RHI Magnesita N.V.

Today's RHI Magnosita Q1 trading update. My name is Seb and I'll be the operator for your call today. If you'd like to ask a question during the Q&A session, please press star 1 on your telephone keypad. If you'd like to withdraw your question, please press star 2. You can also submit text questions via the webcast. I will now hand you over to Stefan Borges, CEO, to begin. Please go ahead.

Thank you very much. Good morning from Vienna. I'm Stefan, the Archive Minister CEO. I'm joined here in the room by Ian, both our CFO and our industrial relations team around Alex Aldos. Let me give you the highlights, the key messages for the last three months, or the first three months of the year, and then I give you a bit of more granularity around this, and Ian will give you some headline numbers. The four key messages. Unfortunately, demand for refractories across both of the big market segments, steel and industrial, was slightly weaker in the first quarter of 2026. than in the appropriate time period in 2025. Our own volumes into the steel market were more or less in line with prior year, with some pricing coming through, pricing benefits coming through, but our industrial project-related volumes remain subdued even compared to last year. First message. Really, still very such demand. Second message, our adjusted EBITDA increased meaningfully year on year, which was all related to the continued execution of our self-help initiatives that we have put in place and that we continue to accelerate. Some pricing actions to catch up with cost increases, actually. a lot of cross-discipline around our company, network optimization in our production network, and some targeted supply chain measures also supported this EBITDA growth. Additional activities around the geopolitical surprises that we experienced during the first quarter, really relying on our digital supply chain capabilities that we have now, that we have built in the last years, helped us to navigate through this difficulty around logistics problems around the street of Hormuz quite well. That's the second message. Very good EBITDA improvement. The third message is We can reconfirm our full year guidance for adjusted EBITDA of 435 million on a constant currency basis or 400 million around if we take today's view on foreign exchange rates into consideration. Same outlook that we had in the full year three months ago. And that's where... translate together with our strong cash generation that we show a leverage reduction towards about 2.6 times net debt to each time. Those are the three key messages. Very weak demand, really good progress on the profit development of the company and affirmation of the guidance both on cash flow as well as on profitability. Let me give you a bit more detail now about these topics. Demand remained weak. It's a challenging market in which we are, and it is made more challenging through the geopolitical tensions. Our own steel volumes were broadly in line with the first quarter last year, some moderate pricing benefits, but their regional performance is actually quite different. On the industrial project side, our volumes stay subdued. In the steel segments, price improvements helped to have a slightly positive trend on the top line, on the revenue line. This is an encouraging performance because the global steel production fell by 2.3% in the first quarter of this year. 2.3% lower steel production globally. just published by World Steel Association, compared to the first quarter of 2025, which wasn't exactly a banger. Our cost management measures, together with the pricing benefits, supported a recovery in the gross profits towards more normalized levels, with a clear improvement compared to the prior year, clearly. And based on our current visibility, we see early signs of a Possible gradual improvement in steel demand through the remainder of 2026, although some of the Western world steel reporting, the early ones from the first quarter, are not super encouraging on the volume side. In industrial markets, cement season was broadly normal, not super strong. earnings very similar level than the first quarter of 2025, but the industrial project-related volumes remain still very, very low. Non-ferrous metals were broadly flat versus last year, but glass volumes in the first quarter were even lower than 2025. Also here, our cost discipline, together with some pricing action, supported gross profit in positive gross profit so that we could at least keep it flat year over year despite lower volumes. The order book in industrial projects shows a good improvement, especially in non-ferrous metals, in other market segments less so. So we are carefully confident about the improvements, especially in the second quarter. That is very clearly there because we're already producing the materials against these orders. But also in the second half of the year, the order book looks slightly better than last year. I'd like to give you the regional perspective of this as well. North America, and not just the segment perspective, North America and Latin America continue to deliver strong earnings in Q1. In North America, the steel business performed well alongside quarterly steel production growth of 2.3% per year compared to last year, despite supply chain disruptions because of all the winter storms. That happens in the U.S., so nothing to worry about, and that equated each other out over time, not fully in the first quarter, but that will happen. In Latin America, our performance was more driven by the strength of the industrial business than by the steel business, because steel in Latin America is down. India, China, East Asia, and Middle East, And Africa performed broadly in line with our expectations, with a little bit stronger steel performance in those regions, offsetting weaker industrial demand pretty much everywhere in this part of the world. Europe and CIS underperformed across both steel and industrial in terms of volumes, reflecting a volume shift from the first quarter into the second quarter, especially on the industrial side. In Europe, the performance is expected to improve over the remainder of the year, especially driven by the cost reductions that are now coming into the P&L step by step and by a recovery of a slow in the industrial projects. Staying with Europe, we have to note that towards the end of the quarter, we announced a review of our production footprint in France, which includes the potential to close one plant there and to convert another one into a recycling hub because it's really well positioned there from a circular economy perspective in the middle of many, many customer sites. To advance this discussion, We are deeply engaged with the local works councils and we of course are totally committed to manage this transition responsibly together with them. The actions are part of the ongoing network optimization program that aims at improving our competitiveness, our operational efficiency, improve our customer service level and reduce our costs. The conflict in the Middle East had not had a material impact on the group's performance until now. Local customers in the Middle East clearly were affected. We had lower volumes to them because they produced less and they needed less. But our overall exposure to that region in the total context of RSI and Magnesita is relatively small, so we don't feel it in the total context very much. Yes. Important to be noticed, we are kind of proud that all shipments that were affected by this, you can imagine dozens and dozens of containers were affected when this incident happened some weeks ago. But all of them were successfully redirected via alternative routes. with a super fast reaction that started even on the day of the very first attack that happened in that region. On that very day, we already redirected some of the shipments. And that shows that the supply chain capabilities that we have built in the last three years enable now a really rapid response, service level for our customers that are not affected by such disruptions, although not, even not the service level in that region. And therefore, I think we have a really world-leading supply chain capability and delivery capability for our customers now. More broadly speaking, inflationary pressures that are linked to the energy costs and freight costs and now also related raw material costs are being actively managed. We are largely able to mitigate the impact on RHI Manzita through pricing measures, including surcharges for those activities. Customers are very cooperative. It doesn't affect them very much because it's such a small part of their total cost, so they work with us. It's a really good and open discussion with customers, and pricing is generally accepted here. The longer-term impact of the conflict remains uncertain. We can just not predict this. We will continue to monitor this closely, and if we can see structural changes, of course, we will let everybody know and talk about it. Against this backdrop, for local strategy and our modern, increasingly digitalized supply chain capabilities continue to support the service levels that we can offer to customers, and we can really be confident that we can deliver here, because we've just tested these capabilities. Let me head over to Ian, who will give you a bit more details on the numbers. Ian. Thank you, Stefan.

