------------------- ------- ---------- -------
Profit before income tax 97.1
Depreciation and amortisation charges (52.5) (18.0) (70.5)
Segment assets 30.06.2018 1,835.6 735.4 2,571.0
Investments in joint ventures and
associates 30.06.2018 0.0 0.0 16.2
Reconciliation to total assets 0.0 0.0 829.4
3,416.6
Investments in property, plant
and equipment and intangible assets 26.5 8.3 34.8
in EUR million for the six months
ended 30 June 2017 Steel Industrial Group
----------------------------------------- ------- ---------- -------
Segment revenue 558.2 297.7 855.9
Gross profit 120.8 66.0 186.8
EBIT 58.9
Net finance costs (19.4)
Share of profit of joint ventures 6.4
----------------------------------------- ------- ---------- -------
Profit before income tax 45.9
Depreciation and amortisation charges (47.1) (25.6) (72.7)
Segment assets 31.12.2017 1,843.6 751.6 2,595.2
Investments in joint ventures 31.12.2017 0.0 0.0 21.4
Reconciliation to total assets 0.0 0.0 920.3
3,536.9
Investments in property, plant
and equipment and intangible assets 53.6 16.8 70.4
When allocating revenue to product groups, a distinction is made between shaped products (e.g. hydraulically pressed bricks, fused cast bricks, isostatically pressed products), unshaped products (e.g. repair mixes, construction mixes and castables), services as well as other revenue. Other mainly includes revenue from the sale of non-group refractory products.
In the reporting year, revenue is classified by product group as follows:
in EUR million for the six months ended 30 June 2018 Steel Industrial Group ---------------------------------------- ------- ---------- ------- Shaped products 728.7 275.5 1,004.2 Unshaped products 251.3 97.6 348.9 Services 67.2 24.9 92.1 Other 46.9 15.5 62.4 ---------------------------------------- ------- ---------- ------- Revenue 1,094.1 413.5 1,507.6
Segment reporting by country
Revenue is classified by customer sites as follows:
in EUR million for the six months ended 30 June 2018 Steel Industrial Group -------------------------------------------- ------- ---------- ------- Netherlands 7.8 3.1 10.9 All other countries USA 169.7 33.7 203.4 Brazil 143.4 32.2 175.6 India 100.8 19.9 120.7 Germany 58.5 31.5 90.0 Mexico 66.3 16.9 83.2 PR China 22.0 50.6 72.6 Italy 57.9 14.1 72.0 Canada 22.9 21.9 44.8 Russia 32.3 3.9 36.2 Other countries, each below EUR37.0 million 412.5 185.7 598.2 -------------------------------------------- ------- ---------- ------- Revenue 1,094.1 413.5 1,507.6
(15) Disclosures on financial instruments
The following tables show the carrying amounts and fair values of the financial assets and liabilities by level and measurement category, and the allocation to the measurement levels in accordance with IFRS 13 and IFRS 9. In addition, the carrying amounts are shown aggregated according to measurement category.
