TIDMRHIM
RNS Number : 0974U
RHI Magnesita N.V.
27 March 2019
RHI Magnesita N.V.
("RHI Magnesita" or the "Company" or "Group")
2018 Full Year Results
Strong organic growth, continued synergy delivery and rapid
deleveraging
RHI Magnesita today announces its 2018 full year results for the
year ended 31 December 2018 ("2018" or "the Year").
Highlights(1)
(EURm unless stated otherwise)
2018 2017 Variance
Adjusted(2) Adjusted(2)
pro-forma(3)
constant currency
----------------------- ------------- ------------------- ---------
Revenue 3,081.4 2,549.6 +21%
----------------------- ------------- ------------------- ---------
Adjusted EBITA 428.1 235.9 +81%
----------------------- ------------- ------------------- ---------
Adjusted EBITA margin 13.9% 9.3% +460bps
----------------------- ------------- ------------------- ---------
Adjusted EPS EUR5.31 n/a n/a
----------------------- ------------- ------------------- ---------
Net debt 638.9 750.8 -15%
----------------------- ------------- ------------------- ---------
Net debt to adjusted
EBITDA 1.2x 1.9x -0.7x
2018 2017
Reported Reported(4)
------------------- ---------- -------------
Revenue 3,081.4 1,950.1
------------------- ---------- -------------
EBITA 427.2 78.9
------------------- ---------- -------------
Profit before tax 246.0 (5.9)
------------------- ---------- -------------
EPS EUR3.52 (EUR0.43)
------------------- ----------
(1) A full table of reported and pro-forma results is provided
on page 18
(2) Adjusted measures are alternative performance measures
excluding impairments, amortisation of acquisition intangibles and
exceptional items to enable an understanding of the underlying
performance of the business. Full details of the APMs can be found
on page 17
(3) Whilst the merger became effective on 27 October 2017, the
pro-forma results were prepared as if the Group had existed since 1
January 2017. Full details on page 18
4 As reported in 2018 Annual Report following purchasing price
allocation ("PPA") and other reclassifications
-- Strong revenue growth of 21% to EUR3,081 million reflecting
increased volumes and commercial and raw material pricing
gains:
o Steel Division revenues up 15%;
o Industrial Division revenues up 33%; and
o Significant growth in China and India, with revenues up 36%
and 21% respectively.
-- Adjusted EBITA up 81% to EUR428 million, representing an
adjusted EBITA margin of 13.9%, 460bps higher than in 2017:
o Continued successful integration with synergies of EUR70
million, exceeding the previously increased target;
o Benefits of volume and price increases retained through
integrated model; and
o Improved efficiency and network optimisation, partially offset
by short term operational issues at certain plants and some supply
chain challenges during H2.
-- Free cash flow of EUR220.5 million, underpinned by an
improvement in working capital intensity(5) of 680bps to 15.4% and
supporting robust organic growth, alongside significant expansion
potential.
-- Leverage reduced significantly, from 1.9x to 1.2x net debt to adjusted EBITDA.
-- Financial performance and strong balance sheet underpin capital allocation policy:
o Progressive dividend policy with proposed 2018 dividend of
EUR1.50 per share, representing a 100% increase on 2017 and
dividend cover of 3.5x(6) ;
o Incremental efficiency and growth capex programme starting in
2019; and
o Flexibility to pursue acquisition opportunities in growth
markets.
(5) Working capital as a percentage of last three months
annualised revenue
(6) Calculated using adjusted earnings per share
Commenting on the results, Chief Executive Officer, Stefan
Borgas said:
"This was our first full financial year as a new company and I
am delighted by the significant amount that we have achieved.
Underpinned by the strength of the markets in which we operate, we
have reported very strong financial results, successfully delivered
on our integration plans and benefitted from the synergies of the
combination.
More broadly, we continue to navigate well the challenges of the
integration process and have set the business on the right path to
support its ongoing strategic development.
Whilst some uncertainties exist in the macroeconomic outlook for
2019, robust customer markets in the medium term (albeit with some
uncertainty in the short term) and positive trends in raw material
pricing support our expectation to deliver modest organic revenue
growth, with improved operating margins from 2018 levels, driven by
continued synergy generation and further optimisation initiatives,
in addition to further growth potential from acquisitions."
This announcement contains inside information for the purposes
of Article 7 of Regulation 596/2014.
For further enquiries, please contact:
RHI Magnesita N.V.:
Guy Marks, Head of Investor Relations
+44 7741 73068
Conference call
The Company will host a presentation for analysts and investors
at the offices of Peel Hunt LLP, Moor House, 120 London Wall, EC2Y
5ET at 8:30am (GMT) on Wednesday 27 March 2019 to discuss the
results. The presentation will also be available via webcast and
conference call. The webcast can be accessed using the following
link:
https://www.investis-live.com/rhimagnesita/5c6c1ea4f562761200e15694/rhgs.
A replay will be available on the same link shortly after
event.
Conference call participant dial-in numbers are as follows:
UK: 020 3936 2999
All other locations: +44 20 3936 2999
Access code: 471643
The Company's 2018 Annual Report has been published and is
available to view on the website at: https://ir.rhimagnesita.com/.
In compliance with Listing Rule 9.6.1, a copy will also be
submitted to the National Storage Mechanism and will shortly be
available for inspection at www.morningstar.co.uk/uk/NSM.
This announcement also contains as appendices additional
information for the purposes of compliance with DTR 6.3.5 (1) of
the UK Disclosure and Transparency Rules. The information below is
extracted, in full unedited text, from the Annual Report 2018. Page
numbers and cross references in the extracted information refer to
page numbers and cross-references in the Annual Report. This
announcement should be read in conjunction with and is not a
substitute for reading the full Annual Report 2018.
About RHI Magnesita
RHI Magnesita is the leading global supplier of high-grade
refractory products, systems and solutions which are indispensable
for industrial high-temperature processes exceeding 1,200degC 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 in nearly all countries
around the world. The Company has a high level of geographic
diversification with more than 14,000 employees in 35 main
production sites and more than 70 sales offices around the world.
RHI Magnesita intends to leverage its global leadership in terms of
revenue, scale, product portfolio and diversified geographic
presence to target strategically those countries and regions
benefitting from more dynamic economic growth prospects.
Its shares have a premium listing on the London Stock Exchange
(symbol: RHIM) and are a constituent of the FTSE 250 index. For
more information please visit: www.rhimagnesita.com
CEO review
In 2018, RHI Magnesita has continued to consolidate its position
as the driving force of the refractory industry and we have made
good progress in setting the business on the right path to
achieving its full potential.
The Group achieved very strong results in its first full year,
following the combination of RHI and Magnesita in 2017, with
revenue growth of 21%, and an increase in adjusted EBITA of 81%.
The growth in revenues, which exceeded that of the underlying steel
and industrial markets, demonstrates the continuing demand for the
Group's breadth of technology, services and products. Positive
customer demand was noted in the Steel Division in 2018, with
strong revenues of EUR2,204 million and a gross margin of 23.7%.
The Industrial Division reported revenue of EUR877 million, with a
gross margin of 24.5%, benefitting from an overall healthy level of
industrial demand.
In addition to capturing a significant proportion of this growth
by virtue of the vertically integrated model, the Group has
benefitted from its successful integration process, with the
realisation of synergies and network optimisation supporting a
significant step up in operating margins. Disappointingly, the
Group experienced some operational and supply chain challenges in
its European business during H2 which partially offset some of the
margin gains. The root cause of these issues has been identified
and improvement plans are in place. Management is confident that
they will be substantially resolved in the current year.
Overall, the Group's integrated model continues to derive
benefit from a structurally changed pricing environment. However,
it is our ability to protect margin improvements, regardless of the
pricing environment, that really matters. This can already be
demonstrated in our results and will be further underpinned by the
Company's solid growth strategy.
The Group has continued its successful integration during 2018,
achieving synergies of EUR70 million, with a further EUR20 million
expected in the current year, and remains on track to deliver
EUR110 million during financial year 2020. The combination of
top-line growth, synergy implementation and our vertically
integrated model has led to an adjusted EBITA margin of 13.9%,
representing a 460 basis points improvement on 2017.
The Company's financial position continues to strengthen, with
growth in operational cash flow generation, materially improved
working capital intensity and a reduction in annualised interest
expense, as a result of the refinancing carried out in 2018. This
has enabled the Group to significantly reduce net debt to 1.2x
adjusted EBITDA.
In 2018, we refined our key strategic priorities and have
identified the following four pillars which will support the
Company's long-term growth and sustainability:
-- People: hire, retain and motivate talent and nurture a
meritocratic, performance-driven, customer-focused and friendly
culture;
-- Business model: the leading service and solution provider in
the refractory industry with an extensive portfolio based on
innovative technologies and digitalisation;
-- Markets: worldwide presence with strong local organisations
and solid market positions in all major markets; and
-- Competitiveness: low-cost producer of technically advanced
refractory materials with a safe production network.
As we adapt our business model to a changing world, we are
aiming for a much higher share of sales through our solutions
offering, leveraging the Company's innovative technologies and
digitalisation, thereby creating additional value for our customers
and further enhancing our competitiveness. We place great
importance on developing and delivering higher quality products and
services, which will in turn enable our customers to improve the
quality of their operations and products.
As the number one refractory player in four out of the top ten
steel markets, in addition to maintaining our leadership positions
in the Americas, Europe and the Middle East, we intend to grow our
share in key, under-penetrated geographies. We have seen
significant success during the Year with our dedicated, local
strategies for the Chinese and Indian markets, resulting in high
levels of growth and market share gains. We will look to accelerate
these in 2019, as well as applying focus to additional important
steel markets where the Group has a limited presence.
One of the fundamental drivers of our business model and
strategy bases itself on our internal expertise in innovative
technologies and digitalisation. The Group continues to drive
innovation, with significant opportunities in the fields of
automation, robotics and recycling, and aims to devote 2.2% of
total revenues per year to R&D and Technical Marketing.
Investment in R&D and Technical Marketing in 2018 was c. EUR63
million(7) , representing 2% of revenues, marginally lower than the
target as a result of foreign exchange movements and the merger
combination process.
(7) R&D portion is stated before subsidies and including
opex and capex
Safety
The Company's intense focus on safety has already shown
significant results, with a 60% improvement in the Lost Time Injury
Frequency ("LTIF") rate in 2018 to reach 0.4. Nothing less than
zero accidents is acceptable and therefore our focus on this
important area will persist.
Board and Management team appointments
The Board has been further strengthened by the proposed
appointment of two Non-Executive Directors - Fiona Paulus and Janet
Ashdown. In April, our new CFO, Ian Botha, will be joining the
Executive Management Team ("EMT") and Board. The composition of the
EMT was complemented during the Year by the appointment of
Jacqueline Knox as General Counsel & Company Secretary and
post-Year end, Gustavo Franco as Chief Sales Officer.
Organic growth investment
Following the progress made in the integration process, as well
as the much strengthened balance sheet and continued strong cash
generation, we intend to initiate a number of targeted capital
investment programmes to support the Group's medium term
objectives. In addition to approximately EUR110 million of annual
maintenance capital investment, we intend to deploy approximately
EUR65 million of additional capital investment in 2019 to support
growth, increase raw material capacity and improve efficiency. Of
this, approximately half relates to the Group's dolomite expansion
project in Chizhou, China and the remainder on smaller projects in
York (US) and India.
Returns to shareholders
Underpinned by the strong performance of the business and given
its strong annual cash generation, the Board has considered its
long term dividend policy in the context of its capital allocation
strategy.
For 2018, the Board has recommended a final dividend of EUR1.50
per share for the full financial year, equating to an increase of
100% over the previous year. This represents a dividend cover of
3.5x adjusted earnings per share.
Going forward, the Board's dividend policy will be to
progressively increase ordinary dividends and to target a dividend
cover of below 3.0x adjusted earnings over the medium term.
Dividends will be paid on a semi-annual basis with one third of the
prior year's full year dividend being paid at the interim.
Share buyback
The Board has taken the decision to commence the repurchase of
shares on the open market to cover the requirement of the Long Term
Incentive Plan ("LTIP") Scheme, with an intention to purchase up to
400,000 RHI Magnesita shares. When purchased, these shares will be
held in Treasury until they are required to satisfy awards made
under the LTIP.
Secondary listing on the Vienna Stock Exchange
The Board has considered the uncertain regulatory environment
that resulted from the United Kingdom's decision to withdraw from
the European Union. Due to these uncertainties the Board has
decided that it is prudent for RHI Magnesita to apply for a
secondary listing on a regulated market in the European Union.
While the Group is a global business and has a strong presence in
many jurisdictions, it has its head office in Vienna and was
historically listed on the Vienna Stock Exchange. The Board has
therefore decided that the most logical secondary listing location
for RHI Magnesita is Vienna.
RHI Magnesita will continue to have a Premium Listing and be
admitted to trading on the London Stock Exchange, which will remain
its primary listing venue.
Outlook
2018 has been a year of tremendous progress and transformation,
creating the leading company in the global refractories industry,
successfully delivering on our integration plans and benefitting
from the synergies of the combination. More broadly, we continue to
navigate well the challenges of the integration process and have
set the business on the right path to achieving its full growth
potential.
We are expecting a more stable raw material market in 2019.
Whilst pricing may ease from the current high levels, a new higher
base looks likely to be maintained through the year on account of
the structurally changed environment, especially in China.
Whilst some uncertainties exist in the macroeconomic outlook for
2019, robust customer markets in the medium term (albeit with some
uncertainty in the short term) and positive trends in raw material
pricing support our confidence in further growth, underpinned by
our strategy. We expect to deliver modest organic revenue growth,
with improved operating margins from 2018 levels, driven by
continued synergy generation and further optimisation initiatives.
In addition to this we expect further growth potential from
acquisitions. We remain focused on driving margin improvement
opportunities and strong cash flow generation, which will provide
the foundation to support our capital allocation and progressive
dividend policy.
I would like to thank our employees, shareholders, and customers
for your continued support in what has been a critical year in the
Company's development.
Financial review
An overview of Alternative Performance Measures ("APMs") is on
page 17 along with a reconciliation of both the adjusted pro-forma
results and reported results. All references to comparative 2017
numbers in the text below are to adjusted pro-forma figures at
constant currency unless stated otherwise.
Adjusted pro-forma results
2017 2018
Constant
currency
pro-forma Variance
Revenue 2,549.6 3,081.4 21%
COGS (1,989.1) (2,344.5) 18%
Gross Profit 560.5 736.9 31%
SG&A (350.4) (337.3) (4%)
Other income & expenses 14.2 (0.9) (106%)
EBIT 224.2 398.6 78%
Amortisation (25.9) (28.6) 11%
EBITA 250.1 427.2 71%
Adjusted EBITA 235.9 428.1 81%
Depreciation (115.1) (124.8) 8%
EBITDA 365.3 552.1 51%
Adjusted EBITDA 351.1 553.0 58%
Revenue
Revenue for 2018 amounted to EUR3,081 million, 21% higher than
2017. The significant growth in revenue is underpinned by strong
growth in both the Group's Steel and Industrial Division results,
as well as the favourable market conditions, with positive dynamics
in customer industries as well as the raw material pricing
environment.
Against this backdrop, with global steel production growing 4.6%
in 2018, the Group's Steel Division revenue increased by 15% to
EUR2,204 million (2017: EUR1,913 million). Given the Company's
global position, with presence in all major refractory markets, the
Industrial Division benefitted from the positive global GDP growth
of 3.7% and was able to drive organic growth, increasing revenue by
33% in 2018 to EUR877 million (2017: EUR658 million.) Continued
government controls in China have led to a significant reduction in
raw material production output, thereby increasing market prices.
Following the significant price increases in H2 2017, raw materials
remained stable throughout 2018 and are expected to continue
broadly at these new levels in 2019. The Group is able to derive
benefit from this structurally altered environment given its level
of backward integration, both in terms of cost control and customer
supply security.
Gross profit
The Company reported gross profit of EUR737 million in 2018
(2017: EUR561 million), as a result of strong selling prices, a
high degree of vertical integration and synergies, partially offset
by operational issues at certain plants and some supply chain
challenges in H2 2018 (which will be an important focus in 2019),
representing a gross profit margin of 23.9%, 190 bps higher than in
the previous year. On a divisional level, gross profit to steel
applications reached EUR522 million, with 23.7% gross margin (2017:
23.1%8). Gross profit for the Industrial Division was EUR215
million, representing a gross margin of 24.5% (2017: 22.5%8).
8 Based on reported 2017 figures
SG&A
Total selling general and administrative expenses stood at
EUR337 million (2017: EUR350 million), representing 11.0% of
revenue in 2018 (2017: 13.7%). The implementation of the announced
synergies in SG&A for 2018 and the higher fixed cost dilution
in light of higher revenues for the Year also contributed to the
overall performance. In 2019 we are targeting incremental synergies
of EUR20 million, bringing the annualised total to EUR90 million,
and remain firmly on track to deliver our EUR110 million 2020
synergy target. Importantly, whilst progress has been made
throughout the Year in our efforts to optimise the Company's supply
chain, governance, controls and compliance systems and to further
develop the use of automation and digitalisation, further
investments are required in order to build the foundations that
will support the Group's ongoing strategic development.
Adjusted EBITA
Adjusted EBITA for the Year was EUR428 million, 81% above
adjusted 2017 EBITA (EUR236 million). Adjusted EBITA margin for the
Year was 13.9%, 460 bps higher than 2017, driven by significant
revenue growth, greater operating efficiencies in both CoGS and
SG&A, including the synergy benefits of EUR70 million brought
about by the continued successful integration of the business and
the benefits of our own raw material supply, both from a cost
control and customer supply security perspective.
Net financial expenses
Net financial expenses in 2018 amounted to EUR163 million (2017:
EUR82 million). This was mainly due to foreign exchange and
derivative variances, the majority of which were non-cash,
amounting to EUR81 million. These variances stem predominantly
from:
-- The mark-to-market of intercompany loans with our Argentine
subsidiaries (EUR25 million), as the Peso devalued c.50% against
the USD during the Year;
-- As a result of the Group's hedging policy, which aims to
match the currency exposure of our net debt to that of the EBITDA,
the Group has incurred EUR19.6 million in derivative losses in
2018;
-- The mark-to-market of the foreign currency debt owed by
Magnesita Refratários (EUR37 million), a Brazilian Real reporting
entity, which have now been effectively all refinanced; and
-- c. EUR6 million FX gain on cash in foreign currencies held by Magnesita Brazilian entities.
Total net interest expenses for 2018 amounted to EUR39 million
and EUR43 million was recognised in other net financial expenses,
which were predominantly non-cash in light of the refinancing
completed in August and other non-cash adjustments related to the
provision for the unfavourable contract required to satisfy the EU
remedies. The refinancing of the legacy debt, concluded on August
2018, has generated a reduction of approximately EUR24 million in
the Company's annualised net interest expense.
Taxation
Tax efficiencies have been achieved as a result of the Group's
integration and by the overall Group's performance, in particular
of our mining operations in Brazil, thereby lowering the Company's
effective tax rate for the year to 23.9%. RHI Magnesita's tax rate
is sensitive to changes in the geographical dispersion of our
worldwide profit or losses and tax regulations in each
jurisdiction. Other key factors affecting the sustainability of the
Group's effective tax rate are set out in note 44 to the financial
statements in the 2018 Annual Report, which provides additional
information on the Group's tax rate.
Purchasing price allocation ("PPA")
As announced on the Q3 trading update, the Group completed the
PPA in relation to the merger between RHI and Magnesita. The
process reviewed the fair value of fixed and intangible assets as a
result of the merger, causing depreciation and amortisation to
increase by EUR37 million and EUR11 million respectively in
2018.
Profit after tax and earnings per share
On a reported basis, the Company recorded a net profit of EUR187
million and earnings per share ("EPS") of EUR3.52 in 2018 (2017:
EUR10.8 million net loss and EUR0.43 loss per share
respectively).
Adjusted earnings per share for 2018 were EUR5.31, which is
stated after excluding the following items, which principally
relate to acquisition of Magnesita SA and related refinancing and
foreign exchange effects:
-- Other income and expenses (EUR0.9 million);
-- Amortisation (EUR28.6 million); and
-- Net finance costs (EUR76.6 million): Impact of foreign
exchange movements on certain of the Group's non-Euro denominated
debt balance of EUR81 million, as detailed in the "Net Financial
Expenses" section above, excluding the EUR19.6 million in
derivative losses; One-off non-cash expenses related to the
refinancing of the legacy debt (EUR10.6 million); Other
non-recurring financial income and expenses (EUR4.4 million).
A reconciliation of the adjusted to reported results is set out
in the table below.
2018 Reported Items excluded 2018 Adjusted
from underlying
performance
-----------------
EBITA 427.2 0.9 428.1
-----------------
Amortisation (28.6) 28.6
-----------------
Net finance costs (162.7) 76.6 (86.1)
-----------------
Share of profit
in joint ventures 10.1 10.1
Profit before
tax 246.0 352.2
-----------------
Income tax (23.9%) (58.9) (25.4) (84.3)
-----------------
Profit after
tax 187.1 267.9
Profit attributable
to shareholders 158.1 238.9
Earnings per
share EUR3.52 EUR5.31
Cash Flow
Cash flow from operations amounted to EUR462 million in 2018
(2017: EUR255 million), with the 81% increase being driven by the
strong operating performance of the Group as well as efficiencies
in working capital (with a 670bps year-on-year improvement in
working capital intensity) as well as an overall higher profit for
the Year.
Cash flow from financing activities amounted to an outflow of
EUR245 million in 2018 as the Group focused on improving the debt
amortisation profile and reducing recurring interest expense
payments. As part of the previously announced debt restructuring
programme to refinance the legacy debt, prepayments of the
perpetual bond and certain short-term facilities were made during
the Year, generating significant interest expense savings. As a
result, the Company was able to negotiate more flexible covenants
and increase the maturity profile of its debt amortisation
schedule, such that more than 70% of the Group's debt maturities
are due on or after 2022.
Operating and free cash flow
The below table demonstrates the underlying operating and free
cash flow generation of the business.
Cash Flow 2018
EURm
------------------------------------------ --------
Adjusted EBITA 428.1
Working capital 48.7
Changes in other assets/liabilities (40.9)
Capex (122.6)
Depreciation 124.8
------------------------------------------ --------
Operating free cash flow9 438.2
------------------------------------------ --------
Income tax (67.9)
Net interest expense (62.8)
Restructuring and transaction costs (52.2)
Dividend payout (34.7)
------------------------------------------ --------
Free cash flow 220.5
------------------------------------------ --------
9 Operating free cash flow is presented to reflect net cash
inflow from operating activities before certain items such as
restructuring costs. See APMs for further detail.
Capital expenditure ("capex")
Cash flow from investing activities registered an outflow of
EUR101 million and capital expenditure for 2018 stood at EUR123
million (2017 reported: EUR72 million). The ratio of capital
expenditure to depreciation was 0.98x (2017: 1.09x) in line with
RHI Magnesita's capital allocation policy and investment profile.
Maintenance capex is guided at around EUR110 million in 2019 and
beyond. As set out above, the Group will continue to invest in
accordance with its strategic priorities, aligned with its newly
defined capital allocation policy.
Working capital
Working capital intensity in 2018 saw significant improvements
when compared to 2017 pro-forma figures, both in absolute terms and
as a percentage of revenue. Cash flow generation from working
capital in 2018 amounted to EUR49 million, driven primarily by
improvements on accounts payable and accounts receivable as a
consequence of improving our terms with both clients and suppliers.
The overall positive impact on the balance sheet was partially
offset by the higher inventory consumption in 2018, driven by
increased sales volumes and higher raw material costs. Working
capital as an absolute value stood at EUR511 million at the end of
2018. As a percentage of revenue, it was at 15.4% at Year-end
(calculated using last three months annualised revenues), 680bps
lower than the previous year (2017: 22.2%).
Net debt
Net debt at Year-end amounted to EUR639 million comprising total
debt of EUR1,166 million, cash and cash equivalents of EUR491
million and marketable securities of EUR36 million. This compared
to net debt of EUR751 million in 2017. In line with the Company's
commitment to deleverage, net debt/EBITDA stood at 1.2x, 0.7x lower
than 2017 as a result of the improved cash generation in 2018. This
improvement was despite the outflows related to our restructuring
costs and the payout to Magnesita's minority shareholders. See
"Capital allocation policy" below for further detail on the Group's
target leverage range.
Integrated Tender Offer
As previously announced, RHI Magnesita launched an Integrated
Tender Offer ("ITO") to the minority shareholders of Magnesita in
November 2018. At the end of the first close of the ITO on 10
December 2018, RHI Magnesita owned 85.2% of Magnesita and had
issued a total of 3,518,008 new RHI Magnesita shares, along with
EUR85.2 million of cash consideration. As at the final close of the
ITO on 10 March 2019, RHI Magnesita owned 97.5% of Magnesita and
had issued a total of 4,657,408 new RHI Magnesita shares, along
with a total EUR115.4 million of cash consideration.
Successful delivery of synergies
The integration of RHI and Magnesita has led to significant cost
saving synergies via procurement and supply chain management as
well as operating cost efficiencies, all of which have exceeded
initial expectations. In August 2018, the Company announced an
increased synergy target of EUR110 million reduction in operating
costs per annum (from EUR70 million) to be realised by 2020 and
synergy benefits of at least EUR60 million in 2018. In 2018,
synergies of EUR70 million were achieved.
Future growth
Through the cycle, the Group expects organic growth to exceed
the broader refractories industry. In the short-term this
expectation is supported by further market share gains, continued
investment in R&D and opportunities in growth markets,
particularly China and India. In the medium to long term, this
expectation will also be supported by new business models and
solutions. We anticipate that this nominal organic growth should
average 1-3% per year through the cycle.
Alongside the organic growth opportunities, we expect to derive
additional growth from acquisitions. Over time, we expect
acquisitions to deliver average growth at levels similar to
expected average organic growth.
Capital allocation policy
Since the merger, RHI Magnesita has made good progress in terms
of integration and in the execution of its corporate strategy as
well as delivering on the targeted synergies. This has led to
leverage continuing to reduce significantly, reaching 1.2x net debt
to adjusted EBITDA at Year-end.
The Board's capital allocation objective remains to support the
long term Group strategy, providing flexibility for both organic
and inorganic investment opportunities and delivering attractive
shareholder returns over time. These opportunities will be
considered against a framework of strategic fit, risk profile,
rates of return, synergy potential and balance sheet strength.
Going forward, the Group intends to target leverage of between
0.5x and 1.5x net debt to EBITDA. Should a highly attractive
acquisition opportunity present itself, the Group will consider
exceeding 1.5x leverage for larger acquisitions but with the
intention to de-lever quickly and back to the target leverage range
within 24 months. If Group leverage is consistently below 0.5x the
Group will consider additional options to return capital to
shareholders, including share buybacks and special dividends,
taking into account the opportunities available to the Group.
Returns to shareholders
For 2018, the Board has recommended a final dividend of EUR1.50
per share for the full financial year, representing an increase of
100% over the previous year. This represents a dividend cover of
3.5x against adjusted earnings per share.
Subject to approval at the AGM on 6 June 2019, the dividend will
be payable to shareholders on 3 July 2019 to shareholder on the
register at the close of business of 14 June. The ex-dividend date
is 13 June 2019.
Operational review
Steel Division
Steel 2018 2017 Variance
-------------- ------------ -------------- ---------
Revenue EUR2,204.3m EUR1,913.1m10 +15%
Gross margin 23.7% 23.1%11 +60bps
10 Adjusted pro-forma
11 Calculated based on 2017 reported figures
72% of total Group revenue was attributable to the Steel
Division in 2018 (2017: 74%), amounting to EUR2,204 million, which
represents an increase of 15% on the previous year. Gross profit
for the Steel Division was EUR522 million, representing a gross
margin of 23.7% (2017: 23.1%). Whilst overall there was a gross
margin improvement in 2018, a deterioration was noted in H2 as a
result of some operational issues at certain plants and supply
chain challenges. These will be a focus for the Company in 2019.
The root cause of the issues has been identified and improvement
plans are in place. Management is confident of substantially
resolving issues during the current year.
According to the World Steel Association, global crude steel
production increased by 4.6% to 1,809 Mt in 2018 (+2.5% excluding
China), with increases noted in all regions except the EU,
providing a positive customer demand backdrop for the Group's Steel
Division.
Europe
The Group realised a good level of organic growth, with revenue
of EUR632 million, in spite of the subdued level of steel
production in Europe and notwithstanding the plant production
challenges encountered during the Year, which can be characterised
by raw material shortages and long lead times (especially in
dolomite). This increase was driven by product portfolio
optimisation with a favourable pricing impact, and also influenced
by our ability to pass on cost increases. The Company successfully
mitigated long lead times and production/shipping delays (as a
result of unplanned ex China orders) by close interdepartmental and
customer cooperation. Furthermore, coordinated inventory measures
were taken to reduce excessive stock and thereby free up capital
employed without impacting customer satisfaction with our supply
reliability.
Steel production in the EU decreased by 0.3% to 168 Mt. Steel
consumption levelled in H2 2018, according to the European Steel
Association ("Eurofer"), showing a 2.2% increase at closing when
compared to 2017. High overall levels of steel consumption and
stock building across the steel distribution chain drove stable
demand during the Year amidst tensions over US tariffs on European
steel and serious discussions on safeguards and tariff barriers in
response to steel imports in the region, especially from China and
other Asian producers.
As with North America, we see potential positive benefits in
Europe from the reopening of the Chizhou plant and expect 2019 to
present a steadier year in this region.
North America
Strong revenue of EUR535 million was recorded in 2018, with
particularly strong performance in North America due to crude steel
production rising in the US and Mexico, but also due to the Group's
focus on key strategic initiatives, an enhanced portfolio of
products, and market price adjustments, which outpaced the cost
development.
Given the limited raw material sourcing options in North
America, resulting in a high reliance on imported goods and raw
materials, this region inevitably saw challenges in 2018. Customer
sentiment was impacted by supply concerns on account of raw
material developments in China, which significantly increased
prices. There were specific challenges in 2018 to fulfil demand for
dolomite-based shaped products, which was impacted by production
capacities and increased steel pour.
The Group was able to derive benefit from its strong market
position in North America, driven by its very competitive product
and service offering across the full refractory portfolio, and also
from its high level of backward integration for imported products
from Europe and South America.
North America demonstrated strong growth in 2018, particularly
when considering the maturity of the market, with steel production
increasing by 4.1% to 120.5 Mt. The US saw a particularly high year
on year increase of +6.2% to 86.7 Mt, with key drivers being the
Government's infrastructure plan, the tariffs escalation with China
and raw material prices.
Looking forward to 2019, we are encouraged by customer green-
and brown-field projects as well as the positive impact of
increased steel pour from those operations which were restarted
during the Year. We also anticipate being in a position to derive
some of the latent benefit from increases in Chinese raw material
pricing that was not yet fully felt during 2018. The reopening of
the Chizhou plant in China is expected to free up dolomite capacity
in North American plants from the end of 2019 onwards, enabling
additional deliveries to customers in the region.
Middle East & Africa ("MEA"), CIS & Asia Pacific
The Group succeeded in outperforming the market in India, China
and Asia Pacific in 2018, which itself saw strong steel growth in
all regions. Revenue reported for MEA and CIS in 2018 was EUR286
million, with EUR386 million in Asia Pacific, positively impacted
by price increases, with the strongest improvements being seen in
MEA. The Group contended with the issue of a limited level of
backward integration in a majority of these regions during the
Year; however, with a steadier raw material supply flow expected in
2019, a further improvement in performance is anticipated.
Steel production in Asia grew by 5.6% to 1,271 Mt. China
increased by 6.6%, with its share of global production rising from
50.3% to 51.3%. India's production increased by 4.9%, overtaking
Japan as the world's second largest steel producing country. The
Middle East saw a significant increase in steel production of 11.7%
to 38.5 Mt. Turkey decreased slightly to 37 Mt. Egypt, Morocco and
Algeria increased steel production by 9.3% to 9.8 Mt12.
12 According to CRU statistics
Steel production in the CIS remained largely flat; +0.3% to 101
Mt. Ukraine production decreased by 1.1% to 21 Mt, continuing to be
impacted by political instability and resultant lower business
activity. The impact of lower steel prices and higher iron ore
production costs at the start of 2019 is already being noted. There
is an increased risk to steel producers in these regions on the
basis of a growing preference for steel imports from Russia,
Ukraine and China as opposed to utilising local steel production.
It is specifically likely that regional electric arc furnace
("EAF") plants may suffer.
South America
The Group's market position in South America is strong, with a
focus on the solutions model, benefiting from longstanding customer
relationships and driving value for these customers. Revenue, which
amounted to EUR366 million in 2018, was negatively impacted by
country-wide industrial action of truck drivers in Brazil in May as
well as the political situation in Venezuela, which has largely
halted steel production in the country. However, profitability was
increased in 2018 as a result of improved product mix, better
technical results in performance contracts as well as
merger-related synergies. The Company encountered some challenges
with its stand-alone installation model in 2018 which negatively
impacted on margins but we expect to generate positive gains in
2019, with a strong focus on a turnaround of this area.
2018 saw average growth in steel production, given the maturity
of the market, with an increase of 1.3% in Latin America to reach
44 Mt. Brazil showed a steady pace in its economic recovery with
steel production reaching 34.7 Mt in 2018 (+1.1% y-o-y).
Apparent steel consumption is forecast to rise by 6.2% to 22
Mt13 on the basis of expectations of the new Brazilian Government
measures. Whilst our internal expectations take into account a
certain level of conservatism, this still has the potential to
driver further steel production increases in 2019.
13 Brazil Steel Institute
We will continue to reinforce the commercial strategy of our
solution-oriented business in South America, with a focus on
supporting the recovery of the steel industry.
Industrial Division
Industrial 2018 2017 Variance
----------------- ------------- ------------- ------------
Revenue EUR877.1m EUR658m14 33%
Gross margin 24.5% 22.5%15 +200bps
14 Adjusted pro-forma
15 Calculated on a statutory basis
With global GDP growth in 2018 of 3.7% (of which c. 3% is
relevant to the business), the Group was able to derive benefit
from a healthy overall industrial demand environment. Revenues in
the Industrial Division accounted for 28% of total Group revenue
(2017: 26%), with revenues of EUR877 million (2017: EUR658
million). Gross profit for the Industrial Division was EUR215
million, representing a gross margin of 24.5% (2017: 22.5%).
Cement / Lime
Cement/Lime in 2018 amounted to EUR321 million, driven by price
increases and portfolio optimisation. This segment constituted 37%
of Industrial Division revenue in 2018 and 10% of overall Group
revenue.
The Company saw a successful turnaround of its Cement/Lime
business during the Year, with positive effects from the
renegotiation of contract terms being noted. Magnesite and dolomite
raw material availability remained tight in 2018, with Chinese dead
burned magnesia ("DBM") maintaining high price levels. In H1,
cement continued to be impacted by long-term contracts and a very
high order level from 2017. Long lead times, mainly in Europe, also
led to delayed margin improvements. However, the Company took
positive actions to mitigate these issues, shortening the impact of
price increases by reducing contracts and price validity, and
concentrating on the most profitable business areas. From H2
onwards, price increases were then evident in improving
margins.
2018 was a year of steady refractory market growth and relative
stability for cement and lime from a global market perspective,
with some significant variances on a regional basis. China, the
world's largest cement producer, continued its focus on
environmental improvements and consequently on reducing mainly
outdated cement capacities. Other countries, such as Brazil and
those in the near Middle East can be characterised by their
challenging economic environments, whereas Eastern Europe, Central
Asia and North America all benefited from significant increases in
demand.
The market demand for lime has been very stable. However, as a
result of fewer projects in vertical shaft kilns - one of our key
market areas - we saw lower volume and revenue compared to 2017.
Nevertheless, we note an encouraging projects pipeline and positive
current trend in early 2019. An additional focus on rotary kilns is
also expected to lead to market growth, mainly in North
America.
After the turnaround seen in this business in 2018, further
upside is anticipated in 2019 driven by our ability to fully
capture the positive effects of our backward integration.
Non-ferrous metals
Revenue contribution from the non-ferrous metals business
represented 7% of the Group's overall revenue in 2018 and 25% of
the Industrial Division, with strong revenues of EUR217 million in
2018, outpacing the market, which itself retained positive
dynamics. The business unit performed well during the Year and saw
the benefit of a number of projects with long-standing
customers.
After a strong year in 2017, the upwards price trend of
LME-listed base metals continued at the start of 2018. Following
the implementation of tariffs and the commencement of international
trade disputes, prices then decreased slightly with the change in
the macro-economic environment, and the majority closed 2018 down
on the previous year.
The business was predominantly driven by major repairs and
standard business with existing customers. We saw strong orders
from certain customers - with an example being greater orders than
expected from Kazakhstan's ferro alloy industry, which positively
impacted our results. The positive momentum seen in 2018 is
expected to continue in 2019 and, looking forward we see
significant opportunities for the non-ferrous metals business as a
result of the evolution of e-mobility technology.
Other process industries
Other process industries mainly comprises glass, environment,
energy and chemicals ("EEC") and mineral industries. In 2018, this
segment accounted for 39% of the Industrial Division revenues and
11% of the Company's overall revenue, with revenues of EUR339
million. The global demand of refractories for the glass industry
was high in 2018, enabling us to fully utilise the production
capacities at all of our plants. Customer investments were strong
and, based on our backwardly integrated portfolio for basic
refractories, we were able to support this trend. Strong
performance was recorded in this section of the business, mainly
driven by pricing. The Company recorded growth which outpaced that
of the market.
In the first complete business year since selling the
non-profitable fused cast product line, we were able to compensate
for the loss of fused cast revenue by focusing on the bonded
product portfolio. Supported by new strategic measures and
alongside a robust pricing strategy the glass business unit
contributed strongly to the overall business plan, and provided
significant improvements to margins.
In the EEC sector, revenue, shipments and profitability
increased in 2018, albeit demand for most applications was
relatively flat year on year, driven by volatile oil markets. 2018
saw strong demand in the pelletising industry, mainly in the Middle
East, as well as an increase in business with our special waste
customers worldwide. European and CIS demand was strong throughout
2018. As a result of the challenging oil and gas environment in
Canada in 2018, in which a large proportion of investment projects
were halted, this market saw subdued demand during the Year.
Opportunities in 2019 include the further broadening of the
product portfolio, especially with regards to non-basic products
for glass furnaces. The EEC market saw some positive impetus at the
end of 2018, which is expected to continue in 2019.
Growth Markets: India
The Group has a strong local presence in India, with a leading
market share, solid revenue streams and continuous growth. We
operate through two production facilities and two sales offices and
have long-standing relationships with blue chip customers.
2018 has seen the Indian steel market becoming the second
largest in the world, further reinforcing the necessity for our
continued emphasis on this geography. The Indian Steel Ministry has
set a 300 Mt per annum steel capacity target by the end of 2030
which underpins the future of this industry.
Revenue for 2018 amounted to EUR252 million16. In spite of the
lack of greenfield steel manufacturing projects during the Year,
the Group's Indian business continued to grow ahead of steel
market. In order to address increased customer demand, the Company
has aligned its Indian business units to meet requirements. The
Group has also increased capacity at its operations in certain
areas to address demand. India's steel production and demand is
expected to increase by 5% and 7% respectively in 2019, backed by
growth in investment in infrastructure and construction projects,
complemented by strong automotive demand. At present, the Indian
steel industry is running at 78% utilisation rate (current capacity
130 Mt per annum). The demand outlook for next 3-5 years is likely
to mirror the current GDP growth rate of 7% (which should enable
India to overtake the UK in becoming the world's fifth largest
economy). Ahead of the 2019 general election it is expected that
Government of India may take measures to boost overall sentiment in
the upcoming fiscal budget.
16 Includes EUR6.2 million revenue from Sri Lanka, Bangladesh,
Nepal and Bhutan
Growth Markets: China
In order to develop and advance our position in the key growth
market of China, we implemented a new business plan and built up a
stronger, locally-focused management team as part of a 'China for
China' strategy developed in 2018. We have been able to grow our
market presence here as a result of the newly developed team, our
tailor made products for China, increased capacities, enhanced
inventory management abilities and an overall strong local focus on
this geography. Demonstrating our focus in 2018, revenue in China
amounted to EUR166 million17 in 2018.
17 Includes EUR0.1 million revenue from Hong Kong and Macau
Cognisant of the unique nature of the Chinese market, our new
R&D team has developed specific, strategic and environmentally
friendly products in cooperation with key customers. The team also
collaborates with local universities and organisations. In addition
to this, we have carried out significant efforts to increase our
brand awareness in China and have implemented the Group's first
Virtual Reality ("VR") project here.
Successful projects carried out in 2018 included:
-- The ramp up of the Group's brick plant in Chizhou, which is
being conducted in a two phased process. Phase one is on track,
with trial production currently underway and our first sales coming
onto the market in early 2019;
-- Silo project: This project offers greater flexibility in the
production of carbon bonded magnesia bricks for the domestic market
(previously production from the carbon bonded magnesia brick site
was predominantly exported). The Group now has three sites in
Dalian.
-- ISO extension at Dalian sites: The Company is developing
technology in the sphere of ISO bricks to enable it to achieve
higher growth than the market. We are investing in additional
capacity at the ISO site to enable shipping to the domestic
market.
Given our local expertise in China, we are able to adapt and
strengthen our business to overcome market challenges and adapt to
trends. As an example of this, we have reorganised and widened the
breadth of the Chinese steel department. Against the backdrop of a
challenging automotive industry, we still see good opportunities in
the steel sector. In addition to the increasing demand for SUV and
MPVs (which consume more steel in their production), we are also
seeing strong demand for new energy vehicles ("NEV"), with the
overall sales of NEV increasing 68% year on year for the January to
November period.
We also see significant opportunities with the shift to EAF
steel plants and the consequent refractory demand. Automation is a
key focus in the Chinese market and we are therefore concentrating
on creating solutions which will enable our customers to increase
the quality of their products, whilst lowering energy and
production costs.
With the increasingly strict environmental policy in China,
recycling will play a key role in our strategy for 2019 and,
benefiting from our local expertise and market access, we are
targeting our R&D work on creating 'China for China' products
with increased use of SRM.
Innovation
The Company's technology leadership is built on the ambition,
dedication and creativity of our employees. Innovation management
gives structure to this creativity and ensures that ideas are
converted to marketable products, services and new business
models.
R&D underpins the Group's strategy to be the top service and
solution provider in the refractory industry with an extensive
portfolio based on innovative technologies and digitalisation.
Alternative performance measures ("APM"s)
APMs used by the Group are reviewed below to provide a
definition and reconciliation from each non--IFRS APM to its IFRS
equivalent, and to explain the purpose and usefulness of each
APM.
In general, APMs are presented externally to meet investors'
requirements for further clarity and transparency of the Group's
underlying financial performance. The APMs are also used internally
in the management of our business performance, budgeting and
forecasting.
APMs are non--IFRS measures. As a result, APMs allow investors
and other readers to review different kinds of revenue, profits and
costs and should not be used in isolation. Commentary within the
Annual Report, including the Financial Review, as well as the
Consolidated Financial Statements and the accompanying notes,
should be referred to in order to fully appreciate all the factors
that affect our business. We strongly encourage readers not to rely
on any single financial measure, but to carefully review our
reporting in its entirety.
Adjusted pro--forma results at a constant currency
Whilst the merger became effective on 27 October 2017, the
adjusted pro-forma results were prepared as if the combined Group
had existed since 1 January 2017. The Pro-forma results are, where
appropriate, adjusted to reflect the purchase price allocation
("PPA") related to the acquisition of Magnesita and other
adjustments. This measure provides an estimation of the historical
financial performance of the current Group structure.
Given the changes in capital structure arising from the
acquisition of Magnesita, the historical interest, tax and dividend
charges are not deemed to be meaningful. As a result, adjusted
pro-forma results have only been provided down to EBITA.
Figures presented at constant currency represent 2017 amounts
retranslated to average 2018 exchange rates.
EBITA
EBIT, as presented in Consolidated Statement of Profit and Loss,
excluding amortisation and impairments.
EBITDA
EBIT, as presented in Consolidated Statement of Profit and Loss,
excluding depreciation, amortisation and impairments.
Adjusted EBITDA and EBITA
To provide further transparency and clarity to the ongoing,
underlying financial performance of the Group, adjusted EBITDA and
EBITA are used. Both measures exclude other income and expenses as
presented in Consolidated Statement of Profit and Loss.
