RHI Magnesita N : H1 2022 Half year results

1 August 2022

RHI Magnesita N.V.

("RHI Magnesita" or the "Company" or the "Group")

Strong first half earnings supported by price increases and market share gains

RHI Magnesita, the leading global supplier of high-grade refractory products, systems and solutions, today announces its unaudited results for the six months ended 30 June 2022 ("H1 2022" or the "Period").

Financial results

(€m unless stated otherwise)	H1 2022	H1 2021	Change	H1 2021	Change
				Constant Currency	Constant Currency
				Adjusted1	Adjusted2
Revenue	1,594	1,200	32.8%	1,273	25.3%
Adjusted EBITDA	245	179	36.6%	192	27.7%
Adjusted EBITA	188	128	47.0%	136	37.8%
Adjusted EBITA margin	11.8%	10.7%	110bps	10.7%	110bps
Adjusted EPS	€2.58	€2.05
Net debt	1,238	812
Net debt to adjusted LTM
EBITDA	2.7x	2.2x
	H1 2022	H1 2021
		Reported
Revenue	1,594	1,200
Reported EBITA	177	136
Profit before tax	142	125
EPS	€2.06	€2.01
Dividend per share	€0.50	€0.50

1. H1 2021 adjusted for constant currency for H1 2022 average FX rates
2. Adjustments of €11 million to reported EBITA include €4m of write downs relating to the Russia/Ukraine conflict, and €2m relating to power purchase agreement commitments

Operational highlights

• Price increases of €293 million since H1 2021 successfully executed, driving strong top line growth and offsetting cost inflation from energy, raw materials and labour
• Significant market share gains in steel following investment in production network and inventory support earnings, as customers continue to prioritise security of supply
• Recycling rate increased to 9.3% (H1 2021: 6.1%) leading to raw material supply and CO2 emissions benefits following new joint venture with Horn & Co

Financial highlights

• Reported revenue increased 33% to €1,594 million (H1 2021: €1,200 million) and by 25% in constant currency
  terms (H1 2021: €1,273 million)
• Adjusted EBITA increased by 47% to €188 million (H1 2021: €128 million), or 38% in constant currency
• Net debt of €1,238 million (31 December 2021: €1,014 million) in line with management expectations and guidance, as reduction in inventory volumes is offset by the increase in value of inventories and accounts receivable due to cost inflation and price increases
• Interim dividend of €0.50 per share declared

Outlook

• Expectations for full year earnings in 2022 unchanged, based on strong demand in the year to date and order book for the second half
• Global growth outlook impacted by inflation and monetary policy response, labour and energy market tightness and ongoing supply chain disruption
• Margins to be maintained through further price increases and with support from strategic cost saving initiatives
• Gearing expected to reduce in the second half, targeting Net Debt : EBITDA towards 2.0x by year end depending on earnings performance

Commenting on the results, Chief Executive Officer, Stefan Borgas, said:

"In the first half of 2022 we further demonstrated the benefits of prioritising customer deliveries in an environment of continued supply chain volatility. Our investment in inventories to ensure our customers remain supplied with essential refractories has underlined the importance of supply reliability and has enabled us to simultaneously increase prices and gain market share. Following major investments in our production network, SG&A reduction and progress on our sales strategies, the Group is in a strong position to maintain its leadership position in the refractory industry and to navigate future challenges."

A presentation for investors and analysts will be held today starting at 8:15am UK time (9:15am CET). The presentation will be webcast live and details can be found on: https://ir.rhimagnesita.com/. Alternatively the webcast can be accessed here.

For further enquiries, please contact:

Investors: Chris Bucknall, Head of Investor Relations, [phone]

Media: Mark Garraway, Hudson Sandler, [phone]

About RHI Magnesita

RHI Magnesita is the leading global supplier of high-grade refractory products, systems and solutions which are critical for high-temperature processes exceeding 1,200°C in a wide range of industries, including steel, cement, non- ferrous metals and glass. With a vertically integrated value chain, from raw materials to refractory products and full performance-based solutions, RHI Magnesita serves customers around the world, with around 13,500 employees in

28 main production sites and more than 70 sales offices. RHI Magnesita intends to build on its leadership in revenue, scale, product portfolio and diversified geographic presence to expand further in high growth markets.

The Group maintains a premium listing on the Official list of the London Stock Exchange (symbol: RHIM) and is a constituent of the FTSE 250 index, with a secondary listing on the Vienna Stock Exchange (Wiener Börse). For more information please visit: www.rhimagnesita.com

HEALTH AND SAFETY

The Group maintained high standards in occupational health and safety, though there was some deterioration in injury frequency rates since 2020. The lost time injury frequency rate remained stable at 0.2 per 200,000 hours worked (H1 2021: 0.2). In 2022 the priority areas for health and safety improvements are preventative measures by tracking leading indicators and near misses as well as specific campaigns focused on hand safety, tool use and lockout procedures.

FINANCIAL OVERVIEW

Reported revenue increased by 33% to €1,594 million, as price increases of €293 million were realised in the first half, with additional costs from freight, energy, labour and raw materials fully passed on to customers. Revenue increased by 25% on a constant currency basis after adjusting for changes in foreign exchange rates, notably the strengthening of the US dollar versus the Euro which benefited revenues in the first half.

