RHI Magnesita earnings weaker despite second-half recovery

(Sharecast News) - RHI Magnesita shares tumbled after the release of its full-year results on Monday, as investors appeared to focus on weaker reported earnings and a subdued market outlook despite a second-half recovery driven by cost measures. The FTSE 250 refractory products supplier reported adjusted revenue of €3.37bn for the year ended 31 December, down 3% from €3.49bn in 2024, or 1% lower on a constant currency basis.

Sales volumes declined 2% amid persistent global demand weakness and continued pressure from Chinese steel and refractory exports.

Adjusted EBITDA fell 7% to €504m, while adjusted EBITA declined 8% to €373m, with the margin narrowing to 11.1% from 11.7% a year earlier.

On a reported basis, profit after income tax dropped to €94m from €154m, and earnings per share fell to €1.82 from €3.01.

Adjusted earnings per share declined to €4.18 from €5.32.

The board proposed a final dividend of €1.20 per share, taking the full-year payout to €1.80, unchanged year on year.

RHI Magnesita said full-year adjusted EBITA met expectations, with a strong second-half weighting reflecting management-led self-help measures across pricing, cost control and plant network optimisation following a weak first half marked by pricing pressure, fixed cost underabsorption and foreign exchange headwinds.

Adjusted operating cash flow was €391m, with cash conversion of 105%, and free cash flow of €214m broadly in line with 2024.

Net debt rose 19% to €1.45bn, reflecting the cash outlay for the Resco acquisition completed in January 2025.

Leverage increased to 2.9 times net debt to pro forma adjusted EBITDA, below prior guidance.

Resco contributed €184m of revenue and €25m of adjusted EBITA in the 11 months following completion.

Regionally, North America delivered revenue growth of €154 million, up 22% year on year including Resco, and accounted for 32% of group gross profit.

Europe recorded a 12% revenue decline, though profitability improved in the second half after plant optimisation and cost savings.

India achieved 4% volume growth alongside rising steel production, but pricing remained weak.

Performance in South America and the Middle East, Türkiye and Africa was affected by Chinese exports.

Looking ahead, the group said market conditions remain challenging, with steel end-markets at cyclical lows and limited visibility in industrial project markets.

Adjusted EBITA for 2026 was expected to increase by around 17% to €435m on a constant currency basis, equivalent to roughly €400m including foreign exchange headwinds, driven by continued efficiency measures.

Cash conversion was expected to remain above 90%, with leverage targeted to fall to around 2.6 times by year end.

"Our relentless self-help driven turnaround measures delivered a strong and sustainable business performance increase in the second half against a very challenging market backdrop," said chief executive Stefan Borgas.

"While management was focused on the business performance turnaround, equally important strategic progress has been made.

"The Resco integration and synergy realisation are on track, recycling rates are up in almost all regions and our digital transformation is progressing well.

"Despite not yet foreseeing a major market tailwind yet, we expect our self-help measures and strategic progress to drive business performance further operational and financial improvements in 2026.

"With our enhanced global footprint, rigorous operational discipline, and clear strategic focus, we believe RHI Magnesita is forging a path for continued success despite persistent headwinds."

At 0847 GMT, shares n RHI Magnesita were down 12.12% at 2,939.5p.

Reporting by Josh White for Sharecast.com.