RHI Magnesita reports resilient 1Q cement business
RHI Magnesita NV reports that the Industrial division continued to perform well in 1Q20, particularly in cement. Trading activity in the steel division remained weak in Europe and South America, largely offset by a robust performance in North America.
Overall, demand levels were similar to the 1Q19 with EBITA slightly ahead, in line with management expectations. Raw material prices fell further in 2020, given the reduction in overall demand and uninterrupted supply from China, which has had an impact on the pricing of some of the group's products.
The trading environment has become increasingly challenging in 2Q as a result of COVID-19, with a significant slowdown in customer activity and fall in order book levels, as expected. The Industrial division has remained resilient, particularly in areas where maintenance work has been accelerated during shutdowns, although there have been some project postponements.
In China the group's plants have remained open through the COVID-19 crisis. Production also remains open in Europe and the Americas, but production slowdown will become necessary during May 2020. While there were short-term plant closures in India, as a result of rapidly introduced governmental restrictions, these facilities have now partially reopened.
The business has increased the focus on cost management which includes the temporary closure of three plants in Europe and one plant in Mexico. In addition, the company is introducing short time working arrangements; deferring at least EUR45m of capital expenditure in 2020; offering no final 2019 dividend proposal; and implementing fixed cost reduction actions, such as a hiring freeze on all non-critical roles and restricting discretionary expenditure. In recognition of these steps, the Board and the Executive Management Team have elected to reduce their fees and salary for at least the next three months.
Longer term, the group is well positioned to take advantage of growth opportunities when markets improve and is focused on ensuring that it can exit this period of disruption with positive strategic momentum.