30.06.2018 01.01.2018
-----------
Measurement
category Carrying Fair Carrying
in EUR million IFRS 9(1) Level amount value amount Fair value
------------------------------------------ ----------- ----- -------- ------- -------- ----------
Other non-current financial
assets
Interests in subsidiaries not
consolidated FVPL 3 0.7 0.7 0.8 0.8
Investments FVPL 3 0.4 0.4 0.4 0.4
Securities FVPL 1 15.0 15.0 14.9 14.9
Shares FVPL 1 1.7 1.7 1.9 1.9
Shares FVPL 3 0.5 0.5 0.5 0.5
Interest derivatives designated
as cash flow hedges - 2 1.9 1.9 1.5 1.9
Non-current receivables from
disposal of subsidiaries AC - 2.6 - 2.6 -
Other non-current financial
receivables AC - 2.0 - 2.5 -
Trade and other current receivables(2) AC - 416.9 - 422.4 -
Other current financial assets
Securities FVPL 1 12.7 12.7 32.3 32.3
Derivatives FVPL 2 0.8 0.8 1.7 1.7
Other current financial receivables AC - 0.2 - 0.1 -
Cash and cash equivalents AC - 396.6 - 442.4 -
------------------------------------------ ----------- ----- -------- ------- -------- ----------
Financial assets 852.0 924.0
------------------------------------------ ----------- ----- -------- ------- -------- ----------
Non-current and current financial
liabilities
Liabilities to financial institutions AC 2 1,014.5 1,026.4 953.0 966.1
Perpetual bonds AC 1 133.3 133.4 215.3 217.0
Senior notes AC 2 0.0 0.0 55.6 55.6
Other financial liabilities AC 2 3.2 3.2 1.7 1.7
Non-current and current other financial
liabilities
Derivatives FVPL 2 37.7 37.7 40.9 40.9
Liabilities to fixed-term or
puttable non-controlling interests AC 2 34.2 34.2 32.0 32.0
Other non-current liabilities
Contingent consideration for
acquired subsidiaries FVPL 3 0.6 0.6 0.6 0.6
Trade payables and other current
liabilities(3) AC - 515.8 - 507.0 -
------------------------------------------ ----------- ----- -------- ------- -------- ----------
Financial liabilities 1,739.3 1,806.1
------------------------------------------ ----------- ----- -------- ------- -------- ----------
Aggregated according to measurement
category
Financial assets measured at
FVPL 31.8 52.5
Financial assets measured at
amortised cost 818.3 870.0
Financial liabilities measured
at amortised cost 1,701.0 1,764.6
Financial liabilities measured
at FVPL 38.3 41.5
1) FVPL: Financial assets/financial liabilities measured at fair value through profit or loss
AC: Financial assets/financial liabilities measured at amortised cost
2) thereof non-financial receivables: EUR103.8 million (01.01.2018: EUR98.4 million)
3) thereof non-financial liabilities: EUR194.8 million (01.01.2018: EUR175.5 million)
Fair value is defined as the amount for which an asset could be exchanged, or a liability settled, between market participants in an arm's length transaction at the measurement date. When the fair value is determined it is
assumed that the transaction in which the asset is sold or the liability is transferred takes place either in the main market for the asset or liability, or in the most favourable market if there is no main market. RHI Magnesita considers the characteristics of the asset or liability to be measured which a market participant would consider in pricing. It is assumed that market participants act in their best economic interest.
RHI Magnesita takes into account the availability of observable market prices in an active market and uses the following hierarchy to determine fair value:
Level 1: Prices quoted in active markets for identical financial instruments. Level Measurement techniques in which all important data used are 2: based on observable market data. Level Measurement techniques in which all important data used are 3: not based on observable market data.
The fair value of securities is based on price quotations at the reporting date (Level 1).
The fair value of interest derivatives in a hedging relationship (interest rate swaps) is determined by calculating the present value of future cash flows based on current yield curves taking into account the corresponding terms (Level 2).
The fair value of derivatives corresponds to the market value of the forward exchange contracts and derivatives in open orders denominated in a currency other than the functional currency and the market value of a long-term power supply contract. These securities and derivatives are measured based on quoted forward rates (Level 2).
Financial liabilities are carried at amortised cost in the Statement of Financial Position. The fair values of the
financial liabilities are only shown in the Notes. They are calculated as the present value of the discounted future cash flows using yield curves that are currently observable (Level 2).
Investments of EUR0.4 million (31.12.2017: EUR0.4 million) and shares of EUR0.5 million (31.12.2017: EUR0.5 million) are equity instruments for which there are no quoted prices on an active market. It was not possible to derive a fair value based on comparable transactions. These investments and shares are immaterial in comparison with the total position of the Group.
The financial receivables approximately correspond to the fair value as no material deviation between the fair value and the carrying amount is assumed due to the amount of the receivables, and the credit default risk being accounted for by forming valuation allowances.
The remaining terms of trade and other current receivables and liabilities as well as cash and cash equivalents are predominantly short. Therefore, the carrying amounts approximate fair value at the reporting date.
At the two reporting dates, no contractual netting agreements of financial assets and liabilities were in place.