Adjusted earnings per share ("EPS")
Adjusted EPS is used to assess the Company's operational
performance per ordinary share outstanding. It is calculated using
adjusted EBITA (as described above) and removes the impact of
foreign exchange effects, amortisation, restructuring expenses,
one-off non-cash expenses related to the refinancing of the legacy
debt, and other non-cash financial income and expenses that are not
directly related to operational performance.
Operating free cash flow and free cash flow
Alternative measures for cash flow are presented to reflect net
cash inflow from operating activities before certain items. Free
cash flow is considered relevant to reflect the cash performance of
business operations after meeting the usual obligations of
financing and tax. It is therefore measured before all other
remaining cash flows, being those related to acquisitions and
disposals, other equity--related and debt-related funding
movements, and foreign exchange impacts on financing and investing
activities.
Working capital
Working capital and intensity provides a measure how efficient
the Company is in managing operating cash conversion cycles.
Working capital is the sum of manageable working capital, composed
of inventories, trade receivables and trade payables and other
receivables and payables. Working capital intensity is measured as
a percentage of last three months annualised revenues.
Net debt
We present an alternative measure to bring together the various
funding sources that are included in the Consolidated Balance Sheet
and the accompanying notes. Net debt is a measure defined in the
Group's principal financing arrangements and reflects the net
indebtedness of the Group and includes all cash, cash equivalents
and marketable securities; and any debt or debt--like items.
Reconciliation of pro-forma and reported results
Reconciliation of 2017 adjusted pro-forma results
This table shows the impact of purchasing price allocation
("PPA") and other adjustments on the adjusted pro-forma results, as
they were presented in the 2017 Annual Report (i.e. taking into
account a supposed full 12 months contribution from both
companies), as well as retranslating to average 2018 exchange rates
(2017 constant currency pro-forma).
2017 2017 2017 2018
Constant
Adjusted PPA P&L Adjusted currency
pro-forma18 adjustment reclassifications19 pro-forma20 pro-forma Variance
Revenue 2,677.2 4.0 2,681.2 2,549.6 3,081.4 21%
COGS (1,999.3) (49.5) (31.4) (2,080.3) (1,989.1) (2,344.5) 18%
Gross Profit 677.9 (49.5) (27.4) 600.9 560.5 736.9 31%
SG&A (399.8) 2.7 27.4 (369.6) (350.4) (337.3) (4%)
Other income
&
expenses 0.0 14.2 (0.1) 14.1 14.2 (0.9) (106%)
EBIT 278.1 (32.6) 0.0 245.5 224.2 398.6 78%
Amortisation (26.0) (3.1) 0.8 (28.3) (25.9) (28.6) 11%
EBITA 304.1 (29.6) (0.8) 273.7 250.1 427.2 71%
Adjusted
EBITA 304.1 (43.8) (0.7) 259.6 235.9 428.1 81%
Depreciation (84.7) (41.1) (125.8) (115.1) (124.8) 8%
EBITDA 388.8 11.5 400.3 365.3 552.1 51%
Adjusted
EBITDA 388.8 (2.7) 0.1 386.2 351.1 553.0 58%
18 As reported in the 2017 Annual Report
19 P&L reclassifications includes the reclassifications of
bad debt, commissions, FX gains and losses and interest expenses
between the P&L line items
20 Including the PPA adjustment and other reclassifications
Reconciliation of 2017 reported results
This table shows the impact of PPA and other adjustments on the
reported 2017 results.
2017 PPA P&L 2017
reported
reported adjustment reclassifications21 after adjustments
Revenue 1,946.1 4.0 1,950.1
COGS (1,485.6) (30.5) (27.3) (1,543.4)
Gross Profit 460.5 (30.5) (23.3) 406.7
SG&A (292.5) 0.5 47.7 (244.3)
Other Expenses (124.9) 1.6 26.4 (96.9)
EBIT 43.1 (28.4) 50.8 65.5
Amortisation (13.6) 0.2 (13.4)
EBITA 56.7 (28.4) 50.6 78.9
Depreciation (59.9) (6.3) (66.2)
EBITDA 116.6 (22.1) 50.6 145.1
21 P&L reclassifications includes the reclassifications of
bad debt, commissions, FX gains and losses and interest expenses
between the P&L line items
Principal risks
The risks identified in the following are those the Board
considers to be principal to the business and which may have a
significant impact on the results of the Group and on its ability
to achieve its strategic objectives. They may occur independently
from each other or in combination. In case they occur in
combination, their impact may be reinforced. For full disclosure of
risks, including our risk management framework, development of the
risk identification and assessment process, risk appetite and
mitigation as well as the link to strategy, see pages 42 to 47 of
the 2018 Annual Report.
The below is not an exhaustive list of risks faced by the
Company but encompasses those considered to be most material. Given
2018 was the first full financial year following the merger, it has
been considered more appropriate to report on risk change
throughout the Year in 2019. However, the principal risks were
reviewed during the Year and amended to reflect the current
situation, with risks related to the merger having been removed and
the addition of significant changes in the competitive environment
or speed of disruptive innovation, inability to execute a key
strategic initiative or necessary adjustments to core operations
and cyber and Information Security risk.
1. Macroeconomic environment and condition of customer industries
Changes in the global economic environment and adverse political
developments may have an impact on the Group's revenue and
profitability.
The demand for refractory products is directly influenced by
steel production, the investment climate, metal and energy prices
and the production methods used by customers.
Due to the Group's cost structure, fluctuations in sales volumes
have an impact on the utilisation of the production capacities, and
consequently on the Group's profitability.
2. Regulatory and compliance risks
We strive to establish a culture of compliance throughout the
organisation. Nevertheless, like many other corporations which
operate internationally, we are confronted with increasing
regulatory complexity and are exposed to regulatory and compliance
risks which may result in financial losses or operational
restrictions.
In addition to this, sudden regulatory changes could impact the
profitability of our operations and our need for investment.
3. Fluctuations in exchange rates and energy prices, increasing volatility of raw material prices
Due to the Group's global sales and production activities,
revenue and profitability may be impacted by currency fluctuations.
The Group relies on external supply of energy and raw materials for
its production activities. Fluctuations in demand and/or supply
from global markets (especially from China) have a significant
impact on the prices and hence on the production costs of
refractory products.
4. Significant changes in the competitive environment or speed of disruptive innovation (new)
Customer demand for environmental features, digitalisation and
services may evolve more quickly than expected. Increasing focus on
digitalisation and services may lower the entry barriers for
existing and new competitors.
Depending on the capacity of the Group to develop adequate
products and services, this may present either an opportunity or a
threat by increasing pressure on demand and margins.
5. Inability to execute a key strategic initiative or necessary
adjustments to core operations (new)
The Group's strategy includes numerous strategic initiatives
including sales expansion, new product and service models, network
optimisation and M&A projects. The failure to execute one of
several of those initiatives because of external or internal
circumstances may lead to lower than planned financial performance
including loss of revenue and margin.
6. Business interruption and supply chain disruption
As a producing company, the Group is exposed to business
interruption risk resulting either from natural catastrophes, fire,
machinery breakdown, supply chain disruptions or cyber-attacks. The
Group partly relies on a small number of production sites or a
small number of external suppliers for certain materials. The
inability to produce or supply those materials may have a
significant impact on the Group's capacity to produce and deliver
its products.
7. Environment, Health & Safety risks
Controlled emissions and usage of potentially hazardous
materials are inherent to the production of refractory products.
Regulatory changes in this area may result in higher production
costs and additional investment needs. Also the risk of
uncontrolled emissions at our production sites exists and may
result in high financial losses and liabilities. Especially at our
production sites, employees and contractors may be exposed to
Health & Safety hazards which cannot be completely eliminated.
Also our products may potentially cause accidents at the customers'
sites.
8. Cyber and information Security risk (new)
Our growth strategy (including mergers and acquisitions, entries
into new geographies, the design of new products and
digitalisation) results in a growing risk exposure. In addition,
the Group is confronted with a fast-evolving cyber and information
security threat landscape. The possible impact of cyber and
information security risks could range from operational
disruptions, loss of intellectual property, legal compliance
issues/frauds, or significant reputation losses.
Statement of Directors' responsibilities
The full statement of Directors' responsibilities can be found
on page 75 of the 2018 Annual Report. The Directors have prepared
the Annual Report in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the European Union and
the relevant provisions of the Dutch Civil Code. The Directors must
not approve the Annual Report unless they are satisfied that it
gives a true and fair view of the state of affairs of the Group and
the Company and of the profit or loss of the Group for that
period.
With reference to section 5.25c paragraph 2c of the Dutch Act on
Supervision, each of the Directors, whose names and functions are
listed in the Governance section of the Annual Report, confirm
that, to the best of their knowledge:
-- the Company's financial statements and the consolidated
financial statements, which have been prepared in accordance with
IFRS as adopted by the European Union and the relevant provisions
of the Dutch Civil Code, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the
Group;
-- the Annual Report gives a true and fair view on the situation
on the balance sheet date, the development and performance of the
business and the position of the Company and the Group companies of
which the financial information is included in the Annual Report
and includes a description of the principal risks and uncertainties
that the Company faces; and
-- having taken all matters considered by the Board and brought
to the attention of the Board during the financial year into
account, the Directors consider that the Annual Report, taken as a
whole is fair, balanced and understandable. The Directors believe
that the disclosures set out in the Annual Report provide the
information necessary for shareholders to assess the Company's
position, performance, business model and strategy.
After conducting a review of management analysis, the Directors
have reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future.
For this reason, the Directors consider it appropriate to adopt the
going-concern basis in preparing the Annual Report.
Directors are also required to provide a broader assessment of
viability over a longer period which can be found on page 43 of the
2018 Annual Report (the "Viability Statement").
Forward looking statements
The consolidated financial statements presented here are
consistent with the criteria of international accounting standards
- IFRS issued by the International Accounting Standards Board -
IASB, based on audited financial information. Nonfinancial
information contained herein, as well as other operational
information, were not audited by independent auditors and may
include forward-looking statements and reflects the current views
and perspectives of the management on the evolution of
macro-economic environment, conditions of the mining and
refractories industries, company performance and financial results.
Any statements, projections, expectations, estimates and plans
contained in this document that do not describe historical facts,
and the factors or trends affecting financial condition, liquidity
or results of operations, are forward-looking statements and
involve several risks and uncertainties.
This document should not be construed as legal, tax, investment
or other advice. This document does not constitute an offer, or
invitation, or solicitation of an offer, to subscribe for or
purchase any securities, and neither any part of this document nor
any information or statement contained herein shall form the basis
of or be relied upon in connection with any contract or commitment
whatsoever. Under no circumstances, neither the Company nor its
subsidiaries, directors, officers, agents or employees be liable to
third parties (including investors) for any investment decision
based on information and statements in this document, or for any
damages resulting therefrom, corresponding or specific.
The information presented or contained in this document is
current as of the date hereof and is subject to change without
notice. RHI Magnesita has no obligation to update it or revise it
in light of new information and / or in face of future events,
safeguard the current regulations which we are submitted to. This
document and its contents are proprietary information of the
Company and may not be reproduced or circulated, partially or
completely, without the prior written consent of the Company.
Consolidated Statement of Financial Position
as of 31.12.2018
in EUR million Notes 31.12.2018 31.12.2017(1)
=============================================== ====== =========== ==============
ASSETS
=============================================== ====== =========== ==============
Non-current assets
=============================================== ====== =========== ==============
Goodwill (11) 117.4 120.2
=============================================== ====== =========== ==============
Other intangible assets (12) 334.4 373.0
=============================================== ====== =========== ==============
Property, plant and equipment (13) 1,094.8 1,141.7
=============================================== ====== =========== ==============
Investments in joint ventures and associates (14) 21.8 21.4
=============================================== ====== =========== ==============
Other non-current financial assets (15) 18.0 25.1
=============================================== ====== =========== ==============
Other non-current assets (16) 34.3 24.2
=============================================== ====== =========== ==============
Deferred tax assets (17) 171.1 140.1
=============================================== ====== =========== ==============
1,791.8 1,845.7
=============================================== ====== =========== ==============
Current assets
=============================================== ====== =========== ==============
Inventories (18) 717.8 654.5
=============================================== ====== =========== ==============
Trade and other current receivables (19) 481.2 522.6
=============================================== ====== =========== ==============
Income tax receivables (20) 18.4 13.5
=============================================== ====== =========== ==============
Other current financial assets (21) 38.6 34.1
=============================================== ====== =========== ==============
Cash and cash equivalents (22) 491.2 442.4
=============================================== ====== =========== ==============
1,747.2 1,667.1
=============================================== ====== =========== ==============
3,539.0 3,512.8
=============================================== ====== =========== ==============
EQUITY AND LIABILITIES
=============================================== ====== =========== ==============
Equity
=============================================== ====== =========== ==============
Share capital (23) 48.3 44.8
=============================================== ====== =========== ==============
Group reserves (24) 752.2 574.0
=============================================== ====== =========== ==============
Equity attributable to shareholders of RHI Magnesita
N.V. 800.5 618.8
======================================================= =========== ==============
Non-controlling interests (25) 84.8 226.9
=============================================== ====== =========== ==============
885.3 845.7
=============================================== ====== =========== ==============
Non-current liabilities
======================================================= =========== ==============
Borrowings (26) 844.8 983.8
=============================================== ====== =========== ==============
Other non-current financial liabilities (27) 49.5 55.5
=============================================== ====== =========== ==============
Deferred tax liabilities (17) 78.4 64.7
=============================================== ====== =========== ==============
Provisions for pensions (28) 304.3 308.7
=============================================== ====== =========== ==============
Other personnel provisions (29) 78.5 82.5
=============================================== ====== =========== ==============
Other non-current provisions (30) 109.2 115.7
=============================================== ====== =========== ==============
Other non-current liabilities (31) 10.3 9.0
=============================================== ====== =========== ==============
1,475.0 1,619.9
=============================================== ====== =========== ==============
Current liabilities
=============================================== ====== =========== ==============
Borrowings (26) 321.6 241.8
=============================================== ====== =========== ==============
Other current financial liabilities (27) 15.0 17.4
=============================================== ====== =========== ==============
Trade payables and other current liabilities (32) 756.9 678.2
=============================================== ====== =========== ==============
Income tax liabilities (33) 32.2 16.1
=============================================== ====== =========== ==============
Current provisions (34) 53.0 93.7
=============================================== ====== =========== ==============
1,178.7 1,047.2
=============================================== ====== =========== ==============
3,539.0 3,512.8
=============================================== ====== =========== ==============
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
Consolidated Statement of Profit or Loss
from 01.01.2018 to 31.12.2018
in EUR million Notes 2018 2017(1)
================================================= ====== ========== ==========
Revenue (35) 3,081.4 1,950.1
================================================= ====== ========== ==========
Cost of sales (36) (2,344.5) (1,543.4)
================================================= ====== ========== ==========
Gross profit 736.9 406.7
================================================= ====== ========== ==========
Selling and marketing expenses (37) (128.9) (101.2)
================================================= ====== ========== ==========
General and administrative expenses (38) (208.4) (143.1)
================================================= ====== ========== ==========
Other income (39) 43.9 10.4
================================================= ====== ========== ==========
Other expenses (40) (44.9) (107.3)
================================================= ====== ========== ==========
EBIT 398.6 65.5
================================================= ====== ========== ==========
Interest income (41) 9.7 5.6
================================================= ====== ========== ==========
Interest expenses on borrowings (48.5) (23.6)
================================================= ====== ========== ==========
Net expense on foreign exchange effects and
related derivatives (42) (81.3) (50.8)
================================================= ====== ========== ==========
Other net financial expenses (43) (42.6) (13.6)
================================================= ====== ========== ==========
Net finance costs (162.7) (82.4)
================================================= ====== ========== ==========
Share of profit of joint ventures and associates (14) 10.1 11.0
================================================= ====== ========== ==========
Profit/(Loss) before income tax 246.0 (5.9)
================================================= ====== ========== ==========
Income tax (44) (58.9) (4.9)
================================================= ====== ========== ==========
Profit/(Loss) after income tax 187.1 (10.8)
================================================= ====== ========== ==========
attributable to shareholders of RHI Magnesita
N.V. 158.1 (17.4)
================================================= ====== ========== ==========
attributable to non-controlling interests (25) 29.0 6.6
================================================= ====== ========== ==========
in EUR
================================================= ====== ========== ==========
Earnings per share (basic and diluted) (51) 3.52 (0.43)
================================================= ====== ========== ==========
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita and the changes in presentation.
Consolidated Statement of Comprehensive Income
from 01.01.2018 to 31.12.2018
in EUR million Notes 2018 2017(1)
=============================================== ====== ======= ========
Profit/(Loss) after income tax 187.1 (10.8)
=============================================== ====== ======= ========
Currency translation differences
=============================================== ====== ======= ========
Unrealised results from currency translation (7) (20.3) (49.3)
=============================================== ====== ======= ========
Deferred taxes thereon (17) 0.9 1.7
=============================================== ====== ======= ========
Current taxes thereon 0.0 (0.4)
=============================================== ====== ======= ========
Reclassification to profit or loss 0.0 40.7
=============================================== ====== ======= ========
Deferred taxes thereon 0.0 (5.7)
=============================================== ====== ======= ========
Current taxes thereon 0.0 (0.5)
=============================================== ====== ======= ========
Cash flow hedges
=============================================== ====== ======= ========
Unrealised fair value changes (53) (6.8) 0.6
=============================================== ====== ======= ========
Deferred taxes thereon (17) 1.8 (0.1)
=============================================== ====== ======= ========
Reclassification to profit or loss (53) 0.0 0.5
=============================================== ====== ======= ========
Deferred taxes thereon (17) 0.0 (0.1)
=============================================== ====== ======= ========
Share of other comprehensive income of joint
ventures and associates (14) 0.1 0.0
=============================================== ====== ======= ========
Items that will be reclassified subsequently
to profit or loss, if necessary (24.3) (12.6)
=============================================== ====== ======= ========
Remeasurement of defined benefit plans
=============================================== ====== ======= ========
Remeasurement of defined benefit plans (28) (11.5) (11.3)
=============================================== ====== ======= ========
Deferred taxes thereon (17) 3.0 2.9
=============================================== ====== ======= ========
Share of other comprehensive income of joint
ventures and associates (14) 0.0 (0.1)
=============================================== ====== ======= ========
Items that will not be reclassified to profit
or loss (8.5) (8.5)
=============================================== ====== ======= ========
Other comprehensive (loss) after income tax (32.8) (21.1)
=============================================== ====== ======= ========
Total comprehensive income/(loss) 154.3 (31.9)
=============================================== ====== ======= ========
attributable to shareholders of RHI Magnesita
N.V. 137.9 (30.7)
=============================================== ====== ======= ========
attributable to non-controlling interests (25) 16.4 (1.2)
=============================================== ====== ======= ========
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
Consolidated Statement of Cash Flows
from 01.01.2018 to 31.12.2018
in EUR million Notes 2018 2017(1)
================================================== ====== ======== ========
Profit/(Loss) after income tax 187.1 (10.8)
================================================== ====== ======== ========
Adjustments for
================================================== ====== ======== ========
income tax 58.9 4.9
================================================== ====== ======== ========
depreciation 124.8 66.2
================================================== ====== ======== ========
amortisation 28.6 13.4
================================================== ====== ======== ========
impairment losses of property, plant and equipment
and intangible assets 0.0 19.8
========================================================== ======== ========
income from the reversal of investment subsidies (0.5) (1.2)
================================================== ====== ======== ========
write-ups/ impairment losses on securities 0.3 1.9
================================================== ====== ======== ========
losses from the disposal of property, plant
and equipment 1.4 1.5
================================================== ====== ======== ========
gains from the disposal of securities and
shares (0.7) 0.0
================================================== ====== ======== ========
losses from the disposal of subsidiaries 0.0 19.3
================================================== ====== ======== ========
net interest expense and derivatives 92.5 13.3
================================================== ====== ======== ========
share of profit of joint ventures and associates (10.1) (11.0)
================================================== ====== ======== ========
other non-cash changes 18.1 82.0
================================================== ====== ======== ========
Changes in
================================================== ====== ======== ========
inventories (56.7) (89.3)
================================================== ====== ======== ========
trade receivables 20.0 12.1
========================================================== ======== ========
other receivables and assets (29.5) 7.6
================================================== ====== ======== ========
provisions (59.4) (15.2)
================================================== ====== ======== ========
trade payables 55.1 111.1
================================================== ====== ======== ========
prepayments received on orders 30.2 9.1
================================================== ====== ======== ========
other liabilities 2.1 20.6
================================================== ====== ======== ========
Cash generated from operations 462.2 255.3
================================================== ====== ======== ========
Income tax paid less refunds (67.9) (41.9)
================================================== ====== ======== ========
Net cash inflow from operating activities (47) 394.3 213.4
================================================== ====== ======== ========
Investments in subsidiaries net of cash acquired 0.0 45.1
========================================================== ======== ========
Proceeds from the sale of subsidiaries net
of cash disposed of 0.0 30.6
================================================== ====== ======== ========
Investments in property, plant and equipment
and intangible assets (122.6) (72.0)
================================================== ====== ======== ========
Cash inflows from the sale of property, plant
and equipment 2.9 2.7
================================================== ====== ======== ========
Investments in/ cash inflows from non-current
receivables 0.4 (0.2)
================================================== ====== ======== ========
Investments in securities (121.2) (11.8)
================================================== ====== ======== ========
Cash inflows from the sale of securities
and shares 118.4 21.8
================================================== ====== ======== ========
Dividends received from joint ventures and
associates 11.0 10.8
================================================== ====== ======== ========
Investment subsidies received 2.1 1.2
================================================== ====== ======== ========
Interest received 8.2 5.1
================================================== ====== ======== ========
Net cash (outflow)/inflow from investing
activities (100.8) 33.3
================================================== ====== ======== ========
Share issue costs (6.2) (3.0)
================================================== ====== ======== ========
Capital contribution to associates (1.4) 0.0
================================================== ====== ======== ========
Proceeds from sale of non-controlling interests 9.2 0.0
================================================== ====== ======== ========
Acquisition of non-controlling interests (80.1) (0.6)
================================================== ====== ======== ========
Dividend payments to shareholders of the
Group (33.6) (29.9)
================================================== ====== ======== ========
Dividend payments to non-controlling interests (1.1) (1.1)
================================================== ====== ======== ========
Proceeds from non-current borrowings and
loans 489.8 459.8
================================================== ====== ======== ========
Repayments of non-current borrowings and
loans (650.9) (375.6)
================================================== ====== ======== ========
Proceeds from current borrowings and loans 245.1 0.0
================================================== ====== ======== ========
Repayments of current borrowings and loans (151.0) 0.0
================================================== ====== ======== ========
Changes in current borrowings 26.4 (8.3)
================================================== ====== ======== ========
Interest payments (71.1) (24.9)
================================================== ====== ======== ========
Cash flows from derivatives (20.1) 8.2
================================================== ====== ======== ========
Net cash (outflow)/inflow from financing
activities (48) (245.0) 24.6
================================================== ====== ======== ========
Total cash flow 48.5 271.3
================================================== ====== ======== ========
Change in cash and cash equivalents 48.5 271.3
================================================== ====== ======== ========
Cash and cash equivalents at beginning of
year 442.4 182.9
================================================== ====== ======== ========
Foreign exchange impact 0.3 (11.8)
================================================== ====== ======== ========
Cash and cash equivalents at year-end (22) 491.2 442.4
================================================== ====== ======== ========
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
Consolidated Statement of Changes in Equity
from 01.01.2018 to 31.12.2018
Additional
Share paid-in Mandatory
in EUR million capital capital reserve
================================================== ========= =========== ==========
Notes (23) (24) (24)
================================================== ========= =========== ==========
31.12.2017(1) 44.8 165.7 288.7
================================================== ========= =========== ==========
Effects of initial application of IFRS 15
(net of tax)
================================================== ========= =========== ==========
Effects of initial application of IFRS 9
(net of tax)
================================================== ========= =========== ==========
01.01.2018 44.8 165.7 288.7
================================================== ========= =========== ==========
Profit after income tax - - -
================================================== ========= =========== ==========
Currency translation differences - - -
================================================== ========= =========== ==========
Market valuation of cash flow hedges - - -
================================================== ========= =========== ==========
Remeasurement of defined benefit plans - - -
================================================== ========= =========== ==========
Share of other comprehensive income of joint
ventures and associates - - -
================================================== ========= =========== ==========
Other comprehensive income after income tax - - -
================================================== ========= =========== ==========
Total comprehensive income - - -
================================================== ========= =========== ==========
Dividends - - -
================================================== ========= =========== ==========
Issue of ordinary shares related to the mandatory
tender offer of Magnesita 3.5 139.8 -
================================================== ========= =========== ==========
Sale of non-controlling interests without
loss of control - - -
================================================== ========= =========== ==========
Acquisition in non-controlling interests
without change of control - - -
================================================== ========= =========== ==========
Share-based payments - - -
================================================== ========= =========== ==========
Transactions with shareholders 3.5 139.8 -
================================================== ========= =========== ==========
31.12.2018 48.3 305.5 288.7
================================================== ========= =========== ==========
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
Additional
Share paid-in Mandatory
in EUR million capital capital reserve
=============================================== ========= =========== ==========
Notes (23) (24) (24)
=============================================== ========= =========== ==========
01.01.2017 289.4 38.3 -
=============================================== ========= =========== ==========
Profit after income tax - - -
=============================================== ========= =========== ==========
Currency translation differences - - -
=============================================== ========= =========== ==========
Cash flow hedges - - -
=============================================== ========= =========== ==========
Remeasurement of defined benefit plans - - -
=============================================== ========= =========== ==========
Share of other comprehensive income of joint
ventures - - -
=============================================== ========= =========== ==========
Other comprehensive income after income tax - - -
=============================================== ========= =========== ==========
Total comprehensive income - - -
=============================================== ========= =========== ==========
Dividends - - -
=============================================== ========= =========== ==========
Issue of ordinary shares related to business
combinations 5.0 174.5 -
=============================================== ========= =========== ==========
Share issue costs, net of tax - (8.8) -
=============================================== ========= =========== ==========
Change in non-controlling interests due to
addition to consolidated companies - - -
=============================================== ========= =========== ==========
Transactions with shareholders 5.0 165.7 -
=============================================== ========= =========== ==========
Disposal of defined benefit plans - - -
=============================================== ========= =========== ==========
Downstream merger from RHI AG to RHI Magnesita
N.V. (249.6) (38.3) 288.7
=============================================== ========= =========== ==========
Reclassifications (249.6) (38.3) 288.7
=============================================== ========= =========== ==========
31.12.2017(1) 44.8 165.7 288.7
=============================================== ========= =========== ==========
Group reserves
================================================
Accumulated other comprehensive
income
====================================
Equity attributable
Defined to shareholders
Retained Cash flow benefit Currency of RHI Magnesita Non-controlling
earnings hedges plans translation N.V. interests Total equity
========== ========== ========= ============= ==================== ================ =============
(24) (24) (24) (24) (25)
========== ========== ========= ============= ==================== ================ =============
281.9 0.1 (107.7) (54.7) 618.8 226.9 845.7
========== ========== ========= ============= ==================== ================ =============
(6.0) (6.0) (0.6) (6.6)
========== ========== ========= ============= ==================== ================ =============
1.8 1.8 - 1.8
========== ========== ========= ============= ==================== ================ =============
277.7 0.1 (107.7) (54.7) 614.6 226.3 840.9
========== ========== ========= ============= ==================== ================ =============
158.1 - - - 158.1 29.0 187.1
========== ========== ========= ============= ==================== ================ =============
- - - (8.5) (8.5) (10.9) (19.4)
========== ========== ========= ============= ==================== ================ =============
- (5.2) - - (5.2) 0.2 (5.0)
========== ========== ========= ============= ==================== ================ =============
- - (6.6) - (6.6) (1.9) (8.5)
========== ========== ========= ============= ==================== ================ =============
- - - 0.1 0.1 - 0.1
========== ========== ========= ============= ==================== ================ =============
- (5.2) (6.6) (8.4) (20.2) (12.6) (32.8)
========== ========== ========= ============= ==================== ================ =============
158.1 (5.2) (6.6) (8.4) 137.9 16.4 154.3
========== ========== ========= ============= ==================== ================ =============
(33.6) - - - (33.6) (1.2) (34.8)
========== ========== ========= ============= ==================== ================ =============
- - - - 143.3 - 143.3
========== ========== ========= ============= ==================== ================ =============
7.2 - - 0.2 7.4 1.7 9.1
========== ========== ========= ============= ==================== ================ =============
(59.4) 0.1 0.1 (10.9) (70.1) (158.4) (228.5)
========== ========== ========= ============= ==================== ================ =============
1.0 - - - 1.0 - 1.0
========== ========== ========= ============= ==================== ================ =============
(84.8) 0.1 0.1 (10.7) 48.0 (157.9) (109.9)
========== ========== ========= ============= ==================== ================ =============
351.0 (5.0) (114.2) (73.8) 800.5 84.8 885.3
========== ========== ========= ============= ==================== ================ =============
Group reserves
================================================
Accumulated other comprehensive
income
====================================
Equity attributable
Defined to shareholders
Retained Cash flow benefit Currency of RHI Magnesita Non-controlling Total
earnings hedges plans translation N.V. interests equity
========== ========== ========= ============= ==================== ================ ========
(24) (24) (24) (24) (25)
========== ========== ========= ============= ==================== ================ ========
331.0 (0.7) (100.3) (49.0) 508.7 15.3 524.0
========== ========== ========= ============= ==================== ================ ========
(17.4) - - - (17.4) 6.6 (10.8)
========== ========== ========= ============= ==================== ================ ========
- - - (5.7) (5.7) (7.8) (13.5)
========== ========== ========= ============= ==================== ================ ========
- 0.8 - 0.8 0.1 0.9
========== ========== ========= ============= ==================== ================ ========
- - (8.3) - (8.3) (0.1) (8.4)
========== ========== ========= ============= ==================== ================ ========
- - (0.1) - (0.1) - (0.1)
========== ========== ========= ============= ==================== ================ ========
- 0.8 (8.4) (5.7) (13.3) (7.8) (21.1)
========== ========== ========= ============= ==================== ================ ========
(17.4) 0.8 (8.4) (5.7) (30.7) (1.2) (31.9)
========== ========== ========= ============= ==================== ================ ========
(29.9) - - - (29.9) (1.2) (31.1)
========== ========== ========= ============= ==================== ================ ========
- - - - 179.5 - 179.5
========== ========== ========= ============= ==================== ================ ========
- - - - (8.8) - (8.8)
========== ========== ========= ============= ==================== ================ ========
- - - - 0.0 214.0 214.0
========== ========== ========= ============= ==================== ================ ========
(29.9) - - - 140.8 212.8 353.6
========== ========== ========= ============= ==================== ================ ========
(1.0) - 1.0 - - - -
========== ========== ========= ============= ==================== ================ ========
(0.8) - - - - - -
========== ========== ========= ============= ==================== ================ ========
(1.8) - 1.0 - - - -
========== ========== ========= ============= ==================== ================ ========
281.9 0.1 (107.7) (54.7) 618.8 226.9 845.7
========== ========== ========= ============= ==================== ================ ========
PRINCIPLES AND METHODS
Notes
to the Consolidated Financial Statements 2018
1. General
RHI Magnesita N.V. (the "Company"), a public company with
limited liability under Dutch law is registered with the Dutch
Trade Register of the Chamber of Commerce under the number 68991665
and has its corporate seat in Arnhem, Netherlands. The
administrative seat and registered office is located at
Kranichberggasse 6, 1120 Vienna, Austria.
The Company and its subsidiaries, associates and joint ventures
(the "Group") is a global industrial group whose core activities
comprise of the development and production, sale, installation and
maintenance of high-grade refractory products and systems used in
industrial high-temperature processes exceeding 1,200degC. The
Group supplies customers in the steel, cement, lime, glass and
nonferrous metals industries. In addition, the Group's products are
used in the environment (waste incineration), energy (refractory
construction) and chemicals (petrochemicals) sectors.
The shares of RHI Magnesita N.V. are listed on the Main Market
of the London Stock Exchange and are included in the FTSE 250
Index.
RHI Magnesita N.V. was incorporated on 20 June 2017 and became
the ultimate parent of the RHI Magnesita Group as of 26 October
2017, after completing the corporate restructuring of RHI AG. Until
then, RHI AG was the ultimate parent of the Group. This
restructuring represented a common control transaction that had no
impact on the Consolidated Financial Statements, except for the
reclassification of individual equity components.
The financial year of RHI Magnesita N.V. and the Group
corresponds to the calendar year. If the financial years of
subsidiaries included in the Consolidated Financial Statements do
not end on 31 December due to local legal requirements, a special
set of financial statements are prepared for the purpose of
consolidation. The reporting date of the Indian subsidiaries is 31
March.
The Consolidated Financial Statements for the period from 1
January to 31 December 2018 were drawn up in accordance with all
International Financial Reporting Standards (IFRSs) mandatory at
the time of preparation as adopted by the European Union (EU). The
presentation in the Consolidated Statement of Financial Position
distinguishes between current and non-current assets and
liabilities. Assets and liabilities are classified as current if
they are due within one year or within a longer normal business
cycle or if the Company does not have an unconditional right to
defer settlement of the liability for at least 12 months after the
reporting date. Inventories as well as trade receivables and trade
payables are generally presented as current items. Deferred tax
assets and liabilities as well as assets and provisions for
pensions and termination benefits are generally presented as
non-current items.
The Consolidated Statement of Profit or Loss is drawn up in
accordance with the cost of sales method. Under this method,
revenue is offset against the expenses incurred to generate it,
which are allocated to the functions production, sales and
administration.
With the exception of specific items such as derivative
financial instruments and plan assets for defined benefit
obligations, the Consolidated Financial Statements are prepared on
a historical cost basis.
The preparation of the Consolidated Financial Statements in
agreement with generally accepted accounting principles under IFRS,
as adopted by the EU, requires the use of estimates and assumptions
that influence the amount and presentation of assets and
liabilities recognised as well as the disclosure of contingent
assets and liabilities as of the reporting date and the recognition
of income and expenses during the reporting period. Although these
estimates reflect the best knowledge of the management based on
experience from comparable transactions, the actual values
recognised at a later date may differ from these estimates.
All amounts in the Notes and tables are shown in EUR million,
unless indicated otherwise. For computational reasons, rounding
differences may occur.
The Annual Report was authorised for issue on 26 March 2019 and
is subject to adoption at the Annual General Meeting of
shareholders on 6 June 2019.
2. Initial application of new financial reporting standards
In 2018, the Group has applied for the first time a number of
new standards and interpretations as well as amendments to IFRSs
issued by the International Accounting Standards Board (IASB) that
are mandatorily effective for an accounting period that begins on
or after
1 January 2018.
Effects on RHI Magnesita
Publication Consolidated Financial
Standard Title (EU endorsement)(1) Statements
======== ====================================== ===================== =========================
New standards and interpretations
================================================ ===================== =========================
24.07.2014
IFRS
9 Financial Instruments (22.11.2016) No material effects
======== ====================================== ===================== =========================
28.05.2014/
11.09.2015
IFRS Timing differences in
15 Revenue from Contracts with Customers (22.09.2016) revenue recognition
======== ====================================== ===================== =========================
12.04.2016
IFRS Clarifications to IFRS 15 Revenue Timing differences in
15 from Contracts with Customers (31.10.2017) revenue recognition
======== ====================================== ===================== =========================
08.12.2016
IFRIC Foreign Currency Transactions and
22 Advance Consideration (28.03.2018) No effect
======== ====================================== ===================== =========================
08.12.2016
Annual improvements to IFRS Standards
Various 2014-2016 Cycle (07.02.2018) No effect
======== ====================================== ===================== =========================
Amendments of standards
================================================ ===================== =========================
08.12.2016
IAS 40 Transfers of Investment Property (14.03.2018) Not relevant
======== ====================================== ===================== =========================
20.06.2016
IFRS Classification and Measurement of
2 Share-based Payment Transactions (26.02.2018) No effect
======== ====================================== ===================== =========================
12.09.2016
IFRS Applying IFRS 9 Financial Instruments
4 with IFRS 4 Insurance Contracts (03.11.2017) Not relevant
======== ====================================== ===================== =========================
1 According to EU Endorsement Status Report of 11.02.2019.
IFRS 9 "Financial Instruments"
IFRS 9 was published in July 2014 and endorsed by the European
Union on 22 November 2016. It is to be applied effective 1 January
2018. IFRS 9 includes revised guidance on classification and
measurement of financial instruments, including a new expected
credit loss model for calculating impairment on financial assets
and new general hedge accounting requirements. The standard
replaces existing guidance in IAS 39 Financial Instruments:
Recognition and Measurement. RHI Magnesita implemented IFRS 9 on 1
January 2018 using the modified retrospective approach, meaning
that the 2017 comparative numbers in the 2018 Consolidated
Financial Statements are not restated. The impact of IFRS 9 as of 1
January 2018 amounting to EUR1.8 million was recognised in equity -
additional information on that effect is disclosed in the table at
the end of Note (2) summarising the effects of the initial
application of IFRS 9 and IFRS 15. No reclassifications between
different components of equity were required due to the initial
application of IFRS 9.
With regard to the revised classification and measurement
principles, IFRS 9 contains three classification categories:
"measured at amortised cost", "fair value through other
comprehensive income" and "fair value through profit or loss". The
standard eliminates the existing IAS 39 categories: "loans and
receivables", "held to maturity" and "available-for-sale". The
resulting effect of the reclassification of the financial assets
due to the adoption of IFRS 9 was immaterial.
Subsequent accounting differences may arise due to the new
classification under IFRS 9. Shares in investment funds that were
previously classified as "available-for-sale", with respective
changes in fair value accounted for through other comprehensive
income, are now classified as "fair value through profit or loss"
as the payments made in connection with the funds do not solely
constitute payments of principal and interest. Changes in fair
value are therefore recognised in profit or loss. In addition,
equity instruments from the "at amortised cost" and
"available-for-sale" categories were classified as "fair value
through profit or loss".
For the category "measured at amortised cost", IFRS 9 replaces
the previously applied incurred loss model under IAS 39 with the
expected loss model. The expected loss model implies a three-stage
model for financial assets. Stage 1 is applied when the credit risk
has not risen significantly and an investment grade rating exists.
Consequently, a risk provision for credit losses expected from
possible default events within the next twelve months has to be
recognised. Stage 2 is applied when the credit risk of receivables
has risen significantly, in which case a risk provision amounting
to the expected credit losses that result from all default events
over the remaining term of the instrument has to be recognised.
Stage 3 is equivalent to default. IFRS 9 requires a simplified
impairment approach for trade receivables and contract assets that
do not contain a significant financing component. With this
simplified approach, the risk provision is to be recognised
according to Stage 2. Therefore, the expected credit losses are
recognised over the remaining term of the instrument. The initial
application effect in equity resulting from the impairment of trade
receivables after deduction of deferred taxes amounted to EUR1.8
million, which is shown in retained earnings.
In accordance with the transition provisions for hedge
accounting laid out in IFRS 9, the Group applied the IFRS 9 hedge
accounting requirements prospectively from the date of initial
application on 1 January 2018. The Group's qualifying hedging
relationships in place as at 1 January 2018 also qualify for hedge
accounting according to IFRS 9 and were therefore regarded as
continuing hedging relationships.
The following table provides information about the impact of
IFRS 9 only. It states each class of financial assets and financial
liabilities as well as the respective carrying amounts under the
original category IAS 39 compared to the new IFRS 9 category.
Original Carrying Carrying
measurement Measurement amount as amount as
category category per IAS 39 per IFRS
in EUR million(1) IAS 39(2) IFRS 9(2) 31.12.2017(3) 9 01.01.2018
=========================================== ============== ============= =============== ==============
Interests in subsidiaries not consolidated
(FAAC) AC FVPL 0.8 0.8
=========================================== ============== ============= =============== ==============
Available-for-sale investments (AfS) FVOCI FVPL 0.4 0.4
=========================================== ============== ============= =============== ==============
Available-for-sale securities (AfS) FVOCI FVPL 12.6 12.6
=========================================== ============== ============= =============== ==============
Available-for-sale shares (AfS) FVOCI FVPL 2.4 2.4
=========================================== ============== ============= =============== ==============
Securities designated as fair value
through profit or loss (FAFVTPL) FVPL FVPL 2.3 2.3
=========================================== ============== ============= =============== ==============
Interest derivatives designated
as cash flow hedges - - 1.5 1.5
=========================================== ============== ============= =============== ==============
Non-current receivables from disposal
of subsidiaries (LaR) AC AC 2.6 2.6
=========================================== ============== ============= =============== ==============
Other non-current financial receivables
(LaR) AC AC 2.5 2.5
=========================================== ============== ============= =============== ==============
Trade and other current receivables(4)
(LaR) AC AC 412.5 414.9
=========================================== ============== ============= =============== ==============
Other current financial receivables
(LaR) AC AC 0.1 0.1
=========================================== ============== ============= =============== ==============
Financial assets held for trading
- securities (FAHfT) FVPL FVPL 32.3 32.3
=========================================== ============== ============= =============== ==============
Financial assets held for trading
- derivatives (FAHfT) FVPL FVPL 1.7 1.7
=========================================== ============== ============= =============== ==============
Cash and cash equivalents (LaR) AC AC 442.4 442.4
=========================================== ============== ============= =============== ==============
Financial assets 914.1 916.5
========================================================================== =============== ==============
Liabilities to financial institutions
(FLAAC) AC AC 953.0 953.0
=========================================== ============== ============= =============== ==============
Perpetual bonds (FLAAC) AC AC 215.3 215.3
=========================================== ============== ============= =============== ==============
Senior notes (FLAAC) AC AC 55.6 55.6
=========================================== ============== ============= =============== ==============
Other financial liabilities (FLAAC) AC AC 1.7 1.7
=========================================== ============== ============= =============== ==============
Financial liabilities held for trading
- derivatives (FLHfT) FVPL FVPL 40.9 40.9
=========================================== ============== ============= =============== ==============
Liabilities to fixed-term or puttable
non-controlling interests (FLAAC) AC AC 32.0 32.0
=========================================== ============== ============= =============== ==============
Contingent consideration for acquired
subsidiaries (FLFVTPL) FVPL FVPL 0.6 0.6
=========================================== ============== ============= =============== ==============
Trade payables and other current
liabilities(5) (FLAAC) AC AC 507.0 507.0
=========================================== ============== ============= =============== ==============
Financial liabilities 1,806.1 1,806.1
========================================================================== =============== ==============
1 FAAC: Financial assets at amortised cost.
AfS: Available for sale financial instruments.
LaR: Loans and receivables.
FAHfT: Financial assets held for trading.
FLAAC: Financial liabilities measured at amortised cost.
FLHfT: Financial liabilities held for trading.
FLFVTPL: Financial liabilities measured at fair value through
profit or loss.
2 FVPL: Financial assets/financial liabilities measured at fair
value through profit or loss.
AC: Financial assets/financial liabilities measured at amortised
cost.
FVOCI: Financial assets measured at fair value through other
comprehensive income.
3 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
4 Thereof non-financial receivables per 01.01.2018: EUR110.1
million.
5 Thereof non-financial liabilities per 01.01.2018: EUR171.2
million.
In addition to this table, a change took place for receivables
from long-term construction contracts previously accounted for
using the percentage of completion method according to IAS 11.
These receivables were reclassified from non-financial receivables
to financial receivables and are now included in trade and other
current receivables in accordance with IFRS 15.
IFRS 15 "Revenue from Contracts with Customers"
IFRS 15 replaces IAS 18 "Revenue" and IAS 11 "Construction
Contracts" as well as the corresponding interpretations. RHI
Magnesita Group applied IFRS 15 using the modified retrospective
approach with effect as of 1 January 2018. The cumulative effect of
initial application was therefore recognised as an adjustment to
the opening balance of retained earnings as of 1 January 2018
without restating the comparable period. Changes from the initial
application of IFRS 15 arose in the following areas:
-- Revenue from the delivery of products is recognised at the
point in time when control over the products is passed to the
customer, which is determined based on the individual Incoterms
rules agreed in the customer contract. In the course of contracts
for the delivery of refractory products, control of the goods is
passed to the customer typically when physical possession has been
transferred to the customer. Therefore, for the Incoterms rules CPT
(Carriage paid to), CIP (Carriage and Insurance paid to) as well as
for CFR (Cost and Freight) and CIF (Cost, Insurance and Freight) it
was determined, that the time of passing control deviates from the
time of transfer of significant risks and rewards. As a result,
revenue will be recognised at a later point in time than previously
under IAS 18. Therefore, the effect from the initial application of
IFRS 15 resulted in a reduction of trade and other current
receivables in the amount of EUR28.4 million and in an increase of
inventories in the amount of EUR19.9 million. The negative equity
effect from the reversal of revenue from the delivery of products,
after deduction of deferred taxes, amounted to EUR6.6 million as of
1 January 2018.
-- Changes in presentation of expected penalty fees were
necessary. Previously, expected penalty fees were recognised as
provisions, whereas according to IFRS 15 they are considered as
variable consideration and therefore shown as either a contract
liability or refund liability. Consequently, a total amount of
EUR4.3 million was reclassified from current provisions to trade
payables and other current liabilities as of 1 January 2018 in the
Consolidated Statement of Financial Position.
