Austria-based refractory producer RHI AG saw its
business slacken in the third quarter of this year due to
sluggish demand for its refractory products in the glass and
non-ferrous metal markets.
RHI said that it expects revenues for the full
year 2014 to be slightly below those in the previous year,
while operating results should be marginally higher.
In glass, RHI added that it expects to close a
site in Europe.
"Due to a decrease in production volume, RHI is
currently evaluating the closure of a site in Europe as part of
the plant concept," the company said.
The RHI results showed that the level of incoming
orders improved in the past quarter, especially in
Italy and China, where an increasing demand for
glass has shown positive effects on capacity utilisation at its
refractory plant in Dalian.
Glass demand hits
For the first nine months however, RHI said that
a challenging market environment in the glass industry impacted
its revenues, due to weak demand in Europe, the CIS and the
Middle East.
The major problems affecting the glass industry
are a global overcapacity in the flat glass segment and in the
refractory industry, which saw utilisation of worldwide
production capacity of fused cast bricks in glass furnaces fall
below 50%, according to RHI.
"A decrease in specific refractory consumption
has been noticeable in the past years due to demand-related low
furnace utilisation," the company said in a statement.
Weak demand from the non-ferrous metals sector is
due to falling metal prices, which caused mining corporations
to reduce investment programmes because of shrinking margins,
according to RHI.
It added that many kiln manufacturers also
reported poor capacity utilisation, which ultimately impacted
its refractories business.
However, the company saw refractory orders
increase in the aluminium industry, where demand now exceeds
supply for the first time in more than five years.
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A challenging market environment in the
glass industry has impacted profits of refractory
producers in 2014.
Emily Mathews
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Low demand in cement
industry
According to the refractory producer, slow
development in the European construction industry, which is
still suffering from the current austerity policies adopted by
the European Union countries, also impacted production
capacities and, consequently, demand for refractories.
RHI also said that large refractories orders in
China are traditionally placed in the fourth quarter to
complete necessary repairs to cement plants, and it expects its
business to pick up in the coming months.
Positive trend in raw
materials
The positive trend in revenues in its raw
materials division in the first nine months of 2014 was due to
growth in internal demand and higher external revenues, the
company said.
However, for Q3 2014, revenues were down 4.3%, to
€73.1m, compared with the same period in 2013, owing to
lower external raw material sales and a declining internal
demand.
The company added that measures to cut costs at
its refractory plant in Porsgrunn, Norway, were successfully
implemented in the first nine months of 2014, enabling the
stabilisation of output of fused magnesia to 1,000 tpw and to
reduce materials waste.
However, RHI said it is still working on the
optimisation of its caustic calcined magnesia (CCM) process,
which is expected to continue in 2015.
The refractory producer said that, despite
halting the acquisition of sintered magnesia plant and mining
rights in Erzurum, Turkey, in September, it is still planning
to establish a facility for mixes at its raw material plant in
Eskisehir, Turkey.
Financials
The company’s revenues in Q3 2014
amounted to €415.6m ($519.5m*), a 4.9% decline quarter-on
quarter (q-o-q) and a 2.8% decline year-on-year (y-o-y). RHI
totalled revenues of €1.25bn in the first nine months of
2014, down 3.8% compared with the same period in 2013.
An 11.1% decline in revenues in the
company’s industrial division, amounting to
€125.1m, more than offset 1.4% and 10.2% growth in its
steel and raw materials divisions, which amounted to
€279.8m and €73.1m, respectively.
RHI said that the decline was caused by a lack of
new construction business and postponements of planned
installations to Q4 2014.
The company explained that the revenue
contribution of its nonferrous metals business unit in the
first nine months of 2014 dropped by 9.8% to €403.9m, as a
result of low investment activities in the glass business and
lower metal prices.
Operating profits consequently declined by 12%
y-o-y to €28.3m, in the third quarter of this year, and by
1% y-o-y to €100.1m, in the first nine months of 2014.
EBITDA** reduced to €43.1m in Q3 2014 from
€50.2m in the same period of 2013 and decreased by 32.2%
y-o-y for the first nine months of 2014.
However, total sale volumes amounted to 452,000
tonnes refractories and raw materials in Q3 2014, up 4.9%
y-o-y, and to 1.37m tonnes in the first nine months of 2014, up
4.3% compared with the same period in 2013.
This resulted from the integration of India-based
Orient Refractories in April 2013 (see p22) and from
growth in sales in its raw materials division, the company
said.
*Conversion made November 2014
**Earnings before interest, tax, depreciation
and amortisation