RHI Magnesita takes into account reclassifications in the measurement hierarchy at the end of the reporting period in which the changes occur. There were no shifts between the different measurement levels in the two reporting periods.
For information about the reconciliation of the opening and closing balances of the financial instruments classified under Level 3 refer to the Consolidated Financial Statements as of 31 December 2017 as no material changes were reported.
(16) Dividends
The Annual General Meeting on 7 June 2018 approved the pay-out of a dividend of EUR0.75 per share for the year 2017. Therefore, a dividend totalling EUR33.6 million was paid out to the shareholders of RHI Magnesita N.V. at the beginning of July 2018.
(17) Contingent liabilities
As of 30 June 2018 contingent liabilities amount to EUR51.2 million (31.12.2017: EUR40.3 million). Of this total, warranties, performance guarantees and other guarantees account for EUR50.9 million (31.12.2017: EUR39.8 million) and sureties for EUR0.3 million (31.12.2017: EUR0.5 million).
RHI Magnesita is party to tax proceedings in Brazil with the estimated amount of EUR157.8 million as of 30.06.2018 (31.12.2017: EUR178.3 million), for which no provision was set up according to IFRS, as management classified risks of loss (based on the evaluation of legal advisors) as possible but not probable. These tax proceedings are described in the Notes to the Consolidated Financial Statements of 31 December 2017.
(18) Other financial obligations
As of 30 June 2018, the RHI Magnesita Group has commitments for the purchase of property, plant and equipment in the amount of EUR23.3 million.
(19) Disclosures on related companies and persons
RHI Magnesita and a close relative of a non-executive director concluded a non-remunerated consultancy agreement to advise the Group on the economic and political framework in countries in which it does not yet have strong business links.
With the exception of the dividend payment received from MAGNIFIN Magnesiaprodukte GmbH & Co KG, St. Jakob, Austria, which amounted to EUR10.4 million (1-6/2017: EUR10.2 million), no other material transactions took place between the RHI Magnesita Group and related companies and persons in the first half of 2018.
(20) Seasonal and cyclical influence
Explanations regarding seasonal and cyclical influences on the operating activities of the RHI Magnesita Group can be found in the report of the divisions in the management report.
(21) Employees
In the first half of 2018 the average number of employees of the RHI Magnesita Group weighted by level of employment amounted to 14,098 (1-6/2017: 7,384).
(22) Events after the reporting date 30.06.2018
In line with the Group's plan to reposition its capital structure to reflect its improved financial position, on 3 August 2018 the Group successfully raised a new unsecured US$600 million 5-year term loan and revolving credit facility with a syndicate of 10 international banks. The proceeds of the new facility will be used to redeem the entire amount of the outstanding Magnesita Perpetual Bonds and prepay other short-term facilities, which will generate significant interest expense savings. The new Term Loan allows the Group flexibility and strength to pursue its long-term strategy.
On 1 August 2018, RHI Magnesita announced the merger of its three Indian subsidiaries. RHI Clasil Private Limited and RHI India Private Limited will be merged with Orient Refractories Limited, a listed company on the Mumbai stock exchange. On completion, RHI Magnesita will own approximately 70% in Orient Refractories which will be renamed to RHI Magnesita India. The transaction is expected to be completed within the next 12 months. The key objective of the merger is to combine the strengths and competences of all three companies to establish one consolidated listed company that is well positioned to seize future growth opportunities and enhance shareholder value.
After the reporting date on 30 June 2018, there were no other events of special significance which may have a material effect on the financial position and performance of the RHI Magnesita Group.
Vienna, 14 August 2018
Executive Directors
Stefan Borgas Octavio Lopes
CEO CFO
Non-independent Non-Executive Directors
Herbert Cordt, Chairman David Schlaff
Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg Fersen Lambranho
Independent Non-Executive Directors
Celia Baxter John Ramsay Andrew Hosty Wolfgang Ruttenstorfer Jim Leng Karl Sevelda
Employee Representatives
Franz Reiter Michael Schwarz
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR LLFLATIIELIT
(END) Dow Jones Newswires
August 16, 2018 02:00 ET (06:00 GMT)
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