Annual Report 2019
We are
RHI
Magnesita
R H I M A G N E S I TA
We are helping shape today's
world. Our products touch many
areas of modern life. From steel,
cement and glass to copper and
aluminium. From the bridges that
connect us, to the vehicles that
cross them. The work we do may
be hidden from view, but the
value we add is considerable.
Contents
CE0's
review
Innovation
Sustainability
Page 10
Page 30
Page 62
Strategic report
Governance
Financial Statements
Investment case
Group highlights
01
02 At a glance
04
06 How we create value
08 Chairman’s statement
CEO’s review
10
Strategic framework
13
Competitiveness
14
18
Business model
22 Markets
People
26
Innovation
30
34
Solutions portfolio
36 Market overview
40 Operational review
46
48
53
60
62
65 Climate & Environment
People & Communities
69
Key performance indicators
Financial review
Risk management approach
RHI Magnesita stakeholder index
Sustainability Governance
74
Chairman’s introduction to Corporate
Governance
Corporate Governance Statement
76
Board of Directors
84
88
Executive Management Team
90 Nomination Committee report
92 Corporate Sustainability Committee report
93
96
100 Directors’ Remuneration Policy
108 Annual Report on Remuneration
110 Compliance with the Dutch Civil Code
Audit Committee report
Remuneration Committee report
122 Consolidated Statement of Financial
Position
123 Consolidated Statement of Profit or Loss
124 Consolidated Statement of
Comprehensive Income
125 Consolidated Statement of Cash Flows
126 Consolidated Statement of Changes
in Equity
128 Notes to the Consolidated Financial
Statements 2019
204 Company Financial Statements of
RHI Magnesita N.V.
206 Notes to the Company Financial
Statements 2019
Other Information
215
Independent Auditor’s report
226 Alternative performance measures
(“APMs”)
227 Shareholder information
STRATEGIC REPORT Group
highlights
Innovation
A portfolio based on innovative
technologies and digitalisation
Read more on
page 30
R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Financial highlights
Revenue
€2.9bn
Adjusted EBITA
€408m
2019
2018
€2.9bn
2019
€408m
€3.1bn1
20181
€448m
Adjusted EBITA margin
Working capital intensity2
14.0%
18.3%
2019
20181
14.0%
2019
18.3%
14.3%
2018
15.4%
Net debt/adjusted EBITDA3
Available liquidity5
€1.1bn
1.2x
2019
20184
1.2x
1.3x
Operational highlights
0.28
Lost time injury frequency rate (LTIF)
Improvement from 0.43 in 2018
€64m
Spend on technology - 2.2% of annual
revenues
See our Strategic priorities
in action
Page 13
€70-80m
Run rate cost savings by 2022
identified for the Production
Optimisation plan and Sales strategies
€90m
Synergies realised since 2017
1 On a constant currency basis.
2 Measured as a percentage of last three months of annualised revenue.
3 Net debt comprises of total debt less cash, cash equivalents, and marketable securities.
4 Adjusted to include the impact of IFRS 16 leases to improve comparability between periods.
5 Available liquidity comprises cash, cash equivalent, and €600 million of undrawn committed facilities.
01
At a
glance
R H I M A G N E S I TA
Refractory products are used in
all the world's high-temperature
industrial processes, exceeding
1,200°C in a wide range of industries
including steel, cement, non-ferrous
metals and glass.
Sectors
Steel
Industrial
The Steel Division provides its customers
products and services for steel production,
consisting of refractories (basic and non-basic
mixes and bricks), machinery, flow control
systems, and broader solutions.
The Industrial Division provides a range of
products and services for the cement, lime,
non-ferrous metals and glass industries as well as
the environment, energy and chemicals ("EEC")
sector, and broader solutions.
Revenue (Steel Division):
Revenue (Industrial Division):
€2,018m
(2018: €2,253 million)1
Gross profit of
€467m
representing 23.1% gross margin
(2018: 24.2% gross margin)1
People,
Culture &
Sustainability
1 Adjusted for 2019 foreign exchange rates.
2 Employees at 31 December 2019.
€904m
(2018: €873 million)1
Gross profit of
€250m
representing 27.7% gross margin
(2018: 24.2% gross margin)1
The people and culture agenda is built on
attracting the best talent, creating a culture ready
for transformation, and further developing its
people. This is underpinned by its leaders,
who are critical to driving the long-term and
sustainable success of RHI Magnesita.
Read more on
pages 28 and 29
02
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Where
we operate
Optimally positioned to provide
products, services and solutions
for clients around the globe.
Headquarters
Technology hubs
Raw materials production
Finished refractory products production
Raw materials and finished refractory
products production
Countries shipped to
Employees2
125+
13,650+
Sales offices
70+
Revenue split by geography
Finished goods sites
Combined sites
Raw material sites
19
8
5
Europe
North America
APAC
South America
MEA-CIS
26%
24%
21%
16%
13%
03
R H I M A G N E S I TA
Clear and compelling
investment case
1
2
Opportunity for
further growth in
refractories margin
Strong cash
conversion and
robust balance sheet
Stable and growing refractories margin, at 9% in 2019
Strong cash flow generation - operating free cash flow
of €359 million
Further €95-115 million EBITA upside by 2022 from
fast-payback management "self help"
Robust balance sheet with leverage at 1.2x net debt
to adjusted EBITDA
Additional margin contribution from backward integration,
albeit varying with prevailing raw materials pricing
(long-term margin of at least 2%)
Capital flexibility to pursue both growth
and shareholder returns
04
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
3
4
Strong competitive
position
Growth opportunity
from new markets,
solutions offering
and M&A
Market leader with a global footprint and a "local for local"
strategy with 15% global market share (30% ex-China).
Clear market leadership in Americas, Europe and
Middle East
Opportunity to grow materially in under-represented
markets such as India and China
Technical leadership, with opportunity to develop
technology and digital solutions across regions
and portfolio
Greater penetration of value-added solutions offering
to customers, improving margins and retention
Low-cost, high-quality backward integration providing
security of supply of raw materials and unique solutions
for the market, alongside high return on assets
Opportunity for further consolidation through M&A
05
R H I M A G N E S I TA
How we
create
value
As the leading company in the
refractory industry, RHI Magnesita
has developed a resilient business
model to create value sustainably
for all our stakeholders across
the world.
Strengths and differentiators
Largest global
footprint
Benefiting from scale and
proximity to customers
through our unique global
footprint with more than 70
sales offices worldwide and
services customers in more
than 125 countries around
the world.
Full suite of products
and services
Delivering value through
more than refractory
materials to address our
customers' needs, such as
digital services, logistical
services and technical
services.
Skilled and
motivated people
The knowledge,
competency and customer
focus of c.13,650 employees
will be the key to driving
long-term success.
Strong relationships
with stakeholders
We operate with integrity,
honesty and reliability
on a daily basis, ensuring
respectful relationships
amongst employees
and with all customers,
suppliers, shareholders
and business partners.
Financial capital
Our focus on working capital
management and cash
generation remains strong;
we continue to be well
financed with high liquidity
and a robust balance sheet.
Backward
integration
With an integrated value
chain, RHI Magnesita
benefits from the security
of supply of high quality
raw materials.
06
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Continuous research & development
Digitalising
the refractory
world
Digital solutions
through 4.0 will allow
our customers to track
and optimise refractory
performance
Meeting customer
demands
Providing bespoke
solutions and services to
our customers through
applied R&D
Increase
competitiveness
Prepare the production network
for the trade environment of the
next decade - Reduce cost and
increase efficiency
Value
creation
Increasing
market share in
growth markets
A "local for local" strategy for
profitable growth in China and
India, and further establish our
market position
High-quality raw
materials and
products
We focus on driving
value at customer sites
Maintaining
market share in
core markets
Maintaining market share
through our solutions
business model,
delivering client benefits
and client cost savings
07
R H I M A G N E S I TA
Chairman’s
statement
2019 has, in many aspects, been
a year of considerable progress for
RHI Magnesita, it has had (and continues)
to navigate in a most challenging global
market environment. It’s a credit to
the management that they have
continued to successfully execute
the long-term strategy.
Herbert Cordt
Chairman of the
Board of Directors
08
My report to you in 2018 covered your Company’s
first full year since we gained a listing in the
Premium Segment of the London Stock Market
in late 2017. In that report I outlined our strategic
priorities, how we were committing to
sustainability in the context of climate change,
our commitment to cultural diversity and the
wider governance agenda as well as our
obligations to you, our shareholders. Whilst I have
heard it said that business is a journey without
end, it is only appropriate that my annual report
candidly reviews how we have performed in the
past 12 months in these critically important areas.
2019 in summary
Let me start my report to you by reviewing the
integration progress of RHI and Magnesita, two
leading refractory companies with headquarters
in different continents and which were brought
together only in November 2017. In 2019, we
completed the planned and successful final
phase of this integration. Critically, this has
resulted in one integrated management team
and delivered €90 million of cost savings.
As you read our 2019 Annual Report, you will
note that whilst 2019 has, in many aspects, been
a year of considerable progress for RHI Magnesita,
it has had (and continues) to navigate in a most
challenging global market environment. It’s a
credit to the management that they have
continued to successfully execute the long-term
strategy. We have retained our position as the
technology leaders in the refractory industry and
reinforced our market position. With these global
headwinds our financial performance fell short
of our original plans, however, we delivered a
resilient performance of profitability and free cash
flow generation. Also against this background,
we remain confident that our strategy and
growth plans will deliver superior returns
to our shareholders and all stakeholders.
Strategic priorities
Our strategy remains based on three major pillars:
• Competitiveness: we will continue with our
programme that optimises our supply chain
from the mine to the market, improving service
levels and cost-effectiveness.
• Business model: we will enhance our business
by driving the development and
implementation of innovative product and
customer solutions with an increased focus on
energy and emission reduction.
• Markets: we aim to maintain our leadership
position in core product and geographic
markets that are growing.
You can read more about our strategies and
priorities on page 13.
STRATEGIC REPORT
R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Sustainability
RHI Magnesita is the leading global supplier
of refractory products, services and solutions
essential in the production of Steel, Cement,
Glass and Copper and other critical products
that are the basic infrastructure materials
indispensable for the needs of 21st century life.
Not only are we committed to a material reduction
in our own emissions, but perhaps of greater
importance is our ability to assist our customers,
largely significant energy users themselves, that
by adopting our innovative products and systems
they can also reduce their own energy
consumption and emissions.
The climate crisis is the defining challenge of
our times and it continues to be a focus of your
Company. The emission reduction plans we
have in place will drive down our CO2 emissions
Scope 1, 2 and 3 (raw materials) by 15% by 2025,
compared to 2018. Additionally, I was pleased to
note that our first submission to the CDP, (formerly
the Carbon Disclosure Project), where the
Company received a "C" rating.
The establishment of our own Corporate
Sustainability Committee ("CSC") will provide
a major input to the Board’s deliberations on this
critical matter and is a further demonstration of
our commitment. A full report on the work of
the CSC can be found on page 92.
Corporate Governance and Diversity
Whilst my report to you covers 2019, I am of
course conscious of the review published by the
Financial Reporting Council in January 2020
and its call for improved governance from all plcs.
As still a "young" member of the London Stock
Exchange and despite having less than 1% of our
employees based in the uK, we are committed to
these principles which we believe will indeed
promote sustainability and trust in business.
These matters are reported in depth, within our
Corporate Governance report on pages 74 to 120.
But let me now touch on some of the key matters.
During the year I was delighted to welcome
two new Directors to the Board, namely Janet
Ashdown and Fiona Paulus. Both brought new
skills and experience (see page 87) to the Board
table and now play a significant part in the Board’s
affairs. Both are contributing to our governance
programme and as members of our committees
and Janet also chairs our newly established
Corporate Sustainability Committee.
As a result of Janet and Fiona’s appointments,
your Board now has 23% female Directors
(excluding the employee nominated Directors),
and we have plans to increase this to over a third
during 2021. It is also worth mentioning that
in the Executive Management Team, 22% are
also female. As a truly international business we
have plants in 15 counties. Another measure of
our diversity is reflected in the 37 different
nationalities we have in senior management
roles. In 2019, we also launched our global
Diversity & Inclusion Strategy, focusing on
gender, international representation and
generation management. You can read further
information on our diversity goals on page 71.
The Directors are also constantly striving to
improve their practical knowledge of our business
and its operations. This in turn adds to their ability
to question and challenge the executive both in
strategic and performance terms. Part of this
knowledge building is our programme of site
visits. In 2019, the Board travelled to Brumado and
Contagem in Brazil. The visit also gave Directors
the opportunity to meet local management, plant
employees, tour a mine and the R&D centre. In
addition, the Directors visited a major customer,
one of Brazil’s largest steel mills. At first-hand,
the Directors experienced the culture of these
operations and the local opportunities
and challenges.
The Board
There were several Board changes in 2019. Firstly,
we said goodbye to Fersen Lambranho, who
stepped down from the Board on 21 January 2019.
I’d like to use this opportunity to thank Fersen for
his significant contribution.
As mentioned above, following the 2019 Annual
General Meeting ("AGM") Fiona Paulus and
Janet Ashdown were appointed as new
Non-Executive Directors.
I would also like to record the appointment of
Ian Botha, who joined the Company in April 2019
as Chief Financial Officer and who was also
appointed as an Executive Director at the 2019
AGM. Ian has moved with his family from South
Africa to live in Vienna, and has already
contributed much to the development of
the Company.
Shareholder returns
As I have said, the Company has not been
immune from the difficult and challenging global
markets and trading conditions, particularly in the
second half of 2019, and now with the uncertainty
of COVID-19. However our margins and cash
flows have remained resilient and we remain
confident that our strategy and focus will, in the
long term, deliver attractive shareholder returns.
Despite the Group's strong financial position,
the uncertainty relating to COVID-19 means that
alongside the efficiency measures we are taking
to preserve cash, the Board has decided not to
recommend the payment of a final dividend for
2019. This decision will be reviewed later in the
year once the outlook becomes clearer. The
Board believes that this is an appropriate and
prudent measure to take as it seeks to preserve
RHI Magnesita's strong liquidity, cashflow and
financial position through these uncertain times.
Share buybacks remain as an integral part of
the Company’s capital allocation policy and our
approach to total shareholder returns. The Board
regularly considers whether it is appropriate to
commence the purchase of RHI Magnesita’s
own shares and in doing so takes into account,
amongst other factors, investment opportunities,
the prevailing value of the company, its share
price, dividend, liquidity and cash resources, etc.
This policy will continue going forward.
Conclusion
Your Company is a truly international company,
with operations in 39 countries and in all five
continents. In reflecting on the characteristics that
I believe are essential in building a world class and
high performing company, I would suggest the
following must be an integral part of its makeup.
• Committed, talented and diverse employees
with high integrity.
• Market leading and innovative products
designed to improve the efficiency of our
customers whilst contributing to improving
the environment of the world in which we live.
• Have a global presence where we can be a
"local" supplier to our global customers.
• Possess a culture that is committed to
continual success over the long term for
our shareholders and all our stakeholders.
I believe that RHI Magnesita is such a company
armed with a strategy that will deliver.
I could hardly conclude my report to you without
mentioning COVID-19, where near-term concern
remains high and financial impact uncertain.
This too will pass.
Thank you for your support.
Herbert Cordt
Chairman of the Board of Directors
09
R H I M A G N E S I TA
CEO’s Review
Q&A
What have been the main highlights
What impact did this have on the Group’s
in 2019?
financial performance?
In 2019, we completed the final phases of
the integration between RHI and Magnesita,
bringing two former competitors together
to establish the global market leader in the
refractory industry. We have continued to
invest in research and development to
create products, systems and solutions that
will revolutionise production processes
at 1200° C and beyond. We have also
maintained our focus of developing
integrated solutions and services which
will provide a tremendous benefit for the
efficiency of our customers’ processes.
Our ambition is clear: We want to leverage
our position as the leading refractory player
globally, and we believe that innovation and
technology will be the enabler for us to
achieve this in a sustainable way.
A significant focus for us in 2019 was
sustainability. We made good progress
towards our targets set out in 2018, but
there is still a lot more to do. During 2019,
we accelerated our climate action plan.
We increased our CO2 emissions target
from a 10% reduction to a 15% reduction
by 2025, extending it to include emissions
from the processing of raw materials in our
supply chain. Increasing our reductions
beyond this point will require new
technology and developing these
solutions remain a focus for the Company.
RHI Magnesita continues to support the
uN Global Compact and its 10 principles
in support of Human Rights, Labour,
Environment and Anti-Corruption.
What was the market environment like
in 2019?
Despite challenging market conditions,
RHI Magnesita delivered a resilient
performance. During the year, the global
economy grew at its slowest pace since
the 2007/2008 global financial crisis,
with rising trade barriers and increasing
geopolitical tensions the main contributing
factors. This had an inevitable impact on
industrial and construction activity, and
we saw a decline in demand in many
of our end-markets.
Global steel production outside China
declined by nearly 1.7% in 2019. This decline
in demand was exacerbated by customers
reducing volumes through the year and
destocking their inventories of our products.
10
RHI Magnesita’s revenues were 6.5% lower
in 2019 at €2,922 million. This reduction is
primarily attributable to lower refractory
volumes from the Steel Division, as a result
of inventory destocking at customers’ sites
amid a weak steel production market
environment. Gross profit was €717 million,
down from €756 million on a constant
currency basis in 2018 mostly due to lower
raw material prices, weaker end-markets,
exiting the Iranian market and lower fixed
cost absorption. Gross margin, however,
increased by 30bps to 24.5%, supported
by the implementation of the Price
Management Programme introduced in
April 2019, which further contributed to
EBITA, and a €15 million benefit from the
turnaround of the previously identified
operational issues in 3 of the 4 plants.
While lower raw material prices in the
year reduced the profit contribution from
backward integration, this aspect of our
business model continued to be financially
beneficial as well as strategically important.
Benefiting from the synergies in 2019, and
additional efficiency improvements, the
Group continued to grow its refractory
margin in the year, rising 60bps to 9.0%.
This contributed to a broadly stable overall
EBITA margin, down 30bps at constant
currency to 14.0%. The Group continued
its successful integration of the merger
throughout 2019, delivering a further €20
million of synergies. This takes the total to
€90 million since the merger in 2017, 29%
ahead of our original target of €70 million.
The additional synergies anticipated in
2020 were to be primarily derived from
procurement savings, however given the
broader macroeconomic backdrop, lower
activity levels and raw materials prices,
we no longer expect to see any further
synergies in 2020.
Operating free cash flow of €359 million
in 2019 (2018: €438 million) was a resilient
performance, lower than 2018 primarily
due to the weaker economic backdrop and
working capital cash consumption. The
Group also focused on further extending
its debt maturity profile and increasing its
liquidity. Our net debt to EBITDA ratio
reduced slightly to 1.2x (2018: 1.3x
including the impact of IFRS 16 leases).
The Group has significant liquidity of
€1.1 billion, comprising cash and undrawn
committed facilities.
On a divisional basis, our Steel business,
which represents approximately 70% of
the Group’s revenue, saw revenue decline
by 10.4% from the prior year at constant
currency as a result of the lower customer
demand. This was partly offset by our
Industrial Division, which has continued
to perform well, with revenue up by 3.6%
on a constant currency basis, driven by a
particularly strong year in the Cement
segment.
What is the Company’s strategy?
As outlined in the Capital Markets Day
in November 2019, our strategy is built
around three key pillars: increasing
competitiveness through cost reduction,
enhancing our business model and driving
market leadership and growth in new
markets. Delivering our strategy relies
on our greatest asset: our people, who are
the true value creators of the company.
Our culture roll-out programme with over
60 culture champions is focused on
bringing them even closer together.
The Company has reviewed its capacity
and global footprint to ensure production
matches regional demand and efficiency
is maximised. As a result, management has
taken the decision to consolidate some of
the Group’s plants via its Production
Optimisation Plan, which will deliver run
rate cost savings of €40 million by 2022.
In sales, we are focused on expanding
our solutions business, complemented
by digital solutions, as we move towards
a value-based pricing model. These
initiatives, combined with the Price
Management Programme, are expected to
generate an additional €40-€60 million
of EBITA by 2022.
What are your other key strategic
initiatives?
The Company will continue to prioritise it’s
supply chain projects in 2020 and beyond,
as part of our dedicated supply chain
transformation programme, to achieve
better customer service with lower
capital demand.
STRATEGIC REPORT
R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
We are an industry-leading
business that is focused on
meeting the needs of our
customers around the world.
Stefan Borgas
Chief Executive Officer,
RHI Magnesita
Strategy section
page 13
11
R H I M A G N E S I TA
materials has reduced overall Group profit
contribution from our own raw material
plants. However, we continue to derive an
important margin contribution from our
backward integration, and enjoy the
security of high-quality supply.
We have also continued to grow our
margin from refractories in the year,
benefiting from the integration synergies
and further efficiencies.
Can you comment on the progress
in your Safety programme?
We believe a safe workplace is a
fundamental right of our employees, and it
is the Group's responsibility to keep our
staff, contractors and customers safe within
our operations. While our lost time injury
frequency (LTIF) rate reduced further this
year, to 0.28, (down from 0.43 in 2018), we
can never be complacent. Nothing less
than zero accidents is acceptable. We are
also focused on protecting our employees
in all possible ways we can from the spread
of COVID-19.
We are deeply saddened by the loss of life
during 2019 of one contractor and one
employee on our production sites, and
send our sincere condolences to their
families, friends and colleagues. One
immediate consequence is a greater focus
on contractor safety, and contractors who
work at our sites will be included in our LTIF
data going forwards. To implement this, we
are defining safety requirements by type of
service provided and assigning
accountability to site managers. We will
also place the same focus on the total
recordable injury frequency (TRIF) as we
do on LTIF.
How is innovation playing a role at
RHI Magnesita?
Innovative technologies including
digitalisation continue to be at the heart of
our business and enable us to better meet
customer demands. Throughout 2019,
particular areas of focus have been:
recycling of refractory products, CO2 and
energy reduction, coating technologies,
new production techniques and
automation and digitalisation. Investment
in R&D totalled €64 million in 2019,
representing 2.2% of Group revenue.
It is through our innovation expertise that
we will continue to strengthen the
products and solutions of our business.
We create and customise refractory
products that suit the unique needs of our
customers, and we offer over 100 value
adding services.
Through these data and digitalisation
products customers will gain greater
insight into the wear rates of our refractory
products so that they can operate more
efficiently, cut costs and energy wastage.
Further details of our new developments
can be found in the innovation section
on pages 30 to 33.
What is the outlook for 2020?
In 2019, RHI Magnesita has further
demonstrated strong progress in executing
our strategy, resolving previously identified
operational issues and implementing the
initiatives that will underpin our long-term
growth. We have delivered a resilient
financial performance in the year, despite
difficult market conditions and lower raw
material prices, particularly in our Steel
Division in the second half.
Looking forwards, we will benefit from
the steps we have taken to strengthen the
business, particularly from the Production
Optimisation Plan. However, the difficult
market environment in the second half of
2019 has continued in the first quarter of
2020. Whilst COVID-19 has not had a
material financial impact on the business
to date, we have seen a recent slowdown in
customer activity, particularly in our Steel
Division, and the future demand
environment is very uncertain. We have
undertaken extensive scenario testing,
factoring in a range of potential outcomes,
which indicate that the Company has
sufficient liquidity to withstand an
extended period of uncertainty.
Longer term we see clear opportunities
to further progress our refractory margin,
whilst also continuing to benefit financially
and strategically from our backward
integration. The business benefits from a
strong financial position, with low leverage
and significant liquidity, and is well
positioned to take advantage of growth
opportunities when markets improve.
CEO’s Review – Q&A
continued
What is your strategy for new
growth markets?
New markets remain a key strategic focus
for us, as we look to expand in higher
growth countries where we currently have
modest market shares such as India, China
and Turkey. Our sales teams in China have
created a "local for local" approach and
built new relationships in this region,
creating strong foundations for the
business. The team has now started to
develop and deliver high-tech solutions
designed for Chinese customers
specifically. In the first half of 2019, our
China team won a major solutions contract
worth €20 million with Guangxi
ShengLong, which represents the Group’s
first such contract in the Chinese
high-quality steel market. A second
major solutions contract was secured in
January 2020.
As part of the strategic expansion in India
to increase capacity and improve customer
services, we bought Intermetal Engineers
Pvt., a metallurgical equipment
manufacturer in May 2019 for €1.3 million,
and separately acquired a refractory brick
plant in September 2019 from Manishri
Refractories & Ceramics Pvt. Ltd. for
€5.5 million.
In addition to the two transactions in
India outlined above, the Group acquired
Missouri Refractories Co. Inc. (Morco) in
January 2020 for $10 million, the first
production asset for RHI Magnesita in the
Mid-south of the united States.
As previously disclosed, the potential
acquisition of Kumas Manyezit Sanayi AS. is
currently under review by the competition
authorities in Turkey and we hope to have
an update on the process later in Q2.
More broadly the Group continues
to monitor a select number of other
acquisition opportunities as part of its
long-term growth plans.
What has been the impact of raw
material price movements on margins
during the year?
During 2019, we have encountered a
significant decline in specific raw material
prices against the peak seen in 2018, at the
height of the raw material supply
constraints. The lower price of these raw
12
STRATEGIC REPORT
R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Strategic
framework
The merger of RHI and Magnesita created
the global refractories leader. The Group
has a resilient business model, clear
strategy and a strong balance sheet.
The strategy is built on the three pillars
of competitiveness, business model and
markets, all supported by our people.
Strategic priorities
Competitiveness
Low-cost producer of
technically advanced
refractory materials with
safe production network.
Deliver cost savings through
restructuring.
Improve operational
cash flow.
Business Model
The leading service and
solution provider in the
refractory industry with an
extensive portfolio based
on innovative technologies
and digitalisation.
Maximise value from sales
strategies.
Increase number of solutions
contracts.
Markets
Worldwide presence with
strong local organisations
and solid market positions
in all major markets.
Measured consolidation
opportunities.
People
Hire, retain and motivate
talent and nurture a
meritocratic, performance-
driven, customer-focused
and friendly culture.
13
R H I M A G N E S I TA
Strategic progress in action
Competitiveness
Execute
cost
reduction
The Company has
reviewed its capacity and
global footprint to ensure
production matches
regional demand and
efficiency is maximised.
14
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
RHI Magnesita has taken the
decision to consolidate plants in
our Production Optimisation Plan
and we have identified run rate
cost savings of €40 million
by 2022.
Stefan Borgas,
Chief Executive Officer
15
R H I M A G N E S I TA
Strategic
progress in action
Competitiveness
Strategic priority
Low-cost producer of technically advanced refractory
materials with safe production network.
Outlook for 2020
Execution of cost reductions will
be key for 2020. Specifically, the
Company will achieve this through
plant optimisation in Europe and the
Americas, focusing on local for local
production. This will balance regional
capacity with regional demand.
Secondly, it will focus on optimising
its raw material strategy through
production, purchasing and recycling.
Automation and digitalisation of
production and of the supply chain
will further lower costs and bring
additional opportunities.
Read more about the Production
Optimisation Plan in the Capital Markets
Day presentation, available on
rhimagnesita.com
Progress in 2019
In 2019, the Company further
increased its dolomite raw material
supply, to support the backward
integrated model and provide high
quality, low-cost raw material.
Firstly, the mine in Chizhou (China)
was re-opened, including the
construction of a state-of-the-art
rotary kiln. Secondly, the company
approved €40 million for the
construction of a new dolomite
Resource Centre in Europe. This
will allow Dolomite for the entire
European market to be mined and
processed at the Hochfilzen site in
Tyrol, and transported sustainably by
rail, to sister plants in France.
Additionally, the Supply Chain
Management transformation was a key
focus in 2019, and the Group focused
on four specific workstreams; Tactical
Network Optimisation, Supply Chain
Performance Management, Integrated
Business Management Planning and
Data Quality.
Safety - a priority
The Company prioritises the safety of its
employees at all times.
It is committed to reducing the impact of its
operations, and have an active role in shaping
the industry’s standards.
Read more on
pages 69 and 70
Operations globally
39 countries
Backward integration basic raw materials
70%
16
STRATEGIC REPORT Production Optimisation Programme
("POP")
In Europe, the Company will address overcapacity
issues and improve efficiency by ramping down
two plants in 2020 with a further one scheduled
for closure in 2021.
In the Americas, the Company will optimise
its production network through specialisation
of regional hubs in the uSA, Mexico and Brazil,
as well as a consolidation of our production
capabilities of the Burlington plant in Canada,
into York in Pennsylvania.
Raw Material Strategy
The Company will continue to build on its
backward integration model, which is key to
providing low-cost, high quality raw materials.
Given recent raw material price volatility,
the Group has been re-evaluating regional
supply options.
As a result, the Fused Magnesia ("FM") production
in Norway and Brazil have been mothballed in
2019, whilst the Company entered into a
long-term purchasing agreement with a Chinese
supplier to more appropriately meet demand,
and maintain margin.
Sustainability
Innovative thinking is required in the refractory
industry in order for it to become more
sustainable. RHI Magnesita will continue
to lead the way on sustainability.
It has started key initiatives and research
programmes to significantly reduce its carbon
footprint as well as partnering with customers
to reduce their emissions. Driven by reduced
primary raw material demand, energy savings and
efficiency improvements and deliver cost savings
as well as improve sustainability.
Read more on
pages 62 to 72
R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Production Optimisation Plan
2022 run-rate savings
€40m
17
R H I M A G N E S I TA
Strategic progress in action continued
Business
model
Expanding
the business
model
In the Sales department,
we focus on expanding our
solutions business, including
digitalisation and recycling,
as we move towards a value-
based pricing model, and
further growth in India
and China.
18
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
We want to make recycling
an integral part of the solution
to our customers. Doing so
allows complete optimisation
of the supply chain, customer
operations and the reverse
supply chain.
Paul Glaubitz,
General Manager Recycling
19
R H I M A G N E S I TA
Strategic progress in action
continued
Business
model
Strategic priority
Leading service & solution provider in the refractory industry with an extensive
portfolio based on innovative technologies and digitalisation.
Progress in 2019
The Company launched several sales
strategies in 2019, which will focus
on expanding the solutions business
as we move towards a value-based
pricing model. The solutions offering
comprises technical services,
logistical services, digital services
and solution services to support
the product portfolio.
The Company invested in its
recycling business throughout 2019,
and made good progress towards
its target of achieving 10% recycling
target by 2025.
Read more about solutions
on page 34
Outlook for 2020
In 2020 the Company will continue
to establish itself as the leading
performance partner in the refractory
industry. The Company will continue
to expand the business model to
increase value in the core markets
and maintain market share. From
product delivery, to installation
services, to recycling and digital
services, the Company’s objective
is to deliver customer value through
reducing costs and driving
efficiencies, in a sustainable way.
The Company will continue to build
an autonomous and profitable
recycling business in 2020, ahead
of its 10% recycling target by 2025.
Read more about recycling on
pages 62 and 66
Automated Process Optimisation
APO – Automated Process Optimisation
uses AI methods to better understand the
correlation between production parameters
& refractory performance.
Read more on
page 31
Number of solutions contracts
worldwide
128
Number of patents
1,598
20
STRATEGIC REPORT Solutions
The Company will continue the expansion of
its business model to increase value through its
services and solutions portfolio in core markets
and in selected growth markets.
Read more about the solutions model on
pages 34 and 35
Digital services
The Company has three key digital products
in the 2020 pipeline:
APO – Automated Process Optimisation
uses AI methods to better understand the
correlation between production parameters
& refractory performance.
QCK – Quick Check uses images to provide
high-accuracy short-time 3D scan measurement.
BST – Broadband Spectral Thermometer uses
greybody radiation curve to accurately & online
determine the temperature of any body in sight.
Recycling
Recycling is an essential part of the Company
CO2 reduction strategy, and will be the largest
contributor in reducing the Company's CO2
footprint. The Company is targeting a 10%
recycling rate by 2025, which will mitigate
approximately 300,000 tonnes of
CO2 emissions.
In partnership with Outokumpu, an RHI Magnesita
customer, and the R&D team, the Company
developed a way to use spent refractories that are
unfit for the recycling process as slag conditioner.
This further improves the sustainability of the
customer’s processes, and drives cost savings
for both RHI Magnesita and its customer.
Read more on
page 41
R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Amount invested into
technology
€64m
21
R H I M A G N E S I TA
Strategic progress in action continued
Markets
Growth
in new
markets
New markets remain
a key strategic focus for
the Company, to expand
in higher growth countries
where we currently have
modest market shares such
as India, China and Turkey.
22
STRATEGIC REPORT
R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
In the first half of 2019,
our China team won a major
solutions contract worth
€20 million with Guangxi
ShengLong, which represents
the Group’s first such contract
in the Chinese high-quality
steel market. A second major
solutions contract was secured
in January 2020.
23
R H I M A G N E S I TA
Strategic progress in action
Strategic progress in action
continued
continued
Markets
Strategic priority
Worldwide presence with strong local organisations
and solid market positions in all major markets.
Outlook for 2020
In 2020. the Company will continue
to focus on defending its leadership
position in core markets, and further
establishing market share in growth
markets. The strategy for organic
growth in India, China and CIS will
be supported by selective M&A.
Across these diverse markets, the
Company will continue to derive
benefit from its global footprint, as
well as the proximity between supply
and production, and the location of
the customer base.
The Production Optimisation Plan
will be implemented in 2020, where
the production footprint will be
consolidated to ensure production
matches regional demand.
Progress in 2019
In order for the Company to continue
to establish itself as the global leader
in refractories, it developed a
differentiated core strategy for each
major region to maximise value
creation and market share growth.
As an example, the Sales team in
China have created a "local for local"
culture and built relationships with
a new mindset in this region, creating
strong foundations for the business.
The teams have also developed a
localised product portfolio, as well
as improved local technical support.
The Company completed two small
M&A transactions in India. In January
2020, the Company also announced
the acquisition of Missouri Refractories
Co Inc, the first production asset for
RHI Magnesita in the Mid-south of the
united States, a region that is rapidly
growing in importance. M&A is also
an important part of the strategic
expansion to increase targeted
capacity and improve customer
services.
India expansion
In 2019 the Company acquired two local
Indian companies to expand our local footprint
in addition to heavily investing in our existing
plants and local organisation.
Read more on
page 45
70+
Sales offices worldwide
15%
Global market share (30% ex-China)
24
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
First solutions contract
in China
€20m
Core markets
Focus on preserving market share and growing
value through our extensive services and product
portfolio in Europe and the Americas, including
digitalisation. In 2019, the Company announced
the Production Optimisation Plan, which will
leverage the "local for local" production footprint.
Growth markets
In China, the Company will focus on further
developing the sales force, strengthening the
localised product portfolio, and improve local
technical support.
In India, the Company will focus on additional
MGu production, sales expansion in the Industrial
Division, and increasing the production of
non-basic products for Cement/Lime. This is
supported by local Research and Development
to further localise the product portfolio and
decrease time-to-market.
M&A
To accelerate growth in-line with the Company
strategy, the Company takes a pragmatic
approach to growing the business in its growth
markets through Mergers and Acquisitions.
This includes actively looking for opportunities to
increase backward integration, complement the
geographic refractory production footprint, as
well as strengthening technological leadership.
25
S T R AT E G I C R E P O R T
R H I M A G N E S I TA
Strategic progress in action continued
People
Our
greatest asset,
our people
In 2019, RHI Magnesita
developed a new method
to identify and rotate top
talent in the company,
within the People Cycle.
26
R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
The process for succession
planning is very well structured and
RHI Magnesita is really increasing
efforts to promote women in
leadership roles.
Sabrina Salmen, Head of
Integrated Business Planning
27
R H I M A G N E S I TA
Strategic progress in action
continued
People
Strategic priority
Hire, retain and motivate talent and nurture a meritocratic, performance-driven,
customer focused and friendly culture.
Progress in 2019
In 2019 further developed,
disseminated and promoted the
company culture, with dedicated
effort from over 60 local culture
champions.
A diversity framework was
established, including the Diversity
Steering Committee to meet the
Company diversity targets by 2025.
The roll out of a new leadership
programme (FitToLead), a new bonus
scheme, new mobility framework,
new salary benchmarks and flexible
work schemes were finalised.
Lastly, several initiatives have been
established to enhance career
development, including the People
Cycle, and individual development
plans which include rotation
programmes.
Outlook for 2020
In 2020 the Company will focus
on driving a better company culture
for the successful delivery of the
strategy, including prioritising
diversity towards meeting the internal
target of 33% females in leadership
positions by 2025.
The Company will continue to
develop its workforce with new
skills in the field of services and
digitalisation, to better equip the
company with its expanding business
model. It will also re-position
its employee brand in 2020,
in a continuation of the progress
made in 2019, which will support
the employee value proposition,
as well as hiring and retaining talent.
Read more about our diversity targets on
page 71
Workforce profile
At 31 December 2019, RHI Magnesita had a total
workforce of 13,650 employees, The main centres
of employment were South America, with
approximately 5,400 employees, Western Europe
4,200, Asia Pacific 2,500, North America 1,100,
Near and Middle East 240, Africa 100 and Eastern
Europe 80. The people of RHI Magnesita are from
many countries, communities and cultures.
Number of employees
13,650+
Employees by tenure
>10 years
7-9 years
4-6 years
<3 years
36%
14%
19%
32%
28
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Diversity & Inclusion
Diversity and Inclusion (D&I) is critical to the future
success of the business. In today’s globalised
business environment, diverse teams are proven
to be more productive and better equipped to
succeed. Diversity has been listed as one of the
key issues for stakeholders and the business.
Diversity is now embedded in the Company's
culture and strategy. Our commitment is to meet
the Hampton-Alexander target of 33% female
representation of leadership roles by 2025.
Culture
Our Cultural Themes are an important compass
on how employees interact and make decisions
at RHI Magnesita; act customer focused and
innovatively,have open decision making in
a respectful environment, operate cross-
functionally, collaboratively and pragmatically
across the organisation, and be performance
driven and accountable.
The Company has achieved great results during
the first two years as one organisation, however
there is still progress to be made. To ensure
we continue to make progress, the Company
established a global team with over 60 culture
champions dedicated to embedding culture by
hosting workshops and townhalls.
Leadership
FitToLead is RHI Magnesita’s new leadership
framework, consisting of a network of leaders, and
defined by specific Leadership Capabilities. The
Leadership Capabilities were established based
on our strategy, culture, external benchmarking
and internal workshops. FitToLead offers different
tailored learning opportunities and empowers
150 leaders to be in the driver’s seat of their own
development. It focuses on the executive level,
but there is a lot more to come.
Read more on
page 71
Employees by region
South America
Western Europe
Asia Pacific
North America
Near and Middle East
Africa
Eastern Europe
40%
31%
18%
8%
2%
1%
1%
South America
Western Europe
Asia Pacific
North America
Near and Middle East
Africa
Eastern Europe
40%
31%
18%
8%
2%
1%
1%
Participants of global
development programmes
1,250
With FitToLead we make our leaders fit for the
future and enable them to bring our business
to excellence.
Simone Oremovic
Executive VP People and Culture,
and Communications
29
R H I M A G N E S I TA
Innovation
RHI Magnesita's aim is to be
the leading solution provider
in the refractory industry based
on innovative technologies and
digitalisation, achieved through its
raw material advantage, innovation
and solutions offerings.
New product revenue as a %1 of revenue
16%
R&D and Technical marketing spend
€64m
1 New product revenue includes new brands
created in the past five years,
30
Applied R&D
RHI Magnesita continues to develop customer-
specific solutions, ensuring leadership position in
our markets. The efficiency of the Applied R&D
activities is being increased, focusing on
delivering high return, fast payback projects, with
a short response time. This allows us to maintain
a high level of support to our customers, while
redirecting some substantial resources to
innovation topics.
4.0 sales initiatives
2019 marked an important year for RHI Magnesita
and its progress in innovation. Firstly, the
Company established a dedicated “4.0”
department. This emphasises the importance
of digitalisation and automation, as these factors
become ever more relevant in how the Company
does day-to-day business and in improving
efficiency, as well as adding value, for
its customers.
Ongoing advancements in the 4.0 department
aim to meet the needs of RHI Magnesita
customers, through leveraging data, connectivity,
artificial intelligence and predictive maintenance.
Through constant evolution of our product
offering, the Company’s objectives remains the
same: to implement new business and service
models that fulfil the demands of the
Company’s customers.
RHI Magnesita’s aim is to be the leading solution
provider in the refractory industry based on
innovative technologies and digitalisation,
achieved through its raw material advantage,
applied R&D capabilities, innovation and
solution offers.
This year, the Company has demonstrated
through its 4.0 sales initiatives that it is able to
offer much more than the traditional refractory
products. As the leader of the industry, the
Company aims to be at the forefront of developing
advanced refractory technologies, digital
products and integrated solutions to meet
evolving customer needs.
The Group expenditure on Technology in 2019
was €64 million, or 2.2% of revenue.
R&D capabilities and developments
The progress made in innovation during 2019
was thanks to the industry-leading R&D team,
made up of 480 technical experts across R&D,
technical marketing and product management,
of which 110 people hold either a Masters
qualification or PhDs. RHI Magnesita’s R&D hubs
are located in Leoben (Austria) and Contagem
(Brazil), and these are supported by three R&D
centres based in York (uSA), Dalian (China)
and Bhiwadi/Visakhapatnam (India).
The total R&D spend in 2019 was €35 million,
before subsidies and including opex and capex.
This is in line with the Company ambitions, as
outlined in the 2018 Annual Report, to commit
1.2% of Group Revenues to R&D and innovative
technologies on an annual basis. Furthermore,
the Group achieved 16% of new product revenue
as a % of total revenue in 2019.
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Quick Check – QCK
QCK is an innovative measurement technology
that, by applying stereoscopic methods to images
recorded by latest technology cameras, produces
high-accuracy 3D scans of metallurgical vessels.
It generates refractory lining wear measurements
that are both significantly faster (up to 10 times)
and have higher resolution (up to five times) than
those produced by state-of-the-art laser
scanning devices. Improved quality of monitoring
increases the availability of vessels by reducing
the risk of unexpected downtime or break-outs,
thus optimising plant logistics and efficiency.
In addition, QCK is easy to install and does not
require high investments for customers. The
current focus of QCK is the application to steel
ladles, but other applications are also being
actively investigated.
Broadband Scanning Thermometer – BST
BST is an innovative method for continuous
temperature measurement. It uses the grey body
radiation curve (visible light emission spectrum)
to accurately determine online the temperature
of any object in sight. Application of BST for
measuring liquid metal melts (in most cases,
this is currently done offline by using disposable
probes) can have several immediate benefits
for the customer:
• Online temperature measurement of
the melt will allow for better controlling of
the temperature and, in turn, optimise the
customer process. This helps to reduce
overall energy consumption as overheating
the melt is avoided, and less external heating
is needed. In turn, this reduces consumption
of graphite electrodes used for heating and,
consequently, CO2 emissions.
• usage of disposable temperature probes can
be completely avoided or at least significantly
reduced, leading to immediate cost savings
for the customer.
• Productivity is increased through higher
equipment availability (no time is needed
for performing discrete temperature
measurements).
• Reduced melt temperature levels have
beneficial effect on refractory consumption.
Among the many projects currently being
developed, three projects have been selected to
demonstrate RHI Magnesita’s 4.0 sales initiatives
for the next couple of years. Dedicated project
teams (consisting of project managers, technical
experts, programmers and data scientists)
have been established, and starting in 2020,
will help to bring these three projects successfully
to the market.
Automated Process Optimisation – APO
APO is a unique, patented solution that allows
for a greater understanding of the correlation
between production parameters, refractory
application and maintenance by analysing the
associated data in a cloud-based environment
using artificial intelligence methods.
APO enables the plant manager to monitor
process conditions and their effects, check
the status of the refractory lining, and manage
maintenance cycles more effectively. APO uses
artificial intelligence to create a digital twin to
make the refractory lifetime predictable. The
digitalised view created by APO aims to increase
safety, optimise production and achieve fewer
production losses.
APO works by integrating data from laser
measurement, the steel making process and
sends this data to the cloud. A refractory wear
model is calculated and provided in real time
to the user via the APO app. This provides wear
lining prognosis and scenario analysis, and
makes planning, controlling and synchronising
maintenance cycles easier.
APO has already been successfully applied to
analyse and optimise Basic Oxygen Furnace,
Electric Arc Furnace, Ladle and RH Degasser
refractory applications, at several customers' sites.
Currently, usage of APO for applications outside
of the steel industry is also being actively pursued.
31
R H I M A G N E S I TA
Innovation
continued
These examples of our R&D developments
demonstrate our continual efforts to innovate
and progress, in order to meet environmental
and social pressures and to increase efficiency,
both in the internal production processes of RHI
Magnesita, and to meet the changing needs
of customers.
Sustainability developments
In 2019, key themes were established within the
innovation department to address sustainability
issues and create increased efficiency for our
customers. It is more critical than ever to support
customers through low carbon solutions and
more efficient processes.
CO2 reduction
The Company is committed to reaching a 15%
reduction in CO2 by 2025. CO2 is an inevitable
by-product in the chemistry of the refractory
brick production process. It is generated in the
production of dead burned magnesia and dead
burned doloma, as well as the fuels used in the
internal processes. It is therefore our priority, and
our responsibility, to reduce these emissions
where possible, and improve the wider
carbon footprint.
RHI Magnesita also continues to explore new
technologies in CO2 capture, CO2 usage and
value chain, and clean production processes.
Recycling
The recycling of used refractory products
continues to be a key strategic initiative for the
Group based on the many benefits it carries,
through significant reductions in energy
consumption as well as increased security of
supply. RHI Magnesita is targeting 10% recycled
materials by 2025, which equates to c. 300,000
tonnes of CO2 emissions saved and c. 150,000
tonnes of material being saved from going
to landfill.
During 2019, the Company focused on the business
development stage of the recycling strategy, and
focused on finalising contracts, trading, outsourcing
and construction. The Company also focused on
increasing the proportion of secondary raw material
in refractory product through new technology
and processes.
Looking ahead, throughout 2020 and 2021, the
Company will establish its own distinct recycling
operations, including new facilities, defined
recycling containing products, and additional
R&D projects. Some longer-term technologies
are being developed to ensure higher levels of
recycling usage, such as automatic sorting,
cleaning and stabilisation processes, following the
technology roadmap that has been established.
Coating technologies
The Company aims to constantly improve
the performance of our refractory solutions.
One technology which will help achieve this is
enhanced coating whereby refractory properties
are modified through depositing layers on either
grains or products. This surface property
functionalisation leads to the development of new
refractory formulations with improved properties
such as: corrosion resistance, flexibility and
thermal conductivity.
Pioneering production techniques
RHI Magnesita, through using pioneering
production techniques, is targeting a 5%
reduction of energy per tonne of product
in plant by 2025.
The Company will develop new processes
for refractory and raw material production with
significant cost reduction, as well as energy
savings. This should be achieved through
processes currently in development such as
microwave drying used for much faster drying
times, and the production of refractories that
no longer require firing or tempering.
The Company has researched new production
techniques for refractory products using
nanomaterials throughout 2019, specifically to
improve both mechanical and thermal properties
of the finished product. This research is
additionally being rolled out to non-refractory
type of applications.
Intellectual property and patents
Given the industry-leading R&D capabilities
of the Group, we place great importance on
protecting its intellectual property.
During 2019, 11 priority patent applications were
filed. The Group continuously examines the
patentability of product developments, new raw
materials, systems and technologies in order to
provide protection for the Group’s assets.
By the end of 2019, the Group’s patent portfolio
accounted for 139 patent families, comprising
of 1598 patents and patent applications.
A key achievement in the Cement/Lime segment
during 2019 was the adoption of Spinosphere
technology, in a series of refractory bricks. The
patent application was filed last year in order
to protect this new development, unique to
RHI Magnesita.
In 2019, a number of third parties formally
challenged the validity of recently granted
patents, and the Group has been largely
successful in actively defending the portfolio.
Our partnerships
The Group continues to collaborate with external
partners such as accelerators, start-ups, open
innovation platforms, companies and institutions.
In 2019, RHI Magnesita had active programmes
with the following leading institutions:
• university of Leoben (Austria)
• Johannes Kepler university (Austria)
• university of Graz (Austria)
• Vienna university of Technology (Austria)
• Federal university of São Carlos (Brazil)
• Slovak Academy of Sciences (Slovakia)
• Seoul National university (South Korea)
• Fraunhofer-Gesellschaft (Germany)
32
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
The Committee addressed the following key
themes during 2019:
Product optimisation and production
method development
RHI Magnesita is involved in a number of
partnerships, as part of the Athor programme
funded by the Eu commission:
Academics:
• university of Limoges (France)
• AGH university of Science &
Technology (Poland)
• university of Aachen (Germany)
• Montanuniversität Leoben (Austria)
• university of Orléans (France)
• university of Minho (Portugal)
• university of Coimbra (Portugal)
Industrial partners:
• Altéo Alumina – Gardanne (France)
•
identifying new technologies, and advising
on existing technologies;
• supporting and challenging the R&D
team; and
• expanding the Company’s technology
network into external partnerships.
The main topics evaluated by the Committee
throughout 2019:
• automation and digitalisation;
•
•
functionalisation of refractory surfaces;
fast drying and low temperature sintering
technologies;
• CO2 emission reduction, capture and
•
Imerys Refractory Minerals – Villach (Austria)
utilisation; and
• Pyrotek Scandinavia AB – Ed (Sweden)
•
innovation fostering.
• Saint-Gobain – Cavaillon (France)
• Tata Steel – IJmuiden (Netherlands)
• Safran (France)
Additionally, RHI Magnesita also worked closely
with the following technology leaders in the
Steel industry:
• Voestalpine Stahl Donawitz
• Voestalpine Stahl Linz
• Bohler Edelstahl
• Primetals Technologies
• Montanwerke Brixlegg
• Fronius
• OMV at competence centres promoted by
the Austrian Research Promotion agency.
Technical Advisory Committee
The TAC was established in 2018, making 2019
the first full year in operation as a new committee.
The TAC meets bi-annually with senior
management present and includes Board
representation with the attendance of Andrew
Hosty, Non-Executive Director in a supervisory
capacity. The committee comprises senior
external professionals, R&D and Technical
Marketing leaders, and consultants as required.
The advisers approved the relevance of the
strategic R&D themes and provided guidance for
new contacts potential collaboration in the scope
of the priority projects.
Fundamental research – key 2019
focus areas
In the recent years modelling and simulation
has become an important discipline in the field
of refractory materials. State-of-the-art
methodologies are being applied to develop,
improve and optimise refractory products.
Constant investment in fundamental research
in that field offers new opportunities for future
developments. One key aspect in 2019 was to
link measurements and material properties with
the finite element method in order to improve
the predictability of potential failure events of
our products in use and derive measures to
avoid it. This is key for a reliable digital product
development. Focusing on a customer-centric
approach more than 170 simulation projects were
carried out for internal and external customers.
A new full-scale water model facility for the
continuous casting process was developed and
put in operation this year. This highly automated
model will support the flow control growth
strategy, especially in Asia.
RHI Magnesita is continuously developing new
products and production routes to meet customer
demand through value adding and sustainable
technologies. The department achieves this
through a combination of material development,
design development in the simulation
department and production process
development. The department also examines
raw material alternatives on an ongoing basis,
in order to secure raw material availability and to
optimise the customer’s total cost of ownership,
one of the fundamental activities of R&D.
Innovative raw materials and production
processes are key for developing new products.
Pilot installations are available in our R&D hubs in
Leoben and Contagem which allows developing
new raw materials solutions. New sintered or
fused raw materials are tested in the Company's
facilities before being scaled up to production
sites. Among different raw material projects
executed in 2019, the development of a new
Dead Burned Doloma based of RHI Magnesita
proprietary raw stones was one of the main
highlights in supporting the Company in
establishing a further step in the direction
of being more backwardly integrated in the
production of basic refractories.
In 2019, RHI Magnesita continued its work in
developing new fused non-oxidic raw materials as
a substitute to classic oxidic raw materials, in order
to improve thermomechanical properties of its
products. The Company believes there is a
promising future for this new class of raw materials.
In 2019, the Company also prioritised developing
new recycling containing solutions to preserve
raw material resource, reduce C02 footprint and
energy consumption as well as lowering
customer refractory costs.
The development of coated refractory grains
via the so-called Spinosphere technology was
transferred from the Company's laboratories to
production sites and finally to some customers.
The Company produced magnesia spinel bricks
which exhibit enhanced mechanical properties
and are being used in rotary kilns of various
cement producers.
33
R H I M A G N E S I TA
Solutions
portfolio
RHI Magnesita offers a full suite of
engineering services and solutions
to complement its extensive range
of refractory products.
RHI Magnesita is focused on creating innovative
solutions to provide value for its customers
through increased productivity, capex savings,
improved working capital, improved Health and
Safety, supply flexibility, environmental impact
reduction, direct cost reduction and through
improving product quality. The Company can
achieve this for its clients through offering
technical, logistical, digital and solution
services, to complement its product range.
The solutions model is designed to provide dual
benefit for both the customer and RHI Magnesita.
Through procuring more services from the
portfolio, the combined packages create value
through driving cost savings and efficiencies
for our customers, and limiting the use of
natural resources.
The range of products
and services within the sales
portfolio is extensive, and can
be a bespoke package to suit a
variety of customer demands:
Products
Technical services
• RHI Magnesita offers a wide range of refractory
• Our technical services team offers a full range
products, such as standard refractories, functional
refractories, minerals and low emission refractories.
It also offers equipment machinery, non-refractory
consumables and mechanics such as slide gate
mechanisms
of engineering expertise
• These include installation, on-site training,
engineering, supervision, maintenance,
laboratory analysis and simulation
• The team also offers consulting services
• The technical services team helps the customer
increase their productivity on site, as well
contributing to a safer working environment
and a better quality end product
Digital services
Logistics services
Solution services
• The sales team partners with the R&D department
to provide innovative solutions that support
customer processes through digital reporting
tools and visualisation. A key development in
digitalisation this year was the APO application.
Read more on page 31
• Our logistics hub is designed to provide ease of
transport and physical inventory management
through logistics consulting, supply chain
management, transport and packaging and
warehouse management
• Application of RHI Magnesita digital services
and improves their working capital efficiency
contributes to better productivity through automation
• This contributes to flexibility of supply for customers,
• RHI Magnesita will develop a contract with
the customer which is based on product output,
rather than refractory consumption, incentivising
less consumption across both parties, providing
cost savings and also higher productivity for
the customer
34
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Products can either be combined in bespoke packages or offered
as a full-line service solution. In a full-line service solution contract,
RHI Magnesita supplies all of the main applications of the customer
site (EAF, Tundish and ladle), in addition to a range of services.
The solutions model
Our solutions-based model offers the
following benefits to our clients
1
2
3
4
5
Reducing refractory specific costs
(per tonne of steel)
Increasing asset productivity and final
steel output
Reducing consumption of materials such as fuel,
energy, electrodes, aluminium & ferroalloys
Value
creation
Reducing capex by reducing the need to
invest in new equipment & inventory
Improving steel quality and
conversion efficiency
And RHI Magnesita receives the
following benefits in return
1
2
Opportunity to increase market share in other
applications, improving customer relationships.
Opportunity to increase profitability by
improving steel production performance.
This is achieved through higher quality
refractory products and on-site technical
specialists to provide consultation.
3
Improved visibility at customer sites, allowing
for direct insight into market demand.
Controlled costs
The untapped value centre within the steel plant
Client cost structure
RHI Magnesita creates value for customers not
only by reducing refractory consumption, but also
through indirect operational savings. These cost
savings can be greater than the overall refractory
expense itself, which accounts for between
2-3% of steel input, and contributes towards
20% of the plant controlled costs.
Plant controlled costs are made up of the
consumables, labour and overhead involved in
steel production. Of the plant-controlled costs, a
up to 20% is made up of the variable costs driven
by the two aspects of steelmaking – conversion
efficiencies and refractory applications.
Service solutions contracts enable RHI Magnesita
to form a partnership with the steel plant to
minimise these costs as much as possible,
through the bespoke range of services.
Conversion efficiency savings are achieved
through continually monitoring and modifying
slag processes and refractory applications.
The chemical behaviour and reactions between
steel, slag and refractory materials have a
profound influence on the quality and
profitability of each tonne of finished steel.
Refractory applications savings are achieved
through optimising the service life of high-heat
operating equipment, maximising furnace uptime
and generating the lowest possible cost per tonne
of steel produced.
The service solutions model can help reduce
refractory consumption, improve conversion
efficiency, reduce downtime and reduce
consumption of other consumables. This results
in increased asset availability, refractory inventory
reduction and improved use of working capital.
Market driven
80% of costs
Plant controlled
20% of costs
I
H
J
1
G
1 Raw material
G Scrap
H Alloys
I Energy
J Gasses
A
2
B
E
C
D
3
F
2 Conversion efficiency
10% potential savings
A Slag engineering
B Energy consumption
C Yield improvement
3 Refractory applications
10% potential savings
D Equipment utilisation
E Consumables
F Steel quality
35
R H I M A G N E S I TA
Market
overview
Demand for refractory solutions is
underpinned by the mega trends that
support long-term growth across our
industry. As our products and solutions
help provide a safe, efficient and digitalised
production environment to our customers,
we become essential in helping shape
the world.
Megatrends
Demand
Key industry drivers for RHI Magnesita
1
Steel production
New cities, roads,
railways, houses,
offices, cars
2
Raw material pricing
3
Construction & infrastructure
1
urbanisation
2
Globalisation
3
Motorisation
4
Industrialisation
5
Sustainability
36
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Steel production
Steel production
Mt
1,100
1,000
900
800
700
600
500
400
2
0
0
9
2
0
0
1
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
2
0
1
7
2
0
1
8
2
0
1
9
China steel production
World Ex-China steel production
World steel production ex-China
Mt
-1.7%
900
890
880
870
860
850
840
2017
2018
2019
Steel production is one of the main market drivers
for the Group, as production volumes are
correlated to the demand for refractory products
and are therefore closely linked to the performance
of the Group’s Steel Division. In 2019, total crude
steel production for the year was up 3.4% (2018:
+4.6%). Excluding China, however, steel demand
slowed, and production has declined 1.7%
year-on-year (2018: +2.0%). The contraction
in the manufacturing sector, particularly in the auto
industry fuelled by the uncertainty in trade and
geopolitical matters have weighed on investment
and slowed GDP in developed economies in 2019,
which as a driver of steel demand, also directly
impacts our Steel Division.
Some of the key contributors of 2019’s
performance were:
• Poor manufacturing performance, ongoing
environmental pressures from governments
and lacklustre demand in the automotive
industry remain key catalysts for weak
performance in Europe, particularly in
Germany, Italy, France, Spain and Poland.
Stagnant steel demand in the Eurozone region
amid deteriorating export and investment
environment also contributed to the 4.9%
contraction of the 28 main countries in
Europe (Eu-28)1.
•
•
•
In North America, new investments directed
towards capacity expansion were responsible
for higher production levels in 2019, which
were up 1.5%, particularly as prices and
margins have improved for uS metals
companies in 2019.
In South America, steel production declined
8.4% in the region, led by a reduction of 9%
in Brazil and 10% in Argentina, as steelmakers
adapt their footprint for the more challenging
market backdrop in order to meet steel demand.
In China, despite the pressures from trade
negotiations with the united States and
sluggish manufacturing performance
indicating signs of a slowing economy, steel
production volumes increased and helped
offset the weak performance in the rest of the
world. This was mainly due to the increased
demand from the property construction
sector, and a newly implemented capacity
replacement campaign introduced by the
Chinese government, which aims to replace
less efficient, old, steelmaking facilities that
were previously idled or closed with new
steelmaking capacity that is less
environmentally harmful.
Key geographical drivers of refractory
demand in the Steel end market
The 10 largest steel producing countries
2019 (Mt)1 Change (%)2
China
India
Japan
united States
Russia
South Korea
Germany
Turkey
Brazil
Iran
996.3
111.2
99.3
87.9
71.6
71.4
39.7
33.7
32.2
31.9
Source: World Steel Association, Deloitte, S&P Global
1 Steel production output in metric tonnes.
2 Compared against 2018 steel production figures.
+8.3
+1.8
-4.8
+1.5
-0.7
-1.4
-6.5
-9.6
-9.0
+30.1
37
R H I M A G N E S I TA
One of the key raw materials used for refractory
products are magnesia and doloma, minerals that
the Company mines in its underground and surface
quarries and mines. These minerals and their
thermochemical properties enhance refractory
performance and are critical for the safety and
productivity of our customer's applications.
DJI_0044_Bergbau-Brumado_Tag-1.jpg
Currently, the Group has a 70% level of backward
integration in basic raw materials. By internally
sourcing the majority of the Company’s raw
material needs, RHI Magnesita is not only able
to deliver high-quality raw materials, provide
certainty of supply to its customers and produce
refractories at a lower cost, but also, mitigate the
risk of fluctuating raw material prices which
can impact Company margins.
Looking at the Group’s core raw material prices
used in refractory production, prices in 2019
dropped significantly relative to the last two
years as a result of a surge in supply as customer
destocking was intensified in 2019, and to a larger
extent, general uncertainty in the steel end
markets. The Chinese environmental sanctions
imposed in 2017, led to a short-term shortage of
raw material which in turn, drove raw material
prices to unprecedented levels. In 2019, as
Chinese producers' supply of magnesia increased
during the year, prices were taken back to levels
seen before 2017. The weak demand from end
markets, as a result of an uncertain Steel and
economic backdrop may lead to a slower
recovery of raw material prices.
Whilst most of the refractory products are priced
according to the complexity of their composition
and often sold as a solution offering package,
some refractory products are impacted by the
price of certain raw materials.
DJI_0053_Bergbau-Brumado_Tag-1.jpg
Market overview
continued
Raw material
pricing
DJI_0039_Bergbau-Brumado_Tag-1.jpg
DJI_0047_Bergbau-Brumado_Tag-1.jpg
70%
Backward integrated
in basic raw materials
Raw material prices – rebased to 100 in Q4 20151
%
600
500
400
300
200
100
0
01/16
01/17
01/18
01/19
168
117
88
DBM high grade (China)
DBM medium grade (China)
DBM high grade (Europe)
1 Source: Asian Metal
38
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
•
In 2019, global clinker demand grew 1%
ex-China supported by 4% growth in India
and broadly stable performance in other
markets. In contrast, China, the world’s largest
cement and clinker producer, is reducing
capacity due to environmental pressures and
accumulated overcapacity leading to a global
clinker market contraction of c.3-4%.
• The glass industry in 2019 has benefited from
the positive momentum in the sector, driven
by healthy demand growth across all regions,
supported by favourable environmental trends.
Production of and demand for non-ferrous metals
are closely associated with their market prices,
with copper and zinc being the most relevant
to our business.
• LME-listed base metals have remained
relatively stable for the most part of the year,
with the exception of Nickel, up c.28% in
2019, as Indonesia export bans drove prices
higher in Q3.
The Industrial Division, which accounts for
approximately 30% of the Group’s revenue,
is mostly driven by global GDP, as most of the
Division’s performance is linked to longer-term
investment projects.
Refractory solutions in this Division service
the cement, lime, non-ferrous metals and other
process industries, which comprise glass, EEC
and minerals segments.
Whilst refractory products for cement
applications tend to be treated as both
consumables and investments from our
customers' perspective, the demand for refractory
solutions for the other segments of the Division
(Non-ferrous metals and other process industries)
are more project based, and therefore closely
linked to global growth.
Demand for cement and glass is closely linked
to the construction industry and construction
markets are estimated to account for c.50%
of overall refractory demand.
Global GDP in 2019 saw 2.9% growth, with
a projection of 2.4%1 in 2020.
• Cement markets have benefited from the
steady long-term growth in line with GDP
and construction activity, despite the growing
environmental pressures linked to CO2
emitting industries.
Construction &
Infrastructure
2.9%1
2019 global GDP growth
2019 LME-listed base metals price2
%
175
165
155
145
135
125
115
105
95
85
75
01/19
02/19
03/19
04/19
05/19
06/19
07/19
08/19
09/19
10/19
11/19
12/19
Aluminium
Lead
Copper
Zinc
Tin
Nickel
1 Source: OECD
2 Source: Bloomberg
129
106
101
99
94
88
39
R H I M A G N E S I TA
Operational
review
This operational review provides a
regional breakdown of performance
in the Steel Division, and by
segment in the Industrial Division.
It also provides an overview of our
growth markets, India and China.
Steel Division
Steel Division revenue
€2,018m
Steel Division gross profit
€467m
Geographical breakdown
in Steel Division
North America 26%
Europe 25%
APAC 19%
South America 18%
CIS-MEA 11%
40
Refractory products in steel plants are used to
protect applications such as the basic oxygen
furnace (BOF), electric arc furnace (EAF) and
ladles from the hot liquid steel. The lifetime of the
refractory lining in a steel application ranges from
as little as 20 minutes up to as long as two months
and are therefore regarded as consumables to the
steel industry and as an operational expense by
our customers. Refractory products and services
are estimated to contribute c. 2-3% to the total
customer cost base.
In 2019, steel demand was impacted by ongoing
geopolitical issues and trade tensions which
together contributed to global uncertainty.
This was particularly felt in the automotive,
manufacturing and construction sectors, key
drivers of the steel industry. Global automotive
production contracted in 2019, with material
declines in several key automotive markets,
including Germany, Turkey and South Korea. The
automotive industry continues to be challenged
by environmental pressures and the transition
towards hybrid electric vehicles. Global
construction growth slowed in 2019, due to
weakening economic fundamentals and
constraints in construction capacity.
