RHI’s revenues decline in Q3 due to depressed glass and non-ferrous market

By Antonio Torrisi
Published: Thursday, 27 November 2014

Refractory products demand sluggish but a positive trend in raw materials noted -

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.


A challenging market environment in the glass industry has impacted profits of refractory producers in 2014.
Emily Mathews 

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.


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