Adjusted EBITA increased by 47% to €188 million (H1 2021: €128 million) representing a margin of 11.8% (H1 2021: 10.7%), supported primarily by the price increase programme.

Freight, energy and raw material costs were respectively 18%, 60% and 12% higher in H1 2022 compared to H1 2021 on a constant currency basis, reflecting significant global inflation in each category due to supply chain disruption and energy shortages resulting from the rapid recovery of global demand following the COVID-19 pandemic, geopolitical instability and continuing lockdowns affecting port capacity and logistics in key locations. Cost inflation was most pronounced in the first quarter, before easing in some areas in Q2. International containerised freight prices peaked in January 2022 and have since stabilised at elevated levels.

Net debt increased to €1,238 million (31 December 2021: €1,014 million) despite a reduction in inventory volumes, as the value of both raw material and finished goods inventories increased and supply chain reliability remained poor. Accounts receivable increased due to higher finished goods prices whilst accounts payables reduced in line with lower capital expenditure on production optimisation projects.

Working capital intensity of 29.3% remained above the medium-term target range of 15-18% as the Group continues to prioritise security of supply to its customers throughout a period of ongoing global supply chain disruption.

Available liquidity was €1,043 million at the period end (31 December 2021: €1,181 million). The Group's gearing

measured as the ratio of Net Debt to Adjusted EBITDA increased slightly to 2.7x (31 December 2021: 2.6x). Operating

cash flow reduced to €(76) million (H1 2021: €(55) million) with higher working capital requirements offsetting the improvement in earnings due to price increases.

In May 2022 RHIM refinanced the outstanding principal of €260m of the €305 million OeKB Term Loan maturing in June 2023 and increased the overall facility amount by signing an additional OeKB-backed tranche of €90m. The total outstanding loan balance as of 30 June 2022 was €350m and the refinanced loan now has a final maturity in May 2027.

On 29 July 2022, the Group secured a new ESG linked €250 million term loan maturing in 2027 of which the proceeds will be used to refinance the $200 million term loan maturing in 2023, significantly improving the Group's debt maturity profile as well as benefiting from a wholly euro denominated profile. The facility was secured at very competitive interest rates and within the same margin grid as the $200 million term loan through its core relationship banks.

OUTLOOK

Order books for both the Steel and Industrial businesses remain at normal levels, with six months of visibility in steel and approaching one year for industrial. The outlook for global growth faces challenges from inflation and monetary policy response, labour and energy market tightness and ongoing supply chain disruption.

More frequent and dynamic pricing discussions with customers have restored margins to acceptable levels following the delays in passing on cost increases in 2021. The Group is confident that any further cost increases in 2022 can be passed on quickly to customers, who continue to value security of supply over price.

Management is focused on reducing working capital in the second half of the year with a target to reduce Net Debt : Adjusted EBITDA, towards 2.0x by the year end depending on earnings performance, as margins are maintained, higher cost inventory is sold, overall inventory volumes are reduced, and further measures are taken to reduce accounts receivable. Following investments in its production network and progress on sales strategies, the Group is well positioned to navigate future volatility with a lower cost base and enhanced cash generating potential.

CAPITAL ALLOCATION AND SHAREHOLDER RETURNS

The Board's capital allocation policy remains to support the long-term Group strategy, providing flexibility for both organic and inorganic investment opportunities and delivering attractive shareholder returns over the midterm. These opportunities will be considered against a framework of strategic fit, risk profile, rates of return, synergy potential and balance sheet strength.

The Group incurred €58 million of capital expenditure in H1 2022, comprising €36 million of project expenditure (H1 2021: €70 million) and €22 million of maintenance capex (H1 2021: €21 million).

Consistent with the Company's dividend policy to pay an interim dividend equal to one third of the previous final dividend, the Board has declared an interim dividend of €0.50 per share representing €23.5 million in aggregate. The interim dividend will be paid on 23 September 2022 to shareholders on the register on 26 August 2022.

The acquisition of SÖRMAŞ in Turkey announced in H2 2021 is on track to complete in the second half of 2022. Further M&A progress was made during the period with the acquisition and joint venture established with Horn & Co. to accelerate the Group's use of secondary raw materials in its refractory products. Whilst the Group's priority in the second half will be to reduce gearing, alongside the planned investment in ongoing strategic projects, it will continue to assess bolt-on acquisition opportunities where the value creation case is compelling.

SUSTAINABILITY

The Group has continued its leadership in the field of Sustainability with a further increase in the use of secondary raw material to 9.3% in the first half of 2022 (H1 2021: 6.1%). Increasing the usage of recycled raw materials is the fastest route for the Group to reduce its CO2 emissions in the short term, since residual refractory material has already been processed from its raw carbonate form. Each tonne of recycled raw material used avoids the release of approximately two tonnes of CO2 which would otherwise be emitted in the manufacturing process.

On 3 May 2022, RHI Magnesita agreed a new joint venture with Horn & Co. Group to accelerate the Group's use of secondary raw materials in its refractory products. The joint venture will give RHI Magnesita access to additional quantities of secondary raw material and improve productivity in the recycling process. In the longer term it is intended to grow the business to become a leading supplier of high quality recycled materials to the broader refractory industry in Europe.

RHI Magnesita was awarded a 'Gold' ESG rating by EcoVadis in June 2022, maintaining the high level of performance established in 2021 and reflecting the Group's industry leading capabilities and transparency in sustainability.