Good morning. Adjusted EBITDA in the first quarter increased by approximately 15% year-on-year, or 46% on a constant currency basis. This improvement reflects sustained cost discipline and the ongoing benefits of self-help measures implemented in 2025 and in 26, supporting a recovery in profitability towards more normalized levels. Foreign exchange represented a significant headwind, as regarded, primarily due to the year-on-year depreciation of the US dollar and the Indian rupee. We confirm our full year guidance for adjusted EBIT A of $435 million on a constant currency basis or approximately $400 million after foreign exchange impacts. The improvement in earnings continues to be underpinned by four structural levers, most of which are progressing in line with our expectations. First, our network optimization program is on track. Second, SG&A reduction is delivering in line with expectations driven by digitalization, process standardization, and the continued expansion of our shared services model. Third, pricing discipline remains strong, supported by the ongoing expansion of our 4Pro offerings. And finally, we are seeing early signs of a gradual improvement in the industrial business, particularly as Stefan mentioned, in non-ferrous metals. These measures have already demonstrated their effectiveness in the second half of 2025, and we remain confident in their continued contribution to earnings improvement to 2026 and beyond. Turning to net debt, net debt increased in Q1 compared to the year end, 2025, with leverage remaining broadly in line with recent levels. The increase was driven by higher working capital, reflecting a planned build-up in inventories ahead of anticipated stronger sales in the second quarter, particularly in industrial projects. This build-up is consistent with normal seasonal patterns, and is expected to unwind over the remainder of the year. Cash conversion for the full year is expected to exceed 90%, supported by disciplined working capital management. Year-end working capital intensity is expected to be around 22%, in line with our earlier guidance, although it will be higher at the half-year, as is normal. We expect net debt to decline over the course of the year to around $1.4 billion, with leverage reducing to approximately 2.6 times by year-end. I'll now hand you back to Stefan for closing comments.

