Leading the refractory
industry in sustainability
and technology
Annual Report 2021
We are RHI Magnesita
We offer refractory products,
customised services and innovative
solutions that help shape tomorrow’s
world. Our advanced products are
essential for our customers in the steel,
cement, metals and glass industries.
Our purpose
Our purpose is to master heat, enabling
global industries to build sustainable
modern life.
Our values
At RHI Magnesita, we believe in an ethical
workplace which means performing our
roles with integrity, honesty, reliability
and in respectful collaboration with each
other. Extending these ethical behaviours
to interactions with all business partners
is vital for the long term sustainable
success of RHI Magnesita.
Contents
Strategic report
01
02
03
04
Investment case
Highlights
Our Culture
Refractory customers and end
markets
05 Global footprint with local for
local strategy
Investing in cleaner technologies
08
Business Model
10
Chairman’s statement
12
CEO review
13
Our strategic framework
14
Strategy in action
16
Key Performance Indicators
24
Operational Review
26
Financial Review
32
38
Effective risk management
40 Our internal control system
Viability Statement
42
Principal Risks
44
Stakeholder engagement
50
Sustainability governance
56
Progress against sustainability
59
targets
Climate and environment
Our People and Communities
EU Taxonomy Regulation
60
64
66
Governance
68
70
88
86
88
91
92
Chairman’s introduction to
corporate governance
Corporate governance statement
Board of Directors
Executive Management Team
Nomination Committee report
Corporate Sustainability
Committee report
Audit & Compliance Committee
report
Remuneration Committee report
96
100 Directors’ Remuneration Policy
111
Annual Report on Remuneration
Financial statements
122
123
124
125
126
128
189
Consolidated Statement of
Financial Position
Consolidated Statement of Profit
or Loss
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Cash Flows
Consolidated Statement of
Changes in Equity
Notes to the Consolidated
Financial Statements 2021
Company Financial Statements
of RHI Magnesita N.V.
190 Notes to the Company Financial
Statements 2021
Other information
Independent Auditor’s report
200
209 Alternative performance
measures (“APMs”)
210 Glossary
211
Shareholder information
Investment case
Global market
share
c.15%
01
Leadership in the
refractory industry
Magnesite raw material
from own sources
c.70%
02
Strong competitive position
with vertical integration
• Market leader in refractory products and heat
management solutions for industrial
applications involving temperatures above
1,200°C. Significant scale benefits from
having the largest global footprint,
close proximity to customers and “local for
local” strategy
• Market share of c.15% globally (30% excluding
China and East Asia) in a c.€20 billion industry.
Clear market leader in North and South
America, Europe and the Middle East
• c.70% of revenue derived from the Steel
Division and c.30% from Industrial. RHI
Magnesita’s customers serve end markets in the
construction and infrastructure, automotive,
machinery and heavy equipment industries
• Vertical integration with low-cost magnesite
and dolomite raw material assets providing
security of supply and contributing 3.2
percentage points of EBITA margin in 2021
• Leadership in innovation and digitalisation of
refractory products and services. Annual
R&D and Technical Marketing spend of €63
million, new products represented 16% of
revenues in 2021
•
Innovating to support sustainable
development, leading the industry in low-CO2
refractory technologies
Adjusted EBITA
margin
11.0%
03
Margin resilience and
significant growth
opportunity
Capital
expenditure
€252m
04
Investment driven
value creation
Use of secondary raw
material, 2021
6.8%
• Low-cost operations and essential nature of
products underpin double digit EBITA margin
performance through the cycle
• Cost saving initiatives to deliver €110 million
EBITA contribution by 2023, further improving
margins through plant consolidation,
specialisation, modernisation and lower
relative SG&A
• Growth opportunity in Flow Control, new
geographic markets of China, India and Turkey,
and through expansion of the business model
into services, digital products and full heat
management solutions
05
Sustainability leadership
• Proprietary technology for increasing use of
secondary raw material with equally good
refractory performance. Reduces waste and
eliminates CO2 emissions from use of new raw
material in short term
• Longer term investment in developing new
technology solutions to capture and store or
utilise CO2 emitted in the refractory
production process
• Strong market share in essential refractory
products that are enablers for the
decarbonisation of steel production through
increased use of electric arc furnaces
• Maintained significant organic investment
throughout 2020 and 2021, with capital
expenditure of €252 million in 2021
• Disciplined focus on returns on capital
• High-returning projects are due to complete
and ramp up from 2022, delivering material
cash flow benefits
• Balanced and dynamic capital allocation
through investment in organic growth,
acquisitions, sustainability and shareholder
returns
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Highlights
RHI Magnesita has successfully
navigated another challenging
year in 2021 whilst continuing
to make further structural
improvements to our business
to strengthen our leadership
position in the global refractory
industry.
Herbert Cordt
Chairman
Financial highlights
Revenue
€2.6bn
2020: €2.3bn
Available liquidity
€1.2bn
31 December 2020: €1.2bn
Adjusted EBITA
Adjusted earnings per share
€280m
2020: €260m
Adjusted EBITA margin
11.0%
2020: 11.5%
Strategic highlights
Capital expenditure
€252m
2020: €157m
ROIC
9.6%
2020: 11.5%
€4.52
2020: €3.28
Dividend per share
€1.50
2020: €1.50
Strategic initiatives EBITA (cumulative)
€84m
2020: €35m
Shareholder returns
€167m
2020: €52m
Sustainability highlights
Recycling rate
6.8%
2020: 5.0%
Reduced CO2 emissions intensity
1.82 t CO2/t
2020: 1.96 t CO2 /t
LTIFR (per 200,000 hours)
CDP rating
0.18
2020: 0.13
B
2020: B
Dalian, China
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Our culture
Our corporate culture guides our strategy
and day-to-day decision making.
customer
focus
innovative
We live innovation to create
value for our customers, by
being bold and providing
the best digital and
sustainable solutions.
performing
Our high performance
is rooted in accountability
and responsibility. We are
a reliable partner that
decides and delivers
based on our
customers' needs.
open
Our open mindset and
transparent way of working is
flanked by a diverse, respectful
and friendly business
environment, where we care
about our customers
and colleagues.
pragmatic
We act pragmatically to
enable fast and simple
collaboration across functions
and regions to serve
our customers best.
The swift response of our management and employees
to the supply chain challenges we encountered in 2021
demonstrated our customer focus, pragmatism and
reliability as a business partner. Throughout the year,
we prioritised keeping our customers supplied with
refractories to avoid interruption to their operations during
a period of high demand, using alternative sources of
supply and new logistics solutions where necessary.
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Refractory customers and end markets
We create the refractory products, customised services
and innovative solutions that help shape tomorrow’s world.
By mastering heat, we enable global industries to build
sustainable modern life.
Through our solutions business model, we provide a broad range of tailored services at
customer sites such as refractory installation, recycling, digital and supply chain services.
These drive process efficiencies, reduce costs and generate sustainable benefits,
thereby creating value for our customers, as well as for the Group.
Customer
industries
Refractories are
specialist materials
used in industrial
processes
which can withstand
temperatures of up to
2,000 degrees. They are
consumed during use at
varying rates, for example
up to 15 kg of refractories
are required per tonne of
steel production.
Refractories
are classified
as operating
expenses for
the steel industry
where replacement
cycles are between 20
minutes and two months.
Other industries have
longer replacement
cycles, for example
refractories in cement
kilns are replaced
annually, whereas in the
glass industry refractory
linings within furnaces
are replaced up to every
10 years.
Market shares
RHI Magnesita serves
thousands of industrial
sites worldwide.
Steel
Cement
Glass
& EEC
Non-ferrous
metals
~10 to 15 kg
~1 kg
~4 kg
Copper
~3 kg
Aluminium
~6 kg
Refractory demand for 1 tonne
1,7600C
1,5000C
1,6500C
1,3500C
1,2500C
20 minutes to
2 months
Annually
Lifetime
Glass
Up to 10 years
EEC
5 to 10 years
% of customers’ costs
c.3%
c.0.5%
Glass
c.1%
EEC
c.1.5%
% market share by customer market
1-10 years
(non-ferrous)
c.0.2%
c.15%
c.35%
c.5%
c.25%
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How our customer industries relate to end-user markets.
Demand for refractories is driven in the first instance by demand from industries requiring
advanced heat-resistant materials for their production processes, being predominantly the
steel, cement/lime, non-ferrous metals, glass, energy and chemicals industries. Over the
long term, demand for refractories is linked to production volumes in these industries, which
in turn are determined by the end markets for those materials. The most important end
markets for the refractory industry are construction, automotive and transport, machinery and
equipment, electronics and consumer goods and energy, oil and gas and petrochemicals.
Customer
industries
Cement
Steel
% of 2021 revenue.
13%
71%
Glass & EEC
Metals
10%
6%
End markets
outlook
Whilst previously
high growth rates
in construction
and automotives
during the initial
recovery from the
COVID-19 pandemic
are not forecast to
continue in 2022-
23, strong growth in
electrification and
decarbonisation are
expected to drive
volumes in non-
ferrous metals.
Trends
We are agile and
proactive in pursuing
opportunities and
managing risks
posed by the rapidly
changing global
environment.
45%
17%
10%
15%
Other
5%
Construction
Automotive
and transport
Machinery
and equipment
Electronics and
consumer goods
Energy and
petrochemicals
6.0%
12.1%
7.4%
5.7%
3.7%
4.8%
4.5%
8.6%
5.1%
3.9% 3.7%
4.1%
3.4%
2.3%
1.7%
2021
2022F 2023F
2021
2022F 2023F
2021
2022F 2023F
2021
2022F 2023F
2021
2022F 2023F
Continued
growth in Asia
ex-China
Green steel
transition
Connectivity
Regionalisation
Commoditisation
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Global footprint with local for local strategy
Our global network of raw material sites,
refractory plants, sales offices and R&D
centres enables us to be a trusted partner
for our customers. RHI Magnesita can supply
a full range of refractory products anywhere
in the world.
Our global network has been optimised by the Production
Optimisation Plan, progressing our “local for local” strategy.
We aim to reduce movements of raw materials and finished
goods, lowering costs and improving reliability and security
of supply for our customers.
Steel Division Revenue split by geography
Key raw material transport routes
North America
South America
Europe/CIS/Turkey
China and East Asia
India, West Asia and Africa
28%
15%
26%
11%
20%
Industrial Division Revenue split by segment
Cement/Lime
Industrial business
44%
56%
2
1
Headquarters
Technology hubs
Raw materials production
Finished refractory products production
Raw materials and finished refractory
products production
Key raw material export route
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Key raw material transport routes
3
4
1 Brumado, Brazil, our Americas
magnesite hub
The Group’s largest magnesite raw
material asset with over 100 years of
remaining mine life and first quartile cost
position, serving production facilities
across the Americas.
2 York, United States, our Americas
dolomite hub
Provides low cost, high-quality dolomite
into North and South America.
3 Eskişehir, Turkey, supplies low
cost Magnesite raw material to
European production plants
Our local for local strategy is enhanced
through the acquisition of SÖRMAŞ,
agreed in 2021 (completion expected in
H1 2022).
4 Externally sourced raw material
partnerships
Externally sourced raw material from
China provides Europe with low-cost
magnesite and alumina based raw
materials, including electro-fused
material.
Note: Shipping routes shown are illustrative.
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Investing in cleaner technologies
The future of steelmaking
Traditional steelmaking process
Globally, c.70% of steel production is carried out using a blast furnace
(“BF”) to reduce iron ore, combined with a Basic Oxygen Furnace (“BOF”)
for conversion of pig iron into steel. The steel industry accounts for around
8% of global CO2 emissions and is classified as a “hard-to-abate” industry
because of the high capital cost and technological challenges involved.
Reduction of iron ore in a blast furnace requires the burning of large
quantities of coke (700kg) per tonne of steel produced). BOF emit a
further 0.17 tonnes of CO2 per tonne of steel produced, as oxygen is
injected to remove carbon dissolved in the steel.
Electric arc furnaces
The first step to reduce CO2 emissions in steelmaking is the adoption of
electric arc furnaces (“EAF”), which can be powered using electricity
sourced partially or wholly from renewable energy generation.
EAF use globally ex-China has grown significantly over the last 20 years,
from 37 % of steel production in 2001 to 47% in 2021. EAF steelmaking
requires a source of scrap steel and has therefore grown fastest in
developed markets where scrap availability is high. EAF use is now
growing fast in China, with current usage representing around 10% of
output, forecast to grow to 23% by 2030 (Source: Internal Company
estimates).
RHI Magnesita has a leading market position in EAF-specific refractories,
services and heat management solutions and is ideally positioned to
benefit from this ongoing transition. In 2021, 16% of the Group’s revenues
were derived from EAF refractories.
Direct reduction of iron ore
Direct reduction of iron ore (“DRI”) using hydrogen is a new technology
that seeks to eliminate CO2 emissions from the reduction of iron ore
in blast furnaces using coke. If sufficient quantities of hydrogen
manufactured from renewable sources can be accessed and if a DRI
furnace can be paired with an EAF for the second stage of the process
that is also powered by renewable energy, CO2 emissions from steel
production can be largely eliminated.
An alternative pathway to reduce CO2 emissions is the use of electrolysis.
RHI Magnesita has partnered with Boston Metal to provide refractories
for prototype molten salt facilities which operate at temperatures of
around 1,850°.
Existing process
Iron ore
Coke
Natural gas
Limestone
Oxygen
CO2
H2O
Oxygen
CO2
BF
(Blast furnace)
2,1000C
BOF
(Basic Oxygen Furnace)
1,6000C
Future technology
Iron ore
Hydrogen
H2O
Electricity
Scrap or
sponge
iron
Zero
emissions
DRI
(Direct Reduction)
1,4000C
EAF
(Electric Arc Furnace)
1,8000C
Tonnes CO2 per tonne of steel
1.77
-63%
0.66
-92%
-92%
BF + BOF
DRI-EAF
(Nat gas)
0.15
Scrap EAF
0.14
DRI-EAF
(Green H2)
EAF steelmaking by region
World ex-China (Mt)
China (Mt)
China long term forecast
% of steel production from EAF
+18%
502
427
+63%
160
98
50%
40%
23%
10%
2021
2026
2021
2026
2021
2030
2040
2050
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The future of refractories
Recycling
RHI Magnesita is leading the refractory industry in the use of
secondary raw materials. For every tonne of waste refractory
material that we re-use, we can save two tonnes of CO2
emissions which would otherwise have been emitted in the
extraction and processing of new raw material.
Historically, the use of secondary raw material in the industry
has been limited because of the reduced effectiveness of
refractories made with recycled material. RHI Magnesita has
developed new technology for using secondary raw material
without impacting performance.
The Group’s recycling target is to increase use of secondary
raw material to 10% of raw material by 2025 and in 2021 this
increased to 6.8% (2020: 5.0%). Due to the geogenic CO2
emissions and energy consumption involved in the processing
of new raw material, increasing the recycling rate is an effective
route for the Group to reduce its CO2 emissions in the short
term.
Carbon capture and utilisation
RHI Magnesita is investing €50 million over the next four years
to develop new technologies for capture and then storage or
utilisation of CO2 emitted during the refractory production
process. The majority of emissions are released in the raw
material processing phase and are reported as Scope 1
emissions for material sourced from our own mines and Scope
2 emissions in respect of externally purchased raw material.
In 2021 the Group signed a memorandum of understanding
with Australia based technology company, Calix Limited, to
develop a Calix Flash Calciner at an RHI Magnesita site for the
capture and storage of CO2. This technology is one of a
number of different routes that the Group is evaluating to
capture geogenic CO2 emissions.
RHI Magnesita is leading the refractory industry on this vital
sustainability issue, which will be an increasingly important
consideration for our customers in the future as they also seek
to reduce the environmental impact of their activities.
Recycling rate
2021
2020
2019
2018
Industry leading recycling technology
Relative CO2 emissions: (t CO2/t)
2021
2020
2019
2018
6.8%
5.0%
4.6%
3.8%
1.82
1.96
1.85
1.89
Carbon capture and storage R&D projects
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Business model
What we do
We offer our customers high-quality refractory
products, supported by industry-leading R&D
and underpinned by our vertically integrated
structure which provides security of supply of low
cost, high grade magnesite based raw material.
Our end-to-end value chain includes the mining
and processing of raw materials, the mixing,
pressing and firing of refractories, logistics, design,
installation, monitoring, recycling and disposal.
Our suite of digital products provides our
customers with unrivalled intelligence and
insights into the refractory lifecycle at their plants,
improving productivity and driving efficiencies.
Our comprehensive product range and expertise
enables us to offer full heat management
solutions to customers who are seeking
to improve production efficiency and lower
their costs and environmental impacts.
Refractory products are used in all high-
temperature industrial processes. Without
refractories, key industries such as steel, cement,
metals, glass, energy and chemicals could not
function. Refractories withstand hostile
conditions including heat and chemical
corrosion, maintaining their form and function
at temperatures over 1,200 °C. They protect
equipment such as furnaces and kilns against
thermal, mechanical and chemical stress.
Our value chain
Innovation, research
and development
One of the fundamental drivers of our business
model is innovation and R&D, supported by
strong internal expertise in materials
technology and digitalisation. The Group
continues to drive innovation, with significant
opportunities identified in the fields of
automation, robotics and sustainability, and
aims to devote 2.2% of revenues per year to
R&D and Technical Marketing. Investment in
R&D and Technical Marketing in 2021 was
c.€63 million, representing 2.5% of revenues.
Raw material production
Mining
Crushing
Unshaped
refractories
Firing in rotary kiln
Refractory production
Press
Firing and/or heat treatment
Logistics
Shaped
refractories
High-quality raw
materials sourcing,
production, recycling
Production
of refractories
With the highest level of vertical integration
in the industry, including significant self-
sufficiency in key raw materials, we have a
unique ability to cover and service every step of
the value chain, and offer distinctive customer
solutions based on our technological
leadership, expertise and cost competitiveness.
Our low-cost raw material assets make a
significant contribution to Group margins
compared to the cost of acquiring equivalent
raw materials from external suppliers.
One of the most important raw materials for
refractory production is magnesite, a mineral
that we mine in both underground and surface
mines. Magnesite ore is crushed and fired at
1,800°C in special kilns. During this process,
CO2 is released and density is increased.
Raw materials are mixed and combined with
technical additives to be sold as mixes or are
further processed into shaped refractory
products. Shaped refractory bricks are pressed
into different sizes and shapes depending on
the specific application, employing pressures
of up to 3,200 tonnes.
After pressing, shaped refractory bricks
undergo heat treatment at temperatures of
up to 350°C and may be further subjected
to firing at 1,800°C in tunnel kilns for a number
of days.
Unfired products are primarily used in the steel
industry, whilst the main applications for fired
products are in the cement, non-ferrous
metals, process and mineral industries.
Product marketing,
sale and delivery
Installation, monitoring,
Stakeholder
and complex issue solving
value creation in 2021
The Group has more than 70 sales offices
A key component of RHI Magnesita’s ability to
Shareholders
worldwide and services customers in more
add value lies in our solutions offering, which
€1.50 per share paid as a dividend
than 100 countries. It has 28 main production
includes the installation, monitoring, repair
hubs and 12 raw material sites, strategically
and removal of refractory products at
Employees
located in order to serve its customers as
customer sites by experienced employees.
€548 million in total gross employee pay
efficiently as possible.
The closer we work with our customers, the
monitor refractory performance, safely
greater the difference we can make for them.
extending the usable life of the refractory,
Digital monitoring products allow us to
Having a global network of offices, research
centres and production sites is important to us,
and to them.
We have differentiated scale, with a global
customer base serving around 1,070 out of
1,3001 steel plants.
1 Approximate number of plants worldwide excluding
China, based on company estimates.
whilst remote gunning solutions can carry
out intermediate repairs during use.
After use in the customer’s production
process, residual refractory linings are
removed and reused if possible as secondary
raw materials in the production of new
refractories. RHI Magnesita therefore operates
across the entire cycle from raw material
production to recycling of spent material
into new finished products.
Customers
€745 million revenue generated in our
solutions business model
Suppliers
€1.8 billion paid to suppliers
Communities
26% of committed community spend directed
to emergency COVID-19 relief
Governments
€39 million direct cash taxes
–
–
–
–
–
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What we do
Heat management solutions
Installation
Monitoring, repair and
process efficiencies
Removal
Disposal
Recycling
How we generate revenue
We generate revenue from our global footprint spanning North and South
America, Europe, China, India, the rest of Asia and the Middle East.
Around 70% of our revenue is generated from selling refractory products
and solutions to our Steel customers, with the remaining 30% from the
Industrial Division.
We sell a full suite of products tailored to customer requirements, with over
120,000 SKUs. Our main product groups include refractory bricks and
mixes and flow control products such as slide gates, nozzles and plugs.
Our unique service offering is one of the key differentiators of RHI Magnesita.
We are able to offer heat management solutions contracts which made up
29% of revenue in 2021 (2020: 27%). In our solutions business model,
we partner with our customers to provide consultancy, engineering and
technical capabilities, as well as other services such as installation
and recycling, to drive efficiency gains for the customer.
Our value chain
Innovation, research
and development
High-quality raw
materials sourcing,
production, recycling
Production
of refractories
Product marketing,
sale and delivery
Installation, monitoring,
and complex issue solving
Stakeholder
value creation in 2021
One of the fundamental drivers of our business
With the highest level of vertical integration
Raw materials are mixed and combined with
model is innovation and R&D, supported by
in the industry, including significant self-
technical additives to be sold as mixes or are
strong internal expertise in materials
sufficiency in key raw materials, we have a
further processed into shaped refractory
technology and digitalisation. The Group
unique ability to cover and service every step of
products. Shaped refractory bricks are pressed
continues to drive innovation, with significant
the value chain, and offer distinctive customer
into different sizes and shapes depending on
opportunities identified in the fields of
solutions based on our technological
the specific application, employing pressures
automation, robotics and sustainability, and
leadership, expertise and cost competitiveness.
of up to 3,200 tonnes.
aims to devote 2.2% of revenues per year to
R&D and Technical Marketing. Investment in
R&D and Technical Marketing in 2021 was
c.€63 million, representing 2.5% of revenues.
Our low-cost raw material assets make a
significant contribution to Group margins
After pressing, shaped refractory bricks
undergo heat treatment at temperatures of
compared to the cost of acquiring equivalent
up to 350°C and may be further subjected
raw materials from external suppliers.
to firing at 1,800°C in tunnel kilns for a number
One of the most important raw materials for
of days.
refractory production is magnesite, a mineral
Unfired products are primarily used in the steel
that we mine in both underground and surface
industry, whilst the main applications for fired
mines. Magnesite ore is crushed and fired at
products are in the cement, non-ferrous
1,800°C in special kilns. During this process,
metals, process and mineral industries.
CO2 is released and density is increased.
The Group has more than 70 sales offices
worldwide and services customers in more
than 100 countries. It has 28 main production
hubs and 12 raw material sites, strategically
located in order to serve its customers as
efficiently as possible.
The closer we work with our customers, the
greater the difference we can make for them.
Having a global network of offices, research
centres and production sites is important to us,
and to them.
We have differentiated scale, with a global
customer base serving around 1,070 out of
1,3001 steel plants.
1 Approximate number of plants worldwide excluding
China, based on company estimates.
A key component of RHI Magnesita’s ability to
add value lies in our solutions offering, which
includes the installation, monitoring, repair
and removal of refractory products at
customer sites by experienced employees.
Digital monitoring products allow us to
monitor refractory performance, safely
extending the usable life of the refractory,
whilst remote gunning solutions can carry
out intermediate repairs during use.
After use in the customer’s production
process, residual refractory linings are
removed and reused if possible as secondary
raw materials in the production of new
refractories. RHI Magnesita therefore operates
across the entire cycle from raw material
production to recycling of spent material
into new finished products.
Shareholders
€1.50 per share paid as a dividend
–
Employees
€548 million in total gross employee pay
–
Customers
€745 million revenue generated in our
solutions business model
–
Suppliers
€1.8 billion paid to suppliers
–
Communities
26% of committed community spend directed
to emergency COVID-19 relief
–
Governments
€39 million direct cash taxes
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
1 1
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Chairman’s
statement
The Board remains committed to the Group’s
three-pillared strategy to invest in improving
its competitive position, expanding the
business model and growing in new markets.
Herbert Cordt
Chairman
Leading the refractory industry
Board review
Each year we carry out a review of Board
effectiveness to assess our performance and
make appropriate improvements, to maintain
high standards of corporate governance.
This exercise is a high priority for me personally
and I am pleased to include the findings and
recommendations from the review in
the Corporate Governance section of this
Annual Report.
Dividend
The Board has recommended a final dividend of
1.00 Euro per share in respect of the financial year
to 31 December 2021. This level of dividend is
aligned with our policy to maintain dividend cover
of below three times adjusted earnings whilst
taking into account the other funding
requirements of the business as we manage
capital expenditures, M&A spend and gearing
levels through this important period in our
strategic development.
Strategy and outlook
The Board remains committed to the Group’s
three-pillared strategy to invest in improving its
competitive position, expanding the business
model and growing in new markets where we are
currently under-represented, in particular
through M&A which has the Board’s full support.
The challenges posed by the COVID-19
pandemic in 2020 and the subsequent very
significant and unexpected supply chain
disruption in 2021 have not diverted us from these
goals and we were pleased that the Group
reached agreement on the acquisition of
SÖRMAŞ in Turkey in October. The Board looks
forward to demonstrating the benefits of the
Group’s investment programme from 2022
onwards, as the projects which make up the
Production Optimisation Plan are completed and
begin to deliver significant value to shareholders.
Read more about our Strategy
Page 14
I am pleased to report that RHI Magnesita has
successfully navigated another challenging year
in 2021 whilst continuing to make the structural
improvements which are necessary to grow our
leadership position in the global refractory
industry.
Sustainability is a key priority for the Board and the
Group is making considerable progress towards
its 2025 sustainability goals, whilst investing in
new recycling and carbon capture technologies
which will make it possible to materially reduce
CO2 emissions in the longer term. The
Remuneration Committee has linked
management incentives to improving our
sustainability performance and the Board is
satisfied with the progress that has already been
achieved. Transitioning to sustainable business
practices will be the next “industrial revolution”
and RHI Magnesita is committed to extending its
leadership in this vital area.
Board changes
I am pleased to welcome five new Directors to
the Board this year, comprising three independent
Non-Executive Directors and two employee
representatives: Jann Brown, Marie-Hélène
Ametsreiter, Sigalia Heifetz, Karin Garcia and
Dr. Martin Kowatsch. Ms. Garcia and Dr. Kowatsch
were appointed by the works councils
representing our employees in Spain and Austria,
respectively. We have therefore taken positive
steps forward in improving gender diversity in
2021, with 38% female representation at Board
level at the year end and 22% in the Executive
Management Team and direct reports.
The skills and expertise of these new Directors
will be a valuable and complementary addition
to the Board, bringing experience in finance,
governance and sustainability combined with
technology, innovation, digitalisation and relevant
international experience in our target markets.
Following these changes in the year, the Board
now has an optimum balance, representing the
interests of our key stakeholders with employee
representative directors, directors representing
major shareholders, executive directors and
independent non-executives. You can read more
about the composition of the Board in the
Corporate Governance Statement in the Annual
Report.
1 2
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
CEO review
Stefan Borgas
CEO
Demand for refractory products and services was
strong in 2021 as our customer industries began
their recovery from the 2020 downturn caused
by the COVID-19 pandemic much faster than was
anticipated. This created an unprecedented strain
on global supply chains, which led to a significant
increase in costs and logistics lead times.
Our reaction to these challenges has been
comprehensive and included the allocation of
additional resources to planning and logistics, a
significant increase in inventory levels, use of air
freight where necessary and multiple price
increases during the year to restore margins by
passing on additional production and shipping
costs to our customers.
People and culture
Our people and culture are the cornerstone of our
achievements and without a strong team ethos
and individual accountability we would not have
been able to respond to the significant challenges
we faced together in 2021. Our colleagues in
logistics, planning, procurement, operations and
sales functions deserve special praise for their
efforts this year in responding to widespread
disruption to global supply chains and prioritising
the needs of our customers.