The weakening global steel demand impacted
the Company, with the Steel Division revenues of
€2,018 million in 2019, 10.4% lower than in 2018
(€2,253 million in 2018 on a constant currency
basis). On a reported basis, the Steel Division
revenue was down by 8.8% (€2,213 million
in 2018).
The Steel Division revenues were impacted by
the customer de-stocking that has taken place
throughout the year. This effect was exaggerated
by the elevated stock levels in 2018, where
customers had purchased additional refractory
products in reaction to the rising raw
material prices.
The successful implementation of the Price
Management Programme, introduced in
April 2019, made an important contribution to
profitability in 2019, which has helped offset the
weaker demand environment. The programme
raised refractory prices across the product
portfolio, enabling the Company to further
accelerate investment in technology,
environmental solutions and production
infrastructure to better serve its customers.
Steel volumes were, however, impacted by the
Price Management Programme, partly as a result
of strategic market share loss. 2019 revenues were
also reduced by RHI Magnesita's exit from the
Iranian market in November 2018.
Gross profit for the division was €467 million,
down from €545 million in 2018 on a constant
currency basis. The Division achieved a gross
margin of 23.1% in 2019, down by 110 bps from
the previous year.
One of the near-term strategic initiatives for the
Company is to drive the business model towards
delivering a suite of services for customers beyond
refractory products. These services range from
supplying technical expertise and digital
solutions through to the complete package of
a full-line service offering. The full-line service
offering provides bespoke solutions to RHI
Magnesita customers, which cover all of their
refractory needs for specific steel applications,
creating efficiencies for both the customer and
RHI Magnesita. RHI Magnesita China won the first
solutions contract in the Chinese high quality
steel market, worth €20 million, with Guangxi
ShengLong which was concluded in the first half
of 2019. This was followed by a second large
contract in China in January 2020.
Another key strategic initiative to enhance the
Company’s business model has been to establish
in the last quarter of 2019 a new and fully
dedicated global Flow Control Business unit,
consisting of a specialised multifunctional team
to drive growth in this area of the Division.
Furthermore, in 2019 the Company implemented
a global installation services team, which will
enable the Steel Division to pursue high value
projects at customer sites that had previously
been unattainable.
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Europe
In Europe, the Company's Steel Division faced
strong headwinds throughout 2019. Revenue
reported for the region was €513 million, down
17.6% from €622 million in 2018 on a constant
currency basis. Revenue was negatively impacted
by significantly reduced demand levels from steel
producers, as demand declined at rates not seen
since the financial crisis in 2007 and 2008. Lower
demand was exacerbated with higher iron ore
prices, a 70% rise in the price of emission-trading
certificates since mid-2018, in addition to the
escalating trade tensions.
Steel production in Europe slowed in 2019, as
the region faced overcapacity due to import tariffs
in the uS, and cheap steel from China, Russia,
Turkey and others trading into Europe. Industry
safeguard measures were put in place by Eu
officials, but the market reached overcapacity
once the quotas were reset in July 2019. This
was especially prevalent in Europe’s largest steel
producing countries, Germany and Italy, where
production declined by 6.5% and 5.2%,
respectively. Overall, the Eu steel production
output declined by 4.9%.
The effect on global steel trading was coupled
with a significant slowdown in the Eu automotive
industry. Lower steel prices in 2019 have
contributed to several customers announcing
cost reduction programmes and production cuts.
Regional revenues were affected by intensified
price competition and reduced stock levels
in customers’ plants.
During 2018, customers increased their inventory
levels in response to rising raw material prices
increasing, following the raw material shortage
(especially in dolomite), and as a result of trade
tariff discussions. This led to customer destocking
of inventory throughout 2019, contributing to
softer sales compared to the previous year.
This trend has continued into Q1 2020, with
potential further weakness as growth slows
with weakening economic fundamentals.
Outokumpu in Alabama –
Recycling programme
In 2019, the Company secured its first major
services contract to include recycling, with
Outokumpu in Alabama, the global leader in
stainless steel. Outokumpu requested, as part
of their contract with RHI Magnesita, for the
installation of an on-site refractory recycling
facility. In the first half of 2019, we successfully
implemented the facility and this was an
important factor in our securing the material
contract for a further five years. This is a defining
moment for RHI Magnesita, as Outokumpu are
the first customer to have an on-site recycling
programme, including the dismantling of
refractories, as well as installation services
for the plant ladle, tundish, Argon oxygen
decarburisation (AOD) and Electric Arc
furnace (EAF) refractories.
By using the crushed recycled
refractories instead of dolomitic
lime, we reduce waste, increase
cost savings and ultimately,
create sustainability.
Craig Powell,
Steel Business unit Head,
North America
Link to strategy
Read more on
page 13
41
R H I M A G N E S I TA
Operational review
continued
North America
South America
APAC
The Steel Division revenue in the APAC region
was €388 million, down by 1.3% on a constant
currency basis, from €393 million in 2018.
In India and China, revenue grew by 0.3%
to €206 million and 6.8% to €48 million,
respectively, on a constant currency basis. Whilst
the performance in India was impacted by the
country’s economic issues, the Company will
continue to focus on its growth trajectory, and
on maintaining its position as the country’s
largest refractory supplier.
In China, the Company now has a full range of
products for this market and is already showing
improved win-rates in recent tenders into 2020,
compared to 2019. We will continue to focus on
winning market share into 2020 and beyond
in China.
Outside of India and China, revenue was down by
5.5% on a constant currency basis to €128 million
from €135 million in 2018. Regional revenues
followed negative trends in steel production in
South Korea and Thailand, which according to
WSA decreased output by 1.4% and 34.6%,
respectively. However, this was partially off-set
by strong performance in Japan and Taiwan,
which both outperformed the market.
In APAC, the Company will strategically grow
certain product segments, and add value through
the solutions business model.
In North America, revenue was €518 million in
2019 down by 7.5% on a constant currency basis,
from €560 million in 2018. The implementation
of value-based price management, a customer
solution-oriented approach, and an adaptable
portfolio of products, resulted in the Company
improving pricing and delivering higher revenue
per tonne, however, this only partially offset the
impact of materially lower volumes.
Lower sales volumes were the result of ongoing
challenges in Company's end-markets, with
increased political uncertainty throughout 2019
and the impact of recently imposed trade tariffs.
The introduction of trade tariffs initially led
to more steel production and the creation of
additional capacity, but then domestic over-
capacity, an increase in imported tariff-exempted
steel and subsequent weakened demand drove
steel prices down to pre-tariff levels. The
softening of steel prices put pressure on the
Company to assist with cost-saving initiatives
by customers to address declining profitability.
Tariffs on Chinese goods entering the united
States persisted throughout 2019. However, the
Company benefited from the tariffs limiting the
participation of low value refractory competition
entering the market. Revenue was negatively
impacted by the decline of the price of magnesite
which put subsequent pressure on refractory
prices. Results were also affected negatively by
the closure of several steel plants in the second
half of 2019, which struggled to retain
competitiveness as steel prices declined.
Looking ahead, the Company will implement
higher value service contracts with its customers,
driving higher revenue per tonne in 2020.
Volume recovery continues to be an emphasis,
with local production to serve local customers,
and the Company expects to benefit from the
ability to convert opportunities quickly into
regular volumes.
Challenging steel conditions are anticipated in
2020, attributed to weakened economic growth
and also uncertainty over trade negotiations.
Steel producers will continue to focus on cost
mitigation with plant idling expected.
42
In South America, revenue was €361 million in
2019, down by 0.9% on a constant currency basis
compared to €364 million in 2018. Revenue was
negatively impacted by lower levels of steel
production in the region throughout 2019, with
production levels 8.4% lower than the previous
year, primarily led by a 9.0% fall in Brazil and
by a 10.0% fall in Argentina.
However, profitability for the Company was largely
maintained despite the decline in demand for
refractories, thanks to the improved product mix
and better technical results in performance
contracts. This demonstrates the Group’s improved
resilience through its strategy of solutions-based
contracts and following the successful
implementation of the Price Management
Programme with some key clients.
In South America, infrastructure investment
is constrained by economic uncertainty and
government budget issues.
In 2019, market conditions remained challenging,
particularly in Brazil and Argentina. There have
been some signs of an improving economic
environment in 2020, particularly in Brazil.
However this is likely to be undermined by
the potential impact of the COVID-19.
CIS-MEA
For countries of MEA and the Commonwealth
of Independent States (CIS), revenues were €230
million, down by 19.3% on a constant currency
basis compared to €286 million in 2018.
This is mostly related to ceasing business in Iran
with the last shipments being sent in Q1 of 2019,
fulfilling orders that had been made during 2018.
The impact of the exiting the Iranian market in
2019 was €35 million of revenue, of which
€30 million were from the Steel Division.
Performance was otherwise reflective of the
overall steel market in these regions, where there
was limited growth and significant volatility.
Conflict in ukraine has particularly impacted
output across the market, and there is uncertainty
around when this may recover.
Following the currency crisis in Turkey,
construction slowed in the country as a result
of the government’s decision to slow capital
projects, impacting steel demand.
In 2020, the Company will look to strengthen
its overall market position. In the CIS, in particular
the Company is intending to grow certain product
segments and will continue to add value through
the solutions business model.
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Industrial
Division
Industrial Division revenue
€904m
Industrial Division gross profit
€250m
Detail on the macro perspective
is provided in the sections below,
as well as in the Market overview
section on pages 36 to 39.
Industrial split
Cement/Lime
Other process industries
Non-ferrous metals
38%
38%
24%
The Industrial Division provides refractory
solutions to customers across the cement, lime,
glass, non-ferrous metals and environment,
energy and chemicals (EEC) industries. The
Industrial Division segments are subject to longer
replacement cycles as the lifetime of a refractory
product in these industries varies anywhere
between one year to twenty years. Cement is
more similar to steel however, in its refractory
consumption characteristics, as it has a
replacement cycle for clinker production (clinker
is the main ingredient in cement production)
of almost a year and so is likened more to a
consumable by the Cement customers.
Demand for cement is closely linked to the
construction industry, and lime is linked to the
steel industry. Non-ferrous metals industries are
closely linked to the market price of non-ferrous
metals, and EEC is linked to oil prices.
The Industrial Division has continued to perform
very strongly with 2019 revenues of €904 million
up 3.6% and gross profits of €250 million. The
gross margin improved again to 27.7%, up by 350
bps compared with 2018.
Cement/Lime
The Cement/Lime segment in 2019 contributed
€344 million to Group revenues, or 12%.
Cement/Lime revenues amounted to 38% of the
Industrial Division’s revenues. Revenue for the
Cement/Lime segment were up by 6.4% in 2019
from €324 million in 2018 on a constant currency
basis, constituting a record year for the
Cement/Lime segment.
This performance, which also included an
improved margin, was driven by selective price
increases, improved product portfolio choices
and increasing demand for the services offered
from the Cement/Lime segment leading to
market share gains specifically across China,
MEA and CIS.
In 2019, global cement demand grew 1%
ex-China. While China continues to be the
world’s largest cement producer, it is removing
cement capacity due to overcapacity and
environmental considerations leading to a global
cement market contraction of c. 3-4%. India is the
highest growth market with 4%. Other regions
showed a stable, but locally volatile demand
picture, such as in the Middle East and
South America.
Demand in Europe has been slightly weaker in
2019, given customer destocking, following the
inventory build-up that took place at customer
sites during 2018 as a result of tightening
magnesite and dolomite raw material availability
during 2018.
The market demand for lime is broadly stable, and
this trend continued throughout 2019. However,
revenues were up significantly compared to 2018,
largely thanks to a strong project pipeline
throughout the year. Additionally, there has
been increased customer demand for the full
solutions offering.
Initial forecasts for the global cement and lime
markets were for a stable market in 2020 with
growth of c.1-2% excluding China. However,
the impact of COVID-19 is likely to impact this.
Other process industries
Other process industries comprise the glass, EEC
and mineral segments. Revenue amounted to
€339 million and contributed 12% to Group
revenue and 38% to Industrial revenue. 2019
revenue was 2.0% higher than 2018 revenue,
at €330 million on a constant currency basis.
The glass industry has continued to grow in 2019,
also supported by the recent trend in consumer
demand towards recyclable glass packaging
and away from single use plastic packaging,
in response to increased environmental
awareness and potential health risks.
Europe, Africa and Americas all benefited from
increased demand, and Eastern Europe and CIS
regions performed well, thanks to an increase in
projects, whilst activities slowed in the Middle
East and Africa and Asia Pacific. China and India
have begun transitioning to higher performance
materials for better glass quality and longer
furnace life times.
The float glass sector maintained momentum
throughout 2019, predominantly through the
repairs business. For the investments business,
the key driver of growth was the construction
industry, through both regional expansions and
from increased demand for eco-friendly buildings
which conserve heat through multiple glass
sheet windows, and through coating with better
heat absorption.
In the EEC sector, volumes were flat, whilst
revenue and profitability increased in 2019,
as customer take up for services increased.
In particular the sector experienced increased
demand from customers in construction services,
refractory engineering and supervision services.
The strong performance was mostly thanks to
several large projects in H1 2019, followed by
significant maintenance demand in H2 2019.
43
R H I M A G N E S I TA
After just over a year, our team
in Research & Development
succeeded in solving a problem
that has been a hard nut to
crack for the entire industry
for a long time.
Stefan Rathausky,
Head of Cement/Lime
Ankral-X series
In 2019, the Company successfully rolled out a
new product line, the Ankral-X series, developed
by our in-house Research and Development team
using Spinosphere technology. The Spinosphere
technology involves using treated spinels to
increase thermal shock resistance and flexibility
to the rotary kiln bricks, but without any
substantial impairment to other important
properties. In response to increased
environmental pressures on end-markets
in the cement industry, the segment has also
introduced a low CO2 emission series this
year, containing recycled materials.
Link to strategy
Read more on
page 13
repair business. Similar to 2018, the business was
predominantly driven by repairs and maintenance
work, rather than new greenfield projects. Looking
forward, there are several new smelters in an
advanced planning stage in Indonesia, where
an ore export ban has driven demand for new
domestic facilities. Further demand for refractories
used in copper and cobalt production (and other
battery metals) is anticipated throughout the
year, with the increase in electric vehicles.
The platinum-group metals "PGM" sector,
notably palladium and platinum which are
both used in automotive catalytic converters,
performed well during the year as the Company
provided large repairs for long-term customers,
mainly in South Africa. Aluminium continues to be
a commoditised business in terms of refractory
supply to the primary aluminium sector. However,
in 2019, the Company completed its largest ever
aluminium project in China, for an original
equipment manufacturer "OEM".
Looking ahead, with the many new global
trade barriers in place and the slowdown in the
automotive and steel industry, there may be an
overall stagnation in refractory demand for the
non-ferrous sector. However, this should be
compensated for by demands from new capacity
in the environmental industries as well as for
e-mobility related applications.
Additional demand from customers for solutions
has strengthened the performance of the
business throughout 2019, as well as demand
for digital 4.0 offerings. This trend is expected
to continue throughout 2020.
China, India and North America all benefited from
higher demand for project orders, from increased
investment activities. Greenfield projects in
Europe and the Middle East slowed due to
lower demand.
2019 saw strong demand in the pelletising industry,
coke oven business and in energy generation,
whereas development of other applications was flat
year-on-year, due to fewer investment projects
(greenfield and capital projects).
Throughout 2020, the Company expects a more
complicated environment due to macroeconomic
uncertainties. However, 2019 proved that the
streamlined business is working well and will
continue to be effective throughout 2020
in growing the glass business, and expanding
service solutions for our customers.
Non-ferrous metals
Revenue contribution from the non-ferrous
metals business amounted to €221 million,
contributing 8% to Group revenue and 24% to
Industrial Division's revenues. The non-ferrous
metals business grew by 1.5%, up from €218
million in 2018 on a constant currency basis.
The business performed well in the first half,
however experienced lower order intake than
expected in the second half, in line with the
broader global slowdown triggered by trade
barriers and macroeconomic concerns.
At the beginning of 2019 the LME listed metals,
including copper and zinc, showed upwards price
movements, whereas all other listed base metals
and precious metals were at comparably low
levels. RHI Magnesita’s main LME listed metal
end-market is copper, and elevated prices in 2019
meant that RHI Magnesita saw an uptick in the
44
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
New Markets
China
India
RHI Magnesita China revenues were up by 9.7%
in 2019 on a constant currency basis compared to
the previous year. The region recorded revenue
of €184 million, up from €168 million in 2018.
India continues to be one of the key growth
markets for the Company and has been delivering
steady growth in revenue and margin, as well as
gains in market share over the years.
China revenue
€184m
India revenue
€252m
As part of its strategy to penetrate new markets,
the Company has focused on increasing market
share in China. In particular, the Cement/Lime
segment showed exceptional performance in
China over the course of the year and now has
around 10% market share. In 2019, the new
dolomite hub in Chizhou began operations and
this will enable China to increase its backward
integration and cost-efficient production.
The Company celebrated the success of winning
its first ever solutions contract in China, with
Guangxi ShengLong, in the first half of 2019.
This was followed by a second large solutions
contract in China in January 2020.
However, there has been an overall slowdown
in Chinese steel demand as demand is linked to
fixed asset investment growth, which has been
declining since mid-2019. Furthermore, Chinese
steel demand has been affected by the weaker
automotive sector. The higher quality and
specialist steel segment in China fared more
positively, however, being less affected by the
underlying demand volatility.
The Chinese economy has had a material impact
from the effect of COVID-19.
Whilst there is likely to be actions from the
government to stabilise the economy, the
performance overall for 2020 is uncertain.
In 2019, India was flat on a constant currency
basis, at €252 million, versus €251 million in 2018.
The demand and consumption of the Indian steel
industry has continued to grow, with production
increasing by 1.8% compared to 2018. However,
from the second quarter of 2019 onwards, the
domestic steel industry witnessed sluggish
demand on the back of slow GDP growth and a
slowdown in the automotive and construction
sectors, following the liquidity crisis. The
slowdown continued until the end of the year,
creating demand and margin pressure for
the Company.
Against this backdrop, the Steel Division revenue
for India was broadly flat in 2019, down to €206
million versus €208 million achieved in the
previous year on a constant currency basis.
Despite the economic backdrop, the Indian
operations maintained their effective deployment
of internal cost control, inventory management,
receivable recovery and synergy measures,
which helped the Company navigate these
more difficult market conditions.
Throughout the year, the Group continued to
drive operational efficiencies and synergies in its
Indian operations. The Group was able to achieve
substantial integration of its production, supply
chain and sales network, which will deliver
significant value to our customers and
other stakeholders.
As part of the strategic expansion in India
to increase capacity and improve customer
services, we bought Intermetal Engineers Pvt.,
a metallurgical equipment manufacturer in May
2019 for €1.3 million, and separately acquired a
refractory brick plant in September 2019 from
Manishri Refractories & Ceramics Pvt. Ltd.
for €5.5 million.
With Government interventions such as lower
interest rates, corporate tax cuts and various reforms
including large planned infrastructure spend,
steel consumption growth in India is forecast at 5%
CAGR for the next 3 years. However, in the short
term, this may be undermined further by broader
economic slowdown.
45
R H I M A G N E S I TA
Key performance
indicators
The Board and Management have identified
the following indicators which it believes to reflect
the financial and non-financial performance
of the business.
Revenue
2019
2018
2017
€2,922m
€3,081m
€2,681m
Adjusted EBITA margin
2019
2018
20171
14.0%
13.9%
9.7%
KPI relevance
KPI relevance
This demonstrates the organic growth of the business. By increasing our global
refractory market share, continually enhancing our product and service offering,
the Company is focused on achieving revenue growth and aims to outperform
the refractories market on an annual basis.
EBITA margin provides a measure of profitability and demonstrates the successful
execution of the integration and the Company’s corporate strategy. Synergy targets,
which impact EBITA margin performance, are included in Directors’ remuneration.
How it is measured
How it is measured
Total Group revenue, as reported in the financial statements.
Adjusted EBITA divided by revenue, as reported in the financial statements.
2019 performance
2019 performance
Revenue for 2019 amounted to €2,922 million, 5% lower than 2018. This
performance is mainly attributable to weaker steel end markets, raw material
price reduction steel customers' destocking of refractory inventory.
Adjusted EBITA margin was 14.0%, 10bps higher than the previous year
reported figures, driven mainly by the successful implementation of the Price
Management Programme and the turnaround of operational issues despite
the deteriorating volume environment in the steel market, raw material price
reduction and a lower fixed cost absorption.
Safety: LTIF
2019
0.28
2018
0.43
2017
1.06
R&D & Technical Marketing spend
2019
2018
2017
€64m
€63m
n/a
KPI relevance
KPI relevance
Safety is paramount to the successful running of our business and therefore sits
at the core of everything we do. LTIF is the main safety KPI we use to measure the
safety performance of the Company. Directors’ remuneration is directly linked
to safety objectives.
This demonstrates our commitment to driving innovation and to being the
leading provider of services and solutions within the refractories industries.
Excellence in R&D and strong Technical Marketing capabilities are key
contributors to our competitiveness. The Company aims to invest 2.2%
per annum of revenue in R&D and Technical Marketing going forward.
How it is measured
How it is measured
The number of accidents resulting in lost time of more than eight hours,
per 200,000 working hours, determined on a monthly basis.
Annual spend on research and development, before subsidies and including
opex and capex.
2019 performance
2019 performance
LTIF reached an all-time low of 0.28 in 2019, with improvements in all regions.
This represents a 35% reduction compared to 2018.
€64 million was committed to R&D and Technical Marketing in 2019, equating
to 2.2% of revenues, in line with the Group's annual commitment.
46
STRATEGIC REPORT
R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Link to strategy
Competitiveness
Business
model
Markets
People
See our strategy
page 13
Leverage
2019
1.2x
1.3x
20181
20171
2.1x
Adjusted EPS
2019
2018
2017
€5.57
€5.31
n/a
KPI relevance
KPI relevance
Reflecting the income statement in a clear way and taking the equity structure
into account, the Board believes adjusted EPS to be one of the indicators which
demonstrate value being created for its shareholders.
A suitable leverage provides the business with headroom for compelling
investment opportunities but also enables distribution to shareholders. Directors’
remuneration is directly linked to free cash flow generation, which impacts Group
leverage. The Board has defined a long-term leverage target range of 0.5 to 1.5x
across the cycle.
How it is measured
Earnings per share, excluding items such as FX effect, merger-related costs,
re-financing costs and other financial income and expenses.
How it is measured
Net debt to adjusted EBITDA1.
2019 performance
2019 performance
Adjusted EPS of €5.57 reflected robust performance of the business as well as
the achievement of synergies, improving from Adjusted EPS of €5.31 achieved
last year.
Net debt at Year-end amounted to EuR 650 million, comprising total debt
of EuR 1,055 million, cash and cash equivalents of EuR 467 million and leases
of EuR 62 million. This compared to net debt of EuR 639 million in 2018,
which excludes the impact from IFRS 16 leases.
Voluntary employee turnover
Gender diversity in leadership
6.5%
6.6%
n/a
2019
2018
2017
KPI relevance
2019
2018
17%
12%
2017
8%
KPI relevance
Voluntary employee turnover is considered to be one way of measuring the
Group’s success in retaining its people.
Diversity is important in terms of maintaining the Group’s competitiveness and
economic success and gender diversity is a key component of this. The Company
has a target to increase women on our Board and in senior leadership to 33%.
How it is measured
How it is measured
The percentage of employees who voluntarily left the Company during the year
and were replaced by new employees.
Number of women as a percentage of all those in leadership positions
(CEO, EMT and EMT direct reports).
2019 performance
2019 performance
Voluntary employee turnover was 6.5% for 2019.
Female representation at leadership level slightly improved to 17%. The Company
is maintaining current progress to meet the Company target of 33% by 2025.
1 2017 and 2018 figures have been adjusted to include the impact of IFRS 16.
47
R H I M A G N E S I TA
Financial review
Revenue split by industry
Despite difficult end markets
in 2019, the Group has recorded
resilient margins, solid balance
sheet position and strong cash
flow generation to support our
capital allocation strategy.
Steel
Industrial
Cement/Lime
Other process industries
Non-ferrous metals
69%
31%
12%
12%
8%
Revenue by geography
Europe
North America
APAC
South America
MEA-CIS
26%
24%
21%
16%
13%
Reporting approach
Revenue
The Company uses a number of alternative
performance measures (“APMs”) in addition
to those reported in accordance with IFRS,
which reflects the way in which Management
assesses the underlying performance of the
business. The Group’s results are presented on
an “adjusted” basis, using APMs which are not
defined or specified under the requirements
of IFRS, but are derived from the IFRS financial
statements. The APMs are used to improve
the comparability of information between
reporting periods and to address investors’
requirements for 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. Reconciliation
of certain metrics to the reported financials
is presented in the section titled APMs.
All references to comparative 2018 numbers
in this review are at constant currency, unless
stated otherwise. Figures presented at
constant currency represent 2018 translated
to average 2019 exchange rates.
48
2019 revenue amounted to €2,922 million,
6.5% lower than 2018 (2018: €3,126 million).
This reduction is primarily attributable to lower
refractory volumes from the Steel Division, as
a result of inventory destocking at customers’
sites amid a weak steel production market
environment. Global steel production ex-China
declined 1.7% in 2019 with production weakening
as the Year progressed. Additionally, the exit from
the Iranian market and the implementation of the
Price Management Programme contributed to
further volume losses. In the Industrial Division,
the Group continues to benefit from the positive
momentum seen in 2018, with improved
performance in all three segments (Cement &
Lime, Non-ferrous metals, and Process Industries).
This performance in the Industrial Division was
underpinned by the positive dynamics in
customer industries despite the weak raw
material pricing environment.
The Group’s Steel Division revenue amounted to
€2,018 million, (2018: €2,253 million) down 10.4%
from the previous year. The Industrial Division
benefited from positive global GDP growth of 2.9%
and was able to drive organic growth, increasing
revenue to €904 million in 2019 (2018: €873
million), up 3.6% from the previous year.
From their elevated prices in 2017 and 2018, raw
material prices have fallen in 2019 particularly
in the fourth quarter. Accumulated overcapacity
in supply and inventory coupled with a sluggish
market environment, have had a significant
impact on raw material prices. These lower levels
are expected to continue in the short-term.
Despite the current lower prices, the Group’s
high level of raw material backward integration
continues to deliver benefits to RHI Magnesita, in
terms of additional margin contribution, customer
supply security and enabling unique product
solutions for the market.
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Gross profit
Adjusted EBITA
Gross profit declined 5.2% to €717 million in 2019
(2018: €756 million), as a result of decreasing
raw material prices, lower deliveries to Steel
customers amid weaker end markets, which has
consequently led to lower fixed cost absorption.
This was partially offset by the successful
implementation of the Price Management
Programme and the turnaround of operational
issues identified in H2 2018 in certain plants of €15
million. This represented a gross margin of 24.5%,
30 bps higher than in the previous year. On a
divisional level, gross profit from the Steel Division
reached €467 million, with 23.1% gross margin in
2019 (2018: 24.2%). Gross profit for the Industrial
Division was €250 million, representing a gross
margin of 27.7% in the Year (2018: 24.2%).
SG&A
Total selling, general and administrative
expenses, before R&D related expenses, stood at
€309 million (2018: €316 million), representing
10.6% of revenue in 2019 (2018: 10.3%). The
delivery of the remaining synergies targeted for
the Year contributed to the lower spend in 2019.
Adjusted EBITA for the Year was €408 million,
8.9% lower than 2018 (€448 million) and
adjusted EBITA margin was 14.0%, 30 bps
lower than 2018. This was primarily driven by
the deteriorating volume environment in the steel
market, raw material price reduction and lower
fixed cost absorption, which was partially offset
by the successful implementation of the Price
Management Programme launched in H1 2019,
a €15 million benefit from the turnaround of the
operational issues in 2018 alongside delivery of
an additional €20 million in synergies in 2019.
Net finance costs
Net finance costs in 2019 amounted to €75
million (2018: €163 million), which represented
a 54% decrease from the previous year. This
significant decrease is largely due to the Group’s
efforts aimed at reducing interest expenses on
borrowings, reducing the translation effects on
non-euro denominated debt and derivatives,
moving to a euro-based debt portfolio to further
reduce funding costs, increasing its exposure
to floating interest rates and repaying higher
interest legacy debt.
As a result of these initiatives, interest expenses on
borrowings for 2019 amounted to €28 million
(2018: €49 million), mainly attributable to
refinancing on legacy high interest-bearing debt.
Interest income recorded €9 million, broadly flat
with the previous year (2018: €10 million).
Foreign exchange and derivative variances
amounted to €17 million in the Year (2018: €81
million), all of which referred to derivative losses
related to the Group’s previous hedging policy.
In August 2019, the Group has restructured its
hedging policy and will no longer be exposed to
these derivative variances and also minimised the
foreign exchange translation effects on the P&L.
Other net financial expenses recorded €39
million (2018: €43 million), which primarily refer
to non-cash adjustments related to the provision
for the unfavourable contract required to satisfy
the Eu remedies, pension and non-controlling
interest related expenses.
Items excluded from adjusted
performance
In order to accurately assess the performance
of the business, the group excludes certain
non-recurring items from its adjusted figures.
These adjustments comprise:
• €108 million recorded in “Other income
and expenses” predominantly related to the
restructuring costs associated with the closure
and downsizing of two plants in Europe, as
part of the Production Optimisation Plan
with severance costs of €18 million and
impairments of €52 million, additional
severances of €19 million for corporate
reorganisation costs and the impairment of
Adjusted EBITA margin progression
%
16
14
12
10
8
6
4
2
0
7.6%
8.5%
6.1%
6.8%
9.5%
9.0%
9.2%
7.3%
6.7%
6.7%
RHI
standalone
RHI
Magnesita
13.9%
14.0%
9.7%
7.9%
7.7%
5.7%
5.1%
5.9%
9.0%
8.4%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Backward integration margin
Refractory margin
At current raw material prices, backward integration contributes 2.5% to 2020
forecast EBITA margin (as at 1 April)
49
R H I M A G N E S I TA
Earnings per share:
€m
EBITA
Amortisation
Net financial expenses
Share of profit in joint ventures
Profit before tax
Income tax1
Profit after tax
Profit attributable to shareholders
Weighted average number of shares outstanding (m)
2019
reported
Items excluded
from underlying
performance
2019
adjusted
300
(26)
(75)
1
200
(51)
149
139
49.2
108
26
14
10
(23)
408
-
(62)
11
358
(74)
284
274
49.2
Earnings per share
€2.82
€5.57
the Norway plant in Porsgrunn of €14 million.
Total restructuring and write-down expenses
associated with these initiatives amounted
to €112 million.
• €14 million related to non-cash other net
financial expenses. These include €9 million
non-cash present value adjustment of the
provision for the unfavourable contract
required to satisfy the Eu remedies and €4
million of foreign exchange movements on the
Group’s certain non-Euro denominated debt,
as detailed in the “Net Financial Expenses”
section. These intercompany loans have been
restructured in July 2019 and there will no
future foreign exchange movements.
• €10 million write-down of a joint venture loan
related to the restructuring of Sinterco
(European dolomite mine)
RHI Magnesita’s tax rate is sensitive to changes in
the geographical distribution of worldwide profit
and losses and tax regulations in each region.
Other key factors affecting the sustainability
of the Group’s effective tax rate are set out in note
45 to the financial statements, which provides
additional information on the Group’s tax rate.
Profit after tax and earnings per share
On a reported basis, the Company recorded a
net profit of €149 million and earnings per share
(“EPS”) of €2.82 per share in 2019 (2018: €187
million profit and €3.52 per share respectively).
Adjusted earnings per share for 2019 were €5.57
(2018: €5.31), which is stated after excluding items
detailed above and amortisation of intangible
assets (€26 million).
Cash flow
• An adjustment to effective tax rate excluding
one-time charges such as the restructuring
and impairment expenses to reflect the
underlying effective tax rate.
Operating free cash flow amounted to €359
million in 2019 (2018: €438 million), primarily
due to the weaker operational performance
and working capital cash consumption.
Total free cash flow, which includes the one-off
cash disbursements from the Magnesita minority
acquisition, share buyback expenses and
restructuring costs related to the merger
totalled €105 million.
Taxation
The Company’s effective tax rate for the Year was
25.5% (2018: 23.9%). The increase year-on-year
is mainly due to one-off tax charges related to
the closure of production facilities. These costs
resulted in non-deductions across tax regions
for RHI Magnesita. Excluding these one-time
charges, as set out above, the effective tax rate
for the Year would have amounted to 20.6%.
1 Effective tax rate for adjusted EPS is calculated by applying the
effective tax rate normalised for restructuring expenses and
impairments. See APMs for further detail on page 225.
Financial review
continued
Adjusted profit after tax
€284m
Adjusted earnings per share
€5.57
50
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Free cash flow
€105m
Working capital intensity
18.3%
Operating and free cash flow:
Working capital
Adjusted EBITA
Working capital
Changes in other assets/liabilities
Capex
Depreciation
Operating free cash flow
Cash Tax
Net interest expense
Restructuring and transaction costs
Magnesita minority acquisition
Dividend payout
Share buyback
Free cash flow
2019
€m
408
(23)
(17)
(156)
146
359
(68)
(42)
(6)
(45)
(76)
(19)
105
Capital expenditure
Capital expenditure for 2019 stood at €156
million (2018: €123 million), which comprised
€110 million of maintenance capex and €46
million of project expenditure. As announced
at the Capital Markets Day in November 2019,
additional project expenditure is expected to
continue until 2022 to support the Company’s
strategy for the Production Optimisation Plan,
Sales Strategies, R&D and other small, fast
payback projects. In 2020, project expenditure
is expected to be around €65 million, of which
€55 million will go towards the Production
Optimisation Plan and Sales Strategies initiatives
and €10 million to support other small, fast
payback projects. Maintenance capex is
expected to be around €85 million in 2020
and €95 million for subsequent years.
Working capital at 31 December 2019 was €523
million (2018: €511 million), up slightly due to the
higher cash consumption in accounts payable of
€145 million in 2019, as fewer purchases of raw
material were made during the Year. This was
offset by a material improvement in inventory
levels, which have reduced year-on-year, leading
to cash generation of €111 million. This was mainly
driven by the Group’s efforts to reduce stock in our
warehouses, improve efficiency of raw material
and finished goods inventory by adjusting
production to current demand levels. Accounts
receivable also improved in 2019 when compared
to the previous year with €11 million of positive
cash impact due to ongoing improvement of
client terms, material reduction of outstanding
receivables, and to an extent, lower revenues.
Total cash flow consumption from working
capital in 2019 amounted to €23 million.
In terms of working capital intensity, measured
as a percentage of last three months annualised
revenue, the Group recorded 18.3% at year-end,
290bps higher than 2018. This was primarily
driven by lower revenue recognised in the last
three months of the Year amid weaker market
demand. On a half-on-half basis, working capital,
both in absolute terms and as a percentage of
revenue has improved. Cash flow generation from
working capital in H2 2019 amounted to €95
million (H1 2019: €-118 million) and working
capital intensity improved 270bps against
intensity recorded in H1 2019.
Working capital financing, used to provide low
cost liquidity to the Group, was at €290 million
at the end of the Year (2018: €316 million). This
comprised €223 million of accounts receivable
financing (factoring) and €67 million of accounts
payable financing (forfeiting). Going forward the
Group expects its working capital financing level
to stay below €320 million.
Improving working capital performance will
continue to be a focus area in 2020. In H2 2019,
the Group rolled out its Tactical Network
Optimisation modelling tool to optimise raw
material and refractory plant loading for best
value. In addition, and to support decision making
and enhance demand planning with global
customers and suppliers, the Group is
implementing an Integrated Business Planning
system in H1 2020. This will enable the Company
to move towards its target of 15-18% working
capital intensity in the medium term.
51
Net debt to EBITDA
1.2x
Available liquidity
€1.1bn
R H I M A G N E S I TA
Financial review
continued
Net debt
Key initiatives
Net debt at the end of the Year amounted to €650
million, comprising total debt of €1,055 million,
cash and cash equivalents of €467 million and
IFRS 16 leases of €62 million. This compared to
net debt of €697 million in 2018, which includes
the pro forma impact from IRFS 16 leases (2018:
€58 million). Net debt to EBITDA stood at 1.2x, 0.1x
lower than the previous year (2018: 1.3x). despite
the remaining cash outflows related to the payout
to Magnesita’s minority shareholders (€45
million). This low leverage profile has allowed
the Company to improve liquidity and extend the
maturity profile of its instruments. Total liquidity is
now at €1,067 million, as the Group increased its
undrawn facilities from u$400 million to €600
million and more than 60% of the Group’s
maturities are due on or after 2023.
Amortisation schedule
(€m as at 31 December 2019)1
1,067
RHI Magnesita announced its plans for the next
round of savings and investment opportunities at
a Capital Markets Day in November 2019. Two key
initiatives were presented and are expected to
bring an additional €70-80 million of EBITA
benefit by 2022.
• The Production Optimisation Plan, targeting
the Company’s global production footprint,
increasing plant specialisation, improving raw
material integration and implementing state
of the art technologies is expected to bring
€40 million of EBITA benefit by 2022.
• Sales Strategies will be focused on expanding
the Company’s presence in growth markets,
improving the solutions offering and investing
in digitalisation, are expected to generate an
added €30-40 million in EBITA benefit.
Total cost to achieve the aforementioned EBITA
benefit from these two initiatives will amount to
€220 million by 2022, of which €165 million
will consist of additional capex and €55 million
will relate to restructuring costs. The Company
also anticipates approximately €70 million of
non-cash impairments to be recorded as a result
of the plant closures in Europe, of which
€52 million was recorded in 2019.
600
467
i
L
q
u
d
i
t
y
i
600
Returns to shareholders
401
300
72
2
0
2
0
45
2
0
2
1
127
110
2
0
2
2
2
0
2
3
2
0
2
4
2
0
2
5
2
0
2
6
Despite the Group's strong financial position,
the uncertainty relating to COVID-19 means that
alongside the efficiency measures we are taking
to preserve cash, the Board has decided not to
recommend the payment of a final dividend for
2019. This decision will be reviewed later in the
year once the outlook becomes clearer. The
Board believes that this is an appropriate and
prudent measure to take as it seeks to preserve
RHI Magnesita's strong liquidity, cashflow and
financial position through these uncertain times.
Amortisation
Cash
Undrawn RCF
Synergy delivery
The Group has continued its successful
integration during 2019, achieving incremental
synergies of €20 million, bringing the annualised
total to €90 million. The additional €20 million
of synergies achieved in 2019 had an associated
restructuring cash cost of €6 million, taking the
total cash cost since merger to €84 million.
As set out above, there will be no further
synergies in 2020.
1 Revolving credit facility increased to €600 million in January
2020 with maturity in 2025 and optionality of additional
2 year extension
52
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Risk management
approach
The Group has developed a Risk
Management approach with the
objective of identifying, assessing
and controlling uncertainties
and risks related to existing and
foreseeable future operations.
Group Risk chart
Impact
minor
low
moderate
high
critical
d
o
o
h
i
l
e
k
i
L
very likely
likely
possible
unlikely
rare
9
11
10
2
3
4
6
8
1
5
7
Rapid –
within 3 months
Moderate –
within 12 months
Slow –
> 12 months
1 Macroeconomic environment and condition
of customer industries leading to significant
sales volume reductions
2 Raw material prices drop sharply, fluctuations
in exchange rates and energy prices
3 Inability to execute key strategic initiatives
4 Significant changes in the competitive environment
or speed of disruptive innovation
5 Business interruption and supply chain disruption
6 Sustainability – Environment risks
7 Sustainability – Health & Safety risks
8 Regulatory and compliance risks
9 Cyber and information security risk
10 Product Quality Failure
11 Inconsistent demonstration of RHIM culture,
values and related behaviours
The approach is based on an assessment of
“Risk Appetite” formed by the Board covering
the key risk categories. Given its importance to the
Group, the Board has additionally defined a more
detailed “Risk Appetite” for Sustainability risks.
The risk management approach combines
top-down, bottom-up and subject specific risk
assessments. The top-down risk assessment is
performed by the Executive Management Team,
reviewed by the Audit Committee and the
reporting against these risks is inherent within
each Board meeting, EMT meeting and strategic
review. The bottom-up risk assessment is based
on each of the operations' sites who maintain
ongoing risk management activity which is linked
the quality management-based governance
practices. Subject specific risk assessments are
performed for areas of emerging or important
risks. In 2019 detailed risk assessments were
performed on Sustainability, IT and Fraud Risks
and these were reviewed by the EMT and
Audit Committee.
Development of the risk identification
and assessment process
The risk management approach is effectively
the approaches at the time of the merger with
enhancements added in the subsequent period.
It is recognized that while each element of the risk
management approach has been supported by
appropriate training and is undertaken with the
appropriate diligence and management review,
RHI Magnesita would benefit from basing all risk
management activity on a single integrated
Enterprise Risk Management (ERM) framework.
An ERM will be designed and implemented in
2020 with the aim of improving consistency
and efficiency of risk management.
Risk mitigation
All risks considered to be unacceptable on
account of their nature or their potential financial
or qualitative impacts are mitigated by appropriate
strategies. The implementation and effectiveness
of the defined mitigation measures are reviewed,
and additional actions are defined if necessary.
For this purpose, the impacts of risks are
considered before and after the implementation
of those mitigation measures.
53
R H I M A G N E S I TA
Risk: our internal
control system
Our principal risks
The principal risks are those the Board considers
may have a significant impact on the results
of the Group and on its ability to achieve its
strategic objectives.
The risks can occur independently from each
other or in combination. Extraordinary events,
such as the COVID-19 pandemic, have the
potential to crystallise multiple principal risks
simultaneously, with the effect that the impact
could be significantly magnified. As a response
to the current circumstances, a bespoke risk
assessment was undertaken by the Executive
Management Team to assess the cumulative
impact and the appropriate mitigating actions.
This is not an exhaustive list of risks faced by the
Company but encompasses those considered
to be most material to business performance.
In compiling the current principal risks, specific
risks on Product Quality and Achieving a
Consistent Corporate Culture have been added
based on their assessment by the Board during
2019. To support more effective disclosure and
reflect the high level of focus on Sustainability the
risks on Environment and Health & Safety have
been shown separately in this report.
A risk appetite rating has been applied to each
risk, ranking from averse to minimalist, cautious
and flexible.
We assess our principal risks in terms of their
potential impact on our ability to deliver our
strategic objectives, their likelihood to occur
and their potential velocity. Those risks and
their assessments are reviewed by the Board.
1 Macroeconomic environment and condition
of customer industries leading to significant
sales volume reductions
2 Raw material prices drop sharply, fluctuations
in exchange rates and energy prices
Inability to execute key strategic initiatives
3
4 Significant changes in the competitive
environment or speed of disruptive innovation
5 Business interruption and supply chain
disruption
6 Sustainability – Environment risks
7 Sustainability – Health & Safety risks
8 Regulatory and compliance risks
9 Cyber and information security risk
10 Product Quality Failure
11
Inconsistent demonstration of RHIM culture,
values and related behaviours
54
The impact of the COVID-19 virus has the
potential to crystallise elements (or raised the
inherent likelihood) of principal risks 1, 2, 3, 5, 7,
8, 9.
Board and Management Control Systems
RHI Magnesita aims to follow both the corporate
governance requirements of the regulations of
both the Netherlands, given the location of its
incorporation, and the uK, given the location
of its listing. Where possible the disclosures are
combined in this report, however there are areas
where the respective governance requirements
necessitate similar but separate assessments.
Such an area is the required disclosure and
description of RHI Magnesita’s control
environment and systems. Therefore, the
Company provides both a “Management
In-control Statement“ as required by the Dutch
Corporate Governance Code and an Internal
Control System’s report as required under the u.K.
Corporate Governance Code. Both outline the
measures that RHI Magnesita takes to ensure
a strong control environment.
Internal Control System
The Board is ultimately responsible for
maintaining effective Corporate Governance,
which includes the Group’s risk management
approach, the Group’s system of internal controls
and the Group’s internal audit approach.
The Board reviews the effectiveness of the system
of internal financial, operational and compliance
controls and the risk management framework.
The Board examines whether the system of
internal controls operated effectively throughout
the year and will make recommendations
when appropriate.
These systems are based on the three lines of
defence model, supported by an internal control
guideline reflecting the responsibility for risk
management and internal controls at all
management levels.
The Group’s risk management framework is
designed to enable the application of the Group’s
risk appetite. This typically seeks to avoid or
mitigate risks rather than to eliminate completely
the risks associated with the accomplishment of
the Group’s strategic objectives. It provides
reasonable assurance but not absolute assurance
against material misstatement or loss.
The Group has in place a specific risk
management approach and an internal control
framework in relation to its financial reporting
process and the process of preparing the financial
statements. These systems include policies and
procedures to ensure that adequate accounting
records are maintained and transactions are
recorded accurately and fairly to permit the
preparation of financial statements in accordance
with the applicable accounting standards. For the
accounting process, an accounting handbook is
available that addresses all the internal control
issues into the accounting process.
The Group has an Internal Audit function, with a
reporting line to the Chair, Audit Committee and
a secondary reporting line, for day to day
operational matters, to the CFO. The Internal
Audit function provides assurance to the Audit
Committee and the Board on the design and
effectiveness of the internal control framework.
The re-modelled global internal audit function
was launched in January 2019 working to a single
risk-based annual audit plan and using a
consistent approach across the Group. During
2019, the Internal Audit function established
dedicated resource based in Europe, Americas
and Asia and also engaged specialist co-source
support to provide subject matter experts where
necessary. The 2019 annual internal audit plan
included audits focussing on strategic risks, global
business processes, IT and business
transformation and has been delivered. The Audit
Committee has conducted an assessment of the
effectiveness and capability of the Internal Audit
function in 2019 based on the outputs delivered
and stakeholder feedback and concluded that the
performance of internal audit is appropriate for the
requirements of the Group. Further improvements
to internal audit will be delivered in 2020
including efficiencies in the audit approach
and increased alignment of internal audit work
to strategic risks.
During 2019, Internal Audit conducted 25
planned internal audits and 11 special
investigations, reporting the most relevant
observations and recommendations to
the Audit Committee.
In 2019, the Group has not identified any
individual material failings in its internal risk
management and control system however the
reports by management and Internal Audit
facilitated consideration by the Audit Committee
and appropriate management responses on the
following key control framework challenges:-
• Ensuring that the Code of Conduct is
consistently adopted across the full scope of
Group operations.
• Revisiting relevant legacy issues to ensure
they reflect the current approach to
Corporate Governance.
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
and quarterly EMT review and challenge of
operational financial performance, zero-based
business planning process, improving the
financial reporting processes, continued
deployment of the corporate culture and values
especially to the more remote areas of the
Company, reinforcement of the Code of Conduct
through increased trainings and communication,
deployment of tools to increase leadership
capabilities, enhancing the response to issues
raised via the whistle-blowing process and
strengthening the capability of the Internal Audit,
Compliance and Legal functions. All key changes
in the internal control framework were reviewed
by the EMT. Each leader is accountable for the
effectiveness of the internal controls within their
areas of responsibility and is required to complete
a self-certification reporting their assessment.
Measures are applied in each functional area to
assess the effectiveness of internal controls and
any identified issues are escalated. Control
weaknesses identified by management and those
identified through the quality management
system reviews, risk management activity and
internal audit reports are escalated to the EMT
and Audit Committee for review and resolution.
In 2019 risk management activity focused on the
top 20 Company risks and thematic studies of key
risk areas such as Sustainability, IT and Fraud Risk.
This complemented the established process for
the recording and management of operational
risks in specialist software. This approach sought
to focus the discussion and monitoring by the
EMT and Directors on key risk areas. The Audit
Committee was informed about the outcome
of this process and steps to improve the
effectiveness were defined. In addition,
the risk appetite was discussed and approved
by the Audit Committee and the Board.
During 2020 the focus will be on completing the
establishment of an Enterprise Risk Management
approach by pulling together the various risk
management activities. Focus will also be
given to providing management with a more
incisive set of Key Risk Indicators to drive the
prompt identification of, and response to
changing and new risks.
Viability statement
The assessment process and key
assumptions
Assessment of the Group’s prospects is based
upon the Group’s strategy, its financial plan and
principal risks. The Group’s focus during 2019
has been to complete the integration process
and deliver €90 million of synergies, execute
the price management programme, strengthen
its market position in China and India, improve
working capital performance and launch the
Production Optimisation Programme. These
actions are expected to improve cash flow
generation and liquidity, strengthen the balance
sheet and create sustainable value through the
disciplined allocation of capital. A financial
forecast covering the next three years is prepared
based on the 2020 Budget and projections for
the following years. It is reviewed on a regular
basis to reflect changes in circumstances.
The financial forecast is based on a number of key
assumptions, the most important of which include
product prices, exchange rates, estimates of
production, production costs and future capital
expenditure. The forecast does not assume the
rollover of debt that is maturing or the raising of
new debt. A key component of the financial
forecast is the expected regional growth of steel
production and the output of non-steel clients,
combined with the development of the specific
refractory consumption taking account of
technological improvements.
Assessment of principal risks
The principal risks are those the Board considers
may have a significant impact on the results of the
Group and on its ability to achieve its strategic
objectives. These are set out on pages 56 to 59.
The risks can occur independently from each
other or in combination. Extraordinary events,
such as the COVID-19 pandemic, have the
potential to crystallise multiple principal risks
simultaneously, with the effect that the impact
could be significantly magnified. As a response
to the current circumstances, a bespoke risk
assessment was undertaken by the Executive
Management Team to assess the cumulative
impact and the appropriate mitigating actions.
• Establishing appropriate delegated authority
levels for local country-based management
teams in the context of new global corporate
policies and approaches.
• Continuing to enhance controls over
Information Security.
• Balancing the objectives of speed and
effective governance in delivering strategic
objectives such as shared service centres.
• Accelerating the delivery of post-merger
activities to provide an integrated internal
control framework particularly in the
IT platforms.
• Ensuring the internal control framework
is aligned with the innovative, empowered
and dynamic Group culture.
Although the Board considers the Company’s
risk management and internal control system
are appropriate and effective to give reasonable,
but not absolute assurance against material
misstatement or loss, given the continued
evolution of the Company post-merger and the
decentralised nature of the Group, there is need
for further strengthening of the internal control
system in 2020.
Management “In-Control” Statement
The Board and EMT are responsible for ensuring
the Company has adequate risk management
and internal controls systems in place.
The core design of the internal control systems is
based on extensive work conducted as part of the
merger activity in 2017. The internal control
system was operated in line with this core design
throughout 2019. Given that the internal control
systems are subject to continual evolution and
that key initiatives such as Integrated Business
Planning will be launched in 2020, it is planned
to reassess and update the design of the internal
control systems in 2020.
During 2019, the Board and EMT reflected the
transition of the Company by placing increased
reliance on the post-merger assessments of the
risk management and internal control systems
in addition to the definitive independent
assessments performed by third-party experts
at the time of the merger. Whilst no material
deficiencies have been identified, management
have included enhancing internal controls as part
of wider strategic changes and in response to
internal assessments. The key internal control
measures during 2019 included reviews of
financial performance and key control
weaknesses at each Board meeting, monthly
55
Viability statement
The Directors believe that the Group is well-
placed to manage its principal risks successfully.
In making this statement the Directors have
considered the resilience of the Group, taking
account of its current position, the risk appetite,
the principal risks facing the business in severe
but reasonable scenarios, and the effectiveness
of any mitigating actions.
The Directors have a reasonable expectation that
the Group and Company will be able to continue
in operation and meet its liabilities as they fall due
over the period to December 2022. The Directors
have determined that the three-year period to
December 2022 is an appropriate period having
regard to the Group’s business model, strategy,
principal risks and uncertainties, and viability.
The Directors believe that the above-mentioned
business plan and the conducted risk analysis
provide evidence of the viability of the business
over the next three years and no material risk that
could endanger the viability or continuity of
the business.
R H I M A G N E S I TA
Risk management approach
continued
Assessment of viability
The assessment of viability has been made with
reference to the Group’s current position and
expected performance over a three-year period,
using forecast product prices, sales volumes and
expected foreign exchange rates. The impact of
the COVID-19 virus has crystallised elements (or
raised the inherent likelihood) of multiple
principal risks to the Group. Consequently,
financial performance and cash flows have then
been subjected to stress testing and sensitivity
analysis over the three-year period. The Executive
Management Team applied sensitivities which
were informed by internal and external data
sources, including a review of the Group’s current
production levels and short-term order book,
customer feedback and review of regional
macroeconomic forecasts. These data were
aggregated to model a range of severe, but
plausible downside scenarios for the potential
impact of COVID-19 on the Group.
The scenarios tested include material reductions
in demand and changes to working capital:
• Scenario A: A reduction in revenue and
volumes globally for March to December 2020
by 14% compared with the outlook in February,
with a reduction of 10% and 5% in 2021 and
2022. This was combined with the reduction of
the benefit arising from the Sales Strategic
initiatives by 80% in 2020 and by 40%-50%
in 2021 and 2022. The consequential financial
effects, such as the under-absorption of fixed
costs and risk of increased working capital
were also considered.
• Scenario B: A more prolonged impact of
COVID-19 with a reduction of revenue and
volumes globally for March to December
2020 by 22% compared with the outlook in
February, with a further reduction of 15% and
8% in 2021 and 2022. This was combined
with the reduction of the benefit arising from
the Sales Strategic initiatives by 80% in 2020
and by 50%-60% in 2021 and 2022.
The consequential financial effects, such
as the under-absorption of fixed costs and
risk of increased working capital, were
also considered.
• Scenario C: A severe outbreak of COVID 19
with a reduction of revenue and volumes
globally for March to December 2020 by
31% in 2020 compared with the outlook in
February 2020 (with a reduction of 55% in
Q2 2020) and with a reduction of 15% and 8%
in 2021 and 2022. This was combined with the
reduction of the benefit arising from the Sales
Strategic initiatives by 80% in 2020 and
by 50%-60% in 2021 and 2022. The
consequential financial effects, such as
the under-absorption of fixed costs and
risk of increased working capital, were
also considered.
Based on the most recent available external data
as described above, the Group’s performance to
date is substantially in line with the financial
forecast used for modelling the downside
scenarios and shows Scenario C is unlikely to
occur. In all of the scenarios the Group maintained
the necessary liquidity levels. The impact of each
of the scenarios showed declining earnings, cash
outflows and increasing leverage. The Board
believes it can sufficiently mitigate these impacts
through the introduction of broad-based cost
savings initiatives, Capex and Opex saving
programmes, working capital reduction measures
and financing activities. The Group’s current
financing facilities’ key covenant is that the net
debt (excluding IFRS16 leases) to EBITDA ratio is
beneath 3.5x. In the event of further deterioration
of market conditions as a result of the COVID 19
outbreak, after mitigation measures have been
implemented the Group will remain compliant
with its financing covenant and will have sufficient
liquidity to meet obligations when they fall due.
As at 31 December 2019, the Group has available
cash resources of €467 million comprising cash
and cash equivalents, as well as committed and
unutilised credit facilities of €600 million. The
Group has maintained similar levels of liquidity
during the first quarter of 2020, including after
the interim dividend payment in January 2020.
The liquidity position of the Group remains robust
under the downside scenarios outlined above.
56
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Link to strategy
Appetite
Competitiveness Business model
Market
People
Averse
Minimalist
Cautious
Flexible
Principal risk
Example of risks
Actions taken
by management
1. Macroeconomic environment
and condition of customer
industries leading to significant
sales volume reductions
Changes in the global economic environment
and adverse political developments may have
an impact on the Group’s revenue and
profitability.
Link to strategy
Target risk appetite
2. Raw material prices drop
sharply, fluctuations
in exchange rates and
energy prices
Link to strategy
Target risk appetite
3. Inability to execute key
strategic initiatives
Link to strategy
Target risk appetite
• Decreasing investment in
• Diversification in terms of geographies
infrastructure projects (therefore
reducing steel and cement
demand) leading to lower
refractory consumption and
lower sales volumes
• Customers focusing on lower
cost products
• Lower sales volumes leading to
lower fixed cost coverage
and industries
• Optimisation of the production network
through complexity reduction and
efficiency increases
• Delivering reductions in SG&A costs
• Re-focus of strategy to products and
markets with growth potential
•
Increasing volatility of revenue
and profit
• Loss of competitiveness of
operations
•
Increasing price pressure and
loss of margin
• Active balance sheet and exposure
management
• Developing a more agile business with
lower fixed cost base and integrated
business planning
•
Improvement of energy efficiency
The macroeconomic environment changes
leading to sales volume reductions can arise
from industrial factors or from wider global
issues such as a pandemic.
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.
Changes in international trading relationships,
the application of tariffs and evolution of trade
treaties can markedly impact the Group’s ability
to sell to certain markets.
Due to the Group’s cost structure, fluctuations
in sales volume have an impact on the
utilisation of the production capacities, and
consequently on the Group’s profitability.
The Group has invested significantly and
achieves competitive advantage through its
backward integration model – the resulting
benefits and competitive advantage are
reduced in periods of low raw material prices.
Low raw material prices can cause a reduction
of sales margin.
Due to the Group’s global sales and production
activities, revenue and profitability may be
impacted by currency fluctuations, which can
be caused by many factors.
The Group’s production processes rely on high
volumes of energy consumption.
The Group’s strategy includes numerous
strategic initiatives including sales expansion,
new product and service models, network
optimisation, digitalisation and M&A projects.
• Failure to develop the strategy into
• Group-wide refresh and
specific actions
• Failure to react in a timely manner
communication of a simplified, more
focused and prioritised strategy
to a changing environment
• Strengthening of project management
The failure to effectively execute these
initiatives because of external or internal
circumstances may lead to lower than
planned financial performance including
loss of revenue and margin.
The Group is dynamic with a large appetite
for continual improvement – the inherent
capability limitations to deliver change require
effective prioritisation and alignment between
strategy and execution
• Resistance to change
• Failure to ensure Group has
capability to deliver the strategy
culture and approach
• Active postponement or cessation
of non-strategically important projects
• Leadership directives to accelerate
project delivery and take appropriate
risks to deliver the strategy
57
R H I M A G N E S I TA
Risk management approach
continued
Principal risk
Example of risks
Actions taken
by management
4. Significant changes in the
competitive environment or
speed of disruptive innovation
Customer demand for environmental features,
digitalisation and services may evolve more
quickly than expected.
Link to strategy
Target risk appetite
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.
• Disruptive product technology
introduced by a competitor
• Create a climate allowing innovation
and “out of the box” thinking
• Disruptive production process
introduced by a competitor
• establishment of fast-acting local R&D
structure in all major markets
• Competitors being more agile and
• Continued investment in R&D
faster to respond to changing
customer requirements
• focus development activity on
“speedboat” projects aimed at agile
and fast impact on the market
5. Business interruption and
supply chain disruption
Link to strategy
Target risk appetite
As a production company, the Group is
exposed to business interruption risk resulting
from events including natural catastrophes,
pandemics, fire, machinery breakdown,
supply chain disruptions or cyber-attacks.
The Group 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.
The Group has an integrated global supply
chain so global operations can be interrupted
by issues in a specific geography.
• Production interruption at single
• Diversified production network in terms
source manufacturing site
of geographies
• Failure of single source supplier
•
• Natural disaster or major
political crisis at one or several
manufacturing sites or in
one region
Implementation of an optimized
production footprint to meet planned
requirements
• Establishment of a best in class
integrated supply chain
• Loss of mining rights
• Operational risk management and
maintenance policies
• Risk based investment policy
• Global insurance coverage
Controlled emissions and usage of potentially
hazardous materials are inherent to the
production of refractory products.
• uncontrolled emissions
• Recycling strategy
•
Inability to meet sustainability
targets
• Regular environmental audits and risk
monitoring at all sites
• Establishment of Board Level
Sustainability Committee supported
by focused management efforts
The risk of failing to meet environment
regulatory targets or uncontrolled emissions
at our production sites exists and may result
in high financial losses and liabilities.
The changing regulatory environment and
the Group’s commitment to Sustainability lead
to increasing investment and effort being
dedicated to achieve environment aims.
There are future environment targets which
can only be met by the Group continuing to
find new technological solutions to change
production processes.
The Group is heavily dependent on
Environmental improvements being delivered
by suppliers and customers to reduce the
overall impact of the Group’s activities.
6. Sustainability –
Environment risks
Link to strategy
Target risk appetite
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STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Principal risk
Example of risks
Actions taken
by management
7. Sustainability –
Health & Safety risks
Link to strategy
Target risk appetite
Especially at our production sites, employees
and contractors may be exposed to Health
& Safety hazards which cannot be
completely eliminated.
Our activities and products may potentially
cause accidents at our customers sites.
Beyond the harm to individuals a Health
& safety incident can lead to high financial
penalties, site closure and a loss in reputation
for the Group.
• Fatal or serious accident at
• Health & Safety objectives defined as
manufacturing or customer site
core Company objective
• Health & Safety being top agenda item
at all Group meetings
• Health & Safety approach based on
leading global standards and practices
• Collaboratively enhancing the Health
& Safety approach at customer and
supplier sites
• Greater emphasis on “near miss”
reporting and root cause analysis
• Regular risk monitoring at all site
• Specific action plans in the event of
Health issues (eg pandemic)
8. Regulatory and
compliance risks
Link to strategy
Target risk appetite
We strive to establish a culture of compliance
throughout the organisation however we face
increasing regulatory complexity.
We are exposed to regulatory and compliance
risks which may result in financial losses or
operational restrictions.
Regulatory changes could impact the
profitability of our operations and require
investment to achieve compliance.
• Failure to act in accordance with
• Ethical values supported by strong
our “Code of Conduct”
corporate culture
• Violation of anti-corruption law by
• Code of conduct and compliance
employees or third-party
representatives
policies and procedures
• Strengthen capability of compliance
• Violation of data privacy
department
regulations
• Enhancement of global training and
documentation of compliance matters
9. Cyber and information
security risk
Link to strategy
Our growth strategy (including mergers and
acquisitions, entries into new geographies,
the design of new products and digitalisation)
results in a growing cyber and information
security risk exposure.
•
Intellectual property or
confidential data breach
• Personal/Private data breach
• Customer or Supplier data breach
• Critical business process
interruption
• Loss of (user) productivity
• Loss of trustworthiness of data
• Loss of proofing capability
• Dedicated Information Security
organisation with capability regularly
re-assessed against threat level
• Global Information and Cyber
Security Policies
• Continuous awareness campaign
and training
• Regular risk assessment and
penetration testing
• Cyber security detection and
response team
• Data classification and protection
implementation
• Failure of product at a customer
incurring consequential loss
• Loss in reputation for high quality
• Financial reparation for product
quality failures
• Specialist quality management teams
and quality management system
covering all production
• Quality testing of products at all stages
of production
• Exhaustive testing of new products
• Re-fresh and enhancement of
procedures for transfer of production
between factories
Target risk appetite
10. Product Quality Failure
Link to strategy
Target risk appetite
There is a fast evolving cyber and information
security global 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.
The Group value proposition is fundamentally
based on a high-quality product performing
to agreed specifications
The Group’s products have to demonstrate
consistent high performance in challenging
environments
The Group can suffer both reputational and
financial loss should the product quality level
not meet required standards
The transition to a more agile production
network entails significantly more production
transfers between factories with each transfer
requiring specific attention on product quality
11. Inconsistent demonstration
of RHIM culture, values and
related behaviours
Link to strategy
Target risk appetite
The merged company has placed a high
emphasis on trust, empowerment, delegation,
leadership, accountability, integrity and
pragmatism as core behaviours within the
new corporate culture.
•
Inconsistent behaviours across
the group
• Phased roll out of new culture in a
multi-year, multi-initiative programme
• Persistent behaviour in line with
• Global network of culture champions
legacy cultures
• Dedicated leadership capability
• Lack of awareness of Corporate
enhancement programme
The embedding of the new company culture
is a significant change journey and represents
a significant difference in the working style for
many colleagues from both legacy entities.
New initiatives are designed and deployed
relying on the foundation of the new corporate
culture and effective corporate governance.
Governance expectations
• understanding that some legacy
behaviours and decisions to be
re-visited and re-assessed
•
Inherent difficulty of aligning
c.13,650 people across all
continents and many countries
• Management, compliance and Internal
Audit reviews
• "Tone from the Top" leadership for
the culture
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R H I M A G N E S I TA
RHI Magnesita
stakeholder index
Shareholders
We aim to consistently deliver shareholder value through
our capital allocation policy, investment decisions and
through the delivery of robust financial performance.
Customers
In order to maintain our position as the global refractory
leader, we must continue to deliver a valuable service and
high-quality products to our customers. We act on
customer feedback, and through the Innovation hub, are
continuously updating our service and product offering
to meet our customers' needs.
Employees
Our people are our most important resource, and at the
heart of everything we do. From researchers in R&D, to our
sales teams, to production staff, to our supply chain team
– they all play an important part.
Environment
We recognise the need for the Company to act as a
good global citizen. It is in the Company’s interest and
in our stakeholders’ interest to create a sustainable
business model.
Communities
We are considerate of the communities that surround
the Company footprint, and try to foster social value,
local employment, and reduce any negative impact
on the environment from its operations.