-- Receivables from long-term construction contracts in the
amount of EUR11.7 million were reclassified to trade receivables
within the same item of the Consolidated Statement of Financial
Position trade and other current receivables as of 1 January 2018
because RHI Magnesita's right to consideration is
unconditional.
The summary of the effects on the individual positions of the
Statement of Financial Position from the initial application of
IFRS 15 as of
1 January 2018 is shown in the table at the end of this Note.
For the purpose of the transition to IFRS 15, the Group did not
apply the available optional practical expedients.
The following tables show the effects of IFRS 15 for the
Consolidated Statement of Financial Position as of 31 December 2018
and the Consolidated Statement of Profit or Loss from 1 January to
31 December 2018.
31.12.2018
without
31.12.2018 Adjustments application
in EUR million as reported IFRS 15 of IFRS 15
============================================= ============= ============ =============
Inventories 717.8 (25.0) 692.8
============================================= ============= ============ =============
Trade and other current receivables 481.2 25.6 506.8
============================================= ============= ============ =============
Current assets 1,747.2 0.6 1,747.8
============================================= ============= ============ =============
ASSETS 3,539.0 0.6 3,539.6
============================================= ============= ============ =============
Group reserves 752.2 5.5 757.7
============================================= ============= ============ =============
Equity attributable to the shareholders 800.5 5.5 806.0
============================================= ============= ============ =============
Non-controlling interests 84.8 0.1 84.9
============================================= ============= ============ =============
Equity 885.3 5.6 890.9
============================================= ============= ============ =============
Trade payables and other current liabilities 756.9 (10.5) 746.4
============================================= ============= ============ =============
Income tax liabilities 32.2 1.7 33.9
============================================= ============= ============ =============
Current provisions 53.0 3.8 56.8
============================================= ============= ============ =============
Current liabilities 1,178.7 (5.0) 1,173.7
============================================= ============= ============ =============
EQUITY AND LIABILITIES 3,539.0 0.6 3,539.6
============================================= ============= ============ =============
Adjustments without application
in EUR million as reported IFRS 15 of IFRS 15
=========================================== ============ ============ ====================
Revenue 3,081.4 32.3 3,113.7
=========================================== ============ ============ ====================
Cost of sales (2,344.5) (25.0) (2,369.5)
=========================================== ============ ============ ====================
Gross profit 736.9 7.3 744.2
=========================================== ============ ============ ====================
EBIT 398.6 7.3 405.9
=========================================== ============ ============ ====================
Profit before income tax 246.0 7.3 253.3
=========================================== ============ ============ ====================
Income tax (58.9) (1.7) (60.6)
=========================================== ============ ============ ====================
Profit after income tax 187.1 5.6 192.7
=========================================== ============ ============ ====================
attributable to the shareholders 158.1 4.9 163.0
=========================================== ============ ============ ====================
attributable to non-controlling interests 29.0 0.7 29.7
=========================================== ============ ============ ====================
Summary of the effects of the initial application of IFRS 9 and
IFRS 15
Effects of Effects of
the initial the initial
application application
of of
in EUR million 31.12.2017(1) IFRS 9 IFRS 15 01.01.2018
======================================== ============== ============= ============= ===========
Deferred tax assets 140.1 (0.6) 1.7 141.2
======================================== ============== ============= ============= ===========
Non-current assets 1,845.7 (0.6) 1.7 1,846.8
======================================== ============== ============= ============= ===========
Inventories 654.5 0.0 19.9 674.4
======================================== ============== ============= ============= ===========
Trade and other current receivables 522.6 2.4 (28.4) 496.6
======================================== ============== ============= ============= ===========
Current assets 1,667.1 2.4 (8.5) 1,661.0
======================================== ============== ============= ============= ===========
ASSETS 3,512.8 1.8 (6.8) 3,507.8
======================================== ============== ============= ============= ===========
Group reserves 574.0 1.8 (6.0) 569.8
======================================== ============== ============= ============= ===========
Equity attributable to the shareholders 618.8 1.8 (6.0) 614.6
======================================== ============== ============= ============= ===========
Non-controlling interests 226.9 0.0 (0.6) 226.3
======================================== ============== ============= ============= ===========
Equity 845.7 1.8 (6.6) 840.9
======================================== ============== ============= ============= ===========
Deferred tax liabilities 64.7 0.0 (0.2) 64.5
======================================== ============== ============= ============= ===========
Non-current liabilities 1,619.9 0.0 (0.2) 1,619.7
======================================== ============== ============= ============= ===========
Trade payables and other current
liabilities 678.2 0.0 4.3 682.5
======================================== ============== ============= ============= ===========
Current provisions 93.7 0.0 (4.3) 89.4
======================================== ============== ============= ============= ===========
EQUITY AND LIABILITIES 3,512.8 1.8 (6.8) 3,507.8
======================================== ============== ============= ============= ===========
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
3. Other changes in comparative information
Consolidated Statement of Financial Position
The Statement of Financial Position per 31 December 2017 was
adjusted for the final fair values of the acquired assets and
liabilities of Magnesita. The details of the effects are shown in
Note (5) Group of consolidated companies under Acquisition of
Magnesita.
Consolidated Statement of Profit or Loss
The Statement of Profit or Loss 2017 was adjusted for the
effects of the subsequent measurement of the values determined in
the final purchase price allocation of Magnesita.
Additionally, in order to improve comparability with other FTSE
350 companies and ensure better understanding of the entity's
financial performance, certain items in the Statement of Profit or
Loss 2017 were reclassified. As of 31 December 2017, the effect on
revenue amounted to EUR4.0 million, on gross profit to EUR(23.3)
million, on EBIT to EUR50.8 million and on net finance costs to
EUR(50.8) million. Variable commissions in the amount of EUR(27.3)
million as of 31 December 2017 were reclassified from selling and
marketing expenses to cost of sales and the expenses for strategic
and merger-related projects (2017: EUR24.4 million) are now
presented in other expenses, instead of general and administrative
expenses. Variable commissions are costs directly linked with
revenue. This reclassification should ensure better interpretation
of these costs. Foreign exchange gains and losses as well as the
effects from derivatives were reclassified from other income and
expenses to a separate line item in net finance costs which is
called "Net expense on foreign exchange effects and related
derivatives". This reclassification was done because the majority
of foreign exchange effects are incurred due to financing
activities and the effects from derivatives are related to foreign
exchange effects.
Additionally, interest expenses on borrowings are now reported
as a separate item due to its significance. Other net financial
expenses include all remaining financial income and expenses. The
information for the previous year was adjusted accordingly.
Consolidated Statement of Cash Flows
Cash flows from derivatives in the amount of EUR8.2 million were
reclassified from cash flow from operating activities to net cash
flow from financing activities because they are related to foreign
exchange effects of financing activities.
Segment reporting
In 2018, RHI Magnesita reorganised its internal structure and
reporting. The activities formerly concentrated in the Raw material
segment are now split between the Steel and Industrial segment.
Each segment serves different customers and generates exclusively
external revenue. The gross profit serves the management of the RHI
Magnesita Group for internal performance management. The profit of
joint ventures and associates, net finance costs and income taxes
are managed on a group basis and are not allocated. The information
for the previous year was adjusted accordingly.
4. New financial reporting standards not yet applied
The Group has chosen to not early adopt the following new and
revised IFRSs, that have been issued by the IASB, but are not yet
mandatory:
Expected effects
on RHI Magnesita
Publication Mandatory application Consolidated
Standard Title (EU endorsement)(1) for RHI Magnesita Financial Statements
======== ===================================== ===================== ====================== ======================
New standards
=============================================== ===================== ====================== ======================
IFRS Prepayment Features with Negative 12.10.2017
9 Compensation (22.03.2018) 01.01.2019 No effect
======== ===================================== ===================== ====================== ======================
13.01.2016
IFRS Material effects
16 Leases (31.10.2017) 01.01.2019 expected
======== ===================================== ===================== ====================== ======================
IFRIC Uncertainty over Income Tax 07.06.2017
23 Treatments (23.10.2018) 01.01.2019 No effect
======== ===================================== ===================== ====================== ======================
Amendments of standards
=============================================== ===================== ====================== ======================
Long-term Interests in Associates 12.10.2017
IAS 28 and Joint Ventures (08.02.2019) 01.01.2019 No effect
======== ===================================== ===================== ====================== ======================
1 According to EU Endorsement Status Report of 11.02.2019.
IFRS 16 "Leases"
General impact of application of IFRS 16 Leases
The accounting standard IFRS 16, which was issued in January
2016, supersedes IAS 17 "Leases" and the related interpretations
and is applicable to financial years beginning on or after 1
January 2019. Accounting for the lessor according to IFRS 16 is
comparable to the current regulations. In contrast, accounting will
change fundamentally for the lessee with the application of IFRS
16. In future, most leases will have to be recognised as assets and
liabilities in the Statement of Financial Position of the lessee,
regardless of whether they are considered operating or financing
leases under the previous criteria of IAS 17.
According to IFRS 16, a lessee recognises a right of use, which
represents his right to use the underlying asset, and a liability
from the lease, which reflects the obligation of lease payments.
Exemptions are provided for short-term leases and assets of minor
value. Moreover, the type of expenses related to these leases will
change since IFRS 16 replaces the straight-line expenses for
operating leases with a depreciation charge for rights of use and
interest expenses for liabilities from the lease. In the
Consolidated Statement of Cash Flows, there is a shift from cash
flow from operating activities to cash flow from financing
activities since the repayment of leasing liabilities must in any
case be shown as cash flow from financing activities.
RHI Magnesita has chosen the modified retrospective application
of IFRS 16 in accordance with IFRS 16:C5(b). Consequently, the
Group will not restate the comparative information.
RHI Magnesita will make use of the practical expedient available
on transition to IFRS 16 not to reassess whether a contract is or
contains a lease. Accordingly, the definition of a lease in
accordance with IAS 17 and IFRIC 4 will continue to apply to those
leases entered or modified before 1 January 2019.
The change in definition of a lease mainly relates to the
concept of control. IFRS 16 distinguishes between leases and
service contracts on the basis of whether the use of an identified
asset is controlled by the customer. Control is considered to exist
if the customer has:
-- The right to obtain substantially all of the economic
benefits from the use of an identified asset; and
-- The right to direct the use of that asset.
RHI Magnesita will apply the definition of a lease and related
guidance set out in IFRS 16 to all lease contracts entered into or
modified on or after 1 January 2019.
Impact on Lessee Accounting
IFRS 16 has no economic impact on the Group. It has no effect on
how the business is run, nor on cash flows for the Group. It does
however have a significant impact on the way the assets,
liabilities and the Statement of Profit or Loss of the Group are
presented, as well as the classification of cash flows relating to
lease contracts.
On initial application of IFRS 16, for all leases (except as
noted below), RHI Magnesita will:
-- Recognise right-of-use assets and lease liabilities in the
Consolidated Statement of Financial Position, initially measured at
the present value of the future lease payments;
-- Recognise depreciation of right-of-use assets and interest on
lease liabilities in the Consolidated Statement of Profit or
Loss;
-- Separate the total amount of cash paid into a principal
portion (presented within financing activities) and interest
(presented within operating activities) in the Consolidated
Statement of Cash Flows.
Furthermore, on initial application RHI Magnesita will make use
of the following practical expedients:
-- Applying a single discount rate to a portfolio of leases with
reasonably similar characteristics;
-- Relying on its assessment of whether leases are onerous
immediately before the date of initial application as an
alternative to performing impairment review;
-- Treating leases for which the lease term ends within 12
months of the date of initial application as short-term leases.
For short-term leases (lease term of 12 months or less) and
leases of low-value assets, the RHI Magnesita Group will opt to
recognise a lease expense on a straight-line basis as permitted by
IFRS 16.
Based on a preliminary assessment, it is expected that the RHI
Magnesita Group will recognise right-of-use assets and
corresponding lease liabilities of EUR62.0 million in respect of
all these leases. The impact on profit or loss is estimated to be a
decrease in other expenses by EUR13.3 million, an increase in
depreciation by EUR12.6 million and an increase in interest expense
by EUR0.6 million.
Under IAS 17, all lease payments on operating leases are
presented as part of cash flows from operating activities. Under
IFRS 16, the cash generated by operating activities is expected to
increase by EUR13.3 million and the net cash outflow in financing
activities is expected to increase by the same amount.
For existing finance leases RHI Magnesita does not expect an
impact on the amounts recognised in the Group's Consolidated
Statement of Financial Position.
The following financial reporting standards were issued by the
IASB, but had not yet been adopted by the EU at the time of the
preparation of the RHI Magnesita Consolidated Financial
Statements:
Expected effects
Mandatory application on RHI Magnesita
for Consolidated
Standard Title Publication(1) RHI Magnesita Financial Statements
======== ============================= =============== ====================== ======================
New standards and interpretations
======================================= =============== ====================== ======================
IFRS 14 Regulatory Deferral Accounts 30.01.2014 No EU endorsement Not relevant
======== ============================= =============== ====================== ======================
IFRS 17 Insurance Contracts 18.05.2017 01.01.2021 Not relevant
======== ============================= =============== ====================== ======================
Amendments of standards
======================================= =============== ====================== ======================
IAS 1, No material
IAS 8 Definition of Material 31.10.2018 01.01.2020 effects
======== ============================= =============== ====================== ======================
Plan Amendment, Curtailment No material
IAS 19 or Settlement 07.02.2018 01.01.2019 effects
======== ============================= =============== ====================== ======================
IFRS 3 Business Combinations 22.10.2018 01.01.2020 No effect
======== ============================= =============== ====================== ======================
Amendments to References to
the Conceptual Framework in
Various IFRS Standards 29.03.2018 01.01.2020 No effect
======== ============================= =============== ====================== ======================
Annual Improvements to IFRSs
Various 2015-2017 Cycle 12.12.2017 01.01.2019 No effect
======== ============================= =============== ====================== ======================
1 According to EU Endorsement Status Report of 11.02.2019.
5. Group of consolidated companies
Changes in the group of consolidated companies in the previous
year
Acquisition of Magnesita
On 26 October 2017, RHI Magnesita N.V. via its indirect,
wholly-owned subsidiary Dutch Brasil Holding B.V. obtained control
in Magnesita Refratários S.A. and its subsidiaries (Magnesita)
after acquiring 50% plus one share and corresponding voting rights
in Magnesita Refratários S.A. The acquisition led to a cash inflow
of EUR50.2 million (purchase price paid of EUR117.3 million less
acquired cash and cash equivalents of EUR167.5 million).
The fair values of the acquired assets and liabilities at the
acquisition date have been adjusted according to IFRS 3 compared to
the Consolidated Financial Statements 2017 over the course of the
measurement period. The final fair values of the assets and
liabilities recognised as a result of the acquisition are presented
as follows:
Preliminary Adjustments Final fair
in EUR million fair value made value
============================================= ============ ============ ===========
Property, plant and equipment 439.0 251.2 690.2
============================================= ============ ============ ===========
Other intangible assets 161.4 160.2 321.6
============================================= ============ ============ ===========
thereof customer relationships 122.0 (20.0) 102.0
============================================= ============ ============ ===========
thereof mining rights 0.0 185.1 185.1
============================================= ============ ============ ===========
Investments in joint ventures and associates 9.9 (9.1) 0.8
============================================= ============ ============ ===========
Other non-current financial assets 4.3 0.0 4.3
============================================= ============ ============ ===========
Other non-current assets 16.3 0.0 16.3
============================================= ============ ============ ===========
Deferred tax assets 49.9 (35.5) 14.4
============================================= ============ ============ ===========
Inventories 244.7 1.0 245.7
============================================= ============ ============ ===========
Trade and other current receivables 175.6 (7.4) 168.2
============================================= ============ ============ ===========
Income tax receivables 9.2 0.0 9.2
============================================= ============ ============ ===========
Other current financial assets 42.7 0.0 42.7
============================================= ============ ============ ===========
Cash and cash equivalents 166.2 0.0 166.2
============================================= ============ ============ ===========
Assets held for sale 33.6 0.0 33.6
============================================= ============ ============ ===========
Non-current financial liabilities (550.8) 0.0 (550.8)
============================================= ============ ============ ===========
Deferred tax liabilities (0.3) (91.6) (91.9)
============================================= ============ ============ ===========
Provisions for pensions (81.0) 0.0 (81.0)
============================================= ============ ============ ===========
Other personnel provisions (1.5) 0.0 (1.5)
============================================= ============ ============ ===========
Other non-current provisions (51.7) (62.9) (114.6)
============================================= ============ ============ ===========
Other non-current liabilities (2.0) 0.0 (2.0)
============================================= ============ ============ ===========
Current financial liabilities (131.4) 0.0 (131.4)
============================================= ============ ============ ===========
Current derivative financial liabilities (0.2) 0.0 (0.2)
============================================= ============ ============ ===========
Trade and other current liabilities (238.4) (6.8) (245.2)
============================================= ============ ============ ===========
Income tax liabilities (10.1) 0.0 (10.1)
============================================= ============ ============ ===========
Current provisions (25.8) (21.4) (47.2)
============================================= ============ ============ ===========
Liabilities relating to assets held for
sale (9.4) 0.0 (9.4)
============================================= ============ ============ ===========
Net assets 250.2 177.7 427.9
============================================= ============ ============ ===========
Non-controlling interest (125.1) (88.9) (214.0)
============================================= ============ ============ ===========
Proportional share of net assets acquired 125.1 88.8 213.9
============================================= ============ ============ ===========
Goodwill 171.7 (88.8) 82.9
============================================= ============ ============ ===========
Purchase price 296.8 0.0 296.8
============================================= ============ ============ ===========
The goodwill of EUR82.9 million essentially reflects expected
synergies achieved by optimising production capacities and cost
structure as well as new business of the enlarged Group. Goodwill
is not deductible for tax purposes. The goodwill has been allocated
to cash-generating unit Steel - Linings in the amount of EUR82.1
million and to cash-generating unit Industrial - Raw Material in
the amount of
EUR0.8 million.
The table below provides information on the carrying amount of
goodwill:
in EUR million
=========================================================== =======
Preliminary goodwill recognised per acquisition date as at
31 December 2017 171.7
=========================================================== =======
Adjustments relating to business combination fair values (88.8)
=========================================================== =======
Exchange rate differences 2017 (1.4)
=========================================================== =======
Goodwill recognised as at 31 December 2017 81.5
=========================================================== =======
Exchange rate differences 2018 (1.7)
=========================================================== =======
Goodwill recognised as at 31 December 2018 79.8
=========================================================== =======
Non-controlling interests have been measured at their
proportionate share of Magnesita's identifiable net assets.
Material adjustments to final fair values since prior reporting
date
Intangible assets arising from non-patented technology and
customer relationships were recognised in the purchase price
allocation to the amount of EUR11.5 million and EUR102.0 million
respectively. Discounted cash flow models were applied to value
these intangible assets. The reason for the fair value adjustment
of customer relations was that higher quality information was
obtained over the course of the reporting period. Furthermore,
since the valuation of property, plant and equipment was not
completed as of 31 December 2017, valuation of intangible assets
arising from customer relationships could not be considered final.
The increase in the value of property, plant and equipment in the
measurement period reduced the fair value of the customer
relationships to a varying degree because of the associated higher
contributory asset charges.
As at the previous financial reporting date, the preliminary
fair value of property, plant and equipment was approximated by
using mainly historical book values because the technical valuation
was not completed at the majority of the production sites. After
completion of the valuation of property, plant and equipment within
the measurement period, fair value amounts to EUR690.2 million and
was determined by external appraisers applying a replacement cost
approach.
As part of the business combination, the Group recognised
intangible assets for mining rights arising from three significant
mines in Brazil and the USA. These were initially not recognised as
at 31 December 2017, as insufficient data was available at that
time. After finalisation of the purchase price allocation fair
value of the mining rights amounts to EUR185.1 million. The
intangible assets arising from mining rights were valued using
discounted cash flow models, based on the life-of-mine plans as at
the acquisition date. Expected cash flows are based on estimates of
future production, margins, operating costs and forecast capital
expenditure. The value of PPE items that form part of the mines
(but valued separately) was deducted from the value of the mining
rights in order to avoid double counting.
The total amortisation of the acquired technology, mining
rights, and customer relationships in the current reporting period
amounts to EUR11.2 million (11-12/2017: EUR2.2 million). The total
depreciation of property, plant and equipment increased by EUR37.1
million in 2018
(11-12/2017: EUR6.3 million) as a result of the fair value
adjustments.
A liability for an unfavourable contract was recognised as at
the previous reporting date, the value of which has been adjusted
and finalised during the measurement period. The fair value of the
liability amounts to EUR109.3 million. This value was calculated
using a discounted cash flow model based on foregone profits
compared to market conditions, the term of the contract,
assumptions of future costs and an appropriate discount rate. The
provision for an unfavourable contract has been amortised by
EUR10.0 million (11-12/2017: EUR1.6 million) in other income and
EUR(8.7) million (11-12/2017: EUR(1.0) million) were accrued as
interest expense in the current reporting period.
The Group was required - in accordance with the share purchase
agreement (SPA) and Brazilian laws and regulations - to make a
mandatory public offer in Brazil which had to be addressed to all
remaining Magnesita shareholders and had to be made on the same
terms and conditions as those made available to the Sellers under
the SPA, including as to purchase price and form of consideration.
The Group decided to combine the mandatory offer with a so-called
"delisting tender offer" in an Integrated Tender Offer (ITO) and
has filed with the Brazilian Securities Commission the respective
request. The launch of the ITO was communicated to the minority
shareholders on 10 November 2018.
Magnesita shareholders received the option of selling each
Magnesita share in exchange of:
(i) R$18.46, adjusted by SELIC (the Brazilian benchmark interest
rate) from 26 October 2017 until the date of the settlement of the
auction of the Integrated Tender Offer, plus 0.1998 RHI Magnesita
shares or
(ii) a cash-only alternative consideration.
The consideration of the cash-only alternative offer was the
highest between:
(i) R$31.09, adjusted by SELIC from 26 October 2017 until the
date of the settlement of the auction of the Integrated Tender
Offer, and
(ii) R$35.56, not adjusted by SELIC.
In the course of the first close of the ITO, the Group acquired
an additional 35.2% of shares in Magnesita, increasing its
ownership from 50% plus one share to 85.2% as of 31 December 2018.
The fair value of the consideration is EUR228.5 million and
includes a cash part in the amount of EUR85.2 million, including
transaction costs, and the issue of 3,518,008 new ordinary shares
of RHI Magnesita N.V. These shares were delivered to the minority
shareholders and admitted to trading on the London Stock Exchange's
main market on 17 December 2018. The closing price of GBP36.62 per
share on that day was used for the determination of the fair value
of the issued ordinary shares totalling up to EUR143.3 million. The
cash part of the consideration has been settled on 20 December 2018
and 35.2% of the Magnesita shares were transferred to the Group.
The carrying amount of Magnesita's net assets in the Group's
Consolidated Financial Statements on the date of acquisition was
EUR450.0 million. Consequently, the carrying amount of
non-controlling interests acquired amounts to EUR158.4 million.
This transaction results in a decrease in equity attributable to
shareholders of RHI Magnesita N.V. in the amount of EUR70.1
million.
Subsequent to the first close of the ITO, the remaining
shareholders had three months to elect from the two options
("Supervening Acquisition Period"), which ended on 10 March 2019.
These effects are disclosed in Note (63).
Companies of the RHI Magnesita Group
The main operating companies of the RHI Magnesita Group and
their core business activities are as follows:
Country of Core business
Name and registered office of the company core activity activity
============================================= =============== ====================
Didier-Werke Aktiengesellschaft, Germany Germany Production
============================================= =============== ====================
Mining, production,
Magnesit Anonim Sirketi, Turkey Turkey sales
============================================= =============== ====================
Magnesita Mineração S.A., Brazil Brazil Mining
============================================= =============== ====================
Mining, production,
Magnesita Refractories Company, USA USA sales
============================================= =============== ====================
Magnesita Refractories GmbH, Germany Germany Production
============================================= =============== ====================
Production,
Magnesita Refratários S.A., Brazil International sales
============================================= =============== ====================
Production,
Orient Refractories Limited, India India sales
============================================= =============== ====================
Production,
sales, provision
RHI Canada Inc., Canada Canada of services
============================================= =============== ====================
Sales, R&D,
RHI Magnesita GmbH, Austria International financing
============================================= =============== ====================
RHI GLAS GmbH, Germany International Sales
============================================= =============== ====================
RHI Refractories (Dalian) Co., Ltd., PR China PR China Production
============================================= =============== ====================
Production,
sales, provision
RHI US Ltd., USA USA of services
============================================= =============== ====================
RHI-Refmex, S.A. de C.V., Mexico Latin America Sales
============================================= =============== ====================
Veitsch-Radex GmbH & Co OG, Austria Austria Mining, production
============================================= =============== ====================
6. Methods of consolidation
Subsidiaries
Subsidiaries are companies over which RHI Magnesita N.V.
exercises control. Control exists when the company has the power to
decide on the relevant activities, is exposed, or has rights, to
variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the
investee.
The acquisition method is used to account for all business
combinations. The purchase price for shares is offset against the
proportional share of net assets based on the fair value of the
acquired assets and liabilities at the date of acquisition or when
control is obtained. Intangible assets which were previously not
recognised in the separate Financial Statements of the company
acquired are also measured at fair value. Intangible assets
identified when a company is acquired, including for example
technology, mining rights and customer relations, are only measured
separately at the time of acquisition if they are identifiable and
are in the control of the company and a future economic benefit is
expected.
For acquisitions where less than 100% of shares in companies are
acquired, IFRS 3 allows an accounting policy choice whereby either
goodwill proportionate to the share held or goodwill including the
share accounted for by non-controlling interests can be recognised.
This accounting policy choice can be exercised for each
acquisition. For the acquisition of Magnesita, non-controlling
interests have been measured at their proportionate share of
Magnesita's identifiable net assets.
If the initial accounting for a business combination is
incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for the
items for which the accounting is incomplete. Those provisional
amounts are adjusted within twelve months of the acquisition to
reflect new information about facts and circumstances that existed
as of the acquisition date.
After completing the purchase price allocation, the determined
goodwill is allocated to the relevant cash-generating unit and
tested for impairment. In accordance with the provisions of IFRS 3,
negative goodwill is immediately recognised to profit or loss in
other income after renewed measurement of the identifiable assets,
liabilities and contingent liabilities.
Net assets of subsidiaries not attributable to RHI Magnesita
N.V. are shown separately under equity as non-controlling
interests. The basis for non-controlling interests is the equity
after adjustment to the accounting and measurement principles of
the RHI Magnesita Group and proportional consolidation entries.
Transaction costs which are directly related to business
combinations are expensed as incurred. Contingent consideration
included in the purchase price is recorded at fair value at initial
consolidation.
When additional shares are acquired in entities already included
in the Consolidated Financial Statements as subsidiaries, the
difference between the purchase price and the proportional carrying
amount in the subsidiary's net assets is offset against
shareholders' equity. Gains and losses from the sale of shares are
recorded in equity unless they lead to a loss of control.
For step acquisitions the difference between the carrying amount
to be transferred and the fair value at initial full consolidation,
is realised through profit or loss.
All intragroup results are fully eliminated.
In accordance with IAS 12, deferred taxes are calculated on
temporary differences arising from the consolidation.
Subsidiaries are deconsolidated on the day control ends.
Joint ventures and associates
Shares in joint ventures and associates are accounted for using
the equity method. A joint venture is a joint arrangement between
the RHI Magnesita Group and one or several other partners whereby
the parties that have joint control over the arrangement have
rights to the net assets of the arrangement.
An associate is an entity over which the RHI Magnesita Group has
significant influence. Significant influence is the power to
participate in the investee's financial and operating policy
decisions without control or joint control. There is the rebuttable
presumption that if a company holds directly or indirectly 20% of
the shares of the investee or has other abilities (e.g. through
seats in the supervisory board) to influence the company's
financial and operating policy decisions it has significant
influence.
At the date of acquisition, a positive difference between the
acquisition costs and the share in the fair values of identified
assets and liabilities of the joint ventures and associates is
determined and recognised as goodwill. Goodwill is shown as part of
investments in joint ventures and associates in the Statement of
Financial Position.
The acquisition cost of investments accounted for using the
equity method is adjusted each year to reflect the change in the
equity of the individual joint venture or associate that is
attributable to the RHI Magnesita Group. Unrealised intragroup
results from transactions are offset against the carrying amount of
the investment on a pro-rata basis during consolidation, if
material.
RHI Magnesita examines at every reporting date whether there
exist any objective indications of an impairment of the shares in
joint ventures and associates. If such indications exist, the
required impairment is determined as the difference between the
recoverable amount and the carrying amount of the joint ventures
and associates and recognised in profit and loss in the item share
of profit of joint ventures and associates.
The Financial Statements of the companies accounted for using
the equity method are prepared in accordance with uniform
accounting and measurement methods throughout the Group.
7. Foreign currency translation
Functional currency and presentation currency
The Consolidated Financial Statements are presented in Euro,
which represents the functional and presentation currency of RHI
Magnesita N.V.
The items included in the Financial Statements of each group
company are based on the currency of the primary economic
environment in which the company operates (functional
currency).
Foreign currency transactions and balances
Foreign currency transactions in the individual Financial
Statements of Group companies are translated into the functional
currency based on the exchange rate in effect on the date of the
transaction. Gains and losses arising from the settlement of such
transactions and the measurement of monetary assets and liabilities
in foreign currencies at the closing rate are recognised in profit
or loss undernet expense on foreign exchange effects and related
derivatives. Unrealised currency translation differences from
monetary items which form part of a net investment in a foreign
operation are recognised in other comprehensive income in equity.
Non-monetary items in foreign currency are carried at historical
rates.
Group companies
The Annual Financial Statements of foreign subsidiaries that
have a functional currency differing from the Group presentation
currency are translated into Euros as follows:
Assets and liabilities are translated at the closing rate on the
reporting date of the Group, while monthly income and expenses and
consequently the profit for the year as presented in the Statement
of Profit or Loss are translated at the respective closing rates of
the previous month. Differences resulting from this translation
process and differences resulting from the translation of amounts
carried forward from the prior year are recorded under other
comprehensive income without recognition to profit or loss. Monthly
cash flows are translated at the respective closing rates of the
previous month. Goodwill and adjustments to the fair value of
assets and liabilities related to the purchase price allocations of
a subsidiary outside the European currency area are recognised as
assets and liabilities of the respective subsidiary and translated
at the closing rate.
RHI Magnesita has evaluated the effect of applying IAS 29
"Financial Reporting in Hyperinflationary Economies" in Argentina
with the conclusion that the effect on the Consolidated Financial
Statements is considered immaterial to the Group.
The Euro exchange rates of currencies important for the RHI
Magnesita Group are shown in the following table:
Closing rate Average rate(1)
========= ======================== ==================
Currencies 1 EUR = 31.12.2018 31.12.2017 2018 2017
====================== ========= =========== =========== ======== ========
Argentine Peso ARS 43.10 22.93 32.58 18.65
====================== ========= =========== =========== ======== ========
Brazilian Real BRL 4.44 3.96 4.29 3.60
====================== ========= =========== =========== ======== ========
Canadian Dollar CAD 1.56 1.50 1.53 1.46
====================== ========= =========== =========== ======== ========
Chilean Peso CLP 793.69 735.00 753.18 733.37
====================== ========= =========== =========== ======== ========
Chinese Renminbi Yuan CNY 7.87 7.78 7.81 7.61
====================== ========= =========== =========== ======== ========
Indian Rupee INR 79.88 76.40 80.45 73.36
====================== ========= =========== =========== ======== ========
Mexican Peso MXN 22.49 23.56 22.70 21.27
====================== ========= =========== =========== ======== ========
Norwegian Krone NOK 9.94 9.85 9.62 9.30
====================== ========= =========== =========== ======== ========
Pound Sterling GBP 0.90 0.89 0.89 0.87
====================== ========= =========== =========== ======== ========
Swiss Franc CHF 1.13 1.17 1.15 1.11
====================== ========= =========== =========== ======== ========
South African Rand ZAR 16.46 14.75 15.45 15.02
====================== ========= =========== =========== ======== ========
US Dollar USD 1.14 1.20 1.18 1.12
====================== ========= =========== =========== ======== ========
1 Arithmetic mean of the monthly closing rates.
8. Principles of accounting and measurement
Goodwill
Goodwill is recognised as an asset in accordance with IFRS 3. It
is tested for impairment at least once each year, or when events or
a change in circumstances indicate that the asset could be
impaired.
In accordance with IFRS 3, negative goodwill is recognised
through profit or loss immediately after a new assessment of the
identified assets, liabilities and contingent liabilities.
Other intangible assets
Mining rights were recognised in the course of the purchase
price allocation for Magnesita and are amortised based on the
depletion of the related mines. Depletion is calculated based on
the volume mined in the period in proportion to the total estimated
volume.
Customer relations were recognised in the course of purchase
price allocations of acquired subsidiaries and are amortised on a
straight-line basis over the expected period of useful life.
Research costs are expensed in the year incurred and included
under general and administrative expenses.
Development costs are only capitalised if the allocable costs of
the intangible asset can be measured reliably during its
development period. Moreover, capitalisation requires that the
product or process development can be clearly defined, is feasible
in technical, economic and capacity terms and is intended for own
use or sale. In addition, future cash inflows which cover not only
normal costs but also the related development costs must be
expected. Capitalised development costs are amortised on a
straight-line basis over the expected useful life, however, with a
maximum useful life of ten years, and recognised in cost of
sales.
The development costs for internally generated software are
expensed as incurred if their primary purpose is to maintain the
functionality of existing software. Expenses that can be directly
and conclusively allocated to individual programmes and represent a
significant extension or improvement over the original condition of
the software are capitalised as production costs and added to the
original purchase price of the software. These direct costs include
the personnel expenses for the development team as well as a
proportional share of overheads. Software is predominantly
amortised on a straight-line basis over a period of four years.
Purchased intangible assets are measured at acquisition cost,
which also includes acquisition-related costs, less accumulated
amortisation and impairments. Intangible assets with a finite
useful life are amortised on a straight-line basis over the
expected period of useful life. The following table shows the most
important useful lives:
Customer relationships 6 to 15 years
====================== ==============
Patents 7 to 18 years
====================== ==============
Brand rights 20 years
====================== ==============
30 to 65
Land use rights years
====================== ==============
Software 4 years
====================== ==============
Property, plant and equipment
Property, plant and equipment is measured at acquisition or
production cost, less accumulated depreciation and accumulated
impairments. These assets are depreciated on a straight-line basis
over the expected useful life, calculated pro rata from the month
the asset is available for use.
Leased property, plant and equipment that qualifies as a finance
lease, is capitalised at the market value of the asset or the lower
present value in accordance with IAS 17. The leased assets are
depreciated on a systematic basis over the useful life. The payment
obligations resulting from future lease instalments are discounted
and recorded as liabilities. Current lease payments are apportioned
between a finance charge and the amortisation of the outstanding
liability. As of the reporting date, the amount of property, plant
and equipment leased through finance leases is low. All other
leases are treated as operating leases with payments expensed.
Production costs of internally generated assets comprise direct
costs as well as a proportionate share of capitalisable overheads
and borrowing costs. If financing can be specifically allocated to
an investment, borrowing costs are capitalised as production costs.
If no direct connection can be made, the average rate on borrowed
capital of the Group is used as the capitalisation rate due to the
central funding of the Group.
Expected demolition and disposal costs at the end of an asset's
useful life are capitalised as part of acquisition cost and
recorded as a provision. The criteria for this treatment are a
legal or constructive obligation towards a third party and the
ability to prepare a reliable estimate.
Real estate, land and plant under construction are not
depreciated. Depreciation of other material property, plant and
equipment is based on the following useful lives in the RHI
Magnesita Group:
15 to 50
Factory and office buildings years
========================================= ==============
Land improvement 8 to 30 years
========================================= ==============
Crusher machines and mixing facilities 8 to 20 years
========================================= ==============
10 to 12
Presses years
========================================= ==============
Tunnel, rotary and shaft kilns 50 years
========================================= ==============
20 to 30
Other calcining and drying kilns years
========================================= ==============
Cars, other plant, furniture and fixtures 3 to 35 years
========================================= ==============
The residual values and economic useful lives are reviewed
regularly and adjusted if necessary.
When components of plant or equipment have to be replaced at
regular intervals, the relevant replacement costs are capitalised
as incurred if the criteria per IAS 16 have been met. The carrying
amount of the replaced components is derecognised. Regular
maintenance and repair costs are expensed as incurred.
Gains or losses from the disposal of property, plant and
equipment, which result as the difference between the net
realisable value and the carrying amount, are recognised as income
or expense in the Consolidated Statement of Profit or Loss.
Impairment of property, plant and equipment, goodwill and other
intangible assets
Property, plant and equipment and intangible assets, including
goodwill, are tested for impairment if there is any indication that
the value of these items may be impaired. Intangible assets with an
indefinite useful life and goodwill are tested for impairment at
least annually.
An asset is considered to be impaired if its recoverable amount
is less than the carrying amount. The recoverable amount of an
asset is the higher of its fair value less costs of disposal and
its value in use (present value of future cash flows). If the
carrying amount is higher than the recoverable amount, an
impairment loss equivalent to the resulting difference is
recognised in the Statement of Profit or Loss. If the reason for an
impairment loss recognised in the past for property, plant and
equipment and for other intangible assets ceases to exist, a
reversal of impairment on the amortised acquisition and production
costs is recognised to profit or loss.
In the case of impairments related to cash-generating units
(CGU) which contain goodwill, existing goodwill is initially
reduced. If the required impairment exceeds the carrying amount of
goodwill, the difference is apportioned proportionately to the
remaining non-current tangible and intangible assets of the CGU.
Reversals of impairment losses recognised on goodwill are not
permitted and are therefore not considered. The effects of
impairment tests at the CGU level are shown separately in the
Statement of Profit or Loss.
If there is an indication for an impairment of a specific asset,
only this specific asset will be tested for impairment. The
recoverable amount is determined through fair value. If the fair
value is lower than the carrying amount, an impairment loss is
recorded in EBIT or, in the case of restructuring, in restructuring
costs.
Cash-generating units (CGU)
In the RHI Magnesita Group the individual assets do not generate
cash inflows independent of one another; therefore, no recoverable
amount can be presented for individual assets. As a result, the
assets are combined in CGUs, which largely generate independent
cash inflows. These units are combined in strategic business units
and reflect the market presence and the market appearance and are
as such responsible for cash inflows. CGU's are determined based on
group of assets that can generate cash inflows independent of other
assets.
The organisational structures of the Group reflect these units.
In addition to the joint management and control of the business
activities in each unit, the sales know-how, the knowledge of RHI
Magnesita's long-standing customer relationships or knowledge of
the customer's production facilities and processes further support
these units. Product knowledge is manifested in the
application-oriented knowledge of chemical, physical and thermal
properties of RHI Magnesita products. The services offered extend
over the life cycle of RHI Magnesita products at the customer's
plant, from the appropriate installation and support of optimal
operations, to environmentally sound disposal with the customer or
the sustainable reuse in RHI Magnesita's production process. These
factors determine cash inflow to a significant extent and
consequently form the basis for the CGU structures of RHI
Magnesita.
The CGUs of the strategic business unit Steel are Linings and
Flow Control. These two units are determined according to the
production stages in the process of steel production.
In the Industrial Division, each industry line of business
(glass, cement/lime, non-ferrous metals and environment, energy,
chemicals) forms a separate CGU. All raw material producing
facilities with the exception of Norway are combined in one
CGU.
The plant in Porsgrunn, Norway, is not included in the raw
materials unit, but treated as a separate CGU because a management
team was installed specifically for the coordination and
implementation of the optimisation measures due to the dimension
and the special situation at the Porsgrunn plant. This organisation
goes beyond plant management and also includes sub-tasks of the
administration processes.
As in the previous year, the impairment test is based on the
value in use; the recoverable amount is determined using the
discounted cash flow method and incorporates the terminal value.
The detailed planning of the first five years is congruent with the
strategic business and financial planning. Based on the detailed
planning period, it is geared to a steady-state business
development, which balances out possible economic or other
non-sustainable fluctuations in the detailed planning period and
forms the basis for the calculation of the terminal value. As in
the previous year, the terminal value is based on a growth rate
derived from the difference of the current and the possible degree
of utilisation of the assets.
The net cash flows are discounted using a discount rate that is
calculated taking into account the weighted average cost of capital
of comparable companies (peer group); the corresponding parameters
are derived from capital market information. In addition,
country-specific risk premiums are considered in the weighted
average cost of capital.The discount rate ranges between 10.1% and
13.0% in the year 2018. In the previous year, the discount rates
ranged between 5.7% and 8.6%. The increase of the discount rate
resulted from annual update of the peer group parameters as well as
considering the location of the CGU's assets (as a cash outflows
originator) in the discount rate determination methodology.
Composition of estimated future cash flows
The estimates of future cash flows include forecasts of the cash
flows from continued use. If assets are disposed at the end of
their useful life, the related cash flows are also included in the
forecasts.
A simplified statement of cash flows serves to determine the
cash flows on the basis of strategic business and financial
planning. The forecasts include cash flows from future maintenance
investments. Expansion investments are only taken into account when
there has been a significant cash outflow or significant payment
obligations have been entered into due to services received and it
is sufficiently certain that the investment measure will be
completed. All other expansion investments are not considered; this
applies in particular to expansion investments that have been
decided on but not begun.
Working capital is included in the carrying amount of the CGU;
therefore, the recoverable amount only takes into account changes
in working capital.
Basis for Planning
Basis for the impairment test was the Long Term Plan 2019 to
2025, which was approved by the Board, and developed with the
growth rates used in the forward-looking business plan. To forecast
the CGUs' cash flows, management predicts the growth rate using
external sources for the development of the customer's industries
and expert assumptions. This includes forecasts about the regional
growth of the steel production and the output of the non-steel
clients. In combination with the development of the specific
refractory consumption, which considers also technological
improvements, the growth rates for the individual CGUs are
determined.
2018 2017
================================================= =================================================
Discount Perpetual Discount Perpetual
rate before annuity growth Goodwill rate before annuity growth Goodwill
Tax rate in EUR million tax rate in EUR million
================ ============= ================ ================ ============= ================ ================
Steel Division
- Linings 11.3% 0.9% 88.4 8.6% 0.9% 90.1
================ ============= ================ ================ ============= ================ ================
Steel Division
- Flow Control 11.3% 0.9% 27.3 8.5% 0.9% 28.3
================ ============= ================ ================ ============= ================ ================
The remaining goodwill of EUR1.7 million (31.12.2017: EUR1.8
million) is spread among the remaining CGU's, all of them having
sufficient headroom.
Result of impairment test
Based on the impairment test conducted in the financial year
2018, the recoverability of the assets was demonstrated in all
CGUs.
As in the previous year, no reversals of impairments were made
in the financial year 2018.
Other financial assets and liabilities
Financial assets are classified as at amortised cost, if the
contractual cash flows of the financial asset include solely
payments of principal and interest and they are held in order to
collect the contractual cash flows. If the contractual cash flows
of financial assets include solely payments of principal and
interest, but they are held in order to both collect the
contractual cash flows and sell the financial asset, then the
financial assets are classified as at fair value through other
comprehensive income. If the contractual cash flows of financial
assets do not solely include payments of principal and interest,
then these financial assets are classified as at fair value through
profit or loss.
The Group initially recognises securities on the trading date
when the entity becomes a party to the contractual provisions of
the instruments. All other financial assets and financial
liabilities are initially recognised on the date when they are
originated. Financial instruments, except for trade receivables,
are initially recognised at fair value. Financial assets are
derecognised if the entity transfers substantially all the risks
and rewards or if the entity neither transfers nor retains
substantially all the risks and rewards and has not retained
control. Financial liabilities are derecognised when the
contractual obligations are settled, withdrawn or have expired.