Delivering our strategic initiatives
Although some investment projects have been
impacted by cost inflation and minor delays,
logistical difficulties have not materially impacted
on the delivery of our long-term strategy. We have
improved our competitive position through SG&A
savings and the Production Optimisation Plan,
which is advancing our “local for local” production
strategy whilst preserving scale benefits from our
global footprint. We have delivered further growth
in our solutions business, in Flow Control sales and
in target markets where we are seeking to increase
our market share. Progress has been accelerated
through M&A, a key pillar of our growth ambitions,
with the agreement to acquire SÖRMAŞ in Turkey
and the establishment of a new joint venture in
Chongqing, China to widen our product range
for cement customers in the region.
Innovation and sustainability leadership
We have an excellent track record in health and
safety, with a Lost Time Injury Frequency Rate of
0.18 (2020: 0.13), despite many of our employees
working in environments with significant
occupational hazards and as we have delivered
close to record high production volumes. The
safety of our people in the workplace will always
be a core value for us.
RHI Magnesita is already the leading global
supplier of high-performance refractory
products, systems and solutions. We are
increasingly adding digital products alongside
our core offering which differentiate us from
competitors and enable us to offer full heat
management solutions. Solutions contracts grew
to represent 29% of Group revenues in 2021
(2020: 27%).
We also lead the refractory industry in all areas
of sustainability. No other refractory producer is
taking the same steps as we are to increase the use
of secondary raw materials and to reduce and
capture CO2 emissions. Our efforts to increase
recycling of refractories offer major benefits
through improved waste management and the
avoidance of CO2 emissions that would otherwise
be released in the processing of new raw material.
To make this possible, we have developed
proprietary technology for achieving high levels
of performance from recycled refractory material.
We are also investing €50 million over the next
four years in the research and development of new
technologies to reduce and capture CO2 emissions
released during the materials manufacturing
process chain.
Our product portfolio is uniquely positioned
to benefit from the shift to lower CO2 emitting
processes in our customer industries. In steel,
we are global leaders in the supply of specialised
refractories for electric arc furnaces and stand
to benefit from the ongoing transition towards
this technology, which will be a key enabler of
the decarbonisation of global steel production.
Our commitment to improving our sustainability
performance was demonstrated this year by the
linking of the margin on over €1 billion of new
or existing debt facilities to our EcoVadis rating,
which improved to “gold” from “silver” this year.
We are leading the industry on these issues
because of the wider benefits for all stakeholders
but we are also increasing the value of RHI
Magnesita’s products and services to our
customers. We believe the value attached to
sustainable business practices will translate into
market share opportunities or pricing advantages
in the future, as we extend our leadership position
relative to our competitors.
Financial and operational performance
The Group delivered adjusted EBITA of
€280 million in 2021, in line with the adjusted
guidance range issued in October. Profitability
improved materially during the fourth quarter as
the Group benefited from multiple price increases
offsetting over €150 million of additional costs,
mainly from higher freight rates, logistics,
purchased raw material and energy costs.
Sales volumes in 2021 were ahead of our initial
expectations, reflecting strong demand from our
customers and the strength of underlying end
markets in construction and machinery. To meet
this high demand we had to deliver additional
volumes from our production facilities while
deploying the largest investment programme in
the Company’s history at most of our key sites
across the network.
Unplanned downtime at Radenthein in the third
quarter impacted EBITA by around €8 million as
customer shipments of high margin refractories
for use in non-ferrous metals and steel
applications were delayed. In these difficult
circumstances, with local supply chain
bottlenecks adding to planning complexity, it is
a huge credit to our people that we nevertheless
managed to deliver a 15% increase in shipped
volumes versus 2020 and 1% above the volume
achieved in 2019.
Key strengths and outlook
RHI Magnesita is uniquely positioned within the
refractory industry as a leader in technology,
including digitalisation and sustainability. A key
differentiator of our business model is our vertical
integration in the supply of magnesite based raw
materials, with assets in the first quartile of the
cost curve giving us security of supply over c.70%
of the magnesite and dolomite that we consume
and higher margins compared to non-integrated
peers, especially during periods of elevated raw
material prices.
In the fourth quarter, energy shortages in China
significantly increased the cost of externally
purchased refractory raw materials. Whilst this
cost pressure has eased in the first months of
2022, magnesite, dolomite, alumina and fused raw
material prices remain above 2021 averages and
this has increased pricing for finished refractory
products across the market. The higher raw
material price environment supported refractory
price increases of €127 million during 2021 and
combined with initial savings from our cost
optimisation initiatives to restore the Group’s
EBITA margin to 12.5% in Q4.
2021 was the peak year of capital expenditure on
our Production Optimisation Plan and we have
already completed works at our Hochfilzen,
Urmitz and Vizag plants. As we move through
2022 we will complete plant upgrades,
expansions and modernisation work at Veitsch,
Radenthein, Contagem and Brumado which have
been delayed slightly due to global supply chain
problems and labour shortages. As the new
facilities ramp up we will see material cash flow
benefits from these fast-payback projects and
establish a higher EBITA margin that we believe
is sustainable in the long term.
Whilst uncertainty and volatility will remain
ongoing features of global markets, we are well
positioned to navigate any new challenges that
2022 will bring. This is mainly thanks to the
commitment and dedication of our employees, as
well as the major investments and restructurings
we have undertaken to improve the cost position
and efficiency of our business over the last three
years.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
1 3
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Progress
Outlook
The Production Optimisation Plan progressed well in 2021, with projects
largely on-time and on-budget. In Brazil, the Contagem and Brumado
project capex estimates have increased, largely due to capex inflation, and
Complete the Production
Optimisation Plan by the end
of 2023 to deliver €65 million
there has been a slight delay to the forecast completion date of Brumado,
of annual savings, and €45 million
See
Page 16
nevertheless the project economics remain attractive. A cumulative
EBITA contribution of €22 million from projects already completed was
in 2022
–
recognised in 2021
The Group achieved its SG&A reduction target in 2021, realising an EBITA
run rate saving of €29 million per annum
Maintain low-cost position of raw
material assets to capture additional
value from vertical integration in a
higher raw material price environment
Expanded the business model through increased solutions contract
revenues
Increased sales of digital products and services
Increased recycling of waste refractories
Continue to grow our service
offering and new products
–
Deliver €40 – 60 million of EBITA
contribution from sales strategies
in 2023 with c.€30 million in 2022
See
Page 18
–
–
–
–
–
–
–
Our strategic framework
RHI Magnesita’s strategy is
based on three pillars,
supported by our people and
culture. Our strategic goals are
to improve competitiveness
through cost reductions and
network optimisation, to grow
revenues and margins by
expanding the business model
and to increase market share in
new geographies or product
areas where the Group is
currently under-represented.
Each strategic pillar represents
an opportunity to deliver
significant long-term value for
shareholders, building on the
Group’s existing global footprint.
Our strategic priorities
Competitiveness
Reduce operating costs
The Group’s cost saving initiatives are targeted to deliver
€110 million of annualised EBITA contribution by 2023,
which will largely comprise €30 million in SG&A savings
and €65 million of annual benefit expected from the
Production Optimisation Plan.
Business model
Expand the business model
RHI Magnesita aspires to lead the refractory industry
through its extensive product offering, pioneering
technology and leadership capabilities in research
and development.
Markets
Maintained strong market share in core markets North America, South
Continue to grow the Group’s position
America and Europe
Grow market share in geographies and products
where we are under-represented
The Group has c.15% market share (c.30% ex-China and
East Asia) within a c.€20 billion global market. The Group
is actively seeking out strategic new organic growth and
consolidation opportunities in target geographies
and product groups such as flow control.
Organic growth in new markets China, India and Flow Control
“Local for local” strategy progressed, through decentralising global
functions and creating regional production hubs
Strengthened market position in under-represented business segments
Acquisitions in Turkey and China
as the global leader in refractories
through maintaining core market
share and through actively pursuing
value accretive M&A opportunities,
supported by organic growth in
target markets
See
Page 20
People and culture
Enablers of our strategy
Hire, retain and motivate talent and nurture an innovative,
open, pragmatic and performance-driven culture.
Strong cross-functional collaboration efforts to overcome supply chain
challenges
–
within the organisation
Supported an innovative, open, pragmatic and performance-driven culture
Continue to develop a workforce
of tomorrow at RHI Magnesita,
equipping our people with the
necessary skills required to face
digital disruption, decarbonisation
and external market volatility
See
Page 22
Sustainability
Sustainability leadership
Sustainability is integral to the accomplishment
of the Company’s strategic priorities.
CO2 capture R&D ongoing
Recycling rate now at 6.8%
–
–
Market leader in EAF refractories, essential for steel emissions reduction
Further increase in Group recycling
rates towards 10% goal, with
associated CO2 emissions savings
–
Work with our customers to reduce their
CO2 emissions by applying our leading
digital solutions and advanced refractory
products
–
Improve gender diversity in senior roles
Read more in
Sustainability
Page 56
Read more in
An industry leader
in addressing
carbon emissions
Page 9
1 4
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Our strategic priorities
Competitiveness
Reduce operating costs
The Group’s cost saving initiatives are targeted to deliver
€110 million of annualised EBITA contribution by 2023,
which will largely comprise €30 million in SG&A savings
and €65 million of annual benefit expected from the
Production Optimisation Plan.
Business model
Expand the business model
RHI Magnesita aspires to lead the refractory industry
through its extensive product offering, pioneering
technology and leadership capabilities in research
and development.
Markets
Grow market share in geographies and products
where we are under-represented
The Group has c.15% market share (c.30% ex-China and
East Asia) within a c.€20 billion global market. The Group
is actively seeking out strategic new organic growth and
consolidation opportunities in target geographies
and product groups such as flow control.
Progress
Outlook
The Production Optimisation Plan progressed well in 2021, with projects
largely on-time and on-budget. In Brazil, the Contagem and Brumado
project capex estimates have increased, largely due to capex inflation, and
there has been a slight delay to the forecast completion date of Brumado,
nevertheless the project economics remain attractive. A cumulative
EBITA contribution of €22 million from projects already completed was
recognised in 2021
–
The Group achieved its SG&A reduction target in 2021, realising an EBITA
run rate saving of €29 million per annum
Complete the Production
Optimisation Plan by the end
of 2023 to deliver €65 million
of annual savings, and €45 million
in 2022
–
Maintain low-cost position of raw
material assets to capture additional
value from vertical integration in a
higher raw material price environment
Expanded the business model through increased solutions contract
revenues
–
Increased sales of digital products and services
–
Increased recycling of waste refractories
Continue to grow our service
offering and new products
–
Deliver €40 – 60 million of EBITA
contribution from sales strategies
in 2023 with c.€30 million in 2022
See
Page 16
See
Page 18
Maintained strong market share in core markets North America, South
America and Europe
–
Organic growth in new markets China, India and Flow Control
–
“Local for local” strategy progressed, through decentralising global
functions and creating regional production hubs
–
Strengthened market position in under-represented business segments
–
Acquisitions in Turkey and China
Continue to grow the Group’s position
as the global leader in refractories
through maintaining core market
share and through actively pursuing
value accretive M&A opportunities,
supported by organic growth in
target markets
See
Page 20
People and culture
Enablers of our strategy
Hire, retain and motivate talent and nurture an innovative,
open, pragmatic and performance-driven culture.
Strong cross-functional collaboration efforts to overcome supply chain
challenges
–
Supported an innovative, open, pragmatic and performance-driven culture
within the organisation
Continue to develop a workforce
of tomorrow at RHI Magnesita,
equipping our people with the
necessary skills required to face
digital disruption, decarbonisation
and external market volatility
See
Page 22
Sustainability
Sustainability leadership
Sustainability is integral to the accomplishment
of the Company’s strategic priorities.
CO2 capture R&D ongoing
–
Recycling rate now at 6.8%
–
Market leader in EAF refractories, essential for steel emissions reduction
Further increase in Group recycling
rates towards 10% goal, with
associated CO2 emissions savings
–
Work with our customers to reduce their
CO2 emissions by applying our leading
digital solutions and advanced refractory
products
–
Improve gender diversity in senior roles
Read more in
Sustainability
Page 56
Read more in
An industry leader
in addressing
carbon emissions
Page 9
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
1 5
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Strategic progress in action
Competitiveness
Execute cost
reductions
Cost-competitive global producer of
technologically advanced refractory materials
with safe production network and a focus on
sustainable value generation
EBITA run rate cost savings by 2023
€110m
EBITA margin
11.0%
2020: 11.5%
Refractory production and raw material
optimisation
In 2019, the Group announced its Production
Optimisation Plan to address the challenges such
as transferring capacity from high-cost locations
to lower cost locations, ensure production close to
raw materials and customers and to upgrade and
specialise the plants through creating centres of
excellence. The Group achieves this through
three focal areas: consolidation of existing
capacity, plant specialisation by investing in
automation and digitalisation and raw material
optimisation.
Investments to upgrade the production network
are progressing with slight delays, with full
benefits being realised in 2023 rather than 2022.
Once complete, it will improve the Group’s cost
position and delivery capabilities significantly, as
new facilities start ramping up in 2022. The
Group’s capital allocation policy underpins its
investment programmes, and each of these
individual projects within the programme of work
delivers very demanding internal rates of return.
These investments will improve Group operating
margin and contribute €45 million of run rate
EBITA savings by 2022, and €65 million by 2023.
EBITA run rate benefit will now be fully realised in
2023 given the project delays at Brumado and
the decision to extend the operation of Mainzlar
through 2022. When complete, it will provide
a strong platform for 2023 and beyond through its
unrivalled production network. The production
facility investments will contribute to refractory
margin accretion, geared towards the Group
target of a mid-teen EBITA margin over the
medium term. Its raw material optimisation
should drive efficiencies in its raw material assets,
increasing the vertical integration margin to
3-4 ppts by 2023.
In 2021, we completed the investment project at
Hochfilzen site, Austria. The investment at
Hochfilzen will consolidate European dolomite
production into a single low-cost site which will
supply a new portfolio of internally sourced
dolomitic raw material, following the decision
to exit our partnership with Joint Venture, Lhoist,
Belgium. The Group’s vertical integration in
Hochfilzen will deliver an alternative supply of
high quality, low cost dolomite whilst increasing
the output of raw material and extending asset life.
The Group commenced dolomitic raw material
production in Q4 2021, and construction of the
new rotary kiln at the site completed in Q4 2021
and will continue to ramp up output in 2022.
At the plant in Valenciennes, France, the Group
made progress towards expanding and upgrading
the Company’s only European plant to produce
fired dolomite bricks. This plant investment
includes the installation of an additional press
and a technical upgrade of the powerful tunnel
kiln, inaugurated in September 2021.
1 6
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
We endeavour to achieve cost leadership in
every regional market by optimising our global
portfolio of low-cost raw material assets.
Rajah Jayendran
Chief Operations Officer
Vertical integration advantage
The Group continues to benefit from its vertical
integration in basic raw material, and in 2021
the total EBITA contribution from its raw material
assets was 3.2%. The Group’s vertical integration
is vital to its competitiveness, with c.70% of the
Group’s total magnesite consumption from
its own internally sourced raw material, and
c.50% of its total raw material by value. The
Group strategically benefits from its certainty
of supply and high-quality raw material at low
cost. It benefits from its strategically positioned
production sites, close to its raw material assets,
which underpin the Group’s “local for local”
strategy. Its raw material assets in some cases
provide unique products for specific applications
in the market, with a bespoke blend of recipes
unrivalled by its competitors given its portfolio
of basic raw material sinters.
The raw material required for an electric arc
furnace uses magnesite-based ore and RHI
Magnesita is vertically integrated in this raw
material. The AnkerHearth product series is used
for the hearth of the electric-arc furnace, and uses
the Group’s unique alpine sinter, which is mined
at Hochfilzen, its raw material asset in Austria. The
product has proven to be the clear market leader
given the excellent specifications of the sinter,
positioning RHI Magnesita as a leading refractory
partner of choice in the green transition of the
steel industry.
During 2021 the Group continued to advance
its fully automated production facility at its
Radenthein site, Austria, a flagship digital and
automated plant. In June 2021, the new tunnel
kiln at Radenthein was fired and inaugurated by
Peter Kaiser, Governor of Carinthia. Additional
automated presses and unmanned vehicles were
installed which will drive efficiency savings and
lower production costs, and together with the
high performance of the new kiln, the plant
production is expected to increase by 30%.
In 2022, the Group will complete its capacity
expansion of magnesia-based finished
products, as well as its programme of reduced
conversion costs.
At Brumado, Brazil, the Group’s largest magnesite
raw material asset, we have commissioned a
project to replace eight vertical kilns with one
rotary kiln, which will facilitate the development
of new raw material sinters as well as considerably
extending mine life, by more than double and
enable the production of various dead-burned
magnesia grades annually. The Brumado site is
the lowest cost, highest quality producer of
magnesite, and this project will further increase its
competitiveness of magnesia-based products in
the Americas and other regions. The Group has
developed a new innovative method during the
extraction process to maximise the magnesite
output through using the tailings, which would
have previously been discarded as waste. The site
is well-positioned for ramping up raw material
production in H2 2022, following a delay to the
project due to COVID-19 restrictions.
At Contagem, Brazil, we are automating the
production of magnesite based finished products,
as well as increasing capacity by c.45%.
Contagem will be well positioned to serve its
customer base in the entire Americas region by
the end of 2022. Across 2021, two new hydraulic
presses were commissioned which will increase
production efficiency and capacity, serving the
steel, cement and glass markets. Civil works were
concluded towards the completion of the new
comminution line, with the installation due to
complete in 2022. The Group is commissioning
new grinding lines, where Contagem will be able
to grind electric-fused magnesia, as well as the
magnesia raw material it currently processes from
its raw material asset, Brumado. This will increase
productivity, product quality and stability, whilst
lowering operating costs.
In Urmitz, Germany, the Group is modernising
and expanding the plant to create a new hub for
non-basic refractory products, as well as creating
a flagship site for improved energy efficiency
and recycling. In 2021, the Group advanced the
installation of its tunnel kiln and is on track to ramp
up production in 2022.
In 2021, the Group took the decision to delay
the closure of its Mainzlar site in Germany, given
an unprecedented strength of underlying
demand in 2021, to ensure that the Group can
continue to serve its European customer base as
efficiently as possible. The decision was taken in
order to maintain production capacity in Europe,
whilst Radenthein underwent its planned plant
maintenance as part of the Production
Optimisation Plan, as well as unplanned schedule
maintenance in Q3 2021. The Group consulted
the appropriate unions during its decision making
processes and has agreed to delay the closure
until the end of 2022.
Mainly due to the high inflationary environment
for project construction materials, some of the
individual projects are expected to require higher
capital expenditure during 2022 and 2023,
however other parameters of the project have
moved favourably, and the additional returns
offset the higher capex such that the economics
of the projects remain attractive. Therefore, in
2023 we expect to achieve €65 million of EBITA
run rate benefit from the Production Optimisation
Plan, an increase of €10 million from the original
2022 EBITA run rate target of €55 million.
SG&A savings
In addition to the cost savings identified through
the Production Optimisation Plan, the Group
identified a further €30 million of SG&A savings
during 2020, of which €29 million have been
realised in 2021. We are enhancing regionalisation
and decentralisation of managerial decision
making, and restructured 540 head office roles
into the regional areas, increasing accountability
and accelerating decision making as well as
reducing the cost base by relocating managerial
roles to lower cost locations. This will enable us to
direct SG&A expenses towards growth and
innovation areas of the business as we continue to
execute our strategy.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
1 7
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Strategic progress in action
Business model
Enhance
business model
The leading service and solutions provider in the
refractory industry, with an extensive portfolio
based on innovative technologies and
digitalisation – the building blocks for a strong
and sustainable future.
Sales strategies EBITA run rate savings by
2023
€40-60m
Revenue from solutions contracts
29%
27% in 2020
Solutions business model
The Group’s solutions business model is a key
component of the Group’s sales initiatives, which
will deliver c.€30 million of additional EBITA
by 2022, and €40-60 million by 2023 given
delays related to COVID-19 restrictions. In the
solutions business model, we partner with our
customers, providing consultancy, engineering
and technical capabilities, as well as other services
such as installation and recycling, to drive
efficiency gains for the customer. The Group then
benefits from higher margin solutions packages
over the medium term as well as capturing market
share. We are committed to derive 40% of all
revenue from the solutions business model by
2025, and in 2021, the Group made good progress
towards this target with 29% of all revenue derived
from solutions contracts (2020: 27%).
Digitalisation at our customer sites
The solutions business model is augmented
by RHI Magnesita’s range of digital products,
which increases our sales effectiveness through
allowing an increasing level of transparency
for the sales team as well as providing greater
insights for the customer into their operations.
This innovative approach enables a data driven
and holistic sales method, disrupting the way
the industry has traditionally done business.
Increased use of digital tools at our customer sites
also improves our customers’ process efficiency
and quality. These digital products are proving to
drive greater market penetration in new markets,
as well as defend market share in core markets
with existing customers.
Following the successful roll out of the
Automated Process Optimisation (“APO”) tool
(used in the steel and non-ferrous metals (“NFM”)
industries), used to improve predictability of lining
wear rates, we developed a similar tool for the
cement industry in 2021. In 2021, we successfully
rolled out the APO tool to 20 customers, which is
double that of 2020. We also successfully trialled
the APO tool for cement at one major customer
site. The APO tool is used by the customer to
measure the wear rates of the refractory lining
using lasers and infra-red thermo cameras. This
creates a digital twin which can in turn predict
maintenance cycles and lining durability, which
enhances safety and reduces downtime. In 2021,
we also celebrated the first installation of the
Quick Check (“QCK”) in USA, innovative image
processing technology which can be used to
monitor the lining wear measurements. In 2021
the Group also introduced to its digital product
portfolio the Mechanical Kiln Audit, a novel way to
evaluate the mechanical condition of a rotary kiln.
This enables the customer to improve
maintenance measures and to optimise the
refractory layout as well as installation
procedures. The audit supports early detection of
upcoming issues so that cost-effective
preventative maintenance can be carried out.
We introduced the ladle slag model in 2021,
where RHI Magnesita, working with its customers,
discovered a novel solution whereby customers
can perform adjustments of the slag within the
ladle furnace. The ladle slag model provides more
accurate calculations that allow for faster decision
making.
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R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
We are constantly innovating to find new ways
of supporting our customers and being the
partner of choice in the refractory industry.
Luis Bittencourt
Chief Technology Officer
To ensure a seamless customer experience we
have recently introduced connected machinery.
Through connected machinery, our customers
have end-to-end oversight of the refractory
lifecycle in their plant through both data driven
predictive maintenance and machine-driven
warehouse management, based on measured
refractory consumption and prediction of future
consumption. Connected machinery can
independently trigger material orders and
maintenance cycles, and subsequently, Radio
frequency identification (“RFID”) technology
can be applied to record and track all material
movements.
Virtual reality has supported our ability to work
effectively throughout the pandemic, and RHI
Magnesita was able to conduct a virtual plant
tour and audit using “Smart Glasses” from its ISO
plant at Bonnybridge, Scotland, at the request
of a customer in April 2021. The customer’s
representatives were afforded the opportunity to
observe and ask questions about Bonnybridge
remotely from their sites in Finland and Sweden.
The outcome of the audit was positive, with the
customer ordering a trial product from the plant.
Our sales teams are able to access their customer
data holistically through the new CRM tool, which
provides valuable information to the sales team
through profiling the customer, based on historic
data points, and they can then use this data to
predict future customer requirements. Data
obtained through our digital applications installed
within the customer plants are then accessible
through the portal, providing the sales team with
a myriad of data points to support their decision
making to drive profitability as well as generate
efficiency savings for the customer.
Digital transformation in operations
In partnership with Rockwell Automation, the
Manufacturing Execution System (“MES”) was
developed, which comprises computerised
systems that are installed to track and document
manufacturing processes from the raw material to
the finished product. By fostering comprehensive
real-time visibility, we will gradually optimise our
production network and processes across the
organisation. Radenthein, Austria and Dalian,
China, our flagship digitalisation and automation
plants are pilot plants to be transformed into
“Smart Factories”. Both of these plants started the
implementation phase of the process in Q3 2021.
The underlying technology connects multiple
locations, integrating machinery, equipment,
quality management systems and other essential
components of the manufacturing process. The
MES will automate production planning, collect
real-time data, increase overall manufacturing
performance and speed up digital transformation
and execution. The MES is scheduled to be
complete in the two pilot plants by integrating
with other automation and planning solutions
in Q4 2022, and upon successful completion,
will be rolled out more widely across the
production network.
Recycling
Recycling and our circular economy approach
are key to achieving our ambitious emissions
reduction targets. The Group is targeting to
increase its recycling rate to 10% by 2025 from
2018, which will be a significant driver of the
Group’s wider CO2 emission reduction target of
15% by 2025. In 2021, we continued to focus on
circular contracts with customers, and build
technology leadership through our own R&D
developments. In South America we made
substantial progress, registering a record
collection of spent refractories, thanks to the
combined efforts of our dedicated circular
economy team, partnering with the sales teams to
provide waste disposal solutions for our
customers. We signed a circular contract with
Ternium CSA to dispose of 100% of the plant’s
spent refractory; we’ve collected more than 80%
of the spent refractory produced by all cement
companies in Brazil; and recently we purchased
refractory waste for the first time in the glass
industry, to better understand recycling
technology from this product segment. The
region achieved an 8% recycling rate in 2021.
The spent refractory material can then be used
in new products as secondary raw materials,
such as in the low-carbon product ANKRAL LC
series. By including secondary raw material,
these products then have a significantly lower
CO2 footprint whilst maintaining the technical
specification and high performance of a product
made using virgin raw material.
Innovation and R&D
Underpinning the business model is the Group’s
ability to innovate and adapt its products and
services to best serve its customers' evolving
needs and requirements. Our industry-leading
R&D team is fundamental to the strategy and
long-term aspirations of the Group, with a 563
workforce which includes a combined total of 148
PhDs and masters, across five technology centres.
The Group committed 2.5% revenue to R&D and
Technical Marketing in 2021 and achieved 16% of
total revenue from new products in the last three
years (2020: 16%). We are committed to
protecting the integrity of our expanding
intellectual property, and currently have 1572
active patents and 1,707 active trademarks globally.
The Technical Advisory Committee (TAC) was
established in 2018 and includes representation
from senior external professionals, R&D and
technical marketing teams. Board directors have
also attended TAC meetings on occasion to learn
more about areas of innovation. In 2021, the TAC
considered the topic of high temperature sensors
for harsh environments and external experts
were invited to evaluate how we could utilise
technologies from extreme environment
applications for supporting the development
of our future sensor technologies.
We are constantly innovating and pioneering the
production of both raw materials and refractories.
An example of this is the Spinosphere technology
used in our ANKRAL-X series, with its unique
characteristics in terms of clinker-melt resistance
and flexibility for rotary kiln bricks. In March
2021, we celebrated the opening of the new
Spinosphere Tower at our Veitsch site in Austria,
which is fully integrated into the already existing
fully automated mixing plant in Veitsch to
maximise capacity, increasing the competitive
advantage of the plant.
We recognise the importance of adapting to a
changing world, which involves more digitalisation,
increased connectivity, disruptive technologies
and a requirement for more sustainable products
and processes. For this reason, we have developed
a 15-year innovation roadmap, ensuring that we
continue to lead the industry through pioneering
technology. We have identified eight innovation
fields and areas which will be of focus, including
recycling, pioneering production routes, hydrogen
compatibility, new refractory solutions, new flow
control solutions, new mining and carbon capture
and utilisation. The carbon capture and utilisation
project was launched in 2021, and we aim to have
the technology solution by 2025 which will create
the path for a full decarbonisation of the Company.
Read more on our Climate strategy
Page 61
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1 9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Drive market
leadership
The Group has c.15% global market share
(c.30% ex-China and East Asia) within a
c.€20 billion industry, worldwide presence
with strong local organisations and solid
positions in all major markets.
Strategic progress in action
Markets
Revenue from India and China in 2021
18%
2020: 16%
Enhancing regionalisation
RHI Magnesita’s refractories business is driven by
our core customer markets; Steel, Cement & Lime
and a variety of other industries like non-ferrous
metals, glass, foundry, energy, environment and
chemicals and aluminium. Their demand is driven
by construction (45%), automotive (17%),
electronics and consumer goods (15%),
machinery and equipment (10%), energy, oil and
gas (5%), and others (8%). Currently, RHI
Magnesita has a c.15% market share globally
(c.30% ex-China and East Asia) within a €20
billion industry; it commands worldwide presence
within strong local organisations and solid
positions in all major markets.
