RHI Magnesita

Results of the first quarter 2017

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quarterly report

* Increase in sales volume and revenue driven by improved business conditions
* Positive start to the year due to higher deliveries and improved capacity
* Merger control clearance for the planned combination with Magnesita filed for
  in Europe and Brazil

In the first quarter of 2017, the RHI Group's sales volume increased by 4.8%
compared with the same period of 2016 to roughly 483,000 tons. While the Steel
Division recorded an increase by 5.3% due to higher deliveries in Europe, North
America, Africa and the Middle East, the Industrial Division's sales volume rose
by 10.4% due to a positive development in nearly all business units.
The RHI Group's revenue in the first quarter of 2017, at EUR 418.8 million,
exceeded the revenue of the comparative period of 2016, at EUR 389.7 million,
and was slightly lower than in the fourth quarter of 2016, at EUR 423.9 million.
Operating EBIT amounted to EUR 37.9 million in the first quarter of 2017, after
EUR 30.3 million in the comparative period of 2016, thus also exceeding the
figure of the fourth quarter of 2016, at EUR 25.2 million. The increase compared
with the first quarter of 2016 is among other things due to a friendlier market
environment in many customer industries and the related better order situation
as well as the resulting higher utilization of production capacities and product
mix effects. The operating EBIT margin, at 9.0% in the first quarter of 2017,
thus exceeded that of the comparative period of 2016, at 7.8%, and that of the
fourth quarter of 2016, at 5.9%. The external costs associated with the planned
business combination of RHI and Magnesita incurred in the past quarter total EUR
3.8 million.
EBIT amounted to EUR 32.6 million in the first quarter of 2017 and primarily
includes a negative net effect from the power supply contract in Norway
amounting to EUR 4.3 million as a result of lower electricity future prices.
Equity was EUR 555.0 million at March 31, 2017, compared with EUR 524.0 million
at December 31, 2016. This corresponds to an equity ratio of 30.5%. Working
capital increased from EUR 465.1 million at the end of the year 2016 to EUR
491.3 million at March 31, 2017. This is primarily attributable to higher
inventories due to an increase in the order level by roughly 15% compared with
December 31, 2016. Free cash flow amounted to EUR 12.0 million in the past
quarter compared with EUR 22.1 million in the same period of 2016. Net debt
declined slightly from EUR 332.8 million at the end of 2016 to EUR 325.2 million
at March 31, 2017. The number of employees amounted to 7,460 at the end of the
past quarter.
In its forecast published in April 2017, the International Monetary Fund
predicts global economic growth of 3.5% in the current year after 3.1% in the
year 2016. However, there is considerable uncertainty regarding the impact of
the policies of the newly elected US government. Although the environment in the
advanced economies improved, the pace of growth in the emerging markets will
continue to influence the global economy to a significant extent. Based on a
current study, the research institute CRU expects a decline in steel production
in China by roughly 1% in the year 2017 and an increase in steel production
outside China by an ambitious 5%. Based on these estimates, RHI expects a more
positive market environment in 2017. The focus will stay on the generation of
free cash flow in the current financial year in order to reduce net debt
further. RHI is currently working on meeting the conditions precedent to the
successful closing of the planned combination with Magnesita (the "Combined
Group") and is preparing the integration of the two companies. In the context of
these activities, external costs will be incurred.
In the past quarter, uncertainties arose due to a shortage in the supply
situation of refractory raw materials in China. Striving to improve
environmental and safety standards, Chinese authorities introduced stricter
requirements and carried out production controls. As a result, many local
manufacturers of sintered and fused magnesia had to completely shut down their
production in the past quarter. Due to this new situation, market prices are now
rising. It can currently not be estimated when this situation will ease. As raw
material supply from China is getting less secure, supply concepts are adapted
continuously within the RHI Group.
Update on the planned combination with Magnesita
RHI filed for merger control clearance with the competition authorities in
Brazil at the end of March and in Europe at the beginning of May and expects to
have a clearer picture of the outcome of the proceedings around the end of the
first half of 2017.
Based on their financial statements for the year 2016, the combined revenue of
RHI and Magnesita amounted to approximately EUR 2.5 billion. RHI has revised its
aspirational financial targets1)for the Combined Group in the course of a
corporate strategy update. These targets replace any earlier financial targets
(which are thus withdrawn) for the Combined Group and include the following. In
the medium term, RHI's aspiration for the Combined Group is to have organic
revenue growth in line with the volume growth in its customers' industries and
an operating EBIT margin of more than 12% after capturing the Combined Group's
envisaged net synergies of approximately EUR 70 million in case of a delisting
of Magnesita. RHI's aspiration for the Combined Group is to pay stable dividends
in 2017 and 2018, in line with RHI's previous years' payment levels. In the mid-
to long-term, however, RHI's aspiration is to increase dividend payments from
the Combined Group, as a result of stronger cash flow generation resulting from
synergies, organic growth and de-leveraging of the company's capital structure.

1) Management's financial targets are not forecasts and there can be no
guarantee that the actual results will resemble the targets in the medium term
or mid- to long-term. RHI has not defined, and does not intend to define,
"medium term" and "mid- to long-term", and these financial targets should not be
read as indicating that RHI is targeting such metrics for any particular fiscal

Financial Key Figures

in EUR million           Q1/2017 Q1/2016 Delta   Q4/2016 Delta
Revenue                  418.8   389.7   7.5%    423.9   (1.2)%
EBITDA                   48.5    43.2    12.3%   40.4    20.0%
EBITDA margin            11.6%   11.1%   0.5pp   9.5%    2.1pp
Operating EBIT 1)        37.9    30.3    25.1%   25.2    50.4%
Operating EBIT margin    9.0%    7.8%    1.2pp   5.9%    3.1pp
EBIT                     32.6    27.1    20.3%   15.0    117.3%
EBIT margin              7.8%    7.0%    0.8pp   3.5%    4.3pp
Profit before income tax 30.2    23.8    26.9%   13.8    118.8%
Profit after income tax  18.5    14.8    25.0%   11.9    55.5%
1) EBIT before expenses from derivatives from supply contracts, impairment and
restructuring effects
The report for the first quarter of 2017 is available for download at the RHI
website: www.rhi-ag.com/ Investor Relations / Financial Reports

Further inquiry note:
Investor Relations
Mag. Simon Kuchelbacher
Tel: +43-1-50213-6676
Email: simon.kuchelbacher@rhi-ag.com

end of announcement                               euro adhoc 

company:     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

Original content of: RHI Magnesita, transmitted by news aktuell

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