The item other financial assets in the Consolidated Statement of
Financial Position of RHI Magnesita includes shares in
non-consolidated subsidiaries and other investments, securities,
financial receivables and positive fair values of derivative
financial instruments.
The item other financial liabilities includes negative fair
values of derivative financial instruments as well as liabilities
to fixed-term or puttable non-controlling interests.
Shares in non-consolidated subsidiaries, investments in other
companies as well as securities are classified as at fair value
through profit or loss in the RHI Magnesita Group. For materiality
reasons if such financial assets are of minor significance cost
serves as an approximation of fair value. Directly attributable
transaction costs are recognised in profit or loss as incurred.
Securities at fair value through profit or loss are measured at
fair value and changes therein, including any interest income, are
recognised in profit or loss.
Financial receivables are measured at amortised cost applying
the effective interest method. Any doubt concerning the
collectability of the receivables is reflected in the use of the
lower present value of the expected future cash flows according to
the impairment model described below. Foreign currency receivables
are translated at the closing rate.
Derivative financial instruments, which are not part of an
effective hedging relationship in accordance with IFRS 9 or do not
meet the hedge accounting requirements, must be classified as at
fair value through profit or loss and measured at fair value
through profit or loss. In the RHI Magnesita Group, this
measurement category includes derivatives related to purchase
obligations, forward exchange contracts, embedded derivatives in
open orders that are denominated in currencies other than the
functional currency as well as derivative financial instruments in
the form of interest rate swaps.
Derivative financial instruments relating to purchase
obligations are accounted for in accordance with IFRS 9 and concern
a long-term power supply contract which provides for the purchase
of fixed amounts of electricity at fixed prices. The measurement is
made taking into account quoted electricity prices in the futures
market. Based on the fixed amounts of electricity, the cash flows
for the entire term of the contract are initially determined as the
difference between forward rates and contractually fixed prices and
discounted at the reporting date using a cost of borrowing rate
corresponding to the term. The measurement effects resulting from
this electricity derivative are shown as gain or loss from
derivatives from supply contracts in the Statement of Profit or
Loss.
The measurement of forward exchange contracts and embedded
derivatives in open orders denominated in a currency other than the
functional currency is made on a case-by-case basis at the
respective forward rate on the reporting date. These forward rates
are based on spot rates, and also include forward premiums and
discounts. Unrealised valuation gains or losses and results from
the realisation are recognised to the Statement of Profit or Loss
under net expense of foreign exchange effects and related
derivatives. The underlying transactions for the derivatives are
carried at amortised cost.
For derivative financial instruments, which are incorporated in
an effective hedging relationship in accordance with IFRS 9, the
provisions regarding hedge accounting are applied. RHI Magnesita
has concluded derivative financial instruments in the form of
interest rate swaps to hedge the cash flow risk of financial
liabilities carrying variable interest. Hedging transactions are
shown as part of cash flow hedge accounting. The interest rate
swaps as hedging instruments are measured at fair value, which
corresponds to the amount which RHI Magnesita would receive or has
to pay on the reporting date when the financial instrument is
terminated. The fair value is calculated using the interest rates
and yield curves relevant on the reporting date. The effective part
of the fair value changes is initially recorded in other
comprehensive income as an unrealised gain or loss. Only at the
time of the realisation of the underlying transaction, the
contribution of the hedging instrument is shown in the Statement of
Profit or Loss. Ineffective parts of the fair value changes of cash
flow hedges are recognised immediately in the Statement of Profit
or Loss. If the underlying transaction is no longer expected to
take place, the accumulated amount previously recorded in other
comprehensive income is reclassified to the Statement of Profit or
Loss.
Capital shares of non-controlling interests in subsidiaries with
a fixed term are recognised under other financial liabilities in
the Consolidated Statement of Financial Position in accordance with
IAS 32. The liabilities are measured at amortised cost. The share
of profit attributable to non-controlling interests is recognised
under other net financial expenses in the Statement of Profit or
Loss. Dividend payments to non-controlling interests reduce
liabilities.
Furthermore, the RHI Magnesita Group has entered into purchase
obligations with non-controlling shareholders of a subsidiary.
Based on these agreements, the shareholders receive the right to
tender their shares at any time on previously defined conditions.
In this case, IAS 32 provides for carrying a liability in the
amount of the probable future exercise price. The difference
between the estimated liability and the carrying amount of the
non-controlling interest was recognised to equity at the time of
initial recognition without affecting profit or loss. Subsequently,
the liability to puttable non-controlling interests is measured at
amortised cost and changes are recorded in net finance costs.
Impairment of financial assets
Impairment of financial instruments is based on expected credit
losses (ECL). Expected credit losses are defined as the difference
between all contractual cash flows the entity is entitled to
according to the contract and the cash flows that the entity
expects to receive. The measurement of expected credit losses is
generally a function of the probability of default, loss given
default and the exposure at default.
RHI Magnesita recognises a loss allowance for expected credit
losses on investments in debt instruments that are measured at
amortised cost, trade receivables and contract assets. The amount
of expected credit losses is updated at each reporting date to
reflect changes in credit risk since initial recognition of the
respective financial instrument.
The Group recognises lifetime ECL for trade receivables and
contract assets by applying the simplified approach. The expected
credit losses on these financial assets are generally estimated
using a provision matrix based on the Group's historical credit
loss experience for customer groups located in different geographic
regions. Forward-looking information is incorporated in the
determination of the applicable loss rates for trade receivables.
For the Group, the general economic development of the countries in
which it sells its goods and services is the relevant for the
determination if adjustment of the historical loss rates is
necessary.
For all other financial instruments, the Group recognises
lifetime ECL when there has been a significant increase in credit
risk since initial recognition. However, if the credit risk on the
financial instrument has not increased significantly since initial
recognition, the Group measures the loss allowance for that
financial instrument at an amount equal to 12-month ECL.
Lifetime ECL represents the expected credit losses that will
result from all possible default events over the expected life of a
financial instrument. In contrast, 12-month ECL represents the
portion of lifetime ECL that is expected to result from default
events on a financial instrument that are possible within 12 months
after the reporting date.
RHI Magnesita takes use of the practical expedient that if a
financial instrument has an 'investment grade' rating that it is
assumed to be of low credit risk and no significant increase in the
credit risk took place and the expected credit loss is calculated
using the 12 month ECL. Among other factors the Group considers a
significant increase in credit risk to have taken place when
contractual payments are more than 30 days past due.
The Group considers the following as constituting an event of
default, hence leading to a credit-impaired financial asset:
-- significant financial difficulty of the issuer or the borrower;
-- a breach of contract;
-- the lender(s) of the borrower, for economic or contractual
reasons relating to the borrower's financial difficulty, having
granted to the borrower concessions that the lender(s) would not
otherwise consider;
-- it is becoming probable that the borrower will enter
bankruptcy or other financial reorganisation;
-- the disappearance of an active market for that financial
asset because of financial difficulties.
In addition to these factors, RHI Magnesita applies the
presumption in regards to trade receivables, that a default event
has occurred when such receivables are 180 days past due unless the
Group has reasonable and supportable information for anything
different. 180 days past due are used as an objective evidence of
default as this is presumed to reflect the Group's customer
industry.
For those financial instruments where objective evidence of
default is present an individual assessment on expected credit
losses takes place.
Generally, financial instruments are written off when there is
no reasonable expectation of recovery. Financial assets written off
may still be subject to enforcement activities under the Group's
recovery procedures, taking into account legal advice where
appropriate. Any recoveries made are recognised in profit or
loss.
Deferred taxes
Deferred taxes are recognised on temporary differences between
the tax base and the IFRS carrying amount of assets and
liabilities, tax-loss carryforwards and consolidation entries.
Deferred tax assets are recognised on temporary differences to
the extent it is probable that sufficient deferred tax liabilities
exist or that sufficient taxable income before the reversal of
temporary differences is available for the settlement of deductible
temporary differences.
Deferred taxes are recognised on temporary differences relating
to shares in subsidiaries and joint ventures, unless the parent
company is in a position to control the timing of the reversal of
the temporary differences and it is probable that the temporary
differences will not reverse. No temporary differences are
recognised for financial instruments which were issued by
subsidiaries to non-controlling interests and which are classified
as a financial liability in accordance with IFRS.
The calculation of deferred taxes is based on the tax rate
expected in the individual countries at the time the deferred tax
asset is realised or the liability is settled and generally
reflects the enacted or substantively enacted tax rate on the
reporting date. As in the previous year, deferred taxes of the
Austrian group companies are determined at the corporation tax rate
of 25.0%. Deferred tax assets and liabilities of the Brazilian
group companies are measured mainly at 34.0%. Tax rates from 12.5%
to 34.9% (31.12.2017: 12.5% to 35.0%) were applied to the other
companies.
Deferred tax assets and liabilities are offset if there is an
enforceable right to offset current tax receivables against current
tax liabilities, and if the deferred taxes relate to income taxes
due from/to the same tax authorities.
Inventories
Inventories are stated at the lower of cost or net realisable
value as of the reporting date. The determination of acquisition
cost of purchased inventories is based on the average cost.
Finished goods and work in process are valued at fixed and variable
production cost. The net realisable value is the estimated selling
price in the ordinary course of business minus any estimated cost
to complete and to sell the goods. Impairments due to reduced
usability are reflected in the calculation of the net realisable
value.
Trade and other current receivables
Trade receivables are initially measured at the transaction
price according to IFRS 15 and subsequently carried at amortised
cost minus any valuation allowances. Valuation allowances are
calculated in accordance with the simplified approach of the
impairment model for financial instruments (see impairment of
financial assets above).
Receivables denominated in foreign currencies are translated
using the closing rate.
Emission certificates
Emission certificates acquired for a consideration are carried
at cost and recognised to profit and loss in cost of sales when
used up, written down to fair value or sold. In the case of a
shortfall, a provision is recognised equivalent to the fair value
of the lacking emission certificates.
Emission certificates allocated free of charge are not accounted
for. Proceeds from the sale of these rights are recognised as
income.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, cheques
received and cash at banks with an original term of a maximum of
three months. Moreover, shares in money market funds, which are
only exposed to insignificant value fluctuations due to their high
credit rating and investments in extremely short-term money market
instruments and can be converted to defined cash amounts within a
few days at any time, are also recorded under cash equivalents
under IAS 7.
Cash and cash equivalents denominated in foreign currencies are
translated at the closing rate.
Disposal groups held for sale
Non-current assets and disposal groups which can be sold in
their present state and whose sale is highly probable are
classified as held for sale. Assets and liabilities which are
intended to be sold together in a single transaction represent a
disposal group held for sale and are shown separately from other
assets and liabilities in the Statement of Financial Position.
Non-current assets and disposal groups which are classified as
held for sale are carried at the lower of fair value less costs to
sell and carrying amount. Impairments are initially allocated to
existing goodwill and then to the non-current assets on a pro-rata
basis, based on the carrying amount of each individual asset of the
disposal group. Impairments beyond that are allocated to current
assets pursuant to the liquidity principle and recognised through
profit or loss in the item other expenses. Non-current assets are
not depreciated as long as they are classified as held for
sale.
Borrowings and other financial liabilities
Financial liabilities include liabilities to financial
institutions and other lenders and are measured at fair value less
directly attributable transaction costs at initial recognition. In
subsequent measurements these liabilities are measured at amortised
cost applying the effective interest method. Financial liabilities
in foreign currency are translated at the closing rate.
A financial liability is derecognised when the obligation under
the liability is discharged (by payment or legal release),
cancelled or expires.
When an existing financial liability is replaced by another from
the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange
or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The terms are
substantially different if the discounted present value of the cash
flows under the new terms, including any fees paid net of any fees
received and discounted using the original effective interest rate,
is at least 10% different from the discounted present value of the
remaining cash flows of the original financial liability. The
difference in the respective carrying amounts is subsequently
recognised in the Statement of Profit or Loss, including any costs
or fees.
Provisions
Provisions are recognised when the Group incurs a legal or
constructive obligation as a result of past events, and it is
probable that an outflow of resources will be required to meet this
obligation, and the amount of the obligation can be reliably
estimated.
Non-current provisions are measured at their discounted
settlement value as of the reporting date if the discounting effect
is material.
If maturities cannot be estimated, they are shown under current
provisions.
Provisions for pensions
With respect to post-employment benefits, a differentiation is
made between defined contribution and defined benefit plans.
Defined contribution plans limit the company's obligation to the
agreed amount of contributions to earmarked pension plans. The
related expenses are shown in the functional areas and thus in
EBIT. No provisions are necessary.
Defined benefit plans require the company to provide the agreed
amount of benefits to active and former employees and their
dependents, with a differentiation made between pension systems
financed through provisions and pension systems financed by
funds.
For pension plans financed through external funds, the pension
obligation according to the projected unit credit method is netted
out against the fair value of the plan assets. If the plan assets
are not sufficient to cover the obligation, the net obligation is
recognised under provisions for pensions. However, if the plan
assets exceed the obligations, the asset recognised is limited to
reductions of future contribution payments to the plan and is shown
under other non-current assets.
The present value of defined benefit obligations for current
pensions, future pension benefits and similar obligations and the
related expenses are calculated separately for each plan annually
by independent qualified actuaries in accordance with the
provisions of IAS 19. The present value of future benefits is based
on the length of service, expected wage/salary developments and
pension adjustments.
The expense to be recognised in a period includes current and
past service costs, settlement gains and losses, interest expenses
from the interest accrued on obligations, interest income from plan
assets and administration costs paid from plan assets. The net
interest expense is shown separately in net finance costs. All
other expenses related to defined benefit plans are allocated to
the costs of the relevant functional areas.
Actuarial assumptions required to calculate these obligations,
include the discount rate , increases in wages/salaries and
pensions, retirement starting age and probability of employee
turnover and actual claims. The calculation is based on local
demographic parameters.
Interest rates chosen on the basis of the interest on
high-quality corporate bonds issued with adequate maturities and
currencies are applied to determine the present value of pension
obligations. In countries where there is no sufficiently liquid
market for high-quality corporate bonds, the returns on government
bonds are used as a basis.
The rates of increase for wages/salaries were based on an
average of past years, which is also considered to be realistic for
the future.
The fluctuation probabilities were estimated specific to age or
according to seniority.
The retirement age used for the calculation is based on the
respective statutory provisions of the country concerned. The
calculation is based on the earliest possible retirement age
according to the current statutory provisions of the respective
country, among other things depending on gender and date of
birth.
Remeasurement gains and losses are recorded net of deferred
taxes under other comprehensive income in the period incurred.
Other personnel provisions
Other personnel provisions include provisions for termination
benefits, service anniversary bonuses, payments to semi-retirees,
share-based payments and lump-sum settlements.
Provisions for termination benefits are primarily related to
obligations to employees whose employment is subject to Austrian
law.
Employees who joined an Austrian company before 31 December 2002
receive a one-off lump-sum termination benefit as defined by
Austrian labour legislation if the employer terminates the
employment relationship or when the employee retires. The
termination payment depends on the relevant salary at the time of
the termination as well as the number of years of service and
ranges between two and 12 monthly salaries. These obligations are
measured in accordance with IAS 19 using the projected unit credit
method applying an accumulation period of 25 years. Remeasurement
gains and losses are recorded directly to other comprehensive
income after considering tax effects and shown in the Statement of
Comprehensive Income.
For employees who joined an Austrian company after 31 December
2002, employers are required to make regular contributions equal to
1.53% of the monthly wage/salary to a statutory termination benefit
scheme. The company has no further obligations. Claims by employees
to termination benefits are filed with the statutory termination
benefit scheme, while the regular contributions are treated like
defined contribution pension plans and included under personnel
expenses of the functional areas.
Service anniversary bonuses are one-time special payments that
are dependent on the employee's wage/salary and length of service.
The employer is required by collective bargaining agreements or
company agreements to make these payments after an employee has
reached a certain number of uninterrupted years of service with the
same company. Obligations are mainly related to service anniversary
bonuses in Austrian and German group companies. Under IAS 19
service anniversary bonuses are treated as other long-term employee
benefits. Provisions for service anniversary bonuses are calculated
based on the projected unit credit method. Remeasurement gains or
losses are recorded in the personnel costs of the functional areas
in the period incurred.
Local labour laws and other similar regulations require
individual group companies to create provisions for semi-retirement
obligations. The obligations are partially covered by qualified
plan assets and are reported on a net basis in the Statement of
Financial Position.
In 2018, the Remuneration Committee of RHI Magnesita developed a
new Remuneration Policy for the members of senior management of the
Group. Based on this new long-term incentive programme,
share-options are granted. The fair value of these options as well
as any adjustments of the fair value are measured at every
reporting date and recognised in equity.
Obligations for lump-sum settlements are based on company
agreements in individual companies.
Other provisions
Provisions for warranties are created for individual contracts
at the time of the sale of the goods concerned or after the service
has been provided. The amounts of the provisions are based on the
expected or actual warranty claims.
Provisions for restructuring are created providing a detailed
formal restructuring plan has been developed and announced prior to
the reporting date or whose implementation was commenced prior to
the reporting date.
The Group recognises provisions for demolition and disposal
costs and environmental damages. RHI Magnesita's facilities and its
refractory, exploration and mining operations are subject to
environmental and governmental laws and regulations in each of the
jurisdictions in which it operates. These laws govern, among other
things, reclamation or restoration of the environment in mined
areas and the clean-up of contaminated properties. Provisions for
demolition and disposal costs and environmental damages include the
estimated demolition and disposal costs of plants and buildings as
well as environmental restoration costs arising from mining
activities, based on the present value of estimated cash flows of
the expected costs. The estimated future costs of deactivation of
assets are reviewed annually and adjusted, if appropriate.
A provision for a contract obligation is recognised when the
expected benefits to be derived from a contract are lower than the
unavoidable cost of meeting its obligations under the contract. The
non-current provisions are measured at the present value of the
unavoidable costs of meeting the obligation under the contract
which exceed the economic benefits expected to arise from that
contract.
Provisions for labour and civil contingencies are recognised for
all risks referring to legal proceedings that represent probable
loss. Assessment of the likelihood of loss includes analysis of
available evidence, including the opinion of internal and external
legal advisors of the RHI Magnesita Group.
Trade payables and other current liabilities
These liabilities are initially recognised at fair value, and
subsequently measured at amortised cost.
Liabilities denominated in foreign currencies are translated at
the closing rate.
Government grants
Government grants to promote investments are recognised as
deferred income and released through profit or loss over the useful
life of the relevant asset distributed on a straight-line
basis.
Grants that were granted as compensation for expenses or losses
are recognised to profit or loss in the periods in which the
subsidised expenses are incurred. In the RHI Magnesita Group, they
mainly include grants for research and employee development. Grants
for research are recorded as income in general and administrative
expenses.
Revenue and expenses
Revenue from the sale of goods and services is recognised at an
amount that reflects the consideration to which the Group expects
to be entitled in exchange for those goods or services. The
transaction price is the expected consideration to be received, to
the extent that it is highly probable that there will not be a
significant reversal of revenue in future periods. If the
consideration in a contract includes a variable amount, the Group
estimates the amount of consideration to which it will be entitled
in exchange for transferring the goods or services to the customer.
The variable consideration is estimated at contract inception and
constrained until it is highly probable that a significant revenue
reversal in the amount of cumulative revenue recognised will not
occur when the associated uncertainty with the variable
consideration is subsequently resolved. The average credit term is
60 days upon transfer of goods or service. The Group is using the
practical expedient in IFRS 15 and does not adjust the promised
amount of consideration for the effects of a significant financing
component if it expects, at contract inception, that the period
between the transfer of the promised good or service to the
customer and payment will be one year or less. At contract
inception, the Group identifies the goods or services promised in
the contract and assesses which of the promised goods or services
shall be identified as separate performance obligations. Promised
goods or services give rise to separate performance obligations if
they are capable of being distinct. Revenue is recognised as
control is transferred, either over time or at a point of time.
Control is defined as the ability to direct the use of and obtain
substantially all of the economic benefits from an asset.
With regard to delivery contracts of refractory products the
goods promised are distinct and control of the goods is passed to
the customer typically when physical possession has been
transferred to the customer. The transport service does not give
rise to a separate performance obligation to which a part of
revenue would have to be allocated, as this service is performed
before control of the products is transferred to the customer.
In consignment arrangements, RHI Magnesita Group ships products
to a customer but retains control of the goods until a
predetermined event occurs. Revenue is not recognised on delivery
of the products to the customer if the delivered products are held
on consignment, but generally when the withdrawal of the products
from the consignment stock occurs. Most of the products within
consignment arrangements have a high stock turn rate.
The Group provides services (e.g. supervision, installation)
that are either sold separately or bundled together with the sale
of products to a customer. Contracts for bundled sales of products
and installation services are comprised of two performance
obligations as the promises to transfer products and provide
services are capable of being distinct and separately identifiable.
Accordingly, the transaction price allocated is based on the
relative stand-alone selling prices of the product and services.
Revenue from services is recognised over time, using an input
method to measure progress towards complete satisfaction of the
service, because the customer simultaneously receives and consumes
the benefits provided by the Group.
Contracts for bundled sales of refractory products and
non-refractory products (e.g. machines) provided to the customer
free of charge comprise two performance obligations that are
separately identifiable. Consequently, the Group allocates the
transaction price based on the relative stand-alone selling prices
of these performance obligations and also allocates revenue to the
non-refractory product which is delivered free of charge.
For contracts in the Steel segment with variable payment
arrangements (transaction price depends on the customer's
production performance) the management has determined that the
promise to transfer each of the products and services to the
customer is not separately identifiable from all the other promises
in the context of such contracts. Thus, only one single performance
obligation, the performance of a management refractory service,
exists. Further information is provided under Note (10). With
regard to these contracts, revenue is recognised over time on the
basis using the output-oriented method (e.g. quantity of steel
produced in the customer aggregate serviced).
Expected penalty fees from guaranteed durabilities when using
refractory products are considered as a variable consideration in
the form of a contract or a refund liability. Based on the expected
value method, the amount of the variable consideration is
estimated. The estimation of the variable consideration is not
subject to a constraint as the Group has significant experience
with promising durabilities. Thus, it is concluded that a
significant reversal of revenue is highly unlikely once the
uncertainty no longer exists. All other warranties guarantee that
the transferred products correspond to the contractually agreed
specifications and are classified as assurance type warranties.
Consequently, no separate distinct performance obligation to the
customer exists.
If transfer of goods or services to a customer is performed
before the customer pays consideration or before payment is due, a
contract asset, excluding any amounts presented as a receivable is
recognised. A contract asset is an entity's right to consideration
in exchange for goods or services that the entity has transferred
to a customer.
If a customer pays consideration before the entity transfers a
good or service to the customer, the entity shall present the
contract as a contract liability when the payment is made or the
payment is due (whatever is earlier). A contract liability is an
entity's obligation to transfer goods or services to a customer for
which the entity has received consideration (or an amount of
consideration is due) from the customer.
Contract costs are the incremental costs of obtaining a contract
and must be recognised as an asset if the company expects to
recover those costs. As a practical expedient, RHI Magnesita
expenses such costs when incurred, if the amortisation period would
be 12 months or less.
In general, the term of customer contracts in accordance with
IFRS 15 is no longer than one year. Therefore, the Group decided,
as a practical expedient, not to disclose the remaining performance
obligations for contracts with original expected duration of less
than one year.
Expenses are recognised to the Statement of Profit or Loss when
a service is consumed or the costs are incurred.
Interest income and expenses are recognised in accordance with
the effective interest method.
Dividends from investments that are not accounted for using the
equity method are recognised to profit and loss at the time the
legal claim arises.
Income taxes are recognised according to the local regulations
applicable to each company. Current and deferred income taxes are
recognised in the Statement of Profit or Loss unless they are
related to items which were recorded directly in equity or in other
comprehensive income. In such a case, income taxes are also
recorded in equity or other comprehensive income.
RHI Magnesita GmbH, Vienna, Austria, acts as the head of a
corporate tax group. A tax compensation agreement was concluded in
2017 between the head of the group and eight Austrian group
members. According to the group and tax compensation agreement, the
members of the group have to pay a positive tax compensation of 20%
of the taxable profit to the head of the group if the result is
positive, as long as tax loss carry forwards exist with the head of
the group; subsequently 25% of the taxable profit have to be paid.
In case of a tax loss of the group member, the head of the group
has to pay a negative tax compensation to the member of the group,
with a rate of 12.5% being applied insofar as the loss can be
utilised within the group. In case the losses of a group member
were compensated (negative tax allocation payment) and this group
member generates taxable income within the next three years (after
compensation), the positive tax allocation amounts to 12.5%. In
case of a loss in the tax group, an unused tax loss of a group
member is retained and offset against future taxable profits of the
group member. When the contract is terminated, a compensation
payment is agreed for unused tax losses of a group member, which
were allocated to the head of the group.
In Germany, Didier-Werke Aktiengesellschaft, Wiesbaden, acts as
the head of a tax group for corporate and trade tax purposes. The
seven tax group members are obliged to transfer their profit or
loss to Didier-Werke Aktiengesellschaft based on a profit or loss
transfer agreement. Additionally, Didier-Werke Aktiengesellschaft,
Wiesbaden, acts as the head of a tax group for VAT purposes with
nine German tax group members. Furthermore, Rearden G Holdings Eins
GmbH, Hagen, acts as the head of a two-level structure tax group
with four group members for corporate, trade tax and VAT
purposes.
9. Segment reporting
The RHI Magnesita Group comprises the operating segments Steel
and Industrial. The segmentation of the business activities
reflects the internal control and reporting structures and is
regularly reported to the Chief Executive Officer.
The Steel segment specialises in supporting customers in the
steel-producing and steel-processing industry. The Industrial
segment serves customers in the glass, cement/lime, nonferrous
metals and environment, energy, chemicals industries. The main
activities of the two segments consist of market development,
global sales of high-grade refractory bricks, mixes and special
products as well as providing services at the customers' sites.
The globally located manufacturing sites, which extract and
process raw materials, are combined in one organisational unit. The
allocation of manufacturing cost of the production plants to the
Steel and Industrial Divisions is based on the supply flow.
Statements of Profit or Loss up to gross profit are available
for each segment. The gross profit serves the management of the RHI
Magnesita Group for internal performance management. Selling and
marketing expenses, general and administrative expenses, other
income and expenses, profit of joint ventures, net finance costs
and income taxes are managed on a group basis and are not
allocated.
Segment assets include trade receivables and inventories, which
are available to the operating segments and are reported to the
management for control and measurement, as well as property, plant
and equipment, goodwill and other intangible assets, which are
allocated to the segments based on the capacity of the assets
provided to the segments. All other assets are not allocated. The
recognition of segment assets is determined on the basis of the
accounting and measurement methods applied to the IFRS Consolidated
Financial Statements.
Data on revenue by country are disclosed by the sites of the
customers. Data on non-current assets (goodwill, intangible assets
and property, plant and equipment) are disclosed on the basis of
the respective locations of the companies of the RHI Magnesita
Group.
10. Critical accounting judgments and key sources of estimation
uncertainty
The RHI Magnesita Group used forward-looking assumptions and
estimates, especially with respect to business combinations,
non-current assets, valuation adjustments to inventories and
receivables, provisions and income taxes to a certain extent in the
application of accounting and measurement methods.
The estimates are based on comparable values in the past, plan
data and other findings regarding transactions to be accounted. The
actual values may ultimately deviate from the assumptions and
estimates made. The resulting changes in value of assets,
liabilities, revenue and expenses are accounted for in the
reporting period in which the change is made and in the affected
future reporting periods.
Critical accounting judgments
Revenue recognition
For customer contracts in the Steel segment with variable
payment arrangements where transaction price depends on the
customer's production performance, (e.g. quantity of steel produced
in the customer aggregate serviced) the management has determined
that the promise to transfer each of the products and services to
the customer is not separately identifiable from the other promises
in the context of such contracts. The customer expects complete
refractory management for the agreed product areas in the steel
plant in order to enable steel production. Thus, only one single
performance obligation, performance of a management refractory
service, exists.
There are no other critical accounting judgments made in the
preparation of the Consolidated Financial Statements.
Key sources of estimation uncertainty
Business combinations (initial consolidation)
Estimates relating to the calculation of fair values of acquired
assets, liabilities and contingent liabilities are required within
the context of business combinations.
If intangible assets are identified, estimates are necessary for
the determination of fair values by means of discounted cash flows,
including the duration, amount of future cash flows, and discount
rate. When determining the fair value of land, buildings and
technical plant, above all the estimate of comparability of the
reference objects with the objects subject to valuation is
discretionary.
When making estimates in the context of purchase price
allocations on major acquisitions, RHI Magnesita consults with
independent experts who accompany the execution of the
discretionary decisions and record it in appraisal documents.
Impairment of intangible assets with finite useful lives and
property, plant and equipment
Intangible assets with a finite useful life and property, plant
and equipment must be tested for impairment when events or a change
in circumstances indicate that the carrying amount of an asset may
not be recoverable. The carrying amounts of these assets amounted
to EUR1,427.4 million at 31 December 2018 (31.12.2017: EUR1,512.9
million). In accordance with IAS 36, such impairment losses are
determined through comparisons with the discounted future cash
flows expected from the related assets of the cash-generating units
(CGUs).
As part of the annual planning process, the impairment test is
conducted for the CGUs defined in the RHI Magnesita Group, thus
taking into account all changes resulting from updates of strategic
planning. Sensitivity analyses are also performed as part of the
impairment test. In their calculation one of the main parameters is
changed as follows: increase in the discount rate by 10%, reduction
in the form of the contribution margin by 10% and reduction of the
growth rate in terminal value by 50%. In all CGUs, these
simulations do not result in impairments.
Likewise, in all CGUs a reduction of the discount rate by 10%,
an increase in profitability in the form of the contribution margin
by 10% and an increase in the growth rate in terminal value by 50%
do not result in reversals of impairments.
There was no triggering event in 2018.
Impairment of goodwill and other intangible assets with
indefinite useful life
The effect of an adverse change by plus 10% in the estimated
interest rates as of 31 December 2018 or by minus 10% in the
contribution margin would not result in an impairment of goodwill
recognised (carrying amount 31.12.2018: EUR131.2 million,
31.12.2017: EUR38.7 million) nor in an impairment charge to
intangible assets with indefinite useful lives (carrying amount at
31.12.2018 and 31.12.2017: EUR1.8 million).
Intangible assets and property, plant and equipment
Management uses its experience to estimate the remaining useful
life of an asset. The actual useful life of an asset may be
impacted by an unexpected event that may result in an adjustment to
the carrying amount of the asset.
Provisions for pensions and termination benefits
The present value of pension and termination benefit obligations
depends on a number of factors, which are based on actuarial
assumptions such as interest rates, future salary and pension
increases as well as life expectancy. Due to the long-term
orientation of these obligations, these assumptions are subject to
significant uncertainties.
The following sensitivity analysis shows the change in present
value of the pension and termination benefit obligations if one key
parameter changes, while the other influences are maintained
constant. In reality, however, it is rather unlikely that these
influences do not correlate. The present value of the pension
obligations for the sensitivities shown was calculated using the
same method as for the actual present value of the pension
obligations (projected unit credit method).
31.12.2018 31.12.2017
===================== ============================ ============================
Change of assumption
in percentage
points Termination Termination
in EUR million or years Pension plans benefits Pension plans benefits
===================== ===================== ============== ============ ============== ============
Present value of the
obligations 506.6 55.5 517.1 58.1
===================== ===================== ============== ============ ============== ============
Interest rate +0.25 (14.0) (1.5) (14.9) (1.5)
===================== ===================== ============== ============ ============== ============
(0.25) 15.0 1.5 15.7 1.6
===================== ===================== ============== ============ ============== ============
Salary increase +0.25 0.9 1.5 0.8 1.6
===================== ===================== ============== ============ ============== ============
(0.25) (1.7) (1.4) (0.7) (3.5)
===================== ===================== ============== ============ ============== ============
Pension increase +0.25 10.3 - 10.6 -
===================== ===================== ============== ============ ============== ============
(0.25) (10.1) - (10.2) -
===================== ===================== ============== ============ ============== ============
Life expectancy +1 year 17.2 - 18.3 -
===================== ===================== ============== ============ ============== ============
(1) year (17.3) - (23.6) -
===================== ===================== ============== ============ ============== ============
These changes would have no immediate effect on the result of
the period as remeasurement gains and losses are recorded in other
comprehensive income without impact on profit or loss.
The assumptions regarding the interest rate are reviewed
semi-annually; all other assumptions are reviewed at the end of the
year.
Other provisions
The recognition and measurement of other provisions totalling
EUR162.2 million (31.12.2017: EUR209.4 million) were based on the
best possible estimates using the information available at the
reporting date. The estimates take into account the underlying
legal relationships and are performed by internal experts or, when
appropriate, also by external experts. Despite the best possible
assumptions and estimates, cash outflows expected at the reporting
day may deviate from actual cash outflows. As soon as additional
information is available, the estimates made are reviewed and
provisions are also adjusted.
The majority of the provisions refers to an unfavourable
contract which was recognised in the course of the acquisition of
Magnesita and is mainly based on an estimate of forgone profit
margins compared to market conditions which is further explained in
Note (5) Group of consolidated companies.
Income taxes
The calculation of income taxes of RHI Magnesita N.V. and its
subsidiaries is based on the tax laws applicable in the individual
countries. Due to their complexity, the tax items presented in the
Consolidated Financial Statements may be subject to different
interpretations by local finance authorities.
RHI Magnesita is continually adapting its global presence to
better serve its customers and maintain its competitive advantage.
As a result, in this way the Group maintains discussions with tax
authorities about functions transferred between related parties and
their exit value, however due to its nature, they do not impact the
Group's accounts.
When determining the amount of the capitalisable deferred tax
assets, an estimate of the management is required regarding the
amount of future taxable income and the expected time. Should the
future taxable profit deviate by 10% from the assumption made on
the reporting date within the planning period defined for the
accounting and measurement of deferred taxes, the net position of
deferred tax assets amounting to EUR92.7 million (31.12.2017:
EUR75.4 million) would have to be increased by EUR0.6 million
(31.12.2017: EUR0.8 million) or reduced by EUR0.6 million
(31.12.2017: EUR0.9 million).
NOTES TO THE CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
11. Goodwill
Goodwill developed as follows:
in EUR million 2018 2017(1)
============================================ ====== ========
At beginning of year 122.1 40.2
============================================ ====== ========
Acquisitions of subsidiaries (Note 5) 0.0 85.3
============================================ ====== ========
Reclassified as held for sale 0.0 (0.4)
============================================ ====== ========
Currency translation (2.8) (3.0)
============================================ ====== ========
Cost at year-end 119.3 122.1
============================================ ====== ========
Accumulated impairment at beginning of year (1.9) (2.4)
============================================ ====== ========
Currency translation 0.0 0.1
============================================ ====== ========
Reclassification as held for sale 0.0 0.4
============================================ ====== ========
Accumulated impairment at year-end (1.9) (1.9)
============================================ ====== ========
Carrying amount at year-end 117.4 120.2
============================================ ====== ========
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
12. Other intangible assets
Other intangible assets changed as follows in the financial year
2018:
Internally
generated
Customer intangible Other intangible
in EUR million Mining rights relationship assets assets Total
=============================== ============== ============== ============ ================= =======
Cost at 01.01.2018(1) 179.2 100.0 47.6 143.1 469.9
=============================== ============== ============== ============ ================= =======
Currency translation (9.8) (2.1) 0.0 (2.6) (14.5)
=============================== ============== ============== ============ ================= =======
Additions 0.0 0.0 2.9 1.2 4.1
=============================== ============== ============== ============ ================= =======
Retirements and disposals 0.0 0.0 0.0 (2.5) (2.5)
=============================== ============== ============== ============ ================= =======
Reclassifications 0.0 10.8 0.0 (10.0) 0.8
=============================== ============== ============== ============ ================= =======
Cost at 31.12.2018 169.4 108.7 50.5 129.2 457.8
=============================== ============== ============== ============ ================= =======
Accumulated amortisation
01.01.2018 0.8 1.1 30.2 64.8 96.9
=============================== ============== ============== ============ ================= =======
Currency translation 0.0 0.0 0.0 (0.8) (0.8)
=============================== ============== ============== ============ ================= =======
Amortisation charges 3.9 6.5 3.9 14.3 28.6
=============================== ============== ============== ============ ================= =======
Retirements and disposals 0.0 0.0 0.0 (1.3) (1.3)
=============================== ============== ============== ============ ================= =======
Reclassifications 0.0 10.2 0.0 (10.2) 0.0
=============================== ============== ============== ============ ================= =======
Accumulated amortisation
31.12.2018 4.7 17.8 34.1 66.8 123.4
=============================== ============== ============== ============ ================= =======
Carrying amounts at 31.12.2018 164.7 90.9 16.4 62.4 334.4
=============================== ============== ============== ============ ================= =======
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
Other intangible assets changed as follows in the previous
year:
Internally
generated
Customer intangible Other intangible
in EUR million Mining rights relationship assets assets Total(1)
=============================== ============== ============== ============ ================= =========
Cost at 01.01.2017 0.0 0.0 45.9 114.0 159.9
=============================== ============== ============== ============ ================= =========
Currency translation (5.9) (2.5) (0.2) (5.9) (14.5)
=============================== ============== ============== ============ ================= =========
Acquisitions of subsidiaries 185.1 102.5 0.0 36.1 323.7
=============================== ============== ============== ============ ================= =========
Additions 0.0 0.0 4.1 1.5 5.6
=============================== ============== ============== ============ ================= =========
Retirements and disposals 0.0 0.0 0.0 (0.6) (0.6)
=============================== ============== ============== ============ ================= =========
Reclassifications 0.0 0.0 (0.6) (0.3) (0.9)
=============================== ============== ============== ============ ================= =========
Reclassified as held for
sale 0.0 0.0 (1.6) (1.7) (3.3)
=============================== ============== ============== ============ ================= =========
Cost at 31.12.2017 179.2 100.0 47.6 143.1 469.9
=============================== ============== ============== ============ ================= =========
Accumulated amortisation
01.01.2017 0.0 0.0 27.7 61.1 88.8
=============================== ============== ============== ============ ================= =========
Currency translation 0.0 0.0 (0.2) (2.1) (2.3)
=============================== ============== ============== ============ ================= =========
Amortisation charges 0.8 1.1 3.8 7.7 13.4
=============================== ============== ============== ============ ================= =========
Impairment losses 0.0 0.0 0.8 0.0 0.8
=============================== ============== ============== ============ ================= =========
Retirements and disposals 0.0 0.0 0.0 (0.6) (0.6)
=============================== ============== ============== ============ ================= =========
Reclassifications 0.0 0.0 (0.6) 0.2 (0.4)
=============================== ============== ============== ============ ================= =========
Reclassified as held for
sale 0.0 0.0 (1.3) (1.5) (2.8)
=============================== ============== ============== ============ ================= =========
Accumulated amortisation
31.12.2017 0.8 1.1 30.2 64.8 96.9
=============================== ============== ============== ============ ================= =========
Carrying amounts at 31.12.2017 178.4 98.9 17.4 78.3 373.0
=============================== ============== ============== ============ ================= =========
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
Internally generated intangible assets comprise capitalised
software and product development costs.
The customer relations of Magnesita have a carrying amount of
EUR90.0 million (31.12.2017: EUR116.1 million) and a remaining
useful life of 10 to 14 years.
Other intangible assets include in particular acquired patents,
trademark rights, software, and land use rights. The land use
rights have a carrying amount of EUR23.4 million (31.12.2017:
EUR26.0 million) and a remaining useful life of 19 to 59 years.
There are no restrictions on the sale of intangible assets.
13. Property, plant and equipment
Property, plant and equipment developed as follows in the year
2018 and in the previous year:
Real Prepayments
estate, Technical Other plant, made and
land and Raw material equipment, furniture plant under
in EUR million buildings deposits machinery and fixtures construction Total
========================== =========== ============= ============ ============== ============== ========
Cost at 01.01.2018(1) 630.1 33.8 1,155.6 298.2 99.4 2,217.1
========================== =========== ============= ============ ============== ============== ========
Currency translation (14.8) (0.7) (22.8) (3.0) (3.8) (45.1)
========================== =========== ============= ============ ============== ============== ========
Additions 2.9 0.3 9.1 11.2 99.4 122.9
========================== =========== ============= ============ ============== ============== ========
Retirements and disposals (8.3) 0.0 (12.4) (6.7) 0.0 (27.4)
========================== =========== ============= ============ ============== ============== ========
Reclassifications 8.5 4.1 37.4 11.8 (62.6) (0.8)
========================== =========== ============= ============ ============== ============== ========
Cost at 31.12.2018 618.4 37.5 1,166.9 311.5 132.4 2,266.7
========================== =========== ============= ============ ============== ============== ========
Accumulated depreciation
01.01.2018 256.8 21.3 575.8 220.7 0.8 1,075.4
========================== =========== ============= ============ ============== ============== ========
Currency translation (1.1) (0.1) (1.5) (1.1) 0.0 (3.8)
========================== =========== ============= ============ ============== ============== ========
Depreciation charges 12.8 1.3 93.9 16.8 0.0 124.8
========================== =========== ============= ============ ============== ============== ========
Retirements and disposals (6.9) 0.0 (11.3) (6.3) 0.0 (24.5)
========================== =========== ============= ============ ============== ============== ========
Reclassifications 0.2 0.0 0.3 0.2 (0.7) 0.0
========================== =========== ============= ============ ============== ============== ========
Accumulated depreciation
31.12.2018 261.8 22.5 657.2 230.3 0.1 1,171.9
========================== =========== ============= ============ ============== ============== ========
Carrying amounts at
31.12.2018 356.6 15.0 509.7 81.2 132.3 1,094.8
========================== =========== ============= ============ ============== ============== ========
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
Real Prepayments
estate, Technical Other plant, made and
land and Raw material equipment, furniture plant under
in EUR million buildings deposits machinery and fixtures construction Total(1)
============================= =========== ============= ============ ============== ============== =========
Cost at 01.01.2017 453.7 32.1 877.9 294.2 43.8 1,701.7
============================= =========== ============= ============ ============== ============== =========
Currency translation (16.3) (0.2) (26.3) (6.7) (2.3) (51.8)
============================= =========== ============= ============ ============== ============== =========
Acquisitions of subsidiaries 224.7 4.5 390.8 15.9 54.4 690.3
============================= =========== ============= ============ ============== ============== =========
Additions 6.5 1.5 13.6 8.8 34.4 64.8
============================= =========== ============= ============ ============== ============== =========
Retirements and disposals (20.4) 0.0 (24.4) (9.5) 0.0 (54.3)
============================= =========== ============= ============ ============== ============== =========
Reclassifications 7.3 1.0 16.5 6.1 (30.0) 0.9
============================= =========== ============= ============ ============== ============== =========
Reclassified as held
for sale (25.4) (5.1) (92.5) (10.6) (0.9) (134.5)
============================= =========== ============= ============ ============== ============== =========
Cost at 31.12.2017 630.1 33.8 1,155.6 298.2 99.4 2,217.1
============================= =========== ============= ============ ============== ============== =========
Accumulated depreciation
01.01.2017 285.6 24.5 639.3 229.6 0.9 1,179.9
============================= =========== ============= ============ ============== ============== =========
Currency translation (5.3) 0.0 (11.2) (5.0) (0.1) (21.6)
============================= =========== ============= ============ ============== ============== =========
Depreciation charges 8.7 0.4 42.8 14.3 0.0 66.2
============================= =========== ============= ============ ============== ============== =========
Impairment losses 9.4 0.0 7.9 1.1 0.3 18.7
============================= =========== ============= ============ ============== ============== =========
Retirements and disposals (19.6) 0.0 (23.1) (9.0) 0.0 (51.7)
============================= =========== ============= ============ ============== ============== =========
Reclassifications 0.4 0.0 0.0 0.0 0.0 0.4
============================= =========== ============= ============ ============== ============== =========
Reclassified as held
for sale (22.4) (3.6) (79.9) (10.3) (0.3) (116.5)
============================= =========== ============= ============ ============== ============== =========
Accumulated depreciation
31.12.2017 256.8 21.3 575.8 220.7 0.8 1,075.4
============================= =========== ============= ============ ============== ============== =========
Carrying amounts at
31.12.2017 373.3 12.5 579.8 77.5 98.6 1,141.7
============================= =========== ============= ============ ============== ============== =========
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
In 2017, impairment losses of EUR18.7 million were mainly caused
by the restructuring of operations in Germany and Brazil. They are
related to the Steel segment.
The item prepayments made and plant under construction includes
plant under construction with a carrying amount of EUR129.9 million
(31.12.2017: EUR96.5 million), with the modification of the smelter
at the site in Radenthein, Austria, representing the largest
investment project under construction in 2018.