Underpinning our strategy within these markets
are key megatrends, which will influence the
strategy and ultimately shape the Company in
the future. The trends shaping our industry today
include continued growth in Asia (ex-China),
the decarbonisation of industry and transport,
connectivity and digitalisation, automation and
artificial intelligence, volatility and regionalisation.
The Steel Division contributes c.70% of Group
revenue, and demand for refractory products
correlates with steel volumes. In 2021, global
steel production increased by 4-5% driven by
the strong economic rebound following the
impact of the pandemic during 2020, with the
V-shaped recovery in steel demand exceeding
expectations, especially in emerging economies.
Strong demand was driven by global fiscal stimuli
of over $20 trillion as part of worldwide COVID-19
response. Fiscal stimuli packages will particularly
benefit construction projects globally, main
drivers for our Steel and Cement businesses,
and consumer demand for durable goods, a key
consuming sector for Steel, Stainless Steel and
NFM. However, the sharp rebound of demand has
led to supply chain disruption in logistical costs
including freight, raw material availability and
labour shortages, leading to unpredictability
in our value chain and longer production lead
times. The supply chain issues materially
impacted both RHI Magnesita and also its end
markets, particularly automotive. Automotive
experienced a surge in customer demand
during 2021; however, given the tight supply
of semiconductor microchips, steel and other
key inputs, production of Automotive materially
softened in H2 2021.
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R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
By decentralising decision making to the
regions, we aim to become more flexible,
adaptable and responsive to evolving
customer needs.
Gustavo Franco
Chief Sales Officer
Growth markets
RHI Magnesita’s end market growth rates
excluding China are between 1-2%. The Group
has therefore identified pockets of growth which
represent a strategic opportunity in market
regions such as India, China and Turkey, as well as
in the product segment, Flow Control and
non-basic. The Group’s approach to M&A is to
capture value-adding consolidation opportunities
in under-represented markets. The Group has a
disciplined approach to M&A and identifies
targets with compelling synergies and a hurdle
rate of 15% return on invested capital.
In China, the Group continued to make good
progress in expanding its presence in both Steel
and Industrial, with 20% revenue increase
compared to 2020. With China being the
unrivalled largest steel producer in the world,
this market represents a significant growth
opportunity for the Group. Despite total Chinese
steel output being capped by government
policies to 2020 levels, many new Electric Arc
Furnaces are currently in the pipeline to start
transitioning the Chinese steel industry to a
modern CO2 efficient state. These projects
represent a major growth opportunity. The
Group leverages its unique capabilities through
its solution offering and digital applications
compared to its regional competitors which
generally have a more commoditised approach.
In 2021 the Group successfully agreed two new
solutions contracts. On 30 December 2021 the
Group acquired a 51% ownership stake in
“Chongqing Boliang Refractory Materials Co. Ltd.”
for a cash consideration of €5 million and an
investment of c.€12 million in new production
capacity, to be deployed in 2022 and 2023 with
an IRR of over 25%. The acquisition and joint
venture investment will establish output of
non-basic refractories alongside a recently
constructed and fully automated plant in
Chongqing, China, that will complement the
Group’s existing magnesite-based operations in
Dalian and deliver a full range of refractory
products for cement customers in China and
Southeast Asia.
The Group has agreed to acquire a 85% stake
in Söğüt Refrakter Malzemeleri Anonim Şirketi
(“SÖRMAŞ”), a producer of refractories for the
cement, steel, glass and other industries in Turkey,
for a consideration of €39 million in cash. The
asset recorded €6 million EBITDA in 2020 and
we expect to benefit from at least 30% EBITDA
synergies. The acquisition will significantly
expand the Group’s locally manufactured product
portfolio and serve as a production hub and
platform for business growth in Turkey and the
wider region. With an enlarged product portfolio,
further potential stems from the opportunity to
deliver full-line service solutions to customers in
Turkey.
India continues to be a very attractive growth
opportunity for the Group, maintaining second
position as the world’s largest steel producer in
2021, driven by domestic availability of raw
material such as iron ore and competitive labour
costs. The World Steel Association short range
outlook forecasts that steel in India is going to
grow significantly by 6.8% in 2022 given India’s
comparatively low per capita steel consumption
which is expected to rise. This will be driven by
increased infrastructure construction and the
thriving automotive and transportation sectors.
The creation of the single RHI Magnesita entity
in India, following the merger of three separate
entities, has created a strong platform in the India
market, primed to benefit from the strong growth
opportunity. Of production, 35% is supplied to
customers in international markets, whilst 65% is
consumed in India’s domestic market. In October
2021 a new tunnel kiln was commissioned at
the Vizag plant, India. The new tunnel kiln will
increase the capacity of non-basic high alumina
content refractory bricks by almost 20%. The
Group also invested in capacity expansion of
magnesia-based refractory products at its
Cuttack plant, increasing production significantly,
and freeing up local capacity in China. The Group
will fully start to realise the benefits from its
investments in its Vizag and Cuttack plants in
2022, in alignment with the market’s considerable
growth trajectory.
Core markets
RHI Magnesita is focused on defending and
subsequently expanding its market share in core
markets, Europe and the Americas, and is
committed to further strengthening its position
in these markets though its unrivalled solutions
product offering, augmented by its advanced
digital product portfolio. We remain the clear
market leaders in the Americas, with approximate
market share of c.65% in South America and
market share of c.40% in North and Central
America, thanks to the success of the solutions
business model, and through its leading position
in supplying electric arc furnaces. Market share in
Europe is around 20% where we focus on our
value optimisation strategy, delivering our suite of
products as cost effectively as possible.
Flow control
Flow control systems play a crucial role on
the continuous casting floor, as they ensure an
uninterrupted and highly precise flow regulation
from the ladle to the tundish and from the tundish
to the mould. Our holistic approach in Flow
Control reaches from ladle to mould, comprising
all relevant aspects of the Flow Control process
from systems, to refractories, to metallurgy. Our
innovative solutions ensure the highest possible
safety standards, whilst delivering better
metallurgical results for our customers.
In 2021, we launched our first global, multi-
channel Flow Control marketing campaign
“Beyond Refractories”. Starting in South America
and Mexico, the campaign informs existing and
potential customers about our Flow Control
solutions packages for clean steel, safety,
productivity, and green steel. It addresses key
challenges in Flow Control and showcases how to
master them by using RHI Magnesita’s customised
solutions. Thus, the campaign builds customer
awareness and demonstrates ways to achieve
steel of the highest possible quality, maximise
safety in challenging working environments, drive
process efficiencies and reduce their carbon
footprint.
To find more information on the individual
solutions, visit the campaign website
www.beyond-refractories.com
Flow Control contributed €430 million of
revenue in 2021 from (€380 million in 2020),
and was broadly in line with 2019 revenue. Flow
Control contributed 16.9% of Group revenues in
2021, broadly stable compared to 2020 (16.9%).
However, 2021 revenue contribution from Flow
Control was a marked improvement on 2019
(15.3%). We are delayed by one year in the Flow
Control segment, given lack of access to
customer sites during the COVID-19 restrictions.
It is therefore well positioned to reach its target
contribution towards the sales initiatives in 2023,
rather than, as previously guided, in 2022. The
sales initiatives will contribute a combined total
EBITA run rate of €30 million by 2022, and €40
– 60 million in 2023.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
2 1
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Strategic progress in action
People and Culture
The driving force
of our strategy
Our skilled, motivated people, our customer-centric
culture and our strong stakeholder partnerships are
critical to the long-term success of the Group.
Tenure
Up to 3 years
From 4 to 6 years
From 7 to 9 years
Over 10 years
33%
17%
11%
39%
Workforce
South America
Western Europe
Asia Pacific
North America
Near and Middle East
Eastern Europe
Africa
37%
28%
21%
10%
2%
1%
0%
Our purpose and culture support
our strategy
Our purpose is to master heat, enabling global
industries to build sustainable modern life.
Our culture has underpinned our foundations
in supporting our business through another
challenging year in 2021, where our workforce
has continued to demonstrate the powerful
elements of our culture, such as customer-
focused pragmatism and performance, a
philosophy at the heart of everything we do.
The culture is based on four segments. We boldly
innovate to create value for our customers, by
providing the best digital and sustainable
solutions. Our open mindset and transparent
way of working is centred around a diverse
and inclusive business environment. We act
pragmatically to enable fast and simple
collaboration across functions and regions to
serve our customers best. Our high performance
is rooted in accountability and responsibility. We
are a reliable and resilient partner that decides
and delivers based on our customers’ needs.
To reinforce our culture, we regularly host
regional and functional townhalls, encouraging
collaboration and an open dialogue between
employees and senior leadership. Our three
employee representatives directors provide an
effective, direct voice in the boardroom on a range
of issues, in particular those which directly impact
the workforce, such as remuneration and any
issues arising as part of the plant changes and
closures from the Production Optimisation Plan.
Read more on how we engage with our
employees
Pages 52 and 53
Creating the leaders of tomorrow
We foster employee development and recognise
the unparalleled importance of creating the leaders
of tomorrow in order to execute the strategy. We
have improved our readiness in the workforce for
more volatility, unexpected market changes and
long-term disruption. Through various initiatives,
we are equipping ourselves with the necessary
skills required to prosper in a net-zero industry, grow
our digital capabilities to create an increasingly
data-driven platform and lastly, thrive in growth
markets such as India and China.
In 2021, we rolled out the digital sales
transformation programme, designed to enhance
the digital analytics culture of the sales
organisation across the globe through the CRM
tool. This will equip the sales team with new ways
to sell our solutions to customers. To be
successful, digital mindset needs to be
embedded into every aspect of business.
Our digital hub in Vienna, Austria, is dedicated to
leading the refractory industry, from big data to
blockchain in refractory applications, providing our
customers with a market-leading digital offering to
support our suite of products and services.
Radenthein, Austria, is the most technologically
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R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
advanced plant in the global refractory industry
and now serves as the new apprentice hub in
Austria. The plant enjoyed its first full year of
apprentice training in process technology in 2021,
to supplement its core training programme and
also launched its new training facility.
At the training centre in Leoben, Austria, we
launched an academy to provide our employees
and our customers with training in the installation
of refractory bricks within the lime kiln. The
trainings are based on the proven fundamentals
from the highly successful cement courses at the
centre but adapted to Lime specific elements. The
training centre for cement at Leoben, celebrated
its 10-year anniversary in 2021, offering
state-of-the-art training, and over that time has
shared specialist knowledge and experience with
more than 550 customers from the cement
sector, specialists from related industries and
in-house professionals from various countries
with over 50 courses having been held.
Supporting our workforce through
a challenging year
During 2021, the Group’s first priority in its
COVID-19 response was to protect the safety and
wellbeing of our employees and others that work
alongside us. Our regional taskforces established
in 2020 continued to work tirelessly during 2021,
responding to challenges throughout the year
on a regional basis and taking guidance from the
World Health Organization (“WHO”), Centres for
Disease Control and Prevention (“CDC”), local
In order to progress our goal of digitalisation,
we need the skills and pioneering culture to
support technology.
Simone Oremovic
Executive VP People, Project
and Value Chain
governments and other sources. We
implemented a remote working strategy where
possible in the corporate offices. We continued
to implement safety protocols at our production
facilities and offices worldwide, including the
provision of personal protective equipment
(“PPE”), infra-red camera temperature checks,
increased cleaning, testing strategies and a global
vaccination drive. In response to the devastating
second wave in India throughout spring 2021,
we deployed a focused vaccination drive in the
region. The vaccination drive has meant that
every employee of any age, their families and
residents of communities nearby have been
offered at least one dose of the vaccine, and in
October 2021, 100% of employees in the Indian
plants including contractual workforce, had
received at least one dose. By December 2021,
more than half had received two doses. The plant
management and safety teams conducted
vaccination initiatives at the plants including
vaccination registration and support, helping
to achieve its vaccination success rate.
We ensure that our employees are as protected
as possible during the pandemic and we made a
concerted effort in our vaccination drive in certain
regions that were most affected and had less
access to healthcare, like South America. By
31 December 2021, a total of 99% of the entire
workforce in South America had received their
first dose of a COVID-19 vaccine, and 81% of
employees had received two doses.
Throughout this past challenging year, it has been
more important than ever to make sure that our
employees are offered support for mental health
and wellbeing. To help support employees during
this extraordinary time, we launched the Head
Office (Vienna) based employee assistance
programme, “Consentiv”, which offers
anonymous face-to-face services including
counselling, coaching, mediation and conflict
intervention for all Vienna based employees and
their families. Outside of Vienna, we have
partnered with local external providers around
the world in order to offer support to our
employees internationally. We believe in creating
an organisation where everyone has someone to
turn to for support with both professional and
personal issues.
Building a diverse, equitable and inclusive
workforce
The Group launched its first ever global graduate
trainee programme in 2020, the “Refractory
Factory”, with our first intake now approaching the
end of their 18-24 month leadership journey.
Graduate trainees have worked on rotational
assignments across Finance, Sales or R&D,
participated in strategic growth projects and
worked in at least two locations. The trainee
programme is designed to bring young talent into
our business, helping us to build a multi-
generational workforce. Our latest graduate
intake recruited during 2021 for 2022 included 21
trainees across 11 nationalities and with 57%
female representation.
The Group is committed to increasing its gender
diversity at leadership level, and in 2021
welcomed five new Directors to the Board,
including three independent Non-Executive
Directors and two employee representatives.
Following these new appointments, Board female
representation is now 38%. Currently, 22% of
all senior leadership positions are held by females
which includes the EMT and their direct reports.
RHI Magnesita’s goal is to increase the share of
female leaders to 33% by 2025.
To help us succeed in the future we require the
broadest range of talent and perspectives from
a varied workforce, especially in terms of gender
diversity, international representation and
generation management. At RHI Magnesita, we
are committed to offering inclusion to everyone,
and discrimination has no place at our Company.
To increase our efforts to expand diversity within
our workforce, a dedicated Global Diversity
Steering Committee was established in June
2021, followed by Regional Diversity Steering
Committees in the regions. The purpose of the
committees is to promote global and regional
measures to increase diversity, keep track of
progress and coordinate rollout with line
functions. In December 2021, the Executive
Management Team committed to executing
a new and impactful diversity strategy with a
greater focus on gender diversity in 2022.
Read more on diversity and inclusion
Page 65
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
2 3
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Key performance
indicators
The Board and management
have identified the following
indicators which it believes
reflect the financial and
non-financial performance
of the business.
2021
2018
2019
2020
Safety: LTIF
Relative CO2 emissions
(t CO2/t)
Revenue
Adjusted EBITA margin
Adjusted EPS
0.18
0.13
0.28
0.43
2021
2020
2019
2018
1.82
1.96
1.85
1.89
2021
2020
2019
2018
€2,551m
€2,259m
€2,922m
€3,081m
2021
2020
2019
20181
11.0%
11.5%
14.0%
13.9%
2021
2020
2019
2018
€4.52
€3.28
€5.57
€5.31
The non-financial
information, as presented
within the Director’s Report,
which in this document
comprises the Strategic report
and Governance section of
this Annual Report, complies
with the Dutch Disclosure of
Non-Financial Information.
Link to strategy
Business model
Competitiveness
Markets
KPI relevance
KPI relevance
KPI relevance
KPI relevance
KPI relevance
Safety is paramount to the successful running of our
business. Lost Time Injury Frequency (“LTIF”) is the main
indicator used to measure safety performance.
The Group’s goal is zero accidents.
Climate change poses strategic and operational risks
to our business, as well as opportunities. The Group’s
target is to reduce Scope 1, 2, 3 (raw materials) by 15%
per tonne of product by 2025 (vs 2018).
This demonstrates the growth of the business.
EBITA margin provides a measure of profitability
Reflecting the income statement in a clear way and
By increasing our global refractory market share,
and demonstrates the successful execution of the
taking the equity structure into account, the Board
continually enhancing our product and service offering,
Company’s strategy.
the Company is focused on achieving revenue growth
and aims to outperform the refractories market on an
believes Adjusted EPS to be one of the indicators which
demonstrates shareholder value.
How it is measured
How it is measured
How it is measured
How it is measured
annual basis.
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.
Tonnes of total Scope 1, 2, 3 (raw materials) carbon
emissions per tonne of product. Scope 1 emissions
consist of on-site emissions, Scope 2 comprise
purchased electricity, and Scope 3 are measured from
raw materials production.
2021 performance
LTIF was 0.18 in 2021 (2020: 0.13) and TRIF (Total
Recordable Injury Frequency) increased slightly to 0.60
(2020: 0.45), broadly in line with industry averages. The
rate of occupational injuries increased slightly compared to
the prior year as staff returned to workplaces following the
COVID-19 pandemic, production volumes increased and
as the Group progressed construction projects at several of
its sites as part of its network optimisation.
2021 performance
CO2 emissions intensity reduced to 1.82 tCO2 per tonne of
product, compared to 1.96 in 2020. Higher Scope 3
emissions from externally purchased raw materials were
offset by efficiencies from high plant utilisation, increased
purchases of electricity from renewable sources,
improved energy efficiency, higher use of secondary
raw material and an increase in production of fused
magnesia at the Group’s Contagem site in Brazil using
renewable electricity.
Total Group revenue, as reported in the financial
Adjusted EBITA divided by revenue, as reported in the
Earnings per share, excluding other financial income
statements.
financial statements.
and expenses.
2021 performance
2021 performance
2021 performance
Revenue for 2021 amounted to €2,551 million, 13% higher
The Group delivered a double-digit adjusted EBITA margin
Adjusted EPS of €4.52 (2020: €3.28) reflected higher
than 2020 given increased customer demand driven by
of 11.0%, 50bps lower than 2020 due to increases in
operating profits and a reduced share count due to the €98
the rebound of end market activity, following the adverse
freight, externally purchased raw material and energy costs
million share buyback programme (thereof €96 million
impact of the COVID-19 pandemic in 2020.
that were not fully passed on to customers during 2021.
share buyback in 2021 and €2 million share buyback in
Use of secondary
raw materials1
2021
2020
2019
2018
5.0%
4.6%2
3.8%
6.8%
Voluntary employee
turnover
Gender diversity in
leadership
2021
2020
2019
2018
6.8%
5.1%
6.2%1
6.6%
22%
25%
2021
2020
2019
2018
17%
12%
Leverage
2021
2020
2019
20181
1.5x
1.2x
1.3x
2.6x
ROIC
2021
2020
2019
2018
9.6%
11.5%
15.3%
16.5%
KPI relevance
KPI relevance
KPI relevance
KPI relevance
KPI relevance
KPI relevance
2020).
2021
2020
2019
2018
R&D and Technical
Marketing spend
€63m
€62m
€64m
€63m
Recycling plays a critical role in achieving our 2025
emissions reduction target while also developing the
circularity of our business. Our target is to reach 10%
secondary raw material (“SRM”) content in refractories
by 20253
Voluntary turnover is one way of measuring the Group’s
success in retaining its employees.
Diversity is important in terms of maintaining our
competitiveness and economic success, and gender
diversity is our first priority. Our target is to increase
female representation in senior leadership to 33% by
2025.
How it is measured
How it is measured
How it is measured
Share of SRM content as a percentage of total raw
materials.
2021 performance
SRM accounted for 6.8% in 2021, compared with 5.0%
in 2021. The strong progress made during the year was due
to new initiatives to increase collection and processing of
material from customer sites combined with an internal
incentive scheme designed to reward sales of refractories
with higher recycling content.
The percentage of employees who voluntarily left the
Company during the year and were replaced by new
employees.
2021 performance
Voluntary employee turnover was 6.8% for 2021, in line
with historic averages but an increase on the rate of 5.1%
recorded in 2020, when staff turnover was temporarily
lower due to the COVID-19 pandemic and associated
uncertainty in the global economic environment.
Number of women as a percentage of all those in
leadership positions (CEO, EMT and EMT direct reports).
2021 performance
Female representation at leadership level decreased to
22% from 25%. The Group is pursuing a number of
initiatives to increase female representation toward target
level.
1 A change in production volume reporting system has led to an
1 The 2019 figure has been restated due to a retrospective
adjustment to the 2018 baseline and KPI.
change to the basis of analysis.
2 The value for the recycling rate for 2019 has been revised since
the publication of the 2019 Annual Report.
3 Use of SRM has been added as a remuneration performance
measure from 2021 – see page 121.
2 4
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Appropriate leverage provides the business with
Return on invested capital (ROIC) is used to assess the
Excellence in R&D and strong Technical Marketing
headroom for compelling investment opportunities
Group’s efficiency in executing its capital allocation
capabilities are key contributors to our competitiveness.
but also enables shareholder distribution. The Board has
strategy, which is aimed at enabling organic growth,
This demonstrates our commitment to driving innovation
defined a long-term leverage target range of 0.5 to 1.5x
disciplined M&A and shareholder returns.
across the cycle.
and to being the leading provider of services and
solutions within the refractories industries. The
Company aims to invest 2.2% per annum of revenue
in R&D and Technical Marketing.
How it is measured
Net debt to adjusted EBITDA.
How it is measured
How it is measured
Calculated as net operating profit after tax, divided by
Annual spend on research and development,
total invested capital1 for the year.
before subsidies and including opex and capex.
2021 performance
2021 performance
2021 performance
Net debt to adjusted EBITDA was 2.6x at the year end,
ROIC decreased from 11.5% in 2020 to 9.6%, due to
€63 million was committed to R&D and Technical
above Group’s target range of 0.5-1.5x due to a material
lower underlying profitability against comparative
Marketing in 2021, equating to 2.5% of revenues,
exceeding the Group’s annual commitment of 2.2%.
increase in inventory levels during 2021 to mitigate
invested capital.
supply chain disruptions and high capital expenditure
on strategic initiatives.
1 2018 was adjusted to include the impact of IFRS 16.
1 Invested capital is: total assets less cash and cash equivalents,
other current and non-current financial assets and
non-interest-bearing current liabilities.
Safety: LTIF
2021
0.18
2020
0.13
2019
2018
0.28
0.43
Relative CO2 emissions
(t CO2/t)
2021
2020
2019
2018
1.82
1.96
1.85
1.89
Safety is paramount to the successful running of our
Climate change poses strategic and operational risks
business. Lost Time Injury Frequency (“LTIF”) is the main
to our business, as well as opportunities. The Group’s
indicator used to measure safety performance.
target is to reduce Scope 1, 2, 3 (raw materials) by 15%
The Group’s goal is zero accidents.
per tonne of product by 2025 (vs 2018).
The Board and management
have identified the following
indicators which it believes
reflect the financial and
non-financial performance
of the business.
The non-financial
information, as presented
within the Director’s Report,
which in this document
comprises the Strategic report
and Governance section of
this Annual Report, complies
with the Dutch Disclosure of
Non-Financial Information.
determined on a monthly basis.
consist of on-site emissions, Scope 2 comprise
purchased electricity, and Scope 3 are measured from
raw materials production.
Link to strategy
2021 performance
2021 performance
Business model
Competitiveness
Markets
LTIF was 0.18 in 2021 (2020: 0.13) and TRIF (Total
CO2 emissions intensity reduced to 1.82 tCO2 per tonne of
Recordable Injury Frequency) increased slightly to 0.60
product, compared to 1.96 in 2020. Higher Scope 3
(2020: 0.45), broadly in line with industry averages. The
emissions from externally purchased raw materials were
rate of occupational injuries increased slightly compared to
offset by efficiencies from high plant utilisation, increased
the prior year as staff returned to workplaces following the
purchases of electricity from renewable sources,
COVID-19 pandemic, production volumes increased and
improved energy efficiency, higher use of secondary
as the Group progressed construction projects at several of
raw material and an increase in production of fused
its sites as part of its network optimisation.
magnesia at the Group’s Contagem site in Brazil using
renewable electricity.
Revenue
Adjusted EBITA margin
Adjusted EPS
2021
2020
2019
2018
€2,551m
€2,259m
€2,922m
€3,081m
2021
2020
2019
20181
11.0%
11.5%
14.0%
13.9%
2021
2020
2019
2018
€4.52
€3.28
€5.57
€5.31
KPI relevance
KPI relevance
KPI relevance
KPI relevance
KPI relevance
This demonstrates the 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
Company’s strategy.
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
demonstrates shareholder value.
How it is measured
How it is measured
How it is measured
How it is measured
How it is measured
The number of accidents resulting in lost time of more
Tonnes of total Scope 1, 2, 3 (raw materials) carbon
than eight hours, per 200,000 working hours,
emissions per tonne of product. Scope 1 emissions
Total Group revenue, as reported in the financial
statements.
Adjusted EBITA divided by revenue, as reported in the
financial statements.
Earnings per share, excluding other financial income
and expenses.
2021 performance
Revenue for 2021 amounted to €2,551 million, 13% higher
than 2020 given increased customer demand driven by
the rebound of end market activity, following the adverse
impact of the COVID-19 pandemic in 2020.
2021 performance
The Group delivered a double-digit adjusted EBITA margin
of 11.0%, 50bps lower than 2020 due to increases in
freight, externally purchased raw material and energy costs
that were not fully passed on to customers during 2021.
2021 performance
Adjusted EPS of €4.52 (2020: €3.28) reflected higher
operating profits and a reduced share count due to the €98
million share buyback programme (thereof €96 million
share buyback in 2021 and €2 million share buyback in
2020).
Use of secondary
raw materials1
2021
2020
2019
2018
5.0%
4.6%2
3.8%
6.8%
Voluntary employee
turnover
Gender diversity in
leadership
2021
2020
2019
2018
6.8%
5.1%
6.2%1
6.6%
22%
25%
2021
2020
2019
2018
17%
12%
Leverage
2021
2020
2019
20181
1.5x
1.2x
1.3x
2.6x
ROIC
2021
2020
2019
2018
R&D and Technical
Marketing spend
9.6%
11.5%
15.3%
16.5%
2021
2020
2019
2018
€63m
€62m
€64m
€63m
KPI relevance
KPI relevance
KPI relevance
KPI relevance
KPI relevance
KPI relevance
Recycling plays a critical role in achieving our 2025
Voluntary turnover is one way of measuring the Group’s
Diversity is important in terms of maintaining our
emissions reduction target while also developing the
success in retaining its employees.
competitiveness and economic success, and gender
diversity is our first priority. Our target is to increase
female representation in senior leadership to 33% by
2025.
Appropriate leverage provides the business with
headroom for compelling investment opportunities
but also enables shareholder distribution. The Board has
defined a long-term leverage target range of 0.5 to 1.5x
across the cycle.
Return on invested capital (ROIC) is used to assess the
Group’s efficiency in executing its capital allocation
strategy, which is aimed at enabling organic growth,
disciplined M&A and shareholder returns.
circularity of our business. Our target is to reach 10%
secondary raw material (“SRM”) content in refractories
by 20253
Excellence in R&D and strong Technical Marketing
capabilities are key contributors to our competitiveness.
This demonstrates our commitment to driving innovation
and to being the leading provider of services and
solutions within the refractories industries. The
Company aims to invest 2.2% per annum of revenue
in R&D and Technical Marketing.
How it is measured
How it is measured
How it is measured
Share of SRM content as a percentage of total raw
The percentage of employees who voluntarily left the
Number of women as a percentage of all those in
materials.
Company during the year and were replaced by new
leadership positions (CEO, EMT and EMT direct reports).
How it is measured
Net debt to adjusted EBITDA.
How it is measured
How it is measured
Calculated as net operating profit after tax, divided by
total invested capital1 for the year.
Annual spend on research and development,
before subsidies and including opex and capex.
employees.
2021 performance
2021 performance
2021 performance
SRM accounted for 6.8% in 2021, compared with 5.0%
Voluntary employee turnover was 6.8% for 2021, in line
Female representation at leadership level decreased to
in 2021. The strong progress made during the year was due
with historic averages but an increase on the rate of 5.1%
22% from 25%. The Group is pursuing a number of
to new initiatives to increase collection and processing of
recorded in 2020, when staff turnover was temporarily
initiatives to increase female representation toward target
material from customer sites combined with an internal
lower due to the COVID-19 pandemic and associated
level.
incentive scheme designed to reward sales of refractories
uncertainty in the global economic environment.
with higher recycling content.