Thank you, Ian. Not much left to say. Let me summarize our key message again. We delivered a solid start to the year in an environment of weaker demand, both in markets, if we look at it from a global perspective, and in the industrial markets as well. Second, our earnings had meaningful improvements, all driven by disciplined execution of our self-help initiatives, and supported by our strong supply chain agility and capability to sustainably deliver a best-in-class service to our customers. Third, We reconfirm our full year guidance both on profits as well as on cash flow. Thank you for joining us this morning and of course we're super happy about your questions and the discussion that will now follow.

Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. If you'd like to withdraw your question, please press star 2. You can also submit any text questions via the webcast Starting with questions from the phone, we have Jonathan Hearn with Barclays. Please go ahead.

Hey, guys. Good morning. Just a few questions from me, please. Good morning. Sorry if I missed this, but can you just talk about that sort of robust order intake you saw in the Middle East or you've seen in the Middle East for Q2? Is that kind of back to the level you were in sort of Q4 in terms of order intake? So has it kind of normalised? relative to where it was historically. So that was the first question on the Middle East. The second question was just on the profitability. Obviously you've seen a good organic growth in terms of profit and also you've called out the self-help measures. But can you just sort of talk us through maybe or break out how we can or how we think about the margin there, but just between sort of the backward integration and the normal margin there. That was the second one. And the third one was just in terms of the industrial projects. So if you look at sort of the history there, it looked like in terms of industrial projects, I should say 2025 was the low. So what you're saying here is that we should actually get back to industrial project growth 26 on 25. That's essentially my three questions. Thanks.

All right. Let me start and then maybe Ian can give you a bit of a profit breakdown on the platform integration. Order intake in the Middle East, we didn't specifically talk about this. What we have experienced is a clear increase in order intake, especially in non-ferrous metals, for the second quarter of this year. Deliveries are in full implementation here, so clearly there's a step up and also a bit of a stronger order intake for the second half of this year. Again, in industrial business, driven by industrial projects. In the Middle East, the trend is very similar. Industrial projects are a little bit stronger than last year. That helps. But order intake in general isn't very much higher. We have benefited a little bit from customers' need for short-term delivery because we're able to fulfill those, so that gives us a bit of a market share improvement here, but otherwise the Middle East isn't much stronger than last year at this point in time. In terms of profit split, backward integration margin is not improving. Raw material prices have not increased significantly, so there's not a big change this year. Our profit improvement in the company comes solely from the self-help measures that we have already talked about. So, it's the cost reduction in the production network, it's the efficiency improvements, it's the SG&A measures, and it's some cost reduction also on the raw material side that, of course, helps the faculty. Industrial projects, we are still, Jonathan, in a very low level. There's no recovery to historic levels yet to be seen we can in non-ferrous this is on the way but it's not a jump it's a step by step improvement so we're confident that we'll have a better non-ferrous year this year than last year and then next year it should improve yet again because of the products that are in the making that's already visible and in glass we see an increased number of requests for quotes and project discussion, but not yet reflected in the order intake. We see some good business development in the refinery sector. Interestingly, despite the Middle East, or maybe because of the Middle East situation, so that segment also will help us. And we see some interesting activities, especially in the interest of many of our cement customers around the world for more of a solution approach rather than simple commodity selling, which is also good because it helps us on the market share and it helps us on the stability of the business. This is the industrial improvement, but we're not at the level yet where we can say industrial projects will this year or even next year be back at the level of 2023. We're not there. Ian, any more comments on the profit improvement? Thanks, Jeff.