There are no restrictions on the sale of property, plant and
equipment.
14. Investments in joint ventures and associates
The following investments in joint ventures and associates are
accounted for using the equity method in the RHI Magnesita
Consolidated Financial Statements:
in EUR million 31.12.2018 31.12.2017(1)
============================== =========== ==============
Investments in joint ventures 19.6 20.7
============================== =========== ==============
Investments in associates 2.2 0.7
============================== =========== ==============
Carrying amount at year-end 21.8 21.4
============================== =========== ==============
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
Joint ventures
The RHI Magnesita Group holds a share of 50% (2017: 50%) in
MAGNIFIN Magnesiaprodukte GmbH & Co KG ("MAGNIFIN"), a private
company based in St. Jakob, Austria. The company's core business
activity is the production and sale of halogen-free flame
retardants for plastics. The investment in MAGNIFIN is treated as a
financial investment. MAGNIFIN is set up as an independent vehicle.
RHI Magnesita has a residual interest in the net assets of the
company and accordingly classified its share as a joint venture.
There are no listed market prices available.
The following table summarises the income and expenses of
MAGNIFIN:
in EUR million 2018 2017
=========================== ===== ======
Revenue 38.8 40.3
=========================== ===== ======
Profit before income tax 17.9 20.8
=========================== ===== ======
Depreciation 1.5 1.5
=========================== ===== ======
Interest expense 0.2 0.2
=========================== ===== ======
Other comprehensive income 0.0 (0.2)
=========================== ===== ======
Total comprehensive income 17.9 20.6
=========================== ===== ======
Income taxes on the share of profit of MAGNIFIN amounting to
EUR2.4 million (2017: EUR2.7 million) are recognised by the head of
the tax group, RHI Magnesita GmbH, Vienna, Austria, due to the
legal form of the joint venture and transferred to Veitscher
Vertriebsgesellschaft m.b.H., Vienna, Austria, in accordance with
the provisions of the tax compensation agreement.
The net assets of MAGNIFIN are shown in the table below:
in EUR million 31.12.2018 31.12.2017
=================================================== =========== ===========
Non-current assets 8.9 9.3
=================================================== =========== ===========
Current assets (without cash and cash equivalents) 11.2 10.2
=================================================== =========== ===========
Cash and cash equivalents 16.5 19.7
=================================================== =========== ===========
Non-current liabilities and provisions (4.0) (4.0)
=================================================== =========== ===========
Current provisions (1.3) (1.2)
=================================================== =========== ===========
Trade payables and other current liabilities (2.9) (2.7)
=================================================== =========== ===========
Net assets 28.4 31.3
=================================================== =========== ===========
The movement in the carrying amount of the share in MAGNIFIN in
the RHI Magnesita Consolidated Financial Statements is shown
below:
in EUR million 2018 2017
====================================================== ======= =======
Proportional share of net assets at beginning of year 15.7 15.6
====================================================== ======= =======
Share of profit 9.4 10.8
====================================================== ======= =======
Share of other comprehensive income (remeasurement
losses) 0.0 (0.1)
====================================================== ======= =======
Dividends received (10.8) (10.7)
====================================================== ======= =======
Other changes in value 0.0 0.1
====================================================== ======= =======
Proportional share of net assets at year-end 14.3 15.7
====================================================== ======= =======
Goodwill 4.9 4.9
====================================================== ======= =======
Carrying amount of investment at year-end 19.2 20.6
====================================================== ======= =======
In the course of the acquisition of Magnesita in 2017 the Group
acquired interests in an immaterial joint venture with a carrying
amount of EUR0.4 million as of 31 December 2018 (31.12.2017: EUR0.1
million). The Group's share of the profit after income tax, other
comprehensive income and total comprehensive income in 2018 amounts
to EUR0.3 million (November and December 2017: less than EUR0.1
million).
Associates
As part of the acquisition of Magnesita in 2017 the Group
acquired two immaterial associated companies with a carrying amount
of
EUR2.2 million as of 31 December 2018 (31.12.2017: EUR0.7
million). In the course of the purchase price allocation the fair
value of one associate was determined as zero at the acquisition
date. The Group's share of the profit after income tax for 2018
amounts to EUR0.3 million (November and December 2017: EUR0.1
million). Total comprehensive income including other comprehensive
income of EUR0.1 million amounts to EUR0.4 million (November and
December 2017: EUR0.1 million).
15. Other non-current financial assets
Other non-current financial assets consist of the following
items:
in EUR million 31.12.2018 31.12.2017
====================================================== =========== ===========
Interests in subsidiaries not consolidated 0.7 0.8
====================================================== =========== ===========
Other investments 0.0 0.4
====================================================== =========== ===========
Marketable securities and shares 15.0 17.3
====================================================== =========== ===========
Interest rate swaps 0.6 1.5
====================================================== =========== ===========
Non-current receivables from disposal of subsidiaries 0.0 2.6
====================================================== =========== ===========
Other non-current financial receivables 1.7 2.5
====================================================== =========== ===========
Other non-current financial assets 18.0 25.1
====================================================== =========== ===========
Accumulated impairments on investments, securities and shares
amounted to EUR4.3 million (31.12.2017: EUR3.8 million).
16. Other non-current assets
Other non-current assets include the following items:
in EUR million 31.12.2018 31.12.2017
========================================== =========== ===========
Tax receivables 20.7 9.9
========================================== =========== ===========
Prepaid stripping costs 6.8 8.0
========================================== =========== ===========
Judicial deposits 3.7 3.7
========================================== =========== ===========
Plan assets from overfunded pension plans 2.1 2.0
========================================== =========== ===========
Prepaid expenses 1.0 0.6
========================================== =========== ===========
Other non-current assets 34.3 24.2
========================================== =========== ===========
Prepaid expenses for stripping costs arising from mining raw
materials in a surface mine are included in non-current assets due
to the planned use of the mine.
Tax receivables relate to input tax credits, which are expected
to be utilised in the medium term.
17. Deferred taxes
Deferred taxes are related to the following significant balance
sheet items and loss carryforwards:
31.12.2018 31.12.2018 2018 31.12.2017(1) 31.12.2017(1) 2017(1)
============ =============== ================= ============== =============== =================
Deferred Deferred
Deferred tax Deferred tax
in EUR million tax assets liabilities Expense/(Income) tax assets liabilities Expense/(Income)
================ ============ =============== ================= ============== =============== =================
Property, plant
and equipment,
intangible
assets 20.1 159.7 (25.1) 52.1 219.8 (29.9)
================ ============ =============== ================= ============== =============== =================
Inventories 33.3 5.6 (9.8) 20.5 (1.6) (1.5)
================ ============ =============== ================= ============== =============== =================
Trade
receivables,
other assets 7.7 7.1 (24.8) 6.4 38.4 (11.5)
================ ============ =============== ================= ============== =============== =================
Pensions and
other
personnel
provisions 69.6 (0.2) 2.3 70.2 0.3 6.4
================ ============ =============== ================= ============== =============== =================
Other provisions 26.1 1.6 (0.1) 25.9 (0.7) 3.9
================ ============ =============== ================= ============== =============== =================
Trade payables,
other
liabilities 18.0 4.4 10.6 26.6 4.7 (1.4)
================ ============ =============== ================= ============== =============== =================
Tax loss carried
forward 96.1 29.9 134.6 - 8.4
================ ============ =============== ================= ============== =============== =================
Offsetting (99.8) (99.8) (196.2) (196.2) -
================ ============ =============== ================= ============== =============== =================
Deferred taxes 171.1 78.4 (17.0) 140.1 64.7 (25.6)
================ ============ =============== ================= ============== =============== =================
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
As of 31 December 2018, subsidiaries which generated tax losses
in the past year or the previous year recognised net deferred tax
assets on temporary differences and on tax loss carryforwards of
EUR47.8 million (31.12.2017: EUR26.0 million). Deferred Tax Assets
have been recognised because the companies concerned are expected
to generate taxable income in the future.
Tax loss carryforwards totalled EUR467.7 million in the RHI
Magnesita Group as of 31 December 2018 (31.12.2017: EUR609.7
million). A significant part of the tax loss carryforwards
originated in Austria and Brazil where their deduction can be
carried forward indefinitely. The annual compensation of tax loss
carryforwards in Austria is limited to 75% and in Brazil to 30% of
the respective taxable profits. Deferred taxes on tax losses of
EUR155.1 million (31.12.2017: EUR157.7 million) were not
recognised. Of these losses, EUR5.8 million (31.12.2017: EUR3.4
million) will expire in 2021, while the remainder will be carried
forward indefinitely.
In addition, no deferred tax assets were recognised for
temporary differences totalling EUR5.1 million (31.12.2017: EUR16.2
million) as it is not sufficiently probable that they can be used.
The deductible temporary differences can be carried forward
indefinitely.
Taxable temporary differences of EUR1,085.7 million (31.12.2017:
EUR667.0 million) and deductible temporary differences of EUR501.1
million (31.12.2017: EUR295.6 million) were not recognised on
shares in subsidiaries because the corresponding distributions of
profit or the sale of the investments are controlled by the Group
and are not expected in the foreseeable future.
The maturity structure of deferred taxes is shown in the table
below:
31.12.2018 31.12.2017(1)
=============================== ==============================
in EUR million Current Non-current Total Current Non-current Total
========================= ======== ============ ======= ======== ============ ======
Deferred tax assets 78.0 93.1 171.1 11.0 129.1 140.1
========================= ======== ============ ======= ======== ============ ======
Deferred tax liabilities 2.9 (81.3) (78.4) 78.8 (14.1) 64.7
========================= ======== ============ ======= ======== ============ ======
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
18. Inventories
Inventories as presented in the Consolidated Statement of
Financial Position consist of the following items:
in EUR million 31.12.2018 31.12.2017(1)
============================ =========== ==============
Raw materials and supplies 176.8 183.7
============================ =========== ==============
Work in progress 140.8 122.1
============================ =========== ==============
Finished products and goods 391.9 331.5
============================ =========== ==============
Prepayments made 8.3 17.2
============================ =========== ==============
Inventories 717.8 654.5
============================ =========== ==============
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
Inventories include EUR2.3 million (31.12.2017: EUR9.0 million)
carried at net realisable value. Net impairment losses amount to
EUR2.6 million (2017: EUR4.0 million).
There are no restrictions on the disposal of inventories.
19. Trade and other current receivables
Trade and other current receivables as presented in the
Statement of Financial Position are classified as follows:
in EUR million 31.12.2018 31.12.2017(1)
=========================================================== =========== ==============
Trade receivables 349.9 394.9
=========================================================== =========== ==============
Receivables from long-term construction contracts 0.0 11.7
=========================================================== =========== ==============
Contract assets 1.9 0.0
=========================================================== =========== ==============
Other taxes receivable 87.6 77.0
=========================================================== =========== ==============
Receivables from joint ventures and associates 11.3 12.0
=========================================================== =========== ==============
Prepaid expenses 3.0 3.7
=========================================================== =========== ==============
Receivables from disposal of investments 2.6 0.0
=========================================================== =========== ==============
Receivables from property transactions 2.2 2.5
=========================================================== =========== ==============
Emission rights 1.7 1.6
=========================================================== =========== ==============
Receivables from employees 1.7 1.3
=========================================================== =========== ==============
Receivables from non-consolidated subsidiaries 0.3 0.3
=========================================================== =========== ==============
Prepaid transaction costs related to financial liabilities 0.0 2.5
=========================================================== =========== ==============
Receivables from personnel welfare foundation 0.0 0.8
=========================================================== =========== ==============
Other current receivables 19.0 14.3
=========================================================== =========== ==============
Trade and other current receivables 481.2 522.6
=========================================================== =========== ==============
thereof financial assets 367.2 412.5
=========================================================== =========== ==============
thereof non-financial assets 114.0 110.1
=========================================================== =========== ==============
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
Other taxes receivable include VAT credits and receivables from
energy tax refunds, research, education and apprentice
subsidies.
Trade receivables with a total nominal value of EUR34.0 million
were assigned as security against financial liabilities as of
31 December 2018 (31.12.2017: EUR34.0 million).
20. Income tax receivables
Income tax receivables amounting to EUR18.4 million (31.12.2017:
EUR13.5 million) are mainly related to tax prepayments and
deductible withholding taxes.
21. Other current financial assets
This item of the Consolidated Statement of Financial Position
consists of the following components:
in EUR million 31.12.2018 31.12.2017
==================================== =========== ===========
Marketable securities 36.3 32.3
==================================== =========== ===========
Derivatives in open orders 1.0 0.8
==================================== =========== ===========
Forward exchange contracts 1.1 0.9
==================================== =========== ===========
Other current financial receivables 0.2 0.1
==================================== =========== ===========
Other current financial assets 38.6 34.1
==================================== =========== ===========
Accumulated impairments on other current financial receivables
amounted to EUR1.1 million (31.12.2017: EUR1.1 million).
22. Cash and cash equivalents
This item of the Consolidated Statement of Financial Position
consists of the following components:
in EUR million 31.12.2018 31.12.2017
========================== =========== ===========
Cash at banks 426.7 373.2
========================== =========== ===========
Money market funds 61.9 67.5
========================== =========== ===========
Cheques 2.5 1.4
========================== =========== ===========
Cash on hand 0.1 0.3
========================== =========== ===========
Cash and cash equivalents 491.2 442.4
========================== =========== ===========
Cash and cash equivalents include restricted cash totalling
EUR42.5 million at 31 December 2018 (31.12.2017: EUR80.8 million).
Restricted cash is mainly related to cash and cash equivalents at
subsidiaries (mainly in Brazil, India and China) to which the
company only has limited access due to foreign exchange and capital
transfer controls. EUR23.8 million (31.12.2017: EUR75.8 million)
are accounted for by subsidiaries with non-controlling
interests.
23. Share capital
In exchange for the cancellation of the RHI AG shares as a
result of the merger in the year 2017, in which RHI AG merged with
and into RHI Magnesita N.V., the shareholders of RHI AG received
one newly issued ordinary share of RHI Magnesita N.V. for each RHI
AG share. As part of the purchase price for the acquisition of
control of Magnesita, RHI Magnesita N.V. issued 5,000,000 new
ordinary shares to the sellers of Magnesita shares as at 26 October
2017. Following the merger and the acquisition of control and also
at year-end 2017, RHI Magnesita N.V.'s issued and fully paid-in
share capital consisted of 44,819,039 ordinary shares at EUR1 each
share.
In the course of the first close of the Integrated Tender Offer
(ITO) in 2018 and the acquisition of additional 35.2% of shares in
Magnesita, RHI Magnesita N.V. issued 3,518,008 new ordinary shares.
Hence, share capital consists of 48,337,047 ordinary shares at EUR1
each share as of 31 December 2018.
The authorised share capital of RHI Magnesita N.V. amounts to
EUR100,000,000 divided into 100,000,000 ordinary shares, of which
48,337,047 ordinary shares are issued and outstanding as explained
before.
All outstanding RHI Magnesita shares grant the same rights. The
shareholders are entitled to dividends and have one voting right
per share at the Annual General Meeting. There are no RHI Magnesita
shares with special control rights.
24. Group reserves
Additional paid-in capital
At 31 December 2018 as well as at 31 December 2017, additional
paid-in capital comprised premiums on the issue of shares less
issue costs by RHI Magnesita N.V.
Mandatory reserve
The articles of association stipulate a mandatory reserve of
EUR288,699,230.59 which was created in connection with the merger.
No distributions, allocations or additions may be made and no
losses of the company may be allocated to the mandatory
reserve.
Retained earnings
Retained earnings includes the result of the financial year and
results that were earned by consolidated companies during prior
periods, but not distributed.
Accumulated other comprehensive income
Cash flow hedges includes gains and losses from the effective
part of cash flow hedges less tax effects. The accumulated gain or
loss from the hedge allocated to reserves is only reclassified to
the Statement of Profit or Loss if the hedged transaction also
influences the result or is terminated.
Defined benefit plans includes the gains and losses from the
remeasurement of defined benefit pension and termination benefit
plans taking into account tax effects. No reclassification of these
amounts to the Statement of Profit or Loss will be made in future
periods.
Currency translation includes the accumulated currency
translation differences from translating the Financial Statements
of foreign subsidiaries as well as unrealised currency translation
differences from monetary items which are part of a net investment
in a foreign operation, net of related income taxes. If foreign
companies are deconsolidated, the currency translation differences
are recognised in the Statement of Profit or Loss as part of the
gain or loss from the sale of shares in subsidiaries. In addition,
when monetary items cease to form part of a net investment in a
foreign operation, the currency translation differences of these
monetary items previously recognised in other comprehensive income
are reclassified to profit or loss. In 2017, the Group reassessed
its internal financing structure and as a result reclassified
accumulated losses of EUR38.9 million to the Statement of Profit or
Loss. Due to the disposal of Fused Cast accumulated foreign
currency translation losses of EUR1.8 million were reclassified to
the Statement of Profit or Loss. The corresponding tax effect led
to an income of EUR6.2 million.
25. Non-controlling interests
Non-controlling interests in Magnesita
Non-controlling interests held a share of 50% minus one share in
the company Magnesita Refratários S.A. and its subsidiaries
("Magnesita") until 20 December 2018. After completion of the
Integrated Tender Offer, the non-controlling interests were reduced
to 14.8%. Total comprehensive income of the year 2018 attributable
to non-controlling interests of Magnesita reflects this development
in ownership structure. Detailed information of this transaction
and the consequences of the change of the ownership interest in
Magnesita that do not result in a change of control are provided
under Note (5). Magnesita is a global group dedicated to the
production and sale of an extensive line of refractory materials
and industrial minerals and distinguishes itself through its
vertically integrated operations.
Based on the net assets of Magnesita, the carrying amount of the
non-controlling interests is determined as follows:
in EUR million 31.12.2018 31.12.2017(1)
============================================= =========== ==============
Non-current assets 969.7 1,008.1
============================================= =========== ==============
Current assets 561.0 647.7
============================================= =========== ==============
Non-current liabilities (400.6) (734.4)
============================================= =========== ==============
Current liabilities (676.0) (498.4)
============================================= =========== ==============
Net assets before intragroup eliminations 454.1 423.0
============================================= =========== ==============
Intragroup eliminations (3.9) (0.1)
============================================= =========== ==============
Net assets 450.2 422.9
============================================= =========== ==============
Percentage of non-controlling interests 14.8% 50.0%
============================================= =========== ==============
Carrying amount of non-controlling interests 66.7 211.5
============================================= =========== ==============
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
The aggregate Statement of Profit or Loss and Statement of
Comprehensive Income are shown below:
in EUR million 2018 11-12/2017(1)
======================================================= ========== ==============
Revenue 1,067.5 172.2
======================================================= ========== ==============
Operating expenses, net finance costs and income tax (1,011.4) (163.8)
======================================================= ========== ==============
Profit after income tax before intragroup eliminations 56.1 8.4
======================================================= ========== ==============
Intragroup eliminations (3.4) 0.0
======================================================= ========== ==============
Profit after income tax 52.7 8.4
======================================================= ========== ==============
thereof attributable to non-controlling interests of
Magnesita 26.3 4.2
======================================================= ========== ==============
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
in EUR million 2018 11-12/2017(1)
====================================================== ======= ==============
Profit after income tax 52.7 8.4
====================================================== ======= ==============
Other comprehensive income (24.4) (13.3)
====================================================== ======= ==============
Total comprehensive income 28.3 (4.9)
====================================================== ======= ==============
thereof attributable to non-controlling interests of
Magnesita 14.2 (2.5)
====================================================== ======= ==============
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
The following table shows the summarised Statement of Cash
Flows:
in EUR million 2018 11-12/2017
======================================== ======== ===========
Net cash flow from operating activities 164.9 46.5
======================================== ======== ===========
Net cash flow from investing activities (10.2) 18.7
======================================== ======== ===========
Net cash flow from financing activities (258.5) (2.8)
======================================== ======== ===========
Total cash flow (103.8) 62.4
======================================== ======== ===========
Non-controlling interests in Orient Refractories Ltd.
Non-controlling interests hold a share of 33.5% (31.12.2017:
30.4%) in the listed company Orient Refractories Ltd. (in the
following "ORL"), based in New Delhi, India. ORL is allocated to
the Steel segment. In August 2018, the Group sold 3.1% of the
shares in ORL. The carrying amount of ORL's net assets in the
Group's Consolidated Financial Statements on the date of the sale
was EUR53.9 million. Consequently, the carrying amount of
non-controlling interests sold amounts to EUR1.7 million. The cash
part of the consideration received is
EUR9.1 million. This transaction results in an increase in
equity attributable to shareholders of RHI Magnesita N.V. in the
amount of
EUR7.4 million.
Based on the net assets of the company, the carrying amount of
the non-controlling interests is determined as follows:
in EUR million 31.12.2018 31.12.2017
============================================= =========== ===========
Non-current assets 24.3 25.6
============================================= =========== ===========
Current assets 56.0 48.8
============================================= =========== ===========
Non-current liabilities (6.3) (6.8)
============================================= =========== ===========
Current liabilities (19.6) (16.6)
============================================= =========== ===========
Net assets before intragroup eliminations 54.4 51.0
============================================= =========== ===========
Intragroup eliminations (0.4) (0.2)
============================================= =========== ===========
Net assets 54.0 50.8
============================================= =========== ===========
Percentage of non-controlling interests 33.5% 30.4%
============================================= =========== ===========
Carrying amount of non-controlling interests 18.1 15.4
============================================= =========== ===========
The aggregate Statement of Profit or Loss and Statement of
Comprehensive Income are shown below:
in EUR million 2018 2017
======================================================= ======= =======
Revenue 91.0 77.9
======================================================= ======= =======
Operating expenses, net finance costs and income tax (81.6) (70.1)
======================================================= ======= =======
Profit after income tax before intragroup eliminations 9.4 7.8
======================================================= ======= =======
Intragroup eliminations (0.2) 0.1
======================================================= ======= =======
Profit after income tax 9.2 7.9
======================================================= ======= =======
thereof attributable to non-controlling interests
of ORL 2.7 2.4
======================================================= ======= =======
in EUR million 2018 2017
=================================================== ====== ======
Profit after income tax 9.2 7.9
=================================================== ====== ======
Other comprehensive income (2.3) (3.6)
=================================================== ====== ======
Total comprehensive income 6.9 4.3
=================================================== ====== ======
thereof attributable to non-controlling interests
of ORL 2.2 1.3
=================================================== ====== ======
The following table shows the summarised Statement of Cash Flows
of ORL:
in EUR million 2018 2017
======================================== ====== ======
Net cash flow from operating activities 9.5 6.4
======================================== ====== ======
Net cash flow from investing activities (1.8) (1.0)
======================================== ====== ======
Net cash flow from financing activities (3.6) (3.8)
======================================== ====== ======
Total cash flow 4.1 1.6
======================================== ====== ======
Net cash flow from financing activities includes dividend
payments to non-controlling interests amounting to EUR1.2 million
(2017:
EUR1.1 million).
Accumulated other comprehensive income attributable to
non-controlling interests
The development of accumulated other comprehensive income
attributable to non-controlling interests is shown in the following
table:
Cash flow Defined benefit Currency
in EUR million hedges plans translation
================================================== ========== ================ =============
Accumulated other comprehensive income 01.01.2018 0.1 (0.1) (7.6)
================================================== ========== ================ =============
Unrealised results from currency translation - - (11.0)
================================================== ========== ================ =============
Unrealised results from fair value change 0.2 - -
================================================== ========== ================ =============
Remeasurement of defined benefit plans - (1.9) -
================================================== ========== ================ =============
Transactions with non-controlling interests
without change of control (0.1) (0.1) 10.7
================================================== ========== ================ =============
Accumulated other comprehensive income 31.12.2018 0.2 (2.1) (7.9)
================================================== ========== ================ =============
26. Borrowings
Borrowings include all interest-bearing liabilities due to
financial institutions and other lenders.
Borrowings have the following contractual remaining terms:
Total Remaining term
=========== ===========================================
in EUR million 31.12.2018 up to 1 year 2 to 5 years over 5 years
============================================ =========== ============= ============= =============
Syndicated Term Loan 479.9 0.0 479.9 0.0
============================================ =========== ============= ============= =============
Bonded loans ("Schuldscheindarlehen") 216.0 0.0 152.0 64.0
============================================ =========== ============= ============= =============
Export credits and investment financing 171.9 34.4 137.5 0.0
============================================ =========== ============= ============= =============
Other credit lines and other loans 278.9 278.9 0.0 0.0
============================================ =========== ============= ============= =============
Accrued interest 6.9 6.9 0.0 0.0
============================================ =========== ============= ============= =============
Total liabilities to financial institutions 1,153.6 320.2 769.4 64.0
============================================ =========== ============= ============= =============
Other financial liabilities 16.6 2.3 13.7 0.6
============================================ =========== ============= ============= =============
Capitalised transaction costs (3.8) (0.9) (2.9) 0.0
============================================ =========== ============= ============= =============
Borrowings 1,166.4 321.6 780.2 64.6
============================================ =========== ============= ============= =============
Total Remaining term
=========== ===========================================
in EUR million 31.12.2017 up to 1 year 2 to 5 years over 5 years
============================================ =========== ============= ============= =============
Export credits and investment financing 346.4 65.6 280.0 0.8
============================================ =========== ============= ============= =============
Syndicated Financing 266.2 0.0 266.2 0.0
============================================ =========== ============= ============= =============
Bonded loans ("Schuldscheindarlehen") 230.5 0.0 162.0 68.5
============================================ =========== ============= ============= =============
Other credit lines and other loans 102.1 102.1 0.0 0.0
============================================ =========== ============= ============= =============
Accrued interest 7.8 7.8 0.0 0.0
============================================ =========== ============= ============= =============
Total liabilities to financial institutions 953.0 175.5 708.2 69.3
============================================ =========== ============= ============= =============
Perpetual bond 215.3 64.3 0.0 151.0
============================================ =========== ============= ============= =============
Senior notes 55.6 1.1 54.5 0.0
============================================ =========== ============= ============= =============
Other financial liabilities 4.8 1.6 3.1 0.1
============================================ =========== ============= ============= =============
Capitalised transaction costs (3.1) (0.7) (2.4) 0.0
============================================ =========== ============= ============= =============
Borrowings 1,225.6 241.8 763.4 220.4
============================================ =========== ============= ============= =============
RHI Magnesita Group optimised its financial structure in 2018.
In the first quarter, the Group refinanced the syndicated financial
agreement, which was concluded in July 2017, with a new EUR305.6
million five year term loan of the Austrian export credit agency
(OeKB). The refinancing extends the final maturity of the term loan
by one year, from June 2022 to June 2023. This new syndicated term
loan replaces the existing EUR477.2 million syndicated financial
agreement for which only EUR266.2 million had been drawn down. Cash
inflows from the new term loan in the amount of EUR305.6 million
are shown in the Consolidated Statement of Cash Flows in proceeds
from non-current borrowings and loans, whereas cash outflows from
the redemption of the syndicated loan in the amount of EUR266.2
million are included in repayments of non-current borrowings and
loans. In addition, on 3 August 2018 the Group raised a new
unsecured five year term loan amounting to US$200 million and a
revolving credit facility in the amount of US$400 million with a
syndicate of 10 international banks. The proceeds of the borrowings
have been used to redeem the entire amount of the outstanding
Magnesita Perpetual Bonds and Senior notes and other export credits
and investment financing, which will generate significant interest
expense savings as well as ensure higher liquidity.
EUR34.0 million (31.12.2017: EUR34.0 million) of the liabilities
to financial institutions are secured by receivables. As at
31.12.2017 EUR2.6 million were secured by cash and cash
equivalents.
Net debt/adjusted EBITDA is the most important financial
covenant of the loan agreements. Calculation of net debt/adjusted
EBITDA is shown under Note (55). Compliance with the covenants is
measured predominantly on an annual or semi-annual basis. Covenant
ratio is limited at 3.5. Breach of covenant will lead to repay the
debts prior to maturity. During 2018 and 2017, the Group met all
covenant requirements.
For liabilities of EUR1,052.6 million (31.12.2017: EUR1,109.9
million), lenders have a termination option in the case of a change
of control. In the event that certain reasons for termination
exist, the lenders may declare the loan due with immediate effect
and demand immediate repayment of the principal including interest,
as well as the payment of other amounts payable that may have been
incurred.
Taking into account interest swaps, 55% (31.12.2017: 34%) of the
liabilities to financial institutions carry fixed interest and 45%
(31.12.2017: 66%) carry variable interest.
The following table shows fixed interest terms and conditions,
taking into account interest rate swaps, without liabilities from
deferred interest:
Interest 31.12.2018 Interest 31.12.2017
terms Carrying terms Carrying
fixed Effective annual Cur- amount in fixed Effective annual Cur- amount in
until interest rate rency EUR million until interest rate rency EUR million
========= =================== ======= ============= ========= =================== ======= =============
2019 EURIBOR + margin EUR 132.0 2018 EURIBOR + margin EUR 369.6
========= =================== ======= ============= ========= =================== ======= =============
LIBOR + margin USD 221.7 LIBOR + margin USD 54.4
========= =================== ======= ============= ========= =================== ======= =============
Interbank Deposit Interbank Deposit
Certificate (CDI) Certificate (CDI)
+ margin BRL 113.9 + margin BRL 145.5
========= =================== ======= ============= ========= =================== ======= =============
Variable interest Variable interest
rate + margin EUR 34.0 rate + margin EUR 34.0
========= =================== ======= ============= ========= =================== ======= =============
3.77% EUR 3.0 4.11% USD 18.3
========= =================== ======= ============= ========= =================== ======= =============
4.15% USD 13.4
========= =================== ======= ============= ========= =================== ======= =============
Various - variable Various - variable
rate Var. 16.5 rate Var. 16.0
========= =================== ======= ============= ========= =================== ======= =============
Various - fixed
rate Var. 10.5
========= =================== ======= ============= ========= =================== ======= =============
2019 0.68% EUR 10.0
========= =================== ======= ============= ========= =================== ======= =============
0.72% EUR 7.1
========= =================== ======= ============= ========= =================== ======= =============
3.77% EUR 3.0
========= =================== ======= ============= ========= =================== ======= =============
1.59% EUR 4.0
========= =================== ======= ============= ========= =================== ======= =============
2020 1.28% USD 32.8 2020 4.19% USD 70.7
========= =================== ======= ============= ========= =================== ======= =============
2.30% EUR 12.4 4.98% USD 62.4
========= =================== ======= ============= ========= =================== ======= =============
7.50% BRL 8.2
========= =================== ======= ============= ========= =================== ======= =============
2022 1.74% EUR 62.0 2022 1.74% EUR 63.0
========= =================== ======= ============= ========= =================== ======= =============
4.60% EUR 3.0 4.60% EUR 3.0
========= =================== ======= ============= ========= =================== ======= =============
2023 1.56% EUR 196.2
========= =================== ======= ============= ========= =================== ======= =============
1.12% EUR 109.4
========= =================== ======= ============= ========= =================== ======= =============
3.94% USD 174.8
========= =================== ======= ============= ========= =================== ======= =============
2024 3.10% EUR 35.0 2024 3.10% EUR 37.0
========= =================== ======= ============= ========= =================== ======= =============
3.20% EUR 5.5
========= =================== ======= ============= ========= =================== ======= =============
4.00% EUR 9.6
========= =================== ======= ============= ========= =================== ======= =============
1,146.7 945.2
========= =================== ======= ============= ========= =================== ======= =============
In some cases, the terms to maturity of the contracts are
substantially longer than the period during which interest terms
are fixed.
27. Other financial liabilities
Other financial liabilities include the negative fair value of
derivative financial instruments as well as fixed-term and puttable
non-controlling interests in Group companies. This item of the
Consolidated Statement of Financial Position consists of the
following items:
31.12.2018 31.12.2017
============================== ==============================
in EUR million Current Non-current Total Current Non-current Total
========================== ======== ============ ====== ======== ============ ======
Derivatives from
supply contracts 0.9 20.0 20.9 6.8 33.4 40.2
========================== ======== ============ ====== ======== ============ ======
Interest rate
swaps 0.0 7.3 7.3 0.0 0.2 0.2
========================== ======== ============ ====== ======== ============ ======
Derivatives in
open orders 0.0 0.0 0.0 0.5 0.0 0.5
========================== ======== ============ ====== ======== ============ ======
Derivative financial
liabilities 0.9 27.3 28.2 7.3 33.6 40.9
========================== ======== ============ ====== ======== ============ ======
Fixed-term or
puttable non-controlling
interests 14.1 22.2 36.3 10.1 21.9 32.0
========================== ======== ============ ====== ======== ============ ======
Other financial
liabilities 15.0 49.5 64.5 17.4 55.5 72.9
========================== ======== ============ ====== ======== ============ ======
Additional explanations on derivative financial instruments are
provided under Note (54).
28. Provisions for pensions
The net liability from pension obligations in the Consolidated
Statement of Financial Position is as follows:
in EUR million 31.12.2018 31.12.2017
============================================== =========== ===========
Present value of pension obligations 506.6 517.1
============================================== =========== ===========
Fair value of plan assets (223.9) (228.6)
============================================== =========== ===========
Funded status 282.7 288.5
============================================== =========== ===========
Asset ceiling 19.5 18.3
============================================== =========== ===========
Net liability from pension obligations 302.2 306.8
============================================== =========== ===========
thereof assets from overfunded pension plans 2.1 1.9
============================================== =========== ===========
thereof pensions 304.3 308.7
============================================== =========== ===========
The present value of pension obligations by beneficiary groups
is as follows:
in EUR million 31.12.2018 31.12.2017
===================================== =========== ===========
Active beneficiaries 101.4 107.9
===================================== =========== ===========
Vested terminated beneficiaries 68.7 71.9
===================================== =========== ===========
Retirees 336.5 337.3
===================================== =========== ===========
Present value of pension obligations 506.6 517.1
===================================== =========== ===========
The calculation of pension obligations is based on the following
actuarial assumptions:
in % 31.12.2018 31.12.2017
======================== =========== ===========
Interest rate 3.3% 3.1%
======================== =========== ===========
Future salary increase 2.7% 2.8%
======================== =========== ===========
Future pension increase 2.2% 2.1%
======================== =========== ===========
These are average values which were weighted with the present
value of the respective pension obligation.
The calculation of the actuarial interest rate for the European
currency area is based on a yield curve for returns of high-quality
corporate bonds denominated in EUR with an average rating of AA,
which is derived from pooled index values. The calculation of the
actuarial interest rate for the USD and GBP currency area is based
on a yield curve for returns of high-quality corporate bonds
denominated in USD and GBP with an average rating of AA, which is
derived from pooled index values. Where there are very long-term
maturities, the yield curve follows the performance of bonds
without credit default risk. The interest rate is calculated
annually at 31 December, taking into account the expected future
cash flows which were determined based on the current personal and
commitment data.
The calculation in Austria was based on the AVÖ 2018-P
(31.12.2017: AVÖ 2008-P) demographic calculation principles for
salaried employees from the Actuarial Association of Austria. In
Germany, the Heubeck 2018 G (31.12.2017: Heubeck 2005 G) actuarial
tables were used as a basis. In the other countries,
country-specific mortality tables were applied.
The main pension regulations are described below:
The Austrian group companies account for EUR125.8 million
(31.12.2017: EUR122.6 million) of the present value of pension
obligations and for EUR26.4 million (31.12.2017: EUR26.1 million)
of the plan assets. The agreed benefits include pensions,
invalidity benefits and benefits for surviving dependents.
Commitments in the form of company or individual agreements depend
on the length of service and the salary at the time of retirement.
For the majority of commitments the amount of the company pension
subsidy is limited to 75% of the final remuneration including a
pension pursuant to the General Social Insurance Act (ASVG). RHI
Magnesita has concluded pension reinsurance policies for part of
the commitments. The pension claims of the beneficiaries are
limited to the coverage capital required for these commitments.
Pensions are predominantly paid in the form of annuities and are
partially indexed. For employees joining the company after
1 January 1984, no defined benefits were granted. Rather, a
defined contribution pension model is in place. In addition, there
are commitments based on the deferred compensation principle, which
are fully covered by pension reinsurance policies, and commitments
for preretirement benefits for employees in mining operations.
The pension plans of the German group companies account for
EUR155.1 million (31.12.2017: EUR158.6 million) of the present
value of pension obligations and for EUR0.7 million (31.12.2017:
EUR0.7 million) of plan assets. The benefits included in company
agreements comprise pensions, invalidity benefits and benefits for
surviving dependents. The amount of the pension depends on the
length of service for the majority of the commitments and is
calculated as a percentage of the average monthly wage/salary of
the last 12 months prior to retirement. In some cases commitments
to fixed benefits per year of service have been made. The pensions
are predominantly paid in the form of annuities and are adjusted in
accordance with the development of the consumer price index for
Germany. The pension plans are closed for new entrants, except one
contribution-based plan. There is no defined contribution model on
a voluntary basis. Individual commitments have been made, with
major part of them being retired beneficiaries.
The pension plan of the US group company Magnesita Refractories
Company, York, USA, accounts for EUR74.2 million (31.12.2017:
EUR73.7 million) of the present value of pension obligations and
for EUR61.8 million (31.12.2017: EUR60.0 million) of the plan
assets. The pension plan is a non-contributory defined benefit plan
covering a portion of the employees of the company. The plan is
subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA). Effective 21 June 1999, the company
offered the participants the opportunity to elect to participate in
a single enhanced defined contribution plan. Participants who make
this election are no longer eligible for future accruals under this
plan. All benefits accrued as of the date of transfer will be
retained. Employees hired after 21 June 1999 and employees that did
not meet the plan's eligibility requirements as of 21 June 1999 are
not eligible for this plan. The pensions are predominantly paid in
the form of annuities and are adjusted annually based on the US
consumer price index. The company's contributions for the year
ended 31 December 2018 met, or exceeded, the minimum funding
requirements of ERISA.
The pension plan of the UK group company Magnesita Refractories
Ltd., Dinnington, United Kingdom, accounts for EUR53.0 million
(31.12.2017: EUR60.7 million) of the present value of pension
obligations and holds EUR69.6 million (31.12.2017: EUR76.5 million)
of assets, although only EUR53.0 million (31.12.2017: EUR60.7
million) of the plan assets are reflected on the balance sheet due
to the application of
IFRIC 14 (asset ceiling). The company sponsors a funded defined
benefit pension plan for qualifying UK employees. The plan is
administered by a separate board of trustees which is legally
separate from the company. The trustees are composed of
representatives of both the employer and employees, plus an
independent professional trustee. The trustees are required by law
to act in the interest of all relevant beneficiaries and are
responsible for the investment policy with regard to the assets
plus the day to day administration of the benefits. Under the plan,
employees are entitled to annual pensions on retirement at age 65
of one-sixtieth of final pensionable salary for each year of
service. Pensionable salary is defined as basic salary less the
Lower Earnings Limit. Benefits are also payable on death and
following other events such as withdrawing from active service. No
other post-retirement benefits are provided to these employees.
The pension liabilities of the Brazilian group company Magnesita
Refratários S.A. account for EUR62.6 million (31.12.2017: EUR62.3
million) of the present value of pension obligations and for
EUR34.6 million (31.12.2017: EUR36.3 million) of the plan assets.
The pension plan qualifies as an optional benefit plan. Employees
are entitled to contribute to the plan, with the company
contributing 1.5 times this value. The agreed benefits include
pensions, invalidity benefits and benefits for surviving
dependents. Commitments in the form of company or individual
agreements depend on the length of service and salary at the time
of retirement. For the majority of commitments, the amount of the
company pension obligation is limited to 75% of the final
remuneration. At retirement the employee may choose to receive up
to 25% of his/her amount at once or receive it on a pro-rata base
with different options of monthly quotes.
The following table shows the development of net liability from
pension obligations:
in EUR million 2018 2017
==================================================== ======= =======
Net liability from pension obligations at beginning
of year 306.8 234.7
==================================================== ======= =======
Currency translation (1.9) (2.3)
==================================================== ======= =======
Acquisition of subsidiaries 0.0 81.0
==================================================== ======= =======
Pension cost 11.6 8.5
==================================================== ======= =======
Remeasurement losses 12.2 6.0
==================================================== ======= =======
Benefits paid (17.3) (17.8)
==================================================== ======= =======
Employers' contributions to external funds (9.0) (3.3)
==================================================== ======= =======
Reclassifications (0.2) 0.0
==================================================== ======= =======
Net liability from pension obligations at year-end 302.2 306.8
==================================================== ======= =======
The present value of pension obligations developed as
follows:
in EUR million 2018 2017
================================================== ======= =======
Present value of pension obligations at beginning
of year 517.1 289.2
================================================== ======= =======
Currency translation (3.0) (7.9)
================================================== ======= =======
Acquisition of subsidiaries 0.0 240.3
================================================== ======= =======
Current service cost 3.9 3.3
================================================== ======= =======
Past service cost (0.5) 0.0
================================================== ======= =======
Interest cost 15.2 7.2
================================================== ======= =======
Remeasurement losses/(gains)
================================================== ======= =======
from changes in demographic assumptions 7.8 (0.6)
================================================== ======= =======
from changes in financial assumptions (5.8) 6.1
================================================== ======= =======
due to experience adjustments 2.7 2.2
================================================== ======= =======
Benefits paid (31.1) (23.1)
================================================== ======= =======
Employee contributions to external funds 0.5 0.4
================================================== ======= =======
Reclassifications (0.2) 0.0
================================================== ======= =======
Present value of pension obligations at year-end 506.6 517.1
================================================== ======= =======
The movement in plan assets is shown in the table below:
in EUR million 2018 2017
=============================================== ======= ======
Fair value of plan assets at beginning of year 228.6 56.4
=============================================== ======= ======
Currency translation (1.2) (5.9)
=============================================== ======= ======
Acquisition of subsidiaries 0.0 174.6
=============================================== ======= ======
Interest income 7.7 2.3
=============================================== ======= ======
Administrative costs (paid from plan assets) (0.3) (0.2)
=============================================== ======= ======
Income on plan assets less interest income (6.6) 3.0
=============================================== ======= ======
Benefits paid (13.8) (5.3)
=============================================== ======= ======
Employers' contributions to external funds 9.0 3.3
=============================================== ======= ======
Employee contributions to external funds 0.5 0.4
=============================================== ======= ======
Fair value of plan assets at year-end 223.9 228.6
=============================================== ======= ======
The changes in the asset ceiling are shown below:
in EUR million 2018 2017
=================================================== ====== ======
Asset ceiling at beginning of year 18.3 1.9
=================================================== ====== ======
Currency translation (0.1) (0.3)
=================================================== ====== ======
Acquisition of subsidiaries 0.0 15.3
=================================================== ====== ======
Interest expense 0.4 0.1
=================================================== ====== ======
Losses from changes in asset ceiling less interest
expense 0.9 1.3
=================================================== ====== ======
Asset ceiling at year-end 19.5 18.3
=================================================== ====== ======
At 31 December 2018 the weighted average duration of pension
obligations amounts to 12 years (31.12.2017: 12 years).
The following amounts were recorded in the Consolidated
Statement of Profit or Loss:
in EUR million 2018 2017
============================================= ====== ======
Current service cost 3.9 3.3
============================================= ====== ======
Negative past service cost (0.5) 0.0
============================================= ====== ======
Interest cost 15.2 7.2
============================================= ====== ======
Interest income (7.7) (2.3)
============================================= ====== ======
Interest expense from asset ceiling 0.4 0.1
============================================= ====== ======
Administrative costs (paid from plan assets) 0.3 0.2
============================================= ====== ======
Pension expense recognised in profit or loss 11.6 8.5
============================================= ====== ======
The remeasurement results recognised in other comprehensive
income are shown in the table below:
in EUR million 2018 2017
============================================================= ====== ======
Accumulated remeasurement losses at beginning of year 119.3 113.3
============================================================= ====== ======
Remeasurement losses on present value of pension obligations 4.6 7.7
============================================================= ====== ======
Expenses/(Income) on plan assets less interest income 6.6 (3.0)
============================================================= ====== ======
Losses from changes in asset ceiling less interest 0.9 1.3
============================================================= ====== ======
Accumulated remeasurement losses at year-end 131.4 119.3
============================================================= ====== ======
The present value of plan assets is distributed to the following
classes of investments:
31.12.2018 31.12.2017
================================== ==================================
No active No active
in EUR million Active market market Total Active market market Total
=================== ============== ========== ====== ============== ========== ======
Insurances 0.0 39.1 39.1 0.0 38.4 38.4
=================== ============== ========== ====== ============== ========== ======
Equity instruments 4.7 18.5 23.2 4.8 23.1 27.9
=================== ============== ========== ====== ============== ========== ======
Debt instruments 14.3 49.2 63.5 17.2 45.2 62.4
=================== ============== ========== ====== ============== ========== ======
Cash and cash
equivalents 32.3 4.1 36.4 35.0 0.4 35.4
=================== ============== ========== ====== ============== ========== ======
Other assets 57.9 3.8 61.7 60.8 3.7 64.5
=================== ============== ========== ====== ============== ========== ======
Fair value of
plan assets 109.2 114.7 223.9 117.8 110.8 228.6
=================== ============== ========== ====== ============== ========== ======
The present value of the insurances to cover the Austrian
pension plans corresponds to the coverage capital. Insurance
companies predominantly invest in debt instruments and to a low
extent in equity instruments and properties.