1 A change in production volume reporting system has led to an
1 The 2019 figure has been restated due to a retrospective
adjustment to the 2018 baseline and KPI.
change to the basis of analysis.
2 The value for the recycling rate for 2019 has been revised since
the publication of the 2019 Annual Report.
3 Use of SRM has been added as a remuneration performance
measure from 2021 – see page 121.
2021 performance
Net debt to adjusted EBITDA was 2.6x at the year end,
above Group’s target range of 0.5-1.5x due to a material
increase in inventory levels during 2021 to mitigate
supply chain disruptions and high capital expenditure
on strategic initiatives.
2021 performance
ROIC decreased from 11.5% in 2020 to 9.6%, due to
lower underlying profitability against comparative
invested capital.
2021 performance
€63 million was committed to R&D and Technical
Marketing in 2021, equating to 2.5% of revenues,
exceeding the Group’s annual commitment of 2.2%.
1 2018 was adjusted to include the impact of IFRS 16.
1 Invested capital is: total assets less cash and cash equivalents,
other current and non-current financial assets and
non-interest-bearing current liabilities.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
2 5
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION operational
review
Strategic initiatives are progressing in building
a strong and sustainable platform, despite
a challenging supply chain environment.
Revenue increased year on
year by 13% to €2,551 million
(2020: €2,259 million) and by
16% in constant currency
terms, with shipped volumes
now above 2019 levels
€127 million price increase
programme realised largely in
Q4, to mitigate unprecedented
supply chain disruption
including higher freight, energy
and purchased raw material
costs
Cost saving initiatives now
expected to deliver c.€90
million of EBITA benefit from
cost optimisations in 2022 and
€110 million in 2023
Sales strategies now targeting
€40-€60 million in 2023 as
Flow Control trials and
solutions contracts delayed by
lack of access to customer sites
during pandemic
Maintained strong market share
in Electric Arc Furnace
refractories, which generated
16.2% of Group revenues
Digital products support
growth in solutions contracts,
now representing 29% of
revenue
Steel Division
Steel revenue
€1,823m
2020: €1,570m
Revenue breakdown by
geography in Steel Division
Steel gross margin
21.6%
2020: 23.4%
North America
South America
Europe/CIS/Turkey
China and East Asia
India, West Asia and Africa
28%
15%
26%
11%
20%
The Steel Division accounts for roughly 70%
of Group revenues, and demand is driven by
global steel production volumes.
Refractory products are used to line steel
applications in the plant, to protect against the
extreme temperatures of liquid steel of up
to 1,800 degrees C. RHI Magnesita offers a
complete product and service portfolio for all
steel applications, including primary steelmaking
such as basic oxygen furnace (BoF), electric arc
furnace (eAF) and ladles as well as ingot and
continuous casting. Refractories have a finite
lifetime of between 20 minutes and two months
in steel applications. they are consumable items
and therefore treated as an operating expense
by steel producers, accounting for between
2-3% of the cost of steel production, on average.
the Division serves over 1,000 customer sites
worldwide, with a global market share of c.15%,
or c.30% excluding China and east Asia.
Steel Division revenues increased by 16% in 2021,
to €1,823 million (2020: €1,570 million)
2 6
R H I M A G N E S I T A A n n u A l R e p oRt 2 0 2 1
The Group is making good progress in Europe in
its strategy to consolidate its production footprint
and drive efficiencies through automation and
modernisation of plants. The Group invested
€27 million at Hochfilzen, Austria in 2021 to
transform it into a European hub for dolomite-
based materials. In 2021, the new mine and
automated conveyor systems were successfully
commissioned, and the new rotary kiln became
operational in Q4 2021. Production from the
newly installed facilities is expected to ramp
up over the first half of 2022.
Read more about our Production Optimisation Plan
progress in the strategy section on pages 16 and 17.
As part of its digitalisation initiative, the Group signed
its first Automated Process Optimisation (“APO”)
digital service contract, a cloud based real-time
monitoring and maintenance system, with a central
European customer on the operational performance
of the RH degasser application, with security
standards based on blockchain technology.
The Group made good progress in growing its
solution business model in the region during
2021. The Group renewed a solutions contract
with a longstanding customer in Poland for an
additional five years, following an existing 10-year
relationship. The Group also secured a large
solution contract for a CIS customer, in joint
collaboration with an OEM partner, for a BOF
application, enhancing the Group’s growth
trajectory in this strategic market.
Aligned to the Group’s strategy of growth in
currently under-represented regions, the Group
agreed to acquire in October 2021 an 85.2%
ownership stake in Söğüt Refrakter Malzemeleri
Anonim Şirketi (“SÖRMAŞ”), a producer of
refractories for the cement, steel, glass and
other industries in Turkey, for a consideration
of €38.8 million in cash. The acquisition will
significantly expand the Group’s locally
manufactured product portfolio and serve as
a production hub and platform for business
growth in Turkey and the wider region. With
an enlarged product portfolio, further potential
exists from the opportunity to deliver full-line
service solutions to customers in Turkey.
In 2021, the Group also signed and implemented
its first on-site recycling contract with Arcelor
Mittal, France. The contract includes the sorting
and re-use of spent refractories at the customer
site. The on-site recycling facility will have
the ability to sort more than 20,000 tonnes
of material per year, with approximately a third
of that expected to be eligible for reuse as
secondary raw material, allowing the Group to
both expand its solutions portfolio as well as driving
its sustainability efforts. RHI Magnesita commits
to help its partners to reduce landfill costs by
increasing the share of secondary raw material into
its own production, underpinned by applied R&D.
reflecting the strong economic rebound globally
following the impact of COVID-19 on demand
in 2020. World Steel Association recorded an
increase in global steel production of 4% in 2021
compared to 2020, and by 4% in 2021 compared
to 2019. Comparatively, Steel Division revenues
were down by 10% on 2019 (2019: €2,018
million). Gross profit for the Division was €394
million, 7% higher than 2020 (2020: €368
million). However, gross margin declined over the
same period by 180bps, predominantly due to the
adverse impact of supply chain disruptions which
increased the cost of sales, and the timing of
passing through cost increases to higher product
prices into H1 2022.
Refractory production increased in 2021, in
response to increased end market demand as
economies started to re-open. However, plant
production capacity was hampered by the
construction work at some of our key plants, as
part of the Production Optimisation Plan, which
was further exacerbated by the supply chain
disruption. Freight availability remained poor for
the majority of the year, containerised shipping
remained disrupted and tightness in this market
is expected to continue into 2022. This heavily
impacted the supply chain for both shipping raw
material to production plants and finished goods
to customer sites. Regions which rely heavily on
raw material imports for refractory production and
finished goods were impacted more severely by
the supply chain issues, such as the India and
West Asia steel region.
From Q2 2021, the Group implemented price
increases across all business areas totalling
€130 million to mitigate the increasingly
inflationary environment and was successful
in achieving 98% of these planned price increases
in 2021, with further benefit expected in 2022.
The price increase negotiations were supported by
a generally higher product pricing environment
during Q4, including raw material price increases.
Europe, CIS, Turkey
Total revenue for the year in Europe, CIS and
Turkey amounted to €474 million, up 9% on
2020 (2020: €437 million). On a constant
currency basis, revenues increased by 9% from
€434 million in 2020. The Group’s overall
performance in the combined region was
positively impacted by the recovery of the
European steel market, as well as increases in
market share and higher finished goods pricing
given higher raw material prices in Q4. World
Steel Association data recorded a 11% increase in
steel production in the region compared to 2020.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
2 7
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Operational review
continued
Americas
Total revenues for the year of €784 million in
North and South America represented a 15%
increase on 2020 (2020: €681 million), as domestic
steel production enjoyed a strong rebound and
steel production returned to, and in some cases
exceeded, pre-pandemic levels. Strong demand
for steel in the Americas is expected to continue into
2022 and beyond, following the announcement of
a $1 trillion infrastructure bill in the United States that
is expected to be directed towards new road and
bridge construction. World Steel Association data
recorded a 17% increase in production over 2020 in
North America and 18% increase in South America.
On a constant currency basis, revenues increased
by 21%, from €645 million in 2020. The Group
experienced a FX revenues headwind, given BRL
and USD weakened in 2021.
During 2021, the Group advanced its investment
projects in Brazil, which are part of the Group’s
Production Optimisation Programme. At the
Brumado mine in Brazil, the installation of a rotary
kiln for magnesite production is due to complete
in H2 2022. The investment will increase the life
of the mine from 47 years to 120 years, and further
improve the cost competitiveness of the mine
which is already in the first quartile of the global
cost curve for DBM raw material. The Group also
continued its investment in the modernisation
and automation of the Contagem plant, which
will increase productivity and reduce costs,
creating a magnesite hub for the Americas.
This project is expected to complete in H2 2022.
A new primary crusher in York, Pennsylvania,
United States, (Americas dolomite hub), was
installed and commissioned in 2021 after a
multi-year €7 million investment. The new
crusher will increase efficiency, reduce waste
and extend the life of the dolomitic mine.
RHI Magnesita continues to expand its solutions
contracts in the Americas, which accounts for
approximately 41% of total revenues. In 2021, the
Group secured a new full line solution contract
with a major steel customer in Texas, United States,
over a time period of two years, with 14 people
on-site dedicated to refractory installation.
In 2021 the Group expanded its market position
in Flow Control, with five projects commissioned
over the year for slide gates and a further four
confirmed for 2022. Production capacity in Flow
Control was increased with an investment at York,
United States, in a tundish working linings, as well
as a new alumina-based production line and
pre-cast nozzle line at Tlalnepantla, Mexico.
The Americas region demonstrated excellent
traction in expanding its digital offering, a key
part of the Group’s overall sales strategy. Seven
projects for laser measurement technology were
successfully implemented, with a further three
in the pipeline.
Initiatives to increase the percentage of recycled
raw materials in our production chain have gained
momentum in the Americas. In the month of
March 2021, for the first time, we achieved a
record 10.3% recycling rate at Ramos Arizpe,
Mexico. R&D success enabled a change in the
composition to include higher secondary raw
material in the products of the basic and
aluminous lines, without affecting performance.
The Group has committed €1 million over 2022
with a two-year payback period towards
developing Ramos Arizpe, Mexico, into the
Group’s first recycling plant in North America.
This transformation will include a dedicated
refractory waste purchasing team and new
refractory waste crushing line.
China and East Asia
The China and East Asia region recorded
revenues of €206 million in 2021, an increase
of 23% on 2020 (2020: €167 million). On a
constant currency basis, the Group recorded
revenues of €164 million in 2020. World Steel
Association data recorded a 1% decrease in
production over 2020 in the combined region,
where production in China decreased by 3%.
The Group performed especially well in the East
Asia region, where revenues increased by 33%
to €132 million from 2020 (2020: €99 million)
reflecting the strength of the economic rebound
in the region, especially within South Korea,
Taiwan and Vietnam. China revenues increased
to €74 million (2020: €67 million), as the Group
continued to execute its strategy in developing
new business and increasing market share.
However, steel production in China was adversely
impacted by the Chinese government’s steel
reduction policy implemented in H2 2021,
environmental restrictions imposed ahead
of the Beijing Winter Olympics and power
shortages in Q4, which impeded production
and reduced local refractory demand. China
revenues increased by 10% to €74 million,
from €67 million in 2020.
2 8
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
We are immensely proud of our newly
established R&D centre in Bhiwadi,
India, which will become our flagship
R&D centre for flow control.
Parmod Sagar
President of India, Africa & West Asia
In November 2021, the Group opened a new
regional R&D centre in India to facilitate a greater
understanding of local markets and enable more
unified technology transfer in the region, driving
cost efficiencies. Focus areas will be local raw
material development, providing solutions
support for customer performance improvement
projects and supporting local content and
manufacturing in each of the Group’s three
plants in India.
Over the year the Group progressed its flow
control strategy in this region, increasing market
share in both slide gates and ladle purging and
remains the market leaders in the region for the
long segment of tundish and ISO products.
India has historically recorded high rates of
secondary raw material usage, given the lack of
virgin raw material availability in the region, and in
2021 it recorded a high recycling rate of 16%. In
West Asia and Africa, the Group consistently
increased the amount of secondary raw material
content in products sold to EAF and ladle
applications and increased efforts to collect spent
refractory material from customer sites.
Outside of India, the Group continued to
partner with its solutions customers in Bahrain
and Oman, helping to drive production
efficiencies. The Group won market share in Iraq
and Algeria and expanded its business in Egypt.
In India, the region has expanded capacity in
non-basic shaped products at the Vizag plant as
part of the Production Optimisation Plan. A new
tunnel kiln was commissioned in October 2021
which will increase capacity of alumina brick
production and a new shuttle kiln at the plant
was installed during 2021, ready for production
in Q1 2022. In line with the Indian government’s
“Made in India” policy, which encourages
companies to on-shore manufacturing in India
for domestic customers, the Group is gaining
competitive advantage from manufacturing
products for the Indian market locally. 65% of the
plant’s production is supplied to customers in the
domestic market. The Group also announced a
€42 million investment to expand its production
capacity in India and increase automation of
existing plants in Bhiwadi, Vizag and Cuttack,
to be completed by 2025.
The combined region celebrated the first
installation of the APO tool in 2021 at a BOF
operated by a major steel customer. The India
region also won its first contract in the country
for electro-magnetic level indicators (“EMLI”) for
a tundish application of a major steel customer.
Other new products and services installed during
the year to improve steel quality at customer sites
include Purgebeam and Magfilter, which have
been designed by RHI Magnesita’s R&D and
innovation departments using flow simulation
to imitate the flow of molten steel in moulds
and in the tundish.
As part of the Group’s efforts to drive its solutions
business, the Group won a solutions contract
in October 2021 to partner with a major steel
customer which has recently commissioned the
largest brownfield expansion in India, creating the
largest plant capacity in India. RHI Magnesita will
provide refractory products for applications such
as the BOF, Ladle and RH degasser as well as flow
control applications.
Over the next four years a key focus area for the
Group will be to grow its market share in EAF
plants, with an additional 75Mt of capacity in
China expected by 2023. In 2021, the Group
completed the start up of its first Quantum-EAF
project in China with Pinggang. It also achieved
a new record number of heats for the EAF plant
at SJZ steel, driving efficiencies for the customer
and contributing to the establishment of a new
solutions contract.
As part of the Group’s ongoing Production
Optimisation Plan, a new temper furnace was
installed at Dalian, China, which will
approximately double capacity at that site.
Additionally, the production plant installed a
new Flow Control production line for purge plugs.
Dalian, China, is home to one of the Group’s
first Manufacturing Execution Systems (“MES”),
a flagship site for the Group’s digitalisation
initiatives. The MES project was initiated in August
2021 and is due to complete during H2 2022,
which will optimise operation of machinery,
improve safety and reduce costs. The Group also
implemented a new RFID-enabled warehouse
in Chongqing, China. RFID technology allows
customers to achieve real-time, virtual inventory
management of consignment stock.
The Group initiated an on-site recycling solutions
contract with a major Chinese steel customer in
2020, and following strong performance during
2021, will now commission the project as a global
pilot given its efficient and cost-effective sorting,
treatment and recycling processes.
India, Africa and West Asia
Total revenues recorded for the year in India,
Africa and West Asia was €359 million, an
increase of 26% compared to 2020 (2020: €285
million). The combined region recorded
significant volume growth in 2021, with sales
volumes higher than in 2019. On a constant
currency basis, revenues increased by 30%
(2020: €275 million). By comparison, India,
Africa and West Asia steel production increased
by 15% in the period according to the World
Steel Association data. The strong revenues
performance was due to a robust economic
rebound in the combined region, despite the strict
COVID-19 lockdown in India in H1 2021.This was
supported by the financial stimulus programme
in India for infrastructure development. Demand
for steel exports from India have also increased,
increasing refractory demand in the region, as
production in China slowed. This trend is
expected to continue into 2022.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
2 9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Operational review
continued
Industrial Division
Industrial revenue
€729m
2020: €689m
Industrial gross margin
26.1%
2020: 26.4%
Revenue breakdown by segment
in Industrial Division
Cement/Lime
Industrial business
44%
56%
The Industrial Division accounts for c.30%
of Group revenues and provides refractory
solutions to customers across cement and lime
and industrial projects (non-ferrous metals
(‘NFM’), glass, environment, energy and
chemicals (‘EEC‘), foundry and mineral sales).
The Industrial Division segments are subject
to longer replacement cycles as the lifetime of
a refractory product in these industries ranges from
one year to 20 years. Refractories used
in the Industrial Division are treated as capital
expenditure at our customer sites, given the long
replacement cycles of over a year. They account for
between 0.2% to 1.5% of the customer cost base
and consume less refractory material per tonne of
production than steel, on average. The Industrial
Division serves approximately 2,800 customers
worldwide, with a significant global market share of
c.35% in Cement and Lime and c.25% in NFM and
c.5% in Glass, EEC and Foundry.
Read more in Our markets
Page 20
3 0
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Industrial Division revenues increased by 6%
in 2021 to €729 million (2020: €689 million),
led by a strong recovery in the Cement and Lime
business which increased by 18% following a
record year of volumes. On a constant currency
basis, revenues increased by 7%, from
€679 million in 2020.
Gross profit for the Division was €190 million,
up from €182 million in 2020 and gross margin
declined over the same period by 30bps to 26.1%
as the impact from supply chain
disruption increased costs, especially for
the project business.
Cement and Lime
Revenue for the year was €322 million, up by 18%
on 2020 (2020: €273 million), and on a constant
currency basis by 20% (2020: €267 million).
Cement and Lime accounted for 44% of total
Industrial Division revenues in 2021 and 13% of
Group revenues. The Cement and Lime segment
recorded a record year for volumes attributed to
both new orders and from a carry-over of delayed
orders during 2020. End-user demand remained
strong throughout 2021 and this trend is expected
to continue into 2022 with full order books for
repair activity in Q1 2022. Stimulus packages,
initiating new infrastructure projects, were
implemented globally to help stimulate slowed
economies over 2020, boosting cement demand
internationally.
The raw materials required for the portfolio of
refractory products for the Cement and Lime
segment were in tight supply at the start of the
year, which was exacerbated by global freight
disruption from Q2 onwards. Raw material
inventory levels have since been restored ahead
of the high seasonal demand expected during the
2021-2022 northern hemisphere winter months,
when the annual industry repair cycle takes place.
Pricing was softer in the first half of the year,
resulting in a lower average price per tonne
compared to 2020. Pricing was established at the
start of Q3 2020 for H1 2021, when refractory raw
material prices were at their lowest levels for five
years. Price increases implemented during 2021
in response to inflationary pressures started to
come through during Q4 2021 and will be fully
realised in 2022. The higher raw material price
environment towards the end of 2021 supported
customer pricing negotiations for 2022.
A state-of-the-art fired alumina brick
plant will be built in 2022 which
underlines our alumina strategy and
opens lots of new opportunities in all
industrial sectors.
Marco Olszewsky
President of China & East Asia
Disruption across the Industrial Projects business
was exacerbated by unplanned maintenance at
Radenthein, the Group’s main production facility
for the projects business. An unscheduled
shutdown during Q3 2021 adversely impacted
Group EBITA by €8 million. The plant was
repaired and fully operational in Q4 2021.
In response to higher inflationary costs, the Group
implemented price increases in its Industrial
Projects business for new orders, as well as for
previously negotiated contracts. The response
from our customers has been largely successful,
however the long lead-time characteristic of
projects with replacement cycles of over one year
means that a significant portion of these price
increases will only be realised in 2022.
Radenthein, Austria, is the Group’s main
production plant for Industrial Projects. The
Group is modernising and automating the plant,
as well as investing in new infrastructure, centred
around a new tunnel kiln, which was inaugurated
in May 2021. A further investment towards new
presses at the site will increase the plant’s
production capacity by 30%, with the investment
project due to complete in H2 2022.
The Group strengthened its sustainable market
share in 2021 and broadened its solution offering,
signing a consortium agreement with Russia’s
ZiO-Podolsk to supply refractory engineering,
materials and installation services. The initiative
will construct four new waste-to-energy plants
in the Moscow area, which is due to commence
in 2023. The plants will process around
2.8 million tonnes of waste annually, supplying
up to 1.5 million people with a renewable source
of electricity.
The Group’s AGELLIS® systems increase yield,
improve quality, reduce maintenance, greatly
enhance safety and are used in our customer
operations for NFM, as well as steel. Sensor
technology monitors process critical parameters
within our customers’ furnaces using
electromagnetic and optical sensors. AGELLIS®
systems are gaining significant market share
within the non-ferrous metals segment.
On 30 December 2021 the Group acquired
a 51% ownership stake in “Chongqing Boliang
Refractory Materials Co. Ltd.” for a cash
consideration of €5 million. The joint venture
investment will establish production of non-basic
refractories alongside an existing fully automated
plant that will complement the Group’s
magnesite-based production in Dalian and
deliver a full range of refractory products for
cement customers in China and Southeast Asia.
In 2021 the Group continued to make
considerable traction in its ANKRAL Low Carbon
(“LC”) product in Europe based on the circular
economy approach and sustainable technology.
The Group approximately doubled revenues
contribution from these products compared to
2020 and increased the number of customers
served from 13 to 22. In 2021 the production of
the ANKRAL LC series was also extended from
Europe to China, at the Dalian site, which will
further increase our market share in sustainable
products in Asia.
The Group also expanded its digitalisation
solutions in 2021, launching the “LaserScan”
preview for cement customers. LaserScan uses
high speed 3D lasers to measure the remaining
thickness of rotary kiln linings ahead of any repair
work, optimising refractory performance and kiln
availability.
Industrial Projects
Industrial Projects, comprising NFM, process
industries (glass, EEC and foundry) and mineral
sales reported revenues of €407 million in 2021,
2% below revenues recorded in 2020 (€416
million) and below expectations for the year. On a
constant currency basis, 2021 revenue was 1%
lower than 2020 (2020: €410 million). The
Industrial Projects business experienced
significant demand throughout the year for both
NFM and process industries, from new orders as
well as carry-over from project postponements in
2020. Demand in the non-ferrous metals sector
strengthened in H1 2021, as commodity prices
rallied in the first five months of 2021.
NFM recorded revenues of €145 million, 2%
higher than the prior year (2020: €142 million).
Process industries revenues declined by 4%
to €262 million (2020: €274 million) as the
production capability in the business and
deliveries to customers were impacted by
insufficient production capacity, given the
Production Optimisation Plan work at Radenthein,
Austria, which was then aggravated by the global
supply chain disruption.
Outlook
In the Steel Division there is a strong order book
and visibility for the first half of 2022, although the
high customer demand recovery experienced in
2021 is expected to normalise in the second half.
The industrial division order book covers most of
2022 and lead times, in some cases, exceed 12
months. Industrials Division margins will continue
to benefit, in the first quarter of 2022, from the
stronger pricing environment for cement
customers compared to the prior year.
Cost pressures from freight, energy and raw
materials are continuing in 2022 with significant
labour inflation now also expected in both local
currency and Euro terms, as high inflation leads to
wage demands. Further price increases have
become effective in January and more price
increases are under negotiation to preserve
margins in response to ongoing cost inflation.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
3 1
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Financial
review
Ian Botha
CFO
We delivered a robust
financial performance in
spite of the challenging
macro environment, and
continued to make good
progress on the 2022
investment programme.
Read more on APMs on
Page 211
Revenue
The Group recorded revenue of €2,551 million in
2021, an increase against the prior year of 13%
(2020: €2,259 million). The Group benefited
from increased customer demand driven by the
rebound of end-market activity, following the
adverse impact of the COVID-19 pandemic in
2020. The higher raw material price environment
in 2021 compared to 2020 supported higher
refractory pricing across all businesses.
In 2021 the Group negotiated price increases
totalling €130 million in response to significant
cost inflation driven by higher freight and energy
costs. The Group was successful in realising 98%
of planned price increases in 2021, with further
benefit expected in 2022 from the restoration of
margins to higher levels. Price increases restored
gross margin to 26% in December 2021,
establishing a run rate into 2022.
Raw material prices
Raw material prices increased and then held
broadly stable levels for eight months of the year
before increasing in the fourth quarter as Chinese
suppliers reduced production due to power
shortages, energy rationing and high energy
costs.
Read more on raw material pricing in the
Markets section on
Page 20
Steel Division
The Group’s Steel Division delivered revenue of
€1,823 million in 2021, 16% higher than 2020
(2020: €1,570 million). On a constant currency
basis, Steel Division revenue increased by 20%
(2020: €1,522 million). Global economies started
to recover in 2021 with the most notable impact in
India, West Asia and Africa where revenues were
26% higher than in 2020. The China & East Asia
region also performed well in 2021, recording an
23% increase in year-on-year revenues
attributed mostly to East Asia. The Americas and
Europe, CIS and Turkey regions contributed 15%
and 9% year-on-year growth, respectively. The
Americas enjoyed a strong rebound in steel
demand, with steel demand outweighing
production throughout the year as steel
producers constrained production focusing on
price rather than volumes. On a constant
currency basis, the Americas region recorded
revenue increase of 21%, impacted by currency
devaluations particularly from Brazilian Reais and
US Dollar against the Euro. The Europe, CIS and
Turkey region was positively impacted by the
recovery of the European steel market, as well as
an increase in market share.
Industrial Division
Industrial Division revenue increased by 6% to
€729 million (2020: €689 million) largely due to
the strong recovery in volumes in the Cement and
Lime business which increased by 18% year-on-
year to €322 million (2020: €273 million),
recording a very strong Q1 and Q4, characteristic
of strong seasonal demand during the northern
hemisphere winter months. However, prices for
the Cement repair season in Q1 2021 were set in
the summer of 2020 when prices were low,
ahead of raw material price increases,
contributing to lower product pricing. The
Industrial projects business was broadly flat
against 2020, recording revenue of €407 million
(2020: €416 million), as production capability in
the business was impacted by global supply chain
disruption and unscheduled tunnel kiln
maintenance at Radenthein, Austria. Revenue
recovery across the project business was further
impacted by the delay in implementing
Group-wide price increases across the segment,
given longer lead times on orders with
replacement cycles of greater than one year.
Read more on divisional performance in
the Operational review
Pages 26 to 29
Cost of goods sold
The Group cost of goods sold over the period
amounted to €1,967 million, an increase of 15%
compared to the same period last year. Higher
freight costs were partially offset by favourable
currency movements, and on a constant currency
basis cost of goods sold was 19% higher than in
2020.
Inbound and outbound freight costs accounted
for 12% of COGS in 2021, compared to 8% in
2020 and amounted to €236 million (2020:
€137 million). The Shanghai Containerized
Freight Index increased by 81% since the
beginning of the year. Supply chain delays
caused by low freight reliability impacted
production schedules and deliveries and there
was continued use of air freight when necessary
to ensure customer supply.
Reporting approach
The Company uses a number of alternative
performance measures (APMs), in addition to
those reported in accordance with IFRS, which
reflect the way in which the Board and the
Executive Management Team 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 used internally in the management of
our business performance, budgeting and
forecasting. A reconciliation of key metrics to the
reported financials is presented in the section
titled APMs.
In January 2021, the Foundry Division was
reclassified into the Industrial Division from the
Steel Division. In 2021, the Foundry Division
contributed €13 million to Group revenue.
2020 divisional revenues have been restated
accordingly.
All references to comparative 2020 numbers in
this review are on a reported basis, unless stated
otherwise. Figures presented at constant
currency represent 2020 translated to average
2021 exchange rates as disclosed in Note 6 to
the Financial Statements.
3 2
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
On a divisional basis, gross profit in the Steel
Division of €394 million represented an increase
of 7% against the previous year (2020: €368
million), while gross margin reduced by 180bps to
21.6%, (2020: 23.4%). Gross profit in the
Industrial Division amounted to €190 million
(2020: €182 million), up 4% against the prior
year, with gross margin declining by 30bps to
26.1% (2020: 26.4%).
Depreciation and amortisation
Depreciation for 2021 amounted to €109 million
(2020: €120 million), 9% lower than 2020 given
the short-term cost measures taken in 2020
which lowered depreciation by €7 million and the
reduction of assets due to the closure of plants
from the Production Optimisation Plan.
Depreciation in 2022 is expected to be around
€125 million.