Morning, Jonathan. So, when we confirm our full-year EBITDA margin guidance of 11.5%, that includes 1% for backward integration, our magnetized-based raw material prices and our raw material plant utilization remains subdued. So, essentially... we've seen a continuation of where we were at the end of 2025, so around 1%. Also, just to mention, on the absolute margin, that 11.5%, there is a timing dimension to it, so we would expect to see the second quarter normally being better than the first quarter, and the second half to be better than the first half, so I think at around the half year, we should probably be looking at a margin of around 10.5%, but for the full year, the 11.5%. Just a very normal trend that you see in our business.

Great, guys. That's very informative. Thank you very much. Next question, please.

Thank you. Sorry, we have a question on the line. We had a question on the line from Harry Phillips, but I believe he's withdrawn the question, so just moving on to those on the So, firstly, we have Jamie Murray. How do you see the EU regulation that is due to come into force in the H226 impacting RHI in H226 and 2027? Okay.

All things being equal, this regulation on steel and the enforcement of C-bombs Also, supporting European production versus imports should help us moderately in the steel business on the volume side. So, it's a slightly positive impact for the European business. And therefore, of course, it's highly margin accretive because every volume improvement in Europe is... almost gross margin drops down to profits because it's a fixed cost solution. So that should be positive. Jamie, I don't want to quantify this specifically for 26 or 27. I think it's too early to tell. There was a lot of optimism three months ago. Now, if you listen to customers, this is more careful. We were maybe the most pessimistic Three months ago, now it looks like our opinion is more mainstream. So let's see how this develops, but it's difficult to quantify.

Thank you. We do have Harry Phillips back on the line now. So please go ahead with your question.

Good morning, everyone. Apologies for this logistics nightmare, but thankfully back on track.

We know all about it.

Just a little bit more on pricing, if you could. I get a sense, maybe wrongly, but my sense is that What you're seeing in pricing this year is a sort of annualization of what you got through in the second half of last year. So is that a correct assumption? And then if it is, is there scope if Europe picks up in any way that we get into a sort of pricing positive environment? And then in terms of the project side of industrials, just sort of noting the commentary, and I know in John's question you were talking about it, but is that project side sort of deferrals of all projects have already been deferred or is this a sort of new set of projects that are again being pushed to the right?

Okay, so on pricing, there's two things going on here. There's the annualization, of course, that's fully ongoing. That has the effect that we already discussed several times. But there's also the surcharge, new surcharges, especially triggered by high energy costs and higher freight costs triggered by what's going on in the street of Hormuz. That is fully an implementation, and you will see it in the revenue, but you will not see it dramatically in the profits, of course. So that happens. There's a bit of a countermeasure here, and that's in some of the more commoditized industrial projects, not so much in non-ferrous and not so much in the very sophisticated glass projects, but in more of the commoditized ones, aluminum and the simple glass furnaces. There's a huge hunger of all global competitors to finally improve the industrial projects order intake, so some pricing is not very conducive to margins. We try to stay out of it, and then if somebody wants to dump and not make any money by overpromising, then we don't participate in this. So that's a bit of a counter... counter move on the pricing side. But in general, pricing is very stable with a maybe slow upward trend. On industrial projects, we never expected higher industrial project delivery in the first quarter of this year, so there hasn't been a lot of postponements. The second quarter always was the one, at least from the perspective of November, December last year, was always going to be the one with the high delivery percentage that is still happening. Therefore, we have this inventory built up and this cash consumption in the first quarter that will reverse now in the second quarter because we deliver these projects. So nothing to worry about, much less of a postponement than we experienced last year. And the order intake for the second half of the year was weak six months ago, is a little bit better now. So we actually indeed see some glimpse of hope in industrial projects for the second half of the year. And of course, that is a trend then that will continue into next year.