Plan assets do not include own financial instruments of the
Group or assets utilised by the RHI Magnesita Group.
RHI Magnesita works with professional fund managers for the
investment of plan assets. They act on the basis of specific
investment guidelines adopted by the pension fund committee of the
respective pension plans. The committees consist of management
staff of the finance department and other qualified executives.
They meet regularly in order to approve the target portfolio with
the support of independent actuarial experts and to review the
risks and the performance of the investments. In addition, they
approve the selection or the extension of contracts of external
fund managers.
The largest part of the other assets is invested in pension
reinsurance, which creates a low counterparty risk towards
insurance companies. In addition, the Group is exposed to interest
risks and longevity risks resulting from defined benefit
commitments.
The Group generally endows the pension funds with the amount
necessary to meet the legal minimum allocation requirements of the
country in which the fund is based. Moreover, the Group makes
additional allocations at its discretion from time to time. In the
financial year 2019, RHI Magnesita expects employer contributions
to external plan assets to amount to EUR4.8 million and direct
payments to entitled beneficiaries to EUR17.1 million. In the
previous year, employer contributions of EUR4.8 million and direct
pension payments of EUR17.9 million had been expected for the
financial year 2018.
29. Other personnel provisions
Other personnel provisions consist of the following items:
in EUR million 31.12.2018 31.12.2017
===================================== =========== ===========
Termination benefits 55.5 58.1
===================================== =========== ===========
Service anniversary bonuses 19.4 19.4
===================================== =========== ===========
Legacy share-based payment programme 1.6 2.9
===================================== =========== ===========
Semi-retirements 1.9 1.4
===================================== =========== ===========
Lump-sum settlements 0.1 0.7
===================================== =========== ===========
Other personnel provisions 78.5 82.5
===================================== =========== ===========
Provisions for termination benefits
Provisions for termination benefits were based on the following
weighted average measurement assumptions:
in % 31.12.2018 31.12.2017
======================= =========== ===========
Interest rate 2.1% 1.7%
======================= =========== ===========
Future salary increase 3.9% 3.8%
======================= =========== ===========
The interest rate for the measurement of termination benefit
obligations in the Euro area was determined taking into account the
company specific duration of the portfolio.
Provisions for termination benefits developed as follows in the
financial year and the previous year:
in EUR million 2018 2017
==================================================== ====== ======
Provisions for termination benefits at beginning of
year 58.1 58.5
==================================================== ====== ======
Currency translation 0.0 (0.1)
==================================================== ====== ======
Current service cost 1.6 1.5
==================================================== ====== ======
Interest cost 0.9 1.0
==================================================== ====== ======
Remeasurement losses/(gains)
==================================================== ====== ======
from changes in demographic assumptions 1.1 0.0
==================================================== ====== ======
from changes in financial assumptions (2.3) 5.1
==================================================== ====== ======
due to experience adjustments 0.5 0.4
==================================================== ====== ======
Benefits paid (4.4) (4.1)
==================================================== ====== ======
Reclassification 0.0 (0.4)
==================================================== ====== ======
Reclassification as held for sale 0.0 (3.8)
==================================================== ====== ======
Provisions for termination benefits at year-end 55.5 58.1
==================================================== ====== ======
Payments for termination benefits are expected to amount to
EUR3.5 million in the year 2019. In the previous year, the payments
for termination benefits expected for the year 2018 amounted to
EUR3.0 million.
The following remeasurement gains and losses were recognised in
other comprehensive income:
in EUR million 2018 2017
====================================================== ====== ======
Accumulated remeasurement losses at beginning of year 27.9 23.6
====================================================== ====== ======
Remeasurement (gains)/losses(1) (0.7) 5.6
====================================================== ====== ======
Reclassification as held for sale 0.0 (1.3)
====================================================== ====== ======
Accumulated remeasurement losses at year-end 27.2 27.9
====================================================== ====== ======
1 Including EUR0.0 million (2017: EUR0.1 million) from a joint
venture accounted for using the equity method.
At 31 December 2018 the weighted average duration of termination
benefit obligations amounts to 11 years (31.12.2017: 11 years).
Provisions for service anniversary bonuses
The measurement of provisions for service anniversary bonuses is
based on an average weighted interest rate of 1.7% (31.12.2017:
1.4%) and takes into account salary increases of 3.7% (31.12.2017:
3.6%).
Provisions for semi-retirement
The funded status of provisions for obligations to employees
with semi-retirement contracts is shown in the table below:
in EUR million 31.12.2018 31.12.2017
============================================= =========== ===========
Present value of semi-retirement obligations 5.1 5.0
============================================= =========== ===========
Fair value of plan assets (3.2) (3.6)
============================================= =========== ===========
Provisions for semi-retirement obligations 1.9 1.4
============================================= =========== ===========
External plan assets are ring-fenced from all creditors and
exclusively serve to meet semi-retirement obligations.
30. Other non-current provisions
The development of non-current provisions is shown in the table
below:
Demolition/
disposal
costs,
Contract Labour and environmental
in EUR million obligations civil contingencies damages Other Total
===================== ============= ===================== =============== ====== =======
1.1.2018(1) 91.1 9.4 10.8 4.4 115.7
===================== ============= ===================== =============== ====== =======
Currency translation (9.7) (1.0) (0.2) (0.1) (11.0)
===================== ============= ===================== =============== ====== =======
Utilised 0.0 (0.4) 0.0 (0.1) (0.5)
===================== ============= ===================== =============== ====== =======
Reversals 0.0 0.0 0.0 (0.1) (0.1)
===================== ============= ===================== =============== ====== =======
Additions 1.7 0.3 1.9 0.5 4.4
===================== ============= ===================== =============== ====== =======
Additions interest 9.8 0.0 0.0 0.0 9.8
===================== ============= ===================== =============== ====== =======
Reclassifications (9.1) 0.0 0.0 0.0 (9.1)
===================== ============= ===================== =============== ====== =======
31.12.2018 83.8 8.3 12.5 4.6 109.2
===================== ============= ===================== =============== ====== =======
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
In November 2017, RHI Magnesita sold a plant located in
Oberhausen, Germany, in order to satisfy the conditions imposed by
the European Commission in connection with their approval of the
Acquisition of Control of Magnesita. As RHI Magnesita is obligated
to provide raw materials at cost, the Group has recognised a
provision for unfavourable contracts as part of the purchase price
allocation to reflect the foregone profit margin. The non-current
portion of this contract obligation amounts to EUR80.0 million as
of 31.12.2018 (31.12.2017:
EUR87.8 million). Furthermore, provisions for contract
obligations amounting to EUR3.2 million (31.12.2017: EUR1.9
million) are due to contracts for logistics services and the
procurement of raw materials.
The provision for labour and civil contingencies primarily
comprises of labour litigation provisions against RHI Magnesita in
a total of
323 cases amounting to EUR7.1 million (31.12.2017: EUR8.3
million).
The provision for demolition and disposal costs and
environmental damages primarily includes provisions for the
estimated costs of mining site restoration of several mines in
Brazil amounting to EUR5.9 million (31.12.2017: EUR4.6 million) and
various sites in the United States amounting to EUR6.1 million
(31.12.2017: EUR5.8 million).
The other provisions primarily include provisions related to tax
litigation procedures in Peru regarding corporate income tax of
fiscal year 2009 amounting to EUR2.7 million (31.12.2017: EUR2.6
million) and judicial action filed in Colombia related to corporate
income tax of fiscal year 2010 amounting to EUR1.9 million
(31.12.2017: EUR1.5 million).
31. Other non-current liabilities
Other non-current liabilities consist of the following
items:
in EUR million 31.12.2018 31.12.2017
=================================================== =========== ===========
Deferred income for subsidies received 6.2 4.7
=================================================== =========== ===========
Liabilities to employees 2.5 2.8
=================================================== =========== ===========
Contingent consideration for acquired subsidiaries 0.6 0.6
=================================================== =========== ===========
Miscellaneous non-current liabilities 1.0 0.9
=================================================== =========== ===========
Other non-current liabilities 10.3 9.0
=================================================== =========== ===========
thereof financial liabilities 0.6 0.6
=================================================== =========== ===========
thereof non-financial liabilities 9.7 8.4
=================================================== =========== ===========
32. Trade payables and other current liabilities
Trade payables and other current liabilities included in the
Consolidated Statement of Financial Position consist of the
following items:
in EUR million 31.12.2018 31.12.2017(1)
============================================= =========== ==============
Trade payables 502.5 467.6
============================================= =========== ==============
Contract liabilities 64.8 0.0
============================================= =========== ==============
Prepayments received on orders 0.0 24.1
============================================= =========== ==============
Liabilities to employees 99.6 99.2
============================================= =========== ==============
Taxes other than income tax 30.0 23.2
============================================= =========== ==============
Payables from commissions 13.0 13.2
============================================= =========== ==============
Payables from property transactions 9.2 4.8
============================================= =========== ==============
Customers with credit balances 7.3 6.5
============================================= =========== ==============
Liabilities to joint ventures and associates 5.4 9.1
============================================= =========== ==============
Liabilities to non-consolidated subsidiaries 1.0 1.6
============================================= =========== ==============
Other current liabilities 24.1 28.9
============================================= =========== ==============
Trade payables and other current liabilities 756.9 678.2
============================================= =========== ==============
thereof financial liabilities 539.3 507.0
============================================= =========== ==============
thereof non-financial liabilities 217.6 171.2
============================================= =========== ==============
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
Contract liabilities mainly consist of prepayments received on
orders. Prepayments received on orders as of 31 December 2017 were
recognised as revenue in the current reporting period.
The item liabilities to employees primarily consists of
obligations for wages and salaries, payroll taxes and
employee-related duties, performance bonuses, unused vacation and
flexitime credits.
Other current liabilities include EUR1.6 million (31.12.2017:
EUR3.7 million) investment reimbursement obligation to the former
subsidiary Dolomite Franchi S.p.A.,and other accrued expenses.
33. Income tax liabilities
Income tax liabilities amounting to EUR32.2 million (31.12.2017:
EUR16.1 million) primarily include income taxes for the current
year and previous years which have not yet been definitively
audited by domestic and foreign tax authorities. Taking into
account a multitude of factors, including the interpretation,
commenting and case law regarding the respective tax laws as well
as past experiences, adequate liabilities have been recognised as
far as apparent.
34. Current provisions
The development of current provisions is shown in the table
below:
Demolition/
disposal
costs,
Restructuring environmental Contract Guarantees
in EUR million costs damages Warranties obligations provided Other Total
===================== ============== =============== =========== ============= =========== ====== =======
1.1.2018(1) 37.6 9.3 4.4 26.2 2.9 9.0 89.4
===================== ============== =============== =========== ============= =========== ====== =======
Currency translation (0.4) 0.0 (0.2) (2.0) 0.0 (0.4) (3.0)
===================== ============== =============== =========== ============= =========== ====== =======
Utilised (25.2) (2.9) (3.3) (18.7) 0.0 (3.2) (53.3)
===================== ============== =============== =========== ============= =========== ====== =======
Reversals (7.0) (0.7) (0.2) (2.4) 0.0 0.0 (10.3)
===================== ============== =============== =========== ============= =========== ====== =======
Additions 4.1 1.7 2.0 9.7 0.1 1.9 19.5
===================== ============== =============== =========== ============= =========== ====== =======
Reclassifications 1.0 0.0 0.0 8.3 0.0 1.4 10.7
===================== ============== =============== =========== ============= =========== ====== =======
31.12.2018 10.1 7.4 2.7 21.1 3.0 8.7 53.0
===================== ============== =============== =========== ============= =========== ====== =======
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita and of the initial application of IFRS
15.
Provisions for restructuring costs amount to EUR10.1 million as
of 31 December 2018 (31.12.2017: EUR37.6 million) and primarily
consist of benefit obligations to employees due to termination of
employment resulting from corporate reorganisation of RHI
Magnesita.
The item demolition and disposal costs, environmental damages
includes an amount of EUR2.5 million (31.12.2017: EUR2.7 million)
which refers to the former site in Aken, Germany. It is assumed
that this provision will be used up within the next 12 months.
Provisions for warranties include provisions for claims arising
from warranties and other similar obligations from the sale of
refractory products.
Provisions for contract obligations include the current portion
of the Oberhausen contract obligation amounting to EUR11.5 million
(31.12.2017: EUR16.9 million). The amortisation of this provision
led to an income of EUR10.0 million in 2018. Furthermore,
provisions for other unfavourable contracts amounting to EUR6.7
million (31.12.2017: EUR6.9 million) and provisions for
unfavourable contracts related to contracts for logistics services
and the procurement of raw materials totalling EUR2.9 million
(31.12.2017: EUR2.4 million) are included.
Provisions for guarantees provided include obligations from
sureties and guarantees to banks and insurance companies in the
country and abroad. The exact due date of the cash outflow is
uncertain.
The item other provisions includes provisions for real estate
transfer tax amounting to EUR1.3 million (31.12.2017: EUR2.4
million) resulting from corporate reorganisation of RHI Magnesita
as well as a provision for the share-based remuneration programme
of the members of the former Management Board of RHI AG of EUR1.4
million (31.12.2017: EUR1.4 million).
In addition, provisions for legal proceedings including
attorney's fees amounting to EUR3.2 million (31.12.2017: EUR3.1
million) are included in the item other provisions. It is currently
uncertain when precisely the cash outflow is due.
Furthermore, several provisions, which are individually
immaterial and cannot be allocated to one of the above-mentioned
categories, are included in other provisions. A large part of these
costs is expected to be paid within 12 months.
NOTES TO THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS
35. Revenue
Revenue is essentially generated by product deliveries and by
performing management refractory services. The distribution of
revenue by product group, division and country is given in the
explanations to segment reporting under Note (50).
36. Cost of sales
Cost of sales comprises the production cost of goods sold as
well as the purchase price of merchandise sold. In addition to
direct material and production costs, it also includes overheads
including depreciation charges on production equipment,
amortisation charges of intangible assets as well as impairment
losses and reversals of impairment losses of inventories. Moreover,
cost of sales also includes the costs of services provided by the
Group or services received.
37. Selling and marketing expenses
This item includes personnel expenses for the sales staff as
well as depreciation charges and other operating expenses related
to the market and sales processes.
38. General and administrative expenses
General and administrative expenses primarily consist of
personnel expenses for the administrative functions, legal and
other consulting costs, expenses for research and non-capitalisable
development costs.
Research and development expenses totalled EUR32.6 million
(2017: EUR24.0 million), of which development costs amounting to
EUR8.3 million (2017: EUR4.6 million) were capitalised. Income from
research grants amounted to EUR3.8 million (2017: EUR3.8 million)
in 2018. Amortisation and impairment of development costs amounting
to EUR3.8 million (2017: EUR4.3 million) are recognised under cost
of sales.
39. Other income
The individual components of other income are:
in EUR million 2018 2017(1)
=============================================== ===== ========
Result from derivatives from supply contracts 19.6 4.9
=============================================== ===== ========
Amortisation of Oberhausen provision 10.0 1.6
=============================================== ===== ========
Income from restructuring 5.4 0.3
=============================================== ===== ========
Income from the disposal of non-current assets 2.2 0.9
=============================================== ===== ========
Miscellaneous income 6.7 2.7
=============================================== ===== ========
Other income 43.9 10.4
=============================================== ===== ========
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita and the changes in presentation.
Income from restructuring amounting to EUR5.4 million results
from the reversal of acquisition-related provisions for redundancy
programmes.
40. Other expenses
Other expenses include:
in EUR million 2018 2017(1)
=============================================== ======= ========
Restructuring costs (22.3) (62.7)
=============================================== ======= ========
Expenses for strategic projects (13.5) (24.4)
=============================================== ======= ========
Losses from the disposal of non-current assets (3.0) (7.6)
=============================================== ======= ========
Impairment losses 0.0 (2.1)
=============================================== ======= ========
Miscellaneous expenses (6.1) (10.5)
=============================================== ======= ========
Other expenses (44.9) (107.3)
=============================================== ======= ========
1 Adjusted to reflect the changes in presentation.
Restructuring costs primarily relate to costs incurred in
connection with the corporate reorganisation of RHI Magnesita,
including costs for termination of employment amounting to EUR5.4
million. Furthermore, dismantling and demolition costs amounting to
EUR3.7 million and expenses for unused logistics services in the
Porsgrunn plant, Norway, amounting to EUR3.9 million (2017: EUR4.4
million) are included. In 2017, restructuring costs included
expenses incurred in connection with the acquisition-related global
restructuring programme totalling EUR35.3 million and the disposal
of the dolomite and fused cast business amounting to EUR23.0
million.
Expenses for strategic projects amounting to EUR13.5 million
mainly include legal and consulting fees for the acquisition and
integration of Magnesita and the related corporate reorganisation
of RHI Magnesita. For the acquisition of Magnesita, costs totalling
EUR33.5 million were incurred in 2017. They were primarily related
to legal and other advisory fees and fees for the consulting
investment banks. Of the total costs, EUR24.4 million were
recognised in profit or loss and EUR9.1 million were accounted for
as a deduction from equity since these costs were directly
attributable to the issue of RHI Magnesita shares in 2017. EUR3.0
million were cash-effective and formed part of capital expenses for
the issue of shares in the Consolidated Statement of Cash
Flows.
41. Interest income
This item includes interest on cash at banks and similar income
amounting to EUR8.8 million (2017: EUR2.8 million), interest income
on financial receivables amounting to EUR0.2 million (2017: EUR0.2
million) and interest income on securities and shares amounting to
EUR0.7 million (2017: EUR2.5 million), of which EUR0.4 million
(2017: EUR2.0 million) is accounted for by impaired securities.
42. Foreign exchange effects and related derivatives
The net expense on foreign exchange effects and related
derivatives consists of the following items:
in EUR million 2018 2017
========================================================== ======== ========
Foreign exchange gains 98.6 68.2
========================================================== ======== ========
Gains from related derivative finanical instruments 4.5 14.2
========================================================== ======== ========
Foreign exchange losses (160.2) (126.3)
========================================================== ======== ========
Losses from from related derivative finanical instruments (24.2) (6.9)
========================================================== ======== ========
Net expense on foreign exchange effects and related
derivatives (81.3) (50.8)
========================================================== ======== ========
The net expense on foreign exchange effects and related
derivatives results mainly from the devaluation of the Euro,
Argentine Peso and Brazilian Real against the US Dollar, affecting
both intercompany and third-party loans, accounts payable and
accounts receivable.
43. Other net financial expenses
Other net financial expenses consist of the following items:
in EUR million 2018 2017(1)
======================================================== ======= ========
Interest income on plan assets 7.3 2.2
======================================================== ======= ========
Interest expense on provisions for pensions (15.2) (7.2)
======================================================== ======= ========
Interest expense on provisions for termination benefits (0.9) (1.0)
======================================================== ======= ========
Interest expense on other personnel provisions (0.3) (0.3)
======================================================== ======= ========
Net interest expense personnel provisions (9.1) (6.3)
======================================================== ======= ========
Unwinding of discount of provisions and payables (15.6) (0.9)
======================================================== ======= ========
Interest expense on non-controlling interests (5.3) (3.3)
======================================================== ======= ========
Impairment losses on securities (1.4) (1.9)
======================================================== ======= ========
Expenses from the valuation of put options (1.0) (0.9)
======================================================== ======= ========
Gains from the disposal of securities and shares 0.7 0.0
======================================================== ======= ========
Other interest and similar expenses (10.9) (0.3)
======================================================== ======= ========
Other net financial expenses (42.6) (13.6)
======================================================== ======= ========
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita and the changes in presentation.
44. Income tax
Income tax consists of the following items:
in EUR million 2018 2017
========================================== ======= =======
Current tax expense 75.9 30.5
========================================== ======= =======
Deferred tax expense/(income) relating to
========================================== ======= =======
temporary differences (46.7) (34.0)
========================================== ======= =======
tax loss carryforwards 29.7 8.4
========================================== ======= =======
(17.0) (25.6)
========================================== ======= =======
Income tax 58.9 4.9
========================================== ======= =======
The current tax expense of the year 2018 includes tax expenses
for previous periods of EUR7.1 million (2017: EUR2.8 million) and
income from income tax relating to other periods of EUR0.5 million
(2017: EUR8.6 million). In 2018, EUR3.8 million are related to an
ongoing tax audit respectively tax loss forfeit in Germany. In
2017, EUR6.7 million were attributable to the reversal of a
provision related to a tax audit in Germany.
In addition to the income taxes recognised in the Statement of
Profit or Loss, tax income totalling EUR5.7 million (2017: EUR4.1
million), which is attributable to other comprehensive income, was
also recognised in other comprehensive income. In 2017, tax expense
totalling EUR6.3 million was reclassified from other comprehensive
income to the Statement of Profit or Loss.
The reasons for the difference between the income tax expense,
which would result from the application of the Austrian corporate
tax rate of 25% on the profit before income tax, and the income tax
reported are shown below:
in EUR million 2018 2017(1)
========================================================== ======= ========
Profit before income tax 246.0 (5.9)
========================================================== ======= ========
Income tax expense calculated at 25% (2017: 25%) 61.5 (1.5)
========================================================== ======= ========
Different foreign tax rates 1.8 (0.7)
========================================================== ======= ========
Expenses not deductible for tax purposes, non-creditable
taxes 10.1 20.4
========================================================== ======= ========
Non-taxable income and tax benefits (32.3) (7.1)
========================================================== ======= ========
Tax losses and temporary differences of the financial
year not recognised 9.5 11.9
========================================================== ======= ========
Utilisation of previously unrecognised loss carryforwards
and temporary differences (0.2) (1.2)
========================================================== ======= ========
Recognition of previously unrecognised loss carryforwards
and temporary differences (0.7) (5.8)
========================================================== ======= ========
Change in valuation allowance on deferred tax assets 1.2 3.7
========================================================== ======= ========
Deferred tax expense due to tax rate changes (1.8) (12.9)
========================================================== ======= ========
Deferred income tax relating to prior periods 2.4 3.3
========================================================== ======= ========
Current income tax relating to prior periods 6.7 (5.8)
========================================================== ======= ========
Other 0.7 0.6
========================================================== ======= ========
Recognised tax expense 58.9 4.9
========================================================== ======= ========
Effective tax rate (in %) 23.9% (83.1)%
========================================================== ======= ========
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
Deferred tax expense due to tax rates changes is primarily
attributable to the reduction of the corporate income tax rate in
Norway from 24% to 23% (2018: EUR(0.9) million) and an increase in
corporate income tax rate in Turkey from 20% to 22% (2018: EUR0.4
million). In 2017, deferred tax expense due to tax rates changes
was primarily attributable to the reduction of the corporate income
tax rate in the United States from 35% to 21% (2017: EUR(7.5)
million) and in Norway (2017: EUR(1.1) million). Non-taxable income
and tax benefits include the SUDENE tax regime amounting to 20.4
million. This tax regime is calculated on profits from activities
covered by the incentive tax treatment for priority projects for
the development of the SUDENE region in Brazil.
45. Expense categories
The presentation of the Consolidated Statement of Profit or Loss
is based on the function of expenses. The following tables show a
classification by expense category for 2018 and the previous
year:
Selling and General and
marketing administrative Other income/
in EUR million Cost of sales expenses expenses expenses Total 2018
============================== ============== ============ ================ ============== ===========
Changes in inventories,
own work capitalised (79.2) 0.0 (2.8) 0.0 (82.0)
============================== ============== ============ ================ ============== ===========
Cost of materials 1,550.8 0.6 2.4 0.0 1,553.8
============================== ============== ============ ================ ============== ===========
Personnel costs 409.6 72.8 106.2 5.6 594.2
============================== ============== ============ ================ ============== ===========
Depreciation and amortisation
charges 133.5 7.9 12.0 0.0 153.4
============================== ============== ============ ================ ============== ===========
Other income (27.5) (0.2) (4.2) (9.9) (41.8)
============================== ============== ============ ================ ============== ===========
Other expenses 357.3 47.8 94.8 5.3 505.2
============================== ============== ============ ================ ============== ===========
Total 2,344.5 128.9 208.4 1.0 2,682.8
============================== ============== ============ ================ ============== ===========
Selling and General and
marketing administrative Other income/
in EUR million Cost of sales expenses expenses expenses Total 2017(2)
============================== ============== ============ ================ ============== ==============
Changes in inventories,
own work capitalised (27.3) 0.2 (3.9) 1.5 (29.5)
============================== ============== ============ ================ ============== ==============
Cost of materials 919.2 4.0 5.3 (0.3) 928.2
============================== ============== ============ ================ ============== ==============
Personnel costs 259.2 72.4 100.2 22.8 454.6
============================== ============== ============ ================ ============== ==============
Depreciation and amortisation
charges(1) 75.8 0.4 6.0 17.2 99.4
============================== ============== ============ ================ ============== ==============
Other income (8.5) 0.0 (6.9) (10.5) (25.9)
============================== ============== ============ ================ ============== ==============
Other expenses 325.0 24.2 42.4 66.2 457.8
============================== ============== ============ ================ ============== ==============
Total(2) 1,543.4 101.2 143.1 96.9 1,884.6
============================== ============== ============ ================ ============== ==============
1 Including impairment losses on property, plant and equipment
and intangible assets.
2 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita and the changes in presentation.
Cost of materials includes expenses for raw materials and
supplies, and purchased goods of EUR1,321.3 million (2017: EUR759.0
million) as well as expenses for services received, especially
energy, amounting to EUR232.5 million (2017: EUR169.2 million).
Amortisation charges of intangible assets are largely recognised
in cost of sales.
Other expenses mainly include freight costs, commissions, travel
costs as well as consulting and other outside services.
46. Personnel costs
Personnel costs consist of the following components:
in EUR million 2018 2017
=============================================== ====== ======
Wages and salaries 474.0 360.1
=============================================== ====== ======
Pensions
=============================================== ====== ======
Defined benefit plans 3.7 3.4
=============================================== ====== ======
Defined contribution plans 5.2 3.4
=============================================== ====== ======
Termination benefits
=============================================== ====== ======
Defined benefit plans 1.6 1.5
=============================================== ====== ======
Defined contribution plans 1.5 2.0
=============================================== ====== ======
Other expenses 2.9 1.5
=============================================== ====== ======
Social security costs 73.7 68.7
=============================================== ====== ======
Fringe benefits 31.6 14.0
=============================================== ====== ======
Personnel expenses (without interest expenses) 594.2 454.6
=============================================== ====== ======
Personnel costs do not include amounts resulting from the
interest accrued on personnel provisions. They amount to EUR9.1
million (2017: EUR6.3 million) and are recorded in other net
financial expenses
NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
The Statement of Cash Flows shows how cash and cash equivalents
of the Group change through cash inflows and cash outflows during
the reporting year. In accordance with IAS 7, cash flows from
operating activities, from investing activities and from financing
activities are distinguished. Cash flows from investing and
financing activities are determined on the basis of cash payment,
while cash flow from operating activities is derived from the
Consolidated Financial Statements using the indirect method.
The respective monthly changes in items of the Statement of
Financial Position of companies that report in foreign currencies
are translated at the closing rate of the previous month and
adjusted for effects arising from changes in the group of
consolidated companies or in other businesses. Therefore, the
Statement of Cash Flows cannot be derived directly from changes in
items of the Consolidated Statement of Financial Position. As in
the Statement of Financial Position, cash and cash equivalents are
translated at the closing rate. The effects of changes in exchange
rates on cash and cash equivalents are shown separately.
47. Net cash flow from operating activities
Other non-cash expenses and income include mainly the net
interest expenses for defined benefit pension plans amounting
to
EUR9.1 million (2017: EUR6.3 million), net remeasurement losses
of monetary foreign currency positions and derivative financial
instruments of EUR14.5 million (2017: EUR51.2 million). In 2017,
other non-cash funding of provisions for restructuring amounted to
EUR13.6 million.
48. Net cash flow from financing activities
The reconciliation of movements of financial liabilities and
assets to cash flows arising from financing activities is shown in
the tables below:
Cash changes Non-cash changes
======================================================
Changes in Interest
foreign exchange expense and
in EUR million 01.01.2018 rates other changes Reclassification 31.12.2018
===================== =========== ============= ================== =============== ================= ===========
Liabilities to
financial
institutions 953.0 164.8 (12.0) 60.3 (12.5) 1,153.6
===================== =========== ============= ================== =============== ================= ===========
Perpetual bond 215.3 (215.0) 1.3 (1.6) 0.0 0.0
===================== =========== ============= ================== =============== ================= ===========
Senior notes 55.6 (54.6) 0.6 (1.6) 0.0 0.0
===================== =========== ============= ================== =============== ================= ===========
Liabilities to
fixed-term or
puttable
non-controlling
interests 32.0 (1.8) (0.4) 6.5 0.0 36.3
===================== =========== ============= ================== =============== ================= ===========
Other financial
liabilities and
capitalised
transaction
costs 1.7 (0.5) (0.3) (0.6) 12.5 12.8
===================== =========== ============= ================== =============== ================= ===========
Prepaid transaction
costs related
to financial
liabilities (2.5) 0.0 0.0 2.5 0.0 0.0
===================== =========== ============= ================== =============== ================= ===========
Trade payables 0.0 (4.5) 0.0 6.3 0.0 1.8
===================== =========== ============= ================== =============== ================= ===========
Changes of financial
liabilities and
assets arising
from financing
activities 1,255.1 (111.6) (10.8) 71.8 0.0 1,204.5
===================== =========== ============= ================== =============== ================= ===========
Cash changes Non-cash changes
======================================================
Changes in Additions Interest
foreign exchange to consolidated expense and
in EUR million 01.01.2017 rates companies other changes 31.12.2017
===================== =========== ============= ================== ================= =============== ===========
Liabilities to
financial
institutions 475.5 60.1 (13.3) 407.9 22.8 953.0
===================== =========== ============= ================== ================= =============== ===========
Perpetual bond 0.0 0.0 (5.6) 217.9 3.0 215.3
===================== =========== ============= ================== ================= =============== ===========
Senior notes 0.0 0.0 (1.4) 56.3 0.7 55.6
===================== =========== ============= ================== ================= =============== ===========
Liabilities to
fixed-term or
puttable
non-controlling
interests 32.5 (3.2) (1.7) 0.0 4.4 32.0
===================== =========== ============= ================== ================= =============== ===========
Other financial
liabilities and
capitalised
transaction
costs 7.7 (3.4) (0.1) 0.1 (2.6) 1.7
===================== =========== ============= ================== ================= =============== ===========
Prepaid transaction
costs related
to financial
liabilities 0.0 (2.5) 0.0 0.0 0.0 (2.5)
===================== =========== ============= ================== ================= =============== ===========
Changes of financial
liabilities and
assets arising
from financing
activities 515.7 51.0 (22.1) 682.2 28.3 1,255.1
===================== =========== ============= ================== ================= =============== ===========
49. Total interest paid and interest received
Total interest paid amounts to EUR72.4 million in the reporting
period (2017: EUR25.6 million), of which EUR0.3 million (2017:
EUR0.1 million) is included in cash flow from operating activities,
EUR1.0 million (2017: EUR0.6 million) in cash flow from investing
activities and EUR71.1 million (2017: EUR24.9 million) in cash flow
from financing activities.
Total interest received amounts to EUR8.5 million for the
financial year 2018 (2017: EUR5.1 million), of which EUR0.2 million
(2017: EUR0.0 million) are included in cash flow from operating
activities and EUR8.3 million (2017: EUR5.1 million) in cash flow
from investing activities.
OTHER DISCLOSURES
50. Segment reporting
Segment reporting by operating company division
The following tables show the financial information for the
operating segments for the year 2018 and the previous year:
in EUR million Steel Industrial Group 2018
================================================= ======== =========== ===========
Revenue 2,204.3 877.1 3,081.4
================================================= ======== =========== ===========
Gross profit 522.4 214.5 736.9
================================================= ======== =========== ===========
EBIT 398.6
================================================= ======== =========== ===========
Net finance costs (162.7)
================================================= ======== =========== ===========
Share of profit of joint ventures and associates 10.1
================================================= ======== =========== ===========
Profit before income tax 246.0
================================================= ======== =========== ===========
Depreciation and amortisation charges (97.5) (55.9) (153.4)
================================================= ======== =========== ===========
Segment assets 31.12.2018 1,666.3 948.0 2,614.3
================================================= ======== =========== ===========
Investments in joint ventures and associates
31.12.2018 21.8
================================================= ======== =========== ===========
Reconciliation to total assets 902.9
================================================= ======== =========== ===========
3,539.0
================================================= ======== =========== ===========
Investments in property, plant and equipment
and intangible assets (according to non-current
assets statement) 67.7 59.3 127.0
================================================= ======== =========== ===========
in EUR million Steel Industrial Group 2017(1)
================================================= ======== =========== ==============
Segment revenue 1,312.6 637.5 1,950.1
================================================= ======== =========== ==============
Gross profit 284.4 122.3 406.7
================================================= ======== =========== ==============
EBIT 65.5
================================================= ======== =========== ==============
Net finance costs (82.4)
================================================= ======== =========== ==============
Share of profit of joint ventures and associates 11.0
================================================= ======== =========== ==============
Profit before income tax (5.9)
================================================= ======== =========== ==============
Depreciation and amortisation charges (53.0) (26.6) (79.6)
================================================= ======== =========== ==============
Segment assets 31.12.2017 1,941.9 742.2 2,684.1
================================================= ======== =========== ==============
Investments in joint ventures and associates
31.12.2017 21.4
================================================= ======== =========== ==============
Reconciliation to total assets 807.3
================================================= ======== =========== ==============
3,512.8
================================================= ======== =========== ==============
Investments in property, plant and equipment
and intangible assets (according to non-current
assets statement) 135.5 17.8 153.3
================================================= ======== =========== ==============
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita and the changes in presentation.
Revenue amounting to EUR317.5 million (2017: EUR195.5 million)
was realised with one customer in 2018, which is included in the
Steel segment. No other single customer contributed 10% or more to
consolidated revenue in 2018 or 2017. Companies which are known to
be part of a group are treated as one customer.
When allocating revenue to product groups, a distinction is made
between shaped products (e.g. hydraulically pressed bricks, fused
cast bricks, isostatically pressed products), unshaped products
(e.g. repair mixes, construction mixes and castables), refractory
management services as well as other revenue. Other mainly includes
revenue from the sale of non-group refractory products.
In the reporting year, revenue is classified by product group as
follows:
in EUR million Steel Industrial Group 2018
=============================== ======== =========== ===========
Shaped products 1,110.3 580.5 1,690.8
=============================== ======== =========== ===========
Unshaped products 336.8 196.2 533.0
=============================== ======== =========== ===========
Management refractory services 616.0 0.0 616.0
=============================== ======== =========== ===========
Other 141.2 100.4 241.6
=============================== ======== =========== ===========
Revenue 2,204.3 877.1 3,081.4
=============================== ======== =========== ===========
In 2017, revenue was classified by product group as follows:
in EUR million Steel Industrial Group 2017(1)
=============================== ======== =========== ==============
Shaped products 654.8 436.0 1,090.8
=============================== ======== =========== ==============
Unshaped products 252.9 123.6 376.5
=============================== ======== =========== ==============
Management refractory services 334.5 0.0 334.5
=============================== ======== =========== ==============
Other 70.4 77.9 148.3
=============================== ======== =========== ==============
Revenue 1,312.6 637.5 1,950.1
=============================== ======== =========== ==============
1 Adjusted to reflect the changes in presentation.
Revenue from shaped and unshaped products is transferred to the
customers at a point in time, whereas revenue from management
refractory services is transferred over time. Other revenue
amounting to EUR100.9 million (2017: EUR67.9 million) is
transferred over time and an amount of EUR140.7 million (2017:
EUR80.4 million) is transferred at a point of time.
Segment reporting by country
Revenue is classified by customer sites as follows:
in EUR million 2018 2017(1)
=================================================== ======== ========
Netherlands 25.8 14.1
=================================================== ======== ========
All other countries
=================================================== ======== ========
USA 407.9 195.3
=================================================== ======== ========
Brazil 333.2 92.5
=================================================== ======== ========
India 245.3 204.1
=================================================== ======== ========
Germany 183.4 137.3
=================================================== ======== ========
PR China 165.7 121.9
=================================================== ======== ========
Mexico 161.0 119.3
=================================================== ======== ========
Italy 131.6 105.7
=================================================== ======== ========
Canada 92.2 70.8
=================================================== ======== ========
Russia 86.9 59.0
=================================================== ======== ========
Other countries, each below EUR62.9 million (2017:
EUR44.8 million) 1,248.4 830.1
=================================================== ======== ========
Revenue 3,081.4 1,950.1
=================================================== ======== ========
1 Adjusted to reflect the changes in presentation.
The carrying amounts of goodwill, other intangible assets and
property, plant and equipment are classified as follows by the
respective sites of the group companies:
in EUR million 31.12.2018 31.12.2017(1)
========================================================= =========== ==============
Brazil 520.7 595.6
========================================================= =========== ==============
USA 233.1 236.4
========================================================= =========== ==============
Austria 220.6 214.0
========================================================= =========== ==============
Germany 198.6 210.0
========================================================= =========== ==============
PR China 160.1 158.7
========================================================= =========== ==============
India 58.0 58.8
========================================================= =========== ==============
Mexico 34.5 33.4
========================================================= =========== ==============
France 31.8 37.1
========================================================= =========== ==============
Turkey 30.6 31.8
========================================================= =========== ==============
Other countries, each below EUR18.6 million (31.12.2017:
EUR19.1 million) 58.6 59.1
========================================================= =========== ==============
Goodwill, intangible assets and property, plant and
equipment 1,546.6 1,634.9
========================================================= =========== ==============
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
51. Earnings per share
In accordance with IAS 33, earnings per share are calculated by
dividing the profit or loss attributable to the shareholders of RHI
Magnesita N.V. by the weighted average number of shares outstanding
during the financial year.
2018 2017(1)
=================================================== =========== ===========
Profit after income tax attributable to the owners
of the parent (in EUR million) 158.1 (17.4)
=================================================== =========== ===========
Weighted average number of shares 44,963,615 40,682,053
=================================================== =========== ===========
Earnings per share (in EUR) 3.52 (0.43)
=================================================== =========== ===========
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
52. Dividend payments and proposed dividend
Based on a resolution adopted by the Annual General Meeting of
RHI Magnesita N.V. on 7 June 2018, dividends totalling EUR33.6
million were paid out to the shareholders in 2018 for 2017, which
corresponded to a dividend of EUR0.75 per share.
For 2018, the Board of Directors will propose a dividend of
EUR1.50 per share for the shareholders of RHI Magnesita N.V. The
proposed dividend is subject to the approval by the Annual General
Meeting on 6 June 2019 and was not recognised as a liability in the
Consolidated Financial Statements 2018.
Dividend payments to the shareholders of RHI Magnesita N.V. have
no income tax consequences for RHI Magnesita N.V.
53. Additional disclosures on financial instruments
The following tables show the carrying amounts and fair values
of financial assets and liabilities by measurement category and
level and the allocation to the measurement category in accordance
with IFRS 13. In addition, carrying amounts are shown aggregated
according to measurement category.
31.12.2018 01.01.2018
============= ====== ====================== ======================
Measurement
category Carrying Carrying
in EUR million IFRS 9(1) Level amount Fair value amount Fair value
============================================== ============= ====== ========= =========== ========= ===========
Other non-current financial assets
============================================== ============= ====== ========= =========== ========= ===========
Interests in subsidiaries not consolidated FVPL 3 0.7 0.7 0.8 0.8
============================================== ============= ====== ========= =========== ========= ===========
Investments FVPL 3 0.0 0.0 0.4 0.4
============================================== ============= ====== ========= =========== ========= ===========
Marketable securities FVPL 1 14.5 14.5 14.9 14.9
============================================== ============= ====== ========= =========== ========= ===========
Shares FVPL 1 0.0 0.0 1.9 1.9
============================================== ============= ====== ========= =========== ========= ===========
Shares FVPL 3 0.5 0.5 0.5 0.5
============================================== ============= ====== ========= =========== ========= ===========
Interest derivatives designated
as cash flow hedges - 2 0.6 0.6 1.5 1.5
============================================== ============= ====== ========= =========== ========= ===========
Non-current receivables from disposal
of subsidiaries AC - 0.0 - 2.6 -
============================================== ============= ====== ========= =========== ========= ===========
Other non-current financial receivables AC - 1.7 - 2.5 -
============================================== ============= ====== ========= =========== ========= ===========
Trade and other current receivables(2) AC - 367.2 - 426.6 -
============================================== ============= ====== ========= =========== ========= ===========
Other current financial assets
============================================== ============= ====== ========= =========== ========= ===========
Marketable securities FVPL 1 35.2 35.2 32.3 32.3
============================================== ============= ====== ========= =========== ========= ===========
Shares FVPL 1 1.1 1.1 0.0 0.0
============================================== ============= ====== ========= =========== ========= ===========
Derivatives FVPL 2 2.1 2.1 1.7 1.7
============================================== ============= ====== ========= =========== ========= ===========
Other current financial receivables AC - 0.2 - 0.1 -
============================================== ============= ====== ========= =========== ========= ===========
Cash and cash equivalents AC - 491.2 - 442.4 -
============================================== ============= ====== ========= =========== ========= ===========
Financial assets 915.0 928.2
============================================================= ====== ========= =========== ========= ===========
Non-current and current borrowings
============================================== ============= ====== ========= =========== ========= ===========
Liabilities to financial institutions AC 2 1,153.6 1,165.6 953.0 966.1
============================================== ============= ====== ========= =========== ========= ===========
Perpetual bonds AC 1 0.0 0.0 215.3 217.0
============================================== ============= ====== ========= =========== ========= ===========
Senior notes AC 2 0.0 0.0 55.6 55.6
============================================== ============= ====== ========= =========== ========= ===========
Other financial liabilities and
capitalised transaction costs AC 2 12.8 12.8 1.7 1.7
============================================== ============= ====== ========= =========== ========= ===========
Non-current and current other financial
liabilities
============================================== ============= ====== ========= =========== ========= ===========
Derivatives FVPL 2 20.9 20.9 40.9 40.9
============================================== ============= ====== ========= =========== ========= ===========
Interest derivatives designated
as cash flow hedges - 2 7.3 7.3 0.0 0.0
============================================== ============= ====== ========= =========== ========= ===========
Liabilities to fixed-term or puttable
non-controlling interests AC 2 36.3 36.3 32.0 32.0
============================================== ============= ====== ========= =========== ========= ===========
Other non-current liabilities
============================================== ============= ====== ========= =========== ========= ===========
Contingent consideration for acquired
subsidiaries FVPL 3 0.6 0.6 0.6 0.6
============================================== ============= ====== ========= =========== ========= ===========
Trade payables and other current
liabilities(3) AC - 539.3 - 507.0 -
============================================== ============= ====== ========= =========== ========= ===========
Financial liabilities 1,770.8 1,806.1
============================================================= ====== ========= =========== ========= ===========
Aggregated according to measurement
category
============================================== ============= ====== ========= =========== ========= ===========
Financial assets measured at FVPL 54.1 52.5
============================================================= ====== ========= =========== ========= ===========
Financial assets measured at amortised
cost 860.3 874.2
============================================================= ====== ========= =========== ========= ===========
Financial liabilities measured
at amortised cost 1,742.0 1,764.6
============================================================= ====== ========= =========== ========= ===========
Financial liabilities measured
at FVPL 21.5 41.5
============================================================= ====== ========= =========== ========= ===========
1 FVPL: Financial assets/financial liabilities measured at fair
value through profit or loss.
AC: Financial assets/financial liabilities measured at amortised
cost.
2 Thereof non-financial receivables per 01.01.2018: EUR98.4
million.
3 Thereof non-financial liabilities per 01.01.2018: EUR175.5 million.
In the RHI Magnesita Group marketable securities, derivative
financial instruments, shares, investments and interests in
subsidiaries not consolidated are measured at fair value.