Supply chain
We rely on our suppliers to deliver services and materials,
and the availability of these goods impact how we operate
as a company. Not only do we want to make sure that we
can ensure delivery on demand, but we also want to make
sure that we are part of a sustainable supply chain.
RHI Magnesita’s vision is
to help shape today’s world
for tomorrow’s future, and
our influence touches all
areas of modern life.
RHI Magnesita aims to lead the refractory industry
in a sustainable fashion, for the benefit of its
customers, communities, employees, suppliers
and investors. Its purpose is to shape the world in a
sustainable way, contributing to socio-economic
development and supporting prosperity. As part
of this ambition, key stakeholders remained
central to the Board's discussions and decision-
making over the course of 2019.
As a Dutch incorporated entity, the Company
applies Dutch law as its primary legal framework.
As a uK listed entity, it complies with the uK
Corporate Governance Code which directly
references section 172 of the uK Companies Act
2006. The Company agrees with the importance
placed on stakeholders in the uK Code and the
wider corporate landscape, and as such has
decided to take the opportunity this year to
provide more detail on how the Board engages
with our stakeholders, in alignment with Section
172. Effective engagement with the Company's
stakeholders is integral to the successful delivery
of the 2025 Corporate Strategy, and for the
long-term success of RHI Magnesita.
In making decisions, the Board considers views
from across all key stakeholder groups as
outlined below:
Employees
The Board’s two Employee Representative
Directors provide an effective direct voice in the
boardroom on a range of matters, particularly
those which impact the workforce.
There have been many opportunities for
engagement and discussions with the various
sectors of the workforce throughout the year, and
you can read more about the Board activities in
this area on page 78. Such activities included visits
to Brumado and Contagem in Brazil, where
Directors met local management and plant
employees, toured a mine, visited an R&D centre
and also Gerdau’s site on a customer visit. This
allowed the Directors to experience first-hand
the culture of the operations and the local
opportunities and challenges.
60
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
capital expenditure on projects with short
payback periods and good returns, in order to
deliver a robust financial performance in 2019.
ultimately, the Board recognises that good
financial performance underpins the basis of
performance for a variety of different stakeholders
and takes these decisions for the benefit of
all stakeholders.
Environment
The Corporate Sustainability Committee was
established by the Board to address the
increasing focus on sustainability, including
addressing key issues around the Company’s
environmental impact, recognising the role
the Company has to play in leading the way
in its industry.
The Corporate Sustainability Committee, along
with the CEO and the Executive Management
Team, are regularly updated by the Sustainability
Steering Committee which is constituted of
personnel across the different areas in the
business which intersect with sustainability
including research & development, health &
safety, and corporate communications, amongst
others. This cross-functional body of senior
management is responsible for driving progress
against key objectives and targets to embed
sustainability throughout the business. In order
to do this, it regularly seeks feedback from key
stakeholders on matters of Environmental,
Social and Governance ("ESG") matters.
In the 2018 Annual Report, details were provided
of sustainability targets to be achieved by 2025
and the Committee has a responsibility to oversee
progress against each of these on behalf of the
Board. One of its first decisions was to increase the
CO2 reduction target from 10% to 15% to include
Scope 1, 2 and 3 (raw materials) CO2 emissions,
challenging management to find technological
and process-driven routes to reduction. The
Corporate Sustainability Committee reports into
the Board on its activities and ensures due focus is
given to matters of ESG, drawing on the members’
discussion within the Sustainability Committee.
The influence of this increased focus can be seen
in the Board decision to transport sintered
dolomite via railway as outlined in the
paragraph below.
Communities
During 2019, the Board considered the impacts of
its decision to construct a new Dolomite Resource
Centre in Europe, in the Hochfilzen site in Tyrol,
on the surrounding community including
customers, landowners, residents’ local
authorities and employees. Impacts considered
included economic benefits, disruption during
the construction of the centre and supply to
customers. Tyrolean Governor Günther Platter
highlighted how the population in Tyrol would
benefit from the safeguarding of jobs. In addition
to creating a Dolomite Centre of Excellence, the
Board opted to transport the sintered dolomite
sustainably with a railway, instead of using trucks.
Herbert Cordt commented: "This step towards
sustainability shows that we take responsibility
for the communities in which we operate. We
consider ourselves part of society and therefore
have to contribute our share. This not only applies
to Hochfilzen but is also in line with our global
corporate approach."
Customers
In 2019, the Board has also had the opportunity to
meet customers in its key market areas, including
Gerdau in Brazil, and the Directors have directly
observed the interaction between management
and their customers. The Company’s Net
Promoter Score is also considered at Board
meetings and is regarded as a good proxy for
the Company’s engagement with its customers.
This input brings customer priorities to the
forefront of considerations and the Board utilises
it to challenge management accordingly to
meet customers’ expectations.
Supply chain
The Board did not make any significant decisions
about our suppliers or the supply chain this year,
however, in 2020 it looks to implement a more
sustainable business, and ensure that suppliers
of the Company act responsibly. They will be
supported in this by the work of the Corporate
Sustainability Committee and it will also be in
conjunction with the review of processes for the
Modern Slavery Act and the California
Transparency in Supply Chains Act.
During 2019, the Board also visited our
administration office at the Contagem site which
helped to inform a later request to the Board for
improvements. The office was deemed to be
unsatisfactory compared to Company standards
and the Board approved the capital required for
the updated facility, to create a positive work
environment, improve well-being and morale,
and improve the ability to recruit.
Shareholders
David Schlaff and Stanislaus Prinz zu Sayn-
Wittgeinstein both represent shareholders
through their position on the Board, and as such
they provide an investor perspective to the
management team and challenge the Company
to deliver to the agreed objectives, to contribute
to the long-term and sustainable success of
the Company.
Additionally, the Investor Relations department in
London regularly engages with both current and
prospective investors, as well as equity analysts
through roadshows and conferences. The
perspectives of shareholders and market analysts
are well represented at Board meetings with
reports from the Investor Relations Team and
coverage from a variety of analysts. The Directors
often carefully consider the reaction of the
markets in their deliberations on various matters,
particularly those relating to results.
During 2019, the Board made the decision to
take a secondary listing on the Vienna stock
exchange (Wiener Börse). Additional benefits
to shareholders included greater liquidity, and
longer periods of trading. Furthermore, as a result
of the uK’s exit from the European union, there
appeared to be a risk that the Company and its
shareholders, in certain circumstances, would
lose the protections provided by the uK Takeover
Code and any takeover of RHI Magnesita N.V.
would therefore be effectively unregulated. The
secondary listing on the Vienna stock exchange,
as a regulated market in European Economic
Area, meant this unregulated scenario could
never arise.
In 2019, the Board resolved to approve the
declaration of an interim dividend of €0.50 per
share, being a total aggregate payment of €25
million in January 2020. The long-term dividend
policy considered in great detail the expectation
of the investors and the impact on the value of
the Company.
Furthermore, a key focus for the Board, with
reference to investors, is financial performance
and with this in mind, the Board challenged
management to reduce costs, whilst focusing
61
R H I M A G N E S I TA
Sustainability
Governance
The planet is facing a climate and ecological crisis.
In 2019, greenhouse gas emissions reached an all-
time high, with almost every country failing to meet
their Paris commitments. Furthermore, the world’s
population continues to grow and is projected to
reach 10 billion by 2050.
The continued decline in global poverty rates is
welcome, although rising living standards place
the planet’s resources under greater pressure.
These interrelated economic, social and
environmental challenges are addressed by the
uN Sustainable Development Goals ("SDGs"), the
global blueprint for people, planet and prosperity.
Business is a vital partner in achieving these goals.
The following chapters address our approach
to sustainability, or ESG (environment, social,
governance). In this chapter, we describe our
governance of sustainability. Next, we discuss
our approach to climate and environmental
challenges (Climate and Environment, page 65),
then how we are addressing social impacts
(People and Communities, page 69).
RHI Magnesita plays a small but critical role in
shaping a sustainable future. Refractories are
instrumental in developing the infrastructure
required by new and larger cities: new housing,
offices, schools, hospitals and transport systems.
As the global leader in refractories, we have a
responsibility to lead the industry in sustainability.
In 2019, we deepened our focus on sustainability,
climate action in particular. Driven by our Board
and led by our Executive Management Team, we
engaged widely with stakeholders, investigated
risks and opportunities, and agreed an ambitious
strategy with targets to 2025.
Sustainability strategy
Our sustainability strategy supports and is integral
to RHI Magnesita’s overarching strategy. We must
ensure that the Company is on a sustainable
growth path and able to succeed in a low-carbon
and resource-constrained economy. As RHI
Magnesita expands geographically, we must also
ensure that we are a valued employer, business
partner and member of all communities in which
we operate. Sustainability needs to be at the heart
of our business; it must become simply part of
who we are and how we do business.
Material issues and targets
In 2019 we conducted a follow-up stakeholder
consultation to confirm the sustainability issues
that are material to our business.
The issues identified by internal and external
stakeholders to be most material are:
• climate and energy;
• health & safety;
• diversity;
•
recycling; and
• NOx and SOx emissions.
Eco-Vadis rating
Silver
62
Targets by 2025 versus 2018
CO2 emissions
Reduce by 15% per tonne of product (Scope 1,
2, 3 (raw materials)
Energy
Reduce by 5% per tonne product
NOx and SOx emissions
Reduce by 30% by 2027 (vs 2018), starting
with China by 2021
Progress in 2019
Reduced by 5%
Energy efficiency projects implemented;
savings not yet seen due to softer
production volumes
Achieved in all pre-existing China sites
- under implementation in Chizhou
plants
Recycling
Diversity
Increase use of secondary raw materials
to 10%
Secondary raw materials accounted for
4.7% in 2019
Increase women on our Board and in senior
leadership to 33%
Board: 23% female
EMT & direct reports: 17%
Safety
Maintain LTIF at <0.5 (goal: zero accidents)
Achieved LTIF of 0.28 in 2019
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
For each of these issues, we have set targets and
report progress towards achieving them see
Targets on page 62. In addition, we also work on
other issues that, although less material, are still
important to us and our stakeholders. These are:
• water usage;
•
forests and biodiversity;
• sustainable supply chain;
• community investment;
• human rights; and
• anti-corruption.
Engaging with stakeholders
Customers
Listening and learning from stakeholders is
fundamental to a successful and sustainable
business.
In addition to our stakeholder consultation,
we continued to expand our engagement
on sustainability in 2019.
Read more about our stakeholder engagement
on pages 65 and 66.
Shareholders
We are actively engaged with the investment
community around our sustainability agenda, as
demonstrated at our Capital Markets Day in 2019.
RHI Magnesita is rated Prime (C+) by ISS ESG
rankings and Silver by Eco-Vadis.
External initiatives and ratings
DISCLOSURE INSIGHT ACTION
Working with customers, we develop solutions
that support their climate action plans. Examples
include our innovative coatings technology to
improve customer energy efficiency, low-carbon
bricks and recycling services. We also work with
customers in cross-industry partnerships, such as
the K1-MET project to develop syngas from waste
gas streams rich in CO2.
Employees
Engaging with employees is a critical part of
developing our new culture. During 2019, our
leaders continued to hold townhall meetings
across our business. They also worked with our
network of over 60 culture champions who
engage our employees across our business. In
2020, culture champions will include diversity
as a key theme for activities. In addition, our
inaugural women’s network is helping to shape
our gender diversity agenda. We also introduced
a sustainability category into our Global Awards
to recognise the most outstanding sustainability
initiatives across our business.
Suppliers
We are extending sustainability programmes
to include our supply chain. We have expanded
our carbon emissions reduction target to include
Scope 3 emissions for raw materials. RHI
Magnesita is also engaging suppliers on safety
requirements and our Supplier Code of Conduct.
Communities
As our business expands globally, we are
extending our community programmes. By
working with local communities and partners,
we aim to support local needs and aspirations.
In addition, we increasingly work in multilateral
partnerships with these stakeholders and others
to address sustainability challenges. For example,
we are engaged in partnerships with universities,
research institutions, start-ups, open innovation
platforms and industry associations to identify and
develop low-carbon technologies. In 2019, we
joined the European Cement Research Academy
(ECRA) and entered into new partnerships with
Imperial College London and the Federal
universities of Minas Gerais and São Carlos
in Brazil.
Sustainability governance and
management
Our sustainability strategy and activity is overseen
by the Corporate Sustainability Committee. This
Board Committee identifies key sustainability risks
and opportunities, sets the strategy, establishes
key objectives and targets and reviews progress.
The Committee, which meets quarterly, is chaired
by independent Non-Executive Director
Janet Ashdown.
The Corporate Sustainability Committee, CEO
and Executive Management Team are regularly
updated by the Sustainability Steering Committee.
This cross-functional body of senior management
is responsible for driving progress against key
objectives and targets and embedding
sustainability throughout the business.
Integrated management system
Our integrated management system covers
environment (ISO 14001), occupational health
and safety (moving to ISO 45001 from OHSAS
18001) and quality (ISO 9001). In 2020, we
will conduct a central audit as a basis for IMS
matrix certification.
To ensure that our environmental data is robust,
in 2019 we commissioned an independent
third-party assessment of our data collection
and developed an environmental roadmap
based on findings.
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R H I M A G N E S I TA
Sustainability
Governance
continued
Standards and reporting
Ethics and compliance
Human rights
Our approach is underpinned by the uN
Global Compact, the world’s largest corporate
sustainability movement in support of the uN
Sustainable Development Goals. As participants,
we must integrate human rights, labour rights,
environment and anti-corruption principles into
our business strategy and operations. We must
also map how our core business and community
investment programmes can best support
the SDGs.
Other initiatives we participate in or support
include:
Climate – In 2019, we made our first climate
submission to the CDP (formerly the Carbon
Disclosure Project).
Diversity – We report our progress in increasing
female leadership to the Hampton-Alexander
Review.
Anti-corruption – We support Transparency
International, the global anti-corruption
movement.
Community investment – We are members of
LBG (formerly London Benchmarking Group) and
use this global standard for measuring corporate
community investment.
Sharing our progress in an open and transparent
way is key to engagement and progress. In this
report, we focus on material issues which,
together with the GRI Content Index on our
website, comprises our GRI report.
This report was prepared in accordance with the
GRI Standards (Core option) and represents our
Communication on Progress (CoP) to the uN
Global Compact (self-assessed as Active).
We must hold ourselves accountable to the
highest standards of corporate behaviour. This
is fundamental to being a responsible business.
Anti-bribery and corruption
Bribery and corruption have no place in our
business or any business. Our Code of Conduct,
which can be found on our website, makes clear
our zero-tolerance approach to corruption. We
expect our employees and business partners to
fully comply with anti-bribery and corruption
laws wherever we operate.
To keep step with our business growth, we are
expanding our compliance organisation with
new compliance specialists in South America,
Europe and India. We are also strengthening
our processes and monitoring. During 2019,
we continued compliance training in South
and North America, Europe and India. More
than 2,000 employees took part in face-to-face
training. In addition, Internal Audit conducted
audits of our approach to anti-bribery, corruption
and data protection, assessing our compliance
organisation’s training, monitoring and reporting.
In 2020, we will continue to strengthen our
approach, with the launch of our digital
compliance portal and a new series of
detailed compliance policies.
We also expect suppliers to uphold the values
in our Supplier Code of Conduct and in 2020 we
will launch an annual certification process. Our
Codes of Conduct can be found on our website.
We are committed to respecting internationally
recognised human rights, in line with the uN
universal Declaration of Human Rights and the
uN Guiding Principles on Business and Human
Rights. As participants in the uN Global Compact,
we must bring this commitment to life in our
business, supply chain and beyond.
Human rights provisions are explicitly included
in our Supplier Code of Conduct. We are
developing a more rigorous approach to supplier
assessment, with digitalisation helping to
strengthen our compliance systems. Statements
in accordance with the uK Modern Slavery Act
2015 and the California Transparency in Supply
Chains Act can be found on our website.
Whistleblowing hotline
Potential concerns about our business or any
suspected wrongdoing can be reported to an
independently operated, confidential and
anonymous whistleblowing hotline. Contact
details are publicised throughout our business
and on our website. Any suspected code
violations are managed by a team comprising
compliance, HR and Internal Audit. The Board
routinely reviews this process and reports arising
from its operation, ensuring that there are
arrangements in place for the appropriate
independent investigation of these cases and
follow-up actions are completed.
In 2019, we received 79 reports most of which
continued to be HR-related grievances. We were
able to address many of these issues in culture
workshops and Compliance training sessions.
A further breakdown of reports is included in the
Audit Committee report on pages 93 to 95.
2,000+
Employees received in-person
Code of Conduct training
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STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Climate &
Environment
The severity and urgency of the climate
crisis became increasingly clear in 2019.
The global economy needs to rapidly
reduce carbon emissions, halving them
by 2030 and reaching net-zero by 2050.
Climate governance and risk
During 2019, the Board and senior leadership
of RHI Magnesita were focused on accelerating
our Company’s climate action. The Company
completed an in-depth assessment of climate
risks our business faces, including physical risks
(extreme weather events, disruption to operations
and supply chain) and transitional risks (current
and emerging regulations, technology,
marketplace and reputation).
Since climate risk is now a major concern to
investors, we undertook our first climate
submission to the CDP (formerly the Carbon
Disclosure Project) in 2019, gaining a C rating. In
addition, we are exploring how to implement the
recommendations of the Taskforce on Climate-
related Financial Disclosures ("TCFD") (see table).
During 2019, we revised our emissions reduction
target, almost doubling it by including Scope 3
emissions from raw materials. Our new
commitment is to reduce Scope 1, 2 and 3
emissions (raw materials) by 15% by 2025 while
improving energy efficiency by 5%. We are also
investigating how RHI Magnesita could adopt a
Science-Based Target for emissions reduction
that is aligned with the latest climate science.
In 2019, our CO2 emissions totalled 4,622,000
tonnes (Scope 1, 2 and 3 – raw materials),
equivalent to 1.65 tonnes per tonne of production.
This marks a 5.0% reduction in emissions per
tonne of production and a 14.0% decrease in
absolute emissions, although softer production
volumes contributed to this. Softer production
volumes also impacted energy consumption,
which dropped by 9.1% to 5.2 TWh in 2019. New
energy efficiency projects were launched during
the year but did not yet yield improvements, with
energy efficiency down 0.3%. In future, these
projects are expected to save up to 61 GWh
per year.
Implementing the TCFD Recommendations
Governance
• The Sustainability Steering Committee works with the Executive Management Team and CEO to assess climate risks and opportunities and develop
and implement climate strategy.
• The Board Sustainability Committee regularly reviews climate risks, strategy and performance.
Risk Management
• Key climate risks are disclosed in our submission to the CDP, which gained a C rating in 2019.
• Risks include physical risks (extreme weather events, disruption to operations and supply chain) and transitional risks (current and emerging
regulations, technology, marketplace and reputation).
• Key opportunities include recycling and offering customers full-service solutions, as well as potential opportunities that could result from capturing
and managing process emissions.
• We continuously monitor and review our approach given the uncertainties and speed of change in the area of climate risk.
Strategy
• Provide innovative solutions to help customers reduce their carbon emissions and increase their operational efficiency.
• Decrease the carbon footprint of our raw materials.
•
Increase the energy efficiency of our operations.
• Reduce the carbon intensity of our energy sources.
Metrics and Targets
• Our target is to reduce Scope 1, 2 and 3 emissions (raw materials) per tonne by 15% by 2025.
• We measure our carbon emissions using the GHG Protocol.
65
R H I M A G N E S I TA
Climate & Environment
continued
Our CO2 Emissions
Absolute Emissions (tonnes of CO2)
Relative Emissions (t CO2 per tonne of product)
Scope 11
Of which geogenic emissions
Of which fuel-based emissions
Scope 2
Scope 3 (raw materials)
Total
2019
2018
(base year)2
Change vs
2018
2,275,000
2,629,000
-354,000
1,194,000
1,413,000
-219,000
1,051,000
1,165,000
-114,000
190,000
207,000
-17,000
2,157,000
2,536,000
-379,000
4,622,000
5,372,000
-750,000
2019
0.81
0.43
0.37
0.07
0.77
1.65
2018
0.85
0.46
0.38
0.07
0.82
1.74
Change vs
2018
-4.5%
-6.7%
-0.4%
1.3%
-6.1%
-5.0%
1 Scope 1 emissions consist of geogenic emissions, fuel-based emissions and other emissions (e.g. emissions from traffic/machinery, heating of office buildings at production sites).
2 The value of Scope 1 CO2 emissions for 2018 has been revised upward since publication of the 2018 Annual Report due to the improved availability of more granular data and analysis.
5%
Total CO2 emissions reduction in 2019
(Scope 1, 2, and 3 – raw materials)
15%
2025 target reduction vs 2018
(Scope 1, 2, and 3 – raw materials)
Climate strategy
Our climate strategy spans our value chain and
includes the following components:
• providing innovative solutions to reduce
customer emissions;
• decreasing the carbon footprint of our
raw materials;
•
•
increasing energy efficiency in our
operations; and
reducing the carbon intensity of our
energy sources.
Innovative customer solutions
The steel and cement industries represent
approximately 80% of our customers. They are
also major carbon emitters, accounting for up to
13% of global emissions. Helping them improve
energy efficiency in production with the
associated drop in emissions could potentially
achieve a significant reduction in our
indirect emissions.
To do so, we are developing innovative
technologies and transforming our business
model. New full-service solutions that can
significantly improve customers’ energy efficiency
in production and reduce associated carbon
emissions include:
•
recycling services that help customers
optimise production, increasing energy
and resource efficiency;
• working with customers to reduce
consumption by extending the life
of refractories;
• coating technologies that improve refractory
performance and energy efficiency in
customer production processes;
• digital solutions such as our Automated
Process Optimisation (APO) that can reduce
energy-intensive stoppages and optimise
production; and
• helping customers digitise operational control
to increase productivity and energy savings.
Reducing raw material emissions
Geogenic emissions from raw materials
represented 48% of our carbon emissions (Scope
1 and 2) in 2019. Carbon dioxide (CO2) is released
when the raw magnesite (MgCO3) is processed
into magnesium oxide (MgO), the basis for many
refractory products.
These process emissions represent another
major focus area of R&D investment, especially
increasing recycled content in our refractories
since this reduces the geogenic emissions
associated with virgin materials.
In 2019, we significantly increased the recycled
content in products with our new series of
low-carbon bricks and expanded our global
recycling capacity (see Recycling below).
Reaching our target of 10% recycled content will
mitigate approximately 300,000 tonnes of CO2
emissions per year.
As we endeavour to reduce the carbon footprint of
our raw materials, we work with others to develop
breakthrough technologies. Such partnerships
include the European Cement Research
Academy ("ECRA") and the K1-MET consortium
which includes steel manufacturers.
In addition, we are setting up research
partnerships with universities and other partners,
including accelerators, start-ups and open
innovation platforms to identify and develop new
technologies. In 2019, we set up a national CO2
research network of universities and businesses in
Brazil and entered into a research partnership with
Imperial College London.
66
STRATEGIC REPORT Energy use by source
Natural gas
Coal, coke & petcoke
Fuel oil
Electricity
Diesel/petrol
Liquid gas
53%
16%
16%
13%
1%
1%
R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Reducing the carbon intensity of energy
Recycling
Our recycling strategy has two vital aims,
reducing both our carbon emissions (see above)
and landfilled waste. Our target is to include 10%
Secondary Raw Materials ("SRM") in refractories
by 2025 which would prevent approximately
150,000 tonnes of material from going to landfill.
We are on track to reach this target, having
increased recycled content in our products by
1% in 2019.
During 2019, we made solid progress in all three
key elements of our recycling strategy:
• establishing on-site recycling solutions for
used refractories at customer sites;
• setting up recycling facilities at our own
production sites; and
• developing recipes that include recycled
content in a wide array of products.
Examples of our progress in 2019 include:
•
•
•
•
•
In North America, we launched our first
on-site customer recycling solution.
In South America, we expanded our recycling
capacity with a new semi-automated
recycling operation in Coronel Fabriciano.
Meanwhile, further investments in Contagem
allowed us to boost recycled content in
our products.
In Europe, we opened our first dedicated
recycling facility in Veitsch, Austria.
In India, our new production facility in Cuttack
has on-site recycling operations.
In China, we increased use of recycled
materials and started our own recycling
activities to ensure a local source of
recycled materials.
As we increase the amount we recycle, we
work to reduce waste. During 2019, the waste
generated by our business amounted to 107,000
tonnes. Most of this waste (83%) was non-
hazardous ceramic and mineral waste from
production sites and mines. We have therefore
established waste teams in priority plants to
identify how to maximise the reuse or recycling
potential of production waste.
We are assessing our potential to reduce Scope 2
emissions from electricity consumption. At
present, our electricity consumption averages
278g CO2 per kWh.
We aim to increase the proportion of renewables
in our energy mix through both on-site generation
and purchasing. For example, our Leoben R&D
centre in Austria implemented its first PV solar
system in 2019. This already covers the site’s
base electricity consumption and will be
further expanded.
We intend to source renewable energy for
production too and are exploring the possibilities
for each site. In Brazil, our Brumado production
site is assessing a Power Purchasing Agreement
for wind power. All of our Austrian sites are already
supplied by 100% certified renewable electricity.
Nevertheless, as things stand, we cannot use
renewables as our primary source of energy, given
the high temperatures and quantities required by
our business. Our production sites therefore still
depend on carbon-intensive fossil fuels.
Switching to alternatives is a highly challenging
transition which we continue to actively explore.
Where feasible, we are moving from petroleum
coke and oil to natural gas, the cleanest fossil fuel,
although location plays a part in availability.
In 2019, gas accounted for 53% of fuel used
by our business.
Increasing energy efficiency
In our own operations, we are pioneering new
production techniques to improve energy
efficiency. Innovative technologies now allow us
to dry pre-cast shapes for 2.5 hours rather than
the traditional five days. In addition, we can now
achieve the same performance from refractory
bricks tempered at 200°C that was previously
possible only by firing at temperatures exceeding
1,500°C. Additional investments include the
recovery of waste heat by our Dalian site which in
2019 reduced the site’s energy consumption by
more than 5 GWh.
These initiatives are expected to save up to 61
GWh per year, equivalent to more than 1% of
our energy consumption in 2019. We are also
exploring how we could reduce emissions from
transportation. For example, our Hochfilzen plant
will start supplying finished products by rail which
will avoid approximately 3,000 truck trips
per year.
67
Target for recycled content by 2025
10%
90%
Water consumption in non-scarce areas
R H I M A G N E S I TA
Climate & Environment
continued
NOx and SOx emissions
Water
Our programme to reduce emissions of
nitrogen oxides (NOx) and sulphur oxides (SOx)
is progressing well. We are targeting a 30%
reduction and during the first phase in China, we
achieved this for pre-existing plants in 2019, with
new Chizhou plant to follow in 2020. Our next
focus is to achieve the same in our uS business
by 2025, followed by Europe and South America
by 2027.
Protecting biodiversity
We recognise that biodiversity is essential to life
and acknowledge its alarming and rapid loss
across the world. Deforestation is of particular
concern since forests play a critical role in
mitigating climate change. We take a
regenerative approach to areas we mine, restoring
them to their original state through re-cultivation
and reforestation. In 2019, activities included:
•
•
•
In Brazil, we grew 26,000 native saplings
in our Brumado tree nursery and planted
6,000 on our land, donating more than
12,500 saplings to local communities.
In Turkey, our Eskişehir site’s annual tree-
planting saw approximately 500 employees,
contractors and members of the local
community plant more than 2,000 trees on
neighbouring land to our mine and production
site in 2019. To date, we have planted 193,650
trees in Turkey.
In Germany, employees at our
Niederdollendorf site planted 2,000 trees
in nearby Siebengebirge natural park and
provided a further 2,000 to the local
conservation partner.
We also promote biodiversity on our sites. In
Germany, our Marktredwitz plant was recognised
by the local Ministry of the Environment for
commitment to species and insect protection in
2019. Named a Blossoming Business (Blühender
Betrieb), the plant has designed its outdoor space
in ways that promote biodiversity, planting
bee-friendly shrubs, hedges and meadows,
avoiding chemical pesticides and peat-
containing substrates.
We aim to minimise our use of water and improve
our water efficiency, especially in areas which
already experience scarcity. Although the
refractory industry is not water-intensive in
comparison to other sectors, we recognise the
growing issue of water scarcity and its links to
the climate crisis.
In 2019, we assessed the locations of all
production sites for water scarcity using the WWF
Water Risk Filter and other tools. Results indicated
that 10 sites operate in regions of Mexico, Brazil,
India, China and France where water scarcity is,
or might soon become, a risk. Next, we will assess
water consumption at these sites to identify
potential risks both to our operations and local
watersheds and develop mitigation plans. In India,
for example, we have completed a feasibility study
into rainwater harvesting.
During 2019, RHI Magnesita used 14.8 million
cubic metres of water, of which 1.5 million cubic
metres was consumed in water-scarce areas.
Water consumption
Water consumption in
non-scarce areas
Water consumption
in water scarce areas
90%
10%
68
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
People &
Communities
As our business grows, we must bring a positive social
impact wherever we operate, both as an employer and
a neighbour. Within our business, we aim to help over
13,650 employees achieve their potential; beyond our
own business, we aim to partner with our communities,
helping them develop resilience and thrive.
assesses employer culture, brand image,
management, training and development, working
environment, compensation and benefits.
Safety
Our employees have a fundamental right to a safe
workplace. We firmly believe that zero accidents
is the only acceptable goal. RHI Magnesita’s
Safety First campaign, which was originated in
2011, clearly defines safety as the responsibility
of every employee. To emphasise this, our CEO
begins each quarterly update to employees
with safety performance.
In 2019, our lost time injury frequency ("LTIF")
rate was 0.28, a 30% improvement compared
to 2018. Yet despite this sustained overall
improvement, we were deeply saddened by the
two fatalities that occurred following accidents.
In Brazil, an employee died from medical
complications following an occupational
accident, while in Turkey a contractor died
in an accident while unloading raw materials.
No loss of life should ever happen in the course
of our business and we are working hard to
ensure that the lessons learned from these
tragic incidents are implemented across
our organisation.
One immediate result is a greater focus on
contractor safety. Contractors working at our
sites will now be included in our LTIF data. To do
so, we are defining safety requirements by service
provided and assigning accountability to site
managers. Conversely, a significant number of
our employees are contracted to work at customer
sites. Although they are already included in our
LTIF reporting, our new safety integration project
aims to ensure that customers share our
understanding, training and reporting practices
for Health and Safety.
As we expand our work on safety, we place
an equal focus on total recordable injury
frequency ("TRIF").
Since most accidents happen due to unsafe
actions, a major focus is behaviour-based safety
and accident prevention. During 2019, we rolled
Lost Time Injury Frequency rate (LTIF)
2.0
1.5
I
F
R
T
1.0
0.5
0.0
2015
2016
2017
2018
2019
TRIF
LTIF
2.0
1.5
L
T
F
I
1.0
0.5
69
Building a strong culture is essential to our
long-term sustainability and success. The
foundations of our new corporate culture have
now been laid, with a focus on its four key themes:
• act customer-focused and innovatively;
• have open decision making in a respectful
environment;
• operate cross-functionally, collaboratively
and pragmatically; and
• be performance-driven and accountable.
Since our merger in 2017, a global network
of culture champions has supported culture
workshops, communications campaigns,
team-building activities and pulse surveys.
More than 3,000 people have been trained
to help bring our new culture to life.
Employee feedback has been positive to date. Our
latest survey showed that almost three-quarters
(74%) of employees are excited about the
Company’s future and the same proportion of
employees understand the Company’s targets and
goals. In addition, we are already living our new
culture according to more than half of respondents
(58%). Work across organisational units is again
raised as an area for improvement, however.
In addition to employee feedback, we were
honoured to be named China’s Preferred Employer
of the Year by recruiting platform zhaopin.com and
Peking university. One of the country’s most
credible and influential employer brand indices
R H I M A G N E S I TA
Our People &
Communities
continued
LTIF improvement since 2018
30%
out observation audits to identify at-risk
behaviours. We also conduct programmes and
training for specific jobs, such as safety leadership
for front-line leaders.
Near miss and unsafe situations are another focus
and we set internal targets to mitigate unsafe
situations, prevent accidents and learn from
near-misses. We have begun to measure the
severity rate of accidents and will set internal
targets for this, too.
Promoting diversity
As a global company, we know that diversity
and inclusion is critical to our success. Diverse
businesses gain greater access to talent, learn
from a wider range of perspectives and have
proven to be more profitable.
We want employees of every background to feel
welcome and valued. Our aim is to provide equal
opportunities to everyone, regardless of gender,
race, ethnicity, disability, sexual orientation, age
or any other difference. Discrimination of any
kind will not be tolerated.
In 2019, we ramped up diversity efforts. Led by the
Executive Management team, we are embedding
diversity into our business. A new global steering
committee, together with six regional steering
committees, is implementing diversity initiatives
throughout our business. Since leaders are
particularly important in promoting diversity,
we conducted training and set clear diversity
expectations of them. We also launched a
high-profile internal communications campaign
to build awareness and understanding across our
business. In 2020, our global network of culture
champions will also focus on diversity, helping
to bring our commitment to life in day-to-
day operations.
Gender diversity
Our target is to achieve 33% female
representation on our Board and in our senior
leadership. Given our 2017 merger and
subsequent listing on the FTSE 250, we adopted
the deadline of 2025, rather than 2020, as
recommended by the Hampton-Alexander
Review since we also needed to embed a new
corporate culture.
We are committed to building gender diversity
and are working to accelerate progress.
Regrettably, gender diversity in senior leadership
lags behind our ambition, although there was
a 5% improvement over 2018. While women
accounted for 22% of our Executive Management
Team (EMT) in 2019, this figure falls to 17%
when direct reports are included.
To develop our pipeline of female leaders, we are
reaching deeper into the organisation to identify
future leaders and to address potential obstacles
to women’s career development. One immediate
result is that the Leadership Conference held in
January 2020 for our top 60 leaders will include
10 future female leaders who are identified to
have high potential. Personally invited by our
CEO, these high-achieving middle managers
from around the world will gain exposure to
our leadership at the event and mentoring
opportunities.
Other new measures include a requirement for
at least one woman to be shortlisted among the
final three candidates for all global roles, from
apprentices to senior leadership. We are also
exploring anonymised recruiting processes to
reduce unconscious bias. Our new women’s
network is helping us understand the barriers
experienced by women in our workplace.
A survey of more than 200 participants found that
while most female employees felt equally treated,
they occasionally encounter gender stereotypes
and other obstacles to career development.
Survey results also confirmed the issues that we
must address: the need for greater awareness of
diversity, more flexible working and the promotion of
parental leave for both men and women. In addition,
the results yielded valuable recommendations for
how to do so. For example, we are encouraged to:
• showcase existing female leaders as
role models;
• make technical jobs more attractive to women;
• help women be more confident and assertive
in the workplace;
• support parental leave and help returning
parents back into work; and
• where necessary, focus on local cultural
aspects of gender diversity.
International representation
In addition to gender diversity, we must ensure
that our leadership reflects the markets we serve.
Our business spans 40 countries, our workforce
includes over 85 nationalities and we serve
customers in over 125 countries. Yet in 2019,
our leadership only included nine nationalities.
Our first priority is therefore to ensure that each
key geographic region is represented in senior
leadership. One example is our international
rotation programme for high-performing
70
STRATEGIC REPORT R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Proportion of Women1
In 2019
In 2018
2025 Target
Board
EMT
EMT Direct Reports
EMT + EMT Direct Reports
Target of women in leadership by 2025
33%
Number of volunteers in 2019
300+
employees from China, given the strategic
importance of the country to our business.
Lastly, we aim to open up our workforce and
leadership to a greater range of ages. Our initial
programmes include a new apprenticeship
scheme for 16 year olds and relationship-building
with educational institutions.
People & development
We want to develop best-in-class capabilities for
our business while helping our employees fulfil
their career potential. To do so, we provide
development opportunities, while assigning
accountability and rewarding performance.
The People Cycle, our new performance
management system, has now been rolled out.
Covering all employees, the system includes
regular planning and structured performance
reviews. Talent management and succession
planning processes have also been implemented.
Our new global leadership learning framework
#FitToLead was launched in 2019, empowering
leaders to plan their own development. Our
FitToLead Leadership Network event, which
focused on our newly defined Leadership
Capabilities, saw 110 leaders learn about future
business challenges and new ways of thinking.
Another new initiative is our Global Talent
Programme. Starting in 2020, we will recruit 15
high-potential trainees around the world, scaling
up to 50 by 2025.
Training ranges from a leadership empowerment
programme for operations to our purchasing
academy and online language courses. We aim
to broaden the ways we offer training, both online
and in person.
Investing in communities
As we expand our community programmes,
we focus on key themes wherever we operate. In
addition, we aim to build global partnerships and
programmes that deliver significant and lasting
impact. To measure our community investment,
we use the LBG framework, the global standard.
Education and youth development
Our first international partnership is with Teach
for All, a global network that addresses the lack
of education, support and opportunity faced
by many children around the world.
In 2019, we piloted a project with local partner
Teach for Austria. Addressing educational
inequity, the project trains graduates and young
professionals to teach in urban low-income
schools. In the first year, 250 children directly
benefited from educational support we funded.
In addition, our CEO and Chairman both taught
a class during the Teach for Austria Week.
Based on positive feedback, we are expanding this
partnership. In 2020, we will work with Teach for
All to launch projects in Mexico and India, while in
Austria, we will conduct hands-on workshops to
encourage girls’ interest in STEM subjects.
We also support STEM education projects across
our business.
•
•
•
In China, we launched the Innovation Green
competition in 2019 together with leading
universities in Liaoning Province. In its first year,
130 teams of students designed innovative
solutions to environmental issues. We aim to
roll out the competition across China.
In Brazil, our Room for Inclusion programme
provides digital education to schoolchildren
from economically deprived areas near our
Brumado plant. We supported the centre’s
construction and fund teaching and
other costs.
In the uS, we donated a robot to the new
career and technology centre in Conewago
Valley School District, Pennsylvania.
23%
22%
16%
17%
8%
22%
10%
12%
33%
33%
33%
33%
Previously used in our plants, the robot will be
programmed to move in laboratory exercises.
•
In Austria, our new schools programme KiTec
(Kids Explore Technology) aims to stimulate
children’s curiosity in STEM. Together with our
partner, Wissensfabrik, we trained and
equipped 50 teachers from 15 schools in 2019
and will expand the programme in 2020.
Tree planting and environmental protection
Given the climate and ecological crisis, we
support tree-planting and reforestation projects.
These natural climate solutions have the potential
to mitigate climate change, support biodiversity
and benefit local communities. During 2019, we
continued to provide and plant trees in a number
of countries (see Climate, page 68). In addition,
we are assessing opportunities to develop our
support for reforestation
Volunteering
A growing number of our sites now offer
employees the chance to volunteer in our
community programmes. In 2019, more than
300 employee volunteers participated in 18
community projects in South America, North
America and Europe. These programmes ranged
from educational projects to tree-planting
initiatives. In 2020, we will continue to roll out
volunteering opportunities across our business.
1 As at the date of this report, does not include Employee
Representative Directors
71
R H I M A G N E S I TA
Chairman’s introduction to Corporate Governance
Corporate Governance Statement
Board of Directors
Executive Management Team
Nomination Committee report
Corporate Sustainability Committee report
Audit Committee report
Remuneration Committee report
74
76
84
88
90
92
93
96
100 Directors’ Remuneration Policy
108 Annual Report on Remuneration
110
Compliance with the Dutch Civil Code
72
GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Governance
73
R H I M A G N E S I TA
Chairman’s introduction
to Corporate Governance
As reported in the 2018 Accounts, Fersen
Lambranho stepped down from the Board on
21 January 2019. Subsequently GP Investments
sold their stake in the Company on 19 November
2019. I would like to record the Board’s appreciation
for Fersen’s commitment and contribution to the
Company and its establishment.
Throughout the year we have held various
meetings with shareholders, and we continue to
engage with shareholders on matters of corporate
governance. Should you have any questions or
issues to raise, please contact our Investor
Relations team at the contact details on page 226.
I was proud to lead a refreshed Board in 2019.
They have provided constructive challenge
to our Executive Management Team and
enthusiastically engaged with a whole host of
challenges, new and emerging in an increasingly
complex world. Of course, 2020 will bring its own
challenges, some existing and some new, which
we are already managing and responding to as
you can see in my Chairman's Statement earlier
on in this report, but I’m confident we have the
right executive team and Board in place to meet
these. A more detailed overview of the matters
discussed and debated by the Board at its
meetings during the year is presented on
pages 82 and 83.
Finally, all Directors will seek re-election at our
AGM in Amsterdam on 18 June 2020 and we
look forward to providing an update on business
performance at that meeting.
Herbert Cordt
Chairman of the Board of Directors
Dear Shareholder,
2019 has been another full and active year for
us as we continue to develop our Corporate
Governance standards to support value and
benefit for our key stakeholders. In our 2019
programme we took full account of the new
uK Corporate Governance Code 2018 (the
“uKCGC”) when assessing our governance
practices in the course of the year and were
pleased to note that our corporate DNA already
accommodated a key principle of the uKCGC
through our Employee Representative Directors
who have been on our Board since 2017. Further
detail on our engagement with stakeholders can
be found on page 60 and 61. updates to the
Terms of Reference for each Board Committee
have been undertaken to formalise compliance
with the uKCGC in the course of the year. Further
details on where we have complied or explained
in respect of each of the uKCGC and the Dutch
Corporate Governance Code 2016 (the “DCGC”
and together “the Codes”) can be found on page
76. The reports from each Board Committee
can be found on pages 90 to 120.
At our Annual General Meeting (“AGM”) in
June 2019, we were pleased to formally welcome
Janet Ashdown and Fiona Paulus as our two
new Non-Executive Directors following their
appointment by the general meeting, having
had the benefit of their expertise as nominated
Non-Executive Directors from December 2018.
Janet Ashdown and Fiona Paulus were appointed
to the Corporate Sustainability Committee, Janet
as the Chair, and the Committee has generated
significant momentum in the course of 2019 as
the Company’s focus on sustainability has grown.
More details of this Committee’s duties can be
found on page 92. Both Janet and Fiona bring
new expertise, and a wealth of experience to the
Board, and we look forward to their contribution
going forward.
With these non-executive appointments, I’m
delighted to report our gender diversity on the
Board has now increased to nearly 25% and half
of our Board committees are chaired by women. I
plan to report further progress on gender diversity
when I report in a year’s time. We were also
delighted to have appointed a new Chief
Financial Officer and Executive Director during
the AGM in June 2019, with Ian Botha joining us
from Anglo American Platinum Ltd. on 1 April
2019. Ian’s excellent skills and experience are
already delivering benefits to the Company and
he has contributed a great deal of rigour and
financial detail to our Board discussions.
74
GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
I was proud to lead a refreshed
Board in 2019. They have provided
constructive challenge to our
Executive Management Team and
enthusiastically engaged a whole
host of challenges, new and
emerging in an increasing
complex world.
Herbert Cordt
Chairman of the
Board of Directors
7575
R H I M A G N E S I TA
Corporate Governance
Statement
Compliance with the Dutch Corporate
Governance Code ("DCGC") and the UK
Corporate Governance Code ("UKCGC")
The Board has applied the principles of, complies
with and intends to continue to comply with the
requirements of, both the DCGC and the uKCGC
to the fullest extent possible, with a limited
number of deviations set out below.
Representative Directors) has been made on the
basis of three-year terms subject to performance
and annual re-election at the AGM which was
consistent with the uKCGC at the time of
appointments. The Board considers that the
three-year term is within the spirit of the uKCGC
and does not propose to make changes to the
existing Non-Executive appointments.
Deviations from the uK Corporate
Governance Code in 2019
The Company adopted relevant corporate
governance practices to comply with the uKCGC,
including publishing the Chief Executive Officer
(the “CEO”), Chairman, Senior Independent
Director (the “SID”) and Deputy Chairman roles on
the Company’s website and updates to the Terms
of Reference for each Board Committee have
been undertaken to ensure the required elements
were considered by each Committee. Whilst the
Company is compliant with the provisions, other
than those stated below, it is anticipated that as
the uKCGC is embedded, best practice will
emerge and thus the Company’s practices
will evolve and further embody the spirit of
the uKCGC.
As disclosed in last year’s report, the Company
did not comply with Provision A.3.1 of the 2016
uK Corporate Governance Code which referred
to the independence of the Chairman of the
Board. This provision is in the uKCGC under
provision 9 and the Company did not comply. The
Chairman is not considered to be independent for
the purposes of the uKCGC because he served
on the Board of RHI AG, prior to the merger, for
more than nine years, and therefore could not
be judged independent under provision 10. This
also means the Company is not compliant with
provision 19. The Board believes that Herbert
Cordt continues to demonstrate integrity,
objective judgement and independence of
character and judgement, and that his experience
as Chairman of RHI AG’s supervisory board is
valuable to the Company, providing continuity
and corporate memory, and therefore justifies
his position as Chairman.
Deviations from the Dutch Corporate
Governance Code in 2019
As disclosed last year’s report, the Company did
not comply with the following provisions of the
DCGC in 2019:
Best practice provision 2.2.2 of the DCGC
recommends that, in case of a one-tier board,
a Non-Executive Director should be appointed
for a period of four years. The appointment of the
Non-Executive Directors (other than Employee
76
In the 2018 report the Company confirmed
compliance with all other provisions and
principles of the DCGC however, best practice
provision 2.1.1 was not complied with in 2018 as
the Board profile was not published on the
website until 2019 as a result of an oversight and
so the Company is pleased to confirm it is now
compliant. Additionally, in the course of 2020,
the Company will improve its compliance with
best practice provision 2.7.2 and implement a
policy governing ownership of securities, other
than those issued by the Company, by the
Board and management.
Corporate governance declaration
The DCGC requires companies to publish
a statement concerning their approach to
corporate governance and compliance with
the DCGC. This is referred to in article 2a of
the decree on requirements for annual reports
(Besluit inhoud bestuursverslag) of 23 December
2004, as most recently amended on 1 January
2018 (the “Decree”).
The information required to be included in this
corporate governance statement as described
in articles 3, 3a and 3b of the Decree, forms part
of the Annual Report, which is available on the
Company’s website. The information required
to be included in this corporate governance
statement as described in sections 3, 3a and 3b
of the Decree can be found in the following
chapters, sections and pages of the Annual
Report and are deemed to be included
and repeated in this statement:
•
•
•
the information concerning compliance with
the DCGC, as required by section 3 of the
Decree, can be found on page 76;
the information concerning the Company’s
main features of the internal risk management
and control systems relating to the financial
reporting process, as required by section 3a
sub a of the Decree, can be found on page 54
and 55;
the information regarding the functioning of
the General Meeting and its main authorities
and the rights of the Company’s shareholders
and holders of certificates of shares and how
•
•
•
they can be exercised, as required by section
3a sub b of the Decree, can be found on pages
74 to 120;
the information regarding the composition and
functioning of the Board and its Committees,
as required by section 3a sub c of the Decree,
can be found on pages 90 to 120;
the diversity policy with regard to the
composition of the Board and their
Committees, can be found on page 91; and
the information concerning the disclosure of
the information required by the Decree on
Section 10 Eu Takeover Directive, as required
by section 3b of the Decree, may be found
on page 77, 80 and 81.
Listing Rules information
For the purposes of LR 9.8.4C R, the information
required to be disclosed by LR 9.8.4 R is set out
in the table below.
1.
Interest capitalised
2. Publication of unaudited financial
information
n/a
n/a
3. Details of long-term incentive
schemes
Pages 103,
106, 120
4. Waiver of emoluments by a Director
5. Waiver of future emoluments by
a Director
6. Non pre-emptive issues of equity
for cash
7.
Item (6) in relation to major
subsidiary undertakings
8. Parent participation in a placing by a
listed subsidiary
9. Contracts of significance
10. Provision of services by a controlling
shareholder
11. Shareholder waiver of dividends
12. Shareholder waiver of future
dividends
n/a
n/a
n/a
n/a
n/a
n/a
Refer to
Note 62
n/a
n/a
13. Agreements with controlling
shareholders
Refer to
Note 62
GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Major shareholdings
At the date hereof, the Company is aware of the
following persons holding directly or indirectly at
least 3% of the issued and outstanding shares in
the capital of the Company:
Shareholder
MSP Stiftung1
Number of
shares
%
14,333,340
29.21
E. Prinzessin zu Sayn-
Wittgenstein Berleburg2
K.A. Winterstein3
2,088,461
2,088,461
W. Winterstein4
1,590,000
4.22
4.22
3.21
1 Information obtained from the Issuer: Held directly by MSP
Stiftung and through a subsidiary. MSP Stiftung is a foundation
under Liechtenstein law, whose founder is Mag. Martin Schlaff.
2 The interest is held through Chestnut
Beteiligungsgesellschaft mbH ("Chestnut"). Ms. Sayn-
Wittgenstein made an agreement with Mr. Winterstein
which allows Chestnut to exercise the voting rights of
Silver Beteiligungsgesellschaft mbH ("Silver") in the Issuer.
Ms. Sayn-Wittgenstein and Mr. Winterstein share a
family relationship.
3 The interest is held through Silver. Ms. Sayn-Wittgenstein
made an agreement with Mr. Winterstein which allows
Chestnut to exercise the voting rights of Silver in the Issuer.
Ms. Sayn-Wittgenstein and Mr. Winterstein share a
family relationship.
4 Held in part directly and in part indirectly through FEWI
Beteiligungsgesellschaft mbH.
There are no restrictions on voting and profit rights
and no holders of any securities with special
control rights. Depositary interests in respect of
shares have been issued by the Company with
the Company’s cooperation.
Shares may be issued pursuant to a resolution of
the General Meeting or of the Board, if and insofar
as, the Board has been designated for that
purpose by a resolution of the General Meeting.
Such designation shall be as set out in the
Company’s Articles of Association. The Company
shall notify each issuance of shares in the relevant
calendar quarter to the Dutch Trade Register,
stating the number of shares issued.
Transactions with majority shareholders
There have been no transactions between the
Company and MSP Stiftung within the meaning
of best practice provision 2.7.5 of the DCGC.
Since there are no other legal or natural persons
who hold at least 10% of the shares in the capital
of the Company, no declaration in accordance
with best practice provision 2.7.5 of the DCGC
has to be published.
Outline of anti-takeover measures
No anti-takeover measures have been
implemented, however in 2019 the Company did
take action to extend regulatory protections to its
shareholders which could have been lost. As a
result of the uK’s exit from the European union,
there appeared to be a risk that the Company and
its shareholders, in certain circumstances, would
lose the protections provided by the uK Takeover
Code and any takeover of RHI Magnesita N.V.
would therefore be effectively unregulated. The
Board took action accordingly, and on 29 March
2019 the Company acquired a secondary listing
on the Vienna Stock Exchange (Wiener Börse)
which, as a regulated market in European
Economic Area, meant this unregulated
scenario could never arise.
capital of the Company at the date of acquisition,
the Company undertook a share repurchase
programme to ensure a supply to satisfy awards
made under its Long-Term Incentive Plan.
The buy-back of 400,000 ordinary shares
commenced on 12 August 2019 and concluded
on 23 September 2019. It was conducted on a
non-discretionary basis with Barclays Bank plc
who made the share purchases on the Company's
behalf, independently of and uninfluenced by the
Company. The purchases were made on market
terms and at an average price of 4,229.39 pence
per share. Dilution of the issued share capital
amounted to 0.8% and there was a minimal
impact on existing and major shareholders in the
Company. The Company is holding the shares in
treasury until they are required to satisfy awards
made under the terms of the Company's
Long-Term Incentive Plan. The remaining amount
authorised under this resolution, at the date of
publication, is 4.2%. This will expire at the end
of the next AGM or the date which falls fifteen
months from the 2019 AGM.
Board and Committee structure
The Company has a one-tier board structure
with a Board consisting of both Executive
Directors and Non-Executive Directors
(collectively the “Directors”). As at the date
of this Annual Report (the “Annual Report”),
the provisions of Dutch law that are commonly
referred to as the “large company regime”
(structuurregime) do not apply to the Company.
Share buy back
In 2019, further to the authority given by the
shareholders at the Annual General Meeting to
purchase a maximum of 5% of the issued share
The Board has established four Board
Committees: the Audit & Compliance Committee
(the Audit Committee), the Remuneration
Committee, the Corporate Sustainability
Committee and the Nomination Committee to
Corporate Governance structure
RHI Magnesita Board
Chief Executive Officer
Remuneration
Committee
Nomination
Committee
Audit
Committee
Corporate
Sustainability
Committee
Executive Management Team
77
R H I M A G N E S I TA
Corporate Governance Statement
continued
ensure a strong governance framework for
decision-making and assessment of performance
against the Company’s strategy. The terms of
reference of these Committees can be found on
our website and the reports of each Committee,
including membership and attendance at
meetings in 2019, can be found on pages 90
to 120.
Brazil Board visit
The Board ensures that one Board session per
annum is held at a location other than the Vienna
headquarters and in April 2019, the Board
travelled to Brumado1 and Contagem in Brazil.
Here they met with local management and plant
employees, toured a mine, an R&D centre and
visited a client’s site. This allowed the Directors
to experience first-hand the culture of the
operations and the local opportunities and
challenges. It was also an example of living the
Company’s culture whereby the Directors were
customer-focused and gained information which
would enable them to put the customer at the
centre of operations. Such visits to global sites
are vital to better understand the Group’s diverse
businesses and the environments in which they
operate. Meeting with local management teams
assists the Board in assessing and monitoring the
Group’s culture and its alignment with the Group’s
strategy and values. In the course of the year,
Non-Executive Directors have also visited
operations in Rotterdam and Hochfilzen,
amongst others, as part of inductions and
ongoing development.
Culture
The integration work following from the 2017
merger of the Company has been a focus for the
Board this year and running through this work has
been the thread of culture, recognising that it is
a crucial element to the success of integration,
delivery of synergies and a sustainable company.
The Board has considered the foundations
of the new corporate culture which has been
laid through a number of different initiatives.
A global network of culture champions has
been constructed to support culture workshops,
communications campaigns, team-building
activities and pulse surveys across the business
and more than 3,000 people have been
engaged and trained so that culture of the
Company is embodied in practice and brought
to life. The Board has considered the culture of
different teams, and discussed with management,
1. Excluding the two Employee Representative Directors
whose appointment to the Board is delegated by
respective works councils.
78
how that culture has contributed to decision-
making within the business.
Culture has been inherent in the Board’s
discussions and questions, from consideration of
whistleblowing reports to the success of Health &
Safety campaigns. This ongoing work has led the
understanding of performance in teams such as
supply chain management, finance and sales, as
well as on the ground in our plants and operations.
The Company is committed to responsible
management and its activities are based on
integrity, honesty, reliability and respectful
contact with employees and business partners.
The following key cultural themes determine
the actions of the Company:
• act customer-focused and innovatively;
• have open decision-making in a respectful
environment;
• operate cross-functionally, collaboratively
and pragmatically across the global
organisation;
• be performance-driven and accountable.
The Code of Conduct, the whistleblowing
hotline, as well as additional policies and
procedures of the comprehensive Compliance
programme, are essential tools to embed the
corporate culture and values as well as the
fundamental legal and ethical rules the
Company stands for.
Through the Directors’ visits to plants, customer
sites and the hub in Rotterdam, they have been
able to observe and experience the culture of the
Company directly, as well as receiving reports to
the Board of Employee Engagement and hearing
directly from the Employee Representative
Directors. The Board of Directors has access to the
RHI Magnesita mobile application which shares
up to date news about the activities of the Group
across the globe, detail on strategy and progress
against objectives with all employees. The ability
to comment and respond to articles gives direct
access to the employee voice. More detail can be
found in the Board stakeholder engagement
report on page 60 and 61.
Whistleblowing
Potential concerns about the business or any
suspected wrongdoing can be reported to an
independently operated, confidential and
anonymous whistleblowing hotline. Contact
details are publicised throughout the business
and are available on the website. Any suspected
code violations are managed by a team
comprising Compliance, HR and Internal Audit.
The Board routinely reviews this process and the
reports arising from its operation, ensuring there
are arrangements in place for the appropriate and
independent investigation of these cases and that
follow-up actions are completed. The Audit
Committee report contains more details on
pages 93 to 95.
Workforce engagement
As referred to in the Chairman’s introduction
to Corporate Governance, RHI Magnesita’s
corporate structure has, from the beginning,
included Employee Representative Directors.
These Directors, Michael Schwarz and Franz
Reiter, have been on the Board from 2017 and
they play an active role at Board meetings,
representing views of the workforce and holding
management to account with the combined
benefit of nearly 80 years of experience at the
front line of operations. The information and
discussions at Board meetings helps their support
of the workforce and provide a mutually beneficial
link between colleagues and the Board.
In addition to the Employee Representative
Directors, the Company conducts regular pulse
surveys of employees, the results of which are
reported to the Board, to inform the Directors as to
the culture of the Company and guide any action
plan to improve engagement.
Across the business, around 71% of employees
are represented by work councils, trade unions
or other bodies and agreements. The business
engages with these bodies, in line with the core
conventions of the International Labour
Organisation and the Board is appraised of key
developments and considerations relating to it.
In the course of 2020, the Board intends to
further develop its employee engagement
programme to ensure coordinated representation
of the global workforce.
The Board site visits, referred to at page 78, enable
the Board to interact in an informal setting with
employees, allowing for authentic and direct
conversations which help the Directors in their
decision-making and their guidance of the
executive team.
As part of improving engagement and
understanding of the Company’s Long-Term
Incentive Plan (the “LTIP”), James Leng, SID
and Deputy Chairman, held a webinar with
participants to outline the benefits of the LTIP
and how it aligns with shareholder objectives.
GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Colleagues from across the world were able to ask
questions and clarify their understanding of the LTIP.
These are just some examples of direct
engagement between Board Directors and
employees which live the values of the Company
to operate collaboratively and pragmatically
across the global organisation, sharing
information, and keeping it simple.
Corporate Governance at a glance
Board diversity
As noted in the Chairman’s letter, Fiona Paulus
and Janet Ashdown were appointed to the
Board by shareholders in June 2019, and their
appointments have broadened gender diversity
on the Board to 23%. The valuable decision-
making and input from the Board Committees is
directly influenced by this diversity, and 50% of
the Committees are now chaired by female
independent Non-Executive Directors.
The Board continues to pursue a policy of having
at least 30% of the seats on the Board held by
men and at least 30% of the seats on the Board
held by women, in accordance with the
“balanced composition” requirement under
Dutch law which applied in 2019. It is planned
that this will be achieved during 2021. The
Nomination Committee continues to explore
paths to build gender diversity, and more can
be read about its efforts in this area on pages
90 and 91.
The Board is committed to encouraging diversity
to deliver long-term sustainable success for the
Company and will continue to pursue its
programme in this regard. The Nomination
Committee seeks to ensure the right balance of
skills, knowledge and experience on the Board,
taking account of the business model, long-term
strategy and the sectors and geographic locations
in which the Group operates.
In view of the Company’s strategy, objectives
and activities, it is important that the Board has
sufficient global manufacturing experience and
outlook, financial literacy, and is structured so that
the following experience and capabilities are
present in one or more of its Directors:
• knowledge and understanding of the business
and products of the Company and its
subsidiaries and the markets and geographies
in which the Company and its subsidiaries
operate, in particular the trends and future
developments of these markets and
geographies;
• an international background and geopolitical
exposure;
• broad board experience, including knowledge
of corporate governance issues at main board
level as appropriate for the Company with
reference to its size and international spread
of activities;
• understanding of corporate social
responsibility and sustainability matters;
• practical experience in, and relating to,
financing and accounting and/or experience
in relation to International Financial Reporting
Standards (“IFRS”), as well as in the areas of risk
management and internal controls;
• understanding of the markets where the
Company is active, in particular emerging
markets;
• science, technology and innovation expertise;
• experience and understanding of human
resources and remuneration related matters;
and
• personal qualities such as impartiality,
integrity, tolerance of other points of view,
ability to challenge constructively and act
critically and independently.
The Nomination Committee considers that all
of these aspects are present in a number of the
Directors and well represented across the Board.
It continues to assess these skills and consider
what other areas of expertise could benefit the
Board in future appointments.
Board composition
The Board is composed of 15 Directors which
comprises two Executive Directors, two Employee
Representative Directors and 11 Non-Executive
Directors, eight of whom are deemed
independent as set out in the table on page 80
and thus ensuring a majority independent Board.
The size of the Board means that input and
Board diversity and composition
challenge from various perspectives can be
provided, allowing for balanced healthy debate.
The Chairman takes care to ensure that each
Director has opportunity to comment and be
heard, whilst enabling an orderly flow at Board
meetings. The Chairman is assisted in this by the
Company Secretary and CEO through the careful
preparation of agendas and the timely provision
of papers to the Board.
Information and support for Directors
upon joining the Board, any new Director is
offered a comprehensive and tailored induction
programme across all aspects of the value chain,
with visits to key sites and meetings with senior
managers and other colleagues. Any new
members to Committees are provided with the
opportunity for a full and detailed induction,
even if they are existing members of the Board.
Relevant reference documents are also made
available on the Board portal to new Board
and Committee members.
In order to build and increase the Non-Executive
Directors’ appreciation and understanding of the
Group’s people, businesses and markets,
particularly growth markets, senior managers
are regularly invited to make presentations
at Board meetings.
There is an established procedure for Directors
to take independent professional advice in the
furtherance of their duties, if they consider
this necessary.
The Company maintains Directors’ and Officers’
liability insurance which provides appropriate
cover for legal action brought against its Directors.
In line with Dutch best practice and corporate law,
at each AGM there is a resolution to release the
Directors from liability for the exercise of their
respective duties during the financial year.
Gender
Independence
Nationality
3
10
5
8
Female
Male
No
Yes
2
1
4
6
British
Austrian
German
South African
79
R H I M A G N E S I TA
Corporate Governance Statement
continued
At the date of this Annual Report, the Board is composed as follows:
Name
Herbert Cordt
Stefan Borgas
Ian Botha
James Leng
Position
Non-Independent Non-Executive Director, Chairman1
Executive Director (CEO)3
Executive Director (CFO)3
Independent Non-Executive Director2, 3
Deputy Chairman and Senior Independent Director
David A. Schlaff
Non-independent Non-Executive Director4, 5
Stanislaus Prinz zu Sayn-Wittgenstein
Non-independent Non-Executive Director4, 5
John Ramsay
Celia Baxter
Janet Ashdown
Andrew Hosty
Independent Non-Executive Director2, 3
Independent Non-Executive Director2, 3
Independent Non-Executive Director2, 3
Independent Non-Executive Director2, 3
Wolfgang Ruttenstorfer
Independent Non-Executive Director6
Karl Sevelda
Fiona Paulus
Michael Schwarz
Franz Reiter
Independent Non-Executive Director2, 3
Independent Non-Executive Director2, 3
Employee Representative Director3
Employee Representative Director3
1 Herbert Cordt was a member of the supervisory board of RHI AG and thus not deemed to be
independent within the meaning of the uKCGC but independent within the meaning of
the DCGC due to a difference in independence requirements under the respective codes.
Year of birth
Date of
appointment
Expiry/
reappointment date
1947
1964
1971
1945
1978
1965
1957
1958
1959
1965
1950
1950
1959
20 June 2017
2020 AGM
20 June 2017
2020 AGM
6 June 2019
2020 AGM
6 October 2017
2020 AGM
6 October 2017
2020 AGM
6 October 2017
2020 AGM
6 October 2017
2020 AGM
6 October 2017
2020 AGM
6 June 2019
2020 AGM
6 October 2017
2020 AGM
20 June 2017
2020 AGM
6 October 2017
2020 AGM
6 June 2019
2020 AGM
1966
8 December 2017
8 December 2021
1962
26 October 2017
26 October 2021
5 Non-Independent within the meaning of the DCGC.
6 Mr. Ruttenstorfer is, as a result of having undertaken a management board role for RHI on a
temporary basis between June and November 2016, not considered to be independent within
the meaning of the DCGC. Notwithstanding this historic role, the Board considers
Mr. Ruttenstorfer to be independent for the purposes of the uKCGC.
that, having considered the demands of the
external appointments of each Non-Executive
Director and the time requirements from the
Company, all Non-Executive Directors are
contributing effectively to the operation of the
Board. Whilst the Non-Executive Directors are
re-elected each year at the AGM, their letters
of appointment state a term of three years.
Company Secretary
Sally Caswell was appointed by the Board as
Company Secretary with effect from 1 January
2020. The Directors have access to the advice
and services of the Company Secretary, whose
responsibilities include ensuring that Board
procedures are followed, assisting the Chairman
in relation to corporate governance matters and,
in conjunction with the General Counsel,
ensuring the compliance of the Company
with legal and regulatory requirements.
Overall Board role and leadership
Powers, responsibilities and functioning
The Board is collectively responsible for and has
the power to conduct the general affairs of the
Company. This role includes being collectively
responsible for the long-term success of the
Company, and for its leadership, strategy, values,
standards, control and management. The Board
Rules, which are available on the website, set out
those matters which are reserved for the Board to
consider. The types of decisions reserved for the
Board include, among other items, overall
responsibility for strategy and management,
major acquisitions and investments, structure
and capital, financial reporting and controls,
and corporate governance. The Executive
Management Team was installed and its main
tasks and responsibilities are to assist the Board
with its responsibilities concerning the strategy
of the Company and to make strategy
recommendations to the Board, being
accountable for implementing the Board’s
decisions, and being responsible for directing
2 Independent within the meaning of the uKCGC.
3 Independent within the meaning of the DCGC.
4 Non-Independent within the meaning of the uKCGC.
Conflict of interests
Dutch law provides that a Director may not
participate in the discussions and decision-
making by the Board if such Director has a direct
or indirect personal interest conflicting with the
interests of the Company or the business
connected with it.