Steel
2021
2020
Change
Revenue (€m)
Gross profit (€m)
Gross margin
1,823
394
21.6%
1,570
368
16%
7%
23.4% (180)bps
Industrial
2021
2020
Change
Revenue (€m)
Gross profit (€m)
Gross margin
729
190
26.1%
689
182
6%
4%
26.4% (30)bps
Amortisation of intangible assets amounted to
€22 million in 2021 (2020: €19 million).
Adjusted EBITDA
Adjusted EBITDA amounted to €389 million, up
by 2% compared to 2020 (2020: €380 million).
The adjusted EBITDA margin for 2021 was 15.2%,
compared to 16.8% over the same period last year,
a decrease of 160bps.
SG&A
The Group completed its permanent SG&A cost
saving programme in 2021, achieving €29 million
in annual EBITA savings, through the
decentralisation of 540 managerial positions into
lower cost locations and driving increased
regionalisation in order to localise decision
making, closer to customers and plants.
At the height of the COVID-19 pandemic in 2020,
€50 million of temporary cost saving measures
were implemented, including short time work
arrangements and plant suspensions. In 2021,
€43 million of these temporary savings returned
to the cost base as expected, with €7 million to be
captured as a permanent cost reduction in the
form of lower depreciation.
Total selling, general and administrative
expenses, before R&D related expenses, were
€297 million, representing a 7% increase against
the prior year given inflation and additional
expenditure on strategic initiatives, notably
digitalisation (2020: €279 million).
In June 2021, the Group implemented a
dedicated taskforce to mitigate the impact of
supply chain disruption, including real-time
logistics monitoring to help plan around shipment
delays. In December 2021, the Group launched
the first phase of its Transport Management
System (“TMS”) in China, ahead of its planned
global roll out. The TMS will provide end-to-end
transport management control covering
planning, execution, monitoring and auditing,
allowing enhanced visibility of freight status and
location.
The Group purchased €906 million of raw
materials from external sources in 2021,
compared to spending of €807 million in 2020.
The cost impact in the 2021 profit and loss
statement was €(69) million. Elevated raw
material prices in Q4 2021 were mainly due to
higher costs of production and transportation
costs for raw material suppliers, as energy costs
increased significantly. The Group restocked its
raw material inventory over the course of the year
prior to expected tighter supply from China during
Q4 2021 ahead of the Beijing Winter Olympics.
Energy costs significantly increased in Q4 2021,
as post-pandemic demand returned whilst
supply remained constrained. Natural gas and
power in Europe and Asia were most impacted.
The Group purchased European natural gas and
power contracts in advance for Q4 2021 and Q1
2021, significantly below where spot prices
subsequently moved to. The Group was also
impacted by higher costs of CO2 credits in Europe,
mainly due to higher production volumes in our
raw material plants. During the year, the Group
implemented a rolling five-year hedging
programme to reduce its exposure to spot CO2
contract prices.
Gross profit
The Group recorded a 6% increase in gross profit
to €584 million in 2021 (2020: €550 million) due
to higher sales volumes, pricing and revenues,
offset by increased freight and energy costs and
higher prices for externally sourced raw material.
Gross margins declined to 22.9% (2020: 24.4%)
as price increases realised during the year did not
fully offset the significant increase in costs from
supply chain disruption and higher energy costs.
Adjusted EBITA margin %
16
14
12
10
8
6
4
2
0
RHI standalone RHI Magnesita
7.7%
2.6%
5.1%
9.7%
3.8%
5.9%
13.9%
5.5%
8.4%
14.0%
5.0%
9.0%
11.5%
2.4%
9.1%
11.0%
3.2%
7.8%
2016
2017
2018
2019
2020
2021
Backward integration margin
Refractory margin
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
3 3
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Financial review
continued
Adjusted EBITA
The Group delivered adjusted EBITA in 2021 of €280 million, an increase of 8% compared to 2020
(2020: €260 million), as the €292 million increase in revenues was offset by c.€150 million of supply
chain, raw material and energy related cost headwinds. The Group realised an incremental €49
million in 2021 from its strategic initiative programmes, with cost saving initiatives contributing €36
million and sales strategies €13 million. €43 million of temporary cost savings made in 2020 to
preserve liquidity were reintroduced to the cost base in 2021.
Adjusted EBITA
€280m
2020: €260m
Adjusted EBITA margin
11.0%
2020: 11.5%
(€m)
Revenue
Cost of sales
Gross profit
SG&A
R&D expenses
OIE
EBIT
Amortisation
EBITA
Adjusted items
Adjusted EBITA
Refractory EBITA
Vertical integration EBITA
2021
2,551
(1,967)
584
(297)
(28)
(44)
214
(22)
236
44
280
199
81
Impacted by significant supply chain headwinds
in 2021, the Group’s price increase programme
and other cost reduction initiatives delivered an
adjusted EBITA margin of 11.0% (2020: 11.5%).
The Group’s refractory margin was directly
impacted by higher supply chain, energy and raw
material costs and declined to 7.8% (2020: 9.1%).
However, the Group’s vertical integration margin
on the production of raw materials for internal
consumption increased to 3.2% (2020: 2.4%),
reflecting the higher raw material price
environment and the low-cost position of the
Group’s raw material assets. The EBITA
contribution of the Group’s raw material assets
increased to €81 million (2020: €55 million),
based on external market price benchmarks for
the raw materials produced.
Net finance costs
Net finance costs in 2021, including gains and
losses relating to foreign exchange, amounted to
€(25) million (2020: €(87) million).
Net interest expense amounted to €(7) million in
2021 (2020: €(14)million), with interest expenses
on borrowings of €(21) million (2020: €(20)
million) and interest income of €14 million (2020:
€6 million). Foreign exchange gains of €3 million
were incurred, compared to a €(43) million in
2020, mainly due to the significant depreciation
of the Brazilian Real and US Dollar against the
Euro, resulting in an increased effect of foreign
currency translation on the P&L in 2020.
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. In
2021, these adjustments comprise:
2020
reported
2,259
(1,709)
550
(279)
(30)
(120)
121
(19)
140
120
260
205
55
2020 at
constant
currency
% change
reported
% change at
constant
currency
2,201
(1,658)
543
(275)
(30)
(120)
118
(19)
137
120
257
12.9%
15.1%
6.2%
6.8%
(6.7)%
63.3%
76.9%
15.8%
68.6%
15.9%
18.6%
7.6%
8.4%
(6.7)%
63.3%
81.4%
15.8%
72.3%
(63.3)%
(63.3)%
7.7%
8.9%
(2.4)%
49.1%
• €91 million recorded in share of joint ventures
and associates following the proceeds from
the sale of the Group’s 50% stake in the
Magnifin Joint Venture;
• €(44) million recorded in “restructurings, other
income and expenses”, relating mainly to the
cost reduction initiatives, including €16 million
relating to the plant closure at Trieben, Austria,
and €31 million for impairment of Dashiqiao,
China. These included severance costs of €1
million and non-cash impairments of €41
million;
• €22 million amortisation of intangible assets
created at the time of the merger between RHI
and Magnesita;
• €6 million non-cash other net financial
expenses, these include €6 million non-cash
present value adjustment of the provision for
the unfavourable contract required to satisfy
EU remedies at the time of the combination of
RHI and Magnesita to form RHI Magnesita; and
• One-time charges excluded from the effective
tax rate (“ETR”), largely the restructuring,
impairment expenses and a tax depreciation.
Taxation
Total tax for 2021 in the income statement
amounted to €39 million (2020: €14 million),
representing a 14% effective tax rate (2020: 33%).
The effective tax rate in 2021 decreased as a result
of restructuring expenses.
Reported profit before tax amounted to €289
million (2020: €42 million). Adjusted profit before
tax amounted to €270 million (2020: €197
million), with an adjusted effective tax rate of
18.0% (2020: 16.7%). The adjusted ETR guidance
is between 20%-22% for 2022.
Profit after tax
On a reported basis, the Group recorded a profit
after tax of €250 million (2020: €28 million) and
earnings per share of €5.10 in 2021 (2020:
€0.51). Adjusted earnings per share for 2021 were
€4.52 (2020: €3.28).
3 4
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
(€m)
EBITA
Amortisation
Net financial expenses
Result of profit in joint ventures
Profit before tax
Income tax
Profit after tax
Non-controlling interest
Profit attributable to shareholders
Shares outstanding1
Earnings per share (€ per share)
2021
reported
Items excluded
from adjusted
performance
2021
adjusted
236
(22)
(25)
100
289
(39)
250
7
243
47.6
5.10
44
22
6
(91)
(19)
(10)
(28)
–
(28)
–
(0.58)
280
–
(19)
9
270
(49)
222
7
215
47.6
4.52
1 Total issued and outstanding share capital as at 31 December 2021 was 46,999,019. The Company held 2,478,686 ordinary shares in
treasury. Weighted average number of shares used for basic earnings per share 47,629,647.
2 EBITA reconciled to revenue on page 34.
Other assets and liabilities
€(90) million of other assets and liabilities
includes €19 million in pension contributions and
€20 million from a change in bonus provision
relative to 2020. €53 million of indirect and other
tax, temporary timing differences includes €43
million refundable VAT paid on increased raw
material purchases, recognition of a refund of
revenue-based taxes previously overpaid in Brazil,
energy taxes and research incentives. The Group
has recognised €14 million of other revenue and
€11 million of interest income following a Brazilian
Supreme Court ruling resulting in a refund of
revenue-based taxes previously overpaid in the
period 2005-2020.
Working capital
Working capital increased to €677 million
(31 December 2020: €369 million) as supply
chain delays increased the value of material in
transit and as inventories of raw materials and
finished goods were intentionally increased to
ensure sufficient levels of product availability for
customers. Cash outflow from increased working
capital was €283 million compared with an inflow
of €97 million in 2020. Favourable foreign
exchange effects reduced working capital cash
outflow by €25 million. Working capital intensity,
measured as percentage of the last three months’
annualised revenue (€2,911 million), increased to
23.3% in 2021 (2020: 15.9%), outside of the
targeted range of 15-18%. Working capital
intensity levels were higher than guided given the
higher raw material prices, and intentional
build-up of raw material given concerns on lower
availability. An improvement in the Group’s
working capital intensity is dependent on
improved supply chain reliability. If supply chain
disruption continues in 2022 and returning to
within the targeted range may not occur until
2023.
Working and raw material availability improves
following energy shortages in China in the fourth
quarter and the impact of the Beijing Winter
Olympics in Q1 2022. Improvement in working
capital intensity is also expected to be supported
by the implementation of a new Integrated
Business Planning system in 2021, which
supports Group-wide decision making and
financial planning.
Inventories increased to €977 million
(31 December 2020: €477 million), accounts
receivable increased to €349 million
(31 December 2020: €210 million) and accounts
payable increased to €649 million (31 December
2020: €319 million).
The decision to increase inventory levels across
both raw materials and finished products was taken
in response to global supply chain issues with raw
material availability significantly disrupted by poor
freight availability and in anticipation of shortages
ahead of the Beijing Winter Olympics in Q1 2022.
The Group spent a total of €906 million on
externally sourced raw material in 2021, compared
to €807 million in 2020. Raw material coverage
ratios in 2021 increased from 1.3 months in 2020 to
2.3 months in 2021, and finished goods from 1.9
months to 2.4 months, given the higher costs of raw
materials and longer delivery times.
Accounts receivable increased by €139 million,
to €349 million, given the higher level of business
activity. The accounts receivable intensity level
increased by 300 bps to 12.0% (31 December
2020: 9.0%), as the prior year comparative
benefited from high revenue in the fourth quarter
in 2020. Accounts receivable is calculated as
trade receivables plus contract assets less
contract liabilities, as per the financial statements.
Accounts payable increased by €330 million, to
€649 million, largely due to payables relating to
the material increase in externally purchased raw
material over the year. Accounts payable intensity
increased to 22.3%, by 860bps (31 December
2020: 13.7%). Accounts payable refers to trade
payables, as per the financial statements.
Working capital financing, used to provide
low-cost liquidity and support the Group’s
commercial offering to customers, stood at €320
million at the end of the year (31 December 2020:
€221 million). This comprised €178 million of
accounts receivable financing (factoring) and
€142 million of accounts payable financing
(forfeiting). Working capital financing levels vary
according to business activity, and the Group
targets a medium-term level below €320 million.
As business activity levels increased over 2021
from 2020, working capital financing has helped
to moderate the cash outflow from working capital
increases.
Capital expenditure
Capital expenditure in 2021 was €252 million
(2020: €157 million), comprising €75 million of
maintenance capex (2020: €71 million) and €177
million of project capex (2020: €86 million). In
2021, the Group increased its capital expenditure
on capital projects, as guided.
The project capital spent in 2021 was slightly
below the guidance of €180 million, largely due
to capital project delays at Contagem and
Brumado in Brazil. Mainly given the high
inflationary environment, the individual projects
are expected to require higher capital expenditure
during 2022 and 2023, however other
parameters of the project have moved favourably,
and the additional returns offset the higher capex
such that the economics of the projects remain
attractive.
In 2022 guidance for capital expenditure is
approximately €190 million, comprising €85
million of maintenance capex and €105 million of
project capex, increasing by €20 million due to
€12 million to be invested at Chongqing, €5
million increase at Contagem and Brumado and
€3 million underspend in 2021 carried forward.
In 2023, capital expenditure is expected to
increase to approximately €150 million, of which
€85 million will be directed towards maintenance
expenditure and €65 million towards projects. In
2024, the Group anticipates approximately €130
million of capital expenditure, of which €85
million will be on maintenance expenditure and
€45 million on projects.
In 2021, the Group invested €61 million (2020:
€35 million) in its raw material assets, including
maintenance capex of €13 million (2020: €14
million1) and project capex of €48 million (2020:
€21 million).
1 Restated from €6 million given an internal change in
methodology.
Adjusted earnings per share
€4.52
2020: €3.28
Capital expenditure
€252m
2020: €157m
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
3 5
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Financial review
continued
Return on invested capital
9.6%
2020: 11.5%
ESG linked financing
€1.2bn
Cost saving initiatives
€110m
Annualised EBITA run rate by 2023
Sales strategies
€40-60m
Annualised EBITA run rate by 2023
Cash flow
The Group generated operating cash flow of €(236) million in 2021 (2020: €290 million),
representing cash flow conversion of (84)% (2020: 112%). Free cash flow was adversely impacted by
high capital expenditure in 2021 on the Group’s strategic initiatives as previously guided, combined
with higher than usual working capital requirements due to supply chain disruptions. Free cash flow
decreased to €(427) million (2020: €101 million).
Cash flow €m
Adjusted EBITA
Working capital
Changes in other assets/liabilities
Capital expenditure (including pre-payments)
Depreciation
Operating cash flow2
Cash tax
Net financial expenses
Restructuring/transaction costs
Magnifin disposal proceeds
Dividend payments
Share buyback
Dividends from associates
MORCO acquisition
Sale of PPE3
Right-of-use assets acquisition
Derivative gains
Free cash flow
1 Reported basis.
2021
280
(283)
(90)
(252)
109
(236)
(39)
(25)
(56)
100
(71)
(96)
–
–
8
(13)
1
(427)
20201
260
97
(31)
(157)
120
290
(48)
(26)
(52)
–
(50)
(3)
11
(9)
11
(25)
2
101
2 Operating free cash flow is presented to reflect the net cash flow from operating activities before certain items such as restructuring
costs. Full details are shown in the APM section on page 211.
3 Including the sale of the Burlington site (Canada) in 2020, cash inflow of €8 million.
Net debt
Net debt at the end of 2021 was €1,014 million,
comprising total debt of €1,595 million including
IFRS 16 leases of €56 million, cash and cash
equivalents of €581 million, this compares to net
debt at the end of 2020 of €583 million including
IFRS 16 leases of €57 million. Net debt to EBITDA
at the year-end was 2.6x, 1.1x higher than 2020
(2020: 1.5x) and above the Group’s target range of
0.5x-1.5x, mainly due to inventory build.
Supported by lower capital expenditure and
earnings growth from organic and inorganic
sources, the Group expects to reduce its gearing
level towards its targeted range during 2022,
before considering M&A.
Additional refinancing was conducted in 2021 to
maintain liquidity levels, extend debt maturities
and establish links to the Group’s sustainability
performance. On 30 November 2021, the
Company entered into a €150 million ESG linked
Bilateral facility with ING, and successfully placed
a €250 million ESG-linked Schuldschein bond
with investors, with maturities ranging from 5.5
years to 10 years and a weighted average interest
rate on issuance of 0.80%.
Total liquidity for the Group at year end was €1,181
million, including undrawn committed facilities of
€600 million.
Return on invested capital
Return on invested capital (“ROIC”) is used to
assess the Group’s efficiency in executing its
capital allocation strategy, which is aimed at
enabling organic growth, disciplined M&A and
shareholder returns. The Group ROIC in 2021 was
9.6% (2020: 11.5%), from a total of €2,296 million
of invested capital (2020: €1,754 million) and €219
million net operating profit after tax (“NOPAT”)
(2020: €201 million). Raw material ROIC was
16.2% (2020: 13.5%), from a total of €377 million of
invested capital (2020: €385 million) and €61
million NOPAT (2020: €52 million).
Amortisation schedule
(€m as at 31 December 2021)
1,181
581
513
600
218
248
151
107
2
0
2
2
1
2
0
2
3
2
0
2
4
2
0
2
5
2
0
2
6
i
L
q
u
d
i
t
y
i
793
600
193
2
0
2
7
109
2
0
2
8
+
56
I
F
R
S
1
6
Cash
Revolving credit facility
Debt
Strategic initiatives
The Group is progressing two significant strategic
programmes to sustainably increase earnings:
• Cost savings initiatives representing €110
million of incremental EBITA by 2023. In 2021,
the cost reduction initiatives delivered EBITA
benefit of €66 million, representing an
increase of €36 million on 2020. The
programme targets to achieve an additional
€44 million in EBITA run rate savings in 2023,
achieving its total EBITA benefit of €110
million, (€90 million in 2022). The Production
Optimisation Plan benefits will increase its
total target to €110 million, although with one
year delay than previous guidance given the
project delays at Brumado and the decision to
extend the operation of Mainzlar through
2022.
3 6
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
• Sales strategies representing c.€40-60 million
of incremental EBITA benefit by 2023. The sales
strategies delivered €18 million of cumulative
EBITA in 2021. The Group is targeting to achieve
c.€40 – 60 million in 2023, and €30 million in
2022. The restrictions from the pandemic and
global supply chain issues resulted in delays in
accessing customer sites, impacting the revenue
benefit from Flow Control and the Solutions
business. New markets continue to deliver
attractive revenue growth, with strong organic
and inorganic revenue contribution expected in
2022 from the JV with Chongqing and
acquisition of SÖRMAŞ.
Cost savings initiatives
In 2021 the Group started to gain material benefits
from its strategic initiatives, with an incremental
EBITA improvement in 2021 of €36 million from its
ongoing cost initiatives, including €17 million from
the Production Optimisation Plan and a €19 million
benefit from the SG&A Reduction programme.
The Production Optimisation Plan seeks to
rationalise the Group’s global production footprint
through the closure of up to 10 sites (with a focus
on Europe and South America) and investments in
remaining facilities to increase plant scale and
specialisation, reduce raw material costs and
implement new technologies.
During 2021, the Group invested in its Hochfilzen
site, Austria, to consolidate European dolomite
production into a single low-cost site. The Group
is creating its flagship digital and automated plant
at Radenthein, Austria, including the installation
and commissioning of a new tunnel kiln. At
Contagem, Brazil, the Group’s largest production
facility in the Americas, the Group is automating
the production of Magnesite finished products.
Key project milestones at Contagem included the
commissioning of two new automated presses
which will increase production efficiency and
capacity and the installation of new grinding lines.
At Urmitz, Germany, the Group is modernising
and expanding the plant to create a new hub for
non-basic refractory products and the installation
of a new tunnel kiln which was commissioned in
November 2021.
The closure of Mainzlar, Germany, was delayed
until the end of 2022 in response to high demand
from European customers, supply chain related
delays affecting the rest of the Group’s network,
the investment project work taking place at
Radenthein reducing capacity and the temporary
closure of Radenthein in Q3 for unscheduled
maintenance.
The Group completed its SG&A cost saving
programme in 2021, achieving €29 million in
annual EBITA savings, through the
decentralisation of 540 managerial positions into
lower cost locations and driving increased
regionalisation in order to localise decision
making, closer to customers and plants.
The extension of the closure of the Mainzlar site in
2022, combined with the continued investment
in the production optimisation plan, will enable
additional run rate savings of €10 million in 2023,
achieving a total cumulative run rate benefit from
the cost savings of €110 million in 2023 (€90
million in 2022).
2021 was the peak capital expenditure year for
spending on strategic initiatives, including the
substantial completion of the Production
Optimisation Plan. In 2021 the Group incurred
capital expenditure of €252 million, of which €75
million was maintenance capital expenditure and
€177 million was expansionary capital
expenditure related to project investments.
Given the resilient performance of the business
and positive outlook into 2022, the Board has
recommended a final dividend of €1.00 per share
for the full financial year, and €47 million in
aggregate. This represents a dividend cover of
3.0x adjusted earnings per share. Subject to
approval at the AGM on 25 May 2022, the final
dividend will be payable on 14 June 2022 to
shareholders on the register at the close of trading
on 27 May 2022. The ex-dividend date is 26 May
2022. This represents a full year dividend of
€1.50 per share.
The Board’s dividend policy remains to target a
dividend cover of below 3.0x adjusted earnings
over the medium term. Dividends will be paid on a
semi-annual basis with one third of the prior year’s
full year dividend being paid at the interim.
In December 2020, the Group commenced a
share buyback programme, to return value to
shareholders, of up to €50 million, which
completed in April 2021, with €45 million of
expenditure falling in 2021 and €3 million in 2020.
The buyback programme was extended in May
2021, and the Company purchased a further €50
million. In total across 2020 and 2021, the buyback
programme repurchased a total of 2,078,686
shares for a total consideration of €98 million1. As
at 31 December 2021, the Company held a total of
2,478,686 ordinary shares in Treasury which
represent 5.01% of the issued share capital at the
date of acquisition of the shares.
Sales strategies
The Group’s sales strategies seek to grow RHI
Magnesita’s presence in new markets including
India and China, increase market share in the flow
control product range and expand the solutions
business targeting 40% by 2025, supported by
investment in digitalisation.
The Group increased percentage of Group
revenue to 29% from solutions contracts (2020:
27%). It agreed to acquire two assets in new
markets. Flow Control as a percentage of revenue
remained stable, at 16.9% (2020: 16.9%).
M&A
In October 2021 the Group agreed to acquire an
85% ownership stake in Söğüt Refrakter
Malzemeleri Anonim Şirketi (“SÖRMAŞ”), a
producer of refractories for the cement, steel,
glass and other industries in Turkey, for a
consideration of €39 million in cash. The asset
recorded €6.4 million EBITDA in 2020 and we
expect to benefit from at least 30% EBITDA
synergies.
The Group completed its disposal of its stake in
the Magnifin joint venture in December 2021, a
non-core asset producing high grade magnesium
hydroxide for use in flame retardancy, for a cash
consideration of €100 million. The asset is held as
a financial investment and is not consolidated into
the Group’s reported EBITDA. In the year to
31 December 2021, the Group’s share of profit
before tax from the Magnifin joint venture was €9
million and the Magnifin joint venture recorded
EBITDA of €19 million.
In December 2021, the Group acquired a 51%
ownership stake in “Chongqing Boliang
Refractory Materials” in return for initial
consideration of €5 million and an investment of
€15 million in new production capacity, to be
deployed in 2022 and 2023.
In December 2020 the Group entered into an
agreement to sell its two high-cost raw material
plants, Porsgrunn, Norway, and Drogheda,
Ireland. The sale of both plants completed on
1 February 2021, realising a loss of €6 million.
Further provisions for restructuring costs
amounting to €4 million have been recognised
during 2021 for the exposure to environmental
risks, unfavourable contracts and dismantling
costs.
Read more in the strategic review
Pages 16 to 21
Returns to shareholders
The Board’s capital allocation policy remains to
support the long-term Group strategy, providing
flexibility for both organic and inorganic
investment opportunities and delivering attractive
shareholder returns over the midterm. These
opportunities will be considered against a
framework of strategic fit, risk profile, rates of
return, synergy potential and balance sheet
strength.
1 The price paid and value of shares purchased by the Company
on 8 April 2021 overstated the value of shares bought back by
€1.5 million. The total value of shares purchased during the first
buyback, completed on 13 April 2021, was €48,450,082 at an
average price of 3,946 pence per share and not the previously
disclosed value of €49,998,930 at an average price of 4,071
pence per share. The number of shares repurchased in the first
buyback and the shares in issue and held in treasury are
unchanged as a result of this correction.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
3 7
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Effective risk
management
The Group has an established risk management
approach with the objective of identifying,
assessing and controlling uncertainties and risks
which could impact the delivery of RHI
Magnesita’s strategy.
Our approach to risk management
Our risk management efficiency and effectiveness
were further improved in 2021 by enhancing the
Group-wide integrated risk management
approach established in 2020. During this
second year, the Group focused on maturing the
risk management framework by further
embedding the risk tools, culture and awareness
into key areas of the Company. A regionalised risk
management approach was developed with the
purpose of providing the Regional Leadership
Teams with insights into current and emerging
risks and a comprehensive regional risk profile,
which is fully integrated within the Group-wide
risk management approach.
The risk management approach combines
top-down, bottom-up and deep-dive risk
assessments. The top-down risk assessment is
performed by the Executive Management Team
(“EMT”) and reviewed by the Audit Committee
and the Board of Directors. Reporting against
these risks is included within quarterly EMT
meetings, Audit Committee meetings and the
annual Board-led strategic review. The bottom-
up risk assessment is based on each of the
operational sites which maintain ongoing risk
management activity linked to the ISO risk
management practices.
Deep-dive risk assessments are performed for
areas of emerging or prevailing risks, which, in
2021, included information security, tax
management, plant operations, fraud
management and sustainability. In addition, the
Group undertook a climate-related risk and
opportunities deep-dive as part of the preparation
of the 2021 TCFD Disclosure summarised on
page 60.
The information from the bottom-up and the
deep-dive risk assessments is integrated into the
top-down risk assessments to ensure that the
Group risk profile is complete and accurate. The
Group risk profile is reviewed by the EMT on a
quarterly basis, and by the Audit Committee
during the meetings which take place on a regular
basis during the year.
Risk management cycle
5
Reporting
Risks which require immediate
action are reported
immediately to line
management for action. Risks
which do not require
immediate action are reported
periodically to the operational
management and on a
quarterly basis to the EMT.
4
Monitoring
Risks and associated
mitigating measures are
reassessed quarterly during
the year, with increased
frequency for those areas
experiencing significant
changes in the risk landscape.
The remaining risk level is
evaluated to ensure that it is
aligned with the Group’s risk
appetite and reviewed on a
quarterly basis by the EMT.
1
Identification
Starting from all the possible
categories of risks potentially
impacting the Group, specific
risks relevant to RHI Magnesita
are identified through several
analytical tools, including
comparative analysis and risk
benchmarking.
2
Assessment
The risks identified are linked
to potential root causes and
assessed for their inherent
likelihood, inherent impact,
and velocity. Risk analysis to
develop an understanding of
the possible interdependencies
between risks is performed.
5
Reporting
1
Identification
4
Monitoring
2
Assessment
3
Mitigation
3
Mitigation
All risks considered to be outside of the Group risk
appetite, due to their nature or their potential
financial or qualitative impacts, are mitigated by
appropriate risk management strategies. The
implementation and effectiveness of the defined
mitigation measures are reviewed, and additional
actions are defined if necessary. For this purpose,
risks are assessed based on their likelihood and
impact before and after the implementation of those
mitigation measures.
Herbert Cordt
Chairman of the
Board of Directors
During the year, the
continuing COVID-19 crisis
and the consequential
disruptions to global logistics
challenged the Group's risk
management capabilities.
However, management’s
proactive approach to risk
management enabled RHI
Magnesita to gain insights
into risks across our end-to-
end value chain. Risk based
mitigating actions supported
RHI Magnesita in continuing
to deliver products and
services to our customers,
returns to our investors and a
healthy working environment
for our employees.