Fantastic. Thank you very much indeed.

Thank you. Just moving on to the next question via the webcast. This is from Andrew Douglas with Jefferies. Three questions. Firstly, please can you explain the increase in industrial order book, given the soft market backdrop seems odd? Secondly, can you explain the delta between 15% growth in just EBITDA and plus 46% growth in constant currency terms? Seems a big FX hit. And third, please can you guide to the expected first half, second half splits of sales and EBITDA?

Yes, so the second half, first half split is more like in normal years, so it's about 45% first half, 55% second half. We have no reason to believe that this will be very different this year. You remember last year that was super different, so we were all nervous in the half year. This is more normalized again. The industrial growth industrial project growth is explained by two things. In non-ferrous, it's really growth of the business, because the related metals, zinc, lithium, but especially copper, are high, pricing for those is high, demand is high, capacities are at a high, capacity utilization at those customers are at a high level, so there's a lot of activities there in order to keep the capacity utilization high and that is a positive effect. It's actual real demand improvement. On the glass side and in aluminum and in a couple of other markets, it is the effect of two years of very subdued low deliveries. And now some of the furnaces cannot be stretched another year, so they need repairs. And that helps a little bit on the order book here. So that's not actually our customers' end demand, but it's the repair and maintenance cycle that supports our business. Those are the two trends in industrial growth. Ian, on the Forex effect?

Yes. And also just on the first half, second half, as Stefan highlighted, something much more normal this year. I think if you look at the first half, probably around $170 million. Of our $400 million, the second half would be around $213 million. So the first half would be up from $140 million last year to $170 million this year-ish. And then the second half broadly similar. And that gets you towards the 45% that Stefan mentioned. Currency has a material impact. We've guided on this really. It's the impact of the weaker U.S. dollar. and it's the weaker Indian rupee. So, if you think last year the dollar was averaging around 112, now it's averaging around 117, 118. Every cent movement is over 4 million euros on our earnings. Likewise, the Indian rupee last year was averaging around 90, now it's over 107 to 110. So, very material impact. Actually, what we have also seen in the first quarter is the impact of the Mexican peso, the Turkish lira, and the Chinese renminbi moving against us. So it's been a little bit weaker than actually evenly guided in our trading updates earlier this year.

Okay, next question, please.

Thank you. Also a follow-up from Andrew. Please, can you update us with your thoughts on M&A Outlook? What does the pipeline look like?

Pipeline looks very good. Discussions have started again, but no updates compared to what we said before. No cash outs this year.

Great, thank you. And then we have from Jamie Murray. Can you provide any growth rates on revenue for steel and industrial in Q1?

Yes, so, Jamie, in constant currency terms, steel would be up around 6%, industrial would be down around 6%. In constant currency, we're looking at the group around 2% plus, but then obviously you've got the significant impact of currency impacting, so down around 5% year on year on a reported basis. but with strong margin improvement coming through with the benefit of all of the self-help around network optimization, SG&A, operational excellence, driving the learnings accretion.

Thank you. As a reminder, for any final questions, please press star 1 on your telephone keypad or submit your text question via the webcast. Okay, we have no further questions on the call or webcast. I'll hand the call back to the team for any closing comments.

Wonderful. Thank you very much for listening in this morning. Let me just repeat the three conclusions of the first quarter. We continue to be in an environment of weak demand, negatively impacted by geopolitics. The outlook is in our expectations, but below what many other people in the market expect. In this environment, Archa Manizita could deliver a meaningful improvement in earnings, all driven by self-help measures and supported by our significantly improved digitalized supply chain capability. Third message, we can reconfirm the guidance for the year of about 400 million of EBITDA and gearing of 2.6 times net debt to EBITDA. Thank you very much for listening in this morning and we're looking forward to speaking with all of you during the course of the day and the week. Goodbye from Vienna.

Goodbye. This concludes today's call. Thank you all very much for joining, and you may now disconnect.