Pursuant to the Articles of Association and the
rules adopted by the Board (the “Board Rules”),
the Board has adopted procedures under which
each Director is required to declare the nature and
extent of any personal conflict of interest to the
other Directors in accordance with Dutch law
and the DCGC.
Time commitment
On appointment, and each subsequent year,
Non-Executive Directors confirm that they have
sufficient time to devote to the Company’s affairs.
In addition, they are required to seek prior
approval from the Chairman before taking on any
additional external commitments, and the Board
is advised of any changes. The Board is satisfied
80
GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
and overseeing the operations of the Company.
The oversight and challenge by the Non-
Executive Directors of the management activity
ensures that the strategy of the Company
is delivered.
Pursuant to the Articles of Association, the Board
may, if it elects to do so, assign duties and powers
to individual Directors and/or committees that are
composed of two or more Directors, with the
day-to-day management of the Company
entrusted to the Executive Directors. The
Non-Executive Directors have the task of
providing strategic guidance to the management
and scrutinising the performance of duties by
the Executive Directors, as well as the general
course of affairs of the Company and the business
connected with it. They should hold the Executive
Directors to account. In addition, both Executive
Directors and Non-Executive Directors must
perform such duties as are assigned to them
pursuant to the Articles of Association and the
Board Rules or a resolution of the Board. Each
Director has a duty towards the Company to
properly perform the duties assigned to him or
her. Furthermore, each Director has a duty to act
in the corporate interests of the Company and
its business. under Dutch law, corporate interest
extends to the interests of all stakeholders of the
Company, such as shareholders, creditors,
employees and other stakeholders.
The Board as a whole is entitled to represent the
Company. Additionally, the CEO and the
Chairman, acting individually, and two Executive
Directors, acting jointly, are also authorised to
represent the Company. In addition, pursuant to
the Articles of Association, the Board may appoint
officers who are authorised to represent the
Company within the limits of the specific powers
delegated to them. The role of the Board is to lead
the Company and develop its strategy in order to
deliver long-term and sustainable success,
generating value for shareholders and key
stakeholders. The Board assesses the strategic
risks it is willing to take in pursuit of this strategy
and measures the performance of management
against agreed objectives aligned with the
strategy. The Board ensures that appropriate
controls and systems are in place to manage risk
and considers the Company culture and
practices, reviewing alignment with the purpose,
values and strategy.
The Board has delegated responsibility for
day-to-day management to the CEO and his
Executive Management Team in accordance with
the Company’s Articles of Association. The Board
has delegated some responsibilities to
Committees of the Board and these
responsibilities are outlined in the Committee
Terms of Reference available on the Company
website and summarised in their individual
reports on pages 90 to 120. The Chairman of each
Committee provides a report to each Board on the
matters discussed and resolved upon in the
respective Committee meetings.
Each Board Committee has considered the
required matters from the respective terms of
reference and, through the Board evaluation
process, has assessed its performance. The
composition of the Committees, the number of
meetings, attendance at those meetings and key
items discussed can be found in each Committee
Report on pages 90 to 120.
Individual roles
The Board has a formal Board Rules document
which covers the matters reserved for its approval
including approvals of major expenditure,
investments and key policies. The roles of
Chairman, the CEO, SID and Deputy Chairman
have been formally recorded by the Board and
these can be found on the Company website.
The composition of the Board has been structured
such that no one individual can dominate the
decision-making processes of the Board.
As reported in the 2018 report, Andrew Hosty
provides a Board level presence to the Technical
Advisory Committee (the “TAC”). As an observer
to that Committee he provides focused board
level supervision of a management committee
within the course of his role as a Non-Executive
Director, leveraging his specific engineering
and manufacturing experience. Other members
comprise members of the Executive Management
Team, senior and global R&D and Technical
Marketing Specialists. The TAC met once in 2019
and further details are outlined on page 33.
Non-Executive roles
The Employee Representative, non-independent
and independent Directors on the Board engage
with the business of the Board from different
perspectives, enabling multifaceted scrutiny to be
applied to the Board’s decision-making ensuring
that the perspective of the Company’s key
stakeholders is represented. All Directors exercise
their independent judgement and act in the best
interests of the Company in their decision-making.
Non-Independent Director roles
Stanislaus Prinz zu Sayn-Wittgeinstein, David
Schlaff and Herbert Cordt are not considered
independent under the uKCGC, having been
members of the supervisory board of RHI AG for
a number of years prior to the merger in 2017 with
Magnesita. However, because of that experience,
they contribute strongly to the Board’s culture and
personality, adding valuable insight gained
through experience of the markets in which the
Group operates and corporate memory. They can
constructively challenge the Executive Directors
and scrutinise the performance of management
in meeting their objectives in a different way to the
independent Non-Executive Directors. Stanislaus
Prinz zu Sayn-Wittgeinstein additionally is a
representative of shareholders and, with David
Schlaff, another shareholder representative,
can provide the investor perspective to the
management team and challenge them to
deliver to the agreed objectives to contribute
to the long-term and sustainable success
of the Company. The detail of all the Directors’
independence and the detail of compliance
with the criteria of each Code can be found
on pages 80 and 76 respectively.
Executive Directors
In accordance with Dutch law, an Executive
Director may not be allocated the tasks of: (i)
serving as Chairman; (ii) participating in the
adoption of resolutions (including any
deliberations in respect of such resolutions)
related to the remuneration of Executive
Directors; or (iii) nominating Directors
for appointment.
The role of an Executive Director is, amongst
other things, to bring commercial and internal
perspectives to the boardroom. The Executive
Directors, being the CEO and CFO, are
responsible for the leadership and management
of the Company according to the strategic
direction set by the Board.
Tasks that have not been specifically allocated
to a specific Director fall within the power of
the Board as a whole. The Directors share
responsibility for all decisions and acts of the
Board and for the acts of each individual member
of the Board regardless of the allocation of tasks.
Pursuant to the Articles of Association, Directors
other than the Employee Representative Directors
are appointed at the AGM by a majority of votes
cast, irrespective of the represented capital. The
Board makes nominations to the AGM for such
appointments. A resolution to appoint the Director
other than in accordance with a nomination
by the Board may be adopted at a general
meeting by an absolute majority of votes cast
representing more than one-third of the
Company’s issued capital.
Non-Executive Directors (other than Employee
Representative Directors) will be nominated
for a term of three years, subject to satisfactory
performance and annual re-appointment at the
AGM. Employee Representative Directors are
appointed for a term of not more than four years.
The term of office for each Director (other than
Employee Representative Directors) will end
on the day of the AGM in the year following
appointment. Pursuant to the Articles of
Association, Directors may be re-appointed for
an unlimited number of terms, but it is anticipated
that the Non-Executive Directors (other than
Employee Representative Directors) may be
offered a second term of three years, at the expiry
of which they will not ordinarily be considered
for re-appointment.
The shareholders have the power to suspend
or remove a Director at any time, by means of a
resolution for suspension or removal as outlined in
the Articles of Association. The shareholders are
authorised to resolve to amend the Articles of
Association, on the proposal of the Board.
81
R H I M A G N E S I TA
Corporate Governance Statement
continued
Board attendance
2019
Total
attended
Total meetings eligible
to attend
Herbert Cordt
Jim Leng
Celia Baxter
Andrew Hosty
John Ramsay
Stanislaus
Sayn-Wittgenstein
Wolfgang
Ruttenstorfer
Karl Sevelda
David Schlaff
Janet Ashdown
Fiona Paulus
Michael Schwarz
Franz Reiter
Stefan Borgas
Ian Botha
8
9
9
8
8
9
9
9
9
7
8
7
7
9
6
9
9
9
9
9
9
9
9
9
9
9
9
9
9
6
1 In the year, two Board sub committees were held to approve
matters specifically delegated by the Board in accordance
with article 17.5 of the Company’s Articles of Association.
These are not included in the table above.
2 Fiona Paulus and Janet Ashdown attended meetings up to
and including 6 June 2019 as observers, being nominated
Non-Executive Directors.
3 Ian Botha was appointed as CFO on 1 April 2019 and attended
meetings between that time and 6 June 2019 as a member
of the Executive Management Team.
4 Two meetings were called on short notice which restricted
attendance where Directors had existing commitments.
5 Herbert Cordt missed one meeting as a result of ill health
Board leadership
Meetings and decision-making of the Board
The Board commits to meeting regularly
throughout the year with five formal two-day
sessions in Vienna, which allows time for Board
committees to sit, and a further two formal
sessions held in a location other than Vienna. One
is in advance of the AGM in the Netherlands and
one is at a key operational site. In 2019, this was at
Contagem, Minas Gerais, Brazil and in 2020 is
planned to be at Dalian in China. Board meetings
can also be convened as deemed necessary by
the Chairman or the SID.
At the end of each Board meeting, the Non-
Executive Directors meet without the Executive
Directors and management present to enable an
open and frank exchange of views and assessment
of performance. Additionally, the SID holds a
meeting with the other Non-Executive Directors to
assess the Chairman’s performance in the course
of the year. The Chairman and the other Non-
Executive Directors will regularly have informal,
individual, meetings with the Executive Directors
and other senior managers in the business for
the purpose of clarifying information in response
to questions or to obtain further information on
points of interest and which contributes to the
development of both the Non-Executive
Director and the management member.
Board papers are circulated in advance of
meetings, using a secure web-based portal, to
allow Directors sufficient time to consider their
content prior to the meeting. The management
team continues to take feedback from the Board
via the evaluation process on how papers and
presentations can be improved to assist the flow
of the meeting. An information room within the
web portal provides access to useful information,
including corporate governance reference
materials, analyst reports, and Company finance,
treasury and strategy information.
In making decisions, the Board considers views
from across its key stakeholder groups. As covered
above, there have been many opportunities for
engagement and discussion with members of the
workforce from across the globe and the Board’s
own Employee Representative Directors provide
a direct voice in the Board room on a range of
matters, but particularly those which impact the
workforce. In 2019, these decisions have included
upgrades to plants and offices to improve the
working lives of the workforce. The voice of this
stakeholder group has also been considered in
the context of business performance and the
economic environment. The Board recognises
the balance of these factors in acting in the best
interests of the Company, and if a decision is
made, such as to place a plant on care and
maintenance, which does not benefit that group
of employees, efforts are made to mitigate the
impact on them and transparently communicate
the decision. This aligns with the Company values
to be open in decision making and accountable
for actions taken.
As per the uKCGC, excluding the Chairman,
at least half of the Board is comprised of
Non-Executive Directors determined to be
independent. The Board has considered the
independence of the Non-Executive Directors,
including potential conflicts of interest, and the
table on page 80 sets out those Directors
considered independent. Each of these Directors
has also confirmed that there is no reason why
they should not continue to be considered
independent.
The Chairman’s other significant commitments
are set out in the table below:
Name of company
Function
CORDT & PARTNER
Management- und
Finanzierungsconsulting
GesmbH.
Managing Partner
Watermill Group Boston
Advisory Board member
Georgetown university,
School of Foreign Service,
MSFS Program
Quality Metalcraft /
Experi-Metal, Inc.
Advisory Board member
Advisory Board member
Cooper & Turner Group
Advisory Board member
Board attendance
Seven Board meetings were planned for the year
(2018: 10), with two meetings held at short notice
on specific items. Where short notice was
provided, information was provided to all Directors
in advance and comment was received from them
and considered at the meeting in respect of the
matters discussed.
The table below shows the number of scheduled
meetings attended and the maximum number
of scheduled meetings which the directors
were eligible to attend. Only in exceptional
circumstances would Directors not attend Board
and Committee meetings. Similarly, every effort
is made to attend ad hoc meetings either in
person or via the use of video or telephone
conferencing facilities if necessary. None of our
Non-Executive Directors have raised concerns
over the time commitment required of them
to fulfil their duties.
On the evening before most scheduled board
meetings the Board and management team meet
together, and this time is usefully spent sharing
views and considering issues impacting the
Company, making the most of the two-day
session. Time together also helps to develop
relationships contributing to better discussion
and decision-making around the board table.
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GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
The Board has had the opportunity to meet
customers in its key market areas and Directors
have directly observed the interaction between
management and their customers. The
Company’s Net Promoter Score is also considered
at Board meetings. This input brings customer
priorities to the forefront of considerations and
the Board utilises it to challenge management
accordingly to meet customers’ expectations.
The perspectives of shareholders and market
analysts is represented at Board meetings with
reports from the Investor Relations Team and
coverage from a variety of analysts regularly
provided to the Board, in addition of course,
to the representation of shareholders from two
non-independent Non-Executive Directors.
These perspectives are considered by the
Board, in a variety of discussions and decisions,
including those on capital expenditure and
share capital management.
Areas of focus
In 2019, the Board focused on strategic, financial,
operational, business, risk, human resources
and governance issues. More specifically,
they considered: matters of health & safety,
performance of particular plants and action plans
to address any issues, opportunities for business
development, acquisitions, financial health of the
Group as a whole, customer feedback, employee
feedback, input from local authorities, risks to
execution of initiatives, the development of
recycling initiatives and low carbon products,
amongst many more items. Action logs
ensured a continuous overview of progress
and development.
Board evaluation
As advised in the 2018 Annual Report and
Accounts, Lintstock are engaged on a three-year
programme to assist the Board in its evaluation
of its performance. The Company has no other
relationship with Lintstock. Prior to commencing
this second stage of the three year programme,
the Board considered the good progress made
against actions from the previous year under the
headings of Board Composition, Stakeholder
Engagement, Board Dynamics, Board Materials,
Board Support & Training, Management & Focus
of Meetings, Board Committees, Strategic
Oversight, Risk Management and Internal
Control and Board Remuneration.
In this second year of review, Lintstock undertook
a full Board evaluation process with a detailed
questionnaire issued to all of the Board and the
Executive Management Team, which then
informed individual confidential face-to-face
interviews with each member of the Board. In
order to promote an open and frank exchange of
views, appropriate arrangements were made to
ensure the anonymity of the respondents.
The review covered core areas of the Board and
Committee performance, with particular focus on:
• Board composition and diversity;
• Board Committee effectiveness;
• stakeholder oversight;
• culture and organisational behaviours;
• Board dynamics, structure and support;
• quality of discussion and relationships
between Directors and management;
• strategic oversight and discussion;
•
focus on risk and oversight of risk management
and internal controls;
• effectiveness of management and succession
planning; and
• oversight of talent management and
development.
A review of the Chairman's performance was
also completed as part of this process which
supported the SID in leading an assessment of
the Chairman’s performance with the other
Non-Executive Directors.
The Board has considered the 2019 review, which
evidenced considerable progress from 2018,
and has drawn up an action plan to be progressed
throughout 2020. This will be reported on in the
2020 Annual Report & Accounts.
Statement of Directors' responsibilities
The Directors are responsible for preparing the
Company’s Annual Report. The Company’s
Annual Report comprises the Strategic Report,
the Governance Report, the Consolidated
Financial Statements, and some other
information. The Directors are responsible for
preparing the Annual Report in accordance with
applicable law and regulations. The Directors are
required by law to prepare the Annual Report for
each financial year. The Directors have prepared
the Annual Report in accordance with 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.
In preparing the Annual Report, the Directors
are required to:
a) select suitable accounting policies and then
apply them consistently;
b) make judgements and accounting estimates
that are reasonable and prudent;
c) state whether applicable IFRS as adopted by
the European union and the relevant
provisions of the Dutch Civil Code have been
followed, subject to any material departures
disclosed and explained in the Annual
Report; and
d) prepare the Annual Report on the going
concern basis, unless it is inappropriate to
presume that the Company will continue
in business.
The Directors are responsible for keeping
adequate accounting records that are sufficient
to show and explain the Company’s transactions
and disclose, with reasonable accuracy at any
time, the financial position of the Company and
the Group and enable them to ensure that the
Annual Report complies with applicable law and,
as regards the consolidated financial statements,
Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of the
Company and the Group and hence for taking
reasonable steps for the prevention and detection
of fraud and other irregularities.
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, 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;
• 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 55 (the
“Viability Statement”) of the integrated report
and accounts. The Financial Statements on
pages 121 to 223 were approved and signed
by the Board on 31 March 2020.
83
R H I M A G N E S I TA
Board of
Directors
1
5
9
2
6
10
3
7
11
4
8
12
13
14
15
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GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Board members by gender
Male
77%
Board Committee member
Female
23%
Nomination Committee
N
Remuneration Committee
R
A
Audit Committee
N
Chair of Committee
Corporate Sustainability Committee
S
Chairman
CEO
Chief Financial Officer
N
2. Stefan Borgas
CEO
3. Ian Botha
Chief Financial Officer
Appointment date: October 2017
Nationality: German
Appointment date: April 2019
Nationality: South African / British
Stefan was CEO at RHI AG from
December 2016 until October 2017. Prior
to that, he was president and CEO at Israel
Chemicals Ltd and between 2004 and
2012, he was CEO at Lonza Group. In his
early career, he worked at BASF Group,
where he held various management
positions. Stefan was elected as President
of the World Refractories Association for
a two-year term in January 2018.
Stefan has a business administration
degree from the university Saarbrücken
and an MBA from the university of
St. Gallen-HSG.
External appointments: Non-Executive
Director of SCR-Sibelco and owner of SB
Industry LLC.
Ian has enjoyed a highly successful
career with FTSE listed Anglo American
plc in the related mining and metals
industry for over 20 years. Whilst there,
he held a variety of international
executive roles including as Group
Financial Controller and divisional Chief
Financial Officer, and most recently
as Finance Director of listed Anglo
American Platinum. Ian has significant
experience in finance and accounting,
investor relations, strategy, M&A and
governance, as well as excellent business
acumen and a track record in financial
and performance improvements.
Ian holds a Bachelor’s degree in
Commerce from the university of Cape
Town and is a chartered accountant.
External appointments: none.
1. Herbert Cordt
Chairman and Non-Independent
Non-Executive Director
Appointment date: October 2017
Nationality: Austrian
Herbert was Chairman of the Supervisory
Board of RHI AG from 2010 until 2017,
as well as Vice-Chairman from 2007 to
2010. He is Managing Partner at Cordt &
Partner GmbH, his international boutique
corporate finance consultancy, which
advises clients on corporate finance
matters, and for a time was a member
of the cabinet of the Austrian Federal
Finance Minister. In the course of his
career he has held a variety of senior
executive and managing director
positions in telecommunications and
financial institutions in European firms,
providing a wide range of business
acumen and international experience.
Herbert obtained a Doctorate in Law from
university of Vienna, graduated from
the Diplomatic Academy of Vienna and
received a Master’s of Science in Foreign
Service from Georgetown university
Washington D.C.
External appointments: Watermill Group
Boston (Advisor), Cooper & Turner Group
(Advisory Board Member), Quality
Metalcraft / Experi-Metal, Inc.
(Advisory Board Member), CORDT &
PARTNER Management und
Finanzierungsconsulting GesmbH
(Managing Partner), Georgetown
university, School of Foreign Service,
MSFS Program (Advisory Board Member).
Non-Independent
Non-Executive Director
4. David A. Schlaff
Non-Independent Non-Executive
Director
Appointment date: October 2017
Nationality: Austrian
David was a member of the Supervisory
Board at RHI AG from 2010 until 2017.
Currently Chief Investment Officer and
joint Managing Director at M-Tel, he
has key management and supervisory
experience in international financial
and manufacturing institutions. He has
undertaken roles at LH Financial Services
Corporation and Forstmann-Leff
Associates Inc, and he has held advisory
and supervisory board positions at
Latrobe Specialty Steel Company
and A/S Ventspils Nafta.
David holds a Bachelor’s degree
in Business Administration from the
Interdisciplinary Center Herzliya in Israel.
External appointments: M-Tel Holding
GmbH (Chief Investment Officer and
Joint Managing Director).
5. Stanislaus Prinz zu
Sayn-Wittgenstein-Berleburg
Non-Independent Non-Executive
Director
Appointment date: October 2017
Nationality: German
Stanislaus was a member of the
Supervisory Board of RHI AG between
2001 and 2017. He has been a member
of Supervisory Boards for several
"Stadtwerke" (municipality owned
utilities) and Didier Werke AG as well as
undertaking senior executive roles,
including CEO and Chief Financial
Officer, in the energy industry, and
numerous management roles within the
EON group. He has also been a Director
in the Investment Banking Division, at
Deutsche Bank AG. He has deployed
industrial knowledge combined with
financial detail throughout his career.
Stanislaus holds a Sloan Fellows Master’s
in Business Administration from MIT
Sloan School of Management and
studied Business Administration and
Economics at université de Fribourg.
He is a Chartered Financial Analyst (CFA).
External appointments: Supervisory
Board member at Endurance Capital AG
and Cognostics AG. CEO of STuV
Steinbach & Vollmann Holding GmbH.
85
R H I M A G N E S I TA
Board of Directors
continued
Deputy Chairman
Independent Non-Executive Directors
7. Celia Baxter
Independent Non-Executive Director
R
N
8. Janet Ashdown
Independent Non-Executive Director
S
9. John Ramsay
Independent Non-Executive Director
A
Appointment date: October 2017
Nationality: British
Appointment date: June 2019
Nationality: British
Appointment date: October 2017
Nationality: British
Celia was Director of Group Human
Resources for Bunzl plc for 13 years. Prior
to that she served as Head of Human
Resources of Enterprise Oil plc, having
been Director of Group Human
Resources at Tate & Lyle plc. She started
her professional career at the Ford Motor
Company where she held several
management positions and went on to
provide consulting services in Human
Resources at KPMG. She now holds a
number of non-executive positions which
deploy her detailed understanding of
international businesses, human
resources, remuneration, sustainability
and related matters.
Celia holds a PhD and BSc in Botany from
the university of Reading.
External appointments: Bekaert SA
(Non-Executive Director), HR Tech LLP
(Partner), and Senior plc (Senior
Independent Director, Chair of
Remuneration) and DS Smith plc
(Non-Executive Director and Chair
of Remuneration).
Janet has had a distinguished career
working for BP plc for over 30 years,
holding a number of international
executive positions throughout the value
chain. until the end of 2012, Janet was
CEO of Harvest Energy Ltd and throughout
her career has provided leadership
through change. Janet also has a wide
range of board and committee experience
as a Non-Executive Director, including the
uK Nuclear Decommissioning Authority,
a public body where she chairs the Safety
and Sustainability Committee. Her
experience in the energy sector has
provided her with significant skills in
general management, particularly in
environmental & sustainability matters.
Janet holds a BSc in Energy Engineering
from Swansea university.
External appointments: Non-Executive
Director and Chair of Safety &
Sustainability at Nuclear Decommissioning
Authority uK, Non-Executive Director and
Chair of Remuneration at Victrex plc,
Senior Independent Director and Chair
of Remuneration Committee at
Marshalls plc.
John has held senior financial executive
roles across the world, including serving
as Chief Financial Officer of Syngenta
AG, as well as being their Interim CEO for
a period. John started with Syngenta AG
as Group Financial Controller in 2000
and prior to that was Finance Head of Asia
Pacific for Zeneca Agrochemicals. Earlier
in his career he was a Financial Controller
of ICI Malaysia and regional controller for
Latin America. He started his career
working in audit and tax at KPMG and his
knowledge in accounting and finance
provides valuable practical experience.
John is a Chartered Accountant and also
holds an Honours Degree in Accounting.
External appointments: Koninklijke DSM
N.V. (Supervisory Board Member), G4S
plc (Non-Executive Director, Chair of
Audit), Croda plc (Chair of Audit and
Non-Executive Director).
6. James Leng
Deputy Chairman, SID and Independent
Non-Executive Director
N
R
Appointment date: October 2017
Nationality: British
James has been the Chairman of Corus
Group plc, HSBC Bank plc and Nomura
European Holdings plc over the course
of his wide-ranging career in finance and
manufacturing. Other directorships have
included AON plc, Alstom SA, Pilkington
plc, Hanson plc, IMI plc, TNK-BP and lead
Non-Executive Director at the uK’s
Ministry of Justice. In an executive
capacity, James was CEO of two publicly
listed companies: Laporte plc, and Low &
Bonar plc. His early career was spent at
John Waddington plc, where he was
Managing Director of a number of their
subsidiaries. James brings with him
extensive experience in listed
environments and of corporate
governance matters. He also has
demonstrated knowledge and
experience of all matters of general
management, including manufacturing
and supply chains.
External appointments: Guyll-Leng
Charitable Trust, (Chairman), Frogmore
Property (Advisory Board Director), AEA
Investors (Advisory Board Director)
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GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Board committee member
Nomination Committee
N
Remuneration Committee
R
A
Audit and Compliance
N
Chair of Committee
Corporate Sustainability Committee
S
Independent Non-Executive Directors
Employee Representative
Directors
10. Wolfgang Ruttenstorfer
Independent Non-Executive Director
A
12. Andrew Hosty
Independent Non-Executive Director
S
13. Fiona Paulus
Independent Non-Executive Director
A
S
14. Franz Reiter
Employee Representative Director
Appointment date: October 2017
Nationality: Austrian
Appointment date: October 2017
Nationality: British
Appointment date: June 2019
Nationality: British
Appointment date: October 2017
Nationality: Austrian
Franz has been with the Group since 1977
and is Chairman of the Group Works
Council at Veitsch-Radex GmbH.
External appointments: none.
15. Michael Schwarz
Employee Representative Director
Appointment date: December 2017
Nationality: German
Michael has been with the Group since
1983 and is a member of the workers
council at Didier Werke AG.
External appointments: none.
Fiona has over 37 years’ global
investment banking experience, having
held senior management roles with a
number of leading international
investment banks, such as Credit Suisse,
Royal Bank of Scotland, Deutsche Bank
and Citigroup. During her career, Fiona
has led and managed a variety of global
banking businesses, from start-ups to
businesses with uS$ 4 billion in total
revenues. Additionally, Fiona has advised
companies in over 70 countries in the
global energy & resources sectors on
various strategic initiatives, including
M&A, equity and debt financings,
and risk management.
Fiona has a BA in Economics from
university of Durham.
External appointments: Interpipe Group
(Non-Executive Director), Redcliffe
Advice (Managing Director).
Andrew is an international business
leader with over 15 years of non-executive
board experience and 30 years of
executive and management experience.
Throughout his career he has held a
number of senior executive roles primarily
in specialist materials manufacturing,
including Chief Executive of the Sir Henry
Royce Institute for Advanced Materials
and Chief Operating Officer at Morgan
Advanced Materials plc. At the latter
company he held a number of senior
positions, including CEO of Morgan
Ceramics. He was previously a
Non-Executive Director of Fiberweb plc
and has been President of the British
Ceramics Confederation. Andrew
provides technological and scientific
expertise combined with practical and
commercial insights. He also has a
detailed understanding of Health
& Safety best practice from his
executive career.
Andrew is a Fellow of the Royal Academy
of Engineering. He has a PhD in
Engineering and a BSc in materials
science.
External appointments: Senior
Independent Director at James Cropper
plc and Non-Executive Director at: Rights
and Issues Investment Trust plc, Consort
Medical plc (to February 2020), mOm
Incubators Ltd.
Wolfgang was a member of the
Supervisory Board of RHI AG from 2012 to
2017, where he acted as the Interim CEO
for six months, following the sickness-
related absence of the CEO. He started his
professional career in oil and gas at OMV,
where he became CEO and then
Chairman of the Management Board. He
has held numerous supervisory board
roles, including as Chairman, in industries
such as telecommunications, real estate,
healthcare and insurance. Wolfgang also
served as Secretary of State in the Austrian
Federal Ministry of Finance. His varied
career brings a wide range of strategic
and business management experience.
Wolfgang graduated from the Vienna
university of Economics and Business.
External appointments: Supervisory
Board member at: Flughafen Wien
Aktiengesellschaft, NIS j.s.c. Novi Sad
(to June 2019), Erne Fittings GmbH and
Management Board member at CollPlant
Holdings, Ltd (to December 2019).
11. Karl Sevelda
Independent Non-Executive Director
R
Appointment date: October 2017
Nationality: Austrian
Karl progressed to CEO of Raiffeisen Bank
International AG after being Deputy CEO
and undertaking management roles in
the Raiffeisen Bank group where he was
responsible for corporate customers and
corporate, trade and export finance
worldwide. Prior to this, he held several
senior management positions in
Creditanstalt-Bankverein where he
focused on corporate and export finance.
Additionally, he has held the position of
Secretary to the Federal Minister for Trade
and Industry of Austria.
Karl holds a Master’s and Doctorate
Degree from Vienna university of
Economics and Business.
External appointments: Supervisory
Board member at: Siemens
Aktiengesellschaft Österreich.
SIGNA Development Selection AG,
SIGNA Prime Selection AG,
Liechtensteinische Landesbank AG.
Crematories & Funerals AG, and
Management Board member at Custos
Privatstiftung.
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R H I M A G N E S I TA
Executive
Management Team
2
5
8
3
6
8
1
4
7
88
GOVERNANCE 1. Stefan Borgas
CEO
2. Ian Botha
Chief Financial Officer
For full biographies, see
page 85
R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
3. Gustavo Franco
Chief Sales Officer
Gustavo was appointed Chief Sales
Officer in January 2019, prior to which he
was Senior VP of Process Industries and
Minerals. He joined Magnesita in 2001 as
a Technical Marketing Engineer, after
finishing his Bachelor’s degree in
Mechanical Engineering at the Federal
Center for Technological Education of
Minas Gerais and since then has
developed his career in the refractory
industry. Over the course of six years,
he progressed through various sales
managerial roles in South and North
America and was part of the Executive
Committee of Magnesita Refratários from
2015 to 2017. In 2018 he completed the
Senior Executive Programme with
the London Business School.
4. Thomas Jakowiak
Executive Vice President:
Integration and Project Management
After studying applied geosciences at the
university of Leoben, Thomas started his
professional career as a sales engineer
with R&A Rost GmbH. In the year 2000,
he joined the RHI Group and was soon
put in charge of the sales management
for the business unit in the Asia-Pacific
region. Since 2005, he has been the
Head of the Cement/Lime segment and
was appointed to the Management Board
of RHI AG as Chief Sales Officer of the
Industrial Division at the beginning of
the year 2016.
8. Ticiana Kobel
General Counsel
Ticiana has extensive legal experience in
a wide range of global businesses, such
as SR Technics Group and Bühler Group,
leading legal departments in
manufacturing, aviation, technology,
service sector and engineering industries.
In these roles, she was in charge of crucial
projects pertaining to varied matters,
such as spin-offs, sales and acquisitions,
and corporate governance issues,
and assisted with the design and
implementation of Compliance
functions, mergers and acquisitions, and
partnerships. Ticiana has a law degree
with an emphasis in corporate law from
Federal university of Minas Gerais and
an LLM in International Economic Law
and European Law at the university
of Geneva.
9. Luiz Rossato
Executive Vice President
Corporate Development
Luiz joined Magnesita Refratários in 2008
as General Counsel, and in 2012 became
Vice President of Legal, M&A and
Institutional Relations, and member of the
Executive Committee. He has worked in
renowned international law firms in Brazil,
including Mattos Filho and Quiroga
Advogados, where he specialized in
M&A, Capital Market and Corporate
Law transactions. He graduated in law
at Mackenzie Presbyterian university in
Brazil and in 2012 he received the
“General Counsel of the Year – Latin
America” award by the International Law
Office and the Association of Corporate
Counsel. In 2013, he attended the
Advanced Management Program at
Wharton university in the united States.
5. Simone Oremovic
Executive Vice President People
and Culture Management
Simone joined RHI Magnesita in an
executive capacity in November 2017,
and her role covers Human Resources,
Culture and Corporate Communications.
Simone has 20 years of experience in
Human Resources. She started her
career at General Electric where her
main focus was on leadership and
talent management, as well as Human
Resources process. She is a certified Six
Sigma Master Black Belt. She has held
leading Human Resources roles in
Telekom Austria Group, IBM Austria, and
Baxter AG. Simone has a degree from the
European Business School (Paris) and of
the Economic university of Vienna.
6. Luis Rodolfo Bittencourt
Chief Technology Officer
Luis worked for Magnesita for 31 years
and has held several positions in his
career in the refractory and mining
industry including Mining/ Geology
Manager, Technical Purchasing Manager,
Plant Manager, and R&D VP. He is
currently President of Magnesita
Refratários in Brazil and the Brazilian
Refractory Producers Association.
He holds a Bachelor's degree in mining
engineering from the Federal university
of Minas Gerais, a Master’s degree in
Metallurgical Engineering from the
university of utah, and a PhD degree
on Ceramic Engineering from the
university of Missouri.
7. Gerd Schubert
Chief Operations Officer
After completing his doctorate in mineral
engineering at RWTH Aachen, Gerd
started his career at Degussa AG, where
he held several positions including:
manager of a Brazilian plant, Technical
Director and Plant Group Manager.
Following the acquisition by Ferro
Corporation, he managed the production
and technology divisions as Global
Operations and Restructuring Director.
In early 2014, he took over the function of
Chief Operating Officer at the Pfleiderer
Group and was appointed to the
Management Board of RHI AG as Chief
Operating Officer /Chief Technical
Officer in January 2017.
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R H I M A G N E S I TA
Nomination
Committee report
Committee purpose and responsibilities
Principal duties
The purpose of the Committee is to support the
Board in ensuring that the composition of the
Board, and its committees, remains appropriate
for the leadership needs of the Company in the
context of an evolving external environment.
Despite its long industrial heritage, in many ways
RHI Magnesita is still a young company having
only been listed on the London Stock Exchange
since 27 October 2017. The Committee is focused
in ensuring that the Board has the competencies
and depth of skills at the Board table to meet the
demands of a developing global business. At
the heart of the Committee’s work is an ongoing
assessment of the Board’s collective skills,
knowledge, competencies and experience, whilst
paying particular attention to independence
and diversity. The Committee is now focusing on
succession plans for Directors and other senior
executives, whilst paying due regard to the
benefits of diversity in both these teams.
Whilst all Board succession planning, processes
and preparations are led by the Nomination
Committee, these are very important Board
topics, and as such appointments are agreed
with the Board as a whole.
The uKCGC enables the Committee to ensure
its activity was focused in the appropriate areas
and its Terms of Reference were appropriately
updated. Its programme during the year is
summarised in the "Activities" section below.
Committee composition, skills and
experience
The Nomination Committee was appointed by the
Board and comprises three members, a majority of
whom are independent Non-Executive Directors.
The Nomination Committee comprises Herbert
Cordt (Chairman), James Leng and Celia Baxter.
The composition of the Nomination Committee is
compliant with the uKCGC and the DCGC, and
a summary of their skills and experience can be
found on page 85 to 87.
Dependent on the specific nature of the issue
being considered by the Committee, when
requested, other members of the Board and
Executive Management Team attend meetings
of the Committee and provide input.
Attendance at Nomination Committee meetings
in 2019:
Member
Herbert Cordt
Celia Baxter
James Leng
Attended
4/4
4/4
4/4
Activities during the year
In 2019 the Committee considered a number
of matters, including Board Committee
composition, the time commitment required
from Non-Executive Directors ("NEDs"), the Board
profile, including the required skills of key Board
roles, and succession planning, together with
Board diversity and independence. In addition,
the Committee led the process of reviewing
progress against the Board actions identified in
2018 as part of the Board review and also led the
process for the 2019 evaluation programme.
Committee composition
In the year under review, the Nomination
Committee, in consultation with the respective
Chairmen of the Audit & Corporate Sustainability
Committees, considered their membership in
view of the new Directors appointed in 2019.
Considering the skills and experience of each
Director, Fiona Paulus was appointed to the
Corporate Sustainability Committee upon her
formal appointment in June and joined the
Audit Committee in September. Andrew Hosty,
with his substantive industrial and technical
experience, continued as a member of the
Corporate Sustainability Committee and to sit
on the TAC as an observer, stepping down from
the Audit Committee.
Time commitment from NEDs
An important part of the uKCGC is that the Non-
Executive Directors dedicate sufficient time to
meet their Board responsibilities. The Committee
considered, as it does annually, the review of time
required from the Non-Executive Directors to fulfil
their duties satisfactorily, which it was happy to
confirm that they did.
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GOVERNANCE
R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
The Committee continued to play a key role
in formulating the diversity agenda within
the Boardroom and the wider company. In
addition to increasing female representation
on the Board and the Executive Management
Team, RHI Magnesita, with operations in 39
countries, is enriched by a variety of talent with
international experience and varied expertise.
The Committee, and the Board, will continue to
support this approach to people development,
ensuring that talent, regardless of gender and
background, enjoys career progression within
RHI Magnesita. We are convinced that this will
play a key role in supporting our business strategy
over the long term for the benefit of the Group
and its shareholders. More details on the Group’s
Diversity and Inclusion work and the gender
balance of those in the senior management
and their direct reports can be found on
pages 70 to 71.
Board Evaluation
In 2018 the Nomination Committee led the design
and introduction of a three-year independent
Board review programme. The outputs of this
first review were diligently considered by the
Board and several changes were introduced.
These changes included improvements to the
information flow to Directors, assisting in their
ability to debate and challenge the executive.
The Directors’ interaction with the management
team was also further developed.
The Committee also led the preparation for the
2019 review, the second year in this programme.
Again, externally facilitated, the review for the
Directors also included the wider Executive
Management team. This year’s review was
complemented with individual and confidential,
personal interviews with each Director. The Board
received a presentation of the review, debated
the findings, and agreed a programme for the
year ahead with a view to further improving
its effectiveness. More detail can be found on
page 83 as to the matters considered and the
response to actions.
Herbert Cordt
Chair of Nomination Committee
Board profile and role profiles
In compliance with the DCGC, the Nomination
Committee considered and recommended for
publication on the Company’s website, the 2019
Board profile. This covers the required skills,
experience, composition and expertise of the
Board Directors with reference to the needs of the
Company, ensuring that these were represented
on the Board. The Committee was pleased
to conclude that these needs were indeed
represented in the Board as a whole.
Additionally, the Committee reviewed the roles
of the CEO, Chairman of the Board and the Senior
Independent Director and Deputy Chairman.
These were approved by the Board and are now
published on the Company’s website.
Succession planning
Over the course of the year, the Committee
initiated a comprehensive succession planning
programme, specifically in relation to all senior
management to meet the Company’s needs as
it develops internationally with its product and
customer service capabilities.
Board Diversity
As highlighted above, the Committee supports
the Board in pursuing its diversity agenda.
Whilst the Board currently enjoys a rich mix
of nationalities, gender, skills, experience and
expertise and notwithstanding the considerable
progress that has been made, the Board
recognises that it has further to go, specifically in
having one third of female Directors. It is planned
that this will be achieved during 2021. This
recognizes that the Board is still a young one, in
terms of appointments, and to avoid disruption
to the successful operation of the Board which
has been developed over the past two years, an
evolutionary approach would be beneficial.
All new Board appointments are, and will
continue be, made on merit and underpinned
by the specific skills and experience which
candidates can bring to the overall Board
composition. As outlined in the Chairman’s
introduction to the Corporate Governance
section, the appointment of Janet Ashdown and
Fiona Paulus in 2019 exemplified this approach.
In addition to increasing female representation on
the Board to 23%, half of the Board Committees
are now chaired by women. In addition, the
gender representation on our Executive
Management Team and their direct reports has
grown to 17%, an increase of 5% in the year.
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R H I M A G N E S I TA
Corporate
Sustainability Committee
report
extremely sad to report that we experienced two
fatalities during the year. In Brazil, an employee
died following medical complications after
an occupational accident, while in Turkey, an
accident while unloading raw materials led to the
death of a contractor. Loss of life is unacceptable
in the course of our business. We have thoroughly
investigated both cases and taken corrective
action to minimise similar risks in future.
A third area of Committee focus during 2019
has been to improve gender diversity in the
Company. We have committed to achieve 33%
female representation on our Board and among
senior leadership. With three women Directors,
the Board is close to achieving our target, but
the number of women in senior leadership has
not yet kept pace. This may be partly explained
by our recent merger and the challenges of
building a new corporate culture, as well as the
male-dominated nature of our industry. Yet this
makes us even more determined to effect change.
Significant work is underway to listen to our new
women’s network and to modify ways in which
we recruit, retain and promote women.
Climate action, Health and Safety and gender
diversity were deemed our most significant issues
following a process of stakeholder engagement
and materiality analysis. We also address a
range of environmental and social issues, from
air emissions to human rights and community
investment. In addition, we are working to embed
sustainability into our business, ensuring we have
the right governance structures and processes,
metrics, strategies and targets in place.
During the first year of the Corporate
Sustainability Committee, we have built strong
foundations and made significant progress
on most fronts. I would like to thank my fellow
Directors, the Sustainability Steering Committee
and Executive Management Team for their hard
work, as well as the many stakeholders who have
provided valuable feedback and support. As we
continue our journey, we aim to remain a trusted
and valued partner whether as an employer,
supplier or member of the communities in
which we operate.
Janet Ashdown
Chair of the Corporate Sustainability Committee
Meeting attendance during 2019
Member
Attended
Janet Ashdown (Chair)
Fiona Paulus
Andrew Hosty
3/3
3/3
3/3
In 2019, the new Corporate Sustainability
Committee met formally three times following the
AGM, where two of its members were appointed
by shareholders.
The Committee will meet regularly each year to
help steer the Company in a rapidly changing
business environment.
Activities during the year
As chair of the new Corporate Sustainability
Committee, I’m delighted to report on progress
during the year.
Set up in early 2019, the Committee’s first
priority is to steer the Company on its path to
decarbonisation. The climate crisis is the defining
challenge of our time and its severity and urgency
became ever more apparent in 2019. Our goal
is to ensure that RHI Magnesita can transition
and succeed in a low-carbon economy. To do
so, we must assess and respond to climate risks
and opportunities as they evolve. In addition, we
must continue to challenge our level of ambition.
In 2019, for example, we effectively doubled our
target, from 10% (Scope 1 and 2 emissions) per
tonne of production to a target of 15% which also
includes Scope 3 emissions from raw materials,
a leader in the refractories industry.
Since emissions in our value chain, especially
among steel and cement industries, can be
greater than our direct emissions, we are evolving
our business model to offer full-service solutions.
Through low-carbon products, recycling
and other services, we can help customers
to significantly reduce their energy use and
associated emissions. We are partnering with
customers, universities and others to develop
the technologies needed to decarbonise heavy
industries. Lastly, we aim to communicate our
progress transparently and are assessing how
we can report against the Taskforce on Climate-
Related Financial Disclosures ("TCFD"). We
were pleased to receive a C for our first climate
submission to the CDP (formerly the Carbon
Disclosure Project).
Health and Safety is another key focus area
for the Committee and 2019 saw our best
LTIF performance. Nevertheless, we cannot
afford even the slightest complacency. I am
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Audit Committee report
We are pleased to present the Audit Committee
report for the year-ended 31 December 2019. The
Committee continues to ensure the integrity and
transparency of corporate reporting, that external
audit remains independent and it evaluates
the robustness of internal controls and risk
management processes.
The Audit Committee advises the Board in
relation to the financial reporting process, risk
management and its other responsibilities and
prepares resolutions of the Board in relation
thereto. The main responsibilities of the Audit
Committee focus on activities of the Board
with respect to:
• supervising and monitoring the effect of
internal risk management and control
systems, including supervision of the
enforcement of the relevant legislation and
regulations, and supervision of the effects of
the Code of Conduct;
• advising the Board on the Group’s overall risk
appetite and tolerance;
• overseeing and advising the Board on the
•
recommending the appointment of an
external auditor by the General Meeting; and
• maintaining regular contact with and
supervising the external auditor.
Composition and Governance
The Committee is governed by terms of
reference reviewed annually by the Committee
for recommendation to the Board for approval.
It executes its duties and responsibilities in line
with these terms of reference for the Group’s
accounting, financial reporting practices and
finance function, external audit, Internal Audit
and internal control, integrated reporting,
risk management and IT (information and
technology) governance.
The Audit Committee comprises three members,
all of whom are considered independent
Non-Executive Directors. Appointments to the
Committee are made by the Board. The Board has
satisfied itself that the Committee’s membership
includes Directors with recent and relevant
financial experience.
current risk exposures of the Group and future
risk strategy;
The members of the Committee that served
during the year 2019 were:
Member
John Ramsay
Wolfgang Ruttenstorfer
Andrew Hosty
(until 24 September)
Fiona Paulus
(since 24 September)
Chairman
Member
Member
Member
Meetings attendance
The Committee meets as required, but not less
than four times a year. The Chairman, the Chief
Executive Officer, the Chief Financial Officer,
the Head of Financial Reporting, the Head
of Assurance and the General Counsel also
participate in Audit Committee meetings, and
the Company Secretary acts as Secretary to the
Committee. The Chairman of the Committee has
had regular private discussions with the external
auditor, the Head of Assurance and the Chief
Financial Officer during the year.
• supervising the recording, management
and submission of financial information by
the Group (including choices of accounting
policies, application and assessment of the
effects of new rules, information regarding
the handling of estimated items in the
Financial Statements);
•
reviewing the content of the Annual Report
and Accounts and advise the Board on
whether, taken as a whole, it is fair, balanced
and understandable;
• supervising the compliance with
recommendations and observations of the
internal auditor and the external auditor;
• supervising the functioning of the Internal
Audit department, and in particular,
review and approve the annual Internal
Audit work plan and taking note of the
findings and considerations of the Internal
Audit department;
• supervising the policy of the Group on
tax planning;
• supervising the financing of the Group;
•
reviewing the adequacy and effectiveness
of the Group’s Compliance function;
• supervising the relationship with the external
auditor, including in particular, assessing its
independence, effectiveness, remuneration
and non-audit related work for the Group;
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R H I M A G N E S I TA
review of significant accounting matters as
explained in the notes to the consolidated
Financial Statements; and
the Audit Committee considered the
conclusions of the external auditor over the
key audit matters that contributed to their audit
opinion, specifically impairments, taxation and
IFRS 16 first time adoption.
Significant issues considered by the
Audit Committee in relation to the
Group’s Financial Statements
Going concern
The ability of the Group to continue as a going
concern depends upon continued access to
sufficient financing facilities. Judgement is
required in the estimation of future cash flows
and compliance with debt covenants in future
years. The Committee assessed the forecast
levels of net debt, headroom on existing
borrowing facilities and compliance with debt
covenants. This analysis covered the period
to 31 December 2021 and considered a range
of downside sensitivities, including the impact
of lower production volumes and higher costs.
The Committee concluded it was appropriate
to adopt the going concern basis.
Production Optimisation Plan
The Group is enhancing its Production
Optimisation Plan in order to increase
competitiveness and reduce its cost base. The
Committee reviewed the judgements involved
in the determination of the amounts and timing
of impairments and restructuring provisions.
Following discussion, the Committee concluded
that these were appropriate. The disclosures on
impairments and other restructuring expenses can
be found in Note 39 to the Financial Statements.
use of supply chain finance programmes
The Committee reviewed the accounting
practice for supply chain finance programmes
in place and appropriateness of disclosures in
the Annual Report. The Group decided to limit
the overall supply chain finance programmes to
€320 million. The disclosures related to factoring
and forfeiting can be found in Notes 19 and 32 to
the Financial Statements.
Audit Committee report
continued
During 2019, the Committee met six times and
had three calls. The Committee has also met
twice since the end of the financial year and prior
to the signing of this Annual Report. The external
auditors had unrestricted access and attended
all Committee meetings and calls.
•
•
John Ramsay
Wolfgang
Ruttenstorfer
Andrew Hosty
(until 24 September)
Fiona Paulus
(since 24 September)
Attended
9/9
8/9
8/8
1/1
Fair, balanced and understandable
A key requirement of our Financial Statements is
for the report to be fair, balanced, understandable
and provides the information necessary for
shareholders to assess the Group’s position,
performance, business model and strategy. The
Audit Committee and the Board are satisfied that
the 2019 Annual Report meets this requirement,
as appropriate weight has been given to both
positive and negative developments in the year.
In justifying this statement, the Audit Committee
has taken into consideration the preparation
process for the Annual Report and Accounts,
including:
• detailed timetable and instructions are
provided to all contributors;
•
revisions to regulatory reporting requirements
are provided to contributors and monitored on
an ongoing basis;
• early-warning meetings are conducted
between finance managers and the auditor in
advance of the year-end reporting process;
• external advisers provide advice to
management and the Audit Committee on
best practice with regard to creation of the
Annual Report;
• Audit Committee meetings were held in
February and March 2020 to review and
approve the draft 2019 Annual Report and
Accounts in advance of the final sign-off by
the Board;
94
First time adoption of IFRS 16 - Leases
The Committee reviewed management’s impact
assessment of the adoption of IFRS 16 Leases
which became effective in 2019 and resulted
in initial recognition of lease liabilities and the
right-of-use assets amounting to €62 million.
The Committee considered the disclosures in the
notes to the Financial Statements prepared by
management to explain the transition impact and
concluded that these were appropriate.
Alternative performance measures
Adjusted EBITA and Adjusted EPS
RHI Magnesita uses a number of alternative
performance measures (“APMs”), which reflect
the way in which Management assesses the
underlying performance of the business. The
Group’s APM policy defines criteria for calculation
of Adjusted EBITA and Adjusted EPS. The
Committee reviewed each of the adjustments
made in Adjusted EBITA and Adjusted EPS and
concluded that the calculation is made in line
with the APM definition.
Significant issues considered by
the Audit Committee
Audit Committee evaluation
An internal evaluation of the performance of the
Audit Committee has been undertaken. This
review concluded that the Audit Committee has
been operating effectively based on the subject
matters covered, the nature of the Committee
meetings, thoroughness of approach and the
business understanding, skills and experience
of the Committee members.
Capital structure, financing and FX strategy
The Committee reviewed the revised treasury
policy and assessed the effectiveness of
financial risk management. During the year
the Group improved its financing structure by
restructuring inter-company debt, extending
the debt maturity profile, refinancing legacy
high cost debt, increasing the level of liquidity
and increasing the EuR debt profile in order
to reduce interest and currency exposure.
Depending on its leverage the Group will keep
between 40% and 100% of its interest rates
floating. The Committee endorsed the proposed
currency and liquidity strategies.
GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Tax strategy
Whistleblowing programme
The Committee reviewed the tax strategy and
received updates on tax compliance, significant
tax matters and ongoing tax projects. The
Committee considered management’s risk
assessment related to the Brazilian tax litigation.
Following discussion, the Committee endorsed
the current tax strategy and will continue to
monitor the progress of the tax projects.
Reviewing the results of Internal Audit work
and the 2019 plan
The Committee reviewed the effectiveness of
the resources of the Internal Audit department
and concluded that the Internal Audit function
is effective and has adequate resources. Based
on the received reports on the results of Internal
Audit work, the Committee satisfied itself that
the 2019 plan was on track and discussed areas
where control improvement opportunities
were identified further, and the Committee
reviewed the progress in completion of agreed
management actions. The Committee reviewed
the proposed 2020 Internal Audit plan, assessing
whether the plan addressed the key areas of
risk for the business units and the Group. The
Committee approved the plan, having discussed
the scope of work and its relationship to the
Group’s risks.
Code of Conduct
The Committee reviewed progress of the
implementation of the Code of Conduct that was
rolled out across the Group starting in 2017. The
Committee received updates on governance of
the Code, ethical risk assessments performed,
and training provided. The Committee assessed
the work being conducted to mitigate the risk of
bribery and corruption and, specifically, work to
assess risk from use of agents, approving plans
to strengthen risk mitigation in this area.
Risk Management
Risk management is the responsibility of the
Board and is integral to the achievement of our
objectives. The Board establishes the system
of risk management, setting risk appetite and
maintaining the system of internal control to
manage risk within the Group. The Group’s
system of risk management and internal control
is monitored by the Audit Committee under
delegation from the Board. Details of the Group’s
risk management approach, risk appetite and
principal risks are outlined in the Risk, viability
and internal control section of the Annual Report.
The whistleblowing programme, which is
monitored by the Audit Committee, is designed
to enable employees, customers, suppliers,
managers or other stakeholders to raise
concerns on a confidential basis where conduct
is deemed to be contrary to our values. During
2019, 79 reports were received via the global
whistleblowing programme, covering a broad
spectrum of concerns, including:
• People and culture
• Fraud and security
• Health and Safety
• Conflicts of interest
The majority of reports were received on an
anonymous basis. All of the cases received in
2019 were investigated and all the proven cases
resulted in some form of management action.
External audit
The Group’s external independent auditor,
PricewaterhouseCoopers Accountants N.V.
(PwC), were first appointed as the Group auditor
at the Annual General Meeting held on 4 October
2017 shortly before the listing of the newly formed
RHI Magnesita NV. This was the first tender the
Company had undertaken. PwC was appointed
at the AGM held on 6 June 2019 for the financial
year 2020. The Committee approved the audit
plan together with the audit fee in November
2019 having given due consideration to the audit
approach, materiality level and audit risks. The
Committee received updates during the year
on the audit process, including how the auditor
had challenged the Group’s assumptions on the
issues noted in this report. In March 2020, the
Committee reviewed the output of the external
audit work that contributed to the auditor’s
opinion, and its overall effectiveness.
External auditor's independence
The external independent auditor reports to
the Committee on the actions taken to comply
with professional and regulatory requirements,
as well as best practice designed to ensure its
independence. The Committee recommended
that PwC and Esther van der Vleuten should
continue as the external independent auditor and
designated auditor for the financial year 2020.
In 2019, the Group revised its non-audit services
policy which further strengthens auditor’s
independence. The new policy is consistent
with the applicable Eu Directive, Dutch
and uK legislation and guidance, including
recommendations set out in the Financial
Reporting Council’s (FRC’s) Guidance on Audit
Committees (2016) and the requirements of the
FRC’s Revised Ethical Standard (2016).
A key factor that may impair an auditor’s
independence is a lack of control over non-audit
services provided by the external auditor. The
external auditor’s independence is deemed to
be impaired if the auditor provides a service that:
• creates conflicts of interest between the
external audit firm and the Group;
•
•
results in the external audit firm functioning
in the role of management;
results in a fee which is material relative to the
audit fee;
• places the external audit firm in the position
of auditing its own work; or
• places the external audit firm in the position
of being an advocate for the Group.
RHI Magnesita addresses this issue through three
primary measures, namely:
• disclosure of the extent and nature of non-
audit services;
•
the prohibition of selected services; and
• prior approval by the Audit Committee of non-
audit services where the cost of the individual
engagements being more than €15,000, and
cumulatively more than €60,000 per annum.
The definition of prohibited non-audit services
corresponds with the European Commission’s
recommendations on the auditor’s independence
and with the Ethical Standards issued by the Audit
Practices Board in the uK. Non-audit work is only
undertaken where there is commercial sense in
using the auditor without jeopardising auditor
independence; for example, where the service is
related to the assurance provided by the auditor
or benefits from the knowledge the auditor has
of the business. Non-audit fees represented are
disclosed in Note 60 of the Financial Statements.
The Group confirms compliance during the
year with the provisions of the Competition and
Markets Authority Order on mandatory tendering
for the appointment of the external auditor and
Audit Committee responsibilities.
John Ramsay
Independent Non-Executive Director
95
R H I M A G N E S I TA
Remuneration
Committee report
Dear Shareholders
I am pleased to present the Report of the
Remuneration Committee for the financial year
ended 31 December 2019, providing a summary
of the Committee’s work during the year, as well
as the context for the decisions made.
RHI Magnesita, being incorporated and registered
in the Netherlands, making it subject to Dutch
corporate law, and having its primary listing
on the London Stock Exchange, is required
to comply with both uK and Dutch reporting
requirements and their respective Corporate
Governance Codes. Our Remuneration Report is
therefore presented on this basis and, recognising
transparency of reporting, includes certain
additional voluntary disclosures.
We were pleased that at the 2019 Annual
General Meeting (“AGM”) the resolution
relating to the Annual Statement and Report
on Remuneration was once again approved
by more than 99% of our voting shareholders.
The Directors’ Remuneration Policy, which was
approved at the 2018 AGM, is intended to operate
until 2021 and, as previously disclosed, has
applied since 1 January 2018.
We will be bringing a revised Directors’
Remuneration Policy for consideration at the
2021 AGM. During 2020, we will be considering
whether our policy continues to suit the
strategy of the Company, takes into account
key stakeholders and assists in retaining and
rewarding talent appropriately. As part of this
process we will, in the year ahead, be consulting
shareholders on any key changes proposed.
Remuneration is closely aligned with our
strategy and culture
Our Remuneration Policy continues to be
closely aligned to, and supportive of, our strategy
and culture. The objective of combining two
companies in 2017 to form RHI Magnesita was
to capture the strengths of each entity, leading
to an enlarged portfolio of products and services,
greater proximity to customers through a broader
geographical footprint, technology leadership,
as well as more effective raw material integration.
Our remuneration policy and practices are in
line with these objectives, with bonus plans
that incentivise growth, cash flow generation
and the achievement of synergy targets and
strategic projects.
In 2019, the bonus structures and targets for
management throughout the Company have
been revised to reflect those of the executive
and senior management. This provides a clear
line of sight of company objectives, supports the
building of the new organisational culture, further
foster teamworking, and incentivises appropriate
behaviours and the success of our workforce.
Our LTIP rewards the creation of shareholder
value and profitability. Total shareholder return
("TSR"), EPS and economic profit measures were
implemented as LTIP KPIs in 2019 to incentivise
the creation of long-term value. As referred to
later, the performance shares awarded are held
for three years before vesting with a further two-
year holding period for the EMT.
RHI Magnesita’s performance during 2019
As laid out in the Chairman’s Statement and the
Chief Executive Officer’s Review, despite difficult
end markets in 2019, the Group has recorded
resilient margins, solid balance sheet position
and strong cash flow generation. Furthermore,
management completed the planned and
successful final phase of the integration of RHI
and Magnesita, delivering €90 million of planned
synergies. It has been within this context that the
Committee has considered the Annual Bonus
scheme, the 2019 outturn and the 2020 targets,
as well as reviewing current LTIP performance,
in addition to other decisions made in the course
of the year. Further details of these activities are
outlined below.
Incentive outcomes for the year
As set out in the Annual Report on Remuneration,
our remuneration outcomes for the year were
as follows:
Annual Bonus Plan
Awards for the year for the CEO and CFO at
38.9% of maximum reflect the performance
of the Company during the year. The operating
EBIT decreased by 4.4%. Executives made
good progress against the strategic deliverables
that are essential for the future efficiency of the
Company and the synergy targets were met.
The Company generated €285 million of free
cash flow. Further details of our performance
against 2019 bonus targets can be seen on
pages 112 and 113, including the way that the cash
flow targets were adjusted on a neutral basis to
reflect the change in strategy on working capital
management. The payout against the strategic
deliverables is measured against preset mainly
quantified targets such as dates, volumes or
monetary values.
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GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
As a part of the changes made to meet the
requirements of the uK Corporate Governance
Code, for 2019 and future years, the Committee
decided to replace the specific underpin that
related only to the strategic targets with an
overarching discretion to adjust, if appropriate,
the formulaic outturn for all of the bonus
measures. Accordingly, the Committee reviewed
the formulaic calculation of the bonus in the
context of the overall performance of the
Company and the executives over the relevant
period. The bonus payout is materially lower than
last year’s, and the Committee is satisfied that it
is at the appropriate level given the targets that
were set and the performance achieved.
Performance Share Plan
There were no long-term incentives subsisting
at the time of Admission. The first performance
shares under the new long-term incentive plan
were awarded in 2018 and are not due to vest,
subject to performance, until 2021.
Key Committee activities during 2019
In addition to the responsibilities of the
Committee (which are described in the Terms of
Reference available on the Company’s website),
the Committee spent time on the following
matters during the year:
Further development of the
Remuneration Report
2018 represented the first full year of
remuneration reporting for the Company, with the
2017 report only covering the period from the date
of Admission (27 October 2017 to 31 December
2017). The 2019 Remuneration Report is the first
where year-on-year comparators exist for a full
12 month period. Our Remuneration Reporting
is complex due to the need to comply with both
Dutch and uK regulations. We have endeavoured
to improve reporting this year to increase
transparency and improve clarity.
Remuneration related to the change of the
Chief Financial Officer (“CFO”)
Context of Director pay within
the Company
Ian Botha joined the Company in April 2019.
His remuneration package is in line with the
Company’s new Remuneration Policy. The
CFO’s remuneration package was benchmarked
against the uK market. Ian Botha was recruited
from Anglo American and held a variety of
long-term incentives that lapsed when he left
Anglo American. In line with the Company’s
remuneration policy, the Committee offered
share-based remuneration to mirror part of the
forfeited long-term incentives of his previous
employer, taking account of the potential vesting.
The CFO received three share grants during
the year: conditional shares to buy-out deferred
share awards, performance shares to buy-out
forfeited performance share awards and an
annual performance share award. Full details
of the new CFO’s remuneration package can
be found on pages 99 and 111.
The past CFO, Octavio Lopes, left the business
on 31 December 2018. As previously reported,
no payments were made for loss of office.
Governance developments
As referred to above, RHI Magnesita is required
to comply with both uK and Dutch reporting
requirements, including the uK and Dutch
Corporate Governance Codes. The 2018
uK Corporate Governance Code came into
effect for RHI Magnesita on 1 January 2019.
Dutch reporting requirements have also been
updated to implement the Eu Shareholder
Rights Directive. Our Remuneration Policy and
remuneration practices already broadly comply
with both governance updates. With the current
Policy due to be renewed at our 2021 AGM the
Committee intends to undertake a review of
the Remuneration Policy in 2020.
CEO Pay ratio
In 2018 and 2019 in line with Dutch regulations
and market practice we disclosed the pay ratio of
the CEO to the average salary of all employees in
the Group. Similarly, on page 107 this year’s ratio
of 34:1 is calculated on the same basis (2018: 49:1).
The current CEO pay ratio is lower than other
similar manufacturing companies with relatively
high levels of blue collar workers. The Committee
however is aware that as currently no long-term
incentives have vested, if the 2018 LTIP vests in
2021 the CEO pay ratio will increase more towards
the median of similar manufacturing companies.
More detail on the calculation of the ratio is
included on page 107.
uK gender pay gap
Although there is no requirement to report
on gender pay in the uK, the Committee has
reviewed the proportion of women throughout
the organisation and their relative positions within
the organisation structure. The Committee is
aware that around 11.6% of the global workforce is
female and female representation in supervisory
and managerial roles is an even lower proportion.
Both of these issues are being addressed. The
Board and leadership team recognise that
inclusion and diversity in all forms are essential
ingredients in creating diversity of thought,
experience and skills within the Company and
it has been a topic of consideration at Board and
Executive management meetings (you can read
more on the Company’s approach to diversity
on pages 70 to 71).
Employee engagement
Two employee representatives, normally based
in Germany and Austria, sit on the Company’s
Board and take part in discussions regarding
executive remuneration when the Remuneration
Committee reports back to the Board and makes
recommendations for Board approval. A variety
of other engagement activities take place across
the Company including employee surveys, CEO
calls, regular townhall meetings and an active
CEO Channel, as part of the My RHI Magnesita
App, where employees can ask questions on any
issues including executive pay. Further details
on workforce engagement can be found on
pages 79 and 105.
97
R H I M A G N E S I TA
Remuneration
Committee report
continued
Alignment of pension contribution
Our incumbent Executive Directors’ pension
allowance (and that for any new appointments)
is aligned to that of the workforce in their country
of appointment.
Implementation of the Remuneration
Policy for 2020
In the early part of 2020, the Board had concerns
regarding the retention of its Executive Directors.
The Board think that it is crucial to maintain
continuity of leadership over the next critical
period of the Group’s development. We reached
out to our key shareholders to gain support for
a re-alignment of our reference markets for
the Executive Directors’ pay, using Germany as
the more relevant market than the uK, being
the key region where we compete for talent.
The resultant salary increases are within our
policy, being within the mid-market range, but
nonetheless we felt it would be more transparent
to consult with leading shareholders to explain
our approach. The consultation provided very
useful engagement and I remain grateful for
shareholders’ time and input.
The base salary of the CEO was increased by
20% and the CFO’s base salary was increased
by 20% with effect from 1 January 2020. Both of
these executives are employed in Austria and this
compares with an average of 3.6% for the majority
of Austrian based employees. As detailed in our
engagement with shareholders and referred to
above, the Executive Director increases arose
from the amendment of the reference market.
The bonus metrics and weightings were reviewed
for 2020. Given the strong progress on the
achievement of synergies, the Committee
decided to remove the synergy metric for the
2020 annual bonus. The Committee is very
conscious of the uncertainty that COVID-19 is
creating and at the date of this report the bonus
metrics had not been finalised. These metrics will
reflect both the strategic needs of the business
and the Policy, which requires a minimum of
70% to be weighted to financial metrics. The
performance metrics and targets for the annual
bonus will be disclosed retrospectively in the
2020 Remuneration Report provided they are
not considered to be commercially sensitive at
that time. The 2019 annual bonus targets are
retrospectively disclosed on page 113.
In 2020, the Committee does not plan to change
the quantum of the CEO and CFO's long-term
incentive performance share awards with a face
value of 200% and 150% of salary, respectively.