See Principal risks on
Pages 44 to 49
3 8
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Risks and strategy
Our risk management approach helps the Board
and EMT to understand the risks associated with
the adopted strategy, periodically assess if the
strategy is aligned with our risk appetite and
understand how the chosen strategy could affect
the Group's risk profile, specifically the types and
amount of risk to which the Group is potentially
exposed. As part of this process, risk scenarios are
evaluated to assess potential outcomes.
The assessment, monitoring and mitigation of key
risks to the strategy are prominent features of the
enhanced approach to risk management adopted
in 2020 and further enhanced in 2021. Risk
workshops have been conducted with the EMT
and Board to review the Group risk profile in the
context of the 2025 strategy and the risk appetite
of the top risks to the Group.
Risk appetite
We define risk appetite as “the nature and extent
of risk RHI Magnesita is willing to accept in relation
to the pursuit of its objectives”. We look at risk
appetite from different angles, such as the severity
of the consequences should the risk materialise,
any relevant internal or external factors
influencing the risk, and the status of
management actions to mitigate or control the
risk. A scale is used to help determine the risk
appetite threshold for each risk, recognising that
risk appetite will change over time.
If a particular risk exceeds its risk appetite
threshold, it will threaten our objectives and
therefore require significant risk mitigation and
potentially a change to the strategy. Risks that
approach the limit of the Group's risk appetite may
require acceleration or enhancement of
management actions to ensure that risks remain
within appetite levels.
The risk management approach is based on an
assessment of the risk appetite formed by the
Board, covering the key risk categories (“averse”,
“limited”, “moderate” and “high”). The risk appetite
statements are approved by the Board and are a
foundational element of our risk framework as it
provides guidance to management on the
amount and type of risk we seek to take in
pursuing our objectives.
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. This does not represent an exhaustive
list of risks faced by the Group but encompasses
those considered to be most material to business
performance.
The risks can occur independently from each
other or in combination. Extraordinary events,
such as the COVID-19 pandemic or global logistic
challenges, have the potential to crystallise
multiple principal risks simultaneously,
significantly magnifying the adverse impact. In
2021, the COVID-19 crisis combined with freight,
energy and raw material cost inflation increased
the risk management challenges in key areas of
the business. As a response to the current
circumstances, continuous monitoring of the
Group's risk profile, with specific reference to the
potential cumulative impact arising from the
crystallisation of risks, was undertaken by the EMT
during the year and mitigating actions were taken.
Group risk chart
Impact
low
moderate
high
critical
very likely
d
o
o
h
i
l
e
k
i
L
likely
possible
unlikely
1
5
10
11
4
7
9
2
3
6
8
Velocity
Rapid –
within 3 months
Moderate –
within 12 months
Slow –
> 12 months
Principal risks 2020
Principal risks 2021
1 Macroeconomic environment and
condition of customer industries leading
to significant sales volume reductions
12 Fluctuations in exchange rate and energy
prices
2 Lack of competitiveness of internally
sourced raw materials
1
Macroeconomic environment
2 Supplier dependency risk
3 Inability to execute key strategic initiatives
3 Inability to execute key strategic initiatives
4 Significant changes in the competitive
environment or speed of disruptive
innovation
4 Significant changes in the competitive
environment or speed of disruptive
innovation
5 Business interruption and supply chain
disruption
6 Sustainability – environmental and
climate risks
5 Reliability of the end-to-end value chain
6 Sustainability – environmental and
climate risks
7 Sustainability – health and safety risks
7 Sustainability – health and safety risks
8 Regulatory and compliance risks
8 Regulatory and compliance risks
9 Cyber and information security risks
9 Cyber and information security risks
10 Product quality failure
11 Inconsistent demonstration of RHIM
culture, values and related behaviours
10 Ability to predict and pass cost increases
to customers
11 Organisational capacity to execute
strategy, including demonstrating
Company cultural values
Unchanged
Replaced by a new risk
Scope broadened
demonstration of RHIM culture, values and
related behaviours” was refocused on the
organisational capacity to deliver the Group's
strategy and consequentially reworded as
“Organisational capacity to execute strategy,
including demonstrating Company cultural
values”.
These key changes in principal risks are
highlighted in the table above.
Emerging risks
Identifying emerging risks is a key part of our risk
management process. Emerging risks identified
during the year are assessed, monitored and
evaluated with the EMT and the Board within the
risk workshops. The extensive consideration of
emerging and changing risks was a key driver to
the changes in principal risks described above.
Nine out of 12 principal risks included in the 2020
Annual Report have been confirmed to be
equally relevant in 2021. The risks have been
reviewed throughout the year, and it has been
determined that there are two new principal risks
to the Group: “Supplier dependency risk” and
“Ability to predict and pass cost increases to
customers”.
It has also been determined that two risks
previously reported as principal risks should no
longer be reported as such: “Lack of
competitiveness of internally sourced raw
materials” and “Product quality failure”. These
were deprioritised in favour of risks requiring more
attention and in alignment with management
focus areas.
Furthermore, the principal risk “Fluctuations in
exchange rates and energy prices “is now covered
by the principal risk “Macroeconomic
environment” within a broader scope. The scope
of the principal risk “Business interruption and
supply chain disruption” was broadened to cover
the entire end-to-end value chain and therefore
re-named “Reliability of the end-to-end value
chain”. In addition, the principal risk “Inconsistent
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
3 9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Our internal
control system
The Board reviews
the effectiveness of
the system of internal
financial, operational
and compliance controls
and the risk management
framework.
RHI Magnesita follows 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
primary 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 report as required under the UK
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 end-to-end
process model and delegation of authorities
structure reflecting the responsibility for risk
management and internal controls at all
management levels.
The Group’s internal control framework is
designed to enable the application of the Group’s
risk appetite. This typically seeks to avoid or
mitigate risks rather than to completely eliminate
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
(and related knowledge portal and training) is
used to structure the internal controls over the
accounting process.
In 2020 the Group introduced a framework of
seven Global Processes to improve the
standardisation, efficiency and digitalisation of
processes. During 2021 it became apparent that
the challenges prompted by the COVID-19
pandemic required the immediate enhancement
of specific internal control processes. The Group
implemented a dedicated taskforce to mitigate
the supply chain disruption and enhance the
relevant internal controls including the
introduction of real-time logistics monitoring to
help plan around shipment delays. Therefore the
internal process development activity was
reprioritised to concentrate initially on addressing
these immediate specific use cases impacting our
service levels to our customers rather than the
wider approach. The broader development of the
Global Processes will be resumed in 2022, albeit
with a stronger emphasis on the processes
directly delivering the value to our customers.
The Group has an Internal Audit function, with a
reporting line to the Chairman, 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.
Internal Audit operates within a single department
also comprising Risk Management and
Compliance. The Audit Committee and
management ensured that appropriate
safeguards are in place to maintain the
independence of Internal Audit. The Internal
Audit, Risk and Compliance function is structured
into regional teams providing a locally-focused
governance presence to support regional
management in line with the established
Group-wide objectives. The delivery of the 2021
Internal Audit plan was impacted by the practical
limitations imposed by COVID-19, however the
overall coverage level was maintained utilising
the approaches, such as remote auditing,
successfully developed in 2020. An External
Quality Assessment of the effectiveness and
capability of the Internal Audit function was
performed in 2021. This report concluded that the
Internal Audit function has the required level of
4 0
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
independence and is operating with a high level
of performance. Certain recommendations were
made to further improve the function and these
will be implemented in 2022.
During 2021, Internal Audit conducted 23
planned internal audits and five special
investigations, reporting the most relevant
observations and recommendations to the Audit
Committee.
The reports by management and Internal Audit,
Risk and Compliance also facilitated
consideration by the Audit Committee of
management actions in respect of the following
key control framework challenges:
• Developing the maturity of the regionally
based management model;
•
Improving the effectiveness of the delivery of
major capital expenditure and IT projects;
• Continuing the enhancement of IT security
controls to address increased cyber security
risks; and
• Utilising the Global Process framework to add
value and improve operational performance.
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. Nonetheless, given the
continued evolution and the regionalised nature
of the Group and the 2021 focus on addressing
supply chain disruption, there is need for further
strengthening of the internal control system in
2022, most notably through the resumed Global
Process development activity.
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 and reassessed in 2020 to
create a more regionally focused and agile
structure. The transactional level controls
operated in line with the established core design
throughout 2021. The planned development of
end-to-end global processes was largely
postponed into 2022 to enable resource to be
focused in 2021 on emerging operational
process-based challenges such as supply chain
disruption. A range of improvements to specific
processes (e.g. logistics management) were
implemented in 2021. It is therefore planned to
reassess and further update the design of the
broader internal control systems in 2022.
the reporting of the related strategic objective
significantly increased visibility and insight of risk
management.
The improvements in the risk management
approach, the milestones achieved, the results of
the internal quality assessment and planned next
steps were reviewed by the Audit Committee. In
addition, the risk appetite was discussed and
approved by the Audit Committee and the Board
following a series of discussion workshops.
During 2022 the focus will be on completing the
integration of risk management within project
management activities and continuing to
enhance the leadership capabilities to deliver risk
management, especially within the regionally
based management teams.
The key internal control measures include reviews
of financial performance and key control
weaknesses at each Board meeting, monthly 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 whistleblowing process and
strengthening the capability of the Legal and the
Internal Audit, Risk and Compliance 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 for review and resolution,
all of which is overseen by the Audit Committee.
The key control weaknesses identified from these
processes were addressed within 2021. During
2021, driven by the need for faster analysis and
decision making on key commercial levers,
Management have identified improvement
potential in the clarity and insight provided by the
core internal performance management data. An
improved financial management data set and
enhanced monthly Management review structure
will be implemented from January 2022.
In 2021, risk management activity continued to
focus on increasing the depth of the assessment
of the top 20 Group risks and the set-up of
consistent reviews to monitor the evolution of
such risks by the EMT, to review the Group risk
profile on a quarterly basis and to take any
additional mitigating action. Improvements to the
plant risk management and the fraud risk
management approaches were delivered in 2021.
The potential to embed risk management
concepts more fully into leadership behaviours
was a key theme of the 2021 Leadership
Conference. Linking the reporting of key risks to
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
4 1
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Viability
statement
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 2024.
Context
An understanding of the Group’s business model
and strategy is key to the assessment of its
prospects. The Company’s strategic priorities
are to:
•
Improve competitiveness through cost
reductions and network optimisation
• Grow revenues and margins by expanding the
business model
•
Increase market share in new geographies or
product segments where the Group is
under-represented
For more information on our strategy and business
model, please refer to page pages 14 to 23 and
pages 10-11.
Whilst uncertainty and volatility remain ongoing
features of global markets, in 2021 the Group
continued to implement its strategy and
demonstrated progress in all strategic priorities.
The assessment process and key
assumptions
The assessment of the Group’s prospects is based
upon the Group’s strategy, its financial plan and
principal risks.
A financial forecast covering the next three years
is prepared based on the context of the strategic
plan and 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, raw material, energy, freight and
labour costs, estimates of production volumes,
future capital expenditure and delivery of our
strategic cost reduction and sales initiatives.
All scenarios consider the completion of the
acquisitions of the Chongqing plant in China and
SÖRMAŞ in Turkey in 2022. No additional M&A is
considered. In addition, the forecast does not
assume the renewal of existing debt facilities or
raising of new debt. A key component of the
financial forecast and strategic plan is the
expected growth of steel production and the
output of non-steel clients in all regions,
combined with the development of the specific
refractory consumption taking account of
technological improvements.
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 page 10.
These risks can occur independently from each
other or in combination. Extraordinary events,
such as the COVID-19 pandemic or global
logistics challenges, have the potential to
crystallise multiple principal risks simultaneously,
with the effect that the impact could be
significantly magnified. The Group continuously
monitors its risk profile with specific reference to
the potential cumulative impact arising from the
crystallisation of the principal risks and defines
appropriate mitigating actions.
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 financial
performance and cash flows have then been
subjected to stress testing and sensitivity analysis
over the three-year period. These data were
aggregated to model a range of severe, but
plausible, downside scenarios for the Group.
The scenarios for stress testing are based upon
materialisation of the Group’s principal risks. The
scenarios tested consider:
• Macroeconomic environment
• Supplier dependency risk
•
Inability to execute key strategic initiatives
• Reliability of the end-to-end value chain
• Organisational capacity to execute strategy,
including demonstrating Company cultural
values
• Reliability of the end-to-end value chain
• Ability to predict and pass cost increases to
customers
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R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
The principal risks described above could either
be triggered by COVID-19, ongoing global
logistics challenges or other circumstances.
The most severe scenario considers a COVID-
type macroeconomic shock limiting revenues and
earnings to 2021 level for the entire planning
period.
The Group’s liquidity amounts to €1,181 million
comprising of cash and cash equivalents of €581
million and undrawn committed credit facilities of
€600 million as of 31 December 2021. This is
sufficient to absorb the financial impact of the risks
modelled in the stress and sensitivity analysis.
However, if these risks were to materialise, the
Group also has a range of additional mitigating
actions that enable it to maintain its financial
strength, including reduction in fixed costs and
capital expenditure, raising debt or reducing the
dividend.
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 2024. The Directors
have determined that the three-year period to
December 2024 is an appropriate period having
regard to the Group’s business model, strategy,
principal risks and uncertainties.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Principal risks
Link to strategy
Business model
Competitiveness
Markets
Appetite
High
Moderate
Limited
Averse
1. Macroeconomic
environment
Risk description
Changes in the global economic environment, financial markets conditions and adverse political developments may have an
impact on the Group's revenue and profitability.
Link to strategy
Target risk appetite
KPIs
Revenue, Adjusted EBITA Margin,
Adjusted EPS, ROIC
Internally monitored metrics
Key macroeconomic and financial
market indicators, steel and
cement forecasted production.
The macroeconomic environment changes leading to sales volume reductions can arise from industrial factors or from wider
global issues, such as a pandemic or global logistic challenges.
The demand for refractory products is directly influenced by steel, cement and non-ferrous metal production, the investment
climate, metal and energy prices and the production methods used by customers.
Due to the Group's cost structure, fluctuations in sales volumes have an impact on the utilisation of production capacities and
consequently on the Group's profitability.
Examples of specific risks:
• Decreasing investment in customers' infrastructure projects (therefore reducing steel and cement demand) leading to lower
refractory consumption and depressed sales volumes.
• Customers focusing on lower-cost and more commoditised refractories.
• Lower sales volumes leading to lower fixed cost absorption.
Risk mitigation
• Initiatives to increase the Group's resilience, through
establishing leaner processes and lower fixed cost
structures (such as the production network optimisation),
whilst increasing the Group's market share and the value
for our customers.
• Diversification of geographies and industries.
• Dedicated taskforce to mitigate the impact of supply chain
disruption.
• Price increase initiative to pass inflationary costs to
customers.
• Early leading indicators to ensure identification of emerging
macroeconomic trends.
• Treasury Policy and usage of financial instruments to
mitigate risk exposure to financial markets.
Risk movement
The demand for refractory products and RHIM customers'
products increased sharply in 2021 and is expected to remain
strong. The improvement of the global macroeconomic
environment and condition of financial markets had a positive
mitigating effect on this risk.
The Group faced global logistic challenges, which impacted
the cost and reliability of shipments. This risk was mitigated by
management focusing on targeted actions such as price
increases to customers, increase in the raw materials inventory
levels and additional people and system resources dedicated
to managing logistics.
The risk appetite for the risk was reassessed by the Board as
high due to the Group's limited ability to influence global
macroeconomic events. This risk is within the risk appetite, and
macroeconomic and industry developments are closely
monitored by management and the Board.
2. Supplier dependency risk
Link to strategy
Target risk appetite
KPIs
Adjusted EBITA Margin,
Adjusted EPS, ROIC
Internally monitored metrics
Tonnes of purchased materials
from sole source suppliers, tonnes
of purchased materials from
suppliers located in the same
geography, stock level of critical
materials.
Risk description
The Group relies on a small number of external suppliers for certain materials. In certain cases, the Group relies on one supplier
for the sourcing of these raw materials.
The Group might depend on a few suppliers operating in the same market or based in the same geography which are subjected
to the same industry, country dynamics and logistic challenges.
The Group works with selected specialist third-party providers to operate some of the mining activities across our production
sites. Potential temporary or permanent inability to carry out these activities by the third-party providers might lead to risk
exposure for the Group and ultimately result in a temporary production interruption.
Examples of specific risks:
• Production disruptions due to single source supplier not being able to deliver raw material on time.
• Production interruption due to third-party providers’ inability to operate mining production.
• All the Group's suppliers of a specific raw material and located in a country might be affected by country-wide disruptions.
Risk mitigation
• Proactive engagement with additional vendors to qualify
additional supply to achieve risk diversification.
• Potential risks linked to suppliers' geographical location are
assessed and considered in the risk mitigation strategies.
• Strategically increasing stock levels to mitigate the risk of
Risk movement
Prompted by the strains of the COVID-19 crisis and the global
logistic challenges on companies that operate globally
through their international supply chains, this risk became
more significant during 2021. For this reason, it is reported as a
new principal risk.
production interruption.
• Increasing internal production of magnesite based raw
material, and evaluating value adding options to produce
other magnesite based raw materials
The risk is within the risk appetite, however the Group is
enhancing its efforts to further mitigating the risk.
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R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
3. Inability to execute key
strategic initiatives
Risk description
The Group's strategic initiatives include sales expansion, new product and service models, production network optimisation,
digitalisation and M&A projects.
Link to strategy
Effective prioritisation and execution are key to delivering the Group strategy. The ambition level of these initiatives requires a
high level of management capacity to effectively deliver change management and strategic initiatives execution.
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.
Target risk appetite
Examples of specific risks:
• Failure to develop the strategy into specific actions.
• Failure to react in a timely manner to a changing environment.
• Failure to effectively deliver projects.
• M&A underperformance.
Risk mitigation
• Group-wide strategy with a high focus on key priorities.
• Postponement or cessation of strategically non-important
projects.
• Strengthening of project management culture and
approach.
• Leadership capability enhancement programme.
• Deep dive learning-based review on each strategic
initiative.
KPIs
Voluntary Employee Turnover,
Revenue, Adjusted EBITA Margin,
Adjusted EPS, Leverage, ROIC
Internally monitored metrics
Adjusted EBITA from strategic
initiatives, ROIC from strategic
initiatives, completion of strategic
initiatives on-time and on-
budget.
Risk movement
During 2021, the residual risk level remained overall consistent.
The COVID-19 crisis increased the pressure on the delivery of
these core strategic initiatives. In addition, the complexity of
executing major projects in the challenging COVID-19
impacted environment remains high.
Management continues to proactively focus on successfully
executing strategic initiatives which are complex in nature.
The risk appetite for the risk was reassessed by the Board as
limited due to the importance of the Group’s ability to
successfully execute its strategic initiatives in a challenging
commercial environment. Overall, this risk is within the risk
appetite of the Group and undergoes close monitoring to
ensure that any further mitigating action will be promptly
implemented if required.
4. Significant changes
in the competitive
environment or speed
of disruptive innovation
Risk description
The Group has a digital strategy that focuses on using digital products to grow its revenue and margin, digitalisation of
operations, and other internal processes. In 2021 this was an area of significant management focus, which enabled the Group
to progress in its digital transformation journey.
Link to strategy
Target risk appetite
Depending on the ability of the Group to develop adequate products and services, the changes in customers' preferences
towards innovative products may present either an opportunity or a threat by increasing pressure on demand and margins.
The speed of evolution of customer demand for environmentally-beneficial features, digitalisation and services may be faster
than the pace of implementation of the Group's digital strategy.
Examples of specific risks:
• Disruptive product technology introduced by a competitor.
• Failure to identify digitalisation trends and technologies.
• Competitors being faster and more agile in responding to changing customer requirements.
KPIs
thinking.
Risk mitigation
• Create a climate that fosters innovation and “out of the box”
Revenue, Adjusted EBITA Margin,
Adjusted EPS, ROIC, R&D &
Technical Marketing Spend
Internally monitored metrics
R&D & Technical Marketing
Spend, ROIC on such spend and
time-to-market, Sales of digital
products, Cost saving generated
by usage of digital technologies.
• Significant focus on and investment in digitalisation to bring
more digital products to market and to enhance internal
processes through digitalisation.
• Continued investment in R&D, including, importantly, on
sustainability in line with the Group's strategy.
• Focus development activity on projects aimed at an agile
and fast impact on the market.
• Monitoring of key R&D and innovation metrics.
• Partnering with third-party innovation leaders.
Risk movement
In 2021 the digitalisation focus was directed at internal process
enhancement, foundational work on customer relationship
management and digital products for customers. The Group
made good progress in the implementation of the digital
infrastructure in operations, and digital/automation projects to
reduce costs are on track. Management continues to focus on
monetising digital-based innovation.
Investments in R&D is continued, and the Group opened a new
R&D centre in India in November 2021.
These initiatives contributed to strengthening the risk
mitigation initiatives already in place and consequently
reducing the residual risk level of this risk.
The risk appetite was also reassessed by the Board as moderate,
and the risk remains within the risk appetite and is consistently
monitored.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Principal risks
continued
5. Reliability of the
end-to-end value chain
Link to strategy
Target risk appetite
KPIs
Revenue, Adjusted EBITA Margin,
Adjusted EPS, ROIC
Internally monitored metrics
Refractory lead times, Plants’
capacity utilisation, Supply in Full
On Time, Inventory levels,
Customer surveys.
Link to strategy
Business model
Competitiveness
Markets
Appetite
High
Moderate
Limited
Averse
Risk description
The journey from raw material to finished goods can span several months and might require shipments across the globe. The
ability to react quickly to changes prompted by internal and external factors is therefore key to ensuring value delivery to our
customers.
In addition, the ability to forecast the demand for the Group’s product is key to enabling efficient and effective planning of
production-related activities, including procurement and inventory planning.
Our global operations can be disrupted by issues in a specific geography or by industry-wide challenges. However, the ability
to transfer some of the production between geographies to mitigate the risk of business interruption can be deployed as a risk
mitigation strategy.
Examples of specific risks:
• Global logistic challenges impacting the stability, speed and cost of our end-to-end value chain.
• Production interruption at a single-source manufacturing site.
• Inability to accurately predict customer demand leading to missed sales opportunities, inefficient production planning and
additional costs.
• A natural disaster or major political crisis in one or more countries or regions.
Risk mitigation
• Dedicated taskforce to mitigate the impact of supply chain
disruption through short-term targeted improvement to
address specific operational challenges.
Risk movement
In the context of the COVID-19 crisis and the global logistic
challenges, the visibility over the future characteristics and
dynamics of the logistics industry remains limited.
• Regular reviews of sales, production and financial plans,
as well as longer-term portfolio decisions, are based on
extensive research.
• Additional people and system resources leading to
improvements in delivery reliability and reduction of
production backlog.
• Operational risk management and maintenance policies.
• Geographical diversification of the production network.
• Implementation of an optimised production footprint to
meet planned requirements.
• Risk-based investment policy.
• Global insurance coverage.
• Focus on the minimisation of sole-source materials and
strategically increasing stock levels.
The Group faced difficulties in the supply chain and production
management. This, combined with the closure of certain
plants, and meaningful investment in others (as part of the
Production Optimisation Plan) increased the level of this risk
during the financial year and pushed it outside of the risk appetite.
Capacity constraints for finished goods production, combined
with the low inventory levels at the beginning of the year and
the high-capacity utilisation, led to higher exposure to peaks of
demand during 2021 and the reduced ability to fully take
advantage of those peaks. Risk mitigation options are
constrained by the limited network flexibility in 2021 and the
long lead times of the end-to-end supply chain. The current
global transportation challenges contribute to increasing
delivery times.
The Group recognises the rapidly evolving challenges
associated with managing the global supply chain and remains
focused on optimising the end-to-end value chain to reduce
the level of risk back to within the risk appetite.
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6. Sustainability –
environmental and
climate risks
Link to strategy
Target risk appetite
KPIs
Relative CO2 emissions, Use of
secondary raw material, Revenue,
Adjusted EBITA Margin, Adjusted
EPS, ROIC
Internally monitored metrics
Relative CO2 emissions, Use of
secondary raw material, Progress
towards the achievement of
environmental and climate
targets.
Risk description
Controlled emissions and use of potentially hazardous materials are inherent to the production of refractory products.
The risk of failing to meet environmental regulatory targets or uncontrolled emissions at our production sites exists and may
result in high financial losses and liabilities.
The evolving regulatory environment, the increased stakeholders’ focus, and the Group’s commitment to sustainability led to
increasing investment and effort being dedicated to achieving environmental and climate goals.
There are future environmental and climate targets that can only be met by new technological solutions to change the Group’s
production processes and by the delivery of environmental improvements by the Group’s suppliers and customers.
Examples of specific risks:
• Uncontrolled emissions.
• Inability to meet sustainability targets.
• Failure in meeting stakeholders’ expectations.
Risk mitigation
• Regular environmental audits and risk monitoring at all
sites.
• Well-established Board-level Corporate Sustainability
Committee to oversee and challenge management’s
environmental and climate strategy.
• We manage, measure and report our environmental risks
and opportunities through the TCFD model (as described
on page 60)
• A climate strategy focused on recycling, carbon capture
and usage, fuel switch, energy efficiency, and innovative
customer solutions. Read more in Climate and environment
on pages 60 to 63.
• Increased focus on the use of secondary raw material as a
core element of the Group’s strategy.
• €50 million investment in a major four-year R&D
programme to pilot new sustainable production
technologies.
• The geographical diversity of the Group’s operations and
the ability to shift production reduce the impact of single
events impacting specific geographies.
• Increased focus on sustainable procurement .
• Executive LTIP and Employee Bonus linked to achievement
of the Group’s CO2 reduction targets and increased
recycling.
Risk movement
The inherent likelihood of this risk has slightly risen due to the
increasing regulatory complexity and rising stakeholders’
expectations. Therefore the potential impacts, including
reputational and financial, of this risk crystallising have
increased.
To match the increasing level of risk, a major four-year R&D
programme designed to expand the Group’s leading
sustainability position within the refractories industry was
launched in the first half of 2021. Over the course of four years,
RHI Magnesita will invest €50 million towards technology
research and pilot plant constructions, including new
technology for the capture of CO2.
In addition, a range of additional risk-mitigating measures was
implemented during the year. These include the achievements
of the Group’s CO2 targets in the employees’ bonus criteria, the
achievement of the “Gold” ESG EcoVadis rating, and the
increased focus on sustainable procurement.
The risk is within the Group’s risk appetite and is continuously
monitored by management.
7. Sustainability – health
and safety risks
Risk description
Employees and contractors may be exposed to health and safety (H&S) hazards in our plants that cannot be completely eliminated.
Our activities and products may potentially cause accidents at our customers’ sites.
Link to strategy
Beyond the harm to individuals, H&S incidents can lead to high financial penalties, site closure and a loss in reputation for the
Group.
Especially in the current context of a pandemic, the health of our employees and contractors is a significant area of risk to the
Group.
Target risk appetite
KPIs
LTIF, Revenue, Adjusted EBITA
Margin, Adjusted EPS, ROIC
Internally monitored metrics
Total Recordable Injury, LTIF,
Severe Lost Time Injuries, Near
Misses, Preventive Ratio, Unsafe
Situations.
Examples of specific risks:
• Fatal or serious accident at manufacturing or customer site.
• Site closure due to H&S incidents.
• Loss in reputation for the Group due to H&S incidents.
Risk mitigation
• H&S objectives are defined as a core Company objective,
and the performance is constantly monitored.
• H&S approach is based on leading global standards and
practices, including regular risk monitoring, emphasis on
“near miss” reporting and root cause analysis.
• Focus on collaboratively enhancing the H&S approach at
customer and supplier sites.
• Continued investment in H&S improvements in our plants.
• Regional COVID taskforces were established to prevent
and manage pandemic-related risks at our sites and
facilitate access to vaccinations.
• Specific action plans in the event of employee or contractor
health issues.
Risk movement
The risk level slightly increased due to the continuous threat of
the pandemic to the health of our employees and contractors.
Several measures to protect the health of our staff have been
implemented to address local risks posed by COVID-19.
Protecting the health of our staff continues to be a priority.
Safety remains a top priority for the Group with continued
focus, investment and management efforts.
