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Sep 09

RHI Magnesita swings into profit despite higher raw material costs

The refractory maker reports higher end-user demand outweighing raw material volatility.

Refractory maker RHI Magnesita reported a sharp rise in revenues, thanks to increased sales volumes and prices, even as its raw material costs rose.

RHI Magnesita reported a pre-tax profit of €246 million in 2018, compared with a €5.9 million loss in 2017, with rising revenues more than outpaced increased raw material costs.

The company forecast a more stable market for refractory raw materials in 2019, but prices are expected to stay high compared with pre-2017 levels.

Chinese refractory material production has been restricted by a number of factors in China, including environmental restrictions on dynamite use and other mining activities.

“As a result of potential further export taxes, more restrictive allocation of explosives, strict environment enforcement and the nationalization or controlled consolidation of mining operations in China, the structurally altered raw materials pricing environment is expected to remain in 2019 and beyond,” RHI Magnesita said.

Refractory material prices have seen extreme volatility since the implementation of Chinese environmental restrictions.

Fastmarkets IM reported the price of magnesia, dead-burned,94-95% MgO, lump, fob China, at $500-580 a tonne on March 26, 2019. This was down from $680-700 a year earlier, but well above the $160-235 per tonne reported at the same point in 2017.

Meanwhile end use markets are expected to remain strong.

“Whilst some uncertainties exist in the macroeconomic outlook for 2019, robust customer markets in the medium term (albeit with some uncertainty in the short term) and positive trends in raw material pricing support our expectation to deliver modest organic revenue growth,” RHI Magnasita chief executive Stefan Borgas said.

The segment of the company’s business which supplies to the steel industry reported revenues up by 15% year on year in 2018, at €2.20 billion ($2.47 billion).

And the company’s industrial division reported sales of €877 million over the same period, up by 33% year on year.
RHI Magnesita also announced it is seeking a secondary listing on the Vienna Stock Exchange, in addition to its existing listing in London, as a protection against Brexit uncertainty.

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