The awards are not made until April 2020 based
on the share price at that time. Executives will
receive the award in 2025 (subject to a three-year
vesting period and two-year holding period), if
performance targets are met. The performance
targets that will determine vesting of the share
awards, will be based half on adjusted earnings
per share ("EPS") targets, and half on Total
Shareholder Return ("TSR"). For 2020 the
Committee decided that Economic Profit was
not a suitable measure as the setting of targets for
the three year period would be too difficult in the
current business environment. The Committee
has the ability to scale back the level of vesting
if it considers the outcome to be reasonably
unacceptable or if it is not reflective of the
underlying performance of the Company.
The Chairman’s fee was considered by the
Committee and in line with the Remuneration
policy, against both the Non-Executive market
and the workforce increase. As the Chairman’s
fee had not been reviewed since 2017, the
Committee agreed an uplift in line with the
workforce increases in Austria over the last
two years. In future it is the intention to review
the Chairman’s fee on an annual basis. The
Non-Executive fees were not considered by
the Committee as no individual should be
involved in their own remuneration, however
the Chairman took a similar approach when
reviewing the Non-Executive fees. Further
details of the increases awarded can be found
in the Directors’ remuneration table.
Just prior to signing of this report the Executive
Directors decided, from 1 April, to waive the
20% salary they were awarded in 2020 for at
least three months. During this time members
of the Executive Management Team will waive
10% of their salary, the Chairman and the Non-
Executive Directors will waive 10% of their fees
and employees globally will likely see a reduction
in their earnings. The Committee is very grateful
for the responsible action being taken by the
Executive Directors and members of the Executive
Management Team, as well as all of our employees
who are taking actions at this difficult time.
Conclusion
We believe that the Directors’ Remuneration
Policy and its implementation for 2020, as well
as the remuneration outcomes for 2019 remain
strongly aligned to the Company’s business
strategy, the complex structure of the business
and long-term shareholder interests.
At the 2020 AGM an advisory shareholder
resolution to approve this Annual Statement
and the Annual Report on Remuneration will be
presented to shareholders and we look forward
to your continued support.
Celia Baxter
Chairman of the Remuneration Committee
98
GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
At a glance: Operation of remuneration policy for
the financial year ending 31 December 2019
Policy element
Base salary from 1 January 2019
% increase from prior year
S Borgas (CEO)
€855,000
3.5%
I Botha (CFO)
€375,0001
0%
Retirement allowance
Allowance of 15% of base salary
Allowance of 15% of base salary
Annual bonus
Annual bonus metrics
up to 150% of base salary
up to 150% of base salary
75% of the annual bonus determined by Group financial targets and 25% by strategic targets as follows: 35% Operating EBIT measured
on a constant currency basis; 30% Free Cash Flow; 10% Synergy targets and 25% strategic targets focusing on key strategic priorities of
the business which are critical to the future profitability of the Group. The Committee used its discretion to review the underlying
performance of the Company and determine whether there should be any adjustment to the formulaic outcome.
Amount paid for threshold performance
0%
0%
Amount paid for target performance
75% of salary (50% of max. annual bonus)
Actual bonus result for 2019 performance
€498,354 (38.9% of maximum)
€218,576 (38.9% of maximum)
Payment of bonus in shares
50% of annual bonus in excess of target after tax is used by the executive to acquire shares that are held for a minimum of three years
Performance Share Award
200% of base salary
150% of base salary
Performance Share Award metrics
Payment for threshold performance
Performance period & post vesting holding
period
33.3% of the award: relative TSR ranking
33.3% of the award: Economic Profit Growth
33.3% of the award: Adjusted EPS
25%
3 years and 2 years respectively
Malus and clawback
Malus applies to the period prior to vesting for Performance Share Awards and payment of the annual bonus
Clawback applies to cash bonus and Performance Share Awards for a period of three years following the date of vesting and three
years following any cash payment
Dividends on vested awards
Participants are eligible for dividend equivalents on Performance Shares awarded
Shareholding requirement
200% of base salary to be met within five years
Shareholding as % of salary at 2019 year-end
75%
75%2
1 Part year, the CFO joined the Company on 1 April 2019, his full-year annual salary is €500,000.
2 Calculated assuming a tax rate of 50%.
99
R H I M A G N E S I TA
Directors’
Remuneration Policy
This Directors’
Remuneration Policy was
approved by over 99%
of voting shareholders at
the June 2018 AGM.
Other than in the event of exceptional
circumstances, the Committee does not intend to
revert to shareholders with a new Remuneration
Policy before the end of the three-year period
at the 2021 AGM.
Policy overview
The Remuneration Committee has responsibility
for determining the remuneration for the
Chairman and Executive Directors.
The aim of the Company’s remuneration strategy
is to provide a level of fixed pay that, together with
incentives, will attract, retain and motivate high-
calibre, high-performing executives, aligning
them to the long-term performance of the
Company and its long-term share performance
while rewarding them for creating and delivering
shareholder value.
The remuneration policy has been structured in
line with market practice for uK-listed companies,
while taking into account the legacy issues and
Dutch law. Dutch governance requires some
additional information on the remuneration which
is set out in the Remuneration Report on page 110.
Certain aspects of our current policy are
only applicable to our past CFO, Octavio
Lopes, reflecting the historic structure of his
remuneration and legacy contract. However,
Octavio Lopes left the Company on 31 December
2018 and these aspects of the Policy are therefore
no longer applicable and will be removed when
the Policy is brought to shareholders for approval
in 2021 and are noted below for ease of reference.
The new CFO’s remuneration is in line with the
ongoing new Remuneration Policy.
The remuneration policy for Executive
and Non-Executive Directors
For ease of reference we have included on
pages 101 to 103 the remuneration policy for the
Executive Directors and Non-Executive Directors.
We have emboldened sections of the Policy that
related to the legacy arrangements for our past
CFO who left the Company on 31 December 2018
and which are not applicable going forward.
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GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Please note, in the policy we have highlighted parts that were only legacy items for our past CFO, which are not applicable going forward.
Policy table for Executive Directors
Element and purpose
How it operates
Maximum opportunity
Performance related framework and recovery
Base salary
Salaries are paid monthly and reviewed annually.
To assist in the recruitment and
retention of appropriate talent.
To provide a fair fixed level of
pay commensurate for the role
ensuring no over reliance on
variable pay.
The Company’s policy is to set salaries at mid-market
levels taking into account salaries at companies of a
similar size by market capitalisation, revenue and any
other factors considered relevant by the Committee
such as international business mix and complexity.
Decisions on salary are influenced by:
There is no prescribed
maximum annual base salary or
salary increase.
Salaries will be reviewed by the Committee annually
taking into account the various factors noted in the
“How it operates” section of the policy.
In respect of salary increases
the Committee is guided by the
general increase for the broader
employee population and
region where the executive is
based.
For the CEO and new Directors
15% of salary.
None.
For our past CFO 30% of salary
valid for 2018 only. NB: The
new CFO will receive 15% of
salary, as detailed above.
Exceptionally, for Executive
Directors outside of the uK an
amount as required by local
regulation and in line with
industry norms.
• The performance and experience of the individual
• The performance of the Group
• The individual’s role and responsibilities and any
change in those responsibilities
• Pay and employment conditions elsewhere in
the Group
• Rates of inflation and market-wide increases
across international locations
• The geographic location of the executive
Directors may participate in a defined contribution
plan, and/or receive cash in lieu of all or some of
such benefit.
Only base salary is pensionable.
Exceptionally, for Executive Directors outside the uK
the pension will be structured as required by local
regulation and in line with industry norms.
Our past CFO received a cash payment in lieu of
pension of 30% of salary. This is a legacy issue
where the pension entitlement was set on
recruitment. This was valid for 2018 only.
Benefits provided currently include: private health
insurance, life insurance, car/car allowance and
fuel allowance.
There is no maximum level
of benefits provided to an
Executive Director.
None.
Our past CFO was entitled to reasonable relocation
expenses on termination of his contract (by either
party). This is a legacy issue where the benefit was
in place prior to Admission.
Additional benefits and tax payable as a result of
reimbursement of reasonable business expenses
may be provided from time to time if the Committee
decides payment of such benefits and tax is
appropriate and in line with market practice.
101
Retirement allowance
To provide competitive
retirement benefits for
recruitment and retention
purposes.
Other benefits
To provide a competitive benefit
package for recruitment and
retention purposes as well as to
support the personal health and
well-being of the executive.
R H I M A G N E S I TA
Directors’ Remuneration Policy
continued
Policy table for Executive Directors continued
Element and purpose
How it operates
Maximum opportunity
Performance related framework and recovery
The annual bonus is based on the Group’s
performance as set and assessed by the Committee
on an annual basis.
The annual bonus is paid in cash and the Executive
Directors (except for our past CFO in respect of his
2018 annual bonus) are required to acquire shares in
the Company with 50% of the amount paid in excess
of target (after tax) which will be held for a minimum
period of three years.
up to 150% of base salary
maximum potential opportunity.
Target potential opportunity is
50% of maximum opportunity.
For 2018 the past CFO’s target
potential opportunity was
100% of salary which is 83.3%
of maximum (on the basis
that his maximum potential
opportunity was 120% of
salary), and threshold
potential opportunity
was 66.6% of maximum
(being 80% of salary).
Annual bonus
To provide focus on the
short-term performance of
the Company and to provide a
reward for achieving short-term
personal, strategic and financial
Company performance.
To provide a mechanism for
alignment with longer- term
performance and shareholder
alignment.
The requirement for Executive
Directors to acquire shares with
their bonus aligns them to the
“development of the market price
of the shares” in the Company as
provided in the Dutch Corporate
Governance Code.
Details of the performance targets set for the year under
review and performance against them will normally
be provided each year in the Annual Report on
Remuneration. If for reasons of commercial sensitivity,
the targets cannot be disclosed then they will be
disclosed in the following year.
Performance normally measured over a one-year period.
Targets will be based on the Group’s annual financial
and non-financial performance for the particular
performance year. At least 70% of the bonus will be
subject to financial performance metrics.
The Committee may scale back the bonus that is payable
if it considers the outcome to be reasonably unacceptable
or if it is not representative of the underlying performance
of the Company and/or there have been regulatory,
environmental or Health and Safety issues that the
Committee considers are of such severity that a scale
back of the bonus is appropriate.
For the financial targets, not more than 25% of the
maximum potential bonus opportunity will be payable for
achieving threshold performance rising on a graduated
scale to 100% for maximum performance. Threshold
performance being the level of performance required
for the bonus to start paying.
In relation to strategic targets the structure of the target
will vary based on the nature of the target set and it will
not always be practicable to set targets using a graduated
scale. Vesting may therefore take place in full if specific
criteria are met in full.
Payments under the annual bonus plan may be subject to
clawback/malus for a period of three years from payment
in the event of a material misstatement of the Company’s
financial results, an error in calculating the level of grant
or level of vesting or payment, a failure of risk management
including the liquidation of the Group, if the participant has
been guilty of fraud or gross misconduct or the Company
has been brought into disrepute. The clawback/malus
provisions as set out above do not limit Article 2:135 of
the Dutch Civil Code.
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GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Policy table for Executive Directors continued
Element and purpose
How it operates
Maximum opportunity
Performance related framework and recovery
Performance Share (PS)
awards granted under the
RHI Magnesita Long-Term
Incentive Plan
To incentivise and reward
execution of the longer-term
business strategy.
To provide alignment to
shareholders and the
longer-term performance of the
Company and to recognise and
reward value creation over the
longer term.
The “development of the market
price of the shares” in the
Company is, as required by the
Dutch Corporate Governance
Code, taken into account by
providing a long-term incentive
using shares as the delivery
mechanism. In addition, part of
the award is determined by Total
Shareholder Return which is a
measure of share price
performance.
PS awards may take the form of nil-cost options or
conditional awards.
Awards are normally made annually.
Awards normally vest after three years subject to
performance and continued service. Where Executive
Directors cease employment or are under notice prior to
the three-year vesting date different rules may apply.
Shares resulting from the exercise of an option or
vesting of a conditional award cannot be sold until five
years have elapsed from the date of award, other than
to pay tax.
To the extent an award vests, the Committee may
permit dividend equivalents to be paid either in the
form of cash or shares representing the dividends that
would have been paid on those shares during the
vesting period (and where the award is a nil-cost
option to the fifth anniversary of award). Dividend
equivalents are payments in cash or shares equal to
the value of the dividends that would have been paid
during the period referred to above, on the number
of shares that vest.
200% of salary (face value of
award) annually (normal limit).
Where the face value is the
market value of the shares
subject to an award at the
time it is awarded.
In exceptional circumstances
on recruitment 250% of salary
(face value of award).
Awards vest based on three-year (or longer) performance
measured against a range of challenging targets set
and assessed by the Remuneration Committee.
The Committee will determine the specific metrics and
targets that will apply to each award prior to the date of
award subject to the vesting of at least 25% of an award
being determined by Total Shareholder Return.
The targets for each award will be set out in the Annual
Report on Remuneration.
In relation to financial targets not more than 25% of the
total award will vest for threshold performance rising on
a graduated scale to 100% for maximum performance.
Threshold performance being the level of performance
required for the PS award to start to vest. In relation to
strategic targets the structure of the target will vary based
on the nature of the target set and it will not always be
practicable to set targets using a graduated scale and
so vesting may take place in full if specific criteria are
met in full.
The Committee may scale back the level of vesting if it
considers the outcome to be reasonably unacceptable
or if it is not reflective of the underlying performance
of the Company and/or there have been regulatory,
environmental or Health and Safety issues that the
Committee considers are of such severity that a scale
back of the PS award is appropriate.
PS may be subject to clawback/malus for three years from
the date of vesting in the event of a material misstatement
of the Company’s financial results, an error in calculating
the level of grant or level of vesting or payment, a failure
of risk management including the liquidation of the
Group, if the participant has been guilty of fraud or gross
misconduct or the Company has been brought into
disrepute. The clawback/malus provisions as set out
above do not limit Article 2:135 of the Dutch Civil Code.
Share ownership
To increase alignment between
management and shareholders
and the longer-term
performance of the Company.
Requirement for the Executive Directors is to normally
retain all of the shares acquired from annual bonus
payments following expiry of the three-year holding
period and normally 50% of vested Performance
Shares (net of tax) following the two-year holding
period until the shareholding requirement is achieved.
The Committee normally expects this requirement to
be met within five years of appointment or approval
of this Policy, if later.
The level of requirement will be
disclosed in the Annual Report
on Remuneration.
None.
The table below sets out the remuneration policy for the Non-Executive Directors (including the Chairman).
Policy table for Non-Executive Directors
Element and purpose
How it operates
Maximum opportunity
Performance related framework and recovery
Non-Executive Directors
(including the Chairman and
Deputy Chairman)
To provide fees reflecting time
commitments and
responsibilities of each role to
enable recruitment of the right
calibre of Non-Executive
Directors who can further the
interests of the Group through
their experience, stewardship
and contribution to strategic
development of the Group.
The Non-Executive Directors are paid a basic
fee. Supplemental fees may be paid for additional
responsibilities and activities, including for a
Committee Chairman and member of the main Board
Committees and the Senior Independent Director.
Cash fee normally paid quarterly. The Chairman’s fee
is inclusive of all of his responsibilities.
Reasonable expenses incurred by the Non- Executive
Directors in carrying out their duties may be
reimbursed by the Company including any personal
tax payable by the Non-Executive Directors as a result
of reimbursement of those expenses. The Company
may also pay an allowance in lieu of expenses if it
deems this is appropriate.
Fees are reviewed periodically.
None.
There is no prescribed
maximum annual fee or fee
increase.
The Board is guided by the
general increase in the
Non-Executive market but may
decide to award a lower or
higher fee increase to
recognise, for example, an
increase in the scale, scope or
responsibility of the role and/or
take account of relevant market
movements.
103
R H I M A G N E S I TA
Directors’ Remuneration Policy
continued
Performance criteria and discretions
Selection of criteria
The Committee assesses annually at the
beginning of the relevant performance period
which performance measures, or combination
and weighting of performance measures, are
most appropriate for both annual bonus and
any performance share awarded to reflect
the Company’s strategic initiatives for the
performance period. The Committee has the
discretion to change the performance measures
for awards granted in future years based upon the
strategic plans of the Company. The Committee
sets what it considers are demanding targets
for variable pay in the context of the Company’s
trading environment and strategic objectives and
considering the Company’s internal financial
planning, and market forecasts. Any non-
financial goals will be well defined.
Discretions retained by the Committee
The Committee operates the Group’s variable
pay plans according to their respective rules. In
administering these plans, the Committee may
apply certain operational discretions.
These include the following:
• determining the extent of vesting based on the
assessment of performance;
• determining the status of leavers and, where
relevant, the extent of vesting;
• determining the extent of vesting of PS awards
under share based plans in the event of a
change of control;
• making appropriate adjustments required
in certain circumstances (e.g. rights issues,
corporate restructuring events, variation of
capital and special dividends); and
• adjusting existing targets if events occur that
cause the Committee to determine that the
targets set are no longer appropriate and
that amendment is required so the relevant
award can achieve its original intended
purpose, provided that the new targets are not
materially less difficult to satisfy.
The Committee also retains discretion to make
non-significant changes to the Policy without
reverting to shareholders (for example, for
regulatory, tax, legislative or administrative
purposes).
Executive Directors’ service contracts
and payments for loss of office
Service contracts and letters of appointment
are available for inspection at the Company’s
registered office.
Service contracts and loss of office
It is the Company’s policy that notice periods for
Executive Directors will not exceed 12 months and
the service contracts for the Executive Directors
are terminable by either the Company or the
Executive Director on 12 months’ notice.
The Committee’s policy in relation to termination
of service contracts is to deal with each case on
its merits having regard to the circumstances of
the individual, the termination of employment,
any legal advice received and what is in the best
interests of the Company and its shareholders.
An Executive Director’s service contract may
be terminated early (other than for cause) by
payment in lieu of salary in equal monthly
instalments over the notice period. The Company
may include pension contributions and benefits
within the payment in lieu of notice if this is
deemed appropriate or is specifically provided
for in the service contract. unless a contract
specifically provides otherwise, all payments
would discontinue or reduce to the extent that
alternative employment is obtained. There are no
enhanced provisions on a change of control and
there are no specific severance arrangements.
An Executive Director’s service contract may be
terminated without notice for certain events such
as gross misconduct in which case no payments
or compensation beyond sums accrued to the
date of termination will be paid.
The Company may also pay outplacement
costs, legal costs and other reasonable relevant
costs associated with termination and may
settle any claim or potential claim relating to the
termination.
Treatment of variable pay awards on
termination1
Annual bonuses and PS awards are non-
contractual and are dealt with in accordance
with the rules of the relevant plans except that
if Octavio Lopes' contract is terminated by the
Company before payment is made of his 2017
bonus then he shall remain entitled to that bonus
to be paid on the same date of payment as for the
other executives of the Company.
At the discretion of the Committee, in certain
circumstances, for example, to incentivise short-
term retention and completion of key business
deliverables, and where poor performance is
not relevant to the cessation, a pro-rata bonus
may become payable at the normal payment
date for the period of employment with financial
performance targets based on full-year
performance. Where the Committee decides
to make a payment, the rationale will be fully
disclosed in the Annual Report on Remuneration.
The default treatment for share based awards is
that any unvested award will lapse on termination
of employment or, in certain circumstances on
the executive giving notice. However, under the
rules of the long-term incentive plan under which
PS awards will be made, in certain prescribed
circumstances, such as death, injury, ill-health,
retirement with the Company’s agreement,
redundancy, leaving the Group because the
employer company or business leaves the
Group or where the Committee determines
otherwise, awards are eligible to vest subject to
the performance conditions being met over the
normal performance period (or a shorter period
where the participant has died) and with the
award being reduced (unless the Committee
considers, in exceptional circumstances, a
different treatment is appropriate) by an amount to
reflect the proportion of the performance period
not actually served.
Approach to recruitment and promotions
The recruitment package for a new Director
would be set in accordance with the terms of the
Company’s approved remuneration policy.
On recruitment, salary may be set below the
normal market rate, with phased increases as
the Director demonstrates performance within
the Company.
Annual bonus opportunity will reflect the period
of service for the year.
The normal annual PS award limit is 200% of
salary face value in a financial year (face value
being the market value of the shares subject
to an award at the time it is awarded). A higher
limit of 250% of salary (face value) is included
in the recruitment policy for use in exceptional
circumstances for the Company to be able
to attract and secure the right candidate if
required. A PS award may be made shortly after
an appointment if the usual annual award date
has passed.
104
1. The policy wording is consistent with previous years, elements
relating to Octavio Lopes no longer apply.
GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
On an internal appointment, any variable pay
element awarded in respect of their prior role will
normally be allowed to continue according to
its terms.
The policy enables the Committee to include
those benefits it deems appropriate for an
Executive Director. On recruitment, this
may include benefits such as relocation,
housing or schooling expenses. In arriving at
a benefits package the Committee’s prevailing
consideration will be to pay only what is
considered necessary and appropriate taking
into account the importance of securing the
right candidate for the job and acting in the best
interests of the Company’s shareholders and
limiting certain benefits to a specified period
where possible.
On recruitment, the Company may compensate
for incentive pay (or benefit arrangements)
foregone from a previous employer. Replacement
share awards would be made under the
Company’s long-term incentive plan and any
subsequently adopted share plans using the
separate specific limit for these purposes of
250% of salary (face value) or as necessary and
as permitted under the Listing Rules. The new
awards would take account of the structure of
awards being forfeited (cash or shares), quantum
foregone, the extent to which performance
conditions apply, the likelihood of meeting any
existing performance conditions and the time
left to vesting.
Policy for Executive Directors on external
appointments
Subject to Board approval, Executive Directors
may accept external non-executive positions and
retain the fees payable for such appointments.
Non-Executive Directors
Letters of appointment and policy
on recruitment
All Non-Executive Directors have letters of
appointment for a fixed period of three years,
subject to reappointment each year at the AGM.
No additional compensation is payable on
termination, with fees being payable to the date
of termination. The appointments are terminable
by either party on three months’ written notice.
On appointment of a new Non-Executive Director,
the fee arrangement will be set in accordance
with the approved remuneration policy in force
at that time. Directors’ Remuneration Policy.
Legacy arrangements
In approving this Directors’ Remuneration Policy,
authority is given to the Company to honour any
commitments entered into with Directors, which
were fully disclosed in the Admission document.
Details of any such payments will be set out in the
Annual Report on Remuneration as they arise.
How the views of shareholders and
employees are taken into account
As the Board members have a wide range of
experience and backgrounds, including being
works council representatives and shareholders,
there is ample opportunity for feedback on the
policy and its implementation on an ongoing basis.
The Committee formally consults directly with
employees on executive pay via the Employee
Representatives appointed to the Board. Other
engagement activities include: employee
surveys, CEO calls, regular townhall meetings
and an active CEO Channel, as part of the My
RHI Magnesita App, where employees can ask
questions on any issues including executive
pay. The Committee receives periodic updates
from the CEO and Human Resources Director
function of the Group which includes employee
feedback received on remuneration practices
across the Group. So far, no substantive questions
have been raised on executive remuneration.
The Committee takes due account of the overall
approach to remuneration and the remuneration
structures for employees in the Group when
setting pay for the Executive Directors.
There are representatives of two of the Company’s
major shareholders on the Board and thus regular
consultation on all elements of remuneration
is ongoing. As advised in the Chair of the
Committee’s letter a consultation with over 70%
of shareholders was undertaken in early 2020.
The Committee appreciated the clear exchange
of views and the opportunity to engage with
shareholders about the context of the changes
made to our Executive Director salaries. This
feedback, best practice in the market, and any
feedback also received from time to time, as well
as guidance from shareholder representative
bodies more generally will be considered as part
of the Company’s annual review of remuneration
policy and implementation of that policy.
In addition to this we also engage with our
shareholders through our website. It contains
a wide range of information on our Company
and has a section dedicated to investors, which
includes certain remuneration information, such
as our LTIP plan rules, our investor calendar,
financial results, presentations, press releases,
with news relating to RHIM financial and
operational performance and contact details.
Remuneration market data was considered as part
of the Committee’s formulation of policy in terms
of considering remuneration data for companies
of a comparable size and complexity to the
Company. This was only one of many factors
considered by the Committee.
The Committee has taken note of the views of the
Executive Directors with regard to the amount and
structure of their remuneration and the provisions
of 3.1.2 of the Dutch Corporate Governance Code
(matters that should be taken into consideration
when formulating the remuneration policy) have
been brought to their attention.
How the Executive Directors’
Remuneration Policy relates to the wider
Group
The policy described above applies specifically
to the Company’s Executive and Non-
Executive Directors. The Committee is aware
of and provides feedback on the wider Group
remuneration structures. The Company’s policy
is for the Executive Directors’ remuneration policy
and structure to be cascaded as far as practicable
to the senior management team and for the
overriding principles to be taken into account for
the Group-wide policy.
Base salaries for the whole Group are operated
under broadly the same policy as for the Executive
Directors and are reviewed annually. The table on
page 118 discloses the annual average percentage
change of each Director's remuneration,
compared to that of all the employees in Austria.
The key difference between the Executive
Directors’ policy and the wider Group’s policy is
that the Executive Directors’ packages (and the
senior management team to a lesser extent) are
weighted more to variable pay. From 2019 on,
the bonus structure and targets are the same
for Executive Directors and for all eligible white-
collar employees. All our employees take part in
annual discretionary bonus schemes, as shown
in the table on the next page. Our approach is
to incentivise our employees to focus on and
contribute to the Company’s goals.
Performance Share awards are awarded to
those employees identified as having the greatest
potential to influence Group-level performance.
Given the cost of operating such a plan, the
Committee considers this is the right approach
and in the best interests of the Company and
its shareholders.
A comparison of the remuneration structure
between the wider workforce and the Board
is illustrated in the table on page 106.
105
R H I M A G N E S I TA
Directors’ Remuneration Policy
continued
Competitive pay and cascade of incentives
Organisational level
Executive Directors
Executive Management Team
Senior Leaders
Functional Directors
Senior Managers
Managers
Specialists
Professionals
Number of
employees
Maximum bonus
as percentage
of salary
Maximum proportion of
bonus payable in cash
(% of maximum award)
Maximum proportion
of bonus deferred
in shares
(% of maximum award)
Maximum LTIP
award based on
annual salary
2
7
c25
c100
c120
c400
c1,300
c1,900
150%
80-140%
40%
30%
25%
20%
10%
5%
75%1
85%2
100%
100%
100%
100%
100%
100%
100%
25%1
150-200%
15%2
80-150%
0%
0%
0%
0%
0%
0%
0%
20-50%
0%
0%
0%
0%
0%
0%
Other bonused employees
c9,800
various3
1 Half of annual bonus in excess of target, after tax, is used by the executive to acquire shares that must be held for a minimum of three years.
2 EMT members are required to acquire shares in the Company with 30% of the amount above target (after tax) which must be held for a minimum of three years.
3 Various local bonus programmes are in place for the operational, administrative and blue-collar employees of the company.
Summary of remuneration structure for employees below the Board
Element
Policy features for the wider workforce
Salary
Read more on
page 101
Salary is the basis for a competitive total reward
package for all employees, and we conduct an
annual salary review for all employees. As we
determine salaries in this review, we take account
of comparable pay rates from market references,
skills, knowledge and experience of each individual,
individual performance, and the overall budget
we set for each country. In setting the budget each
year, we forecast inflation, unions and collective
agreements and business context related to
such things as growth plans, workforce turnover
and affordability.
Comparison with Executive Director
remuneration
We review the salaries of our Executive Directors
and executive team annually. The primary purpose
of the review is to stay aligned with relevant market
comparators and stay competitive, as well as to ensure
any increases are kept on the same percentage
level set for our wider workforce in Europe and North
America, except in exceptional circumstances.
Pensions and benefits
We offer market-aligned benefits packages
reflecting normal practice in each of the countries
where we operate.
We have differences in the Executive Directors’
benefits to reflect market practice and role
differentiation.
Read more on
page 101
Annual bonus and long-
term incentive plan
Read more on
pages 102 to 103
Our white collar global workforce participate in an
annual cash bonus plan. The plan is based on four
company KPIs. This structure places equal emphasis
on the importance of an employee’s personal
contribution to the success of RHI Magnesita. We
operate different bonus plans for those employees
of our business where remuneration models in the
market are markedly different, such as sales and
production areas.
106
Our incumbent Executive Directors’ pension
allowance (and that for new appointments) is
aligned to that of the workforce in their country
of appointment.
Annual bonus for Executive Directors is directly
related to the same performance measures
and outcomes as the wider workforce.
Long-term incentives are provided to our senior
executives and senior roles who have influence
on the overall performance of the Company.
GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Pay ratios
The Dutch Corporate Governance Code
recommended that from the financial year 2018,
and the uK Directors’ Reporting Regulations
required that from 2019, that the Committee
report pay ratios including changes from the prior
year as part of its determination of executive pay
and wider executive remuneration decisions.
Last year RHI Magnesita reported the pay ratio
of the CEO to the average total pay of all the
employees using a methodology which was in
line with Dutch market practice. The ratio was
calculated using the CEO’s Single Total Figure
of remuneration shown on page 111 and the total
employee remuneration figure (for the entire
RHI Magnesita Group) shown in the accounts
on page 118. The total employee remuneration
figure is for all employees in all Group companies
and includes countries with significantly lower
levels of pay than Europe and the united States.
RHI Magnesita only has around 100 employees
in the uK and falls below the required threshold
for uK pay ratio reporting requirements. As
uK employees represent less than 1% of RHI
Magnesita’s employees, the Committee considers
that the above approach is appropriate in the
circumstances and therefore the ratio has been
calculated on the same basis this year.
RHI Magnesita is positioned below the median
CEO pay ratio of other basic materials and
industrial companies of a similar size listed on the
FTSE. The Committee, however, is aware that as
currently no long-term incentives have vested,
if the 2018 LTIP vests in 2021 the CEO pay ratio
will likely increase.
Pay ratios will be a key component to be taken
into account when reviewing the Remuneration
Policy in 2020.
Pay ratio
CEO
2019
34:1
2018
49:11
1 The disclosure last year was incorrectly made using the value
of LTIP award granted in the year. The disclosed 2018 figure of
52:1 has been re-stated as above.
The CEO pay ratio has decreased from 2019 as
the CEO’s bonus payment is lower and employee
salary increases were higher year-on-year.
Remuneration scenarios for
Executive Directors
The Executive Director remuneration
policy provides that a significant proportion
of remuneration is determined by Group
performance. The graph below illustrates how
the total pay opportunities vary under three
different performance scenarios: minimum,
target and maximum. We have also shown
an assumed share price appreciation of 50%
for the Performance Share award during the
performance period under the maximum
payment scenario.
Assumptions
Minimum: Fixed pay only (base salary, pension
and benefits, excluding relocation benefits).
Target: Fixed pay plus 50% of 2020 maximum
annual bonus opportunity for the CEO and CFO
with 50% vesting of the 2020 PS award.
Maximum: Fixed pay plus maximum annual
bonus opportunity and 100% vesting of 2020 PS
award with an assumed share price appreciation
of 50% for the Performance Share award during
the performance period.
As required under the Dutch Corporate Code,
scenario analyses have been carried out as
part of the formulation of the policy and to
establish that the policy results in appropriate
and fair levels of remuneration including that the
level and ratio of fixed to variable pay does not
encourage inappropriate risk-taking or over-
reliance on variable pay while ensuring there is
sufficient alignment to investors, the long-term
performance of the Company and development
of the market value of the shares of the Company.
CEO
€000
CFO
€000
Maximum 20%
27%
35%
18%
5,806
Maximum
24%
30%
31%
15%
2,949
Target
40% 26%
34%
2,984
Target
44%
28%
28%
1,599
Minimum
100%
1,189
Minimum
100%
699
Fixed pay
Annual bonus
Long-term incentives
Share price appreciation 50%
107
R H I M A G N E S I TA
Annual Report
on Remuneration
The following section
provides details of how the
Company’s Directors were
paid during the financial
year to 31 December 2019.
As a Dutch incorporated
and registered and UK
listed company RHI
Magnesita is required
to comply with both
UK and Dutch reporting
requirements including the
UK and Dutch Corporate
Governance Codes.
The Committee together with the Board has
also determined to provide certain additional
voluntary disclosures recognising the importance
of transparency of reporting. This Annual Report
is compiled on this basis.
Committee membership and operation
Celia Baxter is the Chairman of the Committee
and James Leng and Karl Sevelda are members
of the Committee. They are all Independent
Non-Executive Directors within the meaning
of the uK and Dutch Corporate Governance
Codes. The Company secretary is the secretary
to the Committee.
Other individuals, such as the Chief Executive
Officer, the Human Resources Director and
external professional advisers may be invited
to attend for all or part of any meeting as and
when appropriate and necessary. No individual
is present when their own remuneration
is discussed.
The Committee meets at least three times a
year and at such other times as the Chairman
of the Committee shall require or as the Board
may direct. The Committee has formal terms
of reference which are annually refreshed and
can be viewed on the Company’s website. The
terms of reference were reviewed in 2018 to take
account of the new Corporate Governance Code.
Attendance at Remuneration Committee
meetings in 2019:
Member
Celia Baxter
Karl Sevelda
James Leng
Advisers
Attended
4/4
4/4
4/4
Korn Ferry (“KF”), signatories to the uK
Remuneration Consultants Group’s Code of
Conduct (“Code of Conduct”), were appointed
by the Committee in 2017 having submitted
a proposal which demonstrated their skills
and experience in executive remuneration.
KF provides advice to the Committee on
matters relating to executive remuneration.
The Committee was satisfied that the advice
provided by KF was objective and independent
having noted their commitment to the Code of
Conduct. KF’s fees for advice to the Committee in
respect of the 2019 financial year were £33,698.
KF’s fees were charged on the basis of the time
spent advising the Committee.
108
GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Principal activities and matters addressed during 2019
Agenda items
February
FY2018 EMT Bonus outturn
Review of Draft Remuneration Report
LTIP new joiners and leavers overview
Specific considerations
Executive pay and Governance
Overview on Total Rewards
March
Review and approve FY2018 annual bonus outturn for the Executive Directors
LTIP: Review of 2019 grants KPIs, participants and quantum
Approval of 2018 Remuneration Report
Process for deferred bonus share buying CEO/CFO and EMT
September
Review of Committee’s activities
Setting of LTIP grant date for future grants
Executive Remuneration Benchmarking
Total rewards overview
Review of annual work plan
November
Annual review of remuneration for Executive Management Team, senior
executive team and Chairman's fee
Selection of a LTIP administration platforms
Follow up consideration of changes to uK Governance Code
Progress of remuneration report
Review of Committee Terms of Reference
Review of formal post-employment shareholding requirements and developments
in the market
Overview of group work force population compensation compared
to Executive directors' compensation
Report of CEO & EMT’s net post-tax figure to purchase shares in the amount
of in 2019
Pension contributions reviewed across the workforce, to inform the comparison of
Austrian pension contributions to the executive directors’ pension contributions
Statement of voting at AGM
At last year’s AGM, held on 9 June 2019, votes on the Annual Statement and Annual Report on Remuneration were cast as follows:
Annual Report on Remuneration
Voting
Number
of votes
For
Against
Total
38,161,284
%
99.97%
10,472
0.03%
38,171,756
100%
The total voting rights of the Company on the day on which shareholders had to be on the register in order to be eligible to vote was 49,477,705.
A “Vote withheld” is not a vote in law and is not counted in the calculation % of shares voted “For” or “Against” a resolution.
109
R H I M A G N E S I TA
Compliance with
the Dutch Civil Code
On 5 November 2019,
a law implementing the
revised Shareholders'
Rights Directive was
adopted by the Upper
House of the Dutch
Parliament with effect
from 1 December 2019.
This act has implications
for the Remuneration
Policy and the Annual
Report on Remuneration.
RHI Magnesita was merged into one company
on 27 October 2017. Therefore, we are only able
to show figures for the full financial years of 2018
and 2019, but we will continue to add each
year-on-year figures to reach compliance with
Section 2:135b(3) of the Dutch Civil Code.
Remuneration Policy
RHI Magnesita’s shareholder approved policy is
broadly aligned with the new Dutch regulations.
As such, the Committee has decided to retain the
current policy and update as required as part of
the policy review in advance of the 2021 AGM.
In the section below we have set out additional
policy wordings and explanations as required
by Dutch law.
Mission, values and long-term
value creation
• By providing a fair and appropriate level of
fixed remuneration that does not result in over-
reliance on variable pay and undue risk taking,
thereby encouraging the executives to focus
on sustained long-term value creation.
• By providing a balance of short- and long-
term incentives to ensure there is focus on
short term objectives that will over time build
to create long-term value creation as well as
long-term goals.
• By requiring executives to acquire and retain
shares in the Company.
• By offering long-term incentives where the
reward is delivered in shares which aligns
executives to shareholder interests and value
as well as the performance of the Company
over the longer term.
• By requiring performance measures in our
long-term incentive to be measured over the
longer term and for shares to be held post
vesting for a further two-year period.
• By incorporating metrics focused on
long-term shareholder value, such as total
shareholder return.
The proportion of fixed and variable
remuneration
To support the policy’s objectives to deliver long-
term sustainable success of the Company, the
remuneration package of our Executive Directors
includes a mix of fixed and variable remuneration.
The proportion for 2020 is approximately 40%
for fixed pay and 60% variable remuneration on
a target basis. Variable pay is split between the
cash bonus and long-term incentive in the form
of performance shares. Further details are outline
in the scenario chart on page 111.
The policy was formed in 2018 and was aligned
with the four cultural values outlined below:
Performance criteria
• Act customer-focused and innovatively
• Open decision-making in a respectful
environment
• Operate cross-functionally, collaboratively
and pragmatically
• Performance-driven
The mission of the company is “Taking innovation
to 1200°C and beyond” which requires a high-
performing senior management and the policy
is designed to motivate them to perform to a high
standard and reach the stretching goals set.
In addition, the remuneration arrangements for
the Executive Directors contribute to long-term
value creation:
The short term financial and non-financial criteria
of our variable remuneration are as following:
Financial criteria
• EBIT is a reflection of our Company’s operating
profits, operating performance and business
efficiency supporting the value of RHIM for the
shareholders.
• Free cash flow supports RHIM expanding its
operations or investments in additional assets/
acquisitions and paid out of dividends to our
shareholders.
Non-financial criteria
• Strategic Deliverables supporting both EBIT
and Free cash flow with initiatives and strategic
projects like enhancing the current business
model or company’s footprint.
The long-term incentive is based only on financial
measures, the criteria for these measures are
shown below:
• TSR – The combination of movements in
share price and dividends earned on shares
reflecting the total returns earned by holding
the Company’s shares.
• Adjusted EPS reflecting the income statement
in a clear way and taking the equity structure
into account, the Board believes adjusted EPS
to be one of the indicators which demonstrate
value being created for its shareholders.
• Economic Profit Growth – we measure the
value creation, under consideration of all
economic resources employed with the
business, taking into account the costs of
making and selling a product/service.
The criteria listed above directly link to the
Company’s strategy, long-term interests and
sustainability. Performance targets are set at
a level to maintain good financial health. This
enables the Company to perform well, deliver
shareholder returns and invest sustainably to
achieve strategic deliverables.
The assessment of the fulfilment of performance
criteria is set out on page 112 for the annual bonus.
No performance share awards vested during
the year.
Policy review process and considerations
The Remuneration Policy will be reviewed
in 2020 ahead of approval at the 2021 AGM.
The review will follow the process set out below:
• The Committee will consider market and
governance developments (including the
uK Corporate Governance Code and Dutch
regulations) as well as wider pay context, such
as pay ratios.
• The Committee will consult with shareholders
and employees ahead of the AGM.
• The Committee will carefully consider
feedback received from shareholders
and employees.
• All changes, adoption or revisions to the
existing policy will be brought to the 2021
AGM for shareholders voting.
The Committee gains significant benefit and
strong experience in the form of Celia Baxter, the
Chairman of the Committee, with over 30 years
of Human Resources experience and 20 years of
Board and remuneration committee experience.
This is in addition to a variety of perspectives
from the Committee members which enables a
balanced and informed approach to remuneration
policy-making.
110
GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Single total figure table (audited)
The following table shows a single total figure of remuneration in respect of qualifying services for the 2019 financial year for each Executive and
Non-Executive Director of the Company, together with comparative figures for 2018.
Director1,2
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2019
Salary
Taxable benefits3
Bonus4
Pension
Total remuneration
Total fixed
remuneration
Total variable
remuneration
Executive Directors
Stefan Borgas
Ian Botha5
Non-Executive Directors
€855,000
€826,000
€8,823
€8,823
€498,354 €1,090,876
€128,250
€147,650
€1,490,427 €2,073,350
€992,073
€498,354
€375,000
–
€56,755
–
€218,576
–
€56,268
–
€706,617
–
€488,041
€218,576
Herbert Cordt
Celia Baxter
£220,000
£220,000
£87,500
£82,500
Fersen Lambranho6
£3,740
£65,000
Andrew Hosty
James Leng
Stanislaus Prinz zu
Sayn-Wittgenstein
£80,465
£77,500
£102,500
£102,500
£65,000
£65,000
John Ramsay
£82,500
£77,500
Wolfgang Ruttenstorfer
£72,500
£72,500
David A. Schlaff
£65,000
£65,000
Karl Sevelda
£72,500
£72,500
Janet Ashdown7
£82,500
£6,250
Fiona Paulus7
Franz Reiter1
Michael Schwarz1
£72,034
£5,833
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£220,000
£220,000
£220,000
–
£87,500
£82,500
£87,500
–
–
–
–
–
–
–
£3,740
£65,000
£3,740
£80,465
£77,500
£80,465
£102,500
£102,500
£102,500
£65,000
£65,000
£65,000
£82,500
£77,500
£82,500
£72,500
£72,500
£72,500
£65,000
£65,000
£65,000
–
£72,500
£72,500
£72,500
–
£82,500
£6,250
£82,500
–
£72,034
£5,833
£72,034
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Employee Directors attending Board meetings do not receive remuneration for that role, they are remunerated as employees of the Group.
2 All amounts are disclosed in the currencies in which the relevant elements of pay are set. Actual payment may be made in the currency where the recipient resides
using the exchange rate at the time of payment.
3 Benefits in 2019 comprise for Stefan Borgas a car benefit of €8,814 and €9 for insurance for the year and for Ian Botha a car benefit of €7,629, benefits in kind for insurance €184, tax advice of €420 and
relocation costs of €48,522 for the year.
4 The Committee adjusted the way the bonus plan operates for the year as described on page 97.
5 Ian Botha joined the Company on 1 April 2019 and therefore his annual salary was prorated accordingly, from an annual salary of €500,000.
6 Fersen Lambranho stepped down from his Board duties January 21, 2019 therefore his fee was prorated accordingly.
7 Janet Ashdown and Fiona Paulus joined the Board on 1 December 2018 and therefore the 2018 fee was prorated accordingly.
No loans, advances or guarantees have been provided to any Director. No Long-term incentives vested during the year and so there was no impact of share
price appreciation.
Ratio between fixed and variable pay
S. Borgas
I. Botha
67%
69%
33%
31%
Fixed
Variable
111
R H I M A G N E S I TA
Annual Report on Remuneration
continued
2019 Annual bonus performance against targets (audited)
The annual bonus for the Executive Directors – Stefan Borgas (CEO) and Ian Botha (CFO) – was determined following assessment of achievement
of qualitative and quantitative targets as set out below:
Threshold
(0% vests)
Target
(50% vests)
Maximum4
(100% vests)
Actual
performance
2019
CEO
(% of total
for each
element)
CEO
Payment
(% of salary)
Maximum
total pay out5
CEO
cash bonus
based on
€855,000
salary6
CFO
(% of total
for each
element)
CFO
Payment
(% of salary)
Maximum
total payout5
CFO
cash bonus
based on
€375,000
part year
salary6
Measure and
weighting
Operating EBIT1
(35%)
Free Cash Flow FCF2
(30%)
Net Synergy Tracking3
(10%)
Strategic Objectives
(25%)
Total
Measure and weighting
Operating EBIT1
(35%)
Free Cash Flow FCF2
(25%)
Net Synergy Tracking3
(15%)
Strategic Objectives
(25%)
Total
€440.1
million
€247.9
million
€35.0
million
€481.0
million
€273.0
million
€38.0
million
€521.9
million
€298.1
million
€45.0
million
€381.8
million
€285.1
million
€42.0
million
0%
0%
€0
0%
0%
€0
74.0%
33.3%
€284,726
74.0%
33.3%
€124,880
78.6%
11.8%
€100,768
78.6%
11.8%
€44,196
50%
100%
150%
82.5%
35.2%
13.2%
€112,860
35.2%
13.2%
€49,500
38.9%
58.3% €498,354
38.9%
58.3%
€218,576
2018
CEO
(% of total
for each
element)
CEO
Payment
(% of salary)
maximum
total pay out
CFO7
(% of total
for each
element)
CFO7 Payment
(% of salary)
maximum
total pay out
Payout
Payout7
93.6%
49.2% €406,060
97.9%
41.1%
€226,101
100.0%
37.5%
€309,750
100%
30.0%
€65,000
100.0%
22.5%
€185,850
100%
18.0%
€99,000
61.1%
22.9%
€189,216
88.0%
132.1% €1,090,876
98.2%
98.7%
29.3%
€61,297
118.4%
€651,398
1 At constant currency and w/o restructuring expenses.
2 Operating cash flow at constant currency. EBTIDA w/o restructuring expenses + CapEx + change in working capital + cash tax.
3 Synergies are (financial) benefits achieved through the merger of the two companies.
4 The maximum CEO annual bonus in 2019 was 150% of salary and the maximum for the CFO was 150% of salary earned in the year.
5 Bonus achievement % of maximum opportunity (150%).
6 The CEO and CFO are required to purchase shares in the Company to the value of 50% of any bonus paid net of tax, for performance above Target and to hold the shares for a minimum period of
three years.
7 Relates to the previous CFO.
The original basis on which the cash targets were set reflected the strategy at the start of the year including a variety of financial policies and practices
which the incoming CFO reviewed and amended in line with best practice and the strategy for working capital management changed mid-year following
a review by the Board. Consequently, the bonus targets for Free Cash Flow were aligned with the revised strategy on a basis that the targets were no easier
or harder to achieve. The Committee assessed the formulaic outcome of the whole bonus calculation in the context of the overall performance of the
Company. It noted the reasons for the underperformance of the EBIT targets and the partial meeting of the Free Cash Flow, Net Synergy and Strategic
targets. The Committee concluded that the overall outcome of 38.9% of maximum was appropriate and that it was not right to either increase or decrease
the formulaic outcome.
112
GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Strategic deliverables 2019
Strategic measures* and weighting
Performance
Convert business model (5%)
Performance measured in incremental sales revenue from Solutions business in 2019, training of Sales
staff in 2019 and expansion of solutions offering
Restructure European Business (5%)
Performance measured in volume, production and timetable
Restructure Supply Chain Management (5%)
Performance measured in reduced inventory intensity in 2019, EBITA earnings contribution in 2019 and
introduction and embedding of "on-time" supply chain performance metrics
Focus on Recycling Business (5%)
SG&A Reduction Strategy (5%)
Total (25% of bonus opportunity)
Performance measured in sales revenue from sale of recycled material in 2019, internal use of recycled
material in 2019 and introduction of recycling plant in Europe
Performance measured on sustainable SG&A reduction initiatives identified and enabled, SG&A cost
savings delivered in 2019 and implementation of Global Business Services
Actual
(score out
of 150%)
65%
88%
65%
78%
133%
85%
* The details of CEO’s/CFO ´s Threshold/Target/Maximum are market sensitive and details of the specific targets are not therefore disclosed as the Board believes they would provide information to
competitors. They will remain market sensitive because they are an integral part of our on-going business operations. The Committee has provided as much information as it is able given the nature
of the objectives so that investors can be comfortable that the Committee has used a thorough approach in setting the objectives and targets and measuring the outcome.
Given the significant strategic advances made during the year, the Committee is comfortable with the bonus payments made for achievement of strategic
deliverables in light of financial performance in the wider macro-economic environment.
No bonuses were awarded to Non-Executive Directors other than the employee representatives in relation to their employment activities.
Share awards where vesting is based on performance periods ending during the financial year ending 31 December 2019 (audited)
There were no share awards where vesting is determined based on performance period during the financial year ending 31 December 2019.
Share awards awarded during the financial year ending 31 December 2019 (audited)
During the year, our CEO received an annual grant of 200% of salary as part of the performance share plan. The CFO received three grants of shares during
the year. A grant of 150% of salary in performance shares which represents the annual grant. In addition, the CFO also received conditional shares to buy-out
deferred bonus awards with a face value of c.150% of salary and c.150% of salary of performance shares to buy-out performance share awards forfeited.
Details of the annual Performance Share award and the performance targets that will determine the extent to which the award vests are set out below.
Director
Scheme
Basis of award Date of award
Percentage of
salary award
Share price
used 1
Face value
€000
Percentage
vesting at
threshold
performance
Number
of shares
End of
performance
period
Stefan Borgas
Performance Shares
Annual award
19 Aug 19
200%
€44.534
Ian Botha
Performance Shares
Annual award
19 Aug 19
150%
€44.534
1,710
750
25%
25%
38,397
31 Dec 2021
16,840
31 Dec 2021
1 The face value of the awards was calculated using the average closing price for the five trading days prior to the award being granted being £41.06 converted to € (using average FX rate over the same
five day period of €1.0846 to £1 = €44,534).
The 2018 Performance Share awards are subject to relative TSR, adjusted EPS and EBIT targets. For the 2019 Performance Share awards the Committee
replaced the EBIT metric with Economic Profit Growth. Economic Profit Growth was a key performance indicator (KPI) of the Magnesita business prior to the
Combination (of RHI and Magnesita) and has been introduced as a KPI for the combined businesses from 2019 onwards in order to manage and measure the
long-term value of the Company. The Committee also changed the measurement of TSR from the percentage growth against the FTSE 350 Index to reviewing
its performance against a relevant group of FTSE 350 companies. This change of measurement is seen to be no less challenging than the previous measure.
The performance conditions and targets for the 2019 awards shown above are as follows (awards vest on straight line basis between threshold and maximum).
113
R H I M A G N E S I TA
Annual Report on Remuneration
continued
Performance targets for 2018 Performance Share awards
Performance measure
Relative TSR
Adjusted EPS
EBIT1
Weighting
Threshold
(25% vests)
Maximum
(100% vests)
Performance period
33.3% Matching Index
Index +(25)%2
33.3% €5.20 per share €6.50 per share
33.3%
€390 million
€440 million
2018 to 20203
(+ 2 year holding period post
vesting)
1 The above EBIT target range was incorrectly stated as €380 M to €435 M in the 2018 report and has been corrected in this table.
2 Being at least 25% in absolute terms higher than the Index (e.g. if Index TSR is 23% over three years then the vesting range is TSR of 23% to 48%)
3 For EPS and EBIT performance conditions the period of three financial years commencing with 2018. For the TSR Performance Condition the period of three financial years and one calendar month
commencing with the financial year 2018.
Performance targets for 2019 Performance Share awards
Performance measure
Relative TSR1
Adjusted EPS
Economic profit growth
Weighting
Threshold
(25% vests)
Maximum
(100% vests)
Performance period
33.3% 50th percentile
75th percentile2
33.3% €7.80 per share €9.00 per share
33.3%
€600 M
€670 M
2019 to 2021
(+ 2 year holding period post
vesting)
1 Measured against the FTSE 350, excluding sectors with limited direct relevance to RHI Magnesita.
2 Awards vest on a straight-line basis between threshold and maximum.
Awards to compensate for remuneration forfeited on joining RHI Magnesita
Ian Botha was appointed as CFO from 1 April 2019. In buying out incentive pay that was forfeited on his joining RHI Magnesita, the Committee compensated
the CFO with awards that vest over longer time periods, which are subject to performance conditions based on the longer-term performance of RHIM and
take into account the expected value of the awards forfeited. The basis and terms of the buy-out awards were fully disclosed in the 2018 Remuneration
Report. The Committee granted the following awards:
Form of award
Date of award
Share price used
€000 Number of shares
Vesting conditions
Face value
Conditional
shares to
buy-out deferred
bonus awards
Performance
shares to
buy-out
performance
shares awards
forfeited
26 November 2019
€45.202
750
16,592 Vesting 3 years after grant
(no corporate performance
conditions attached, but vesting
dependent on continued
employment for 3 years from
the award date)
19 August 2019
€44.534
750
16,841 Vesting 3 years after grant
subject to meeting 2019
corporate performance
conditions for 2019 PS awards
shown above. Two-year post
vesting holding period applies
Director
Ian Botha
Ian Botha
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GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Directors' interests in RHI Magnesita’s Long-term incentive plan
The table below details outstanding share awards including the normal annual PS awards granted to the CEO and CFO during 2019.
Scheme
Award Date
Share price
used
€
Share awards
held at
1 January
2019
Awarded
during
the year
Vested
during the
year
Share awards
lapsed
during
the year
Share awards
held at
31 December
2019
Total share
value at
award
(face value)
€
Vesting
date
Stefan Borgas
Performance
shares
7 June 2018
57.773
28,594
–
Ian Botha
Performance
shares
19 August
2019
19 August
2019
19 August
2019
Conditional
Award
26 November
2019
44.534
44.534
44.534
45.202
–
–
–
–
38,397
16,840
16,841
16,592
–
–
–
–
–
–
–
–
–
–
28,594
1,652,0001
7 June 2021
38,397
1,709,9722
16,840
750,0002
16,841
750,0002
19 August
2022
19 August
2022
19 August
2022
16,592
750,0003
26 November
2022
1 The face value of the awards was calculated using the average closing price for the five trading days prior to the PS award being granted being £50.62 converted to € (using average FX rate over the
same five days period of €1.14 to £1 = €57.773).
2 The face value of the awards was calculated using the average closing price for the five trading days prior to the PS award being granted being £41.06 converted to € (using average FX rate over the
same five days period of €1.0846 to £1 = €44.534).
3 The face value of the awards was calculated using the average closing price for the five trading days prior to the PS award being granted being £38.73 converted to € (using average FX rate over the
same five days period of € 1.167 to £1 = €45.202).
115
R H I M A G N E S I TA
Annual Report on Remuneration
continued
Statement of Directors’ shareholding and share interests (audited)
under the share ownership requirements set out in the Directors’ Remuneration Policy, the Executive Directors are normally required to build and maintain
over five years a shareholding equivalent to at least 200% of salary. At the 2019 year-end, the Executive Directors each held shares in the Company
as detailed below. Shares are valued using the Company’s closing middle market share price on 31 December 2019 of £38.48.
The table below shows how each Director complies with the shareholder guidelines at 31 December 2019:
Shares held at
31 December 2019
Shares held
by connected
persons
Shares held at
31 December 2018
unvested and
subject to
a service
requirement
only
unvested and
subject to
performance
conditions
Shareholding
requirement
Current
shareholding
% salary
Requirement
met?
Executive Directors
Stefan Borgas
Ian Botha
Non-Executive Directors
Herbert Cordt
Celia Baxter
Andrew Hosty
James Leng
Fersen Lambranho4
Stanislaus Prinz zu
Sayn-Wittgenstein5
Franz Reiter
Wolfgang Ruttenstorfer
David A. Schlaff6
John Ramsay
Michael Schwarz
Janet Ashdown
Fiona Paulus
Karl Sevelda
13,600
–
–
1,002
379
–
–
–
–
–
–
2,130
–
–
–
–
675
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10,4251
–
66,991 200% salary
–
16,592
33,681 200% salary
75%2
75%3
–
1,002
379
–
–
–
–
–
–
2,130
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
No
No
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 In the 2018 disclosure, 675 shares held by persons connected to Stefan Borgas were omitted, although they were announced to the market at the time of purchase. The 2018 figure in the above table
has been restated.
2 Referring to unvested and subject to service requirement assuming tax rate of 50%
3 Percentage includes share holdings by connected persons
4 Interests held from Alumina Holding controlled by persons including Fersen Lambranho were sold in November 2019.
5 2,088,461 interests are held through Chestnut Beteiligungsgesellschaft mbH (“Chestnut“). Ms. Sayn-Wittgenstein made an agreement with Mr. Winterstein which allows Chestnut to exercise
the voting rights of Silver Beteiligungsgesellschaft mbH (“Silver“) in the Issuer. Ms. Sayn-Wittgenstein and Mr. Winterstein share a family relationship. 2,088,461 held through Silver. Ms. Sayn-
Wittgenstein made an agreement with Mr. Winterstein which allows Chestnut to exercise the voting rights of Silver in the Issuer. Ms. Sayn-Wittgenstein and Mr. Winterstein share a family relationship.
1,590,000 held in part directly and in part indirectly through FEWI Beteiligungsgesellschaft mbH.
6 14,333,340 held directly by MSP Stiftung and through a subsidiary. MSP Stiftung is a foundation under Liechtenstein law, whose founder is Mag. Martin Schlaff. The number of shares reported in the
2018 Annual Report stated as 11,347,058 was incorrect.
There were no changes in the Directors’ shareholdings and share interests between the end of the year and 31 March, 2020.
116
GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Review of past performance and CEO remuneration table (unaudited)
Share price performance
The closing middle market price of the shares at 31 December 2019 was £38.48 (2018: £39.60). During 2019, the shares traded in the range of £34.20
to £50.00.
RHI Magnesita total shareholder return
The graph below compares the Total Shareholder Return of the Company with the FTSE 350 Index over the 26-month period from Admission to
31 December 2019. This is considered an appropriate comparator for RHI Magnesita and aligns with the use of the FTSE 350 in the TSR performance
measure for the Performance Share awards.
180
160
140
120
100
80
60
27/10/17
31/12/17
31/12/18
31/12/19
RHI Magnesita
FTSE 350
Source: Datastream (Thomson Reuters)
Remuneration of the CEO
Single figure of total remuneration1
Annual bonus pay-out as % of maximum2
Long-term incentive vesting rates as % of maximum3
2017
2018
2019
€476,981
€2,073,350
€1,490,427
83.16%
88.04%
N/A
N/A
38.9%
N/A
1 The 2017 Single figure of Total Remuneration relates to the period 27 October 2017 to 31 December 2017.
2 The 2017 Annual bonus pay-out as a % of maximum relates to bonus targets set prior to the merger of the two companies that now form RHI Magnesita.
3 A long-term incentive plan was introduced when the Company was formed in October 2017. The first awards are not due to vest until 2021 based on a performance period ending 31 December 2020
(and shortly thereafter for the TSR element).
Annual percentage change in remuneration of the CEO (unaudited)
The table below illustrates the percentage change in annual salary, benefits and bonus between 2018 and 2019 for the CEO and the average for all
Company Austrian employees. The CEO is an Austrian-based employee so the Committee feels that a comparator based on all Austrian employees
is appropriate for the purposes of this analysis.
CEO
Average of employees
Salary change
(2018 to 2019)
Benefits change
(2018 to 2019)
Annual bonus change
(2018 to 2019)
3.5%1
6.1%
-12.4%
5.1%
-54.3%
5.8%
1 The basic salary of Stefan Borgas increased from € 826,000 to € 855,000 (3.5%) based on performance and aligned to salary increase of the workforce.
117
R H I M A G N E S I TA
Annual Report on Remuneration
continued
Directors and employee remuneration over time (unaudited)
Directors’ total remuneration (on a full-time equivalent basis)
Year
Executive Directors
Stefan Borgas1
Ian Botha2
Octavio Lopes (CFO until September 2018)
Non-Executive Directors
Herbert Cordt
Celia Baxter
Andrew Hosty
Fersen Lambranho
James Leng
Stanislaus Prinz zu Sayn-Wittgenstein
John Ramsay
Wolfgang Ruttenstorfer
David A. Schlaff
Karl Sevelda
Janet Ashdown3
Fiona Paulus3
Franz Reiter4
Michael Schwarz4
Company performance
Adjusted EPS
Operating EBIT in € million
Free Cash Flow in € million
Average remuneration (on a full-time equivalent basis)
Employees of the Company5
2019
2018
Change %
€1,490,427 €2,073,350
-28.1%
€706,617
–
–
£1,936,838
£220,000
£220,000
£87,5006
£82,500
£80,4657
£77,500
£3,740
£65,000
£102,500
£102,500
£65,000
£65,000
N/A9
N/A9
–
6.1%
3.8%
N/A9
–
–
£82,5006
£77,500
6.4%
£72,500
£72,500
£65,000
£65,000
£72,500
£72,500
£82,5006
£6,250
£72,0348
£5,833
–
–
5.57
381.8
285.1
–
–
5.31
399.6
370.5
–
–
–
N/A9
N/A9
–
–
4.8%
-4.4%
-23.0%
€102,338
€96,398
6.1%
1 The basic salary of Stefan Borgas increased from €826,000 to €855,000 (3.5%) based on performance and aligned to salary increase of the workforce.
2 Ian Botha appointed from 1 April 2019 and therefore in 2019 received a prorated salary of €375,000. The full-year annual salary is €500,000.
3 Janet Ashdown and Fiona Paulus joined the Board on 1 December 2018 and therefore the 2018 fee was prorated accordingly.
4 Employee Directors attending Board meetings do not receive remuneration for that role, they are remunerated as employees of the Group.
5 The group of RHIM employees covers the parent company, namely all employees within the Austrian subsidiaries.
6 The workload of the Committee Chairs was assessed, and fees raised to acknowledge the workload required.
7 An increase in fees due to the establishment of the Corporate Sustainability Committee, whereby Andrew Hosty is a member.
8 From 24 September 2019 on Fiona Paulus has been appointed to Audit Committee as a member and therefore received an additional fee of £2,178 prorated for 2019.
9 Where the incumbent did not serve the full year, the calculation has not been made as it is unrepresentative.
Relative importance of spend on pay (unaudited)
The following table sets out the change in dividends and overall spend on pay in the financial year ended 31 December 2018 compared with the financial
year ended 31 December 2019.
Total gross employee pay
Dividends1
1 Dividend is not time apportioned.
118
2019
€million
2018
€million
Percentage
change
629.7
24.5
594.2
74.3
5.9%
-67%
GOVERNANCE
R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Payments to past Directors (audited)
There were no payments to past Directors in the period 1 January to 31 December 2019.
Payments for loss of office (audited)
No payments were made to any Director in respect of loss of office in the period 1 January to 31 December 2019.
2020 remuneration (unaudited)
Set out below is how the Directors’ Remuneration Policy will be implemented during 2020.
Salaries and fees for 2020
Directors' remuneration (on a full-time equivalent basis)
Executives
Stefan Borgas
Ian Botha1
Non-executives
Chairman (inclusive of all Committee fees)
Non-Executive Directors
Deputy Chair / Senior Independent Director
Chair of Audit Committee & Remuneration Committee
Membership of the Audit and Compliance and Remuneration Committees
Chairs of Nomination Committee (unless held by the Chairman) and Corporate Sustainability Committee
Membership of the Nomination and Corporate Sustainability Committee
2020
2019
Percentage
change
€1,026,000
€855,000
€600,000 €500,000
£235,0002
£220,000
£69,4002
£65,000
£26,700
£25,000
£18,700
£17,500
£8,000
£7,500
£18,700
£17,500
£5,300
£5,000
20%
20%
6.8%
6.8%
6.8%
6.9%
6.7%
6.9%
6.0%
1 Ian Botha appointed from 1 April 2019, and therefore in 2019 was receiving a prorated salary of €375,245 from the full-year annual salary of €500,000.
2 Assuming that suggested increases are approved by shareholders. The base fee for the Chairman and non-executive directors was not increased in 2018 and therefore the above increase is in line with
the average employee base pay increase in 2018 and 2019.
The Company does not contribute to defined benefit pension schemes on behalf of Executive directors or non-executive directors.
Just prior to the signing of this report the Executive Directors decided from 1 April to waive the 20% salary they were awarded for at least three months.
During this time members of the Executive Management Team will waive 10% of their salary, the Chairman and Non-Executive Directors will waive 10%
of their fees and many employees globally will likely see a reduction in their earnings.
Executive Directors external appointments
Stefan Borgas was appointed as a Non-Executive Director of SCR-Sibelco NV on 17 April 2019. For this period he retained fees of €35,000.
Annual bonus for 2020
The maximum potential annual bonus opportunity for FY20 remains at 150% of salary for both the CEO and CFO.
The Committee has not yet finalised how the bonus will operate for the year. However, at least 70% of the annual bonus will be determined by financial
measures and the balance by strategic objectives. Following the strong progress achieved in delivering on synergies since our business combination
“Synergies” as a measure will be removed from the annual bonus.
The specific targets relating to the 2020 bonus will be provided on a retrospective basis in next year’s Annual Report on Remuneration.
All other elements of the annual bonus structure remain unchanged and are in line with the approved Directors’ Remuneration Policy. The CEO and
the CFO are required to use 50% of any bonus earned in excess of target (net of tax) to acquire shares in the Company that will be held for a minimum
of three years.
119
R H I M A G N E S I TA
Annual Report on Remuneration
continued
2020 LTIP awards
Our CEO will be granted a Performance Share award over shares with a value at grant of 200% and our CFO 150% of salary. The performance measures
have been updated to reflect the desire of the Committee to focus management on delivering material increases in the share price (plus dividends) and
aggregate EPS over the three year performance period. The Committee felt that in these uncertain times the narrower focus on the absolute (rather than
relative) total shareholder return and on total EPS over the three years provides a significantly simpler incentive, better aligned with shareholders’ interests.