Fair value is defined as the amount for which an asset could be
exchanged, or a liability settled, between market participants in
an arm's length transaction on the day of measurement. When the
fair value is determined it is assumed that the transaction in
which the asset is sold or the liability is transferred takes place
either in the main market for the asset or liability, or in the
most favourable market if there is no main market. RHI Magnesita
considers the characteristics of the asset or liability to be
measured which a market participant would consider in pricing. It
is assumed that market participants act in their best economic
interest.
RHI Magnesita takes into account the availability of observable
market prices in an active market and uses the following hierarchy
to determine fair value:
Level
1: Prices quoted in active markets for identical financial instruments.
===== =====================================================================
Level Measurement techniques in which all important data used are based
2: on observable market data.
===== =====================================================================
Level Measurement techniques in which at least one significant parameter
3: is based on non-observable market data.
===== =====================================================================
The fair value of securities, shares, investments and interests
in subsidiaries not consolidated is based on price quotations at
the reporting date (Level 1), where such quotations exist. In other
cases a valuation model (Level 3) would be used for such
instruments with the exception that such instruments are immaterial
to the group, in which case amortised cost serves as an
approximation of fair value.
The fair value of interest derivatives in a hedging relationship
(interest rate swaps) is determined by calculating the present
value of future cash flows based on current yield curves taking
into account the corresponding terms (Level 2).
The fair value of other derivative contracts corresponds to the
market value of the forward exchange contracts and the embedded
derivatives in open orders denominated in a currency other than the
functional currency, as well as the market value of a long-term
power supply contract, which was classified as a derivative
financial instrument since 2015. These derivatives are measured
using quoted forward rates that are currently observable (Level
2).
The fair value of the contingent consideration liability
amounting to EUR0.6 million recognised in 2017 due to the
acquisition of Agellis is determined by discounting the estimated
earn-out with the transaction's internal rate of return (Level
3).
RHI Magnesita takes into account reclassifications in the
measurement hierarchy at the end of the reporting period in which
the changes occur. Apart from the initial application of IFRS 9,
there were no shifts between the different measurement levels in
the two reporting periods.
Financial liabilities and liabilities to fixed-term or puttable
non-controlling interests are carried at amortised cost in the
Consolidated Statement of Financial Position; the fair values of
the financial liabilities are only shown in the notes. The fair
value of the perpetual bond is based on price quotations at the
reporting date (Level 1), all other liabilities are calculated at
the present value of the discounted future cash flows using yield
curves that are currently observable (Level 2).
The financial receivables approximately correspond to the fair
value as due to the amount of the existing receivables no material
deviation between the fair value and the carrying amount is assumed
and the credit default risk is accounted for by forming valuation
allowances.
The remaining terms of trade and other current receivables and
liabilities as well as cash and cash equivalents are predominantly
short. Therefore, the carrying amounts of these items approximate
fair value at the reporting date.
At the two reporting dates, no contractual netting agreement of
financial assets and liabilities were in place.
Net results by measurement category in accordance with IFRS
9/IAS 39
The effect of financial instruments on the income and expenses
recognised in 2018 and 2017 is shown in the following table,
classified according to the measurement categories defined in IFRS
9/IAS 39:
in EUR million 2018 2017
=========================================================== ======== =======
Net gain from financial assets and liabilities measured
at fair value through profit or loss 1.4 0.0
=========================================================== ======== =======
Net (loss)/gain from financial assets and liabilities
measured at fair value through profit or loss designated
on initial recognition (1.2) 0.1
=========================================================== ======== =======
Net loss from financial assets and liabilities measured
at amortised cost (123.5) 0.0
=========================================================== ======== =======
Net gain on available-for-sale financial assets recognised
in profit or loss 0.0 0.5
=========================================================== ======== =======
Net loss from loans and receivables as well as financial
liabilities at amortised cost 0.0 (87.7)
=========================================================== ======== =======
Net gain on financial assets and financial liabilities
classified as held for trading 0.0 12.2
=========================================================== ======== =======
The net gain on available-for-sale financial assets recognised
in the Consolidated Statement of Profit or Loss includes income
from securities and shares, income from the disposal of securities
and shares, as well as impairment losses and income from reversals
of impairment losses. According to IFRS 9 these financial
instruments are now included in the fair value through profit or
loss category, hence the corresponding gains or losses are included
in the gains or losses from financial assets measured at fair value
through profit or loss.
The net loss arising from loans and receivables as well as
financial liabilities includes interest income and expenses,
changes in valuation allowances and losses on derecognition,
foreign exchange gains and losses as well as expenses related to
the measurement of put options. According to IFRS 9 these financial
instruments are now included in the amortised cost category, hence
the corresponding gains or losses are included in the gains or
losses from financial assets and liabilities measured at amortised
cost.
The net gain of financial assets held for trading and financial
liabilities includes unrealised results from the measurement of a
long-term commodity futures contract as well as changes in the
market value and realised results of forward exchange contracts and
embedded derivatives in open orders in a currency other than the
functional currency of RHI Magnesita, interest derivatives which do
not meet the requirements of hedge accounting in accordance with
IAS 39 and interest income from securities. According to IFRS 9
these financial instruments are now included in the fair value
through profit or loss category, hence the corresponding
gains/losses are included in the gains/losses from financial assets
and financial liabilities measured at fair value through profit or
loss.
The net gain from financial assets and liabilities at fair value
through profit or loss designated on initial recognition includes
income related to the measurement of securities and personnel
obligations.
Net finance costs include interest income amounting to EUR9.5
million (2017: EUR5.0 million) and interest expenses of EUR69.5
million (2017: EUR26.5 million), which result from financial assets
and liabilities which are not carried at fair value through profit
or loss.
54. Derivative financial instruments
Commodity forward
The RHI Magnesita Group concluded a commodity forward contract
for electricity for the fusion plant in Porsgrunn, Norway, in
November 2011 which has been accounted for as a financial
instrument in accordance with IFRS 9 since 31 December 2015 because
the "own-use exemption" (exemption for own use in accordance with
IFRS 9.2.6) no longer applies.
The measurement of the entire term of the contract until the end
of the year 2023 at market price level leads to a financial
liability of EUR20.9 million at 31 December 2018 (31.12.2017:
EUR40.1 million). The corresponding present value of the cash flows
for the agreed electricity supply totals EUR71.3 million at 31
December 2018 (31.12.2017: EUR83.4 million); the present value of
the cash flow at market price amounts to EUR50.4 million
(31.12.2017: EUR43.3 million).
Interest rate swaps
RHI Magnesita has concluded interest rate swaps to hedge the
cash flow risk associated to financial liabilities carrying
variable interest rates. Variable interest cash flows of financial
liabilities were designated as hedged items. The cash flow changes
of the hedged items, which result from the changes of the variable
interest rates, are balanced out by the cash flow changes of the
interest rate swaps. These hedging measures pursue the objective to
transform variable-interest financial liabilities into fixed
interest financial liabilities, thus hedging the cash flow from the
financial liabilities. Ineffectiveness in the hedge relationship
may arise due to credit risk, although this risk is assessed to be
very low.
In the year 2018, RHI Magnesita concluded an interest rate swap
with a nominal volume of EUR305.6 million maturing in 2023. The
interest and compensation payments are due on a quarterly basis.
Fixed interest rate amounts to roughly 0.28%, the variable interest
rate is based on the EURIBOR. Furthermore, one other interest rate
swap has been concluded in 2018, with a nominal volume of US$200.0
million and a term until 2023. The interest and compensation
payments are also due on a quarterly basis. Fixed interest rate
amounts to roughly 3.1%, the variable interest rate is based on the
USD LIBOR.
A hedging relationship with a nominal volume of US$50.0 million
(31.12.2017: US$160.0 million) ends in the second half of 2020. The
interest and compensation payments for this hedging relationship
are due semi-annually. Fixed interest rates amount to roughly 1.3%;
the variable interest rates are based on the LIBOR.
Two interest rate swaps measured at fair value through profit or
loss with an original maturity until 2019 and with a nominal volume
of EUR12.2 million (31.12.2017: EUR17.2 million) were early settled
in the current reporting period. Total expense in 2018 of this
transaction amounts of EUR0.3 million and is recognised within
other net financial expenses.
In 2017, a hedging relationship with a nominal value of EUR50.0
million ended on 31 July 2017. The expense of EUR0.2 million
recognised in other comprehensive income was reclassified to profit
or loss and recognised within other net financial expenses.
The fair values of the interest rate swaps totalled EUR(6.7)
million at the reporting date (31.12.2017: EUR1.3 million), which
is shown within other non-current financial assets in the amount of
EUR0.6 million(31.12.2017: EUR1.5 million) and within other
non-current financial liabilities in the amount of EUR7.3 million
(31.12.2017: EUR0.2 million) in the Consolidated Statement of
Financial Position. For the year ended, EUR6.8 million (2017:
EUR0.2 million) have been recognised within other comprehensive
income. In 2017, an expense amounting to EUR0.5 million has been
reclassified from other comprehensive income to profit or loss and
recognised within other net financial expenses. No ineffectiveness
has been recognised in profit and loss.
Forward exchange contracts
As of 31 December 2017, there were no material open forward
exchange contracts. The nominal value and fair value of forward
exchange contracts as of 31 December 2018 are shown in the table
below:
31.12.2018
=========== ===================================
Nominal value Fair value
Purchase Sale in million in EUR million
================= =========== ================= ================
EUR USD USD 182.0 1.1
================= =========== ======= ======== ================
USD INR EUR 890.0 0.0
================= =========== ======= ======== ================
Forward exchange contracts 1.1
============================== ======= ======== ================
55. Financial risk management
Financial risks are incorporated in RHI Magnesita's corporate
risk management and are centrally controlled by Group Treasury.
None of the following risks have a significant influence on the
going concern of the RHI Magnesita Group.
Credit risks
The maximum credit risk from recognised financial assets amounts
to EUR915.0 million (31.12.2017: EUR914.1 million) and is primarily
related to investments with banks and receivables due from
customers.
The credit risk with banks related to investments (especially
cash and cash equivalents) is reduced as business transactions are
generally only carried out with financial institutions with a good
credit rating.
To counteract the default risk related to these transactions,
receivables from customers are hedged as far as possible through
credit insurance and collateral arranged through banks (guarantees,
letters of credit), Credit and default risks are monitored
continuously, and provisions are formed for risks that have
occurred and are identifiable.
In the following, the credit risk from trade receivables is
shown classified by customer industry, by foreign currency and by
term.
This credit risk, which is hedged by existing credit insurance,
letters of credit and bank guarantees, is shown by customer segment
in the following table:
in EUR million 31.12.2018 31.12.2017
===================================== =========== ===========
Segment Steel 250.3 294.3
===================================== =========== ===========
Segment Industrial 99.6 100.6
===================================== =========== ===========
Trade receivables 349.9 394.9
===================================== =========== ===========
Credit insurance and bank guarantees (139.8) (158.1)
===================================== =========== ===========
Net credit exposure 210.1 236.8
===================================== =========== ===========
The following table shows the carrying amounts of receivables
denominated in currencies other than the functional currencies of
the group companies. The carrying amounts of the receivables in the
functional currency of the respective Group company are included
under other functional currencies:
in EUR million 31.12.2018 31.12.2017
============================ =========== ===========
US Dollar 75.4 96.0
============================ =========== ===========
Euro 11.6 9.9
============================ =========== ===========
Pound Sterling 5.8 3.8
============================ =========== ===========
Other currencies 7.0 7.9
============================ =========== ===========
Other functional currencies 250.1 277.3
============================ =========== ===========
Trade receivables 349.9 394.9
============================ =========== ===========
The movement in the valuation allowance in respect of trade and
other receivables and contract assets during the year was as
follows. Comparative amounts for 2017 represent the allowance
account for impairment losses under IAS 39.
2018 2017
================================
Collectively
Individually assessed
assessed -
- not credit
in EUR million credit impaired impaired
============================================= ================= ============= ======
Accumulated valuation allowance at beginning
of year under IAS 39 34.4 0.0 35.2
============================================= ================= ============= ======
Adjustment on initial application of IFRS
9 (5.7) 3.3 -
============================================= ================= ============= ======
Accumulated valuation allowance at beginning
of year under IFRS 9 28.7 3.3 35.2
============================================= ================= ============= ======
Currency translation (1.1) 0.0 (1.1)
============================================= ================= ============= ======
Addition 5.0 0.0 11.2
============================================= ================= ============= ======
Use (3.0) 0.0 (3.2)
============================================= ================= ============= ======
Reversal 0.0 0.0 (5.6)
============================================= ================= ============= ======
Net remeasurement of loss allowance - (2.1) 0.0
============================================= ================= ============= ======
Reclassification as held for sale 0.0 0.0 (2.1)
============================================= ================= ============= ======
Accumulated valuation allowance at year-end 29.6 1.2 34.4
============================================= ================= ============= ======
For trade receivables and contract assets, for which no
objective evidence of impairment exists, lifetime expected credit
losses have been calculated using a provision matrix as shown
below:
in EUR million Trade receivables - days past due
-----------------------------------------------------------------------------------------------
between 31 between 61 between 91
Not past less than and and and more than 180
31.12.2018 due 30 days 60 days 90 days 180 days days Total
=============== ========= ============= ============= ============== ============== ============== ======
Expected
credit loss
rate in 0.05 -
% 0.45% 0.11 - 1.08% 0.50 - 7.04% 1.39 - 13.33% 2.27 - 17.63% 5.86 - 33.81%
=============== ========= ============= ============= ============== ============== ============== ======
Gross carrying
amount 294.0 34.0 7.6 3.2 2.8 4.0 345.6
=============== ========= ============= ============= ============== ============== ============== ======
Life time
expected
credit loss 0.4 0.1 0.1 0.1 0.2 0.3 1.2
=============== ========= ============= ============= ============== ============== ============== ======
in EUR million Trade receivables - days past due
-----------------------------------------------------------------------------------------------
between 31 between 61 between 91
Not past less than and and and more than 180
01.01.2018 due 30 days 60 days 90 days 180 days days Total
=============== ========= ============= ============= ============== ============== ============== ======
Expected
credit loss
rate in 0.02 -
% 0.32% 0.03 - 0.73% 0.11 - 5.63% 0.19 - 10.59% 0.28 - 14.06% 0.71 - 76.86%
=============== ========= ============= ============= ============== ============== ============== ======
Gross carrying
amount 310.5 46.2 19.3 7.2 4.2 9.6 397.0
=============== ========= ============= ============= ============== ============== ============== ======
Life time
expected
credit loss 0.4 0.1 0.2 0.2 0.2 2.3 3.4
=============== ========= ============= ============= ============== ============== ============== ======
Liquidity risk
Liquidity risk refers to the risk that financial obligations
cannot be met when due. The Group's financial policy is based on
long-term financial planning and is centrally controlled and
monitored continuously at RHI Magnesita. The liquidity requirements
resulting from budget and medium-term planning are secured by
concluding appropriate financing agreements. As of 31 December
2018, the RHI Magnesita Group has a credit facility of EUR319.3
million (31.12.2017: EUR317.2 million) at its disposal, which is
unused and available immediately. These lines of credit were
concluded with different international banks in order to ensure
independence of banks. The companies of the RHI Magnesita Group are
integrated into a clearing process managed by Central Treasury and
provided with financing limits in order to minimise the need of
borrowings for the Group as a whole.
Non-derivative financial instruments
An analysis of the terms of non-derivative financial liabilities
based on undiscounted cash flows including the related interest
payments shows the following expected cash outflows:
Remaining term
=================== ========== ======================================
Carrying Cash up to 1
in EUR million amount 31.12.2018 outflows year 2 to 5 years over 5 years
====================================== =================== ========== ======== ============= =============
Liabilities to financial institutions
====================================== =================== ========== ======== ============= =============
fixed interest 116.1 127.3 2.7 88.5 36.1
====================================== =================== ========== ======== ============= =============
variable interest 1,037.5 1,100.9 338.6 732.9 29.4
====================================== =================== ========== ======== ============= =============
Other financial liabilities
and capitalised transaction
costs 12.8 15.2 2.2 12.3 0.7
====================================== =================== ========== ======== ============= =============
Liabilities to fixed-term
or puttable non-controlling
interests 36.3 211.8 14.2 18.4 179.2
====================================== =================== ========== ======== ============= =============
Contingent consideration for
acquired subsidiaries 0.6 0.6 0.0 0.6 0.0
====================================== =================== ========== ======== ============= =============
Trade payables and other current
liabilities 539.3 539.3 539.3 0.0 0.0
====================================== =================== ========== ======== ============= =============
Non-derivative financial liabilities 1,742.6 1,995.1 897.0 852.7 245.4
====================================== =================== ========== ======== ============= =============
Remaining term
====================== ========== ===========================================
Carrying Cash
in EUR million amount 31.12.2017(1) outflows up to 1 year 2 to 5 years over 5 years
===================================== ====================== ========== ============= ============= =============
Liabilities to financial institutions
===================================== ====================== ========== ============= ============= =============
fixed interest 176.7 202.7 60.6 96.8 45.3
===================================== ====================== ========== ============= ============= =============
variable interest 776.3 858.1 146.5 683.7 27.9
===================================== ====================== ========== ============= ============= =============
Perpetual bond 215.3 309.5 79.1 52.9 177.5
===================================== ====================== ========== ============= ============= =============
Senior Notes 55.5 66.0 5.2 60.8 0.0
===================================== ====================== ========== ============= ============= =============
Other financial liabilities
and capitalised transaction
costs 1.7 1.8 0.9 0.8 0.1
===================================== ====================== ========== ============= ============= =============
Liabilities to fixed-term
or puttable non-controlling
interests 32.0 161.0 10.1 12.3 138.6
===================================== ====================== ========== ============= ============= =============
Contingent consideration for
acquired subsidiaries 0.6 0.6 0.0 0.6 0.0
===================================== ====================== ========== ============= ============= =============
Trade payables and other current
liabilities 507.0 507.0 507.0 0.0 0.0
===================================== ====================== ========== ============= ============= =============
Non-derivative financial liabilities 1,765.1 2,106.7 809.4 907.9 389.4
===================================== ====================== ========== ============= ============= =============
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
Derivative financial instruments
The remaining terms of derivative financial instruments based on
expected undiscounted cash flow as of 31 December 2018 and
31 December 2017 are shown in the table below:
Remaining term
=================== =========== ===========================================
Carrying
in EUR million amount 31.12.2018 Cash flows up to 1 year 2 to 5 years over 5 years
============================= =================== =========== ============= ============= =============
Receivables from derivatives
with net settlement
============================= =================== =========== ============= ============= =============
Interest rate swaps 0.6 0.6 0.5 0.1 0.0
============================= =================== =========== ============= ============= =============
Derivatives in open orders 1.0 1.0 1.0 0.0 0.0
============================= =================== =========== ============= ============= =============
Forward exchange contracts 1.1 1.1 1.1 0.0 0.0
============================= =================== =========== ============= ============= =============
Liabilities from derivatives
with net settlement
============================= =================== =========== ============= ============= =============
Derivatives from supply
contracts 20.9 22.2 1.0 21.2 0.0
============================= =================== =========== ============= ============= =============
Interest rate swaps 7.3 8.1 2.4 5.7 0.0
============================= =================== =========== ============= ============= =============
Remaining term
=================== =========== ===========================================
Carrying
in EUR million amount 31.12.2017 Cash flows up to 1 year 2 to 5 years over 5 years
============================= =================== =========== ============= ============= =============
Receivables from derivatives
with net settlement
============================= =================== =========== ============= ============= =============
Interest rate swaps 1.5 1.5 0.9 0.6 0.0
============================= =================== =========== ============= ============= =============
Financial assets held for
trading 1.7 1.7 1.7 0.0 0.0
============================= =================== =========== ============= ============= =============
Liabilities from derivatives
with net settlement
============================= =================== =========== ============= ============= =============
Financial liabilities held
for trading 40.9 43.5 7.5 28.8 7.2
============================= =================== =========== ============= ============= =============
Foreign currency risks
Foreign currency risks arise where business transactions
(operating activities, investments, financing) are conducted in a
currency other than the functional currency of a company. They are
monitored at the group level and analysed with respect to hedging
options. Usually the net position of the Group in the respective
currency serves as the basis for decisions regarding the use of
hedging instruments.
Foreign currency risks are created through financial instruments
which are denominated in a currency other than the functional
currency (in the following: foreign currency) and are monetary in
nature. Important primary monetary financial instruments include
trade receivables and payables, cash and cash equivalents as well
as financial liabilities as shown in the Consolidated Statement of
Financial Position. Equity instruments are not of a monetary
nature, and therefore not linked to a foreign currency risk in
accordance with IFRS 7.
The majority of foreign currency financial instruments in the
RHI Magnesita Group result from operating activities, above all
from intragroup financing transactions, unless the foreign exchange
effects recognised to profit or loss on monetary items, which
represent part of a net investment in a foreign operation in
accordance with IAS 21, are eliminated or hedged through forward
exchange contracts. Significant provisions denominated in foreign
currencies are also included in the analysis of risk.
The following table shows the foreign currency positions in the
major currencies as of 31 December 2018:
in EUR million USD EUR MXN CAD Other Total
======== ======== ======= ====== ======= ==========
Financial assets 651.5 104.1 0.4 23.1 71.4 850.5
======================= ======== ======== ======= ====== ======= ==========
Financial liabilities,
provisions (938.6) (241.7) (21.5) (6.8) (45.7) (1,254.3)
======================= ======== ======== ======= ====== ======= ==========
Net foreign currency
position (287.1) (137.6) (21.1) 16.3 25.7 (403.8)
======================= ======== ======== ======= ====== ======= ==========
The foreign currency positions as of 31 December 2017 are
structured as follows:
in EUR million USD EUR MXN CAD Other Total
======== ======== ======= ====== ======= ==========
Financial assets 583.9 88.5 (0.1) 22.7 48.6 743.6
======================= ======== ======== ======= ====== ======= ==========
Financial liabilities,
provisions (727.5) (218.6) (18.6) (2.4) (47.1) (1,014.2)
======================= ======== ======== ======= ====== ======= ==========
Net foreign currency
position (143.6) (130.1) (18.7) 20.3 1.5 (270.6)
======================= ======== ======== ======= ====== ======= ==========
The disclosures required by IFRS 7 for foreign exchange risks
include a sensitivity analysis that shows the effects of
hypothetical changes in the relevant risk variables on profit or
loss and equity. In general, all non-functional currencies in which
Group companies enter into financial instruments are considered to
be relevant risk variables. The effects on a particular reporting
period are determined by applying the hypothetical changes in these
risk variables to the financial instruments held by the Group as of
the reporting date. It is assumed that the positions on the
reporting date are representative for the entire year. The
sensitivity analysis does not include the foreign exchange
differences that result from translating the net asset positions of
the foreign group companies into the Group currency, the Euro.
A 10% appreciation or devaluation of the relevant functional
currency against the following major currencies as of 31 December
2018 would have had the following effect on profit or loss and
equity (both excluding income tax):
Appreciation of 10% Devaluation of 10%
====================== =====================
in EUR million Gain/(loss) Equity Gain/(loss) Equity
================= ============= ======= ============ =======
US Dollar 27.0 27.0 (33.0) (33.0)
================= ============= ======= ============ =======
Euro 12.4 12.4 (15.1) (15.1)
================= ============= ======= ============ =======
Mexican Peso 1.9 1.9 (2.3) (2.3)
================= ============= ======= ============ =======
Canadian Dollar (1.5) (1.5) 1.8 1.8
================= ============= ======= ============ =======
Other currencies (2.3) (2.3) 2.7 2.7
================= ============= ======= ============ =======
The hypothetical effect on profit or loss at 31 December 2017
can be summarised as follows:
Appreciation of 10% Devaluation of 10%
====================== =====================
in EUR million Gain/(loss) Equity Gain/(loss) Equity
================= ============= ======= ============ =======
US Dollar 20.3 20.3 (24.8) (24.8)
================= ============= ======= ============ =======
Euro 11.9 11.9 (14.5) (14.5)
================= ============= ======= ============ =======
Mexican Peso 1.7 1.7 (2.1) (2.1)
================= ============= ======= ============ =======
Canadian Dollar (1.8) (1.8) 2.3 2.3
================= ============= ======= ============ =======
Other currencies (0.4) (0.4) 0.3 0.3
================= ============= ======= ============ =======
Interest rate risks
The interest rate risk in the RHI Magnesita Group is primarily
related to financial instruments carrying variable interest rates,
which may lead to fluctuations in results and cash flows. At 31
December 2018, interest rate hedges amounting to a nominal value of
EUR305.6 million (31.12.2017: EUR17.2 million) and a nominal value
of US$250 million (31.12.2017: US$160.0 million) existed; a
variable interest rate was converted into a fixed interest rate
through an interest rate swap.
The exposure to interest rate risks is presented through
sensitivity analyses in accordance with IFRS 7. These analyses show
the effects of changes in market interest rates on interest
payments, interest income and interest expense and on equity.
The RHI Magnesita Group measures fixed interest financial assets
and financial liabilities at amortised cost, and did not use the
fair value option - a hypothetical change in the market interest
rates for these financial instruments at the reporting date would
have had no effect on profit and loss or equity.
Changes in market interest rates on financial instruments
designated as hedges as a part of cash flow hedges to protect
against interest rate-related payment fluctuations have an effect
on equity and are therefore included in the equity-related
sensitivity analysis. If the market interest rate as of 31 December
2018 had been 25 basis points higher or lower, equity would have
been EUR3.8 million (31.12.2017: EUR0.5 million) higher or lower
taking into account tax effects.
Changes in market interest rates have an effect on the interest
result of primary variable interest financial instruments whose
interest payments are not designated as hedged items as a part of
cash flow hedge relationships against interest rate risks, and are
therefore included in the calculation of the result-related
sensitivities. If the market interest rate as of 31 December 2018
had been 25 basis points higher or lower, the interest result would
have been EUR0.1 million (31.12.2017: EUR0.5 million) lower or
higher.
Other market price risk
RHI Magnesita holds certificates in an investment fund amounting
to EUR12.0 million (31.12.2017: EUR12.6 million) to cover the
legally required protection of personnel provisions of Austrian
group companies. The market value of these certificates is
influenced by fluctuations of the worldwide volatile stock and bond
markets.
In 2015, an energy supply contract with a term until the year
2023 was classified as a derivative financial instrument in and the
fair value of the financial liability amounts to EUR20.9 million at
31 December 2018 (31.12.2017: EUR40.1 million). If the quoted
forward prices at 31 December 2018 had been 20% higher or lower,
EBIT would have been EUR10.1 million (31.12.2017: EUR8.7 million)
higher or lower. In contrast, if the borrowing costs relevant for
discounting had been 25 basis points higher or lower at the
reporting date, EBIT would have been
EUR0.2 million (31.12.2017: EUR0.3 million) higher or lower.
56. Capital management
The objectives of the capital management strategy of the RHI
Magnesita Group are to secure going concern at all times by
creating a solid capital base to finance growth, investments, to
increase shareholders value on a sustained basis and to generate
adequate returns to enable attractive dividend payments to the
shareholders and to service debt.
The RHI Magnesita Group manages its capital structure through
careful monitoring and assessment of the overall economic framework
conditions, credit, interest rate and FX risks and the requirements
and risks related to operations and taking into account strategic
projects.
As the Group optimised its financial structure in 2018 and there
are only two months of Magnesita results in the Consolidated
Statement of Profit or Loss in 2017, the key figures of capital
management for 2017 are not comparable. Therefore they are not
included in the disclosure.
The capital structure key figures at the reporting date are
shown below:
31.12.2018
========================== ===========
Net debt (in EUR million) 638.9
========================== ===========
Net gearing ratio (in %) 72.2%
========================== ===========
Group leverage 1.16
========================== ===========
Net debt, which reflects borrowings net of cash and cash
equivalents and marketable securities, is controlled by Corporate
Treasury. The main task of the Corporate Treasury department is to
execute the capital management strategy as well as to secure
liquidity to support business operations on a sustainable basis, to
use banking and financial services efficiently and to limit
financial risks while at the same time optimising earnings and
costs.
The net gearing ratio is the ratio of net debt to equity.
The key performance indicator for net debt in the RHI Magnesita
Group is the group leverage, which reflects the ratio of net debt
to adjusted EBITDA. It is calculated as follows:
in EUR million 31.12.2018
==================================== ===========
EBIT 398.6
==================================== ===========
Amortisation 28.6
==================================== ===========
Depreciation 124.8
==================================== ===========
Other operating income and expenses 1.0
==================================== ===========
Adjusted EBITDA 553.0
==================================== ===========
Total debt 1,166.4
==================================== ===========
Cash and cash equivalents 491.2
==================================== ===========
Marketable securities 36.3
==================================== ===========
Net debt 638.9
==================================== ===========
Group leverage 1.16
==================================== ===========
In both 2018 and 2017, all externally imposed capital
requirements were met. The Group has sufficient liquidity headroom
within its committed debt facilities.
RHI Magnesita N.V. is subject to minimum capital requirements
according to its articles of association. The articles of
association stipulate a mandatory reserve of EUR288,699,230.59
which was created in connection with the merger.
57. Contingent liabilities
At 31 December 2018, warranties, performance guarantees and
other guarantees amount to EUR43.0 million (31.12.2017: EUR39.8
million). Contingent liabilities have a remaining term between two
months and three years, depending on the type of liability. Based
on experiences of the past, the probability that contingent
liabilities are used is considered to be low.
In addition, contingent liabilities from sureties of EUR0.3
million (31.12.2017: EUR0.5 million) were recorded, of which EUR0.3
million (31.12.2017: EUR0.3 million) are related to contingent
liabilities to creditors from joint ventures.
Individual proceedings and lawsuits which result from ordinary
activities are pending as of 31 December 2018 or can potentially be
exercised against RHI Magnesita in the future. The related risks
were analysed with a view to their probability of occurrence. The
Group is party to tax proceedings in Brazil with the estimated
amount of EUR169.0 million (31.12.2017: EUR178.3 million) for the
following lawsuits, for which no provision was set up according to
IFRS, as management classified risks of loss (based on the
evaluation of legal advisors) as possible but not probable:
In 2011, the Brazilian Tax Authorities made an assessment
regarding income tax and social contribution on tax goodwill
deducted in the years 2008 and 2009. The Tax Authority thus
disallowed the deductibility of the amortisation of tax goodwill
arising from operations with subsidiaries. In 2016, the company was
notified of the decision issued by CARF (Administrative Council of
Tax Appeals), which cancelled more than 90% of the tax assessment
regarding the disallowed deductibility. However, this decision can
still be changed as a result of appeals filed by the company and by
the General Counsel to the National Treasury (PGFN). The final
decision is expected within one to two years. The potential loss of
this process amounts to EUR81.4 million (including interest and
penalties) as of 31 December 2018 (31.12.2017: EUR87.8
million).
In 2016, the Brazilian tax authorities extended the above view
for the years 2011 and 2012. In December 2016, the company filed a
defence against the assessment. The final decision is expected
within two to three years. The potential loss of this process
amounts to
EUR37.5 million (including interest and penalties) as of 31
December 2018 (31.12.2017: EUR40.0 million).
In 2013, the Brazilian Tax Authorities raised an assessment
notice for allegedly failing to pay social security contributions
in the period from January to December 2009. The company has
appealed the assessment. Legal opinions demonstrate that the
company has solid supporting documentation capable of reversing the
assessment. The potential loss from this proceeding amounts to
EUR4.8 million (including interest and penalties) as at 31 December
2018 (31.12.2017: EUR6.0 million).
Furthermore, the Brazilian Tax Authorities raised an assessment
into a former holding company in Brazil in respect of federal
taxes. The assessment relates to federal tax offsets made by the
company up to and including 2008 which have not been approved by
the Federal Revenue Service. Legal opinions demonstrate that the
company has solid supporting documentation capable of reversing the
assessment. The potential loss amounts to EUR10.7 million
(including interest and penalties) as at 31 December 2018
(31.12.2017: EUR11.1 million).
In addition, the Brazilian Tax Authorities raised an assessment
into the calculation basis of CFEM (Financial Compensation for
Exploration of Mineral Resources). Based on the opinion of the
legal advisors the company has appealed the assessment and the loss
was considered possible due to jurisprudence of the Brazilian
court. Additionally, recent changes on CFEM legislation, mostly
adopting the company's interpretation, also demonstrate that the
interpretation taken is the most accurate, which is a fact judges
can decide upon. The potential loss from this proceeding amounts to
EUR12.9 million (including interest and penalties) as at 31
December 2018 (31.12.2017: EUR13.9 million).
In 2018, the Brazilian Tax Authorities raised an assessment in
respect of tax on the circulation of goods and services for the
alleged non-fulfillment of ancillary obligation and non-payment of
tax in the period from 2013 to 2017. The decision by the Taxpayers
Council is expected within the year 2019. Any decision taken by the
Council will be subject to appeal. The potential loss from this
proceeding amounts to EUR4.1 million (including interest and
penalties) as at 31 December 2018.
Magnesita Refratários S.A., Contagem, Brazil, is also involved
in other minor lawsuits totalling EUR17.6 million (31.12.2017:
EUR19.5 million) which relate to a number of assessments concerning
various taxes and related obligations.
Furthermore, Magnesita Refratários S.A., Contagem, Brazil, is
party to a public civil action for damages caused by overloaded
trucks in contravention with the Brazilian traffic legislation. In
2017, a decision was rendered in favour of Magnesita in the trial
court considering the requests submitted by the Federal Public
Attorney's Office to be completely devoid of legal merit. The
decision taken by the trial court was subject to appeal by the
Public Ministry of Minas Gerais. The potential loss from this
proceeding amounts to EUR12.1 million as at 31 December 2018
(31.12.2017: EUR7.1 million).
Other minor proceedings and lawsuits in which subsidiaries are
involved have no significant negative influence on the financial
position and performance of the RHI Magnesita Group.
58. Other financial commitments
Other financial commitments consist of the following items:
Total Remaining term
=========== ===========================================
in EUR million 31.12.2018 up to 1 year 2 to 5 years over 5 years
==================================== =========== ============= ============= =============
Obligations from rental and leasing
contracts 73.7 16.3 27.7 29.7
==================================== =========== ============= ============= =============
Capital commitments 5.4 5.4 0.0 0.0
==================================== =========== ============= ============= =============
Other financial commitments 79.1 21.7 27.7 29.7
==================================== =========== ============= ============= =============
Total Remaining term
=========== ===========================================
in EUR million 31.12.2017 up to 1 year 2 to 5 years over 5 years
==================================== =========== ============= ============= =============
Obligations from rental and leasing
contracts 56.9 16.1 24.2 16.6
==================================== =========== ============= ============= =============
Capital commitments 5.9 5.9 0.0 0.0
==================================== =========== ============= ============= =============
Other financial commitments 62.8 22.0 24.2 16.6
==================================== =========== ============= ============= =============
Other financial commitments are exclusively due to third
parties. They are shown at nominal value.
Rental and leasing commitments for property, plant and equipment
of EUR34.4 million (2017: EUR23.1 million) are recognised in the
Consolidated Statement of Profit or Loss for 2018.
The conditions of the most important operating rental and
leasing agreements can be summarised as follows:
The old rental agreement of the company's head office ended in
2018 and the Group's headquarter moved into a new office in Vienna,
Austria. Another new office was opened in Oviedo, Spain. Both have
a contractual term until 2028 and include a prolongation
option.
Another rental contract for offices has a term until 30 April
2020. The tenant has a two-time optional right to extend the
contract by three years each. The annual rent is coupled to the
development of the consumer price index.
At one production site, the area for operating a plant has been
leased for the long term. The related contract ends in April 2062
and includes an extension option for another 30 years. The rent is
subject to adaptation to inflation.
The Group also rents numerous mining vehicles, diggers,
forklifts and the like by cancellable leasing agreements. The
contracts have terms ranging from two to seven years; most of them
do not include a purchasing option after the contract ends.
In addition to the aforementioned financial commitments, the RHI
Magnesita Group also has long-term purchase commitments related to
the supply with raw materials, especially for electricity, natural
gas, strategic raw materials as well as for the transport of raw
materials within the Group. This results in other financial
commitments of the nominal value of EUR96.2 million at the
reporting date (31.12.2017: EUR99.9 million). The remaining terms
of the contracts amount to up to nine years. Purchases from these
arrangements are recognised in accordance with the usual course of
business. Purchase contracts are regularly reviewed for imminent
losses, which may occur, for example, when requirements fall below
the agreed minimum purchase volume or when contractually agreed
prices deviate from the current market price level.
59. Expenses for the Group auditor
The expensed fees for the activities of the Group auditor PwC
that are included in the Consolidated Statement of Profit or Loss
are shown in the following table:
in EUR million 2018 2017
========================================== ===== =====
Audit of the Financial Statements 2.7 2.4
========================================== ===== =====
thereof invoiced by PwC Accountants N.V. 0.2 0.2
========================================== ===== =====
thereof invoiced by PwC network firms 2.5 2.2
========================================== ===== =====
Other audit-related services 0.1 0.1
========================================== ===== =====
Tax compliance services 0.9 0.9
========================================== ===== =====
Other non-audit services 0.0 2.5
========================================== ===== =====
Total fees 3.7 5.9
========================================== ===== =====
Other audit-related services, tax compliance services and other
non-audit services were performed and invoiced by PwC network firms
outside of the Netherlands.
The other non-audit services of EUR2.5 million in 2017 are
mainly related to services in connection with the acquisition of
Magnesita and listing on the London Stock Exchange.
60. Annual average number of employees
The average number of employees of the RHI Magnesita Group based
on full time equivalents amounts to:
2018 2017
====================================== ======= ======
Salaried employees 5,947 3,788
====================================== ======= ======
Waged workers 8,171 4,781
====================================== ======= ======
Number of employees on annual average 14,118 8,569
====================================== ======= ======
Sixteen full time equivalents of salaried employees work in the
Netherlands.
61. Transactions with related parties
Related companies include subsidiaries that are not fully
consolidated, joint ventures, associates and MSP Foundation,
Liechtenstein, as a shareholder of RHI Magnesita N.V. since it
exercises significant influence based on its share of more than 25%
in RHI Magnesita N.V. In accordance with IAS 24.9v, the personnel
welfare foundation of Stopinc AG, Hünenberg, Switzerland, also has
to be considered a related company.
Related persons are persons having authority and responsibility
for planning, directing and controlling the activities of the Group
(key management personnel) and their close family members. Since 26
October 2017, key management personnel comprises of members of the
Board of Directors of RHI Magnesita N.V. and the Executive
Management Team. Before that, members of the Management Board and
the Supervisory Board of RHI AG formed the key management
personnel.
Related companies
In 2018, the Group conducted the following transaction with its
related companies:
Non-
consolidated
Joint ventures Associates subsidiaries
================= =============== ================
in EUR million 2018 2017 2018 2017(1) 2018 2017(1)
=================================== ======== ======= ===== ======== ====== ========
Revenue from the sale of goods and
services 3.1 3.4 0.1 0.4 0.3 0.1
=================================== ======== ======= ===== ======== ====== ========
Purchase of raw materials 3.2 2.5 20.3 3.8 0.1 0.0
=================================== ======== ======= ===== ======== ====== ========
Interest income 0.1 0.1 0.8 0.0 0.0 0.0
=================================== ======== ======= ===== ======== ====== ========
Asset purchase 0.0 0.0 0.6 0.0 0.0 0.0
=================================== ======== ======= ===== ======== ====== ========
Trade and other receivables 0.9 1.3 0.0 1.1 0.2 0.2
=================================== ======== ======= ===== ======== ====== ========
Loans granted 0.0 0.0 10.4 9.6 0.1 0.1
=================================== ======== ======= ===== ======== ====== ========
Trade liabilities 0.3 0.6 5.1 8.5 0.9 1.6
=================================== ======== ======= ===== ======== ====== ========
Dividends received 10.8 10.7 0.2 0.0 0.0 0.0
=================================== ======== ======= ===== ======== ====== ========
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
In 2018 and 2017, the Group charged electricity and stock
management costs to the joint venture MAGNIFIN Magnesiaprodukte
GmbH & Co KG, St. Jakob, Austria, and purchased raw materials.
In 2018 and in November and December 2017, the associate Sinterco
S.A., Nameche, Belgium, sold sintered doloma to the RHI Magnesita
Group. Furthermore, the Group has a financing receivable of EUR10.4
million (31.12.2017: EUR9.6 million) from a loan agreement with
Sinterco.
The balances at the end of 2018 are unsecured and will be paid
in cash. All income and expenses 2017 of the joint ventures,
associates and non-consolidated subsidiaries acquired in the course
of the acquisition of Magnesita relate to the periods November and
December 2017. Before the acquisition of Magnesita the Group had no
associates.
To secure a pension claim of a former employee of MAGNIFIN, RHI
Magnesita has assumed a surety amounting to EUR0.3 million
(31.12.2017: EUR0.3 million). A resulting cash outflow is not
expected. No guarantees were received.
In 2018 and 2017, no transactions were carried out between the
RHI Magnesita Group and MSP Foundation, with the exception of the
dividend paid.
A service relationship with respect to the company pension
scheme of the employees of Stopinc AG exists between the personnel
welfare foundation of Stopinc AG and the fully consolidated
subsidiary Stopinc AG. Stopinc AG makes contribution payments to
the plan assets of the foundation to cover pension obligations. The
pension plan is recognised as a defined benefit plan and is
included in
Note (28). At 31 December 2018, no current account receivables
existed (31.12.2017: EUR0.8 million). In the past reporting period,
no employer contributions (2017: EUR0.5 million) were made to the
personnel welfare foundation. The overfunding of the pension plan
is recognised as a non-current asset of EUR2.1 million (31.12.2017:
EUR2.0 million).
Related persons
Remuneration of key management personnel of the Group, which is
subject to disclosure in accordance with IAS 24, comprises the
remuneration of the active Board of Directors and the Executive
Management Team (EMT) in 2018 and from November to December 2017 as
well as the former Management Board and Supervisory Board of RHI AG
until October 2017.
For the financial year 2018, expenses for the remuneration of
the Executive Directors and EMT members, active in 2018, recognised
in the Consolidated Statement of Profit or Loss total EUR10.1
million (2017: EUR12.6 million including also remuneration of the
former Management Board). The expenses, not including non-wage
labour costs, amount to EUR9.1 million (2017: EUR11.8 million), of
which EUR8.4 million (2017: EUR9.8 million) were related to current
benefits (fixed, variable and other earnings), EUR0.0 million
(2017: EUR0.0 million) to benefits related to the termination of
employment and EUR0.7 million (2017: EUR1.9 million) to share-based
remuneration. At 31 December 2018, liabilities for
performance-linked variable earnings and share-based payments for
active members of the former Management Board of EUR5.6 million
(2017: EUR6.7 million) are recognised as liabilities. There are no
obligations arising from post-employment benefits and legally
required termination benefits.
In addition to the variable remuneration, the members of the
former Management Board of RHI AG active in 2017 were also entitled
to share-based payments. The programme was terminated after RHI AG
merged with and into RHI Magnesita N.V. and the provisioned amount
will be paid until 2020. In the financial year 2018, a payment of
EUR1.4 million was made in this regard (2017: EUR1.2 million).
For Non-Executive Directors, remuneration totalling EUR1.0
million (2017: EUR0.8 million including remuneration for the former
Supervisory Board) was recognised through profit or loss in the
year 2018. The compensation paid to the Non-Executive Directors and
the members of the former Supervisory Board only consists of
short-term employee benefits.
Employee representatives acting as Non-Executive Directors of
RHI Magnesita N.V. who are employed by the Group, do not receive
compensation for their activity as Non-Executive Directors. For
their activity as employees in the Company and the activity of
their close relatives employed with RHI Magnesita, expenses of
EUR0.8 million (2017: EUR0.7 million) are recognised.
No advance payments or loans were granted to key management
personnel. The RHI Magnesita Group did not enter into contingent
liabilities on behalf of the key management personnel.
Directors Dealings reports are published on the websites of RHI
Magnesita N.V. and of the London Stock Exchange. The members of the
Board of Directors are covered by D&O insurance at RHI
Magnesita.
Detailed and individual information on the remuneration of the
Board of Directors is presented in the Annual Report on
Remuneration,in the Remuneration Committee report and the
Remuneration Policy on pages 80 to 101 of the Annual Report of the
RHI Magnesita Group.
Earnings of former members of the former Management Board
amounted to EUR2.6 million (2017: EUR3.5 million), of which EUR0.6
million (2017: EUR1.4 million) are related to share-based
remuneration.
