• Gearing ratio declines due to high free cash flow and good performance
  • US authorities have already approved the planned combination with Magnesita
  • Shares of RHI Magnesita NV also to be traded on Vienna Stock Exchange

The RHI Group's revenue amounted to € 1,651.2 million in the past financial year compared with
€ 1,752.5 million in the year 2015. This decline is primarily attributable to the continued moderate steel production and lower project deliveries in the business segments outside the steel industry.

CEO Stefan Borgas summarizes the results: 'Despite the difficult market environment we managed to generate a solid result. Thanks to high free cash flow and the good operating performance we achieved a reduction of net debt - an important step on the way towards the planned combination with Magnesita.'

Cost savings and portfolio adjustments support positive operating EBIT
The operating EBIT amounted to € 123.2 million in the past financial year and was maintained at the level of 2015 despite weak markets and one-off costs of roughly € 12 million related to the planned combination with Magnesita. This positive operating business development is predominantly attributable to the good earnings situation in the Steel Division, the improved operating EBIT in the Raw Materials Division due to good capacity utilization at the Austrian raw material plants and cost reductions in all areas of the company.

EBIT amounted to € 116.1 million in the past financial year and includes a full impairment of the assets of the two production sites for fused cast products for the glass industry totaling € 8.0 million. Moreover, negative effects on earnings of € 4.6 million from the deconsolidation of the US subsidiary RHI Monofrax, LLC following its sale and € 4.8 million related to the social plan for personnel cuts and the reorganization of the production portfolio at the Norwegian site in Porsgrunn are included. In contrast, a positive effect of € 10.1 million resulted from the measurement of the power supply contract in Norway.

Finance costs amounted to € (21.2) million in the year 2016 and the tax rate was 28.3%. Profit after income taxes amounted to € 75.9 million and earnings per share to € 1.86.

Good operating performance leads to lower net debt
Due to the further reduction of working capital by roughly 13% and the good operating performance, free cash flow of € 109.8 million was generated and net financial liabilities were reduced from € 397.9 million in 2015 to € 332.8 million in 2016. Net financial liabilities correspond to roughly 1.8 times the EBITDA of the year 2016. The equity ratio improved from 27.2% to 29.2% in the year 2016.

Update on the combination
With respect to the combination of RHI AG and Magnesita Refratarios S.A., which is currently undergoing anti-trust clearance procedures, the Management Board emphasized that the combination enables the Austrian company to successfully assert itself as the globally leading group in the tough competition with the Chinese refractory industry. Stefan Borgas specifies the objective: 'Europe is not a growth market, whereas North and South America are substantially more interesting. With the complementary product portfolio of the two companies, we can also develop new opportunities. Of course, our cost structure will be improved with the combination so that we can continue to invest in technology and R&D and offer our customers added value. This will above all also benefit the Austrian sites.' The Management Board was pleased that the combination has already been approved in the United States.

Future RHI Magnesita NV shares to be traded also on the Vienna Stock Exchange
In the course of the planned combination of RHI and Magnesita, one of the objectives is a listing of the shares of the combined company in the Premium segment of the Official List on the Main Market of the London Stock Exchange.

The listing of RHI on the Vienna Stock Exchange ends with the completion of the organizational changes. In order to enable Austrian private shareholders to continue trading via the usual stock exchange, RHI will apply for the integration of the future RHI Magnesita NV shares in the Third Market, after discussions with the Vienna Stock Exchange. CFO Barbara Potisk-Eibensteiner explains: 'London offers the new company, as the global market leader in refractories, access to an important capital market. At the same time, however, we want to stay loyal to the Vienna Stock Exchange and thus also consider the interests of private investors in Austria and of RHI employees.'

Outlook
In its forecast published in January 2017, the International Monetary Fund expects global economic growth of 3.4% in the current year after 3.1% in 2016. However, there is considerable uncertainty regarding the effects of the policies of the newly elected US government. Although the environment in the advanced economies improved in the second half of 2016, the pace of growth in the emerging markets will continue to exercise a significant influence on the global economic situation. Based on a study of mid-November 2016, the research institute CRU expects steel production in China to decline by roughly 2% in the year 2017 and steel production outside China to grow by an ambitious 6%. The emerging markets are also among the main drivers of this development. 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 and is preparing the integration of the two companies. In the context of these activities, external costs will be incurred. The Management Board of RHI AG intends to propose a dividend of € 0.75 per share to the Annual General Meeting on May 5, 2017, the same as in the previous year.

RHI AG published this content on 15 March 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 16 March 2017 10:13:08 UTC.

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