The Committee may scale back the level of vesting if it considers the outcome to be reasonably unacceptable or if it is not reflective of the underlying
financial performance of the Company. The Committee determined that a review at the time of vesting of the 2020 awards was preferable to a scale back
at grant as the drop in the share price since the 2019 grants were made was predominantly reflective of the COVID-19 market correction. The measures
and targets for the 2020 awards are set out below.
Performance measure
TSR1
Intermediate
(75% of vesting)
Weighting
Threshold
(25% vesting)
Maximum
(100% vesting)
Performance
period
50%
50%
30%
70% 2020 to 2023
(+2 year holding
period post
vesting)
€9.50
Adjusted EPS (cumulative for the three-year performance period)
€8.00
50%
€6.50
1 Measured from, date of grant to 3rd anniversary with a two month average before each date.
2 Awards vest on a straight line basis between threshold intermediate and maximum.
Terminology for Performance Share awards
The RHI Magnesita long-term incentive plan (the "Plan") was approved by shareholders at the AGM 2018. After approval Performance Share awards may
be granted under the Plan. The grant of an award is when participants are told they will receive shares provided performance targets are met. Participants
DO NOT RECEIVE shares at the time an award is granted. Performance targets are set at the time the award is granted and measured over a performance
period of three financial years. At the end of the performance period the performance targets are tested against performance. An award will vest if the
performance targets are met. If the performance targets are only met in part then only part of the award will vest. When the award vests the participant
RECEIVES shares in the Company. If therefore a participant is granted an award over 100 shares but the performance targets are only met in part and only
50% of the award vests, the participant will receive 50 shares. Once an award vests the Executive Directors must retain the vested shares for a further two
years (subject to the sale of sufficient shares to meet any tax payable on vesting).
This Report was reviewed and approved by the Board on 31 March 2020 and signed on its behalf by order of the Board.
Celia Baxter
Chairman of the Remuneration Committee
120
GOVERNANCE R H I M A G N E S I TA
A N Nu A L REP O R T 2 01 9
Financial
Statements
122 Consolidated Statement of
204 Company Financial Statements
Financial Position
of RHI Magnesita N.V.
123 Consolidated Statement of Profit
206 Notes
or Loss
124 Consolidated Statement of
Comprehensive Income
125 Consolidated Statement of Cash Flows
126 Consolidated Statement of Changes
in Equity
Notes
128
Independent auditor’s report
Other Information
215
226 Alternative performance
measures (“APMs”)
Shareholder information
227
121
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Consolidated Statement of
Financial Position
as of 31.12.2019
in € million
ASSETS
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investments in joint ventures and associates
Other non-current financial assets
Other non-current assets
Deferred tax assets
Current assets
Inventories
Trade and other current receivables
Income tax receivables
Other current financial assets
Cash and cash equivalents
EQUITY AND LIABILITIES
Equity
Share capital
Group reserves
Equity attributable to shareholders of RHI Magnesita N.V.
Non-controlling interests
Non-current liabilities
Borrowings
Other non-current financial liabilities
Deferred tax liabilities
Provisions for pensions
Other personnel provisions
Other non-current provisions
Other non-current liabilities
Current liabilities
Borrowings
Other current financial liabilities
Trade payables and other current liabilities
Income tax liabilities
Current provisions
122
Notes
31.12.2019
31.12.2018
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
(26)
(27)
(17)
(28)
(29)
(30)
(31)
(26)
(27)
(32)
(33)
(34)
117.5
319.0
1,106.8
19.5
15.4
39.5
181.9
117.4
334.4
1,094.8
21.8
18.0
34.3
171.1
1,799.6
1,791.8
602.7
432.7
17.3
0.1
467.2
1,520.0
3,319.6
49.5
774.4
823.9
20.8
844.7
983.5
105.1
54.0
328.1
75.8
98.5
7.3
717.8
481.2
18.4
38.6
491.2
1,747.2
3,539.0
48.3
752.2
800.5
84.8
885.3
844.8
49.5
78.4
304.3
78.5
109.2
10.3
1,652.3
1,475.0
71.5
31.9
614.0
35.4
69.8
822.6
3,319.6
321.6
15.0
756.9
32.2
53.0
1,178.7
3,539.0
R H I M A G N E S I T A
A N N U A L R E P O R T 2 0 1 9
Consolidated Statement of
Profit or Loss
from 01.01.2019 to 31.12.2019
in € million
Revenue
Cost of sales
Gross profit
Selling and marketing expenses
General and administrative expenses
Restructuring and write-down expenses
Other income
Other expenses
EBIT
Interest income
Interest expenses on borrowings
Net expense on foreign exchange effects and related derivatives
Other net financial expenses
Net finance costs
Share of profit of joint ventures and associates
Profit before income tax
Income tax
Profit after income tax
attributable to shareholders of RHI Magnesita N.V.
attributable to non-controlling interests
in €
Earnings per share - basic
Earnings per share - diluted
Notes
(35)
(36)
(37)
(38)
(39)
(40)
(41)
(42)
(43)
(44)
(14)
(45)
(25)
(52)
2019
2,922.3
(2,205.1)
717.2
(126.2)
(209.2)
(112.1)
34.9
(31.3)
273.3
9.1
(28.4)
(17.2)
(38.7)
(75.2)
1.5
199.6
(50.8)
148.8
139.0
9.8
2018
3,081.4
(2,344.5)
736.9
(128.9)
(208.4)
(22.3)
43.9
(22.6)
398.6
9.7
(48.5)
(81.3)
(42.6)
(162.7)
10.1
246.0
(58.9)
187.1
158.1
29.0
2.82
2.81
3.52
3.52
123
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Consolidated Statement of
Comprehensive Income
from 01.01.2019 to 31.12.2019
Notes
2019
148.8
2018
187.1
(20.3)
0.9
0.0
0.0
0.0
0.0
0.0
(6.8)
1.8
0.0
0.1
(24.3)
(11.5)
3.0
0.0
(8.5)
(7.6)
3.9
2.4
(2.9)
0.5
0.2
3.7
(7.4)
1.9
(0.7)
0.0
(6.0)
(37.1)
9.1
(0.1)
(28.1)
(34.1)
(32.8)
114.7
103.4
11.3
154.3
137.9
16.4
(7)
(45)
(56)
(56)
(56)
(41)
(55)
(45)
(55)
(14)
(28)
(45)
(14)
(25)
in € million
Profit after income tax
Currency translation differences
Unrealised results from currency translation
Deferred taxes thereon
Current taxes thereon
Unrealised results from net investment hedge
Deferred taxes thereon
Current taxes thereon
Reclassification to profit or loss
Cash flow hedges
Unrealised fair value changes
Deferred taxes thereon
Reclassification to profit or loss
Share of other comprehensive income of joint ventures and associates
Items that will be reclassified subsequently to profit or loss, if necessary
Remeasurement of defined benefit plans
Remeasurement of defined benefit plans
Deferred taxes thereon
Share of other comprehensive income of joint ventures and associates
Items that will not be reclassified to profit or loss
Other comprehensive income after income tax
Total comprehensive income
attributable to shareholders of RHI Magnesita N.V.
attributable to non-controlling interests
124
R H I M A G N E S I T A
A N N U A L R E P O R T 2 0 1 9
Consolidated Statement of
Cash Flows
from 01.01.2019 to 31.12.2019
in € million
Cash generated from operations
Income tax paid less refunds
Net cash inflow from operating activities
Investments in property, plant and equipment and intangible assets
Investments in subsidiaries net of cash acquired
Investments in securities
Cash inflows from sale of subsidiaries net of cash disposed of
Cash inflows from the sale of property, plant and equipment
Cash inflows from the sale of securities and shares
Dividends received from joint ventures and associates
Investment subsidies received
Interest received
Investments in/ cash inflows from non-current receivables
Net cash (outflow) from investing activities
Share issue costs
Capital contribution to associates
Acquisition of treasury shares
Acquisition of non-controlling interests
Proceeds from sale of non-controlling interests
Dividend payments to shareholders of the Group
Dividend payments to non-controlling interests
Proceeds from borrowings and loans
Repayments of borrowings and loans
Changes in current borrowings
Interest payments
Repayment of lease obligations
Interest payments from lease obligations
Cash flows from derivatives
Net cash (outflow) from financing activities
Total cash flow
Change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Foreign exchange impact
Cash and cash equivalents at year-end
Notes
(48)
(50)
(50)
2019
470.4
(67.8)
402.6
(156.1)
(0.5)
(0.4)
2.5
1.4
40.9
13.4
0.2
8.3
0.0
(90.3)
0.0
0.0
(18.8)
(44.6)
0.0
(74.2)
(1.3)
432.0
(550.4)
(2.8)
(49.8)
(14.3)
(1.2)
(14.4)
2018
462.2
(67.9)
394.3
(122.6)
0.0
(121.2)
0.0
2.9
118.4
11.0
2.1
8.2
0.4
(100.8)
(6.2)
(1.4)
0.0
(80.1)
9.2
(33.6)
(1.1)
734.9
(801.9)
26.4
(71.1)
0.0
0.0
(20.1)
(49)
(339.8)
(245.0)
(27.5)
(27.5)
491.2
3.5
467.2
48.5
48.5
442.4
0.3
491.2
(22)
125
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
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127
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Notes
to the Consolidated Financial Statements 2019
PRINCIPLES AND METHODS
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 1,200°C. The Group supplies customers in the steel, cement, lime, glass and non-ferrous metals
industries. In addition, the Group’s products are used in the environment (waste incineration), energy (refractory construction) and chem-
icals (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 2019 were drawn up in accordance with all Interna-
tional Financial Reporting Standards (IFRSs) mandatory at the time of preparation as adopted by the European Union (EU). The presenta-
tion 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 receiv-
ables 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.
With the exception of specific items such as derivative financial instruments and plan assets for defined benefit obligations, the Consoli-
dated Financial Statements are prepared on a historical cost basis unless otherwise stated.
The financial statements have been prepared on a going concern basis. Information on the outbreak of the coronavirus COVID-19 is dis-
closed under Note (64). The impact of COVID-19 on the Group is assessed below:
The Group benefits from a strong financial position, with low leverage and significant liquidity. As at 31 December 2019 the group has
liquid resources of €467.2 million comprising cash and cash equivalents as well as since January 2020 a committed and unutilised
credit facility amounting to €600.0 million. Furthermore, repayments of borrowings to financial institutions in 2020 are scheduled with
€15.4 million only. Therefore, it is very likely that liquidity security is given for a period of at least 12 months after the date of approval of
RHI Magnesita N.V.’s financial statements. As part of assessing the ability to continue as a going concern, RHI Magnesita also considered
the impact of COVID-19 and a related potential global economic downturn on its business. Economic activities in the Steel and Industrial
Segments are closely linked to the developments of the global markets. During this assessment management conducted various scenario
analyses with sufficient depth and duration, considering different levels of revenue reduction and working capital implications. The sensi-
tivities applied were informed by internal and external data sources, including a review of the Group’s most recent production levels and
short-term order book, customer feedback and review of regional macroeconomic forecasts. Using this data, management created Sce-
nario A, Scenario B and Scenario C which modelled the effect of incremental reductions to revenue at regional and aggregated levels on
the Group’s results for a three-year period. The scenarios also accounted for the working capital implications of reduced sales activity
and the mitigating actions available to management.
128
R H I M A G N E S I T A
A N N U A L R E P O R T 2 0 1 9
In each scenario, sufficient liquidity and headroom on the Group’s covenants were demonstrated. Based on the most recent available
external information we have no information that Scenario C is likely to occur. In the event of such further deterioration of market condi-
tions as a result of the COVID-19 outbreak, and implementation of the mitigating actions identified by the Board, the Group will remain
compliant with its financing covenant and will have sufficient liquidity to meet obligations when they fall due for a period of at least 12
months after 31 March 2020. In order to secure production capabilities and the health and safety of our employees, RHI Magnesita estab-
lished Corona Task Forces on a global and regional basis, plants are operating with very strict restrictions, such as pre-work temperature
checks. Moreover, all corporate offices are currently closed with employees working from home. RHI Magnesita is currently evaluating
further potential actions to mitigate risk such as the use of short working hours, governmental subsidies and the tax benefits which are
offered from the different national governments due to the COVID-19 crisis. As a result, and even though globally everyone is confronted
with a high level of uncertainty, it is not expected that the coronavirus COVID-19 will have a material negative impact on the ability of the
Group to operate as going concern.
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 ex-
penses 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 € million, unless indicated otherwise. For computational reasons, rounding differences
may occur.
The Annual Report was authorised for issue on 31 March 2020 and is subject to adoption at the Annual General Meeting of shareholders
on 18 June 2020.
2. Initial application of new financial reporting standards
In 2019, 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 2019.
Standard
Title
New standards and interpretations
IFRS 16
Leases
IFRIC 23
Uncertainty over Income Tax Treatments
Amendments of standards
Various
Annual Improvements to IFRS 2015-2017 Cycle
IAS 19
Plan Amendment, Curtailment or Settlement
IAS 28
Long-term Interests in Associates and Joint Ventures
IFRS 9
Prepayment Features with Negative Compensation
IFRS 7, IFRS 9,
IAS 39
Interest Rate Benchmark Reform
1) According to EU Endorsement Status Report of 23.01.2020.
Publication
(EU endorsement)1)
Effects on RHI Magnesita Consolidated
Financial Statements
13.01.2016
(31.10.2017)
07.06.2017
(23.10.2018)
12.12.2017
(14.03.2019)
07.02.2018
(13.03.2019)
12.10.2017
(08.02.2019)
12.10.2017
(22.03.2018)
26.09.2019
(15.01.2020)
Detailed description after the
tabular overview
No material effects
No material effects
No effect
No effect
No effect
No material effects
IFRS 16 “Leases”
The accounting standard IFRS 16 “Leases”, issued in January 2016 supersedes the previous IAS 17 “Leases” as well as the related interpre-
tations and is applicable to financial years beginning on or after 1 January 2019.
129
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Notes
continued
Whereas accounting according to IFRS 16 remains mainly comparable to the IAS 17 regulations for lessors, accounting according to
IFRS 16 leads to major changes for lessees as it requires lessees to recognise right-of-use assets and liabilities for all leases in the scope
of IFRS 16. Applying this single lessee accounting model results in an increase in total assets and liabilities in the Consolidated Statement
of Financial Position as well as in a replacement of the straight-line expenses for operating leases with a depreciation charge for right-of-
use assets and interest expenses for lease liabilities in the Consolidated Statement of Profit or Loss. Moreover, there is a shift from cash
flow from operating activities to cash flow from financing activities in the Consolidated Statement of Cash Flows, except for short-term
leases and low value leases.
RHI Magnesita implemented IFRS 16 on 1 January 2019 using the modified retrospective approach for transition. According to this meth-
od the lease liability is measured at the present value of the remaining lease payments, discounted at using the incremental borrowing
rate at initial application. The recognised amount of the right-of-use asset equals the lease liability. Cumulative adjustments were recog-
nised as at adoption and comparative information was not restated.
When adopting IFRS 16 RHI Magnesita makes use of the following transition exemptions:
Continuing to apply the definition of a lease in accordance with IAS 17 and IFRIC 4 and not to reassess whether a contract is or
contains a lease according to IFRS 16.
Relying on its assessment of whether leases are onerous immediately before the date of adoption as an alternative to perform-
ing impairment review.
RHI Magnesita makes use of the following ongoing IFRS 16 practical expedients:
Lease payments for leases whose contractual term is 12 months or less or whose remaining term at adoption is 12 months or less
will continue to be recognised as an expense.
Lease payments for leases for which the underlying asset is of low value will continue to be recognised as an expense.
Applying a single discount rate to a portfolio of leases with reasonably similar characteristics.
From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is
available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to
profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each
period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of
the following lease payments:
Fixed payments (including in-substance fixed payments), less any lease incentives receivable
Variable lease payment that are based on an index or a rate
Amounts expected to be payable by the lessee under residual value guarantees
The exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental
borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value
in a similar economic environment with similar terms and conditions. The incremental borrowing rate is based on the German federal
bond and the US Government Treasury Yield Curve. Based on these two governmental curves, a spread is determined in relation to the
bond rating of RHI Magnesita. This spread is then added with an inflation differential and a country risk premium for each country. The
weighted average incremental borrowing rate applied to these lease liabilities was 2.44%.
130
R H I M A G N E S I T A
A N N U A L R E P O R T 2 0 1 9
Right-of-use assets are measured at cost comprising the following:
The amount of the initial measurement of lease liability
Any lease payments made at or before the commencement date less any lease incentives received
Any initial direct costs, and
Restoration and removal costs.
A lease modification is a change in the scope of a lease or the consideration for a lease, that was not part of the original terms and condi-
tions of the lease. If the modification decreases the scope of the lease, the carrying amount of the right-of-use asset and the lease liability
has to be reduced accordingly. If the modification increases the scope of the lease (consideration is not at a stand-alone price), the carry-
ing amount of the right-of-use asset and the lease liability has to be increased accordingly.
RHI Magnesita’s leases are mainly arrangements regarding land and buildings, technical equipment and machinery as well as other
equipment, furniture and fixtures. The average lease term is eleven years for land and buildings, five years for technical equipment and
four years for other equipment, furniture and fixtures. Impacts resulting from extension and termination options, as well as residual value
guarantees are immaterial.
The following table shows the reconciliation of the minimum lease payments reported as at 31 December 2018 to the lease liability
recognised on 1 January 2019:
Commitments arising from rental agreements and leases as at 31.12.2018
Commitment for less than one year
Commitment for longer than one year and up to five years
Commitment for longer than five years
Total commitments arising from rental agreements and leases
Commitments arising from short-term leases and leases of low-value assets
Total commitments for the determination of the lease liability
Effect of discounting at the incremental borrowing rate
Lease liability as at 01.01.2019
The following table gives an overview of the positions affected by IFRS 16:
in € million
Right-of-use assets included in property, plant and equipment
Right-of-use assets – land and buildings
Right-of-use assets – technical equipment and machinery
Right-of-use assets – other equipment, furniture and fixtures
Total right-of-use assets
thereof Segment Steel
thereof Segment Industrial
Lease liabilities included in other non-current and other current financial liabilities
Current lease liabilities
Non-current lease liabilities
Total lease liabilities
16.3
27.7
29.7
73.7
(4.1)
69.6
(7.6)
62.0
31.12.2019
01.01.2019
24.0
23.0
4.2
51.2
28.2
23.0
13.8
48.1
61.9
40.0
17.0
5.0
62.0
34.0
28.0
16.0
46.0
62.0
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R H I M A G N E S I T A
Notes
continued
in € million
Depreciation charge of right-of-use assets
Depreciation charge of right-of-use assets - land and buildings
Depreciation charge of right-of-use assets - technical equipment and machinery
Depreciation charge of right-of-use assets - other equipment furniture and fixtures
Total depreciation charge of right-of-use assets
Interest expense
Expenses related to short-term and low-value leases as well as variable lease payments
The total cash outflow for leases in 2019
Impact on Earnings per share in € (basic)
Impact on Earnings per share in € (diluted)
2019
5.1
7.0
2.4
14.5
1.2
9.2
24.7
0.00
0.00
Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-
line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT
equipment, office furniture and other small items.
IFRS 7, IFRS 9, IAS 39 “Interest Rate Benchmark Reform”
RHI Magnesita has elected to early adopt the amendments to IAS 39 and IFRS 7 Interest Rate Benchmark Reform (IBOR) issued in Sep-
tember 2019. In accordance with the transition provisions, the amendments have been adopted retrospectively to hedging relationships
that existed at the start of the reporting period and to the amount accumulated in the cash flow hedge reserve at that date.
The amendments provide temporary relief from applying specific hedge accounting requirements to hedging relationships directly af-
fected by the IBOR reform. The reliefs stipulated in the IBOR reform should not cause hedge accounting to terminate in general. However,
any hedge ineffectiveness continues to be recorded in the income statement. Furthermore, the amendments set out triggers for when the
reliefs will end, which include the uncertainty arising from interest rate benchmark reform no longer being present.
The timing and precise nature of the IBOR reform are currently uncertain. RHI Magnesita’s risk exposure that is directly affected by the
IBOR reform concerns its USD 200 million floating-rate debt with a remaining term until 2023. RHI Magnesita has hedged this debt with
an interest rate swap, and it has designated the swap in a cash flow hedge of the variability in cash flows of the debt, due to changes in
USD LIBOR that is the current benchmark interest rate. Further information is provided under note (55).
Currently the structure of the USD LIBOR is unclear after 2021. This represents a possible source of ineffectiveness because this might
affect at a different time and have a different impact on the hedged item (the floating-rate debt) and the hedging instrument (the interest
rate swap used to hedge the debt). Management considers that the most likely scenario is that the hedged debt will move to the same
alternative benchmark rate as the swap. Therefore, no material effect on the Group is expected.
According to recent developments on the market, the EURIBOR is expected to remain active as the benchmark rate in the Euro area and
consequently the risk of discontinuation before 2023 is relatively small, thus the interest rate swap of EUR 305.6 million and its corre-
sponding underlying hedged item, a floating-rate debt, both maturing in 2023, would most likely be unaffected. Even in the unlikely
scenario of precocious discontinuation of the EURIBOR, Management considers that the hedged debt would move to the same alterna-
tive benchmark rate as the swap.
RHI Magnesita is closely monitoring the developments of the IBOR reform and is in close communication with the banks to minimise any
mismatches going forward.
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3. New financial reporting standards not yet applied
The IASB issued further standards, amendments to standards and interpretations, whose application is, however, not yet mandatory as at
31 December 2019. They were not applied early on a voluntary basis. They are not expected to have a significant impact on the RHI Mag-
nesita Consolidated Financial Statements.
Standard
New standards
IFRS 14
IFRS 17
Amendments of standards
Title
Regulatory Deferral Accounts
Insurance Contracts
IAS 1, IAS 8
IFRS 3
Various
Definition of Material
Business Combinations
Amendments to References to the Conceptual
Framework in IFRS Standards
1) According to EU Endorsement Status Report of 23.01.2020.
Publication
(EU endorsement)1)
Mandatory
application for RHI
Magnesita
Expected effects on
RHI Magnesita
Consolidated
Financial
Statements
30.01.2014
18.05.2017
No EU
endorsement
Not relevant
01.01.2021
Not relevant
31.10.2018
22.10.2018
01.01.2020
01.01.2020
No material
effects
No effect
29.03.2018
01.01.2020
No effect
The following financial reporting standard was 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:
Standard
Title
New standards and interpretations
Amendments of standards
Publication1)
Mandatory
application for
RHI Magnesita
Expected effects on
RHI Magnesita
Consolidated
Financial
Statements
IAS 1
Classification of Liabilities as Current or Non-current
1/23/2020
1/1/2022
No material
effects
1) According to EU Endorsement Status Report of 23.01.2020.
4. Integrated Tender Offer
As a result of the merger between RHI and Magnesita, 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 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)
(ii)
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
A cash-only alternative consideration.
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Notes
continued
The consideration of the cash-only alternative offer was the highest between:
(i)
(ii)
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
R$35.56, not adjusted by SELIC.
In the course of the finalisation of the ITO in 2019, the Group acquired the remaining outstanding Magnesita shares during the first four
months of 2019 and has issued a total of 1,140,658 new ordinary shares. As at 10 April 2019, RHI Magnesita’s issued share capital consist-
ed of 49,477,705 shares with voting rights. The fair value of the consideration as at 31 December 2019 is €97.5 million and includes a
cash part in the amount of €40.5 million. These shares were delivered in four different instances to minority shareholders and admitted
to trading on the London Stock Exchange's main market in the first four months 2019. The closing price per share on each of the trading
days was used for the determination of the fair value of the issued ordinary shares totalling up to €57.0 million. The carrying amount of
Magnesita’s net assets in the Group’s Consolidated Financial Statements as of 10 April 2019 was €499.7 million. Consequently, the car-
rying amount of non-controlling interests acquired amounts to €74.0 million. This transaction results in a decrease in equity attributable
to shareholders of RHI Magnesita N.V totalling to €23.5 million.
5. Other changes in comparative information
Consolidated Statement of Profit or Loss
In 2019 RHI Magnesita initiated its Production Optimisation Plan and entered into the final phase of integration which led to a recognition
of €112.1 million of restructuring expenses and asset write-downs. In line with the materiality principle this effect has been disclosed
separately on the face of the Statement of Profit or Loss, the comparative figures have been adjusted accordingly.
Consolidated Statement of Cash Flows
Cash flows generated from operating activities have been repositioned within the Notes section and are now shown in Notes to Consoli-
dated Statement of Cash Flows in order to improve peer comparability.
Segment reporting
Our internal management reporting is organised according to the activity of the customer. For the foundry customers this is the Steel
segment as the majority of these customers are processing iron. Therefore, the responsibility of the foundry business has been moved
from the Segment Industrial to Segment Steel in 2019. The information for the previous year was adjusted accordingly, impacting reve-
nue by €8.7 million, Gross Profit by €4.0 million and segment assets by €3.6 million.
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.
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The main operating companies of the RHI Magnesita Group and their core business activities are as follows:
Name and registered office of the company
Didier-Werke Aktiengesellschaft, Germany
Magnesit Anonim Sirketi, Turkey
Magnesita Mineração S.A., Brazil
Magnesita Refractories Company, USA
Magnesita Refractories GmbH, Germany
Magnesita Refratários S.A., Brazil
RHI Magnesita Trading B.V., Netherlands
Orient Refractories Limited, India
RHI Canada Inc., Canada
RHI Magnesita GmbH, Austria
RHI GLAS GmbH, Germany
RHI Refractories (Dalian) Co., Ltd., PR China
RHI US Ltd., USA
RHI-Refmex, S.A. de C.V., Mexico
Veitsch-Radex GmbH & Co OG, Austria
Country of
core activity
Germany
Turkey
Brazil
USA
Germany
International
International
India
Core business activity
Production
Mining, production, sales
Mining
Mining, production, sales
Production
Production, sales
Procurement, sales, supply chain
Production, sales
Canada
Production, sales, provision of services
International
International
PR China
Sales, R&D, financing
Sales
Production
USA
Production, sales, provision of services
Latin America
Austria
Sales
Mining, production
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. In-
tangible 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 rela-
tions, 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 a business combination is achieved in stages, the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at
the acquisition date. Any gains and losses arising from such remeasurement are recognised in profit or loss.
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.
All intragroup results are fully eliminated.
In accordance with IAS 12, deferred taxes are calculated on temporary differences arising from the consolidation. Subsidiaries are decon-
solidated on the day control ends.
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R H I M A G N E S I T A
Notes
continued
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 com-
pany 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 lia-
bilities 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 ven-
tures 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.
When the group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other
unsecured long-term receivables, the group does not recognise further losses, unless it has incurred obligations or made payments on
behalf of the other entity. If the equity-accounted investment subsequently reports profits, the entity resumes recognising its share of
profits only after those profits equal or exceed its share of losses not recognised.
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 Magne-
sita 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 under net ex-
pense 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. When a non-derivative financial
instrument is designated as the hedging instrument in a net investment hedge in a foreign operation, the effective portion of the foreign
exchange gains and losses is recognised in the currency translation difference reserve within equity. Non-monetary items in foreign cur-
rency are carried at historical rates.
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 or when in case of a net investment hedge the foreign operation is disposed, the currency translation differences previously
recognised in other comprehensive income are reclassified to profit or loss.
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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 con-
sequently the profit or loss 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 for-
ward 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 respec-
tive 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:
Currencies
Argentine Peso
Brazilian Real
Canadian Dollar
Chilean Peso
Chinese Renminbi Yuan
Indian Rupee
Mexican Peso
Norwegian Krone
Pound Sterling
Swiss Franc
South African Rand
US Dollar
1) Arithmetic mean of the monthly closing rates.
Closing rate
Average rate1)
1 € =
ARS
BRL
CAD
CLP
CNY
INR
MXN
NOK
GBP
CHF
ZAR
USD
31.12.2019
31.12.2018
67.09
4.51
1.46
842.57
7.81
79.90
21.19
9.88
0.85
1.09
15.78
1.12
43.10
4.44
1.56
793.69
7.87
79.88
22.49
9.94
0.90
1.13
16.46
1.14
2019
52.94
4.41
1.49
792.03
7.73
78.84
21.74
9.86
0.88
1.11
16.24
1.12
2018
32.58
4.29
1.53
753.18
7.81
80.45
22.70
9.62
0.89
1.15
15.45
1.18
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, eco-
nomic and capacity terms and is intended for own use or sale. In addition, future cash inflows which cover not only normal costs but also
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R H I M A G N E S I T A
Notes
continued
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 exten-
sion 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 amortisa-
tion 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
Patents
Brand rights
Land use rights
Software
6 to 15 years
7 to 18 years
20 years
30 to 65 years
4 years
Property, plant and equipment
Property, plant and equipment is measured at acquisition or production cost, less accumulated depreciation and accumulated impair-
ments. 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.
IFRS 16 “Leases”, supersedes the previous IAS 17 “Leases” as well as the related interpretations and is applicable to financial years begin-
ning on or after 1 January 2019. For the amounts relating to leases recognised in the Statement of Financial Position and in the Statement
of Profit or Loss see the overview of the positions affected by IFRS 16 under Note (2).
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.
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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:
Factory and office buildings
Land improvement
Crusher machines and mixing facilities
Presses
Tunnel, rotary and shaft kilns
Other calcining and drying kilns
Cars, other plant, furniture and fixtures
15 to 50 years
8 to 30 years
8 to 20 years
10 to 12 years
50 years
20 to 30 years
3 to 35 years
RHI Magnesita’s leases include mainly arrangements regarding land and buildings, technical equipment and machinery as well as other
equipment, furniture and fixtures. The average lease term is eleven years for land and buildings, five years for technical equipment and
four years for other equipment, furniture and fixtures. Impacts resulting from extension and termination options, as well as residual value
guarantees are immaterial.
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 in-
curred 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, including Right-of-use assets, 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 Group individual assets do not generate cash inflows independent of one another; therefore, no recoverable amount can be pre-
sented 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 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
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R H I M A G N E S I T A
Notes
continued
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 the Group’s production process. These factors determine cash inflow to a significant extent
and consequently form the basis for the CGU structures.
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 situa-
tion at the Porsgrunn plant. This organisation goes beyond plant management and 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 possi-
ble 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 5.4% and 8.9% in the
year 2019. In the previous year, the discount rates ranged between 10.1% and 13.0%. Main reason for higher discount rates in 2018 was
that the equity beta for the peer group increased as the peer group companies outperformed the market index during the period under
consideration. In addition, in 2018 one member of the peer group did not pass the statistical test (t-test) and consequently was excluded
from the calculation. The adoption of IFRS 16 has no material impact on the discount rate.
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 2020 Budget and Long-Term Plan 2021 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 re-
gional growth of the steel production and the output of the non-steel clients. In combination with the development of the specific refrac-
tory consumption, which considers technological improvements, the growth rates for the individual CGUs are determined.
Discount rate
before Tax
Perpetual annuity
growth rate
Goodwill
in € million
Discount rate
before Tax
Perpetual annuity
growth rate
2019
Steel Division - Linings
Steel Division - Flow Control
7.9%
7.7%
0.9%
0.9%
88.6
27.2
11.3%
11.3%
0.9%
0.9%
2018
Goodwill
in € million
88.4
27.3
The remaining goodwill of €1.7 million (31.12.2018: €1.7 million) is spread among the remaining CGU's, all of them having sufficient head-
room.
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Result of impairment test
Based on the impairment test conducted at 31 December 2019, the recoverability of the assets was demonstrated in all CGUs, except for
the CGU Norway.
The property, plant and equipment of CGU Norway has been fully impaired as a result of impairment testing in previous years. This was
caused by production costs exceeding the price of comparable raw materials on the market. Given the high raw material prices in 2018
and the lack of Fused Magnesia in the market, management decided to increase the production of Fused Magnesite at the plant. Fused
Magnesia is a key raw material used for refractory bricks sold to Linings customers. At the adoption date of IFRS 16, the financial projec-
tions supported the recognition of the right-of-use assets according to IFRS 16, but future profitability was insufficient to reverse previous-
ly recognised impairments. In the fourth quarter of 2019 the Fused magnesia prices declined and the availability on the market allows
RHI Magnesita to buy the material from external sources at lower cost.
Considering the current low prices for Fused Magnesia from China, the cash flow generated by the facility in Norway is negative. The
cash flow is calculated based on the external sales of products manufactured in Porsgrunn and the value of internal supply of Fused
Magnesia. This value is calculated comparing the manufacturing costs versus potential costs of sourcing comparable material from exter-
nal sources.
As a result, RHI Magnesita has to write-down the non-current assets of CGU Norway totalling € 13,9 million (thereof real estate, land and
buildings € 0.9 million, technical equipment, machinery € 1.4 million, other plant, furniture and fixtures € 0.3 million, plant under con-
struction € 0.8 million, right-of-use asset land and buildings € 10.4 million, right-of-use asset technical equipment and machinery € 0.1
million) as of December 2019 in accordance with IAS 36.
As in the previous year, no reversals of impairments were made in the financial year 2019.
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 instru-
ments. All other financial assets and financial liabilities are initially recognised on the date when they are originated. Financial instru-
ments, except for trade receivables, are initially recognised at fair value. Financial assets are derecognised if the entity transfers substan-
tially all the risks and rewards or if the entity neither transfers nor retains substantially all the risks and rewards and has not retained con-
trol. 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 (RHI Magnesita exercises control but the subsidiary is not-fully consolidated due to materiality
reasons), 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 at-
tributable 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.
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Notes
continued
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 report-
ing 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 trans-
actions 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 Mag-
nesita 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 accumu-
lated amount previously recorded in other comprehensive income is reclassified to the Statement of Profit or Loss.
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instru-
ment relating to the effective portion of the hedge are recognised in Other Comprehensive Income and presented in the currency trans-
lation difference reserve within equity while any gains or losses relating to the ineffective portion are recognised in the Statement of Profit
or Loss. On disposal of the foreign operation, the cumulative amount of any such gains or losses recorded in Other Comprehensive In-
come is reclassified to the Statement of Profit or Loss. The Group uses a loan to hedge its exposure to foreign exchange risk on its invest-
ments in foreign subsidiaries.
Capital shares of non-controlling interests in subsidiaries with a fixed term are recognised under other financial liabilities in the Consoli-
dated Statement of Financial Position in accordance with IAS 32. The liabilities are measured at amortised cost. The share of profit at-
tributable to non-controlling interests is recognised under other net financial expenses in the Statement of Profit or Loss. Dividend pay-
ments 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 be-
tween 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 appli-
cable 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.
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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 makes 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 regard 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% (31.12.2018: 12.5% to 34.9%) 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 pur-
chased inventories is based on the average cost. Finished goods and work in process are valued at fixed and variable production cost. The
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Notes
continued
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 recognised initially at the amount of consideration that is unconditional, unless they contain significant financing
components when they are recognised at fair value and subsequently carried at amortised cost minus any valuation allowances. Valua-
tion allowances are calculated in accordance with the simplified approach of the impairment model for financial instruments (see im-
pairment of financial assets above).
In case of factoring arrangements trade receivables are derecognised if RHI Magnesita transfers substantially all the risks and rewards or
does not retain control.
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, writ-
ten 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 certif-
icates.
Emission certificates allocated free of charge are not accounted for. Proceeds from the sale of these rights are recognised as revenue.
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 effec-
tive 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 ex-
pires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an exist-
ing 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.
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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.
Defined benefit plans require the company to provide the agreed amount of benefits to active and former employees and their depend-
ents, with a differentiation made between pension systems financed through provisions and pension systems financed by external 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 contribu-
tion 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, retire-
ment starting age and probability of employee turnover and actual claims. The calculation is based on local demographic parameters.
Interest rates used are the rates on high-quality corporate bonds issued with comparable maturities and currencies are applied to deter-
mine the present value of pension obligations. In countries where there is not a 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 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 pay-
ment 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 accu-
mulation 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 employ-
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Notes
continued
ees 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 approved 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. Each reporting date the provisional amount per
due date is 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 refrac-
tory, 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 demoli-
tion 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 an onerous or unfavourable contract 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. As-
sessment 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 re-
search are recorded as income in general and administrative expenses.
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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 varia-
ble amount, the Group estimates the amount of consideration to which it will be entitled in exchange for transferring the goods or ser-
vices to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a sig-
nificant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the varia-
ble 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 compo-
nent if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer and pay-
ment 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.
Regarding 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 perfor-
mance 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 ar-
rangements 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 prom-
ises 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 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 perfor-
mance) 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. Therefore, only one single performance obligation exists - the
performance of a management refractory service. Further information is provided under Note (10). With regards to these contracts, reve-
nue 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 estima-
tion of the variable consideration is not subject to a constraint as the Group has significant experience with promising durabilities. Once
the uncertainty related to guaranteed durabilities ceases to exist, a significant reversal of revenue is highly unlikely. All other warranties
guarantee that the transferred products correspond to the contractually agreed specifications and are classified as assurance type war-
ranties. 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 (whichever 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.
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Notes
continued
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 prac-
tical 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 rec-
ognised in the Statement of Profit or Loss unless they are related to items which were recorded directly in equity or in other comprehen-
sive 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 mem-
bers 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 ten 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, non-ferrous 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 provid-
ing services at the customers’ sites.
The globally located manufacturing sites, which extract and process raw materials, are combined in one organisational unit. The alloca-
tion 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 Magnesi-
ta Group for internal performance management. Selling and marketing expenses, general and administrative expenses, restructuring and
write-down 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 man-
agement for control and measurement, as well as property, plant and equipment, goodwill and other intangible assets, which are allocat-
ed 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.
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Data on revenue by country are disclosed by the sites of the customers. Data on non-current assets (goodwill, intangible assets and prop-
erty, 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, reve-
nue 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 the transaction price depends on the customer’s
production performance, (e.g. quantity of steel produced) management has determined that the commitment to transfer each of the
products and services to the customer is not separately identifiable from the other commitments 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 performance obligation, performance of a management refractory service, exists.
Trade payables subject to supply chain finance arrangements
RHI Magnesita participates in supply chain finance arrangements whereby raw material suppliers may elect to receive a discounted early
payment of their invoice from a bank rather than being paid in line with the agreed contractual payment terms. The Group settles the
amount owed to the bank. The invoice due date as well as the value of the original liability remains unaltered. RHI Magnesita assesses
that these arrangements do not modify the terms of the original trade payable, and therefore financial liabilities subject to supply chain
finance arrangements continue to be classified as trade payables.
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, includ-
ing 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
€1,424.0 million at 31 December 2019 (31.12.2018: €1,427.4 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 consid-
ering 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.
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 2019 or by minus 10% in the contribution
margin would not result in an impairment of goodwill recognised (carrying amount 31.12.2019: 117.5 million, 31.12.2018: €117.4 million) nor
in an impairment charge to intangible assets with indefinite useful lives (carrying amount at 31.12.2019 and 31.12.2018: €1.8 million).
149
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Notes
continued
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 several 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 nature 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 param-
eter changes, while the other influences are maintained constant. In reality, 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).
in € million
Present value of the obligations
Interest rate
Salary increase
Pension increase
Life expectancy
Change of assumption
in percentage points
or years
Pension plans
31.12.2019
Termination
benefits
Pension plans
31.12.2018
Termination
benefits
+0.25
(0.25)
+0.25
(0.25)
+0.25
(0.25)
+1 year
(1) year
557.9
(17.1)
17.4
1.1
(1.2)
11.6
(11.4)
21.0
(20.7)
52.0
(1.4)
1.4
1.4
(1.3)
-
-
-
-
506.6
(14.0)
15.0
0.9
(1.7)
10.3
(10.1)
17.2
(17.3)
55.5
(1.5)
1.5
1.5
(1.4)
-
-
-
-
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 €168.3 million (31.12.2018: €162.2 million) were based on the best possi-
ble 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.
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. When determining the amount of the capitalisable deferred tax assets, an estimate is required of future taxable
income. 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 €127.9 million
(31.12.2018: €92.7 million) would have to be increased by €1.7 million (31.12.2018: €0.6 million) or reduced by €2.0 million (31.12.2018:
€0.6 million).
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NOTES TO THE CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
11. Goodwill
Goodwill developed as follows:
in € million
Cost at beginning of the year
Currency translation
Cost at year-end
Accumulated impairment at beginning of the year
Accumulated impairment at year-end
Carrying amount at year-end
2019
119.3
0.1
119.4
(1.9)
(1.9)
117.5
12. Other intangible assets
Other intangible assets changed as follows in the financial year 2019:
in € million
Cost at 31.12.2018
Currency translation
Additions
Retirements and disposals
Reclassifications
Cost at 31.12.2019
Accumulated amortisation 31.12.2018
Currency translation
Amortisation charges
Impairment charges
Retirements and disposals
Accumulated amortisation 31.12.2019
Carrying amounts at 31.12.2019
Mining rights
169.4
(0.3)
0.0
0.0
0.0
169.1
4.7
0.0
3.3
0.0
0.0
8.0
161.1
Customer
relationship
108.7
0.6
0.0
0.0
0.0
109.3
17.8
(0.1)
7.5
0.0
0.0
25.2
84.1
Internally
generated
intangible assets
Other intangible
assets
50.5
0.1
3.4
(1.6)
0.0
52.4
34.1
0.1
4.5
0.0
(1.6)
37.1
15.3
129.2
0.6
6.3
(4.4)
2.4
134.1
66.8
0.4
11.1
0.6
(3.3)
75.6
58.5
2018
122.1
(2.8)
119.3
(1.9)
(1.9)
117.4
Total
457.8
1.0
9.7
(6.0)
2.4
464.9
123.4
0.4
26.4
0.6
(4.9)
145.9
319.0
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F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Notes
continued
Other intangible assets changed as follows in the previous year:
in € million
Cost at 31.12.2017
Currency translation
Additions
Retirements and disposals
Reclassifications
Cost at 31.12.2018
Accumulated amortisation 31.12.2017
Currency translation
Amortisation charges
Retirements and disposals
Reclassifications
Accumulated amortisation 31.12.2018
Carrying amounts at 31.12.2018
Mining rights
179.2
(9.8)
0.0
0.0
0.0
169.4
0.8
0.0
3.9
0.0
0.0
4.7
164.7
Customer
relationship
100.0
(2.1)
0.0
0.0
10.8
108.7
1.1
0.0
6.5
0.0
10.2
17.8
90.9
Internally
generated
intangible assets
Other intangible
assets
47.6
0.0
2.9
0.0
0.0
50.5
30.2
0.0
3.9
0.0
0.0
34.1
16.4
143.1
(2.6)
1.2
(2.5)
(10.0)
129.2
64.8
(0.8)
14.3
(1.3)
(10.2)
66.8
62.4
Total
469.9
(14.5)
4.1
(2.5)
0.8
457.8
96.9
(0.8)
28.6
(1.3)
0.0
123.4
334.4
Internally generated intangible assets comprise capitalised software and product development costs.
The customer relations of Magnesita have a carrying amount of €83.6 million (31.12.2018: €90.0 million) and a remaining useful life of 9
to 13 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 €23.0 million (31.12.2018: €23.4 million) and a remaining useful life of 18 to 58 years.
There are no restrictions on the sale of intangible assets.
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13. Property, plant and equipment
Property, plant and equipment developed as follows in the year 2019 and in the previous year:
in € million
Cost at 31.12.2018
Initial recognition IFRS 16
Currency translation
Additions
Reassessment / Modification of leases
(IFRS 16)
Retirements and disposals
Reclassifications
Cost at 31.12.2019
Accumulated depreciation 31.12.2018
Currency translation
Depreciation charges
Impairment charges
Retirements and disposals
Accumulated depreciation 31.12.2019
Carrying amounts at 31.12.2019
in € million
Cost at 31.12.2017
Currency translation
Additions
Retirements and disposals
Reclassifications
Cost at 31.12.2018
Accumulated depreciation 31.12.2017
Currency translation
Depreciation charges
Retirements and disposals
Reclassifications
Accumulated depreciation 31.12.2018
Carrying amounts at 31.12.2018
Real
estate,
land and
buildings
618.4
0.0
0.4
3.4
0.0
(1.5)
20.6
641.3
261.8
0.5
13.4
8.9
(1.3)
283.3
358.0
Raw material
deposits
37.5
0.0
(0.2)
(1.0)
0.0
(0.5)
0.8
36.6
22.5
(0.2)
1.6
0.0
(0.3)
23.6
13.0
Technical
equipment,
machinery
1,166.9
0.0
1.7
11.6
0.0
(21.2)
51.4
1,210.4
657.2
1.5
99.0
38.7
(19.3)
777.1
433.3
Other plant,
furniture and
fixtures
Prepayments
made and
plant under
construction
Right-of-use
assets
311.5
0.0
0.9
7.4
0.0
(12.8)
14.6
321.6
230.3
0.9
17.7
1.1
(12.2)
237.8
83.8
132.4
0.0
(0.5)
132.2
0.0
(0.8)
(89.8)
173.5
0.1
0.0
0.0
5.9
0.0
6.0
167.5
0.0
62.0
0.5
17.7
(3.9)
(0.2)
0.0
76.1
0.0
0.1
14.5
10.5
(0.2)
24.9
51.2
Real
estate,
land and
buildings
630.1
(14.8)
2.9
(8.3)
8.5
618.4
256.8
(1.1)
12.8
(6.9)
0.2
261.8
356.6
Raw material
deposits
33.8
(0.7)
0.3
0.0
4.1
37.5
21.3
(0.1)
1.3
0.0
0.0
22.5
15.0
Technical
equipment,
machinery
1,155.6
Other plant,
furniture and
fixtures
298.2
(22.8)
9.1
(12.4)
37.4
1,166.9
575.8
(1.5)
93.9
(11.3)
0.3
657.2
509.7
(3.0)
11.2
(6.7)
11.8
311.5
220.7
(1.1)
16.8
(6.3)
0.2
230.3
81.2
Prepayments
made and
plant under
construction
99.4
(3.8)
99.4
0.0
(62.6)
132.4
0.8
0.0
0.0
0.0
(0.7)
0.1
132.3
Total
2,266.7
62.0
2.8
171.3
(3.9)
(37.0)
(2.4)
2,459.5
1,171.9
2.8
146.2
65.1
(33.3)
1,352.7
1,106.8
Total
2,217.1
(45.1)
122.9
(27.4)
(0.8)
2,266.7
1,075.4
(3.8)
124.8
(24.5)
0.0
1,171.9
1,094.8
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Notes
continued
The item prepayments made and plant under construction includes plant under construction with a carrying amount of €163.5 million
(31.12.2018: €129.9 million), with the sinterplant and the brickplant in Chizhou, China, representing the largest investment project under
construction in 2019 as well as the modification of the smelter at the site in Radenthein, Austria, representing the largest investment
project under construction in 2018. Information on impairment is provided under Note (8).
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 € million
Investments in joint ventures
Investments in associates
Carrying amount at year-end
31.12.2019
31.12.2018
19.5
0.0
19.5
19.6
2.2
21.8
Joint ventures
The RHI Magnesita Group holds a share of 50% (2018: 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 € million
Revenue
Profit before income tax
Depreciation
Interest expense
Other comprehensive (loss)/income
Total comprehensive income
2019
39.4
20.0
1.5
0.1
(0.3)
19.7
2018
38.8
17.9
1.5
0.2
0.0
17.9
Income taxes on the share of profit of MAGNIFIN amounting to €2.5 million (2018: €2.4 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.
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The net assets of MAGNIFIN are shown in the table below:
in € million
Non-current assets
Current assets (without cash and cash equivalents)
Cash and cash equivalents
Non-current liabilities and provisions
Current provisions
Trade payables and other current liabilities
Net assets
31.12.2019
31.12.2018
8.3
14.7
13.4
(3.9)
(1.2)
(3.2)
28.1
8.9
11.2
16.5
(4.0)
(1.3)
(2.9)
28.4
The movement in the carrying amount of the share in MAGNIFIN in the RHI Magnesita’s Consolidated Financial Statements is shown
below:
in € million
Proportional share of net assets at beginning of year
Share of profit
Share of other comprehensive income (remeasurement losses)
Dividends received
Other changes in value
Proportional share of net assets at year-end
Goodwill
Carrying amount of investment at year-end
2019
14.3
10.5
(0.1)
(10.5)
(0.1)
14.1
4.9
19.0
2018
15.7
9.4
0.0
(10.8)
0.0
14.3
4.9
19.2
In the course of the acquisition of Magnesita in 2017 the Group acquired interests in an immaterial joint venture with a carrying amount of
€0.5 million as of 31 December 2019 (31.12.2018: €0.4 million). The Group’s share of the profit after income tax, other comprehensive
income and total comprehensive income in 2019 amounts to less than €0.1 million (2018: €0.3 million).
Associates
As part of the acquisition of Magnesita in 2017 the Group acquired two immaterial associated companies with a carrying amount of
€0.0 million as of 31 December 2019 (31.12.2018: €2.2 million). The Group’s share of the profit after income tax and total comprehensive
income for 2019 amounts to €0.7 million. In 2018 the Group’s share of the profit after income tax amounted to €0.3 million, total com-
prehensive income including other comprehensive income of €0.1 million amounted to €0.4 million.
In 2019 the Group has decided to restructure its Sinterdolime sourcing options in Europe and increase its vertical integration. As a result,
it will exit from the equity accounted investment in Sinterco in 2021. In the course of the Magnesita purchase price allocation the fair
value of the investment was determined as zero due to its economic performance. It is RHI Magnesita's best estimate that no additional
cash contributions will be needed to cover the closing cost based on the current operations and determined exit plan. However, the cur-
rent shareholders’ loan to Sinterco is fully written off, which results in a €9.6 million impairment in 2019, shown in result of joint ventures
and associates.
The other immaterial associated company Krosaki Magnesita Refractories is in liquidation as of 31 December 2019.
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R H I M A G N E S I T A
Notes
continued
15. Other non-current financial assets
Other non-current financial assets consist of the following items:
in € million
Interests in subsidiaries not consolidated
Marketable securities and shares
Interest rate swaps
Other non-current financial receivables
Other non-current financial assets
31.12.2019
31.12.2018
0.7
13.8
0.0
0.9
15.4
0.7
15.0
0.6
1.7
18.0
Accumulated impairments on investments, securities and shares amounted to €3.5 million (31.12.2018: €4.3 million).
16. Other non-current assets
Other non-current assets include the following items:
in € million
Tax receivables
Prepaid stripping costs
Judicial deposits
Plan assets from overfunded pension plans
Prepaid expenses
Other non-current assets
31.12.2019
31.12.2018
27.4
6.9
4.5
0.2
0.5
39.5
20.7
6.8
3.7
2.1
1.0
34.3
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:
in € million
Deferred tax assets
Deferred tax
liabilities
(Expense)/Income
Deferred tax assets
Deferred tax
liabilities
(Expense)/Income
31.12.2019
2019
31.12.2018
2018
26.5
27.8
21.0
78.7
25.2
24.2
86.8
(108.3)
181.9
136.4
3.5
11.7
0.0
5.5
5.2
0.0
(108.3)
54.0
30.2
(6.0)
8.5
(1.9)
(4.8)
3.0
(7.1)
‐
21.9
20.1
33.3
7.7
69.6
26.1
18.0
96.1
(99.8)
171.1
159.7
5.6
7.1
(0.2)
1.6
4.4
-
(99.8)
78.4
25.1
9.8
24.8
(2.3)
0.1
(10.6)
(29.9)
-
17.0
Property, plant and
equipment, intangible assets
Inventories
Trade receivables, other
assets
Pensions and other personnel
provisions
Other provisions
Trade payables, other
liabilities
Tax loss carried forward
Offsetting
Deferred taxes
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As of 31 December 2019, 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 €61.5 million (31.12.2018: €47.8 million). Deferred tax assets have been recog-
nised because the companies concerned are expected to generate taxable income in the future.
Tax loss carryforwards totalled €494.5 million in the RHI Magnesita Group as of 31 December 2019 (31.12.2018: €467.7 million). A signifi-
cant part of the tax loss carryforwards originated in Brazil and Austria where their deduction can be carried forward indefinitely. Further-
more, there are substantial tax loss carryforwards in China expiring within the next five years. The annual compensation of tax loss car-
ryforwards in Austria is limited to 75% and in Brazil to 30% of the respective taxable profits. Deferred taxes on tax losses of €212.7 million
(31.12.2018: €155.1 million) were not recognised. Of these losses, €0,1 million will expire in 2020, €0,4 million in 2022, €25,4 million in
2023, €7.8 million in 2024, €1.0 million in 2027 and €1.8 million in 2028 (31.12.2018: €5.8 million in 2021),while the remainder will be
carried forward indefinitely.
In addition, no deferred tax assets were recognised for temporary differences totalling €1.4 million (31.12.2018: €5.1 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 €965.0 million (31.12.2018: €1,085.7 million) and deductible temporary differences of €545.0 million
(31.12.2018: €501.1 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:
in € million
Deferred tax assets
Deferred tax liabilities
Current
140.6
(9)
Non-current
41.3
(45.0)
31.12.2019
Total
181.9
(54.0)
Current
Non-current
78.0
2.9
93.1
(81.3)
31.12.2018
Total
171.1
(78.4)
18. Inventories
Inventories as presented in the Consolidated Statement of Financial Position consist of the following items:
in € million
Raw materials and supplies
Work in progress
Finished products and goods
Prepayments made
Inventories
31.12.2019
31.12.2018
134.5
123.9
334.0
10.3
602.7
176.8
140.8
391.9
8.3
717.8
Inventories include €2.8 million (31.12.2018: €2.3 million) carried at net realisable value. Net impairment losses amount to €8.0 million
(2018: €-2.6 million).
There are no restrictions on the disposal of inventories.
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Notes
continued
19. Trade and other current receivables
Trade and other current receivables as presented in the Statement of Financial Position are classified as follows:
in € million
Trade receivables
Contract assets
Other taxes receivable
Receivables from joint ventures and associates
Prepaid expenses
Receivables from disposal of investments
Receivables from property transactions
Emission rights
Receivables from employees
Receivables from non-consolidated subsidiaries
Other current receivables
Trade and other current receivables
thereof financial assets
thereof non-financial assets
31.12.2019
31.12.2018
317.5
1.9
84.9
2.1
2.3
0.0
2.7
1.7
3.4
0.2
16.0
432.7
324.2
108.5
349.9
1.9
87.6
11.3
3.0
2.6
2.2
1.7
1.7
0.3
19.0
481.2
367.2
114.0
RHI Magnesita entered into factoring agreements and sold trade receivables to financial institutions. The balance sold totalled € 223.0
million as of 31 December 2019 (31.12.2018: € 229.9 million). The trade receivables have been derecognised as substantially all risks and
rewards as well as control have been transferred. Payments received from customers in the period between the last sale of receivables
and the reporting date are recognised in current borrowings.
Other taxes receivable include VAT credits and receivables from energy tax refunds, research, education and apprentice subsidies.
In 2018 trade receivables with a total nominal value of €34.0 million were assigned as security against financial liabilities. These financial
liabilities have been fully repaid in 2019.
20. Income tax receivables
Income tax receivables amounting to €17.3 million (31.12.2018: €18.4 million) are mainly related to tax prepayments and deductible with-
holding taxes.
21. Other current financial assets
This item of the Consolidated Statement of Financial Position consists of the following components:
in € million
Derivatives in open orders
Marketable securities
Forward exchange contracts
Other current financial receivables
Other current financial assets
31.12.2019
31.12.2018
0.1
0.0
0.0
0.0
0.1
1.0
36.3
1.1
0.2
38.6
Accumulated impairments on other current financial receivables amounted to €0.6 million (31.12.2018: €1.1 million).
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22. Cash and cash equivalents
This item of the Consolidated Statement of Financial Position consists of the following components:
in € million
Cash at banks
Money market funds
Cheques
Cash on hand
Cash and cash equivalents
31.12.2019
31.12.2018
391.2
74.7
1.2
0.1
467.2
426.7
61.9
2.5
0.1
491.2
Cash and cash equivalents include restricted cash totalling €23.3 million at 31 December 2019 (31.12.2018: €42.5 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. €13.0 million (31.12.2018: €23.8 million) are accounted for by sub-
sidiaries 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 €1.0 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 consisted of 48,337,047 ordinary shares at €1.0 each
share as of 31 December 2018.
In the course of the finalisation of the ITO in 2019, the Group acquired the remaining outstanding Magnesita shares during the first four
months of 2019 and has issued a total of 1,140,658 new ordinary shares. As at 10 April 2019, RHI Magnesita’s issued share capital consist-
ed of 49,477,705 shares with voting rights. Additional explanation is provided under Note (4).
The authorised share capital of RHI Magnesita N.V. amounts to €100,000,000 divided into 100,000,000 ordinary shares, of which
49,077,705 ordinary shares are issued and outstanding, taking into consideration the treasury shares amounting to 400,000. All out-
standing 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
Treasury shares
During August and September 2019 RHI Magnesita N.V. purchased a total of 400,000 of its ordinary shares of one euro nominal value
each pursuant to its £20 million share repurchase programme to satisfy awards made under employee performance share plans. Follow-
ing the purchase of these shares the company holds 400,000 shares in treasury equalling €18.8 million.
Additional paid-in capital
At 31 December 2019 as well as at 31 December 2018, 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 €288,699,230.59 which was created in connection with the merger. No dis-
tributions, 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.
159
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Notes
continued
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 include 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, unrealised currency translation differences from monetary items which are part of a net investment in a foreign operation,
net of related income taxes, as well as the effective portion of foreign exchange gains or losses when a non-financial instrument is desig-
nated as the hedging instrument in net investment hedge in a foreign operation.
25. Non-controlling interests
Non-controlling interests in Magnesita
After completion of the Integrated Tender Offer (ITO) as at 10 April 2019 the Group holds 100% of the Magnesita shares. Detailed infor-
mation 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 (4). 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.
The carrying amount of the non-controlling interests at time of completion of the ITO as at 10 April 2019 is based on the net assets of
Magnesita and is determined as follows:
in € million
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets before intragroup eliminations
Intragroup eliminations
Net assets
Percentage of non-controlling interests
Carrying amount of non-controlling interests
The aggregate Statement of Profit or Loss and Statement of Comprehensive Income are shown below:
in € million
Revenue
Operating expenses, net finance costs and income tax
Profit after income tax before intragroup eliminations
Intragroup eliminations
Profit after income tax
thereof attributable to non-controlling interests of Magnesita
in € million
Profit after income tax
Other comprehensive income/(loss)
Total comprehensive income
thereof attributable to non-controlling interests of Magnesita
160
10.04.2019
31.12.2018
976.3
1,556.6
(356.0)
(1,671.0)
505.9
(6.2)
499.7
14.8%
74.0
1-3/2019
286.5
(241.4)
45.1
0.7
45.8
5.8
1-3/2019
45.8
4.7
50.5
7.3
969.7
561.0
(400.6)
(676.0)
454.1
(3.9)
450.2
14.8%
66.7
2018
1,067.5
(1,011.4)
56.1
(3.4)
52.7
26.3
2018
52.7
(24.4)
28.3
14.2
R H I M A G N E S I T A
A N N U A L R E P O R T 2 0 1 9
The following table shows the summarised Statement of Cash Flows:
in € million
Net cash flow from operating activities
Net cash flow from investing activities
Net cash flow from financing activities
Total cash flow
1-3/2019
(8.0)
(13.2)
(15.2)
(36.4)
2018
164.9
(10.2)
(258.5)
(103.8)
Non-controlling interests in Orient Refractories Ltd.
Non-controlling interests hold a share of 33.5% (31.12.2018: 33.5%) in the listed company Orient Refractories Ltd. (in the following “ORL”),
based in New Delhi, India. ORL is allocated to the Steel segment.
Based on the net assets of the company, the carrying amount of the non-controlling interests is determined as follows:
in € million
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets before intragroup eliminations
Intragroup eliminations
Net assets
Percentage of non-controlling interests
Carrying amount of non-controlling interests
The aggregate Statement of Profit or Loss and Statement of Comprehensive Income are shown below:
in € million
Revenue
Operating expenses, net finance costs and income tax
Profit after income tax before intragroup eliminations
Intragroup eliminations
Profit after income tax
thereof attributable to non-controlling interests of ORL
in € million
Profit after income tax
Other comprehensive income/(loss)
Total comprehensive income
thereof attributable to non-controlling interests of ORL
31.12.2019
31.12.2018
30.4
52.1
(3.7)
(17.8)
61.0
(0.2)
60.8
33.5%
20.4
2019
90.8
(79.1)
11.7
0.2
11.9
4.0
2019
11.9
0.0
11.9
4.0
24.3
56.0
(6.3)
(19.6)
54.4
(0.4)
54.0
33.5%
18.1
2018
91.0
(81.6)
9.4
(0.2)
9.2
2.7
2018
9.2
(2.3)
6.9
2.2
161
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Notes
continued
The following table shows the summarised Statement of Cash Flows of ORL:
in € million
Net cash flow from operating activities
Net cash flow from investing activities
Net cash flow from financing activities
Total cash flow
2019
11.9
(9.1)
(3.9)
(1.1)
2018
9.5
(1.8)
(3.6)
4.1
Net cash flow from financing activities includes dividend payments to non-controlling interests amounting to €1.3 million (2018:
€1.1 million).
In addition, non-controlling interests hold a share of 33.5% in one immaterial subsidiary acquired in 2019. The carrying amount of the
non-controlling interests amounts to €0.4 million as of 31 December 2019.
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:
in € million
Accumulated other comprehensive income 31.12.2018
Unrealised results from currency translation
Reclassification to profit or loss
Transactions with non-controlling interests without change of control
Accumulated other comprehensive income 31.12.2019
Cash flow hedges
Defined benefit
plans
Currency
translation
0.2
0.0
(0.1)
(0.1)
0.0
(2.1)
0.0
0.0
2.1
0.0
(7.9)
1.6
0.0
4.5
(1.8)
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
31.12.2019
up to 1 year
2 to 5 years
over 5 years
584.0
400.0
55.0
4.1
1,043.1
15.6
(3.7)
1,055.0
15.3
0.0
50.8
4.1
70.2
2.3
(1.0)
71.5
568.7
100.0
4.2
0.0
672.9
13.1
(2.7)
683.3
0.0
300.0
0.0
0.0
300.0
0.2
0.0
300.2
in € million
Syndicated Term Loan
Bonded loans ("Schuldscheindarlehen")
Other credit lines and other loans
Accrued interest
Total liabilities to financial institutions
Other financial liabilities
Capitalised transaction costs
Borrowings
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R H I M A G N E S I T A
A N N U A L R E P O R T 2 0 1 9
in € million
Syndicated Term Loan
Bonded loans ("Schuldscheindarlehen")
Export credits and investment financing
Other credit lines and other loans
Accrued interest
Total liabilities to financial institutions
Other financial liabilities
Capitalised transaction costs
Borrowings
Total
Remaining term
31.12.2018
up to 1 year
2 to 5 years
over 5 years
479.9
216.0
171.9
278.9
6.9
1,153.6
16.6
(3.8)
1,166.4
0.0
0.0
34.4
278.9
6.9
320.2
2.3
(0.9)
321.6
479.9
152.0
137.5
0.0
0.0
769.4
13.7
(2.9)
780.2
0.0
64.0
0.0
0.0
0.0
64.0
0.6
0.0
64.6
RHI Magnesita further improved its financial structure by signing a new €100.0 million 5-year term loan guaranteed by the Austrian
export credit agency (OeKB) in June 2019. The interest rate is floating and is based on EURIBOR plus a margin between 0.4% and 1.3%,
according to Group Leverage. RHI Magnesita borrows currently at the lowest margin of 0.4%. The final maturity of the loan is February
2024. Cash inflows from the new term loan in the amount of €100.0 million are shown in the Consolidated Statement of Cash Flows in
proceeds from borrowings and loans.
In July and October 2019 RHI Magnesita took out a Schuldscheindarlehen (“SSD”) bonded loan in one tranche of €280.0 million and
another of €20.0 million respectively. Cash inflows from the new term loan in the amount of €300.0 million are shown in the Consoli-
dated Statement of Cash Flows in proceeds borrowings and loans. With the proceeds from the new and lower interest bearing SSD bond-
ed loans, the Group repaid €116.0 million of the extinguished legacy SSD bonded loans. Cash outflows from the redemption of the bond-
ed loan in the amount of €116.0 million are included in repayments of borrowings and loans.
The utilised sum of USD 210.0 million at December 2018 from the USD 400.0 million RCF was fully repaid during the year of 2019 and at
31 December 2019 the RCF remained fully unutilised.
In the US, a legacy long-term loan of USD 37.5 million was early settled in January 2019. Likewise, in Brazil, remaining legacy loan of
BRL 265.3 million was early settled in August 2019. Both cash outflows from the redemption of these loans are included in repayments of
borrowings and loans.
As at 31.12.2018 €34.0 million of the liabilities to financial institutions were secured by receivables, which were fully repaid in 2019.
Net debt excluding lease liabilities/adjusted EBITDA is the main financial covenant of the loan agreements. Calculation of this covenant
and net debt/adjusted EBITDA is shown under Note (57). Compliance with the covenants is measured on a semi-annual basis. Covenant
ratio is limited at 3.5. Breach of covenants leads to an anticipated maturity of loans. During 2019 and 2018, the Group met all covenant
requirements.
For liabilities of €1,008.1 million (31.12.2018: €1,052.6 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.