The overall H&S risk is evaluated to be within the risk appetite
and is constantly monitored to ensure that any necessary
action is taken promptly.
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Principal risks
continued
Link to strategy
Business model
Competitiveness
Markets
Appetite
High
Moderate
Limited
Averse
8. Regulatory and
compliance risks
Link to strategy
Risk description
The Group faces increasing regulatory complexity and operates in some geographies with inherently high corruption risks.
We strive to establish a culture of compliance throughout the organisation.
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.
Target risk appetite
Examples of specific risks:
• Failure to act in accordance with our Code of Conduct.
• Violation of anti-corruption laws by employees or third-party representatives.
• Violation of data privacy regulations.
Risk mitigation
• Ethical values supported by strong corporate culture.
• Code of Conduct and compliance policies and procedures.
• Enhancement of global training, documentation of
compliance matters and communication.
• Anonymous whistleblowing hotline is available to
employees and external parties to report compliance
concerns. All reports are followed up by qualified
professionals.
Risk movement
In 2021 the focus on key compliance risks has continued,
enhanced by ad-hoc training, and targeted compliance
communications. Significant milestones to strengthen
preventative measures were achieved with the delivery of core
compliance policies, guidelines, and training.
The overall risk level was reduced due to the achievement of a
significant level of risk mitigation. The risk is within risk appetite
and continuously monitored by management.
KPIs
Revenue, Adjusted EBITA Margin,
Adjusted EPS, ROIC
Internally monitored metrics
Percentage completion of
internal Code of Conduct and
Compliance training and
certification, Whistleblowing
reports, Data privacy breaches
9. Cyber and information
security risks
Risk description
The Group’s reliance on IT systems and the greater focus on digitalisation result in a growing exposure to cyber and information
security risks.
Link to strategy
The possible impact of cyber and information security risks could range from operational disruptions, loss of intellectual
property, legal compliance issues, frauds, to significant reputation losses.
Target risk appetite
Examples of specific risks:
• Intellectual property or confidential data theft.
• Personal data breach.
• Software or hardware failure leading to critical business process interruption.
• Cyber attacks leading to financial losses.
KPIs
Revenue, Adjusted EBITA Margin,
Adjusted EPS, ROIC
Internally monitored metrics
Security incidents classified by
severity, Phishing test fail rates,
Triage escalation time.
Risk mitigation
• Global information and cyber security policies in line
with information security best practices, standards
and frameworks.
• Continuous awareness campaign and training.
• Regular risk assessment and penetration testing.
• Cyber security detection and response team.
• Network, device and application protection.
• Audit Committee oversight and specific focus on cyber
security related controls.
Risk movement
The fast-evolving cyber and information security global
landscape experienced a continued increase in the level of
cyber-threat. This led to an increase in the potential risk impact
in 2021.
The Group continued the implement additional risk-mitigating
measures to respond to this rising threat, including awareness
campaigns and data encryption. These risk mitigation initiatives
contribute to lower the residual likelihood of this risk.
The overall residual risk was evaluated to be within the risk
appetite and closely monitored to enable fast reaction.
4 8
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
10. Ability to predict and
pass cost increases to
customers
Risk description
The Group is exposed to increases in its variable costs such as raw materials, energy, logistics and labour costs. In 2021, some of
these costs increased materially due to global factors.
Link to strategy
To achieve the Group’s margin targets, it is crucial that rising costs are identified early through the monitoring of leading
indicators and that these are effectively passed on to the Group’s customers.
The Group can suffer significant financial loss should these costs not be fully passed on in a timely manner whilst preserving
customers’ relationships and our market share.
Target risk appetite
Examples of specific risks:
• Inability to identify early signs of increases in the variable costs.
• Inability to effectively negotiate price increases with customers.
Risk mitigation
• Consistent monitoring of leading indicators to identify early
signs of externally driven cost inflation.
• Management focuses on effectively negotiating price
increases with customers without compromising
relationships and market share. These efforts targeted the
delivery of price increases of €130 million in 2021.
• Close management monitoring of progress towards price
increase implementation.
KPIs
Revenue, Adjusted EBITA Margin,
Adjusted EPS, ROIC
Internally monitored metrics
Price increase realised, Price
fulfilment, Leading cost
indicators.
Risk movement
Raw material and freight costs showed an upward trend since
early 2021, whilst energy, CO2 and labour costs started to rise in
the second half of the year. Following these externally driven
changes in key variable cost components for the Group, this risk
is now deemed to be high and a key area of management focus.
A range of risk-mitigating measures were implemented and
mainly relied on the successful delivery of 98% of the €130
million planned price increases within 2021 and enhancing the
monitoring of leading indicators to increase future visibility and
enable effective decision making.
The risk is within risk appetite due to the significant progress in risk
mitigation execution. This is closely monitored by management to
enable a fast reaction to additional changes in external costs.
Focus remains on structural process improvements to enhance
visibility over internal and external costs changes.
11. Organisational capacity
to execute strategy,
including demonstrating
Company cultural values
Risk description
The Group places a high emphasis on pragmatism, openness, performance, customer centricity and innovation as core
behaviours within its corporate culture. The embedding of the Company culture is a continuous journey and leadership is
pivotal to enhancing the Group values across geographies and departments. Our values of accountability and responsibility
are key to promptly communicating and addressing issues to enable a fast and reliable execution.
Link to strategy
Target risk appetite
KPIs
Gender diversity in leadership,
Voluntary Employee Turnover,
Adjusted EBITA, Adjusted EPS,
ROIC
Internally monitored metrics
Gender diversity in leadership,
Voluntary Employee Turnover,
Adjusted EBITA from strategic
initiatives, ROIC on strategic
initiatives.
The Group’s corporate culture, combined with an optimal internal structure, adequate skills and resources, are key to ensuring
the delivery of the Group strategy. To ensure access to adequate skills, the Group is focused on being able to retain talent as
well as attract talent from the market.
A key focus of the Group’s corporate culture is gender, ethnic and generational diversity, which is seen as an important driver to
enhance performance.
Examples of specific risks:
• Inconsistent behaviour across the Group.
• Lack of accountability and responsibility.
• Inability to attract and retain top talent.
Risk mitigation
• Continuous emphasis on the Company culture as a key
enabler of performance and driver of strategy execution.
• Dedicated leadership capability enhancement
programme.
• “Tone from the Top” leadership culture.
• Developing talent, enhancing diversity and promoting
Company culture as significant components in the People
Cycle.
• Trainee programme to develop graduates into future
leaders.
Risk movement
The increasing pace of changes driven by the fast-evolving global
landscape, which manifested prominently in 2021, requires the
Group to continuously ensure that its internal structure and
employees’ skill set enable agility to successfully deliver the
Group’s strategy. In addition, a consistent and well-established
culture is a pivotal enabler of management’s effectiveness in
delivering the strategy, especially in a fast-evolving context.
During the year, leadership and project management skills within
the Group have been subjected to multiple pressure points due to
the increasing complexity to manage the Group’s operations,
projects and strategic initiatives in a context of global challenges.
The global job market, which has been significantly impacted by
COVID-19 and the strong macroeconomic recovery in 2021 in
several of the geographies in which the Group operates, started
to indicate an increasing retention risk for talents in the second
half of 2021. However, this risk has not crystallised, and the
retention rate amongst senior leaders remains high.
For these reasons, the level of risk has been deemed to have
risen in 2021 and requires management focus to enhance risk
mitigation actions to reduce it and bring it within the risk appetite.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
4 9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Stakeholder
engagement
Consistent, effective and transparent
engagement with our stakeholders helps us
better understand their needs and opinions,
thereby informing our strategy.
Stakeholder group
How the Company engages
How the Board engages
(what matters to the stakeholders)
(i.e. how has engagement and stakeholder opinion impacted on the Company’s strategy)
Topics raised
Outcomes
Shareholders
Why they are important
As providers of capital and owners of the
business, our shareholders play a central
role in the Company’s growth and
development. By fostering and
maintaining their support, we are able to
implement our strategy and objectives.
The Investor Relations department maintains an
ongoing, transparent dialogue with shareholders and
analysts and reports regularly to the Board.
Regular engagement with our shareholders is
facilitated via one-on-one meetings, investor
presentations and webcasts, the AGM, industry
conferences and events, capital markets days and site
visits.
In 2021, the Investor Relations department initiated a
perception study on behalf of the Board, inviting our
capital markets stakeholders to provide their
perspective on the Company strategy and progress,
allowing management to take proactive and informed
decisions.
Debt holders
and lenders
Why they are important
Our lenders and debt holders are an
important source of the financial
liquidity the Group requires to operate
and are integral to the long-term
sustainable success and growth
initiatives of the business.
Customers and
innovation partners
Why they are important
Our customers are positioned at the
heart of our business model and
everything we do. They are fundamental
to the sustainable future of the Group.
Our customers help us to achieve our
Company purpose, through delivering
the vital materials such as steel, cement
and glass which are essential to our end
markets.
We collaborate with external partners
such as accelerators, start-ups, open
innovation platforms, companies and
institutions to foster innovation and drive
developments in R&D.
The Treasury department maintains an ongoing,
transparent dialogue with its debt holders and lenders
and reports regularly to the Board.
Regular engagement with these stakeholders is
facilitated via one-on-one and Group meetings and
presentations.
In 2021, the Treasury department engaged with its
debtholders to, among other initiatives, convert its
€600 million Syndicated RCF and $200 million Term
Loan into ESG linked facilities as well as to issue €400
million of new ESG linked long-term debt, including a
€250 million Schuldschein.
We work closely with our customers to ensure we are
aware of their needs – this is facilitated via day-to-day
contact with Company representatives as well as
fact-finding, technical consulting, installation and
operations supervision and resident expert site visits.
The Company’s Net Promoter Score (“NPS”) is
measured regularly and is used as a key metric for
customer-facing teams, to ensure focus on the goal of
providing a positive customer experience in every
interaction. It has been especially important to
maintain close communication with our customers
during 2021 as we have faced unprecedented
challenges from the supply chain volatility. In Q4 2021
we achieved an “outstanding” score, ranking in the top
quartile of companies.
In a Customer Satisfaction Survey conducted in Q4
2021 83% of respondents scored RHI Magnesita as a
“good” or “excellent”. 85% of respondents stated that
RHI Magnesita’s product quality is either “excellent” or
“good” whereas only 72% of respondents scored
delivery performance as “excellent” or “good”.
Our R&D, Technical Excellence Marketing and Digital
Solutions teams collaborate and engage with
innovation partners on an ongoing basis.
5 0
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
David Schlaff and Stanislaus Prinz zu Sayn-Wittgeinstein
represent major shareholders in the Company through their
position on the Board and can provide an essential investor
perspective to the Board and EMT.
The Executive Directors (“EDs”) meet regularly with investors and
analysts (both in person and via digital channels).
When Board members interact with shareholders an update is
usually given to the full Board. Directors also received regular
presentations from Investor Relations with analyst coverage of
market and shareholder reactions to Company events.
The Board contributed towards the formation of the perception
study and a detailed Board presentation on the results of the
perception study was considered in a Board meeting.
The Investor Relations department regularly engage with its
shareholders on matters regarding sustainability and in November
2021 held its annual sustainability and governance roadshow with
Janet Ashdown, Chairman of the Corporate Sustainability
Committee (“CSC”) and Remuneration Committee and John
Ramsay, Senior Independent Director and Chairman of the Audit &
Compliance Committee (“Audit Committee”). Additionally, the
CSC received a report from the Head of Investor Relations on the
particular views relating to ESG.
The Board has a clearly defined approval and delegation of
authorities matrix for the contracting of debt instruments, and
actively contributes and engages in discussions with the CFO and
Group Treasurer.
The CFO and Group Treasurer execute the Board-approved
strategies by consistently engaging with debt holders and lenders
to secure favourable terms, mitigate risks and ensure sustainable
and solid relationships.
The EDs communicate with customers in regular meetings to
discuss joint strategies, at industry congresses, seminars and
webinars, and at high-technology events and fairs.
NPS is considered at Board meetings and is regarded as a good
proxy for engagement with customers on the basis of its role in
bringing customer priorities to the boardroom. Management
continues to develop this survey to reach and engage with as many
customers as possible.
The CSC received a report from the CSO on the particular
customer views relating to ESG.
The Board received an update from the Technical Advisory
Committee, which works closely with innovation partners, and
considered the intellectual property strategy throughout the year.
The Corporate Sustainability Committee receives technical
updates on measures to develop the Company’s sustainability
strategy which are developed in conjunction with innovation
partners. This is then fed into the Board via discussions and
Committee reports.
In previous years the Board have visited customer sites but in 2020
and 2021 the various restrictions have meant this has not been
possible.
• Company strategy and implementation
• Shareholder perspectives were considered in Board discussions surrounding capital allocation
• Operational and financial performance
• Capital structure and liquidity
• Capital allocation
• The role and impact of our Employee Representative Directors
• Sustainability agenda – meeting the challenges of climate
• Overboarding
change and diversity
•
Linking remuneration and ESG
• The sustainability and governance roadshow centred upon
approach to diversity, environmental activity, supply chain
governance, corporate governance practices and remuneration
decisions, notably the extension by €50 million of the €100 million share buyback undertaken
in May 2021.
• The Board continued to incorporate shareholder feedback about remuneration into its decision
making around sustainability measures in incentive schemes and ensuring the outcomes
against existing measures will be sufficiently assessed.
• The Directors used feedback from shareholders to challenge management about progress of
sustainability measures and the strategy with regard to pricing and first mover advantage.
• The Board considered shareholder expectations when considering the outlook and potential
announcements throughout the year, ensuring the Company remained compliant with MAR.
• Ongoing conversations about diversity – particularly gender – ensured that the Nomination
Committee recommended to the Board a refreshed diversity policy (found here on our website)
and proposed three female Directors for appointment at the AGM in June 2021.
• Feedback about acquisition strategy from shareholders informs the business strategy and
• The Nomination Committee considered shareholder expectations around the number of
appointments held by new Directors and the IR team engaged with particular shareholders as
required to give assurance that new Directors had sufficient time to dedicate to the Company.
• Response to COVID-19: employee protection measures,
planning for the future in terms of liquidity and business capacity.
participation in government schemes
• Company strategy and implementation
• Additional refinancing with competitive rates was conducted in 2021 to further enhance the
Company’s capital structure, debt amortisation schedule and liquidity profile including a €150
million ESG-linked bilateral facility with ING and a €250 million Schuldschein issuance with
maturities ranging from 5.5 years to 10 years.
• Operational and financial performance and outlook
• Capital structure and liquidity
• Sustainability initiatives
•
Risk management
• Climate action
and Cement
• COVID-19
• Our customers’ partner of choice in the green transition of Steel
part of every Board decision.
• Customers remain at the heart of the Company’s values and culture and as such form a central
• The Board referred to the customer experience when considering and discussing the outlook for
the business, incorporating this perspective into their view of the Company’s future
performance.
• The Board carefully considered global customer viewpoint in pricing discussions when
• Customer service levels, lead times and supply chain issues
•
Innovation partners – the art of the possible and where new
considering costs and value proposition. Retention of long-term customers with strong working
developments are being made which might apply to the industry
relationships was considered and prioritised.
• Price increases in response to inflationary costs, higher transport
their level of focus on Scope 1, 2 and 3 emissions).
• Strategic direction in respect of sustainable products (price, secondary raw material level and
and progress sustainable goals
costs and higher raw material prices
• Strategic direction in respect of tailored products for customers against the complexity of
business operation.
• The opening of a customer complaints centre in India was driven by the desire to provide better
customer service, reducing response times.
• Emergency air freight used in exceptional circumstances to meet customer needs in supply
chain disruption.
• Any changes to production footprint which involve product transfers include mitigating actions
if this would impact on customers to ensure their service is not disrupted.
• Considered customer relationships when considering potential M&A.
Stakeholder group
How the Company engages
How the Board engages
Shareholders
Why they are important
As providers of capital and owners of the
business, our shareholders play a central
role in the Company’s growth and
development. By fostering and
maintaining their support, we are able to
implement our strategy and objectives.
visits.
The Investor Relations department maintains an
David Schlaff and Stanislaus Prinz zu Sayn-Wittgeinstein
ongoing, transparent dialogue with shareholders and
represent major shareholders in the Company through their
analysts and reports regularly to the Board.
position on the Board and can provide an essential investor
Regular engagement with our shareholders is
facilitated via one-on-one meetings, investor
perspective to the Board and EMT.
The Executive Directors (“EDs”) meet regularly with investors and
presentations and webcasts, the AGM, industry
analysts (both in person and via digital channels).
conferences and events, capital markets days and site
When Board members interact with shareholders an update is
usually given to the full Board. Directors also received regular
In 2021, the Investor Relations department initiated a
presentations from Investor Relations with analyst coverage of
perception study on behalf of the Board, inviting our
market and shareholder reactions to Company events.
capital markets stakeholders to provide their
perspective on the Company strategy and progress,
allowing management to take proactive and informed
decisions.
The Board contributed towards the formation of the perception
study and a detailed Board presentation on the results of the
perception study was considered in a Board meeting.
The Investor Relations department regularly engage with its
shareholders on matters regarding sustainability and in November
2021 held its annual sustainability and governance roadshow with
Janet Ashdown, Chairman of the Corporate Sustainability
Committee (“CSC”) and Remuneration Committee and John
Ramsay, Senior Independent Director and Chairman of the Audit &
Compliance Committee (“Audit Committee”). Additionally, the
CSC received a report from the Head of Investor Relations on the
particular views relating to ESG.
The Treasury department maintains an ongoing,
The Board has a clearly defined approval and delegation of
transparent dialogue with its debt holders and lenders
authorities matrix for the contracting of debt instruments, and
and reports regularly to the Board.
actively contributes and engages in discussions with the CFO and
Regular engagement with these stakeholders is
Group Treasurer.
facilitated via one-on-one and Group meetings and
The CFO and Group Treasurer execute the Board-approved
presentations.
strategies by consistently engaging with debt holders and lenders
to secure favourable terms, mitigate risks and ensure sustainable
and solid relationships.
liquidity the Group requires to operate
In 2021, the Treasury department engaged with its
debtholders to, among other initiatives, convert its
€600 million Syndicated RCF and $200 million Term
Loan into ESG linked facilities as well as to issue €400
million of new ESG linked long-term debt, including a
€250 million Schuldschein.
Debt holders
and lenders
Why they are important
Our lenders and debt holders are an
important source of the financial
and are integral to the long-term
sustainable success and growth
initiatives of the business.
Customers and
innovation partners
Why they are important
Our customers are positioned at the
heart of our business model and
everything we do. They are fundamental
to the sustainable future of the Group.
Our customers help us to achieve our
Company purpose, through delivering
the vital materials such as steel, cement
and glass which are essential to our end
markets.
such as accelerators, start-ups, open
innovation platforms, companies and
institutions to foster innovation and drive
developments in R&D.
We collaborate with external partners
quartile of companies.
We work closely with our customers to ensure we are
The EDs communicate with customers in regular meetings to
aware of their needs – this is facilitated via day-to-day
discuss joint strategies, at industry congresses, seminars and
contact with Company representatives as well as
webinars, and at high-technology events and fairs.
fact-finding, technical consulting, installation and
operations supervision and resident expert site visits.
NPS is considered at Board meetings and is regarded as a good
proxy for engagement with customers on the basis of its role in
The Company’s Net Promoter Score (“NPS”) is
bringing customer priorities to the boardroom. Management
measured regularly and is used as a key metric for
continues to develop this survey to reach and engage with as many
customer-facing teams, to ensure focus on the goal of
customers as possible.
providing a positive customer experience in every
interaction. It has been especially important to
maintain close communication with our customers
during 2021 as we have faced unprecedented
The CSC received a report from the CSO on the particular
customer views relating to ESG.
The Board received an update from the Technical Advisory
challenges from the supply chain volatility. In Q4 2021
Committee, which works closely with innovation partners, and
we achieved an “outstanding” score, ranking in the top
considered the intellectual property strategy throughout the year.
The Corporate Sustainability Committee receives technical
In a Customer Satisfaction Survey conducted in Q4
updates on measures to develop the Company’s sustainability
2021 83% of respondents scored RHI Magnesita as a
strategy which are developed in conjunction with innovation
“good” or “excellent”. 85% of respondents stated that
partners. This is then fed into the Board via discussions and
RHI Magnesita’s product quality is either “excellent” or
Committee reports.
“good” whereas only 72% of respondents scored
delivery performance as “excellent” or “good”.
In previous years the Board have visited customer sites but in 2020
and 2021 the various restrictions have meant this has not been
Our R&D, Technical Excellence Marketing and Digital
possible.
Solutions teams collaborate and engage with
innovation partners on an ongoing basis.
Topics raised
(what matters to the stakeholders)
• Company strategy and implementation
• Operational and financial performance
• Capital structure and liquidity
• Capital allocation
• The role and impact of our Employee Representative Directors
• Overboarding
• Sustainability agenda – meeting the challenges of climate
change and diversity
•
Linking remuneration and ESG
• The sustainability and governance roadshow centred upon
approach to diversity, environmental activity, supply chain
governance, corporate governance practices and remuneration
Outcomes
(i.e. how has engagement and stakeholder opinion impacted on the Company’s strategy)
• Shareholder perspectives were considered in Board discussions surrounding capital allocation
decisions, notably the extension by €50 million of the €100 million share buyback undertaken
in May 2021.
• The Board continued to incorporate shareholder feedback about remuneration into its decision
making around sustainability measures in incentive schemes and ensuring the outcomes
against existing measures will be sufficiently assessed.
• The Directors used feedback from shareholders to challenge management about progress of
sustainability measures and the strategy with regard to pricing and first mover advantage.
• The Board considered shareholder expectations when considering the outlook and potential
announcements throughout the year, ensuring the Company remained compliant with MAR.
• Ongoing conversations about diversity – particularly gender – ensured that the Nomination
Committee recommended to the Board a refreshed diversity policy (found here on our website)
and proposed three female Directors for appointment at the AGM in June 2021.
• Feedback about acquisition strategy from shareholders informs the business strategy and
• Response to COVID-19: employee protection measures,
planning for the future in terms of liquidity and business capacity.
participation in government schemes
• The Nomination Committee considered shareholder expectations around the number of
appointments held by new Directors and the IR team engaged with particular shareholders as
required to give assurance that new Directors had sufficient time to dedicate to the Company.
• Company strategy and implementation
• Additional refinancing with competitive rates was conducted in 2021 to further enhance the
• Operational and financial performance and outlook
• Capital structure and liquidity
• Sustainability initiatives
•
Risk management
Company’s capital structure, debt amortisation schedule and liquidity profile including a €150
million ESG-linked bilateral facility with ING and a €250 million Schuldschein issuance with
maturities ranging from 5.5 years to 10 years.
• Climate action
• Customers remain at the heart of the Company’s values and culture and as such form a central
• Our customers’ partner of choice in the green transition of Steel
part of every Board decision.
and Cement
• COVID-19
• Customer service levels, lead times and supply chain issues
•
Innovation partners – the art of the possible and where new
developments are being made which might apply to the industry
and progress sustainable goals
• The Board referred to the customer experience when considering and discussing the outlook for
the business, incorporating this perspective into their view of the Company’s future
performance.
• The Board carefully considered global customer viewpoint in pricing discussions when
considering costs and value proposition. Retention of long-term customers with strong working
relationships was considered and prioritised.
• Strategic direction in respect of sustainable products (price, secondary raw material level and
• Price increases in response to inflationary costs, higher transport
their level of focus on Scope 1, 2 and 3 emissions).
costs and higher raw material prices
• Strategic direction in respect of tailored products for customers against the complexity of
business operation.
• The opening of a customer complaints centre in India was driven by the desire to provide better
customer service, reducing response times.
• Emergency air freight used in exceptional circumstances to meet customer needs in supply
chain disruption.
• Any changes to production footprint which involve product transfers include mitigating actions
if this would impact on customers to ensure their service is not disrupted.
• Considered customer relationships when considering potential M&A.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
5 1
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Stakeholder
engagement
continued
Stakeholder group
How the Company engages
How the Board engages
(what matters to the stakeholders)
(i.e. how has engagement and stakeholder opinion impacted on the Company’s strategy)
Topics raised
Outcomes
• Operational and financial performance
• Social plans for plant closures have been implemented.
• Business restructuring
• Encouraged talent development in key teams and considered how this would inform succession
• Production halts and plant closures
• Talent development and retention
• Workforce remuneration
• COVID-19
• Vaccination
• Health and safety
planning for levels below EMT.
• Cultural assessment contributed to the conversation on execution of strategic initiatives through
consideration of staff morale and the need to react speedily. Senior management are
encouraged to recognise hard work and encourage accountability to deliver the strategy.
• Considered retention and attraction in the changing labour market/ inflation.
• Remuneration Committee considered workforce remuneration when considering a revised
Remuneration Policy, the decision to pay a bonus in respect of the financial year 2020 and
when agreeing the Chairman’s and EDs’ fees. The workforce overall average remuneration
increases, taking into consideration inflation, collective and union agreements, formed the basis
for the increase in fees at Board level.
• Employee KPI reports enabled Directors to use examples with management about diversity,
operational complexity, the production network and support debate about progress within
these topics.
extensive testing globally.
work.
• Ensuring safety of the workplace for employees, supporting with vaccination programmes and
• Through oversight of safety campaigns, the CSC has encouraged and challenged
management on H&S performance to drive future progress in keeping our employees safe at
• Focus on upskilling, competence to deliver and executing the strategy.
Employees
Why they are important
Attracting, retaining and developing
talent is central to the success of the
Company. We aim to cultivate an
engaged, innovative and collaborative
workforce, with a strong focus on
diversity.
We emphasise the importance of frequent,
constructive and open communication with our
employees and have many channels through which
this is facilitated.
Communication channels include townhall meetings,
social media channels, email and an employee app
(“MyRHIMagnesita”). To help facilitate effective
communication throughout every level of the
Company, employees were given a mobile phone if
they didn’t already own one so that they could access
MyRHIMagnesita.
We have “culture champions” throughout the
Company who engage with the workforce on an
ongoing basis to embed our culture and values, and
are currently focusing on “accountability”.
We have expanded our localised strategy, with
increased accountability in the regional leadership
teams. Our regional presidents and site managers hold
their own townhalls to address regional specific issues
e.g. local supply chain issues, local COVID-19 updates
and restrictions, vaccinations and production site or
office changes.
We held our annual Leaders conference in October
2021, focusing on processes, culture, collaboration
and specific KPIs. Ahead of the conference, a survey to
collect feedback from the participants was conducted
about their assessment of the Company performance.
Three Employee Representative Directors sit on the Board,
providing a direct voice in the boardroom on a range of issues, in
particular those which directly impact the workforce, such as
workforce remuneration, agreements to accommodate working
conditions under COVID-19, and plant closures.
As a result of ongoing COVID-19 restrictions, other forms of Board
engagement with employees were limited during the year,
however the Directors were pleased to make some site visits in
2021 to the R&D centre in Leoben, Austria, our plants in India, and
our Radenthein and Bonnybridge plants. Not all trips were possible
as a whole Board, but different Directors took opportunities as they
arose and reported back to the Board on their experience.
EDs and EMT went to India, Brazil and Netherlands as well as site
visits in Germany, France and Austria .
On these site visits Directors took opportunities to discuss topics
with employees they met such as safety, strategy for business units,
local conditions, innovation and production, amongst many more.
The Board engaged with employees below EMT level, with
relevant specialist managers presenting on their areas of expertise
to the Board and Committees throughout the year, particularly as
part of the Strategy session in September where they received
detailed briefings on digital initiatives, Steel business in North and
South America and steel technology.
The Board received presentations on culture and employee
engagement, particularly with focus on executing the strategy,
recognising this could only be achieved through effective
collaboration amongst employees. Presentations to the Board also
detailed KPIs relating to employees, particularly in respect of
tenure, overall attrition, reasons for exit, and diversity statistics.
The CSC considers employee safety KPIs at each meeting which
included root cause analysis of any serious or fatal accidents
amongst the employee and contractor population.
Outside of Board meetings, individual Directors met with
employees for direct discussions on areas of interest as they arose
in Board meetings such as diversity, hedging approach, EU Trading
Scheme for CO2 Certificates, risk management, demand planning
and outlook amongst many more topics.