RHI Magnesita and a close relative of a Non-Executive Director
concluded a non-remunerated consultancy agreement to advise the
Group on the economic and political framework in countries in which
it does not yet have strong business links.
Equity-settled share option plan (LTIP)
The Company has a share option plan for the members of senior
management of the Group which was approved by shareholders at the
Annual General Meeting held on 7 June 2018.
Each share option converts into one ordinary share of the
Company on exercise. No amounts are paid or payable by the
recipient on receipt of the option. The options carry rights to
dividends but no voting rights. Options may be exercised at any
time from the date of vesting to the date of their expiry.
The number of options granted is calculated in accordance with
the performance-based formula approved by the shareholders at the
annual general meeting and is subject to approval by the
remuneration committee.
The formula rewards employees to the extent of the Group's
achievements judged against quantitative criteria from the
following measures:
-- Group's earnings per share,
-- Group's earnings before interest and tax,
-- comparing the performance of the Group's total shareholder
return (TSR) against the FTSE 350.
The vesting period is three years. If the options remain
unexercised after a period of seven years from the vesting date the
options expire. Options are forfeited if the employee leaves the
Group before the options vest.
2018 2017
Number of Number of
options options
====================================== ========== ==========
As at 1 January 0 0
====================================== ========== ==========
Granted during the year 107,599 0
====================================== ========== ==========
Exercised during the year 0 0
====================================== ========== ==========
Forfeited during the year (13,494) 0
====================================== ========== ==========
As at 31 December 94,105 0
====================================== ========== ==========
Vested and exercisable at 31 December 0 0
====================================== ========== ==========
No options expired or were exercised during the periods covered
by the above tables.
The options outstanding at 31 December 2018 have a
weighted-average contractual life of 2.5 years.
The outstanding share options, which were granted on 7 June
2018, will expire on 7 June 2028. The share price at grant date for
the 94,105 options was EUR53.13.
The assessed fair value at grant date of options granted during
the year ended 31 December 2018 was EUR52.51 per option. The fair
value of share options with non-market performance conditions has
been calculated using the Black-Scholes option pricing model. The
fair value of options with market-related performance conditions
has been measured using the Monte Carlo model. The calculation
takes into account the exercise price, the term of the option, the
share price at grant date and expected price volatility of the
underlying share, the expected dividend yield, the risk free
interest rate for the term of the option and the correlations and
volatilities of the peer group companies.
The requirement that the employee has to save in order to
purchase shares under the share purchase plan has been incorporated
into the fair value at grant date by applying a discount to the
valuation obtained. The discount has been determined by estimating
the probability that the employee will stop saving based on
historical behaviour.
The inputs used in the measurement of the fair values at grant
date of the equity-settled share-based payment plans were as
follows:
in EUR million 2018 2017
======================================= ========== =====
Fair value at grant date 5.0 0.0
======================================= ========== =====
Expected volatility (weighted-average) 21.45% 0.0%
======================================= ========== =====
Expected life (weighted-average) 36 Months 0
======================================= ========== =====
Expected dividends 0.5 0.0
======================================= ========== =====
Risk-free interest rate 0.89% 0.0%
======================================= ========== =====
Expected volatility was determined by calculating the historical
volatility of the Group's share price over the previous years. The
expected life used in the model has been adjusted, based on
management's best estimate, for the effect of non-transferability,
exercise restrictions, and behavioural considerations.
62. Board of Directors of RHI Magnesita N.V.
The members of the Board of Directors are as follows:
Herbert Cordt, Chairman
Stefan Borgas, CEO
Octavio Lopes (until 31 December 2018)
Fersen Lambranho (until 22 January 2019)
David Schlaff
Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg
Celia Baxter
Andrew Hosty
James Leng
John Ramsay
Wolfgang Ruttenstorfer
Karl Sevelda
Franz Reiter
Michael Schwarz
63. Material events after the reporting date
On 10 March 2019 the Supervening Acquisition Period of the
Integrated Tender Offer (as described in Note (5) of the
Consolidated Financial Statements) ended. RHI Magnesita N.V. via
its indirect, wholly-owned subsidiary Dutch Brasil Holding B.V.
received valid acceptances from holders of 6,167,636 Magnesita
Refratários S.A. common shares, representing approximately 12.3% of
the total share capital of Magnesita Refratários S.A. increasing
its total ownership to 97.5%. As a result, 1,139,400 new RHI
Magnesita N.V. shares were issued. The cash disbursement of this
transaction amounts to EUR30.2 million.
After the reporting date on 31 December 2018, there were no
other events of special significance which may have a material
effect on the financial position and performance of the RHI
Magnesita Group.
Company Balance Sheet as at 31 December 2018
(before appropriation of result)
in EUR million Notes 31.12.2018 31.12.2017(1)
================================= ======= =========== ==============
ASSETS
================================= ======= =========== ==============
Fixed assets
================================= ======= =========== ==============
Financial fixed assets (A) 915.5 569.3
================================= ======= =========== ==============
915.5 569.3
========================================= =========== ==============
Current assets
================================= ======= =========== ==============
Receivables from Group companies 0.0 62.5
========================================== =========== ==============
Cash and cash equivalents (B) 0.1 0.1
================================= ======= =========== ==============
Total current assets 0.1 62.6
========================================== =========== ==============
Total assets 915.6 631.9
========================================== =========== ==============
EQUITY AND LIABILITIES
================================= ======= =========== ==============
Equity
================================= ======= =========== ==============
Share capital (C) 48.3 44.8
================================= ======= =========== ==============
Additional paid-in capital (D) 305.5 165.7
================================= ======= =========== ==============
Legal and mandatory reserves (E) 209.9 234.1
================================= ======= =========== ==============
Other reserves 78.7 263.5
========================================== =========== ==============
Result for the period (H) 158.1 (89.3)
================================= ======= =========== ==============
Shareholders' Equity 800.5 618.8
========================================== =========== ==============
Current liabilities
================================= ======= =========== ==============
Other current liabilities (F) 115.1 13.1
================================= ======= =========== ==============
Total current liabilities 115.1 13.1
========================================== =========== ==============
Total equity and liabilities 915.6 631.9
========================================== =========== ==============
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
Company Statement of Profit or Loss for the period 1 January to
31 December 2018
in EUR million Notes 2018 2017(1)
==================================== ======= ====== ========
General and administrative expenses (8.5) (13.0)
============================================= ====== ========
Result before taxation (8.5) (13.0)
============================================= ====== ========
Income tax 0.0 0.0
============================================= ====== ========
Net result from investments (G) 166.6 (76.3)
==================================== ======= ====== ========
Net result for the period (H) 158.1 (89.3)
==================================== ======= ====== ========
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
Movements in Shareholders' Equity
Legal and mandatory Other
reserves reserves
================================== ============
Retained Equity
Additional Cash earnings attributable
Share paid-in flow Currency Mandatory Net to
in EUR million capital capital hedges translation reserve result shareholders
================= ========= =========== ======== ============ ========== ============ ======== =============
31.12.2017(1) 44.8 165.7 0.1 (54.7) 288.7 263.5 (89.3) 618.8
================= ========= =========== ======== ============ ========== ============ ======== =============
Effects of
initial
application of
IFRS
15 (net of tax) (6.0) (6.0)
================= ========= =========== ======== ============ ========== ============ ======== =============
Effects of
initial
application of
IFRS
9 (net of tax) 1.8 1.8
================= ========= =========== ======== ============ ========== ============ ======== =============
01.01.2018 44.8 165.7 0.1 (54.7) 288.7 259.3 (89.3) 614.6
================= ========= =========== ======== ============ ========== ============ ======== =============
Appropriation of
prior
year result - - - - - (89.3) 89.3 -
================= ========= =========== ======== ============ ========== ============ ======== =============
Net result - - - - - - 158.1 158.1
================= ========= =========== ======== ============ ========== ============ ======== =============
Transactions
with
non-controlling
interests
without change
of
control - - 0.1 (10.7) - (52.1) - (62.7)
================= ========= =========== ======== ============ ========== ============ ======== =============
Issue of
ordinary
shares 3.5 139.8 - - - - - 143.3
================= ========= =========== ======== ============ ========== ============ ======== =============
Share-based
payments - - - - - 1.0 - 1.0
================= ========= =========== ======== ============ ========== ============ ======== =============
Dividends - - - - - (33.6) - (33.6)
================= ========= =========== ======== ============ ========== ============ ======== =============
Net income /
(expense)
recognised
directly
in equity - - (5.2) (8.4) - (6.6) - (20.2)
================= ========= =========== ======== ============ ========== ============ ======== =============
31.12.2018 48.3 305.5 (5.0) (73.8) 288.7 78.7 158.1 800.5
================= ========= =========== ======== ============ ========== ============ ======== =============
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
Legal and mandatory Other
reserves reserves
=================================== ==============
Retained Equity
Additional Cash earnings attributable
Share paid-in flow Currency Mandatory Net to
in EUR million capital capital hedges translation reserve result shareholders
============== ========= =========== ======== ============= ========== ============== ======== =============
Incorporation
20 June
2017 - - - - - - - 0.0
============== ========= =========== ======== ============= ========== ============== ======== =============
Increase of
equity - 70.0 - - - - - 70.0
============== ========= =========== ======== ============= ========== ============== ======== =============
30.06.2017 - 70.0 - - - - - 70.0
============== ========= =========== ======== ============= ========== ============== ======== =============
Net result - - - - - - (89.3) (89.3)
============== ========= =========== ======== ============= ========== ============== ======== =============
Downstream
merger
from RHI AG 39.8 (70.0) (0.1) (71.2) 288.7 270.0 - 457.2
============== ========= =========== ======== ============= ========== ============== ======== =============
Issue of
ordinary
shares minus
costs 5.0 165.7 - - - - - 170.7
============== ========= =========== ======== ============= ========== ============== ======== =============
Net income/
(expense)
recognised
directly
in equity - - 0.2 16.5 - (6.5) - 10.2
============== ========= =========== ======== ============= ========== ============== ======== =============
31.12.2017(1) 44.8 165.7 0.1 (54.7) 288.7 263.5 (89.3) 618.8
============== ========= =========== ======== ============= ========== ============== ======== =============
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
General
RHI Magnesita N.V. (the "Company"), a public company with
limited liability under Dutch law is registered with the Dutch
Trade Register of the Chamber of Commerce under the number 68991665
and has its corporate seat in Arnhem, Netherlands. The
administrative seat and registered office is located at
Kranichberggasse 6, 1120 Vienna, Austria.
The shares of RHI Magnesita N.V. (ISIN code NL0012650360) are
listed on the Main Market of the London Stock Exchange and are
included in the FTSE 250 Index.
On 16 October 2017, the general meeting of the Company decided
to amend the articles of association of the Company and to fully
accept them. With this amendment of the articles of association of
the Company, it has been determined that the financial year of RHI
Magnesita N.V. corresponds to the calendar year. The current
financial year is therefore the same as the calendar year, while
the previous year ran from 1 July 2017 up to and including 31
December 2017.
Basis of preparation
The Company Financial Statements have been prepared in
accordance with the provisions of Part 9 of Book 2 of the Dutch
Civil Code. The Company uses the option of Section 362, subsection
8, of Part 9, Book 2, of the Dutch Civil Code to prepare the
Company Financial Statements on the basis of the same accounting
principles as those applied for the Consolidated Financial
Statements. Valuation is based on recognition and measurement
requirements of accounting standards adopted by the EU (i.e. only
IFRS that is adopted for use in the EU at the date of
authorisation) as explained further in the Notes to the
Consolidated Financial Statements.
Changes in comparative information
The Company Balance Sheet as of 31.12.2017 and the Company
Statement of Profit or Loss 2017 have been adjusted for the final
fair values of the acquired assets and liabilities of Magnesita and
the effects of the subsequent measurement of the values determined
in the final purchase price allocation of Magnesita. Further
information is included in Note (3) of the Consolidated Financial
Statements.
Significant accounting policies
Financial fixed assets
Investments in Group companies in the Company Financial
Statements are accounted for using the equity method.
Net result from investments
The share in the result of investments comprises the share of
the Company in the result of these investments.
Fixed assets
(A) Financial fixed assets
The financial fixed assets comprise investments in:
2018 2017
================ ========= =========
Country of Share in Share in
Name and registered office of the company core activity % %
=================================================== ================ ========= =========
Didier Werke A.G., Wiesbaden, Germany Germany 12.5 12.5
=================================================== ================ ========= =========
RHI Refractories Raw Material GmbH, Vienna,
Austria Austria 25.0 25.0
=================================================== ================ ========= =========
RHI Magnesita GmbH, Vienna, Austria Austria 100.0 100.0
=================================================== ================ ========= =========
RHI Magnesita Trading B.V., Rotterdam, Netherlands Netherlands 100.0 -
=================================================== ================ ========= =========
The investments have developed as follows:
in EUR million 31.12.2018 31.12.2017(1)
======================================================= =========== ==============
At beginning of year 569.3 0.0
======================================================= =========== ==============
Effects of the initial application of IFRS 9 and IFRS
15 (4.2) 0.0
======================================================= =========== ==============
From downstream merger 0.0 457.2
======================================================= =========== ==============
Transactions with non-controlling interests without
change of control (59.2) 0.0
======================================================= =========== ==============
Capital contributions 262.1 179.5
======================================================= =========== ==============
Changes from currency translation and cash flow hedges (13.6) 16.7
======================================================= =========== ==============
Changes from defined benefit plans (6.5) (5.6)
======================================================= =========== ==============
Equity settled transaction 1.0 (2.2)
======================================================= =========== ==============
Net result from investments 166.6 (76.3)
======================================================= =========== ==============
Balance at year-end 915.5 569.3
======================================================= =========== ==============
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
The following list, prepared in accordance with the relevant
legal requirements (Dutch Civil Code, Book 2, Sections 379), shows
all companies in which RHI Magnesita N.V. holds a direct or
indirect share of at least 20% (with the exception of the RHISA
Employee Trust):
31.12.2018 31.12.2017
---- ========================================== ================ ================
Ser. Share- Share Share- Share
no. Name and registered office of the company holder in % holder in %
==== ========================================== ======== ====== ======== ======
1. RHI Magnesita N.V., Arnhem, Netherlands
==== ========================================== ======== ====== ======== ======
Fully consolidated subsidiaries
================================
2. Agellis Group AB, Sund, Sweden 56. 100.0 56. 100.0
=== ==================================================== ========= ====== ========= ======
Baker Refractories Holding Company, Wilmington,
3. USA 43. 100.0 43. 100.0
=== ==================================================== ========= ====== ========= ======
Baker Refractories I.C., Inc., Wilmington,
4. USA 3. 100.0 3. 100.0
=== ==================================================== ========= ====== ========= ======
5. Baker Refractories, Las Vegas, USA 43. 100.0 43. 100.0
=== ==================================================== ========= ====== ========= ======
Betriebs- und Baugesellschaft mit beschränkter
6. Haftung, Wiesbaden, Germany 10. 100.0 10. 100.0
=== ==================================================== ========= ====== ========= ======
D.S.I.P.C.-Didier Société Industrielle
de Production et de
7. Constructions, Valenciennes, France 10. 100.0 10. 100.0
=== ==================================================== ========= ====== ========= ======
8. Didier Belgium N.V., Evergem, Belgium 71.,104. 100.0 71.,104. 100.0
=== ==================================================== ========= ====== ========= ======
Didier Vertriebsgesellschaft mbH, Wiesbaden,
9. Germany 10. 100.0 10. 100.0
=== ==================================================== ========= ====== ========= ======
Didier-Werke Aktiengesellschaft, Wiesbaden,
10. Germany 1.,56. 100.0 1.,56. 100.0
=== ==================================================== ========= ====== ========= ======
11. Dutch Brasil Holding B.V., Arnhem, Netherlands 110. 100.0 110. 100.0
=== ==================================================== ========= ====== ========= ======
12. Dutch MAS B.V., Arnhem, Netherlands 10. 100.0 10. 100.0
=== ==================================================== ========= ====== ========= ======
13. Dutch US Holding B.V., Arnhem, Netherlands 110. 100.0 110. 100.0
=== ==================================================== ========= ====== ========= ======
14. FE "VERA", Dnepropetrovsk, Ukraine 56. 100.0 56. 100.0
=== ==================================================== ========= ====== ========= ======
Feuerfestwerk Bad Hönningen GmbH,
15. Hagen, Germany 115. 100.0 115. 100.0
=== ==================================================== ========= ====== ========= ======
FireShark Refractories GmbH, Vienna,
16. Austria 74. 100.0 74. 100.0
=== ==================================================== ========= ====== ========= ======
Full Line Supply Africa (Pty) Ltd., Sandton,
17. South Africa; i.l. 83. 100.0 83. 100.0
=== ==================================================== ========= ====== ========= ======
GIX International Limited, Dinnington,
18. United Kingdom 116. 100.0 116. 100.0
=== ==================================================== ========= ====== ========= ======
INDRESCO U.K. Ltd., Dinnington, United
19. Kingdom 18. 100.0 18. 100.0
=== ==================================================== ========= ====== ========= ======
INTERSTOP (Shanghai) Co., Ltd., Shanghai,
20. PR China 109. 100.0 109. 100.0
=== ==================================================== ========= ====== ========= ======
Liaoning RHI Jinding Magnesia Co., Ltd.,
21. Dashiqiao City, PR China(1) 56. 83.3 56. 83.3
=== ==================================================== ========= ====== ========= ======
22. LLC "RHI Wostok Service", Moscow, Russia 56.,74. 100.0 56.,74. 100.0
=== ==================================================== ========= ====== ========= ======
23. LLC "RHI Wostok", Moscow, Russia 56.,74. 100.0 56.,74. 100.0
=== ==================================================== ========= ====== ========= ======
Lokalbahn Mixnitz-St. Erhard Aktien-Gesellschaft,
24. Vienna, Austria 95. 100.0 95. 100.0
=== ==================================================== ========= ====== ========= ======
25. LWB Holding Company, Las Vegas, USA 57. 100.0 57. 100.0
=== ==================================================== ========= ====== ========= ======
31.12.2018 31.12.2017
---- =============================================== ===================== =====================
Ser. Share- Share Share- Share
no. Name and registered office of the company holder in % holder in %
==== =============================================== ============= ====== ============= ======
LWB Refractories Belgium S.A., Liège,
26. Belgium 45.,115. 100.0 45.,115. 100.0
==== =============================================== ============= ====== ============= ======
LWB Refractories Beteiligungs GmbH &
27. Co. KG, Hagen, Germany 35.,57. 100.0 35.,57. 100.0
==== =============================================== ============= ====== ============= ======
28. LWB Refractories Hagen GmbH, Hagen, Germany 115. 100.0 115. 100.0
==== =============================================== ============= ====== ============= ======
LWB Refractories Holding France S.A.S.,
29. Valenciennes, France 115. 100.0 115. 100.0
==== =============================================== ============= ====== ============= ======
M.E. Refractories Company FZE i. l.,
30. Dubai, United Arab Emirates 34. 100.0 34. 100.0
==== =============================================== ============= ====== ============= ======
Mag Data Participaçoes e Investimentos
em Projetos de Mineração S.A.,
31. Contagem, Brazil - 100.0 50. 100.0
==== =============================================== ============= ====== ============= ======
32. Magnesit Anonim Sirketi, Eskisehir, Turkey(2) 56. 100.0 56. 100.0
==== =============================================== ============= ====== ============= ======
Magnesita Asia Refractory Holding Ltd,
33. Hong Kong, PR China 29. 100.0 29. 100.0
==== =============================================== ============= ====== ============= ======
34. Magnesita Finance S.A., Luxembourg, Luxembourg 50. 100.0 50. 100.0
==== =============================================== ============= ====== ============= ======
Magnesita Grundstücks-Beteiligungs
35. GmbH, Hagen, Germany 50. 100.0 50. 100.0
==== =============================================== ============= ====== ============= ======
Magnesita International Limited, London,
36. United Kingdom 50. 100.0 50. 100.0
==== =============================================== ============= ====== ============= ======
Magnesita Malta Finance Ltd., St. Julians,
37. Malta 38.,115. 100.0 38.,115. 100.0
==== =============================================== ============= ====== ============= ======
Magnesita Malta Holding Ltd., St. Julians,
38. Malta 45.,115. 100.0 45.,115. 100.0
==== =============================================== ============= ====== ============= ======
Magnesita Mineração S.A., Brumado,
39. Brazil 34.,50.,120. 100.0 34.,50.,122. 100.0
==== =============================================== ============= ====== ============= ======
Magnesita NAM Insurance Company, Wilmington,
40. USA 25. 100.0 25. 100.0
==== =============================================== ============= ====== ============= ======
Magnesita Refractories (Canada) Inc.,
41. Montreal, Canada 3. 100.0 3. 100.0
==== =============================================== ============= ====== ============= ======
Magnesita Refractories (Dalian) Co. Ltd.,
42. Dalian, PR China 34. 100.0 34. 100.0
==== =============================================== ============= ====== ============= ======
Magnesita Refractories Company, York,
43. USA 25. 100.0 25. 100.0
==== =============================================== ============= ====== ============= ======
Magnesita Refractories de Mexico S.A.
44. de C.V., Monterrey, Mexico 3.,4. 100.0 3.,4. 100.0
==== =============================================== ============= ====== ============= ======
45. Magnesita Refractories GmbH, Hagen, Germany 115. 100.0 115. 100.0
==== =============================================== ============= ====== ============= ======
Magnesita Refractories Ltd., Dinnington,
46. United Kingdom 3. 100.0 3. 100.0
==== =============================================== ============= ====== ============= ======
Magnesita Refractories Middle East FZE,
47. Dubai, United Arab Emirates 34. 100.0 34. 100.0
==== =============================================== ============= ====== ============= ======
Magnesita Refractories S.C.S., Valenciennes,
48. France 29.,115. 100.0 29.,115. 100.0
==== =============================================== ============= ====== ============= ======
Magnesita Refractories S.R.L., Milano,
49. Italy 115. 100.0 115. 100.0
==== =============================================== ============= ====== ============= ======
Magnesita Refratários S.A., Contagem,
50. Brazil 11. 85.2 11. 50.0
==== =============================================== ============= ====== ============= ======
Magnesita Resource (Anhui-Chizhou) Company.
51. Ltd., Chizhou, PR China 33. 100.0 33. 100.0
==== =============================================== ============= ====== ============= ======
52. Mezubag AG, Pfäffikon, Switzerland 109. 100.0 109. 100.0
==== =============================================== ============= ====== ============= ======
Orient Refractories Limited, Mumbai,
53. India 13. 66.5 13. 69.6
==== =============================================== ============= ====== ============= ======
Premier Periclase Limited, Drogheda,
54. Ireland 13. 100.0 13. 100.0
==== =============================================== ============= ====== ============= ======
Producción RHI México, S. de
55. R.L. de C.V., Ramos Arizpe, Mexico 87.,116. 100.0 87.,116. 100.0
==== =============================================== ============= ====== ============= ======
Radex Vertriebsgesellschaft m.b.H., Leoben,
56. Austria 112. 100.0 112. 100.0
==== =============================================== ============= ====== ============= ======
Rearden G Holdings Eins GmbH, Hagen,
57. Germany 34. 100.0 34. 100.0
==== =============================================== ============= ====== ============= ======
Refractarios Argentinos S.A.I.C.M., Buenos
58. Aires, Argentina 50. 100.0 50. 100.0
==== =============================================== ============= ====== ============= ======
Refractarios Magnesita Chile S/A, Santiago,
59. Chile 58. 100.0 58. 100.0
==== =============================================== ============= ====== ============= ======
Refractarios Magnesita Colombia S/A,
60. Sogamoso, Colombia 50. 100.0 50. 100.0
==== =============================================== ============= ====== ============= ======
Refractarios Magnesita del Perú
61. S.A.C., Lima, Peru 50. 100.0 50. 100.0
==== =============================================== ============= ====== ============= ======
Refractory Intellectual Property GmbH
62. & Co KG, Vienna, Austria 63.,74. 100.0 63.,74. 100.0
==== =============================================== ============= ====== ============= ======
Refractory Intellectual Property GmbH,
63. Vienna, Austria 74. 100.0 74. 100.0
==== =============================================== ============= ====== ============= ======
Reframec Manutenção e Montagens
de Refratários S.A., Matozinhos,
64. Brazil 50. 100.0 50. 100.0
==== =============================================== ============= ====== ============= ======
RHI Argentina S.R.L., San Nicolás,
65. Argentina 13.,116. 100.0 13.,116. 100.0
==== =============================================== ============= ====== ============= ======
66. RHI Canada Inc., Burlington, Canada 116. 100.0 116. 100.0
==== =============================================== ============= ====== ============= ======
67. RHI Chile S.A., Santiago, Chile 18.,116. 100.0 18.,116. 100.0
==== =============================================== ============= ====== ============= ======
68. RHI Clasil Private Limited, Mumbai, India(1) 116. 53.7 116. 53.7
==== =============================================== ============= ====== ============= ======
69. RHI Dinaris GmbH, Wiesbaden, Germany 104. 100.0 104. 100.0
==== =============================================== ============= ====== ============= ======
31.12.2018 31.12.2017
---- ======================================================= =================== ===================
Ser. Share- Share Share- Share
no. Name and registered office of the company holder in % holder in %
==== ======================================================= =========== ====== =========== ======
70. RHI Finance A/S, Hellerup, Denmark 74. 100.0 74. 100.0
==== ======================================================= =========== ====== =========== ======
71. RHI GLAS GmbH, Wiesbaden, Germany 104. 100.0 104. 100.0
==== ======================================================= =========== ====== =========== ======
RHI India Private Limited, Navi Mumbai,
72. India 11.,116. 100.0 11.,116. 100.0
==== ======================================================= =========== ====== =========== ======
73. RHI ITALIA S.R.L., Brescia, Italy 74. 100.0 74. 100.0
==== ======================================================= =========== ====== =========== ======
74. RHI Magnesita GmbH, Vienna, Austria 1. 100.0 1. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Magnesita Distribution B.V., Rotterdam,
75. Netherlands 76. 100.0 - -
==== ======================================================= =========== ====== =========== ======
RHI Magnesita Trading B.V., Rotterdam,
76. Netherlands 1. 100.0 - -
==== ======================================================= =========== ====== =========== ======
RHI Marvo Feuerungs- und Industriebau
77. GmbH, Gerbstedt, Germany 78. 100.0 78. 100.0
==== ======================================================= =========== ====== =========== ======
RHI MARVO Feuerungs- und Industriebau
78. GmbH, Kerpen, Germany 10. 100.0 10. 100.0
==== ======================================================= =========== ====== =========== ======
79. RHI MARVO S.R.L., Ploiesti, Romania 56.,110. 100.0 56.,110. 100.0
==== ======================================================= =========== ====== =========== ======
80. RHI Normag AS, Porsgrunn, Norway 56. 100.0 56. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Refractories (Dalian) Co., Ltd.,
81. Dalian, PR China 56. 100.0 56. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Refractories (Site Services) Ltd.,
82. Dinnington, United Kingdom 19. 100.0 19. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Refractories Africa (Pty) Ltd., Sandton,
83. South Africa 56.,107. 100.0 56.,107. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Refractories Andino C.A., Puerto
84. Ordaz, Venezuela 116. 100.0 116. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Refractories Asia Pacific Pte. Ltd.,
85. Singapore 74. 100.0 74. 100.0
==== ======================================================= =========== ====== =========== ======
86. RHI Refractories Egypt LLC., Cairo, Egypt 56.,110. 100.0 56.,110. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Refractories España, S.L., Lugones,
87. Spain 10.,12. 100.0 10.,12. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Refractories France SA, Valenciennes,
88. France(3) 108. 100.0 108. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Refractories Holding Company, Wilmington,
89. USA 116. 100.0 116. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Refractories Ibérica, S.L.,
90. Lugones, Spain 108. 100.0 108. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Refractories Italiana s.r.l., Brescia,
91. Italy; i.l. 108. 100.0 108. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Refractories Liaoning Co., Ltd.,
92. Bayuquan, PR China(1) 56. 66.0 56. 66.0
==== ======================================================= =========== ====== =========== ======
RHI Refractories Mercosul Ltda., Sao
93. Paulo, Brazil 110.,116. 100.0 110.,116. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Refractories Nord AB, Stockholm,
94. Sweden 108. 100.0 108. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Refractories Raw Material GmbH, Vienna,
95. Austria 1.,56.,74. 100.0 1.,56.,74. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Refractories Site Services GmbH,
96. Wiesbaden, Germany 10. 100.0 10. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Refractories UK Limited, Bonnybridge,
97. United Kingdom 10. 100.0 10. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Refratários Brasil Ltda, Belo
98. Horizonte, Brazil 11.,116. 100.0 11.,116. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Sales Europe West GmbH, Mülheim-Kärlich,
99. Germany 10.,108. 100.0 10.,108. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Trading (Dalian) Co., Ltd., Dalian,
100. PR China 56. 100.0 56. 100.0
==== ======================================================= =========== ====== =========== ======
101. RHI Ukraina LLC, Dnepropetrovsk, Ukraine 56.,110. 100.0 - -
==== ======================================================= =========== ====== =========== ======
RHI United Offices America, S.A. de C.V.,
102. Monterrey, Mexico 87.,103. 100.0 87.,103. 100.0
==== ======================================================= =========== ====== =========== ======
RHI United Offices Europe, S.L., Lugones,
103. Spain 87. 100.0 87. 100.0
==== ======================================================= =========== ====== =========== ======
RHI Urmitz AG & Co. KG, Mülheim-Kärlich,
104. Germany 9.,10. 100.0 9.,10. 100.0
==== ======================================================= =========== ====== =========== ======
105. RHI US Ltd., Wilmington, USA 13. 100.0 13. 100.0
==== ======================================================= =========== ====== =========== ======
RHI-Refmex, S.A. de C.V., Ramos Arizpe,
106. Mexico 87.,116. 100.0 87.,116. 100.0
==== ======================================================= =========== ====== =========== ======
RHISA Employee Trust, Sandton, South
107. Africa(4) - 0.0 - 0.0
==== ======================================================= =========== ====== =========== ======
SAPREF AG für feuerfestes Material,
108. Basel, Switzerland 116. 100.0 116. 100.0
==== ======================================================= =========== ====== =========== ======
Stopinc Aktiengesellschaft, Hünenberg,
109. Switzerland 10.,56. 100.0 10.,56. 100.0
==== ======================================================= =========== ====== =========== ======
Veitscher Vertriebsgesellschaft m.b.H.,
110. Vienna, Austria 74. 100.0 74. 100.0
==== ======================================================= =========== ====== =========== ======
Veitsch-Radex America LLC., Wilmington,
111. USA 105. 100.0 105. 100.0
==== ======================================================= =========== ====== =========== ======
112. Veitsch-Radex GmbH & Co OG, Vienna, Austria 74.,113. 100.0 74.,113. 100.0
==== ======================================================= =========== ====== =========== ======
113. Veitsch-Radex GmbH, Vienna, Austria 74. 100.0 74. 100.0
==== ======================================================= =========== ====== =========== ======
Veitsch-Radex Vertriebsgesellschaft m.b.H.,
114. Vienna, Austria 74. 100.0 74. 100.0
==== ======================================================= =========== ====== =========== ======
31.12.2018 31.12.2017
---- ===================================================== ================== ==================
Ser. Share- Share Share- Share
no. Name and registered office of the company holder in % holder in %
==== ===================================================== ========== ====== ========== ======
Vierte LWB Refractories Holding GmbH,
115. Hagen, Germany 27.,57. 100.0 27.,57. 100.0
==== ===================================================== ========== ====== ========== ======
116. VRD Americas B.V., Arnhem, Netherlands 56.,74. 100.0 56.,74. 100.0
==== ===================================================== ========== ====== ========== ======
Zimmermann & Jansen GmbH, Düren,
117. Germany 10. 100.0 10. 100.0
==== ===================================================== ========== ====== ========== ======
Subsidiaries not consolidated due to
minor significance
==== ===================================================== ========== ====== ========== ======
118. Agellis Process AB, Lund, Sweden - 100.0 2. 100.0
==== ===================================================== ========== ====== ========== ======
119. Agellis Surface AB, Lund, Sweden - 100.0 2. 100.0
==== ===================================================== ========== ====== ========== ======
Araçuaí Holding S.A., São
120. Paulo, Brazil 131. 100.0 131. 100.0
==== ===================================================== ========== ====== ========== ======
Dr.-Ing. Petri & Co. Unterstützungsgesellschaft
121. m.b.H., Wiesbaden, Germany 10. 100.0 10. 100.0
==== ===================================================== ========== ====== ========== ======
Grayhill MDMM Holding Ltda., São
122. Paulo, Brazil 50. 100.0 50. 100.0
==== ===================================================== ========== ====== ========== ======
123. Guapare S.A, Montevideo, Uruguay 50. 100.0 - -
==== ===================================================== ========== ====== ========== ======
124. Magnesita Australia PTY Ltd. i. l., Australia 33. 100.0 33. 100.0
==== ===================================================== ========== ====== ========== ======
Magnesita Refractories A.B., Köping,
125. Sweden 115. 100.0 115. 100.0
==== ===================================================== ========== ====== ========== ======
Magnesita Refractories PVT Ltd, Mumbai,
126. India 57.,115. 100.0 57.,115. 100.0
==== ===================================================== ========== ====== ========== ======
Magnesita Refractories S.A. (Pty) Ltd.,
127. Middleburg, South Africa 45. 100.0 45. 100.0
==== ===================================================== ========== ====== ========== ======
MAG-Tec Participações Ltda.
128. Ltda., Contagem, Brazil 50. 98.7 50. 98.7
==== ===================================================== ========== ====== ========== ======
Metal Data Participações Ltda.,
129. Rio de Janeiro, Brazil 50. 61.0 50. 61.0
==== ===================================================== ========== ====== ========== ======
Metal Data S.A. - Mineração
130. e Metalurgia, Contagem, Brazil 50.,129. 100.0 50.,129. 100.0
==== ===================================================== ========== ====== ========== ======
MMD Araçuaí Holding Ltda.,
131. São Paulo, Brazil 50. 100.0 31.,50. 100.0
==== ===================================================== ========== ====== ========== ======
MPC, Metal Process Control AB, Lund,
132. Sweden - 100.0 2. 100.0
==== ===================================================== ========== ====== ========== ======
Refractarios Especiales Y Moliendas S.A.,
133. Buenos Aires, Argentina 58. 100.0 58. 100.0
==== ===================================================== ========== ====== ========== ======
Refractarios Magnesita Uruguay S/A, Montevideo,
134. Uruguay 50. 100.0 50. 100.0
==== ===================================================== ========== ====== ========== ======
RHI Réfractaires Algérie E.U.R.L.,
135. Sidi Amar, Algeria 88. 100.0 88. 100.0
==== ===================================================== ========== ====== ========== ======
Equity-accounted joint ventures and associated
companies
==== ===================================================== ========== ====== ========== ======
Krosaki Magnesita Refractories LLC, York,
136. USA 43. 40.0 43. 40.0
==== ===================================================== ========== ====== ========== ======
Magnesita Envoy Asia Ltd., Kaohsiung,
137. Taiwan 3. 50.0 3. 50.0
==== ===================================================== ========== ====== ========== ======
MAGNIFIN Magnesiaprodukte GmbH & Co KG,
138. St. Jakob, Austria 110.,142. 50.0 110.,142. 50.0
==== ===================================================== ========== ====== ========== ======
139. Sinterco S.A., Nameche, Belgium 57. 70.0 57. 70.0
==== ===================================================== ========== ====== ========== ======
Other immaterial investments, measured
at cost
==== ===================================================== ========== ====== ========== ======
LLC "NSK Refractory Holding", Moskau,
140. Russia - 49.0 56. 49.0
==== ===================================================== ========== ====== ========== ======
141. LLC "NSK Refractory", Novokuznetsk, Russia - 49.0 56. 49.0
==== ===================================================== ========== ====== ========== ======
MAGNIFIN Magnesiaprodukte GmbH, St. Jakob,
142. Austria 110. 50.0 110. 50.0
==== ===================================================== ========== ====== ========== ======
1 In accordance with IAS 32, fixed-term or puttable
non-controlling interests are shown under liabilities.
2 Further shareholders are VRD Americas B.V., Lokalbahn Mixnitz
St. Erhard Aktien-Gesellschaft and Veitscher Vertriebsgesellschaft
mbH.
3 Further shareholders are Didier-Werke AG, RHI Dinaris GmbH and
RHI GLAS GmbH.
4 Controlling influence due to contractual terms and
conditions.
i.l. in liquidation
Current assets
(B) Cash and cash equivalents
Cash and cash equivalents are at RHI Magnesita N.V.'s free
disposal.
Equity
(C) Share capital
The Company's authorised share capital amounts to
EUR100,000,000, comprising 100,000,000 ordinary shares, each of
EUR1 nominal value. As at 31 December 2018, RHI Magnesita N.V.'s
issued and fully paid-in share capital consists of 48,337,047
ordinary shares. (As at 31 December 2017: 44,819,039 ordinary
shares).
(D) Additional paid-in capital
Additional paid-in capital comprises premiums on the issue of
shares less issue costs by RHI Magnesita N.V.
(E) Legal and mandatory reserves
Cash flow hedges
The item cash flow hedges includes gains and losses from the
effective part of cash flow hedges less tax effects. Further
information on hedge accounting is included in Note (54) of the
Consolidated Financial Statements.
Currency translation
Currency translation includes the accumulated currency
translation differences from translating the Financial Statements
of foreign subsidiaries as well as unrealised currency translation
differences from monetary items which are part of a net investment
in a foreign operation, net of related income taxes. If foreign
companies are deconsolidated, the currency translation differences
are recognised in the Statement of Profit or Loss as part of the
gain or loss from the sale of shares in subsidiaries. In addition,
when monetary items cease to form part of a net investment in a
foreign operation, the currency translation differences of these
monetary items previously recognised in other comprehensive income
are reclassified to profit or loss.
The cash flow hedges reserve and the currency translation
reserve are legal reserves in accordance with the Dutch Civil Code
and are restricted for distribution.
Mandatory reserve
The articles of association stipulate a mandatory reserve of
EUR288,699,230.59 which was created in connection with the
merger.
No distributions, allocations or additions may be made and no
losses of the Company may be allocated to the mandatory
reserve.
Current liabilities
(F) Other current liabilities
in EUR million 31.12.2018 31.12.2017(1)
============================ =========== ==============
Trade payables 5.1 2.8
============================ =========== ==============
Payables to group companies 105.6 0.0
============================ =========== ==============
Accrued liabilities 4.4 10.3
============================ =========== ==============
Total current liabilities 115.1 13.1
============================ =========== ==============
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
The other current liabilities fall due in less than one year.
The fair value of other current liabilities approximates the book
value, due to their short-term character.
(G) Net results from investments
In the year 2018 the full year results of the investments amount
to a profit of EUR166.6 million and are recognised in the Company
Statement of Profit or Loss.
In year 2017 the exact legal steps of the merger were reflected
in the Company Financial Statements. Consequently the interests in
the investments were recognised as per date of the transaction, in
this case 26 October 2017. The (adjusted) results of the
investments for the period from 26 October to 31 December 2017
amounted to a loss of EUR76.3 million.
The results of the investments for the period from 1 January to
25 October 2017 amounted to a profit of EUR71.9 million and were
recognised as an effect from the downstream merger under retained
earnings.
(H) Net result for the period
In 2018, there are no differences in the result between the
Company Financial Statements and the Consolidated Financial
Statements.
In 2017, a different accounting treatment of the merger has been
applied in the Consolidated Financial Statements and the Company
Financial Statements. In the Consolidated Financial Statements the
results of a full year have been recognised in the Consolidated
Statement of Profit or Loss (the so called 'pooling of interest
methodology'), whereas in the Company Financial Statements the
results of the period 26 October 2017 to 31 December 2017 have been
recognised in the Company Statement of Profit or Loss (the so
called 'carryover accounting methodology). The difference in year
2017 between the Consolidated Financial Statements and the Company
Financial Statements is shown in the table below:
in EUR million 2017(1)
================================================================== ========
Company's net result for the period 1 July to 31 December 2017 (89.3)
================================================================== ========
Result of the investments for the period from 1 January 2017
to 25 October 2017 recognised in retained earning 71.9
================================================================== ========
Company's consolidated results 2017 (attributable to shareholders
of RHI Magnesita N.V.) (17.4)
================================================================== ========
1 Adjusted to reflect the effects of the final purchase price
allocation of Magnesita.
Proposed appropriation of result
It is proposed that pursuant to Article 27 clause 1 of the
articles of association of the Company the result shown in RHI
Magnesita N.V. income statement be appropriated as follows:
in EUR million 2018
============================================================ ======
Profit attributable to shareholders 158.1
============================================================ ======
In accordance with Article 27 clause 1 to be transferred to
reserves 0.0
============================================================ ======
At the disposal of the General Meeting of shareholders 158.1
============================================================ ======
For 2018, the Board of Directors will propose a dividend of
EUR1.50 per share for the shareholders of RHI Magnesita N.V. The
proposed dividend is subject to the approval by the Annual General
Meeting on 6 June 2019.
Other notes
Number of employees
The average number of employees of RHI Magnesita N.V. during
2018 amounts to nil (2017: nil).
Other information
Information regarding auditor's fees, number of employees of RHI
Magnesita Group and the remuneration of the Board of Directors is
included in Note (59) to (61) of the Consolidated Financial
Statements.
Material events after the reporting date
On 10 March 2019 the Supervening Acquisition Period of the
Integrated Tender Offer (as described in Note (5) of the
Consolidated Financial Statements) ended. RHI Magnesita N.V. via
its indirect, wholly-owned subsidiary Dutch Brasil Holding B.V.
received valid acceptances from holders of 6,167,636 Magnesita
Refratários S.A. common shares, representing approximately 12.3% of
the total share capital of Magnesita Refratários S.A. increasing
its total ownership to 97.5%. As a result, 1,139,400 new RHI
Magnesita N.V. shares were issued. The cash disbursement of this
transaction amounts to EUR30.2 million.
After the reporting date on 31 December 2018, there were no
other events of special significance which may have a material
effect on the financial position and performance of RHI Magnesita
N.V.
Vienna, 26 March 2019
Board of Directors
Herbert Cordt, Chairman
Stefan Borgas, CEO
David Schlaff
Stanislaus Prinz zu Sayn- Wittgenstein-Berleburg
Celia Baxter
Andrew Hosty
James Leng
John Ramsay
Wolfgang Ruttenstorfer
Karl Sevelda
Franz Reiter
Michael Schwarz
Other information
Provisions of the articles of association on profit and
distributions
The stipulations of Article 27 and 28 of the Articles of
Association concerning profit and distributions are:
27 Profit and distributions
27.1 The Board may resolve that the profits realised during a
financial year will fully or partially be appropriated to increase
and/or form reserves. With due regard to Article 26.2, a deficit
may only be offset against the reserves prescribed by law to the
extent this is permitted by law.
27.2 The allocation of profits remaining after application of
Article 27.1 shall be determined by the General Meeting. The Board
shall make a proposal for that purpose. A proposal to make a
distribution of profits shall be dealt with as a separate agenda
item at the General Meeting.
27.3 Distribution of profits shall be made after adoption of the
annual accounts if permitted under the law given the contents of
the annual accounts.
27.4 The Board may resolve to make interim distributions and/or
to make distributions at the expense of any reserve of the Company,
other than the Mandatory Reserve.
27.5 Distributions on shares may be made only up to an amount
which does not exceed the amount of the Distributable Equity. If it
concerns an interim distribution, the compliance with this
requirement must be evidenced by an interim statement of assets and
liabilities as referred to in Section 2:105 paragraph 4 of the
Dutch Civil Code. The Company shall deposit the statement of assets
and liabilities at the Dutch Trade Register within eight days after
the day on which the resolution to make the distribution is
published.
27.6 Distributions on shares payable in cash shall be paid in
euro, unless the Board determines that payment shall be made in
another currency.
27.7 The Board is authorised to determine that a distribution on
shares will not be made in cash but in kind or in the form of
shares, or to determine that shareholders may choose to accept the
distribution in cash and/or in the form of shares, all this out of
the profits and/or at the expense of reserves, other than the
Mandatory Reserve, and all this if and in so far the Board has been
designated by the General Meeting in accordance with Article 6.1.
The Board shall set the conditions under which such a choice may be
made.
28 Release for payment
Distributions of profits and other distributions shall be made
payable four weeks after adoption of the relevant resolution,
unless the Board or the General Meeting at the proposal of the
Board determine another date.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UNURRKUAOUUR
(END) Dow Jones Newswires
March 27, 2019 03:00 ET (07:00 GMT)
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