Considering interest swaps, 59% (31.12.2018: 55%) of the liabilities to financial institutions carry fixed interest and 41% (31.12.2018: 45%)
carry variable interest.
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Notes
continued
The following table shows fixed interest terms and conditions, taking into account interest rate swaps, without liabilities from deferred
interest:
Interest
terms
fixed until
Effective annual interest rate
2020
EURIBOR + margin
LIBOR + margin
Interbank Deposit Certificate
(CDI) + margin
Various - variable rate
2022
1.74%
2023
2024
2026
2024
4.60%
0.28%
3.09%
3.10%
1.10%
1.52%
Cur-
rency
EUR
USD
CNY
Var.
EUR
EUR
EUR
USD
EUR
EUR
EUR
31.12.2019
Carrying amount
in € million
Interest
terms fixed
until
Effective annual interest rate
389.9 2019
EURIBOR + margin
LIBOR + margin
Interbank Deposit Certificate
(CDI) + margin
Variable interest rate + margin
3.77%
Various - variable rate
1.28%
2.30%
1.74%
4.60%
1.56%
1.12%
3.94%
3.10%
15.9
14.0
0.2
2020
62.0 2022
3.0
305.5 2023
178.5
35.0 2024
27.0
8.0
1,039.0
Cur-
rency
EUR
USD
BRL
EUR
EUR
Var.
USD
EUR
EUR
EUR
EUR
EUR
USD
EUR
31.12.2018
Carrying amount
in € million
132.0
221.7
113.9
34.0
3.0
16.5
32.8
12.4
62.0
3.0
196.2
109.4
174.8
35.0
1,146.7
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 lease liabilities and fixed-term and
puttable non-controlling interests in Group companies. This item of the Consolidated Statement of Financial Position consists of the
following items:
in € million
Current
Non-current
Derivatives from supply
contracts
Interest rate swaps
Derivatives in open orders
Derivative financial
liabilities
Lease liabilities
Fixed-term or puttable non-
controlling interests
Other financial liabilities
5.9
0.0
0.6
6.5
13.8
11.6
31.9
18.0
14.8
0.0
32.8
48.1
24.2
105.1
31.12.2019
31.12.2018
Total
23.9
14.8
0.6
39.3
61.9
35.8
137.0
Current
Non-current
0.9
0.0
0.0
0.9
0.0
14.1
15.0
20.0
7.3
0.0
27.3
0.0
22.2
49.5
Total
20.9
7.3
0.0
28.2
0.0
36.3
64.5
Additional explanation on derivative financial instruments is provided under Note (55).
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28. Provisions for pensions
The net liability from pension obligations in the Consolidated Statement of Financial Position is as follows:
in € million
Present value of pension obligations
Fair value of plan assets
Funded status
Asset ceiling
Net liability from pension obligations
thereof assets from overfunded pension plans
thereof pensions
The present value of pension obligations by beneficiary groups is as follows:
in € million
Active beneficiaries
Vested terminated beneficiaries
Retirees
Present value of pension obligations
The calculation of pension obligations is based on the following actuarial assumptions:
in %
Interest rate
Future salary increase
Future pension increase
31.12.2019
31.12.2018
557.9
(248.0)
309.9
18.0
327.9
0.2
328.1
506.6
(223.9)
282.7
19.5
302.2
2.1
304.3
31.12.2019
31.12.2018
115.3
74.6
368.0
557.9
101.4
68.7
336.5
506.6
31.12.2019
31.12.2018
2.3%
2.6%
2.1%
3.3%
2.7%
2.2%
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 demographic calculation principles for salaried employees from the Actuarial
Association of Austria. In Germany, the Heubeck 2018 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 €122.0 million (31.12.2018: €125.8 million) of the present value of pension obligations and for
€23.2 million (31.12.2018: €26.4 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 remu-
neration 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 com-
mitments. 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 com-
mitments based on the deferred compensation principle, which are fully covered by pension reinsurance policies, and commitments for
preretirement benefits for employees in mining operations.
165
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R H I M A G N E S I T A
Notes
continued
The pension plans of the German group companies account for €160.4 million (31.12.2018: €155.1 million) of the present value of pension
obligations and for €0.7 million (31.12.2018: €0.7 million) of plan assets. The benefits included in company agreements comprise pen-
sions, invalidity benefits and benefits for surviving dependents. The amount of the pension depends on the length of service for the ma-
jority 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 commit-
ments 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 €87.5 million (31.12.2018:
€74.2 million) of the present value of pension obligations and for €67.8 million (31.12.2018: €61.8 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 oppor-
tunity 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 predom-
inantly 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 2019 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 €63.5 million
(31.12.2018: €53.0 million) of the present value of pension obligations and holds €81.5 million (31.12.2018: €69.6 million) of assets, alt-
hough only €63.5 million (31.12.2018: €53.0 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 adminis-
tered 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 rele-
vant beneficiaries and are responsible for the investment policy with regard to the assets plus the day to day administration of the bene-
fits. 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 follow-
ing 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 €72.5 million (31.12.2018: €62.6 million) of
the present value of pension obligations and for €39.9 million (31.12.2018: €34.6 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 € million
Net liability from pension obligations at beginning of year
Currency translation
Pension cost
Remeasurement losses
Benefits paid
Employers' contributions to external funds
Reclassifications
Net liability from pension obligations at year-end
166
2019
302.2
0.3
12.2
36.9
(18.2)
(4.9)
(0.4)
328.1
2018
306.8
(1.9)
11.6
12.2
(17.3)
(9.0)
(0.2)
302.2
R H I M A G N E S I T A
A N N U A L R E P O R T 2 0 1 9
The present value of pension obligations developed as follows:
in € million
Present value of pension obligations at beginning of year
Currency translation
Current service cost
Past service cost
Interest cost
Remeasurement losses/(gains)
from changes in demographic assumptions
from changes in financial assumptions
due to experience adjustments
Benefits paid
Employee contributions to external funds
Reclassifications
2019
506.6
5.2
3.7
0.0
16.5
(1.4)
60.1
0.4
(33.1)
0.5
(0.6)
2018
517.1
(3.0)
3.9
(0.5)
15.2
7.8
(5.8)
2.7
(31.1)
0.5
(0.2)
Present value of pension obligations at year-end
557.9
506.6
The movement in plan assets is shown in the table below:
in € million
Fair value of plan assets at beginning of year
Currency translation
Interest income
Administrative costs (paid from plan assets)
Income/(expense) on plan assets less interest income
Benefits paid
Employers' contributions to external funds
Employee contributions to external funds
Transfer
Fair value of plan assets at year-end
The changes in the asset ceiling are shown below:
in € million
Asset ceiling at beginning of year
Currency translation
Interest expense
(Gains)/losses from changes in asset ceiling less interest expense
Asset ceiling at year-end
At 31 December 2019 the weighted average duration of pension obligations amounts to 12 years (31.12.2018: 12 years).
2019
223.9
5.8
9.1
(0.5)
19.5
(14.9)
4.9
0.5
(0.3)
2018
228.6
(1.2)
7.7
(0.3)
(6.6)
(13.8)
9.0
0.5
0.0
248.0
223.9
2019
19.5
1.0
0.6
(3.1)
18.0
2018
18.3
(0.1)
0.4
0.9
19.5
167
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Notes
continued
The following amounts were recorded in the Consolidated Statement of Profit or Loss:
in € million
Current service cost
Negative past service cost
Gains on settlement
Interest cost
Interest income
Interest expense from asset ceiling
Administrative costs (paid from plan assets)
Pension expense recognised in profit or loss
The remeasurement results recognised in other comprehensive income are shown in the table below:
in € million
Accumulated remeasurement losses at beginning of year
Remeasurement losses on present value of pension obligations
(Income)/expense on plan assets less interest income
(Gains)/losses from changes in asset ceiling less interest expense
Accumulated remeasurement losses at year-end
The present value of plan assets is distributed to the following classes of investments:
2019
3.7
0.0
(0.1)
16.7
(9.2)
0.6
0.5
12.2
2019
131.4
59.2
(19.5)
(3.1)
168.0
in € million
Insurances
Equity instruments
Debt instruments
Cash and cash equivalents
Other assets
Fair value of plan assets
Active market
No active market
0.0
4.1
17.7
38.1
65.8
125.7
40.2
31.0
44.2
4.0
2.9
122.3
31.12.2019
Total
40.2
35.1
61.9
42.1
68.7
Active market
No active market
0.0
4.7
14.3
32.3
57.9
39.1
18.5
49.2
4.1
3.8
114.7
248.0
109.2
2018
3.9
(0.5)
0.0
15.2
(7.7)
0.4
0.3
11.6
2018
119.3
4.6
6.6
0.9
131.4
31.12.2018
Total
39.1
23.2
63.5
36.4
61.7
223.9
The present value of the insurances to cover the Austrian pension plans corresponds to the coverage capital. Insurance companies pre-
dominantly 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 inde-
pendent 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 compa-
nies. 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 2020, RHI Magnesita expects employer contributions to external plan assets to amount to €3.7 million and direct payments to enti-
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R H I M A G N E S I T A
A N N U A L R E P O R T 2 0 1 9
tled beneficiaries to €21.1 million. In the previous year, employer contributions of €4.8 million and direct pension payments of €17.1 mil-
lion had been expected for the financial year 2019.
29. Other personnel provisions
Other personnel provisions consist of the following items:
in € million
Termination benefits
Service anniversary bonuses
Legacy share-based payment program
Semi-retirements
Lump-sum settlements
Other personnel provisions
31.12.2019
31.12.2018
52.0
21.0
0.0
2.8
0.0
75.8
55.5
19.4
1.6
1.9
0.1
78.5
Provisions for termination benefits
Provisions for termination benefits were based on the following weighted average measurement assumptions:
in %
Interest rate
Future salary increase
31.12.2019
31.12.2018
1.3%
3.4%
2.1%
3.9%
The interest rate for the measurement of termination benefit obligations in the Euro area was determined taking into account the compa-
ny specific duration of the portfolio.
Provisions for termination benefits developed as follows in the financial year and the previous year:
in € million
Provisions for termination benefits at beginning of year
Currency translation
Current service cost
Past service cost
Interest cost
Remeasurement losses/(gains)
from changes in demographic assumptions
from changes in financial assumptions
due to experience adjustments
Benefits paid
Provisions for termination benefits at year-end
2019
55.5
0.1
1.5
(0.7)
1.1
0.0
2.1
(1.8)
(5.8)
52.0
2018
58.1
0.0
1.6
0.0
0.9
1.1
(2.3)
0.5
(4.4)
55.5
Payments for termination benefits are expected to amount to €5.8 million in the year 2020. In the previous year, the payments for termi-
nation benefits expected for the year 2019 amounted to €3.5 million.
The following remeasurement gains and losses were recognised in other comprehensive income:
in € million
Accumulated remeasurement losses at beginning of year
Remeasurement losses/(gains)
Accumulated remeasurement losses at year-end
2019
27.2
0.3
27.5
2018
27.9
(0.7)
27.2
169
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Notes
continued
At 31 December 2019 the weighted average duration of termination benefit obligations amounts to 11 years (31.12.2018: 11 years).
Provisions for service anniversary bonuses
The measurement of provisions for service anniversary bonuses is based on an average weighted interest rate of 0.8% (31.12.2018: 1.7%)
and takes into account salary increases of 3.4% (31.12.2018: 3.7%).
Provisions for semi-retirement
The funded status of provisions for obligations to employees with semi-retirement contracts is shown in the table below:
in € million
Present value of semi-retirement obligations
Fair value of plan assets
Provisions for semi-retirement obligations
31.12.2019
31.12.2018
6.3
(3.5)
2.8
5.1
(3.2)
1.9
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:
in € million
31.12.2018
Currency translation
Reversals
Additions
Additions interest
Reclassifications
31.12.2019
Onerous/
unfavourable
contracts
Labour and civil
contingencies
Demolition/disposal
costs,
environmental
damages
83.8
(0.8)
0.0
0.4
8.4
(14.3)
77.5
8.3
(0.2)
0.0
2.1
0.0
0.0
10.2
12.5
0.0
(2.4)
0.0
0.6
0.0
10.7
Other
4.6
0.1
0.0
0.0
0.0
(4.6)
0.1
Total
109.2
(0.9)
(2.4)
2.5
9.0
(18.9)
98.5
In November 2017, RHI Magnesita sold a plant located in Oberhausen, Germany, in order to satisfy the conditions imposed by the Europe-
an 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 €71.2 million as of 31.12.2019 (31.12.2018:
€80.0 million). Furthermore, provisions for contract obligations amounting to €6.3 million (31.12.2018: €3.2 million) are due to contracts
for logistics services and the procurement of raw materials.
The provision for labour and civil contingencies primarily comprises labour litigation provisions against RHI Magnesita totalling
337 cases amounting to €8.0 million (31.12.2018: €7.1 million).
The provision for demolition and disposal costs and environmental damages primarily includes provisions for the estimated costs of min-
ing site restoration of several mines in Brazil amounting to €3.9 million (31.12.2018: €5.9 million) and various sites in the United States
amounting to €6.3 million (31.12.2018: €6.1 million).
Provisions related to tax litigation procedures in Peru and Colombia included in the amount of €4.6 million in other provisions as of 31
December 2018 were reclassified to income tax liabilities as of 31 December 2019.
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31. Other non-current liabilities
Other non-current liabilities consist of the following items:
in € million
Deferred income for subsidies received
Liabilities to employees
Contingent consideration for acquired subsidiaries
Miscellaneous non-current liabilities
Other non-current liabilities
thereof financial liabilities
thereof non-financial liabilities
31.12.2019
31.12.2018
5.8
1.4
0.0
0.1
7.3
0.0
7.3
6.2
2.5
0.6
1.0
10.3
0.6
9.7
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 € million
Trade payables
Contract liabilities
Liabilities to employees
Taxes other than income tax
Dividend liabilities
Payables from property transactions
Payables from commissions
Customers with credit balances
Liabilities to joint ventures and associates
Liabilities to non-consolidated subsidiaries
Other current liabilities
Trade payables and other current liabilities
thereof financial liabilities
thereof non-financial liabilities
31.12.2019
31.12.2018
354.1
45.5
87.5
49.7
25.0
17.0
8.2
6.6
0.7
0.7
19.0
614.0
412.3
201.7
502.5
64.8
99.6
30.0
0.5
9.2
13.0
7.3
5.4
1.0
23.6
756.9
539.3
217.6
Trade payables include an amount of €67.4 million (31.12.2018: €85.5 million) for raw material purchases subject to supply chain finance
arrangements.
Contract liabilities mainly consist of prepayments received on orders. Prepayments received on orders as of 31 December 2018 were rec-
ognised 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, per-
formance bonuses, unused vacation and flexitime credits.
Other current liabilities include €1.3 million (31.12.2018: €1.6 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 €35.4 million (31.12.2018: €32.2 million) primarily include income taxes for the current year and pre-
vious years which have not yet been definitively audited by domestic and foreign tax authorities. Taking into account a multitude of fac-
tors, including the interpretation, comments and case law regarding the respective tax laws as well as past experiences, adequate liabili-
ties have been recognised.
171
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R H I M A G N E S I T A
Notes
continued
34. Current provisions
The development of current provisions is shown in the table below:
in € million
31.12.2018
Currency translation
Utilised
Reversals
Additions
Reclassifications
31.12.2019
Restructuring
costs
Demolition/
disposal costs,
environmental
damages Warranties
Onerous/
unfavourable
contracts
Guarantees
provided
10.1
0.1
(6.1)
(0.6)
28.3
0.0
31.8
7.4
0.0
(1.3)
(1.1)
0.4
0.0
5.4
2.7
0.0
(1.0)
(1.9)
9.5
0.0
9.3
21.1
0.1
(20.0)
(5.8)
9.0
13.4
17.8
3.0
0.0
0.0
(3.1)
0.1
0.0
0.0
Other
8.7
0.0
(5.3)
(0.5)
1.2
1.4
5.5
Total
53.0
0.2
(33.7)
(13.0)
48.5
14.8
69.8
Provisions for restructuring costs amount to €31.8 million as of 31 December 2019 (31.12.2018: €10.1 million) and primarily consist of
benefit obligations to employees due to termination of employment resulting from corporate reorganisation of RHI Magnesita. Out of the
€31.8 million, €12.1 million relates to the plant closure in Hagen, Germany, and €4.0 million to the partial shut-down of the plant in
Trieben, Austria.
The item demolition and disposal costs, environmental damages includes an amount of €2.5million (31.12.2018: €2.5 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 €10.4 million
(31.12.2018: €11.5 million). The amortisation of this provision led to an income of €15.5 million in 2019 (31.12.2018: €10.0 million). Fur-
thermore, provisions for other unfavourable contracts amounting to €3.5 million (31.12.2018: €6.7 million) and provisions for unfavourable
contracts related to contracts for logistics services and the procurement of raw materials totalling €3.9 million (31.12.2018: €2.9 million)
are included.
Provisions for guarantees provided included obligations from sureties and guarantees to banks and insurance companies as of 31 Decem-
ber 2018. As of 31 December 2019, these provisions are disclosed as contingent liabilities, as the outflow of resources is not estimated to
be probable.
The item other provisions includes a provision for the share-based remuneration programme of the members of the former Management
Board of RHI AG of €1.9 million (31.12.2018: €1.4 million).
In addition, provisions for legal proceedings amounting to €0.7 million (31.12.2018: €3.2 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.
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A N N U A L R E P O R T 2 0 1 9
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 (51).
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 in-
tangible 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 €35.0 million (2018: €32.6 million), of which development costs amounting to €9.0 mil-
lion (2018: €8.3 million) were capitalised. Income from research grants amounted to €4.4 million (2018: €3.8 million) in 2019. Amortisa-
tion and impairment of development costs amounting to €4.4 million (2018: €3.8 million) are recognised under cost of sales.
39. Restructuring and write-down expenses
In 2019 the Group initiated a plant rationalisation programme which led to €46.7 million of restructuring expenses and €65.4 million of
asset write-downs of which €54.6 million are allocated to Segment Steel and €10.8 million are allocated to Segment Industrial.
This item includes costs for the plant closure in Hagen, Germany, amounting to €55.3 million (thereof termination of employment of
€12.4 million and write-down of €42.9 million), the partial shut-down of the plant in Trieben, Austria, amounting to €13.7 million (there-
of termination of employment of €5.1 million and write-down of €8.6 million) and other costs for termination of employment totalling
€18.9 million. In 2018, restructuring costs primarily related to costs for termination of employment incurred in connection with the cor-
porate reorganisation of RHI Magnesita amounting to €5.4 million.
In addition, restructuring costs include expenses for unused logistics services and procurement of raw materials in the Porsgrunn plant,
Norway, amounting to €6.1 million (2018: €3.9 million).
Write-down expenses amounting to €13.9 million result from the impairment testing of CGU Norway according to IAS 36, of which €9.3
million are allocated to Segment Steel and €4.6 million are allocated to Segment Industrial. Further information is provided under
Note (8).
40. Other income
The individual components of other income are:
in € million
Amortisation of Oberhausen provision
Income from the reversal of provisions
Income from the disposal of non-current assets
Result from derivatives from supply contracts
Income from restructuring
Miscellaneous income
Other income
2019
15.5
4.6
1.9
0.0
0.0
12.9
34.9
2018
10.0
0.0
2.2
19.6
5.4
6.7
43.9
In 2018, income from restructuring amounting to €5.4 million resulted from the reversal of acquisition-related provisions for redundancy
programmes.
173
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Notes
continued
41. Other expenses
Other expenses include:
in € million
Expenses for strategic projects
Losses from the disposal of non-current assets
Result from deconsolidation - recycling currency translation differences
Result from derivatives from supply contracts
Miscellaneous expenses
Other expenses
2019
(9.0)
(4.3)
(3.7)
(3.0)
(11.3)
(31.3)
2018
(13.5)
(3.0)
0.0
0.0
(6.1)
(22.6)
Expenses for strategic projects amounting to €9.0 million mainly include legal and consulting fees related to optimisation of supply
chain, M&A and integration costs. In 2018, expenses for strategic projects amounted to €13.5 million and mainly included legal and
consulting fees for the acquisition and integration of Magnesita as well as the related corporate reorganisation of RHI Magnesita.
42. Interest income
This item includes interest on cash at banks and similar income amounting to €8.7 million (2018: €8.8 million), interest income on finan-
cial receivables amounting to €0.2 million (2018: €0.2 million) and interest income on securities and shares amounting to €0.2 million
(2018: €0.7 million). In 2018 €0.4 million were accounted for by impaired securities.
43. Foreign exchange effects and related derivatives
The net expense on foreign exchange effects and related derivatives consists of the following items:
in € million
Foreign exchange gains
Gains from related derivative financial instruments
Foreign exchange losses
Losses from related derivative financial instruments
Net expense on foreign exchange effects and related derivatives
2019
83.3
14.6
(83.4)
(31.7)
(17.2)
2018
98.6
4.5
(160.2)
(24.2)
(81.3)
Compared to the previous year the Group improved its financial structure. The absence of the Magnesita legacy debt combined with
reduced volatility of Euro and Brazilian Real against the US Dollar resulted in lower net expense on foreign exchange effects. Realised
losses from derivative financial instruments result from the dissolution of derivatives as of July 2019. These derivatives were fully restruc-
tured in 2019 and no effect is expected in the future out of this item.
In 2018 the net expense on foreign exchange effects and related derivatives resulted 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 receiv-
able.
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44. Other net financial expenses
Other net financial expenses consist of the following items:
in € million
Interest income on plan assets
Interest expense on provisions for pensions
Interest expense on provisions for termination benefits
Interest expense on other personnel provisions
Net interest expense personnel provisions
Unwinding of discount of provisions and payables
Interest expense on non-controlling interests
Interest expense on lease liabilities
Gains from the disposal of securities and shares
Reversal of impairment losses on securities
Impairment losses on securities
Expenses from the valuation of put options
Other interest and similar expenses
Other net financial expenses
45. Income tax
Income tax consists of the following items:
in € million
Current tax expense
Deferred tax (expense)/income relating to
temporary differences
tax loss carryforwards
Income tax
2019
8.6
(16.7)
(1.2)
(0.3)
(9.6)
(12.9)
(3.9)
(1.2)
0.9
0.8
0.0
(0.5)
(12.3)
(38.7)
2019
(72.7)
29.8
(7.9)
21.9
(50.8)
2018
7.3
(15.2)
(0.9)
(0.3)
(9.1)
(15.6)
(5.3)
0.0
0.7
0.0
(1.4)
(1.0)
(10.9)
(42.6)
2018
(75.9)
46.7
(29.7)
17.0
(58.9)
The current tax expense of the year 2019 includes tax expenses for previous periods of €8.4 million (2018: €7.1 million) and income from
income tax relating to prior periods of €1.7 million (2018: €0.5 million).
Income tax expenses for prior periods mainly include exit value expenses out of an ongoing transfer of functions between related parties
amounting to €1.8 million as well as tax audit expenses in APAC and Italy amounting to € 1.2 million. In 2018 €3.8 million were related to
an ongoing tax audit respectively tax loss forfeit in Germany.
In addition to the income taxes recognised in the Statement of Profit or Loss, tax income totalling €18.0 million (2018: €5.7 million),
which is attributable to other comprehensive income, was also recognised in other comprehensive income.
175
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Notes
continued
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 € million
Profit before income tax
Income tax expense calculated at 25% (2018: 25%)
Different foreign tax rates
Expenses not deductible for tax purposes, non-creditable taxes
Non-taxable income and tax benefits
Tax losses and temporary differences of the financial year not recognised
Utilisation of previously unrecognised loss carryforwards and temporary differences
Recognition of previously unrecognised loss carryforwards and temporary differences
Change in valuation allowance on deferred tax assets
Deferred tax expense due to tax rate changes
Deferred income tax relating to prior periods
Current income tax relating to prior periods
Other
Recognised tax expense
Effective tax rate (in %)
2019
199.6
49.9
(4.4)
17.2
(22.5)
9.9
(2.5)
(13.3)
0.6
(0.6)
8.5
7.6
0.5
50.8
25.5%
2018
246.0
61.5
1.8
10.1
(32.3)
9.5
(0.2)
(0.7)
1.2
(1.8)
2.4
6.7
0.7
58.9
23.9%
In 2019 expenses not deductible for tax purposes include voluntary leave payment, Chinese capacity compensation and a write down of
a receivable which is not deductible for tax purposes in the total amount of €4.4 million. Non-taxable income includes benefits concern-
ing the SUDENE tax regime amounting to €9.1 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. Due to improved projections of taxable income de-
ferred tax assets on tax loss carryforwards previously not recognised in the amount of €7.4 million in the Netherlands and €5.9 million in
China were capitalised. Deferred tax assets relating to the tax losses of the current financial year of €3.8 million have not been recog-
nised in the Netherlands and €2.3 million have not been recognised in Brazil.
Tax expense due to tax rate changes relates mainly to an Indian company, where the tax rate changed from 34,94% to 27,83%, leading to
an additional expense of €1,5 million and to an American company where the tax rate changed from 23,66% to 24,2%, leading to an
additional income of €0,7 million.
In 2018, deferred tax expense due to tax rates changes was primarily attributable to the reduction of the corporate income tax rate in
Norway from 24% to 23% of 0.9 million and an increase in corporate income tax rate in Turkey from 20% to 22% of €0.4 million. Non-
taxable income and tax benefits include the SUDENE tax regime amounting to €20.4 million.
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46. Expense categories
The presentation of the Consolidated Statement of Profit or Loss is based on the function of expenses. The following tables show a classi-
fication by expense category for 2019 and the previous year:
in € million
Changes in inventories, own
work capitalised
Cost of materials
Personnel costs
Depreciation and amortisation
charges
Write-down expenses
Other income
Other expenses
Total
Cost of sales
Selling and
marketing expenses
General and
administrative
expenses
Other income/
expenses
Restructuring and
write-down
income/expenses
60.7
1,269.6
412.2
154.1
0.0
(23.2)
331.7
0.0
(0.7)
76.9
2.7
0.0
(2.0)
49.3
(4.8)
2.4
115.2
15.9
0.0
(4.3)
84.8
2,205.1
126.2
209.2
0.0
0.0
0.0
0.0
0.0
(1.8)
(1.8)
(3.6)
0.0
1.7
25.3
0.0
65.4
0.0
19.7
112.1
Total 2019
55.9
1,273.0
629.6
172.7
65.4
(31.3)
483.7
2,649.0
Cost of materials includes expenses for raw materials and supplies and purchased goods of €1,049.6 million (2018: €1,321.3 million) as
well as expenses for services received, especially energy, amounting to €223.5 million (2018: €232.5 million).
in € million
Changes in inventories, own
work capitalised
Cost of materials
Personnel costs
Depreciation and amortisation
charges
Other income
Other expenses
Total
Cost of sales
Selling and
marketing expenses
General and
administrative
expenses
Other income/
expenses
Restructuring and
write-down
income/expenses
(79.2)
1,550.8
409.6
133.5
(27.5)
357.3
2,344.5
0.0
0.6
72.8
7.9
(0.2)
47.8
128.9
(2.8)
2.4
106.2
12.0
(4.2)
94.8
208.4
0.0
0.0
0.0
0.0
(9.9)
(11.4)
(21.3)
0.0
0.0
5.6
0.0
0.0
16.7
22.3
Total 20181)
(82.0)
1,553.8
594.2
153.4
(41.8)
505.2
2,682.8
1) To ensure comparability prior-year figures have been adjusted.
Amortisation charges of intangible assets are largely recognised in cost of sales. Other expenses mainly include freight costs, commis-
sions, travel costs as well as consulting and other outside services.
177
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Notes
continued
47. Personnel costs
Personnel costs consist of the following components:
in € million
Wages and salaries
Pensions
Defined benefit plans
Defined contribution plans
Termination benefits
Defined benefit plans
Defined contribution plans
Other expenses
Social security costs
Fringe benefits
2019
489.6
4.1
5.9
0.8
1.4
15.9
79.3
32.7
2018
474.0
3.7
5.2
1.6
1.5
2.9
73.7
31.6
Personnel expenses (without interest expenses)
629.7
594.2
Personnel costs do not include amounts resulting from the interest accrued on personnel provisions. They amount to €9.6 million (2018:
€9.1 million) and are recorded in other net financial expenses.
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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 oper-
ating 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 trans-
lated 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 State-
ment 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.
48. Net cash flow from operating activities
in € million
Profit after income tax
Adjustments for
income tax
depreciation
amortisation
write-down of property, plant and equipment and intangible assets
income from the reversal of investment subsidies
write-ups/ impairment losses on securities
losses from the disposal of property, plant and equipment
gains from the disposal of securities and shares
losses from the disposal of subsidiaries
net interest expense and derivatives
share of profit of joint ventures and associates
other non-cash changes
Changes in working capital
inventories
trade receivables
contract assets
trade payables
contract liabilities
Changes in other assets and liabilities
other receivables and assets
provisions
other liabilities
Cash generated from operations
2019
148.8
50.8
146.2
26.4
65.5
(0.6)
8.7
2.8
(0.9)
3.7
49.6
(11.1)
26.0
110.9
30.3
0.0
(145.0)
(19.0)
(4.9)
(8.0)
(9.8)
470.4
2018
187.1
58.9
124.8
28.6
0.0
(0.5)
0.3
1.4
(0.7)
0.0
92.5
(10.1)
18.1
(56.7)
21.9
(1.9)
48.8
36.5
(29.5)
(59.4)
2.1
462.2
Other non-cash expenses and income include mainly the net interest expenses for defined benefit pension plans amounting to
€9.6 million (2018: €9.1 million), net remeasurement losses of monetary foreign currency positions and derivative financial instruments
of €19.8 million (2018: €14.5 million).
179
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Notes
continued
49. Net cash flow from financing activities
The reconciliation of movements of financial liabilities and assets to cash flows arising from financing activities for the current and the
prior year is shown in the tables below:
Cash changes Non-cash changes
Changes in
foreign
exchange rates
Initial
recognition
IFRS 16
Interest expense
and other
changes
Additions and
modifications of
leases (IFRS 16)
(161.8)
(15.5)
(5.3)
(2.1)
(1.8)
7.3
0.4
0.3
0.1
0.0
0.0
62.0
0.0
0.0
0.0
44.0
1.2
4.5
1.1
0.0
0.0
13.8
0.0
0.0
0.0
31.12.2018
1,153.6
0.0
36.3
12.8
1.8
31.12.2019
1,043.1
61.9
35.8
11.9
0.0
1,204.5
(186.5)
8.1
62.0
50.8
13.8
1,152.7
Cash changes
Non-cash changes
Changes in foreign
exchange rates
Interest expense
and other changes
Reclassification
31.12.2018
164.8
(215.0)
(54.6)
(1.8)
(0.5)
0.0
(4.5)
(12.0)
1.3
0.6
(0.4)
(0.3)
0.0
0.0
60.3
(1.6)
(1.6)
6.5
(0.6)
2.5
6.3
(12.5)
0.0
0.0
0.0
12.5
0.0
0.0
1,153.6
0.0
0.0
36.3
12.8
0.0
1.8
31.12.2017
953.0
215.3
55.6
32.0
1.7
(2.5)
0.0
1,255.1
(111.6)
(10.8)
71.8
0.0
1,204.5
in € million
Liabilities to financial
institutions
Lease liabilities
Liabilities to fixed-term or
puttable non-controlling
interests
Other financial liabilities and
capitalised transaction costs
Trade payables
Changes of financial
liabilities and assets arising
from financing activities
in € million
Liabilities to financial
institutions
Perpetual bond
Senior notes
Liabilities to fixed-term or
puttable non-controlling
interests
Other financial liabilities and
capitalised transaction costs
Prepaid transaction costs
related to financial liabilities
Trade payables
Changes of financial
liabilities and assets arising
from financing activities
180
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The reconciliation of the cash impact of net financing in 2019 and 2018 is shown in the tables below:
in € million
Interest income
Interest expenses on borrowings
Net expense on foreign exchange effects and related derivatives
Other net financial expenses
Net finance costs
in € million
Interest income
Interest expenses on borrowings
Net expense on foreign exchange effects and related derivatives
Other net financial expenses
Net finance costs
Reconciliation to cash net finance cost
Profit or loss
financing cash
movements
other cash and
non-cash
movements
Cash impact of net
financing costs
9.1
(28.4)
(17.2)
(38.7)
(75.2)
0.0
(5.7)
0.0
(5.8)
0.8
(4.2)
(2.8)
(24.6)
8.3
(29.9)
(14.4)
(19.9)
(55.9)
Reconciliation to cash net finance cost
Profit or loss
financing cash
movements
other cash and
non-cash
movements
Cash impact of net
financing costs
9.7
(48.5)
(81.3)
(42.6)
(162.7)
0.0
(12.8)
0.0
(5.2)
1.5
(6.9)
(61.2)
(31.1)
8.2
(54.4)
(20.1)
(16.7)
(83.0)
Non-cash movements in other net financial expenses are mainly related to net interest expenses on personnel provisions as well as to
expenses from the discount on provisions.
50. Total interest paid and interest received
Total interest paid amounts to €50.5 million in the reporting period (2018: €72.4 million), of which €0.4 million (2018: €0.3 million) is
included in cash flow from operating activities, €0.3 million (2018: €1.0 million) in cash flow from investing activities and €49.8 million
(2018: €71.1 million) in cash flow from financing activities.
Total interest received amounts to €8.3 million for the financial year 2019 (2018: €8.5 million), of which €0.0 million (2018: €0.2 million)
are included in cash flow from operating activities and €8.3 million (2018: €8.3 million) in cash flow from investing activities.
181
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Notes
continued
OTHER DISCLOSURES
51. Segment reporting
Segment reporting by operating company division
The following tables show the financial information for the operating segments for the year 2019 and the previous year:
in € million
Revenue
Gross profit
EBIT
Net finance costs
Share of profit of joint ventures and associates
Profit before income tax
Steel
2,018.0
Industrial
904.3
Group 2019
2,922.3
466.8
250.4
717.2
273.3
(75.2)
1.5
199.6
Depreciation and amortisation charges
(109.1)
(63.5)
(172.6)
Segment assets 31.12.2019
Investments in joint ventures and associates 31.12.2019
Reconciliation to total assets
1,545.9
919.5
2,465.4
19.5
834.7
3,319.6
Investments in property, plant and equipment and intangible assets (according to non-
current assets statement)
103.2
77.8
181.0
in € million
Revenue
Gross profit
EBIT
Net finance costs
Share of profit of joint ventures and associates
Profit before income tax
Steel
2,213.0
Industrial
Group 20181)
868.4
3,081.4
526.4
210.5
736.9
398.6
(162.7)
10.1
246.0
Depreciation and amortisation charges
(97.5)
(55.9)
(153.4)
Segment assets 31.12.2018
Investments in joint ventures and associates 31.12.2018
Reconciliation to total assets
1,669.9
944.4
2,614.3
21.8
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
1) Adjusted to reflect the changes in presentation.
No single customer contributed 10% or more to consolidated revenue in 2019. Companies which are known to be part of a group are
treated as one customer. In 2018, revenue amounting to €317.5 million was realised with one customer, which was included in the Steel
segment.
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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 € million
Shaped products
Unshaped products
Management refractory services
Other
Revenue
In 2018, revenue was classified by product group as follows:
in € million
Shaped products
Unshaped products
Management refractory services
Other
Revenue
1) Adjusted to reflect the changes in presentation.
Steel
963.0
323.4
628.8
102.8
2,018.0
Steel
1,114.9
340.9
616.0
141.2
2,213.0
Industrial
Group 2019
613.7
187.6
0.0
103.0
904.3
1,576.7
511.0
628.8
205.8
2,922.3
Industrial
Group 20181)
575.9
192.1
0.0
100.4
868.4
1,690.8
533.0
616.0
241.6
3,081.4
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 €96.9 million (2018: €100.9 million) is transferred over time and
an amount of €108.9 million (2018: €140.7 million) is transferred at a point of time.
Segment reporting by country
Revenue in 2019 and in the previous year is classified by customer sites as follows:
in € million
Netherlands
All other countries
USA
Brazil
India
PR China
Germany
Mexico
Italy
Canada
Russia
Other countries, each below €52.7 million
Revenue
Steel
11.4
359.7
273.3
206.3
47.6
96.8
108.1
88.5
47.9
68.8
709.6
2,018.0
Industrial
5.0
55.4
58.8
45.5
136.1
74.1
47.4
26.3
55.2
9.6
390.9
904.3
Group
16.4
415.1
332.1
251.8
183.7
170.9
155.5
114.8
103.1
78.4
1,100.5
2,922.3
183
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Notes
continued
in € million
Netherlands
All other countries
USA
Brazil
India
Germany
PR China
Mexico
Italy
Canada
Russia
Other countries, each below €62.9 million
Revenue
Steel
13.9
353.7
277.1
202.3
116.6
44.0
127.8
104.6
46.4
73.7
852.9
2,213.0
Industrial
11.9
54.2
56.1
43.0
66.8
121.7
33.2
27.0
45.8
13.2
395.5
868.4
Group
25.8
407.9
333.2
245.3
183.4
165.7
161.0
131.6
92.2
86.9
1,248.4
3,081.4
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 € million
Brazil
USA
Austria
Germany
PR China
India
Mexico
France
Turkey
Other countries, each below €22.1 million (31.12.2018: €18.6 million)
Goodwill, intangible assets and property, plant and equipment
31.12.2019
31.12.2018
514.0
233.2
228.8
154.0
181.9
64.7
38.9
27.9
29.4
70.5
520.7
233.1
220.6
198.6
160.1
58.0
34.5
31.8
30.6
58.6
1,543.3
1,546.6
52. 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 Magne-
sita N.V. by the weighted average number of shares outstanding during the financial year.
Profit after income tax attributable to the owners of the parent (in € million)
Weighted average number of shares for basic EPS
Effects of dilution from share options
Weighted average number of shares for dilutive EPS
Earnings per share basic (in €)
Earnings per share diluted (in €)
2019
139.0
2018
158.1
49,220,010
44,963,615
273,969
94,105
49,493,979
45,057,720
2.82
2.81
3.52
3.52
The weighted average number of shares for basic and dilutive EPS considers the weighted average effect of the newly issued ordinary
shares as well the effect of changes in treasury shares during the reporting period. As of 31 December 2019, there are 273,969 diluting
options.
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A N N U A L R E P O R T 2 0 1 9
53. Dividend payments and proposed dividend
The Annual General Meeting on 6 June 2019 approved the pay-out of a dividend of €1.50 per share for 2018. Consequently, a dividend
totalling €74.2 million was paid out to the shareholders of RHI Magnesita N.V. at the beginning of July 2019.
On 23 July 2019 the Board of Directors of RHI Magnesita N.V. approved the 2019 interim dividend of €0.50 per share amounting to
€ 24.5 million. The 2019 interim dividend was paid on 9 January 2020.
For 2019, the Board of Directors has recommended not to pay a final dividend for 2019, subject to shareholder approval at the Annual
General Meeting, on 5 June 2020 to shareholders on the register at 2020. This decision will be reviewed later in the year once the out-
look becomes clearer.
Dividend payments to the shareholders of RHI Magnesita N.V. have no income tax consequences for RHI Magnesita N.V.
185
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Notes
continued
54. 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.
in € million
Other non-current financial assets
Interests in subsidiaries not consolidated
Marketable securities
Shares
Interest derivatives designated as cash flow hedges
Other non-current financial receivables
Trade and other current receivables
Other current financial assets
Marketable securities
Shares
Derivatives
Other current financial receivables
Cash and cash equivalents
Financial assets
Non-current and current borrowings
Liabilities to financial institutions
Other financial liabilities and capitalised transaction costs
Non-current and current other financial liabilities
Lease liabilities
Derivatives
Interest derivatives designated as cash flow hedges
Liabilities to fixed-term or puttable non-controlling interests
Other non-current liabilities
Contingent consideration for acquired subsidiaries
Trade payables and other current liabilities
Financial liabilities
Aggregated according to measurement category
Financial assets measured at FVPL
Financial assets measured at amortised cost
Financial liabilities measured at amortised cost
Financial liabilities measured at FVPL
Measurement
category
IFRS 91)
Level
Carrying
amount
Fair value
Carrying
amount
Fair value
31.12.2019
31.12.2018
FVPL
FVPL
FVPL
-
AC
AC
FVPL
FVPL
FVPL
AC
AC
AC
AC
AC
FVPL
-
AC
FVPL
AC
3
1
3
2
-
-
1
1
2
-
-
2
2
2
2
2
2
3
-
0.7
13.3
0.5
0.0
0.9
324.2
0.0
0.0
0.1
0.0
467.2
806.9
0.7
13.3
0.5
0.0
-
-
0.0
0.0
0.1
-
-
0.7
14.5
0.5
0.6
1.7
367.2
35.2
1.1
2.1
0.2
491.2
915.0
0.7
14.5
0.5
0.6
-
-
35.2
1.1
2.1
-
-
1,043.1
1,056.6
1,153.6
1,165.6
-
-
20.9
7.3
-
0.6
-
11.9
61.9
24.5
14.8
35.8
0.0
412.3
1,604.3
14.6
792.3
1,565.0
24.5
-
-
24.5
14.8
-
0.0
-
12.8
-
20.9
7.3
36.3
0.6
539.3
1,770.8
54.1
860.3
1,742.0
21.5
1) FVPL: Financial assets/financial liabilities measured at fair value through profit or loss.
AC: Financial assets/financial liabilities measured at amortised cost.
In the RHI Magnesita Group marketable securities, derivative financial instruments, shares, 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
186
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A N N U A L R E P O R T 2 0 1 9
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:
Level 2:
Level 3:
Prices quoted in active markets for identical financial instruments.
Measurement techniques in which all important data used are based on observable market data.
Measurement techniques in which at least one significant parameter is based on non-observable market data.
The fair value of securities, shares, 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 deriva-
tives 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 for-
ward rates that are currently observable (Level 2).
The fair value of the contingent consideration liability amounting to €0.0 million (31.12.2018: €0.6 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.
Liabilities to financial institutions, other financial liabilities and capitalised transaction costs, lease 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
liabilities to financial institutions are only shown in the notes and 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 devia-
tion between the fair value and the carrying amount is assumed and the credit default risk is accounted for by forming valuation allow-
ances.
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.
187
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R H I M A G N E S I T A
Notes
continued
Net results by measurement category in accordance with IFRS 9
The effect of financial instruments on the income and expenses recognised in 2019 and 2018 is shown in the following table, classified
according to the measurement categories defined in IFRS 9:
in € million
Net (loss)/gain from financial assets and liabilities measured at fair value through profit or loss
Net loss from financial assets and liabilities measured at fair value through profit or loss designated on initial
recognition
Net gain/(loss) from financial assets and liabilities measured at amortised cost
2019
(17.7)
0.5
(39.7)
2018
1.4
(1.2)
(123.5)
The net gain from financial assets and liabilities measured at fair value through profit or loss includes income from securities and shares,
income from the disposal of securities and shares, impairment losses and income from reversals of impairment losses, unrealised results
from the measurement of a long-term commodity futures contract, 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 IFRS 9 and interest income from securities.
The net gain or loss from financial assets and liabilities at fair value through profit or loss designated on initial recognition includes in-
come related to the settlement and measurement of securities and personnel obligations.
The net loss from financial assets and liabilities measured at amortised cost 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 op-
tions. The net loss is mainly related to financial liabilities measured at amortised cost.
Net finance costs include interest income amounting to €9.1 million (2018: €9.5 million) and interest expenses of €49.9 million (2018:
€69.5 million), which result from financial assets and liabilities which are not carried at fair value through profit or loss.
55. Derivative financial instruments
Commodity forward
The RHI Magnesita Group signed 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 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
€23.9 million at 31 December 2019 (31.12.2018: €20.9 million). The corresponding present value of the cash flows for the agreed elec-
tricity supply totals €59.5 million at 31 December 2019 (31.12.2018: €71.3 million); the present value of the cash flow at market price
amounts to €35.6 million (31.12.2018: €50.4 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 hedg-
ing 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 €305.6 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 USD 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 USD 50.0 million (31.12.2018: USD 50.0 million) with an original maturity until 2020
was early settled in 2019. An income of €0.7 million recognised in other comprehensive income was reclassified to profit or loss and
recognised within other net financial expenses.
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A N N U A L R E P O R T 2 0 1 9
In 2018, two interest rate swaps measured at fair value through profit or loss with an original maturity until 2019 and with a nominal value
of €12.2 million were subject to early settlement in the reporting period. Total expense in 2018 of this transaction amounted to €0.3
million and was recognised within other net financial expenses.
The fair values of the interest rate swaps totalled €-14.8 million at the reporting date (31.12.2018: €-6.7 million) and are shown in other
non-current financial liabilities (31.12.2018: €7.3 million) in the Consolidated Statement of Financial Position. At 31.12.2018 a fair value of
€ 0.6 million was shown in other non-current financial assets. For the reporting period 2019, €-7.4 million (2018: €6.8 million) have
been recognised in other comprehensive income and an income amounting to €0.7 million (2018:€0.0) has been reclassified from other
comprehensive 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 2019, there were no 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:
Purchase
EUR
USD
Forward exchange contracts
Sale
USD
INR
31.12.2018
Nominal value
in million
Fair value in €
million
USD
EUR
182.0
890.0
1.1
0.0
1.1
56. Financial risk management
Financial risks are incorporated in RHI Magnesita’s corporate risk management and are centrally controlled by Corporate 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 €806.9 million (31.12.2018: €915.0 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 only car-
ried out with prime financial institutions with a good credit rating. Individual counterpart exposures limits are assigned to each financial
institution based on a matrix composed of the credit rating (S&P or Moody’s) and balance sheet assets.
Receivables from customers are hedged as far as possible through credit insurance and collateral arranged through banks (guarantees,
letters of credit) in order to mitigate credit and default risk. 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 € million
Segment Steel
Segment Industrial
Trade receivables
Credit insurance and bank guarantees
Net credit exposure
31.12.2019
31.12.2018
206.8
110.7
317.5
(140.8)
176.7
250.3
99.6
349.9
(139.8)
210.1
189
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Notes
continued
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 € million
US Dollar
Euro
Pound Sterling
Other currencies
Other functional currencies
Trade receivables
31.12.2019
31.12.2018
75.9
10.1
5.2
3.5
222.8
317.5
75.4
11.6
5.8
7.0
250.1
349.9
The movement in the valuation allowance in respect of trade and other receivables and contract assets during the year and the previous
year was as follows.:
in € million
Accumulated valuation allowance at beginning of year
Currency translation
Addition
Use
Reversal
Net remeasurement of loss allowance
Accumulated valuation allowance at year-end
2019
2018
Individually
assessed -
credit impaired
Collectively
assessed -
not credit impaired
Individually
assessed -
credit impaired
Collectively
assessed -
not credit impaired
29.6
0.3
5.9
(1.0)
(2.5)
-
32.3
1.2
-
-
-
-
0.1
1.3
28.7
(1.1)
5.0
(3.0)
0.0
-
29.6
3.3
-
-
-
-
(2.1)
1.2
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 € million
Trade receivables - days past due
31.12.2019
Not past due
less than 30 days
between 31 and
60 days
between 61 and
90 days
between 91 and
180 days
more than 180 days
Total
Expected credit
loss rate in %
Gross carrying
amount
Life time
expected credit
loss
0.04 -
0.65%
0.08 - 1.50%
0.33 - 10.33%
0.90 - 19.71%
1.43 - 26.35%
3.02 - 46.81%
260.8
20.8
0.4
0.1
8.0
0.1
1.9
0.1
1.4
0.1
2.8
295.7
0.5
1.3
190
R H I M A G N E S I T A
A N N U A L R E P O R T 2 0 1 9
in € million
Trade receivables - days past due
31.12.2018
Not past due
less than 30 days
between 31 and
60 days
between 61 and
90 days
between 91 and
180 days
more than 180 days
Total
Expected credit
loss rate in %
Gross carrying
amount
Life time
expected credit
loss
0.05 -
0.45%
0.11 - 1.08%
0.50 - 7.04%
1.39 - 13.33%
2.27 - 17.63%
5.86 - 33.81%
294.0
34.0
0.4
0.1
7.6
0.1
3.2
0.1
2.8
0.2
4.0
345.6
0.3
1.2
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 2019, the RHI Mag-
nesita Group has a committed credit facility of USD 400.0 million, which is fully unutilised (31.12.2018: USD 190.0 million were unu-
tilised). The USD 400.0 million committed RCF is a syndicated facility with multiple international banks and matures in 2023. The com-
panies of the RHI Magnesita Group are integrated into a clearing process managed by Corporate 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:
in € million
Liabilities to financial institutions
fixed interest
variable interest
Other financial liabilities and capitalised transaction costs
Lease liabilities
Liabilities to fixed-term or puttable non-controlling
interests
Trade payables and other current liabilities
Non-derivative financial liabilities
Carrying amount
31.12.2019
Cash
outflows
up to 1 year
2 to 5 years
over 5 years
Remaining term
135.0
908.1
11.9
61.9
35.8
412.3
147.4
949.6
13.4
79.5
187.8
412.3
1,565.0
1,790.0
2.7
76.2
2.0
16.2
11.6
412.3
521.0
108.5
601.7
11.2
37.7
13.2
0.0
772.3
36.2
271.7
0.2
25.6
163.0
0.0
496.7
191
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Notes
continued
in € million
Liabilities to financial institutions
fixed interest
variable interest
Carrying amount
31.12.2018
Cash
outflows
up to 1 year
2 to 5 years
over 5 years
Remaining term
116.1
127.3
1,037.5
1,100.9
Other financial liabilities and capitalised transaction costs
12.8
15.2
Liabilities to fixed-term or puttable non-controlling
interests
Contingent consideration for acquired subsidiaries
Trade payables and other current liabilities
Non-derivative financial liabilities
36.3
0.6
539.3
211.8
0.6
539.3
1,742.6
1,995.1
2.7
338.6
2.2
14.2
0.0
539.3
897.0
88.5
732.9
12.3
18.4
0.6
0.0
852.7
36.1
29.4
0.7
179.2
0.0
0.0
245.4
Derivative financial instruments
The remaining terms of derivative financial instruments based on expected undiscounted cash flow as of 31 December 2019 and
31 December 2018 are shown in the table below:
in € million
Receivables from derivatives with net
settlement
Derivatives in open orders
Liabilities from derivatives with net settlement
Derivatives from supply contracts
Interest rate swaps
Derivatives in open orders
in € million
Receivables from derivatives with net
settlement
Interest rate swaps
Derivatives in open orders
Forward exchange contracts
Liabilities from derivatives with net settlement
Derivatives from supply contracts
Interest rate swaps
Carrying amount
31.12.2019
Cash flows
up to 1 year
2 to 5 years
over 5 years
Remaining term
0.1
23.9
14.8
0.6
0.1
24.6
15.1
0.6
0.1
6.0
5.0
0.6
0.0
18.6
10.1
0.0
Remaining term
0.0
0.0
0.0
0.0
Carrying amount
31.12.2018
Cash flows
up to 1 year
2 to 5 years
over 5 years
0.6
1.0
1.1
20.9
7.3
0.6
1.0
1.1
22.2
8.1
0.5
1.0
1.1
1.0
2.4
0.1
0.0
0.0
21.2
5.7
0.0
0.0
0.0
0.0
0.0
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.
192
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A N N U A L R E P O R T 2 0 1 9
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 receiva-
bles 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 in-
tragroup 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. Sig-
nificant 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 2019:
in € million
Financial assets
Financial liabilities, provisions
Net foreign currency position
USD
813.8
(646.9)
166.9
EUR
57.0
(165.7)
(108.7)
ZAR
12.8
0.0
12.8
The foreign currency positions as of 31 December 2018 are structured as follows:
in € million
Financial assets
Financial liabilities, provisions
Net foreign currency position
USD
651.5
(938.6)
(287.1)
EUR
104.1
(241.7)
(137.6)
ZAR
15.8
0.0
15.8
CHF
0.8
(11.2)
(10.4)
CHF
1.4
(11.0)
(9.6)
Other
69.0
(34.9)
34.1
Other
77.7
(63.0)
14.7
Total
953.4
(858.7)
94.7
Total
850.5
(1,254.3)
(403.8)
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 2019
would have had the following effect on profit or loss and equity (both excluding income tax):
in € million
US Dollar
Euro
South African Rand
Swiss Franc
Other currencies
Appreciation of 10%
Devaluation of 10%
Gain/(loss)
Equity
Gain/(loss)
(15.2)
9.9
(1.2)
0.9
(3.0)
(4.7)
15.5
(1.2)
0.9
(3.0)
18.6
(12.1)
1.4
(1.2)
3.8
Equity
5.7
(18.9)
1.4
(1.2)
3.9
193
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Notes
continued
The hypothetical effect on profit or loss at 31 December 2018 can be summarised as follows:
in € million
US Dollar
Euro
South African Rand
Swiss Franc
Other currencies
Appreciation of 10%
Devaluation of 10%
Gain/(loss)
27.0
12.4
(1.4)
0.9
(1.4)
Equity
27.0
12.4
(1.4)
0.9
(1.4)
Gain/(loss)
(33.0)
(15.1)
1.7
(1.1)
1.6
Equity
(33.0)
(15.1)
1.7
(1.1)
1.6
Net investment hedge
Non-current borrowings as of 31 December 2019 include USD 200.0 million which have been designated as a hedge of the net invest-
ments in two subsidiaries in the USA as of 1 July 2019. This borrowing is used to hedge the Group´s exposure to the USD foreign exchange
risk on these investments. Gains or losses on the translation of this borrowing are reclassified to Other Comprehensive Income to offset
any gains or losses on translation of the net investments in the subsidiaries.
There is an economic relationship between the hedged item and the hedging instrument as the net investment creates a translation risk
that will match the foreign exchange risk on the USD borrowing. The Group has established a hedge ratio of 1:1 as the underlying risk of
the hedging instrument is identical to the hedged risk component. Hedge ineffectiveness could arise when the amount of the investment
in the foreign subsidiary becomes lower than the amount of the fixed rate borrowing. For the reporting period, there was no ineffective-
ness to be recorded from net investments hedges.
The impact of the hedging instrument for the period 2019 is shown as follows:
in € million
Carrying amount
Statement of Financial Position
Change in fair value used for
measuring ineffectiveness
Nominal amount
178.5
Non-current borrowings
(2.9)
USD 200.0 million
The change in the carrying amount of the non-current borrowing as a result of the foreign currency movements since 1 July 2019 is rec-
ognised in Other Comprehensive Income within the currency translation differences.
The impact of the hedged item for the period 2019 is shown as follows:
in € million
Change in fair value used for
measuring ineffectiveness
2.9
Nominal amount
2.2
The hedging gain or loss recognised in the currency translation differences is also including the corresponding tax effect. The hedging
gain or loss recognised before tax is equal to the change in the fair value used for measuring effectiveness.
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 2019, interest rate hedges amounting to a nominal value of €305.6 million
(31.12.2018: €305.6 million) and a nominal value of USD 200.0 million (31.12.2018: USD 250.0 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.
194
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A N N U A L R E P O R T 2 0 1 9
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 2019 had been 25 basis points higher or lower, equity would have been €3.1 million (31.12.2018:
€3.8 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 in-
cluded in the calculation of the result-related sensitivities. If the market interest rate as of 31 December 2019 had been 25 basis points
higher or lower, the interest result would have been €0.1 million (31.12.2018: €0.1 million) lower or higher.
Other market price risk
RHI Magnesita holds certificates in an investment fund amounting to €13.3 million (31.12.2018: €12.0 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 and the fair value of
the financial liability amounts to €23.9 million at 31 December 2019 (31.12.2018: €20.9 million). If the quoted forward prices at 31 De-
cember 2019 had been 20% higher or lower, EBIT would have been €7.1 million (31.12.2018: €10.1 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
€0.1million (31.12.2018: €0.2 million) higher or lower.
57. Capital management
The objectives of the capital management strategy of the RHI Magnesita Group are to continue as a going concern and to provide a capi-
tal base to finance growth and investments, to service debt, and to increase shareholders value, including the payment of dividends to
shareholders.
The RHI Magnesita Group manages its capital structure through careful monitoring and assessment of the overall economic framework
conditions, credit, interest rate and foreign exchange risks and the requirements and risks related to operations and strategic projects.
The capital structure key figures at the reporting date are shown below:
Net debt (in € million)
Net gearing ratio (in %)
Net debt to adjusted EBITDA
31.12.2019
31.12.2018
649.7
76.9%
1.17x
638.9
72.2%
1.16x
Net debt, which reflects borrowings and lease liabilities net of cash and cash equivalents and marketable securities, is managed by Cor-
porate 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 total equity.
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F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Notes
continued
Net debt excluding lease liabilities/adjusted EBITDA is the main financial covenant of loan agreements. 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, including lease liabili-
ties. It is calculated as follows:
in € million
EBIT
Amortisation
Restructuring and write-down expenses
Other operating income and expenses
Adjusted EBITA
Depreciation
Adjusted EBITDA
Total debt
Lease liabilities
Cash and cash equivalents
Marketable securities
Net debt
Net debt excluding IFRS 16 lease liabilities
Net debt to adjusted EBITDA
Net debt to adjusted EBITDA excluding IFRS 16 lease liabilities
31.12.2019
31.12.2018
273.3
26.4
112.1
(3.6)
408.2
146.2
554.4
1,055.0
61.9
467.2
0.0
649.7
398.6
28.6
22.3
(21.3)
428.2
124.8
553.0
1,166.4
0.0
491.2
36.3
638.9
587.8
638.9
1.17x
1.06x
1.16x
1.16x
In both 2019 and 2018, 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 €288,699,230.59 which was created in connection with the merger.
58. Contingent liabilities
At 31 December 2019, warranties, performance guarantees and other guarantees amount to €44.0 million (31.12.2018: €43.0 million).
Contingent liabilities have a remaining term between two months and three years, depending on the type of liability. Based on experi-
ences of the past, the probability that contingent liabilities are used is considered to be low.
In addition, contingent liabilities from sureties of €0.3 million (31.12.2018: €0.3 million) were recorded, of which €0.3 million (31.12.2018:
€0.3 million) are related to contingent liabilities to creditors from joint ventures.
Individual administrative proceedings and lawsuits which result from ordinary activities are pending as of 31 December 2019 or can po-
tentially be exercised against RHI Magnesita in the future. The related risks were analysed with a view to their probability of occurrence.
The Group is a party in several tax proceedings in Brazil which involve an estimated amount of €233.5 million (31.12.2018: €169.0 mil-
lion). No provision was set up to cover the potential disbursements related to such proceedings as, according to IFRS, management clas-
sified the risks of loss (based on the evaluation of legal advisors) as possible but not probable. The proceedings are as follows.
In 2011, the Brazilian Tax Authorities issued an assessment regarding Corporate Income Taxes on the amortization of goodwill related to
the years 2008 and 2009. The tax authorities 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 the Administrative Council of Tax Appeals (“CARF”), which can-
celled more than 90% of the tax assessment. However, the CARF’s ruling is still subject to appeals filed by both the company and the
General Counsel to the National Treasury (“PGFN”). The final ruling for this proceeding is expected within one to two years. As of 31 De-
cember 2019, the potential risk amounts to €81.7 million, including interest and penalties (31.12.2018: €81.4 million).
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In 2016, the Brazilian Tax Authorities considered the arguments partially accepted by the CARF in the proceeding started in 2011 to chal-
lenge goodwill deductions for the years 2011 and 2012. In December 2016, the company filed a defense against the tax assessment,
which was partially granted by the tax authorities. The parties can appeal to the CARF as soon as the formal notice about the first-tier
decision occurs. The final decision is expected within three to four years. As of 31 December 2019, the potential risk amounts to €38.1
million, including interest and penalties (31.12.2018: €37.5 million).
In 2019, the Brazilian Tax Authorities extended the goodwill challenge also for the years 2013 to 2018. The company will file a defense
against the tax assessment notice. A preliminary first-tier decision by the tax authorities (the Federal Revenue Judgment Office in the city
of Belo Horizonte) is expected within one to two years. As of 31 December 2019, the potential risk amounts to €53.3 million, including
interest and penalties.
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 final decision is expected within one to two years. The potential loss
from this proceeding amounts to €4.2 million (including interest and penalties) as at 31 December 2019 (31.12.2018: €4.8 million).
Furthermore, the Brazilian Tax Authorities issued a tax assessment against a former Brazilian holding company. The assessment relates to
the offset of federal taxes’ credits and debits performed by the company up to and including 2008, which have not been approved by the
Tax Authorities. Legal opinions demonstrate that the company’s arguments are solidly based on supporting documentation. The final
decision is expected within four to five years. As of 31 December 2019, the potential risk amounts to €12.8 million, including interest and
penalties (31.12.2018: €10.7 million).
The Brazilian Tax Authorities also issued a tax assessment regarding the Financial Compensation for Exploration of Mineral Resources
(“CFEM”). Based on the opinion of its legal advisors, the company appealed against the assessment and the chances of loss in this pro-
ceeding were considered “possible” due to the applicable case-law of the Brazilian courts. Additionally, changes in the CFEM legislation
mirror the company’s interpretation and, therefore, demonstrate its accurateness. The final decision is expected within four to five years.
As of 31 December 2019, the potential risk amounts to €14.0 million, including interest and penalties (31.12.2018: €12.9 million).
In addition to the above, the Brazilian Tax Authorities issued a tax assessment for an allegedly incurred use of Income Tax credits relating
to the year 2015. Legal opinions demonstrate that the company’s arguments are solidly based on substantial supporting documentation.
The final decision is expected within four to five years. As of 31 December 2019, the potential risk amounts to €3.5 million, including
interest and penalties.
Finally, in 2018 the State Tax Authorities issued a tax assessment in respect of the Tax on the Circulation of Goods and Services (“ICMS”)
for an alleged lack of compliance of ancillary obligation and lack of tax collection concerning the period stemming from years 2013 to
2017. The potential loss amounted to €4.1 million (including interest and penalties) as at 31 December 2018. In 2019, the State Taxpayers
Council granted a 73% reduction of the original assessment amount through immediate payment. In view of this decision, in November
2019, the company opted to pay €1.2 million to settle the claim.
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. In this context it should be noted that a tax provision is generally recognised when the group has a present obli-
gation as a result of a past event, and when it is considered probable that there will be a future outflow of funds.
Since RHI Magnesita is continually adapting its global presence to improve customer service and maintain its competitive advantage, the
group leads open discussions with tax authorities, mostly about the transfer of functions between related parties and their exit value. In
this regard, disputes may arise, where the group’s management understanding differs from the positions of the local authorities. In such
cases, when an appeal is available, the group’s management judgments are based on a likely outcome approach based on in-house tax
experts, professional firms, and previous experiences when assessing the risks. Magnesita Refratários S.A., Contagem, Brazil, is also in-
volved in other minor lawsuits totalling €25.9 million (31.12.2018: €17.6 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 final decision is expected in 10 years. The potential loss from this
proceeding amounts to €13.3 million as at 31 December 2019 (31.12.2018: €12.1 million).
197
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Notes
continued
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.
59. Other financial commitments
Capital commitments amount to €5.0 million as at 31 December 2019 (31.12.2018: €5.4 million) and are exclusively due to third parties.
They are shown at nominal value.
In addition, the RHI Magnesita Group has purchase commitments related to the supply with raw materials, especially for electricity, natu-
ral 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 €175.5 million at the reporting date (31.12.2018: €96.2 million). The increase in other financial commitments com-
pared to the previous year mainly results from energy purchase contracts concluded in 2019. The remaining terms of the contracts
amount to up to seven years. Purchases from these arrangements are recognised in accordance with the usual course of business. Pur-
chase 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.
In 2019 obligations from rental and leasing contracts are not part of other financial commitments due to the initial application of IFRS 16.
Further information is provided under Note (2).
60. 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 € million
Audit of the Financial Statements
thereof invoiced by PwC Accountants N.V.
thereof invoiced by PwC network firms
Other audit related services
Tax compliance services
Other non-audit services
Total fees
2019
2.9
1.0
1.9
0.0
0.3
0.2
3.4
2018
2.7
0.2
2.5
0.1
0.9
0.0
3.7
The expensed fees for the audited financial statements in 2019 include the half year review procedures that were not applicable in 2018."
In 2019, other audit related services, tax compliance services and other non-audit services amounting to €0.5 million (2018: €1.0 million)
were performed and invoiced by PwC network firms outside of the Netherlands.
61. Annual average number of employees
The average number of employees of the RHI Magnesita Group based on full time equivalents amounts to:
Salaried employees
Waged workers
Number of employees on annual average
2019
4,860
9,515
14,375
2018
5,947
8,171
14,118
84 full time equivalents of salaried employees work in the Netherlands. In 2018 16 full time equivalents of salaried employees worked in
the Netherlands.
62. 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.
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A N N U A L R E P O R T 2 0 1 9
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 2019 and 2018, the Group conducted the following transaction with its related companies:
Joint ventures
Associates
in € million
Revenue from the sale of goods and services
Purchase of raw materials
Interest income
Asset purchase
Trade and other receivables
Loans granted
Trade liabilities
Dividends received
2019
3.3
1.6
0.0
0.0
1.3
0.0
0.0
2018
3.1
3.2
0.1
0.0
0.9
0.0
0.3
10.5
10.8
2019
0.0
15.7
0.8
0.0
0.0
0.8
0.7
2.9
Non-consolidated
subsidiaries
2019
2018
0.0
0.1
0.0
0.0
0.2
0.0
0.3
0.1
0.0
0.0
0.2
0.1
2018
0.1
20.3
0.8
0.6
0.0
10.4
5.1
0.7
0.9
0.2
0.0
0.0
In 2019 and 2018, 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 2019 and 2018, the associate Sinterco S.A., Nameche, Belgium, sold sintered
doloma to the RHI Magnesita Group. Furthermore, the Group has a financing receivable of €0.8 million (31.12.2018: €10.4 million) from a
loan agreement with Sinterco.
