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RHI Magnesita sees improving momentum in 2021

The refractory products supplier was squeezed by a decline in steel and cement production in 2020
RHI Magnesita sees improving momentum in 2021
  • Adjusted operating profit declined by 38 per cent at constant currencies in 2020
  • But net debt has also come down by a tenth

Reflecting the pandemic-driven decline in steel and cement production, refractory products specialist RHI Magnesita (RHIM) saw its adjusted operating profit drop almost two-fifths at constant currencies in 2020, to €260m (£223m).

Demand picked up towards the end of the year with momentum carrying over into the first quarter of 2021. But RHI has warned that the short-term and concentrated increase in demand has led to additional costs, particularly amid the surge in freight rates and shortage of shipping containers.

Still, on the back of more than €100m of free cash flow, net debt has fallen by a tenth to €582m. Having reinstated its dividend in November, the group has declared a final payout of 100¢ per share and is undertaking a €50m share buyback programme.

RHI says that its adjusted operating profit in 2021 should be in line with company-compiled analyst consensus of €310m, although this would still be down from its 2019 profit of €408m. But its shares have rebounded strongly over the past year and its cost cutting plans should help bolster margins until its end markets recover. Buy.  

RHI MAGNESITA (RHIM)   
ORD PRICE:4,122pMARKET VALUE:£ 2.0bn
TOUCH:4,120-4,124p12-MONTH HIGH:4,288pLOW: 1,419p
DIVIDEND YIELD:3.1%PE RATIO:94
NET ASSET VALUE:1,334¢*NET DEBT:87%
Year to 31 DecTurnover (€bn)Pre-tax profit (€m)Earnings per share (¢)Dividend per share (¢)
2016**1.6510618675
20171.95-5.90-43.075
20183.08246352150
20192.9220028250
20202.2641.551.0150
% change-23-79-82+200
Ex-div:10 Jun   
Payment:30 Jun   
£1 = €1.16, *Includes €377m in intangible assets or 777¢ a share, **Pre-merger of RHI and Magnesita

Last IC View: Buy, 2,586p, 5 Aug 2020