The balances at the end of 2019 are unsecured and will be paid in cash. 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 €0.3 million
(31.12.2018: €0.3 million). A resulting cash outflow is not expected. No guarantees were received.
In 2019 and 2018, 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 wel-
fare 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 2019, no current account receivables existed (31.12.2018: €0.0 million). In the past reporting period, employer
contributions amounting to €0.6 million (2018: €0.0 million) were made to the personnel welfare foundation. The overfunding of the
pension plan is recognised as a non-current asset of €0.2 million (31.12.2018: €2.1 million).
Related persons
Remuneration of key management personnel of the Group, which is subject to disclosure in accordance with IAS 24, comprises the re-
muneration of the active Board of Directors and the Executive Management Team (EMT) in 2019 and 2018 as well as the former Manage-
ment Board and Supervisory Board of RHI AG until October 2017.
For the financial year 2019, expenses for the remuneration of the Executive Directors and EMT members, active in 2019, recognised in the
Consolidated Statement of Profit or Loss total €9.8 million (2018: €10.1 million including also remuneration of the former Management
Board). The expenses, not including non-wage labour costs, amount to €9.2 million (2018: €9.1 million), of which €6.7 million (2018:
€8.4 million) were related to current benefits (fixed, variable and other earnings), €0.0 million (2018: €0.0 million) to benefits related to
the termination of employment and €2.5 million (2018: €0.7 million) to share-based remuneration. At 31 December 2019, liabilities for
performance-linked variable earnings and share-based payments for active members of the former Management Board of €2.6 million
199
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Notes
continued
(2018: €5.6 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 2019, a payment of €1.0 million was made in this regard (2018: €1.4 million).
For Non-Executive Directors, remuneration totalling €1.2 million (2018: €1.0 million including remuneration for the former Supervisory
Board) was recognised through profit or loss in the year 2019. 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 com-
pensation for their activity as Non-Executive Directors. For their activity as employees in the Company and the activity of their close rela-
tives employed with RHI Magnesita, expenses of €0.2 million (2018: €0.8 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 Directors &Officers 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 96 to 120 of the Annual Report of the RHI Magnesita Group.
Earnings of former members of the former Management Board amounted to €2.7 million (2018: €2.6 million), of which €0.2 million
(2018: €0.6 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.
In the ordinary course of business, RHI Magnesita had the following transactions with various organisations with which certain members
of the Board of Directors are associated. All transactions with related part are conducted on an arm’s-length basis and in accordance with
normal business terms.
Karl Sevelda holds position as a supervisory board member at Siemens AG Austria. Siemens AG Austria is both a supplier and customer of
the Group with only immaterial transaction volumes. The related party was not involved in the decision making of any of these transac-
tions.
Furthermore, Fiona Paulus is an independent non-executive board member of Interpipe Group. RHI Magnesita supplied the Interpipe
Group with refractory materials amounting to about € 3.0 million in 2019. However, the materiality of these sales is not significant for the
Group.
Equity-settled share option plan (LTIP)
The company implemented a share option plan for the members of senior management of the Group starting with 2018 which was ap-
proved by shareholders at the Annual General Meeting held on 7 June 2018. The Group operates in two different share option plans, one
applicable for the financial year 2019 and one for the financial year 2018.
Each share option converts into one ordinary share of the Company on exercise. No amounts are paid or payable by the recipient on re-
ceipt of the option. The options carry rights to dividends but no voting rights. Options may be exercised at any time from the date of vest-
ing 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 which are explained in
detail in the Remuneration Committee Report.
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A N N U A L R E P O R T 2 0 1 9
The vesting period for each share option plan is three years. If the options remain unexercised after a period of seven years from the vest-
ing date the options expire. Options are forfeited if the employee leaves the Group before the options vest.
LTIP 2019
As at 1 January
Granted during the year
Exercised during the year
Forfeited during the year
As at 31 December
Vested and exercisable at 31 December
LTIP 2018
As at 1 January
Granted during the year
Exercised during the year
Forfeited during the year
As at 31 December
Vested and exercisable at 31 December
2019
2018
Number of options
Number of options
0
188,856
0
(9,081)
179,775
0
-
-
-
-
-
-
2019
2018
Number of options
Number of options
94,105
89
0
0
94,194
0
0
107,599
0
(13,494)
94,105
0
No options expired or were exercised during the periods covered by the above tables.
The options outstanding at 31 December 2019 have a weighted-average contractual life of 2.5 years.
The outstanding share options for the LTIP 2018, which were granted on 6 June 2019, will expire on 7 June 2021. The share price at grant
date for the 94,105 options was €53.13. The outstanding share options for the LTIP 2019, which were granted on 19 August 2019, will
expire on 20 August 2022. The share price at grant date for the 188,856 options was €46.32.
The assessed fair value at grant date of options of the LTIP 2018 as 31 December 2019 was €54.48 per option. The assessed fair value at
grant date of options of the LTIP 2019 granted during the year ended 31 December 2019 was €46.32 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 ac-
count 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 compa-
nies.
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 for 2019 and the
previous year were as follows:
LTIP 2019 in € million
Fair value at grant date
Expected volatility (weighted-average)
Expected life (weighted-average)
Expected dividends
Risk-free interest rate
2019
8.3
30,36%
36 Months
0,5
0,47%
2018
-
-
-
-
-
201
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Notes
continued
LTIP 2018 in € million
Fair value at grant date
Expected volatility (weighted-average)
Expected life (weighted-average)
Expected dividends
Risk-free interest rate
2019
5.0
2018
5.0
21,45%
21,45%
24 Months
36 Months
0,5
0,89%
0,5
0,89%
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.
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63. Board of Directors of RHI Magnesita N.V.
The members of the Board of Directors are as follows:
Executive Directors
Stefan Borgas
Ian Botha
Non-Executive Directors
Herbert Cordt
James Leng
Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg
David Schlaff
Celia Baxter
Janet Ashdown
Andrew Hosty
Fiona Paulus
John Ramsay
Wolfgang Ruttenstorfer
Karl Sevelda
Employee Representative Directors
Franz Reiter
Michael Schwarz
64. Material events after the reporting date
In January 2020 RHI Magnesita has refinanced its USD 400.0 million revolving credit facility in order to further strengthen the capital
structure and extend the debt maturity. The new revolving credit facility has been converted to EUR, increased to €600.0 million and the
maturity has been extended to 2025.
On January 28, 2020 the Group acquired Missouri Refractories Co, Inc. (MORCO) in order to strengthen its position in the North Ameri-
can refractory market. The purchase price amounted to USD 9.8 million. The site is strategically located in the Midsouth of the United
States, a region that is rapidly growing in importance for RHI Magnesita. It produces over 400 high-quality monolithic mixes, which serve
a multitude of industries, including steel, cement, lime and glass.
The outbreak of the coronavirus COVID-19 will likely have an impact on RHI Magnesita’s customer industries as well as on supply chain
and production. Considering that the spread of the virus accelerated during the first quarter 2020, this event was classified as a non-
adjusting event for accounting purposes. Given the uncertainties on scope and length as well as the ongoing developments, the Group
cannot give any accurate or reliable estimates on potential quantitative impacts currently. This may result in an overall challenged and
volatile market environment. The assessment on the ability of the group to operate as going concern is disclosed under Note (1).
After the reporting date on 31 December 2019, 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.
203
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Company Financial Statements
of RHI Magnesita N.V.
Company Balance Sheet as at 31 December 2019
(before appropriation of result)
in € million
ASSETS
Non-current assets
Financial non-current assets
Deferred tax assets
Total non-current assets
Current assets
Receivables from group companies
Cash and cash equivalents
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Share capital
Additional paid-in capital
Legal and mandatory reserves
Other reserves
Treasury shares
Result for the period
Shareholders' Equity
Current liabilities
Other current liabilities
Total current liabilities
Total equity and liabilities
Company Statement of Profit or Loss for the period 1 January to 31 December 2019
in € million
General and administrative expenses
Result before taxation
Net financial result
Income tax
Net result from investments
Net result for the period
204
Notes
31.12.2019
31.12.2018
(A)
(B)
(C)
(D)
(E)
(F)
(J)
(G)
815.3
7.4
822.7
28.5
0.1
28.6
915.5
0.0
915.5
0.0
0.1
0.1
851.3
915.6
49.5
361.3
197.9
95.0
(18.8)
139.0
823.9
27.4
27.4
48.3
305.5
209.9
78.7
0.0
158.1
800.5
115.1
115.1
851.3
915.6
Notes
(H)
(I)
(J)
2019
(14.7)
(14.7)
(1.5)
7.4
147.8
139.0
2018
(8.5)
(8.5)
0.0
0.0
166.6
158.1
R H I M A G N E S I T A
A N N U A L R E P O R T 2 0 1 9
Movements in Shareholders’ Equity
in € million
Share
capital
Treasury
shares
Additional
paid-in
capital
Cash flow
hedges
Currency
translation
Mandatory
reserve
Retained
earnings
Net result
Equity
attributable to
shareholders
Legal and mandatory reserves
Other
reserves
305.5
(5.0)
(73.8)
288.7
78.7
158.1
800.5
31.12.2018
48.3
Appropriation of prior
year result
Net result
Acquisition with non-
controlling interests
without change of control
Issue of ordinary shares
related to the integrated
tender offer of Magnesita
Shares repurchased
Share-based expenses
Dividends
Net income / (expense)
recognised directly in
equity
-
-
-
1.2
-
-
-
-
-
-
-
-
-
(18.8)
-
-
-
-
-
-
55.8
-
-
-
-
31.12.2019
49.5
(18.8)
361.3
-
-
-
-
0.1
(4.6)
-
-
-
-
-
-
-
-
(6.1)
(11.0)
(1.4)
(79.8)
-
-
-
-
-
-
-
-
288.7
158.1
-
(158.1)
139.0
-
139.0
(19.0)
-
-
4.1
(98.8)
(28.1)
95.0
-
-
-
-
-
-
139.0
(23.5)
57.0
(18.8)
4.1
(98.8)
(35.6)
823.9
Legal and mandatory reserves
Other
reserves
Share
capital
Additional
paid-in
capital
Cash flow
hedges
Currency
translation
Mandatory
reserve
Retained
earnings
Net result
Equity
attributable to
shareholders
44.8
165.7
0.1
(54.7)
288.7
263.5
(89.3)
618.8
in € million
31.12.2017
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
Appropriation of prior year result
Net result
Acquisition with non-controlling
interests without change of control
Issue of ordinary shares related to
the integrated tender offer of
Magnesita
Share-based expenses
Dividends
Net income / (expense) recognised
directly in equity
-
-
-
-
-
-
3.5
139.8
-
-
-
-
-
-
31.12.2018
48.3
305.5
0.1
-
-
0.1
-
-
-
(54.7)
288.7
-
-
(10.7)
-
-
-
-
-
-
-
-
-
-
288.7
(5.2)
(5.0)
(8.4)
(73.8)
(6.0)
1.8
259.3
(89.3)
-
(52.1)
-
1.0
(33.6)
(6.6)
78.7
(89.3)
89.3
158.1
-
-
-
-
-
158.1
(6.0)
1.8
614.6
-
158.1
(62.7)
143.3
1.0
(33.6)
(20.2)
800.5
205
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Notes
to the Company Financial Statements 2019
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, 1100 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 in-
cluded in the FTSE 250 index.
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.
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:
Name and registered office of the company
Didier Werke A.G., Wiesbaden, Germany
RHI Refractories Raw Material GmbH, Vienna, Austria
RHI Magnesita GmbH, Vienna, Austria
RHI Magnesita Trading B.V., Rotterdam, Netherlands
The investments have developed as follows:
in € million
At beginning of year
Effects of the initial application of IFRS 9 and IFRS 15
Transactions with non-controlling interests without change of control
Capital contributions
Changes from currency translation and cash flow hedges
Changes from defined benefit plans
Equity settled transaction
Dividend distribution
Net result from investments
Balance at year-end
Country of core
activity
Germany
Austria
Austria
Netherlands
31.12.2019
31.12.2018
Share in %
Share in %
12.5
25.0
100.0
100.0
2019
915.5
0.0
(23.5)
107.0
(7.5)
(28.1)
4.1
(300.0)
147.8
815.3
12.5
25.0
100.0
100.0
2018
569.3
(4.2)
(59.2)
262.1
(13.6)
(6.5)
1.0
0.0
166.6
915.5
As part of the finalisation of the ITO in 2019 (as described in Note (4) of the Consolidated Financial Statements), the Company issued and
contributed a total of 1,140,658 new ordinary shares, with a fair value of €56,950,485, to RHI Magnesita GmbH. In July 2019 the
Company made a capital contribution of €50,000,000 to RHI Magnesita Trading B.V.
206
R H I M A G N E S I T A
A N N U A L R E P O R T 2 0 1 9
The following list, prepared in accordance with the relevant legal requirements (Dutch Civil Code, Book 2, Sections 379), shows all com-
panies in which RHI Magnesita N.V. holds a direct or indirect share of at least 20% (with the exception of the RHISA Employee Trust):
Ser. no.
Name and registered office of the company
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
RHI Magnesita N.V., Arnhem, Netherlands
Fully consolidated subsidiaries
Agellis Group AB, Lund, Sweden
Baker Refractories Holding Company, Delaware, USA
Baker Refractories I.C., Inc., Delaware, USA
Baker Refractories, Las Vegas, USA
Betriebs- und Baugesellschaft mit beschränkter Haftung, Wiesbaden, Germany
D.S.I.P.C.-Didier Société Industrielle de Production et de
Constructions, Valenciennes, France
Didier Belgium N.V., Evergem, Belgium
Didier Vertriebsgesellschaft mbH, Wiesbaden, Germany
Didier-Werke Aktiengesellschaft, Wiesbaden, Germany
Dutch Brasil Holding B.V., Arnhem, Netherlands
Dutch MAS B.V., Arnhem, Netherlands
Dutch US Holding B.V., Arnhem, Netherlands
FE "VERA", Dnepropetrovsk, Ukraine
Feuerfestwerk Bad Hönningen GmbH, Hagen, Germany
FireShark Refractories GmbH, Vienna, Austria
GIX International Limited, Dinnington, United Kingdom
INDRESCO U.K. Ltd., Dinnington, United Kingdom
Intermetal Engineers Private Limited, Mumbai, India
INTERSTOP (Shanghai) Co., Ltd., Shanghai, PR China
Liaoning RHI Jinding Magnesia Co., Ltd., Dashiqiao City, PR China 1)
LLC "RHI Wostok Service", Moscow, Russia
LLC "RHI Wostok", Moscow, Russia
Lokalbahn Mixnitz-St. Erhard Aktien-Gesellschaft, Vienna, Austria
31.12.2019
31.12.2018
Share-
holder
Share
in %
Share-
holder
Share
in %
56.
43.
3.
43.
10.
100.0
100.0
100.0
100.0
100.0
56.
43.
100.0
100.0
3.
100.0
43.
10.
100.0
100.0
10.
100.0
10.
100.0
71.,104.
10.
100.0
100.0
1.,56.
100.0
71.,104.
100.0
10.
100.0
1.,56.
100.0
110.
10.
110.
56.
115.
74.
114.
17.
52.
107.
55.
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.9
100.0
83.3
110.
10.
110.
56.
115.
74.
114.
17.
-
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
-
107.
100.0
55.
83.3
55.,73.
100.0
55.,73.
100.0
55.,73.
100.0
55.,73.
100.0
93.
100.0
93.
100.0
207
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Notes
to the Company Financial Statements 2019
Ser. no.
Name and registered office of the company
LWB Holding Company, Delaware, USA
LWB Refractories Belgium S.A., Liège, Belgium
LWB Refractories Beteiligungs GmbH & Co. KG, Hagen, Germany
LWB Refractories Hagen GmbH, Hagen, Germany
LWB Refractories Holding France S.A.S., Valenciennes, France
M.E. Refractories Company FZE i. l., Dubai, United Arab Emirates
Magnesit Anonim Sirketi, Eskisehir, Turkey 2)
Magnesita Asia Refractory Holding Ltd, Hong Kong, PR China
Magnesita Finance S.A., Luxembourg, Luxembourg
Magnesita Grundstücks-Beteiligungs GmbH, Hagen, Germany
Magnesita International Limited, London, United Kingdom
Magnesita Malta Finance Ltd., St. Julians, Malta
Magnesita Malta Holding Ltd., St. Julians, Malta
Magnesita Mineração S.A., Brumado, Brazil
Magnesita NAM Insurance Company, Delaware, USA, i.l.
Magnesita Refractories (Canada) Inc., Montreal, Canada
Magnesita Refractories (Dalian) Co. Ltd., Dalian, PR China
Magnesita Refractories Company, York, USA
31.12.2019
31.12.2018
Share-
holder
Share
in %
Share-
holder
Share
in %
56.
100.0
56.
100.0
44.,113.
100.0
44.,113.
100.0
34.,56.
100.0
34.,56.
100.0
113.
113.
33.
55.
29.
49.
49.
49.
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
113.
113.
33.
55.
29.
49.
49.
49.
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
37.,113.
100.0
37.,113.
100.0
44.,113.
100.0
44.,113.
100.0
33.,49.
100.0
33.,49.
100.0
25.
3.
33.
25.
100.0
100.0
100.0
100.0
25.
100.0
3.
100.0
33.
25.
100.0
100.0
Magnesita Refractories Mexico S.A. de C.V., Monterrey, Mexico
3.,4.
100.0
3.,4.
100.0
Magnesita Refractories GmbH, Hagen, Germany
Magnesita Refractories Ltd., Dinnington, United Kingdom
Magnesita Refractories Middle East FZE, Dubai, United Arab Emirates
113.
3.
33.
100.0
100.0
100.0
113.
100.0
3.
100.0
33.
100.0
Magnesita Refractories S.C.S., Valenciennes, France
29.,113.
100.0
29.,113.
100.0
Magnesita Refractories S.R.L., Milano, Italy
Magnesita Refratários S.A., Contagem, Brazil
Magnesita Resource (Anhui) Company. Ltd., Chizhou, PR China
Mezubag AG, Freienbach, Switzerland
Orient Refractories Limited, Mumbai, India
Premier Periclase Limited, Drogheda, Ireland
113.
11.
32.
100.0
100.0
100.0
107.
100.0
13.
13.
66.5
100.0
113.
100.0
11.
32.
85.2
100.0
107.
100.0
13.
13.
66.5
100.0
Producción RHI México, S. de R.L. de C.V., Ramos Arizpe, Mexico
86.,114.
100.0
86.,114.
100.0
Radex Vertriebsgesellschaft m.b.H., Leoben, Austria
Rearden G Holdings Eins GmbH, Hagen, Germany
Refractarios Argentinos S.A.I.C.M., San Nicolás, Argentina
Refractarios Magnesita Chile S/A, Santiago, Chile
Refractarios Magnesita Colombia S/A, Sogamoso, Colombia
Refractarios Magnesita del Perú S.A.C., Lima, Peru
Refractory Intellectual Property GmbH & Co KG, Vienna, Austria
Refractory Intellectual Property GmbH, Vienna, Austria
Reframec Manutenção e Montagens de Refratários S.A., Matozinhos, Brazil
RHI Argentina S.R.L., Buenos Aires, Argentina
RHI Canada Inc., Burlington, Canada
RHI Chile S.A., Santiago, Chile
RHI Clasil Private Limited, Mumbai India 1)
RHI Dinaris GmbH, Wiesbaden, Germany
110.
33.
100.0
100.0
110.
100.0
33.
100.0
49.,59.
100.0
49.,59.
100.0
49.,57.
100.0
49.,57.
100.0
49.
100.0
49.
100.0
49.,59.
100.0
49.,59.
100.0
62.,73.
100.0
62.,73.
100.0
73.
49.
100.0
100.0
73.
49.
100.0
100.0
13.,114.
100.0
13.,114.
100.0
114.
100.0
114.
100.0
17.,114.
100.0
17.,114.
100.0
114.
102.
53.7
100.0
114.
53.7
102.
100.0
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
208
R H I M A G N E S I T A
A N N U A L R E P O R T 2 0 1 9
69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.
87.
88.
89.
90.
91.
92.
93.
94.
95.
96.
97.
98.
99.
Ser. no.
Name and registered office of the company
RHI Finance A/S, Hellerup, Denmark
RHI GLAS GmbH, Wiesbaden, Germany
RHI India Private Limited, Navi Mumbai, India
RHI ITALIA S.R.L., Brescia, Italy
RHI Magnesita GmbH, Vienna, Austria
RHI Magnesita Distribution B.V., Rotterdam, Netherlands
RHI Magnesita Trading B.V., Rotterdam, Netherlands
RHI Marvo Feuerungs- und Industriebau GmbH, Gerbstedt, Germany
RHI MARVO Feuerungs- und Industriebau GmbH, Kerpen, Germany
RHI MARVO S.R.L., Ploiesti, Romania
RHI Normag AS, Porsgrunn, Norway
RHI Refractories (Dalian) Co., Ltd., Dalian, PR China
RHI Refractories (Site Services) Ltd., Dinnington, United Kingdom
RHI Refractories Africa (Pty) Ltd., Sandton, South Africa
RHI Refractories Andino C.A., Puerto Ordaz, Venezuela
RHI Refractories Asia Pacific Pte. Ltd., Singapore
RHI Refractories Egypt LLC., Cairo, Egypt
RHI Refractories España, S.L., Lugones, Spain
RHI Refractories France SA, Valenciennes, France 3)
RHI Refractories Ibérica, S.L., Lugones, Spain
RHI Refractories Italiana s.r.l., Brescia, Italy; i.l.
RHI Refractories Liaoning Co., Ltd., Bayuquan, PR China 1)
RHI Refractories Mercosul Ltda., Sao Paulo, Brazil
RHI Refractories Nord AB, Stockholm, Sweden
RHI Refractories Site Services GmbH, Wiesbaden, Germany
RHI Refractories UK Limited, Bonnybridge, United Kingdom
RHI Refratários Brasil Ltda, Contagem, Brazil; i.l.
RHI Sales Europe West GmbH, Urmitz, Germany
RHI Trading (Dalian) Co., Ltd., Dalian, PR China
RHI Ukraina LLC, Dnepropetrovsk, Ukraine
100.
RHI United Offices America, S.A. de C.V., Monterrey, Mexico
101.
102.
103.
104.
105.
106.
107.
108.
109.
110.
111.
112.
RHI United Offices Europe, S.L., Lugones, Spain
RHI Urmitz AG & Co. KG, Mülheim-Kärlich, Germany
RHI US Ltd., Delaware, USA
RHI-Refmex, S.A. de C.V., Ramos Arizpe, Mexico
RHISA Employee Trust, Sandton, South Africa 4)
SAPREF AG für feuerfestes Material, Basel, Switzerland
Stopinc Aktiengesellschaft, Hünenberg, Switzerland
Veitscher Vertriebsgesellschaft m.b.H., Vienna, Austria
Veitsch-Radex America LLC., Delaware, USA
Veitsch-Radex GmbH & Co OG, Vienna, Austria
Veitsch-Radex GmbH, Vienna, Austria
Veitsch-Radex Vertriebsgesellschaft m.b.H., Vienna, Austria
31.12.2019
31.12.2018
Share-
holder
Share
in %
73.
100.0
102.
100.0
Share-
holder
Share
in %
73.
100.0
102.
100.0
11.,114.
100.0
11.,114.
100.0
73.
1.
75.
1.
77.
10.
100.0
100.0
100.0
100.0
100.0
100.0
73.
100.0
1.
100.0
75.
100.0
1.
100.0
77.
10.
100.0
100.0
55.,108.
100.0
55.,108.
100.0
55.
55.
18.
100.0
100.0
100.0
55.
55.
18.
100.0
100.0
100.0
55.,105.
100.0
55.,105.
100.0
114.
73.
100.0
100.0
114.
73.
100.0
100.0
55.,108.
100.0
55.,108.
100.0
10.,12.
100.0
10.,12.
100.0
106.
106.
106.
55.
100.0
100.0
100.0
66.0
106.
106.
106.
55.
100.0
100.0
100.0
66.0
108.,114.
100.0
108.,114.
100.0
106.
100.0
106.
100.0
10.
10.
100.0
100.0
10.
10.
100.0
100.0
13.,38.
100.0
13.,38.
100.0
10.,106.
100.0
10.,106.
100.0
55.
100.0
55.
100.0
55.,108.
100.0
55.,108.
100.0
86.,101.
100.0
86.,101.
100.0
86.
100.0
86.
100.0
9.,10.
100.0
9.,10.
100.0
13.
100.0
13.
100.0
86.,114.
100.0
86.,114.
100.0
.
0.0
114.
100.0
-
0.0
114.
100.0
10.,55.
100.0
10.,55.
100.0
73.
100.0
103.
100.0
73.
100.0
103.
100.0
73.,111.
100.0
73.,111.
100.0
73.
73.
100.0
100.0
73.
73.
100.0
100.0
209
RHI Refractories Raw Material GmbH, Vienna, Austria
1.,55.,73.
100.0
1.,55.,73.
100.0
F I N A N C I A L S TAT E M E N T S
R H I M A G N E S I T A
Notes
to the Company Financial Statements 2019
Ser. no.
Name and registered office of the company
113.
114.
115.
116.
117.
118.
119.
Vierte LWB Refractories Holding GmbH, Hagen, Germany
VRD Americas B.V., Arnhem, Netherlands
Zimmermann & Jansen GmbH, Wiesbaden, Germany
Subsidiaries not consolidated due to minor significance
Dr.-Ing. Petri & Co. Unterstützungsgesellschaft m.b.H., Wiesbaden, Germany
Grayhill MDMM Holding Ltda., São Paulo, Brazil
Guapare S.A, Montevideo, Uruguay
Magnesita Refractories A.B., Stocksund, Sweden
31.12.2019
31.12.2018
Share-
holder
Share
in %
Share-
holder
Share
in %
27.,56.
100.0
27.,56.
100.0
55.,73.
100.0
55.,73.
100.0
10.
100.0
10.
100.0
10.
49.
49.
113.
100.0
100.0
100.0
100.0
.
10.
49.
49.
113.
100.0
100.0
100.0
100.0
120.
Magnesita Refractories PVT Ltd, Mumbai, India
56.,113.
100.0
56.,113.
100.0
121.
122.
123.
124.
125.
126.
127.
128.
129.
130.
131.
132.
133.
Magnesita Refractories S.A. (Pty) Ltd., Sandton, South Africa
MAG-Tec Participações Ltda. Ltda., Contagem, Brazil; i.l.
Metal Data Participações Ltda., Contagem, Brazil, i.l.
44.
49.
49.
100.0
98.7
100.0
44.
49.
49.
100.0
98.7
61.3
Metal Data S.A. – Mineração e Metalurgia, Contagem, Brazil; i.l.
49.,123.
100.0
49.,123.
100.0
MMD Araçuaí Holding Ltda., São Paulo, Brazil, i.l.
Refractarios Especiales Y Moliendas S.A., Buenos Aires, Argentina; i.l.
Refractarios Magnesita Uruguay S/A, Montevideo, Uruguay
RHI Réfractaires Algérie E.U.R.L., Sidi Amar, Algeria
Equity-accounted joint ventures and associated companies
Krosaki Magnesita Refractories LLC, Delaware, USA, i.l.
Magnesita Envoy Asia Ltd., Kaohsiung, Taiwan
MAGNIFIN Magnesiaprodukte GmbH & Co KG, St. Jakob, Austria
Sinterco S.A., Nameche, Belgium
Other immaterial investments, measured at cost
49.
57.
49.
87.
42.
3.
108.,133.
56.
100.0
100.0
100.0
100.0
40.0
50.0
50.0
70.0
49.
57.
49.
87.
.
42.
3.
108.,133.
56.
.
100.0
100.0
100.0
100.0
40.0
50.0
50.0
70.0
MAGNIFIN Magnesiaprodukte GmbH, St. Jakob, Austria
108.
50.0
108.
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
210
R H I M A G N E S I T A
A N N U A L R E P O R T 2 0 1 9
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 €100,000,000, comprising 100,000,000 ordinary shares, each of €1 nominal
value. During 2019 the Company issued 1,140,658 new shares to the relevant shareholders of Magnesita Refratários S.A. as agreed in the
terms of the Integrated Tender Offer. As at 31 December 2019, RHI Magnesita N.V.’s issued and fully paid-in share capital consists of
49,477,705 ordinary shares (31.12.2018: 48,337,047 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 include gains and losses from the effective part of cash flow hedges less tax effects. Further information on
hedge accounting is included in Note (56) 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 and are restricted for distribution.
Mandatory reserve
The articles of association stipulate a mandatory reserve of €288,699,230.59 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.
(F) Treasury shares
In year 2019 the Company repurchased 400,000 shares from the market for a total cash consideration of €18.8 million.
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Notes
to the Company Financial Statements 2019
Current liabilities
(G) Other current liabilities
in € million
Trade payables
Payables to group companies
Dividend payable
Accrued liabilities
Total current liabilities
31.12.2019
31.12.2018
0.5
1.0
24.5
1.4
27.4
5.1
105.6
0.0
4.4
115.1
Accrued liabilities include two outstanding disputes relating to the delisting in Austria and the demerger to the Netherlands. As at 31
December 2019, the resulting liabilities are estimated at €0.5 million. The other current liabilities are due in less than one year. The fair
value of other current liabilities approximates the book value, due to their short-term character.
(H) Net financial result
The 2019 net financial result mainly consists of €1.4 million interest expense from intercompany financing transactions.
(I) Net results from investments
In year 2019 the full year results of the investments amount to a profit of €147.8 million (€166.6 million) and are recognised in the Com-
pany Statement of Profit or Loss.
(J) Net result for the period
In 2019, there are no differences in the result between the Company Financial Statements and the Consolidated Financial Statements.
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 € million
Profit attributable to shareholders
In accordance with Article 27 clause 1 to be transferred to reserves
At the disposal of the General Meeting of Shareholders
2019
139.0
0.0
139.0
For 2019, the Board of Directors has recommended not to pay a dividend for the shareholders of RHI Magnesita N.V., subject to share-
holder approval at the Annual General Meeting, on 18 June 2020. This decision will be reviewed later in the year once the outlook be-
comes clearer.
(I) Treasury shares
In 2019, the Company repurchased 400,000 shares from the market for a total cash consideration of €18.8 million.
Other notes
Number of employees
The average number of employees of RHI Magnesita N.V. during 2019 amounts to nil (2018: 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 (60) to (62) of the Consolidated Financial Statements.
Material events after the reporting date
In January 2020 the Company registered a branch office in Vienna. As of February 2020, the branch has 47 employees.
Information regarding the outbreak and the impact of COVID-19 is provided under Note (64) in the Consolidated Financial Statements.
After the reporting date on 31 December 2019, there were no other events of special significance which may have a material effect on the
financial position and performance of the RHI Magnesita N.V.
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Vienna, 31 March 2020
Board of Directors
Executive Directors
Stefan Borgas
Ian Botha
Non-Executive Directors
Herbert Cordt
James Leng
Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg
David Schlaff
Celia Baxter
Janet Ashdown
Andrew Hosty
Fiona Paulus
John Ramsay
Wolfgang Ruttenstorfer
Karl Sevelda
Employee Representative Directors
Franz Reiter
Michael Schwarz
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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 Meet-
ing.
27.3 Distribution of profits shall be made after adoption of the annual accounts if permitted under the law given the contents of the annu-
al 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 con-
cerns 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.
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Independent auditor’s report
To: the general meeting and the board of directors of RHI Magnesita N.V.
Report on the financial statements 2019
Our opinion
In our opinion, the financial statements of RHI Magnesita N.V. (‘the Company’) give a true and fair view of the financial position of the
Company and the Group (the company together with its subsidiaries) as at 31 December 2019, and of its result and its cash flows for the
year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with
Part 9 of Book 2 of the Dutch Civil Code.
What we have audited
We have audited the accompanying financial statements 2019 of RHI Magnesita N.V., Arnhem, the Netherlands. The financial statements
include the consolidated financial statements of the Group and the company financial statements.
The consolidated financial statements comprise:
•
•
•
the Consolidated Statement of Financial Position as at 31 December 2019;
the following statements for 2019: the Consolidated Statement of Profit or Loss and the Consolidated Statement of Compre-
hensive Income, Cash Flows and Changes in Equity; and
the Notes to the Consolidated Financial Statements 2019, comprising significant accounting policies and other explanatory
information.
The company financial statements comprise:
•
•
•
the Company Balance Sheet as at 31 December 2019;
the Company Statement of Profit or Loss for the period 1 January to 31 December 2019, and
the Notes, comprising significant accounting policies applied and other explanatory information.
The financial reporting framework applied in the preparation of the financial statements is EU-IFRS and the relevant provisions of Part 9 of
Book 2 of the Dutch Civil Code.
The basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. We have further described our re-
sponsibilities under those standards in the section ‘Our responsibilities for the audit of the financial statements’ of our report. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of RHI Magnesita N.V. in accordance with the European Union Regulation on specific requirements regarding statu-
tory audit of public-interest entities, the ‘Wet toezicht accountantsorganisaties’ (Wta, Audit firms supervision act), the ‘Verordening inzake
de onafhankelijkheid van accountants bij assuranceopdrachten’ (ViO, Code of Ethics for Professional Accountants, a regulation with re-
spect to independence) and other relevant independence requirements in the Netherlands. Furthermore, we have complied with the
‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics).
Our audit approach
Overview and context
RHI Magnesita N.V. is a worldwide producer of refractory products. Refractory products are used in all the world’s high-temperature in-
dustrial processes. The Group is comprised of several components and therefore we considered our group audit scope and approach as
set out in the section ‘The scope of our group audit’. We paid specific attention to the areas of focus driven by the operations of the
Group, as set out below.
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In
particular, we considered where the board of directors made important judgements, for example, in respect of significant accounting
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estimates that involved making assumptions and considering future events that are inherently uncertain. In Note (10) of the consolidated
financial statements the Company describes the areas of judgement in applying accounting policies and the key sources of estimation
uncertainty. Given the significant estimation uncertainty and the related higher inherent risks of material misstatement in the impairment
assessment of goodwill and other intangible assets, the recoverability of deferred tax assets and the accounting for the plant rationalisa-
tion programme, we considered these matters as key audit matters as set out in the section ‘Key audit matters’ of this report. Furthermore,
we identified the implementation of IFRS 16, the new leasing standard, a key audit matter.
Other areas of focus, that were not considered key audit matters, were the migration to a single instance of SAP, which mainly relates to
the migration of legacy Magnesita SAP instance to the former RHI SAP instance as well as the implementation of a target operating mod-
el which consists of the transfer of functions in local entities to centralised Global Business Support (“GBS”) centres.
We ensured that the audit teams at both group and component level included the appropriate skills and competences which are needed
for the audit of an international industrial products company. We therefore included experts and specialists in the areas of amongst oth-
ers forensics, IT and corporate income tax, as well as experts in the areas of valuation and employee benefits, in our team.
The outline of our audit approach was as follows:
Materiality
• Overall materiality: €14.0 million.
Audit scope
• We conducted audit work in 15 locations.
• Site visits were conducted to 9 countries – Brazil, the Netherlands, United States, China, Spain,
Germany, Switzerland, Argentina and Austria.
• Audit coverage: 85% of consolidated revenue, 85% of consolidated total assets and 81% of consol-
idated profit before tax.
Key audit matters
• Recoverability of deferred tax assets
• Accounting for the plant rationalisation programme
• Valuation of goodwill and other intangible assets
• Implementation of IFRS 16, leasing
Materiality
The scope of our audit is influenced by the application of materiality, which is further explained in the section ‘Our responsibilities for the
audit of the financial statements’.
Based on our professional judgement we determined certain quantitative thresholds for materiality, including the overall materiality for
the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine
the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and to evaluate the
effect of identified misstatements, both individually and in aggregate, on the financial statements as a whole and on our opinion.
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Overall group materiality
€14.0 million (2018: €13.8 million).
Basis for determining
materiality
We used our professional judgement to determine overall materiality. As a basis for our judgement we
used 5% of adjusted profit before tax. We adjusted profit before tax for impairment and restructuring
changes which were considered unusual or infrequently occurring items.
Rationale for benchmark
applied
We used profit before tax adjusted for unusual or infrequently occurring items as the primary bench-
mark, a generally accepted auditing practice, based on our analysis of the common information needs
of users of the financial statements. On this basis, we believe that profit before tax adjusted for unusual
or infrequently occurring items is an important metric for the financial performance of the Company.
In prior year we used earnings before interest, taxes depreciation and amortisation (EBITDA) as materi-
ality benchmark due to the high number of non-recurring items and the former Magnesita business
not being fully integrated yet. In 2019, the non-recurring items are mainly limited to asset write downs
and restructuring costs and those were factored in, in our benchmark.
Component materiality
To each component in our audit scope, we, based on our judgement, allocate materiality that is less
than our overall group materiality. The range of materiality allocated across components was between
€ 1,1 million and € 8,3 million.
We also take misstatements and/or possible misstatements into account that, in our judgement, are material for qualitative reasons.
We agreed with the audit committee of the board of directors that we would report to them misstatements identified during our audit
above €0.7 million (2018: €0.7 million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative
reasons.
The scope of our group audit
RHI Magnesita N.V. is the parent company of a group of entities. The financial information of this group is included in the consolidated
financial statements of RHI Magnesita N.V.
We tailored the scope of our audit to ensure that we, in aggregate, provide sufficient coverage of the financial statements for us to be able
to give an opinion on the financial statements as a whole, taking into account the management structure of the Group, the nature of op-
erations of its components, the accounting processes and controls, and the markets in which the components of the Group operate. In
establishing the overall group audit strategy and plan, we determined the type of work required to be performed at component level by
the Group engagement team and by each component auditor.
We have audited the complete financial information of 15 components, of which 3 components are individually financially significant to
the Group:
RHI Magnesita GmbH, Austria;
RHI US, USA and;
Magnesita Refratários S.A., Brazil.
The remaining 12 components, of which we conducted audits on the complete financial information, were selected to achieve appropri-
ate coverage. We also selected 13 components to achieve appropriate coverage on financial line items in the consolidated financial
statements and to build an element of unpredictability in our audit.
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In total, in performing these procedures, we achieved the following coverage on the financial line items:
Revenue
Total assets
EBIT
EBITDA
Profit before tax
85%
85%
84%
86%
81%
None of the remaining components represented more than 3% of total group revenue or total group assets. For those remaining compo-
nents we performed, among other things, analytical procedures to corroborate our assessment that there were no significant risks of
material misstatements within those components.
The group engagement team performed the audit work for the parent company RHI Magnesita N.V. as well as the GBS office activities in
Spain on areas such as fixed assets, cash and cash equivalents and aspects of accounts receivable and accounts payable. In addition, the
group engagement team performed the audit work over the headquarter related activities in Vienna. This includes group consolidation,
inventory valuation, the adoption of IFRS 16, financial statement disclosures, remuneration disclosures and a number of complex items,
such as goodwill impairment testing, share based compensation and compliance of accounting positions taken by the Group in accord-
ance with EU IFRS.
Where component auditors performed the work, we determined the level of involvement we needed to have in their audit work to be able
to conclude whether we had obtained sufficient and appropriate audit evidence as a basis for our opinion on the consolidated financial
statements as a whole.
We issued instructions to the component audit teams in our audit scope. These instructions included amongst others our risk analysis,
materiality and scope of the work. We explained to the component audit teams the structure of the Group, the main developments that
are relevant for the component auditors, the risks identified, the materiality levels to be applied and our global audit approach. We had
individual meetings and/or calls with each of the in-scope component audit teams during the year including upon conclusion of their
work. During these calls and meetings, we discussed the significant accounting and audit issues identified by the component auditors,
the reports of the component auditors, the findings of their procedures and other matters, which could be of relevance for the consolidat-
ed financial statements.
The group engagement team visits the component teams and local management partly on a rotational basis. In the current year, the
group audit team visited the RHI Magnesita finance functions in Austria, the Netherlands, Spain, Brazil, China and the U.S. given the size
of these operating locations. We also visited the locations in Switzerland, Germany, Spain and Argentina. We reviewed selected working
papers of the component auditors. Our component auditors in Austria visited one of the group’s German locations.
By performing the procedures above at components, combined with additional procedures at group level, we have been able to obtain
sufficient and appropriate audit evidence on the Group’s financial information, as a whole, to provide a basis for our opinion on the finan-
cial statements.
Our focus on the risk of fraud and non-compliance with laws and regulations
Our objectives
The objectives of our audit are:
In respect to fraud:
to identify and assess the risks of material misstatement of the financial statements due to fraud;
to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through de-
signing and implementing appropriate audit responses; and
to respond appropriately to fraud or suspected fraud identified during the audit.
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In respect to non-compliance with laws and regulations:
to identify and assess the risk of material misstatement of the financial statements due to non-compliance with laws and regula-
tions; and
to obtain reasonable assurance that the financial statements, taken as a whole, are free from material misstatement, whether
due to fraud or error when considering the applicable legal and regulatory framework.
The primary responsibility for the prevention and detection of fraud and non-compliance with laws and regulations lies with executive
directors with the oversight of the board of directors.
Our risk assessment
As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to financial reporting fraud, misappropriation
of assets and bribery and corruption. We evaluated the fraud risk factors to consider whether those factors indicated a risk of material
misstatement due to fraud.
In addition, we performed procedures to obtain an understanding of the legal and regulatory frameworks that are applicable for the
Group. We identified provisions of those laws and regulations, generally recognised to have a direct effect on the determination of mate-
rial amounts and disclosures in the financial statements such as the financial reporting framework and tax, environmental and labour
related laws and regulations.
As in all of our audits, we addressed the risk of management override of internal controls, including evaluating whether there was evi-
dence of bias by board of directors that may represent a risk of material misstatement due to fraud. We refer to the key audit matters for
examples of our approach related to areas of higher risk due to accounting estimates where management makes significant judgments.
Our response to the risks identified
We performed the following audit procedures to respond to the assessed risks:
We performed data analysis of high-risk journal entries and evaluated key estimates and judgements for bias by RHI Magnesita
N.V., including retrospective reviews of prior year’s estimates. Where we identified instances of unexpected journal entries or
other risks through our data analytics, we performed additional audit procedures to address each identified risk. These proce-
dures also included testing of transactions back to source information.
We inquired with executive directors, other members of management and the board of directors as to whether they have any
knowledge of (suspected) fraud, their views on overall fraud risks within the Group and their perspectives on the Groups miti-
gating controls addressing the risk of fraud.
We assessed the matters reported on the Group’s whistleblowing and complaints procedures with the entity and results of
management’s investigation of such matters.
With respect to the risk of fraud in revenue we performed testing over the existence of recorded revenue transactions and,
where applicable addressed the risk for improperly shifting revenues to an earlier or later period.
With respect to the risk of bribery and corruption across various countries, we performed specific inquiries with (local) man-
agement in order to identify higher risk areas.
We incorporated an element of unpredictability in our audit.
We considered the outcome of our other audit procedures and evaluated whether any findings or misstatements were indicative
of fraud.
We obtained audit evidence regarding compliance with the provisions of those laws and regulations generally recognised to
have a direct effect on the determination of material amounts and disclosures in the financial statements.
As to the other laws and regulations, we inquired with executive directors and/or the board of directors as to whether the entity
is in compliance with such laws and regulations and inspected correspondence, if any, with relevant licensing and regulatory
authorities.
Identified (indications) of fraud
During our audit, the Company disclosed to us instances of (indications of) fraud, which we followed up with our forensic specialists. We
communicated those (indications of) fraud to the relevant local audit teams who performed sufficient and appropriate audit procedures
supplemented by audit procedures performed at the group level. These procedures include amongst others obtaining an understanding
of Company’s assessments and validating aspects of the investigations performed by the Company. Where appropriate, we consulted our
forensic specialists.
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Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements.
We have communicated the key audit matters to the audit committee of the board of directors. The key audit matters are not a compre-
hensive reflection of all matters identified by our audit and that we discussed. In this section, we described the key audit matters and
included a summary of the audit procedures we performed on those matters.
We addressed the key audit matters in the context of our audit of the financial statements as a whole, and in forming our opinion thereon.
We do not provide separate opinions on these matters or on specific elements of the financial statements. Any comment or observation
we made on the results of our procedures should be read in this context.
Given the non-recurring nature of the key audit matters related to the finalisation of the Purchase Price Allocation in respect of the acqui-
sition of Magnesita Refratários S.A. and the Implementation of IFRS 15, the new revenue standard as considered in the 2018 auditor’s
report, these have not been disclosed as key audit matters in 2019.
Key audit matter
Our audit work and observations
Recoverability of deferred tax assets
•
Refer to Note (8), (10), (17) and (45) of the consolidated financial
statements
The Group capitalised deferred tax assets on tax loss carry-
We have requested and obtained evidence for the existence and
forwards and deductible temporary differences arising on various
accuracy of the tax loss carry-forwards and assessed the expiration
items for the amount of €181.9 million. Reference is made to Note
dates per jurisdiction. In addition, together with local tax special-
(17) of the financial statements.
ists, we have assessed per tax jurisdiction the level of potential
offsetting of the deferred tax assets with the deferred tax liabilities.
Deferred tax assets are capitalised based on the assumption that
sufficient taxable income will be generated against which loss
Furthermore, we have critically assessed the underlying assump-
carry-forwards and other deductible temporary differences can be
tions of the forecasted taxable income through agreeing the fore-
offset. This assumption is based on estimates of the current and the
casted future taxable profits with approved business plans in a tax
estimated taxable results, and any future measures implemented
jurisdiction. We also assessed the past performance against the
by the company in several jurisdictions concerned that will have an
expected future tax profits in the business plans used by the
effect on income tax. The Group also has losses and other tempo-
Group, by using our knowledge of the Group and the industry in
rary differences for which no deferred tax asset has been recog-
which it operates. In addition, we have considered the local expiry
nised in these consolidated financial statements.
period together with any applicable restrictions in recovery for
each individual jurisdiction.
Due to the inherent level of uncertainty, the potential limitations in
the recoverability of deferred tax assets and the significant judge-
We assessed and corroborated the adequacy and appropriateness
ment involved, we considered the recoverability of deferred tax
of the disclosure made in the consolidated financial statements.
assets to be a key audit matter for our audit.
Based on the audit procedures performed, we found the Group’s
estimates and judgment used in the recoverability assessment of
the deferred tax assets to be supported by the available evidence.
Accounting for the plant rationalisation programme
•
Refer to Note (8), (34) and (39) of the consolidated financial state-
ments
The Group incurred €46.7 million of restructuring expenses and
We performed enquiries of management and inspected the latest
€65.4 million of asset write-downs in 2019, primarily related to the
strategic plans and minutes of meetings of the Board of Directors.
plant rationalisation programme. Reference is made to Note (34) of
We evaluated the appropriateness of the Group’s judgements
the financial statements. These amounts are reported as adjusted
regarding the preconditions of IAS 37 with regard to restructuring
items in the Group’s alternative performance measures.
provisions and asset impairment in accordance with IAS 36.
In the second half of 2019, the Board of Directors approved a plant
We tested the mechanical accuracy of the provisions and assessed
rationalisation programme resulting in the plant closure in Hagen,
the integrity of key inputs, for example through recalculating the
Germany and partial shut-down of the plant in Trieben, Austria.
amounts recorded for severance based on agreed upon social
This resulted in restructuring and asset write down cost of €69.0
plans and or other (publicly available) evidence. For the amounts
million.
recorded we reconciled the amounts calculated to the booking
entries.
In addition, restructuring and write-down expenses amounting to
€20.0 million are related to the Porsgrunn plant in Norway. The
With regard to the asset impairments we have assessed the appro-
declining Fused magnesia prices in the fourth quarter of 2019
priateness of the calculations made by the company and recon-
resulted in a trigger to reassess the provision for onerous contracts
ciled the recorded asset write-downs to the general and sub ledger
as well as in write-down expenses of non-current assets.
accounts. For assets to be transferred to alternative locations we
validated management’s assumptions based on the nature of the
Our key audit matter was focused on the recognition of the restruc-
asset.
turing cost and the expected cost to be incurred (see Note (34) to
the financial statements) as well as the accuracy of the asset write-
We assessed the completeness and accuracy of disclosures within
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Key audit matter
Our audit work and observations
Recoverability of deferred tax assets
Refer to Note (8), (10), (17) and (45) of the consolidated financial
statements
•
The Group capitalised deferred tax assets on tax loss carry-
forwards and deductible temporary differences arising on various
items for the amount of €181.9 million. Reference is made to Note
(17) of the financial statements.
Deferred tax assets are capitalised based on the assumption that
sufficient taxable income will be generated against which loss
carry-forwards and other deductible temporary differences can be
offset. This assumption is based on estimates of the current and the
estimated taxable results, and any future measures implemented
by the company in several jurisdictions concerned that will have an
effect on income tax. The Group also has losses and other tempo-
rary differences for which no deferred tax asset has been recog-
nised in these consolidated financial statements.
Due to the inherent level of uncertainty, the potential limitations in
the recoverability of deferred tax assets and the significant judge-
ment involved, we considered the recoverability of deferred tax
assets to be a key audit matter for our audit.
We have requested and obtained evidence for the existence and
accuracy of the tax loss carry-forwards and assessed the expiration
dates per jurisdiction. In addition, together with local tax special-
ists, we have assessed per tax jurisdiction the level of potential
offsetting of the deferred tax assets with the deferred tax liabilities.
Furthermore, we have critically assessed the underlying assump-
tions of the forecasted taxable income through agreeing the fore-
casted future taxable profits with approved business plans in a tax
jurisdiction. We also assessed the past performance against the
expected future tax profits in the business plans used by the
Group, by using our knowledge of the Group and the industry in
which it operates. In addition, we have considered the local expiry
period together with any applicable restrictions in recovery for
each individual jurisdiction.
We assessed and corroborated the adequacy and appropriateness
of the disclosure made in the consolidated financial statements.
Based on the audit procedures performed, we found the Group’s
estimates and judgment used in the recoverability assessment of
the deferred tax assets to be supported by the available evidence.
Accounting for the plant rationalisation programme
Refer to Note (8), (34) and (39) of the consolidated financial state-
ments
•
The Group incurred €46.7 million of restructuring expenses and
€65.4 million of asset write-downs in 2019, primarily related to the
plant rationalisation programme. Reference is made to Note (34) of
the financial statements. These amounts are reported as adjusted
items in the Group’s alternative performance measures.
We performed enquiries of management and inspected the latest
strategic plans and minutes of meetings of the Board of Directors.
We evaluated the appropriateness of the Group’s judgements
regarding the preconditions of IAS 37 with regard to restructuring
provisions and asset impairment in accordance with IAS 36.
In the second half of 2019, the Board of Directors approved a plant
rationalisation programme resulting in the plant closure in Hagen,
Germany and partial shut-down of the plant in Trieben, Austria.
This resulted in restructuring and asset write down cost of €69.0
million.
In addition, restructuring and write-down expenses amounting to
€20.0 million are related to the Porsgrunn plant in Norway. The
declining Fused magnesia prices in the fourth quarter of 2019
resulted in a trigger to reassess the provision for onerous contracts
as well as in write-down expenses of non-current assets.
Our key audit matter was focused on the recognition of the restruc-
turing cost and the expected cost to be incurred (see Note (34) to
the financial statements) as well as the accuracy of the asset write-
We tested the mechanical accuracy of the provisions and assessed
the integrity of key inputs, for example through recalculating the
amounts recorded for severance based on agreed upon social
plans and or other (publicly available) evidence. For the amounts
recorded we reconciled the amounts calculated to the booking
entries.
With regard to the asset impairments we have assessed the appro-
priateness of the calculations made by the company and recon-
ciled the recorded asset write-downs to the general and sub ledger
accounts. For assets to be transferred to alternative locations we
validated management’s assumptions based on the nature of the
asset.
We assessed the completeness and accuracy of disclosures within
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Key audit matter
Our audit work and observations
downs and impairment charges. When calculating the exit costs,
management has estimated future settlement and exit costs where
these are not yet known.
We consider this to represent a key audit matter reflecting the level
of judgement applied by management in the assumptions used to
determine the extent of provisioning required and the magnitude of
the recorded cost.
the financial statements in accordance with IFRSs.
Based on the audit procedures performed, we found the Group’s
estimates and judgement used in the accounting for the plant
rationalisation programme be supported by the available evidence.
Valuation of goodwill and other intangible assets
Refer to Note (8), (10), (11), and (12) of the consolidated financial
statements
•
The Group capitalised goodwill for €117.5 million, mainly related to
the acquisition of Magnesita Group. In addition, the company
capitalised intangible assets for €319.0 million. These assets form
part of cash-generating units (‘CGUs’) to the extent that they inde-
pendently generate cash inflows. If and to the extent to which
these CGUs include goodwill or intangible assets with indefinite
useful lives or show sign for impairment, the recoverable amount is
assessed. Annual planning process data is used to make assump-
tions on the discount rates, profitability as well as growth rates, and
sensitivity analyses are carried out with regard to any accounting
effects. The assessment did not result in an impairment.
We identified the impairment assessment as a key audit matter due
to significant estimates and assumptions about the discount rates,
profitability as well as growth rates.
As part of our audit procedures, we have evaluated and challenged
the composition of management’s future cash flow forecast and
process applied to identify and define cash-generating units, cal-
culate the recoverable amount, test for impairment, calculate the
capital cost rate and the growth rate as well as the calculation
model.
We have reconciled the assumed future cash flows used in the
budget planning with the information included in the forecast
made by the directors.
With the support of our valuation specialists, we have evaluated
management’s assumptions such as revenue and margin, the dis-
count rate, terminal value, operational and capital expenditure. We
have obtained corroborative evidence for these assumptions. We
performed analyses to assess the reasonableness of forecasted
revenues, margins and expenditures in line with the level of activity
forecasted and corroboration to contracted revenue for the coming
years and price trends and obtained further explanations when
considered necessary. We compared the long-term growth rates
used in determining the terminal value with economic and industry
forecasts. We have re-performed calculations, compared the
methodology applied with generally accepted valuation tech-
niques, assessed appropriateness of the cost of capital for the
company and comparable assets, as well as considered territory
specific factors and assessed appropriateness of disclosure of the
key assumptions and sensitivities underlying the tests.
Based on the audit procedures performed, we found the assump-
tions to be reasonable and supported by the available evidence.
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Key audit matter
Our audit work and observations
Implementation of IFRS 16, Leases
Refer to Note (2) and (13) of the consolidated financial statements
•
As described in Note (2) and (13) of the consolidated financial
statements the Group has adopted IFRS 16, Leases. The disclosures
on the effects of initial application and reconciliations can be
found in Note (2) to the Consolidated Financial Statements. As of
December 31, 2019, Right-of-use assets and lease liabilities in the
amount of €62.0 million were recognised by the Group.
The Group has applied the modified retrospective approach. Ac-
cording to this method the lease liability is measured at the present
value of the remaining lease payments, discounted at using the
incremental borrowing rate at initial application. The recognised
amount of the right-of-use asset equals the lease liability. The
Group applies several practical expedients in its implementation.
The calculation of the lease term and the incremental borrowing
rates used as discount rates can be discretionary and based on
estimates. In addition, extensive data from the leases must be rec-
orded to calculate the initial effects of IFRS 16 and the develop-
ment of lease liabilities and Right-of-use assets in accordance with
the standard. This data is the basis for the measurement and
recognition of the lease liabilities and Right-of-use assets.
As a result, we consider the adoption and implementation of IFRS
16 a key audit matter.
We performed inquiries of management to obtain an understand-
ing of the IFRS 16 implementation process.
We have obtained a schedule of all lease contracts in the scope of
IFRS 16, as identified by the Group. We evaluated the accuracy and
completeness of this schedule by reconciling this to previously
disclosed future lease commitments and based on our knowledge
of the Group and experience of the industry in which it operates.
For a sample of selected leases, we validated whether the relevant
data was recorded correctly and in full. To the extent that discre-
tionary decisions were made regarding the lease term, we reviewed
whether, in light of the market conditions and risks in the industry,
the underlying assumptions are plausible and consistent with other
assumptions made in the consolidated financial statements.
We compared the assumptions and parameters underlying the
incremental borrowing rates with our own assumptions and public-
ly available data.
Furthermore, we have assessed the adequacy of the related (IFRS
16) disclosures in the financial statements.
Based on the audit procedures performed, we found no material
exceptions with respect to the application of IFRS 16 and disclo-
sures thereto.
Emphasis of matter related to the uncertainty related to the effects of the COVID-19 virus
We draw attention to Note (1) of the consolidated financial statements, the section ‘going concern and the implications of the COVID-19
(Corona) virus’ in which management has described the possible impact and consequences of the COVID-19 virus on the entity and the
environment in which the entity operates as well as the measures taken and planned to deal with these events or circumstances. This
note also indicates that uncertainties remain and that currently it is not reasonably possible to estimate the future impact. Our opinion is
not modified in respect of this matter.
Report on the other information included in the annual report
In addition to the financial statements and our auditor’s report thereon, the annual report contains other information that consists of:
• the section strategic report on pages 1 to 71 of the annual report;
• the section governance, which includes the Remuneration Report on pages 74 to 120 of the annual report;
• the other information pursuant to Part 9 of Book 2 of the Dutch Civil Code.
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Based on the procedures performed as set out below, we conclude that the other information:
• is consistent with the financial statements and does not contain material misstatements;
• contains the information that is required by Part 9 of Book 2 of the Dutch Civil Code.
We have read the other information. Based on our knowledge and understanding obtained in our audit of the financial statements or
otherwise, we have considered whether the other information contains material misstatements.
By performing our procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720.
The scope of such procedures was substantially less than the scope of those performed in our audit of the financial statements.
The directors are responsible for the preparation of the other information, including the directors’ report and the other information in
accordance with Part 9 of Book 2 of the Dutch Civil Code.
Report on other legal and regulatory requirements
Our appointment
We were appointed as auditors of RHI Magnesita N.V. by the audit committee of the board of directors following the passing of a resolu-
tion by the shareholders at the annual meeting held on 4 October 2017. Our appointment has been renewed annually by shareholders
representing a total period of uninterrupted engagement appointment of 3 years.
No prohibited non-audit services
To the best of our knowledge and belief, we have not provided prohibited non-audit services as referred to in Article 5(1) of the European
Regulation on specific requirements regarding statutory audit of public-interest entities.
Services rendered
The services, in addition to the audit, that we have provided to the Company and its controlled entities, for the period to which our statu-
tory audit relates, are disclosed in Note (60) to the financial statements.
Responsibilities for the financial statements and the audit
Responsibilities of executive directors and board of directors for the financial statements
Executive directors are responsible for:
• the preparation and fair presentation of the financial statements in accordance with EU-IFRS and with Part 9 of Book 2 of the Dutch Civil
Code; and for
• such internal control as executive directors determine is necessary to enable the preparation of the financial statements that are free
from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, executive directors are responsible for assessing the Company’s ability to continue
as a going concern. Based on the financial reporting frameworks mentioned, executive directors should prepare the financial statements
using the going-concern basis of accounting unless executive directors either intend to liquidate the Company or to cease operations, or
has no realistic alternative but to do so. Executive directors should disclose events and circumstances that may cast significant doubt on
the Company’s ability to continue as a going concern in the financial statements.
The board of directors is responsible for overseeing the Company’s financial reporting process.
Our responsibilities for the audit of the financial statements
Our responsibility is to plan and perform an audit engagement in a manner that allows us to obtain sufficient and appropriate audit evi-
dence to provide a basis for our opinion. Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error and to issue an auditor’s report that includes our opinion. Rea-
sonable assurance is a high but not absolute level of assurance, which makes it possible that we may not detect all material misstate-
ments. Misstatements may arise due to fraud or error. They are considered to be material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
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Materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our
opinion.
A more detailed description of our responsibilities is set out in the appendix to our report.
Amsterdam, 31 March 2020
PricewaterhouseCoopers Accountants N.V.
Original has been signed by E.M.W.H. van der Vleuten RA MSc
Appendix to our auditor’s report on the financial statements 2019 of RHI Magnesita N.V.
In addition to what is included in our auditor’s report, we have further set out in this appendix our responsibilities for the audit of the fi-
nancial statements and explained what an audit involves.
The auditor’s responsibilities for the audit of the financial statements
We have exercised professional judgement and have maintained professional scepticism throughout the audit in accordance with Dutch
Standards on Auditing, ethical requirements and independence requirements. Our audit consisted, among other things of the following:
• Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and
performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the intentional override of internal control.
• Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the cir-
cumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
• Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by executive directors.
• Concluding on the appropriateness of executive directors’ use of the going-concern basis of accounting, and based on the audit evi-
dence obtained, concluding whether a material uncertainty exists related to events and/or conditions that may cast significant doubt on
the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention
in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report and are made in the context of our opin-
ion on the financial statements as a whole. However, future events or conditions may cause the Company to cease to continue as a going
concern.
• Evaluating the overall presentation, structure and content of the financial statements, including the disclosures, and evaluating whether
the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Considering our ultimate responsibility for the opinion on the consolidated financial statements, we are responsible for the direction,
supervision and performance of the group audit. In this context, we have determined the nature and extent of the audit procedures for
components of the Group to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole.
Determining factors are the geographic structure of the Group, the significance and/or risk profile of group entities or activities, the ac-
counting processes and controls, and the industry in which the Group operates. On this basis, we selected group entities for which an
audit or review of financial information or specific balances was considered necessary.
We communicate with the audit committee of the board of directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. In this re-
spect, we also issue an additional report to the audit committee in accordance with Article 11 of the EU Regulation on specific require-
ments regarding statutory audit of public-interest entities. The information included in this additional report is consistent with our audit
opinion in this auditor’s report.
We provide the audit committee of the board of directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on
our independence, and where applicable, related safeguards.
From the matters communicated with the audit committee of the board of directors, we determine those matters that were of most signifi-
cance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not
communicating the matter is in the public interest.
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Alternative performance
measures (“APMs”)
come 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 certain foreign exchange effects, amortisation, one-
off restructuring expenses and impairments, other non-cash
financial income and expenses, that are not directly related to
operational performance. Effective tax rate for adjusted EPS is
calculated by applying the effective tax rate normalised for
restructuring expenses and impairments.
Operating 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 re-
maining 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
revenue.
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.
APMs used by the Group are reviewed below
IFRS
to provide a definition from each non
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.
‐
IFRS measures. As a result, APMs allow investors
APMs are non
and other readers to review different kinds of revenue, profits
and costs and should not be used in isolation. Commentary
within the Half Year Results, including the Financial Review, as
well as the Consolidated Financial Statements and the accom-
panying 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 care-
fully review our reporting in its entirety.
Adjusted pro-forma results at a constant currency
Adjusted and Adjusted results at constant currency The H1
2018 Adjusted 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. H1 2018 figures presented at constant currency
represent H1 2018 reported figures translated at average H1
2019 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 in-
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Shareholder information
RHI Magnesita N.V. is a public company with limited liability
under Dutch law and was incorporated on 20 June 2017. It has
its corporate seat in Arnhem, the Netherlands, its administrative
seat in Vienna, Austria and its registered office at Kranichberg-
gasse 6, 1120 Vienna, Austria.
Investor relations department
7th Floor, 125 Old Broad Street
London EC2N 1AR
United Kingdom
The telephone number of the Issuer is +43 50 2136200.
The shares of RHI Magnesita N.V, are listed on the Premium
Segment of the Offical List on the Main Market of the London
Stock Exchange.
Ticker symbol: RHIM
ISIN Code:NL0012650360
Investor information
The Company’s website www.rhimagnesita.com provides in-
formation for shareholder and should be the first port of call for
general queries. The investors section contains details on the
current and historical share price. Annual and Interim Reports,
analyst presentations, shareholder meetings as well as a
‘Shareholders FAQ’ section.
T: +44 20 7292 6171
Email: investor.relations@rhimagnesita.com
Corporate brokers
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
United Kingdom
T: +44 20 74188900
www.peelhunt.com
Barclays
10 The North Colonnade
Canary Wharf
London E14 4BB
United Kingdom
You can also subscribe to an email alert service to automatically
receive an email when significant announcements are made.
T: +44 20 7623 2323
www.barclays.com
Shareholding information
Please contact our Registrar, Computershare, for all administra-
tive enquiries about your shareholding, such as the loss of a
share certificate, dividend payments, or a change of address:
Computershare Investor Services PLC
The Pavilions,
Bridgwater Road
Bristol BS99 6ZZ
United Kingdom
Website: https://www-uk.computershare.com
T: +44 (0) 370 707 1402
Financial calendar
Q1 Trading Update
Annual General Meeting
Half Year Results
Q3 Trading Update
May 2020
18 June 2020
August 2020
November 2020
Auditor
PricewaterhouseCoopers Accountants N.V,
Thomas R. Malthusstraat 5
1066 JR Amsterdam
P.O. Box 90357
T: +31 88 792 00 20
www.pwc.nl
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RHI Magnesita
Headquarters
Kranichberggasse 6
1120 Vienna
Austria
www.rhimagnesita.com