The EDs used the results of the Leadership survey to structure the
conference and generate discussion about strategic
improvements to the Company and to the Company’s culture,
particularly with reference to accountability. The Board was
subsequently updated on this.
5 2
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Stakeholder group
How the Company engages
How the Board engages
Employees
Why they are important
Attracting, retaining and developing
talent is central to the success of the
Company. We aim to cultivate an
engaged, innovative and collaborative
workforce, with a strong focus on
diversity.
We emphasise the importance of frequent,
Three Employee Representative Directors sit on the Board,
constructive and open communication with our
providing a direct voice in the boardroom on a range of issues, in
employees and have many channels through which
particular those which directly impact the workforce, such as
this is facilitated.
Communication channels include townhall meetings,
workforce remuneration, agreements to accommodate working
conditions under COVID-19, and plant closures.
social media channels, email and an employee app
As a result of ongoing COVID-19 restrictions, other forms of Board
(“MyRHIMagnesita”). To help facilitate effective
engagement with employees were limited during the year,
communication throughout every level of the
however the Directors were pleased to make some site visits in
Company, employees were given a mobile phone if
2021 to the R&D centre in Leoben, Austria, our plants in India, and
they didn’t already own one so that they could access
our Radenthein and Bonnybridge plants. Not all trips were possible
MyRHIMagnesita.
We have “culture champions” throughout the
as a whole Board, but different Directors took opportunities as they
arose and reported back to the Board on their experience.
Company who engage with the workforce on an
EDs and EMT went to India, Brazil and Netherlands as well as site
ongoing basis to embed our culture and values, and
visits in Germany, France and Austria .
are currently focusing on “accountability”.
On these site visits Directors took opportunities to discuss topics
We have expanded our localised strategy, with
with employees they met such as safety, strategy for business units,
increased accountability in the regional leadership
local conditions, innovation and production, amongst many more.
teams. Our regional presidents and site managers hold
their own townhalls to address regional specific issues
e.g. local supply chain issues, local COVID-19 updates
and restrictions, vaccinations and production site or
office changes.
The Board engaged with employees below EMT level, with
relevant specialist managers presenting on their areas of expertise
to the Board and Committees throughout the year, particularly as
part of the Strategy session in September where they received
detailed briefings on digital initiatives, Steel business in North and
We held our annual Leaders conference in October
South America and steel technology.
2021, focusing on processes, culture, collaboration
and specific KPIs. Ahead of the conference, a survey to
collect feedback from the participants was conducted
about their assessment of the Company performance.
The Board received presentations on culture and employee
engagement, particularly with focus on executing the strategy,
recognising this could only be achieved through effective
collaboration amongst employees. Presentations to the Board also
detailed KPIs relating to employees, particularly in respect of
tenure, overall attrition, reasons for exit, and diversity statistics.
The CSC considers employee safety KPIs at each meeting which
included root cause analysis of any serious or fatal accidents
amongst the employee and contractor population.
Outside of Board meetings, individual Directors met with
employees for direct discussions on areas of interest as they arose
in Board meetings such as diversity, hedging approach, EU Trading
Scheme for CO2 Certificates, risk management, demand planning
and outlook amongst many more topics.
The EDs used the results of the Leadership survey to structure the
conference and generate discussion about strategic
improvements to the Company and to the Company’s culture,
particularly with reference to accountability. The Board was
subsequently updated on this.
Topics raised
(what matters to the stakeholders)
Outcomes
(i.e. how has engagement and stakeholder opinion impacted on the Company’s strategy)
• Operational and financial performance
• Social plans for plant closures have been implemented.
• Business restructuring
• Encouraged talent development in key teams and considered how this would inform succession
• Production halts and plant closures
• Talent development and retention
• Workforce remuneration
• COVID-19
• Vaccination
• Health and safety
planning for levels below EMT.
• Cultural assessment contributed to the conversation on execution of strategic initiatives through
consideration of staff morale and the need to react speedily. Senior management are
encouraged to recognise hard work and encourage accountability to deliver the strategy.
• Considered retention and attraction in the changing labour market/ inflation.
• Remuneration Committee considered workforce remuneration when considering a revised
Remuneration Policy, the decision to pay a bonus in respect of the financial year 2020 and
when agreeing the Chairman’s and EDs’ fees. The workforce overall average remuneration
increases, taking into consideration inflation, collective and union agreements, formed the basis
for the increase in fees at Board level.
• Employee KPI reports enabled Directors to use examples with management about diversity,
operational complexity, the production network and support debate about progress within
these topics.
• Ensuring safety of the workplace for employees, supporting with vaccination programmes and
extensive testing globally.
• Through oversight of safety campaigns, the CSC has encouraged and challenged
management on H&S performance to drive future progress in keeping our employees safe at
work.
• Focus on upskilling, competence to deliver and executing the strategy.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
5 3
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Stakeholder
engagement
continued
Stakeholder group
How the Company engages
How the Board engages
(what matters to the stakeholders)
(i.e. how has engagement and stakeholder opinion impacted on the Company’s strategy)
Topics raised
Outcomes
As a member of the UN Global Compact, we support
the UN Sustainable Development Goals and
implement the Global Compact principles
(anti-corruption, human rights, labour rights and
environment). These commitments drive our
engagement with policymakers, NGOs and others at
national and international level.
At a local level, each operation engages with local
communities and other stakeholders to identify their
concerns and how we can support them.
In 2021 we specifically focused on education and
youth development, environmental protection and
emergency relief. The latter two have become more
relevant given COVID-19 and the climate crisis.
In 2021, we commissioned a new rail container
terminal at Hochfilzen, Austria. Around 3,000 trucks
per year will be replaced by rail, considerably reducing
CO2 emissions in the surrounding community.
Read more in Communities on
Page 65
The Board receives updates on our community engagement and
investment programmes.
The Board received regular updates on COVID-19 infection rates
and considered operations in the context of local community
situations, receiving reports from management on how Company
resources had been deployed to help communities across our
global operation with their COVID-19 response.
As well as focusing on the COVID-19 response, the Corporate
Sustainability Committee considered key aspects of community
engagement, including charitable fundraising for local
communities and received updates from management on projects
in communities in Brazil and Austria. You can read more about
these initiatives on page 65.
Read more in Communities on
Page 65
In 2021, the Group had to change the way it managed
its supply chains in order to adapt to a much more
volatile environment.
The Corporate Sustainability Committee received reports from
management on supplier audits and engagement and considered
new sustainable procurement initiatives.
We implemented a taskforce by recruiting some of our
top talent on a temporary basis. This multidisciplinary
group was tasked to find solutions to reduce lead times,
lower costs, restore sales and help replenish our raw
material inventories.
The Board received regular updates on the business’s work to
future-proof our supply chain and the work undertaken to adapt
our processes to an increasingly volatile environment.
Janet Ashdown lent her particular experience in value chain
management to the senior management team and provided a
sounding board and coaching to senior individuals in the
Company to challenge them to consider different approaches to
supply chain management.
Communities
Why they are important
Wherever we operate, our business
depends on maintaining the acceptance
and approval of local communities. In
return for this social licence to operate,
we must conduct our business ethically
and responsibly. We must also strive
towards sustainability, not only in our
own operations but also to support
socio-economic development and
environmental protection wherever we
operate.
Suppliers
Why they are important
Strong relationships with our suppliers
are vital for the effective running of our
operations. We rely on our suppliers to
deliver services and materials, and the
availability of these goods impact how
we operate as a company.
In 2021, we experienced unprecedented
supply chain volatility, after an
unexpectedly sharp rebound in demand
for goods as the pandemic eased, which
led to a shortage of containers in East
Asia causing a sharp increase in freight
prices. This also led to poor reliability of
containers and severe delays affecting
the shipment of both raw materials and
finished goods to our customer sites.
• COVID-19
• Climate change
• Skills and employment programmes
• Protecting existing programmes and partners
• We rolled out an extensive vaccination programme globally and in India we offered vaccines to
our employees, their families and the local communities.
• We donated to the German Red Cross to support the local community during the extreme
flooding that took place in July 2021.
• Heavy rains fell during December 2021 near the Brumado site, Bahia, Brazil. We responded
through donating 14 tonnes of food to the communities surrounding the site.
• Employees are encouraged to volunteer in our community programmes.
• The impact of supply chain volatility on profitability
• As a result of the reports received and discussion on supply chain topics at Board meetings, the
•
Inventory levels
• Shipment delays
• COVID-19
• Climate action
• Safety
• Raw materials
• Sustainable procurement
Board encouraged management to seek outside input to aim towards a Best In Class value chain
and to improve day-to-day supply chain issues. Management commissioned audits of the
supply chain from consultants with precise and particular expertise in the subject and created a
task force to manage immediate issues in the face of global supply chain disruption and a
longer-term steering committee to fundamentally set the value chain up for the future.
• The taskforce implemented changes such as more efficient transportation reporting, regular
updates of freight costs, the creation of a lead time dashboard, implemented an automated
critical raw material check and regional support for backlog prioritisation
• The Corporate Sustainability Committee considered progress made by Procurement in pursuit
of sustainable suppliers. RHI Magnesita intends to evaluate its suppliers through:
– A sustainability risk matrix that assesses suppliers according to country and category risk
– A goal based framework to evaluate the majority of RHI Magnesita purchase spend by
supplier under sustainability criteria until 2025
– Implement sustainable procurement process and organisation in 2022 and 2023 in all
• The Board considered and approved the Modern Slavery Act statement for publication,
following recommendation from the Corporate Sustainability Committee, and this can be found
• The Company succeeded in improving payment terms with suppliers significantly over the
period of the last two years
(completed)
regions.
on our website.
5 4
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Stakeholder group
How the Company engages
How the Board engages
Communities
Why they are important
Wherever we operate, our business
depends on maintaining the acceptance
and approval of local communities. In
return for this social licence to operate,
we must conduct our business ethically
and responsibly. We must also strive
towards sustainability, not only in our
own operations but also to support
socio-economic development and
environmental protection wherever we
operate.
As a member of the UN Global Compact, we support
The Board receives updates on our community engagement and
the UN Sustainable Development Goals and
implement the Global Compact principles
(anti-corruption, human rights, labour rights and
environment). These commitments drive our
engagement with policymakers, NGOs and others at
national and international level.
At a local level, each operation engages with local
communities and other stakeholders to identify their
concerns and how we can support them.
investment programmes.
The Board received regular updates on COVID-19 infection rates
and considered operations in the context of local community
situations, receiving reports from management on how Company
resources had been deployed to help communities across our
global operation with their COVID-19 response.
As well as focusing on the COVID-19 response, the Corporate
Sustainability Committee considered key aspects of community
engagement, including charitable fundraising for local
In 2021 we specifically focused on education and
communities and received updates from management on projects
youth development, environmental protection and
in communities in Brazil and Austria. You can read more about
emergency relief. The latter two have become more
these initiatives on page 65.
relevant given COVID-19 and the climate crisis.
In 2021, we commissioned a new rail container
terminal at Hochfilzen, Austria. Around 3,000 trucks
per year will be replaced by rail, considerably reducing
CO2 emissions in the surrounding community.
Read more in Communities on
Page 65
Read more in Communities on
Page 65
In 2021, the Group had to change the way it managed
The Corporate Sustainability Committee received reports from
its supply chains in order to adapt to a much more
management on supplier audits and engagement and considered
volatile environment.
new sustainable procurement initiatives.
We implemented a taskforce by recruiting some of our
top talent on a temporary basis. This multidisciplinary
The Board received regular updates on the business’s work to
future-proof our supply chain and the work undertaken to adapt
group was tasked to find solutions to reduce lead times,
our processes to an increasingly volatile environment.
lower costs, restore sales and help replenish our raw
material inventories.
Janet Ashdown lent her particular experience in value chain
management to the senior management team and provided a
sounding board and coaching to senior individuals in the
Company to challenge them to consider different approaches to
supply chain management.
Suppliers
Why they are important
Strong relationships with our suppliers
are vital for the effective running of our
operations. We rely on our suppliers to
deliver services and materials, and the
availability of these goods impact how
we operate as a company.
In 2021, we experienced unprecedented
supply chain volatility, after an
unexpectedly sharp rebound in demand
for goods as the pandemic eased, which
led to a shortage of containers in East
Asia causing a sharp increase in freight
prices. This also led to poor reliability of
containers and severe delays affecting
the shipment of both raw materials and
finished goods to our customer sites.
Topics raised
(what matters to the stakeholders)
• COVID-19
• Climate change
• Skills and employment programmes
• Protecting existing programmes and partners
Outcomes
(i.e. how has engagement and stakeholder opinion impacted on the Company’s strategy)
• We rolled out an extensive vaccination programme globally and in India we offered vaccines to
our employees, their families and the local communities.
• We donated to the German Red Cross to support the local community during the extreme
flooding that took place in July 2021.
• Heavy rains fell during December 2021 near the Brumado site, Bahia, Brazil. We responded
through donating 14 tonnes of food to the communities surrounding the site.
• Employees are encouraged to volunteer in our community programmes.
• The impact of supply chain volatility on profitability
• As a result of the reports received and discussion on supply chain topics at Board meetings, the
•
Inventory levels
• Shipment delays
• COVID-19
• Climate action
• Safety
• Raw materials
• Sustainable procurement
Board encouraged management to seek outside input to aim towards a Best In Class value chain
and to improve day-to-day supply chain issues. Management commissioned audits of the
supply chain from consultants with precise and particular expertise in the subject and created a
task force to manage immediate issues in the face of global supply chain disruption and a
longer-term steering committee to fundamentally set the value chain up for the future.
• The taskforce implemented changes such as more efficient transportation reporting, regular
updates of freight costs, the creation of a lead time dashboard, implemented an automated
critical raw material check and regional support for backlog prioritisation
• The Corporate Sustainability Committee considered progress made by Procurement in pursuit
of sustainable suppliers. RHI Magnesita intends to evaluate its suppliers through:
– A sustainability risk matrix that assesses suppliers according to country and category risk
(completed)
– A goal based framework to evaluate the majority of RHI Magnesita purchase spend by
supplier under sustainability criteria until 2025
– Implement sustainable procurement process and organisation in 2022 and 2023 in all
regions.
• The Board considered and approved the Modern Slavery Act statement for publication,
following recommendation from the Corporate Sustainability Committee, and this can be found
on our website.
• The Company succeeded in improving payment terms with suppliers significantly over the
period of the last two years
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
5 5
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Sustainability
governance
From COVID-19 to climate change, the urgent
challenges facing the world today cannot be
solved by governments alone. Business also has
a vital role to play and can be a force for good.
RHI Magnesita’s purpose is to master heat,
enabling global industries to build sustainable
modern life. Our solutions play a vital role in the
manufacture of the steel, cement, copper and
glass that create the housing, hospitals, schools
and roads which are needed by the world’s
growing population. To make our business
sustainable, we are preparing our business for the
zero-carbon and resource-constrained economy.
As our customers chart their pathway to net zero
emissions, we aim to support them as their
preferred partner on the journey.
We are not only the global leader in refractories,
but the sustainability leader in our sector, too. To
retain this leadership, we are setting bold
ambitions, driving innovation, understanding risks
and capturing opportunities.
Materiality
Our risk management approach helps the Board
and EMT to understand the risks associated with
the adopted strategy, periodically assess if the
strategy is in alignment with our risk appetite and
understand how the chosen strategy could affect
the Group’s risk profile, specifically the types and
amount of risk to which the Group is potentially
exposed.
We prioritise the sustainability challenges that are
material to our business and our stakeholders. In
2021, these were:
• COVID-19
• Climate change
• NOx and SOx emissions
• Recycling
• Health and safety
• Diversity
These issues were reconfirmed based on informal
engagement with internal and external
stakeholders and close monitoring of the issues.
We did not conduct a formal stakeholder
consultation in 2021.
We report our progress against 2025 targets for
each of these issues. In addition, we report
progress on other social and environmental
issues, such as anti-bribery and corruption,
sustainable supply chain and water usage.
Engaging with stakeholders
Sustainability and ESG continued to grow in
importance to our stakeholders during 2021.
Below is a summary of discussion on these topics
during the year.
Investors
Investor interest in our ESG strategy and
performance rose increased further in 2021. Our
sustainability experts engage with investors on
various fronts, from bilateral meetings and written
exchanges on specific topics to periodic ESG
updates at broader investor meetings.
Our climate strategy, recycling and investment in
emerging technologies remain the topics of
greatest interest, with a new focus on how we are
supporting customer transitions, such as DRI
(direct reduced iron) and EAF (electric arc furnace)
in steelmaking.
Investors are also keen to understand how we are
developing our gender diversity and have started
to show more interest in biodiversity. In 2021, CDP
awarded RHI Magnesita a B for climate. We also
obtained a Gold rating from EcoVadis, AA rating
from MSCI, Medium from Sustainalytics and
Prime (C+) by ISS ESG rankings.
Customers
As our customers chart their pathway to net-zero,
they increasingly focus on Scope 3 emissions in
their value chain. In 2021, we met with a series of
major customers to learn about their net zero
plans and how we can support them.
In response, we already market our first low-
carbon brick, the ANKRAL LC series, and will soon
launch our first net-zero brick.
As a full-service solutions business, we also help
customers to reduce their Scope 1 and 2
emissions with our digital technologies. Given the
scale of customer emissions, this could yield
greater reductions than tackling our own Scope 1
and 2 emissions. Lastly, taking back spent
refractories for recycling reduces customer
emissions and waste, as well as cost.
We aim to be a trusted partner to our customers
supporting their transition to a net-zero economy.
In steelmaking, for example, we are already the
market leader in EAF refractories and we plan to
position the company as a leader in DRI
refractories.
On social sustainability, we continue to work with
customers on safety to develop shared
commitments and processes. We respond to our
customers’ needs with information about our
practices. Our new sustainable supply chain
process with EcoVadis will also provide greater
transparency.
Employees
Our employee engagement spans townhall
meetings for our employees to meet with the
leaders of our business (physical and virtual
meetings), a dedicated mobile app and other local
channels. During 2021, we continued to
communicate on COVID-19, for example
explaining the benefits of vaccination. Our most
recent global survey conducted in 2020 showed
a 79% score for employee engagement,
exceeding both the global benchmark and that
for the manufacturing industry.
Our performance in ESG rankings
AA
Gold
Prime C+
B
DISCLOSURE INSIGHT ACTION
5 6
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Suppliers and contractors
Working in partnership
In 2021, we began a new level of engagement
with our suppliers, working with them and
EcoVadis in order to improve sustainability
throughout our supply chain. Building on our
existing Supplier Code of Conduct, our new
approach integrates environment, labour rights,
human rights and anti-corruption considerations
into the procurement process.
We also continued to integrate our safety
programmes for all relevant contractors on our
sites. In addition to clauses in our standard
contracts, we request all contractors to provide
key safety data such as LTIF on a regular basis.
Communities
With many of our sites located in relatively remote
locations, we engage directly with communities in
the immediate vicinity of our plants. Although we
have clear overarching areas that we support
around the world, we also respond to immediate
local needs. In 2021 our community support
ranged from donating COVID-19 vaccines to
residents near our Bhiwadi plant in India to
providing disaster relief to flood-hit communities
near our Urmitz plant in Germany.
In addition to bilateral engagement, we take part
in broader multilateral platforms on the most
complex sustainability challenges. For example,
we work together in industry partnerships on the
development of carbon capture and usage. These
include the K1-MET consortium in the Austrian
steel industry and the Industrial Advisory Board of
the EU-funded MOF4AIR project, a development
of the new Metal Organic Framework for capturing
CO2.
Governance structure
At Board level, the Corporate Sustainability
Committee is responsible for overseeing all
aspects of sustainability and ESG. They are
responsible for reviewing risks and opportunities,
approving strategies and reviewing progress.
The Sustainability Steering Committee is the
senior management body responsible for driving
progress against key objectives, integrating
sustainability throughout the business. The Chair
reports regularly to the CEO, Executive
Management Team (“EMT”) and the Board.
Standards, frameworks and reporting
We follow leading sustainability standards and
frameworks. As a supporter of the Taskforce for
Climate-Related Financial Disclosures (“TCFD”),
we have assessed and quantified the risks and
opportunities posed by climate change. The
Board of Directors received training on this topic.
We make annual climate submissions to CDP and
in 2021 were awarded a B rating.
Our integrated management system meets the
requirements of ISO 14001 (environment), ISO
50001 (energy management), ISO 45001
(occupational health and safety) and ISO 9001
(quality).
We report our progress on gender diversity
annually to the Hampton-Alexander Review. In
2021 we completed our first submission on ethnic
diversity to the Parker Review.
We endeavour to report our progress openly and
transparently. RHI Magnesita has reported in
accordance with the GRI Standards (Core option)
for the period 1 January 2021 to 31 December
2021. Together with our GRI Content Index, this
report serves as our GRI Report.
As a participant in the UN Global Compact, we
have committed to support the UN Sustainable
Development Goals. We focus on the goals most
aligned to our core competencies. This report
represents our Communication on Progress
(self-assessed as Active) and we detail how we
support each UN SDG in our GRI Index.
Our reporting meets the legislative requirements
in the UK and the Netherlands in implementing
the EU Non-Financial Reporting Directive. In
accordance with the new EU taxonomy
requirements, we report below the proportion of
our revenue, operating expenditure and capital
expenditure for the 2021 financial year that are
taxonomy-eligible.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
5 7
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Sustainability
governance
continued
We support the UN Sustainable
Development Goals (“SDGs”)
and have identified these as
the goals our business is best
placed to actively support.
We urge anyone with concerns about our
business to report them to our independently
operated hotline, which is confidential and allows
anonymity. We are firmly committed to protecting
the whistleblower from any form of retaliation.
Contact details of the hotline are publicised
online and throughout the business. Reported
incidents are independently investigated and, if
necessary, appropriate follow-up actions are
taken; the Audit & Compliance Committee
receive regular reports. In 2021, the hotline and
additional reporting channels generated 63
reports (vs 62 in 2020); The majority of reports
were HR-related cases with approximately 70%
of all reports originating from Brazil. The tendency
regarding the high number of cases from Brazil is
rooted in the whistleblowing hotline being the
preferred escalation route for HR-related queries
or concerns in Brazil, which in other regions are
typically raised via other communication
channels.
We conduct bribery and fraud risk assessments
across our business, with results presented to the
Audit Committee each year. All our sales agents
are certified by TRACE International, a leading
anti-bribery standard-setting organisation.
Business partners and transactions such as
mergers or acquisitions are screened in the due
diligence process. We have implemented digital
workflows to address and document conflicts of
interest declarations, gifts and invitations and
community investment approvals. Guidelines on
each topic provide further support for employees.
We are committed to upholding human rights
and labour rights. More than three quarters (82%)
of our employees belong to unions or are covered
by works councils or collective bargaining.
This focus on human rights and labour rights is
now being expanded to include our suppliers. Our
Supplier Code of Conduct includes provisions
that address both human rights and labour rights.
With the help of a digital tool, we ask all suppliers
to commit to our Supplier Code of Conduct. Our
Board reviews and approves annual statements
for publication in accordance with the UK Modern
Slavery Act 2015 and California Transparency in
Supply Chains Act.
Ethics and compliance
In 2021, we continued to review and enhance our
approach to the following key ethics and
compliance areas: business ethics, anti-bribery
and corruption (including gifts and invitations and
conflicts of interests), anti-trust and fair
competition, data privacy, trade compliance and
business partner due diligence. We enhanced
and further embedded a range of compliance
policies and procedures and conducted
compliance training and communications. As we
enhance our framework and internal controls, our
compliance culture continues to mature too.
Anti-corruption is among the UN Global
Compact’s 10 principles that we have committed
to integrating into our business strategy and
operations. Others include environment, human
rights and labour rights.
We take a zero-tolerance approach to any
incidents of fraud, bribery or corruption, in both
our operations and our value chain. This approach
is made explicit in our Code of Conduct and our
Supplier Code of Conduct.
Comprehensive online training on topics such as
business ethics, anti-corruption or trade
compliance and monthly monitoring of the
training completed ensure that all office-based
employees, including new hires, are trained.
Additional sessions are provided as necessary,
such as for sales staff. In addition, anti-corruption
and other key topics are regularly included in
global internal communications.
5 8
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Progress against
sustainability targets
Targets by
2025 vs 2018
baseline year
Progress
in 2021
Material issue
1. CO2 emissions
CO2 intensity decreased by
3.7% compared to the base
year
Absolute
(t CO2)
Reduce by 15%
per tonne of
product
– Scope 1, 2, 3
(raw materials)
2018
2019
2020
2021
5,453,000 4,681,000 4,277,000
4,878,000
Relative
(t CO2/t)1
1.89
1.85
1.96
1.82
2. Energy
Reduce by 5%
per tonne of
product
Energy efficiency improved
by 4.7% compared to 2020
and 2.7% compared to the
base year (2018)
Absolute
energy
consumption
(GWh)
5,718
5,227
4,577
5,184
3. Recycling
Use of SRM increased to
6.8%
Increase use
of secondary
raw materials to
10%
1.98
1.93
2.03
1,93
3.8%
4.6%
5.0%
6.8%
Relative
(MWh / t)1
Use of
secondary
raw materials
4. Diversity
Women now account for
38% of our Board. Share of
women in leadership
decreased to 22%
Increase
women on
our Board and in
senior
leadership
to 33%
Board
7%
23%
25%
38%
EMT and
direct reports
12%
17%
25%
22%
5. Safety
Maintain LT IF at
<0.5 (goal: zero
accidents)
Lost time injury frequency
(“LTIF”) increased 38% over
2020
per
200,000
hours worked
0.43
0.28
0.13
0.18
6. NOx and SOx
emissions
Reduce by 30%
by 2027 (vs
2018), starting
with China by
2021
30% reduction in NOx and
SOx, achieved in China
already; work now focuses on
US operations
China
– target
achieved
2021
Europe–
target
2027
South
America
– target
2027
North
America
– target
2025
1 Adaptations in line with the Greenhouse Gas protocol and refinement in reporting result in updated CO2 and energy efficiency figures for 2018-2021.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
5 9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Climate and
environment
The effects of climate change became ever more
visible in 2021, from extreme weather events to
record temperatures. At the UN COP26 conference,
world leaders committed to keep the goal of 1.5oC
alive while business leaders aligned emissions
reduction pledges to this critical goal.
Driving emissions down is a key corporate priority
for RHI Magnesita. In addition to charting our own
transition, we want to be a trusted partner to our
customers on their journey to net zero.
Our first target is to reduce Scope 1, 2 & 3 (raw
materials) emissions intensity by 15% by 2025. In
parallel, we are working to develop a Paris-
aligned target. To do so, we have been working
with the Austrian Government and WWF and aim
to submit a Science-Based Target in 2022.
To decarbonise our business will require
unprecedented innovation and investment.
Between 2021 and 2025, we have committed to
invest €50 million in the research and
development of new and emerging technologies.
In 2021 we spent €63 million on R&D and
Technical Marketing.
In 2021 we further integrated carbon
considerations into key processes:
• A new internal pricing mechanism was
introduced to incentivise sales teams to
prioritise products with higher recycled
content
• Reducing CO2 emissions now accounts for
10% of the annual bonus for all eligible
employees
• Enhanced monthly monitoring of CO2 was
integrated into our SAP enterprise resource
planning tool
Our supplier evaluation tool will also include an
increasing focus on CO2 emissions. This will help
enhance our emissions data for raw materials, our
most significant source of Scope 3 emissions.
Climate governance
Climate risk
The Corporate Sustainability Committee of the
Board oversees our climate strategy, reviewing
risks, opportunities and performance at each
quarterly meeting. At an operational level, the
Climate Working Group of the Sustainability
Steering Committee assesses climate risks and
opportunities and develops and implements
strategy.
Climate change represents both strategic and
operational risks to our business. These can be
grouped as physical risks and transitional risks.
Physical risks include greater severity of flooding,
droughts or other extreme weather events which
could disrupt our operations and supply chain.
Transitional risks range from regulatory
frameworks and the rising price of carbon to the
viability and customer acceptance of emerging
technologies. Another transitional risk is our
ability to set and meet Paris-aligned targets.
In 2021, the Group completed modelling and
analysis based on a low-emissions scenario of
RCP2.6 and a worst-case scenario of RCP85.
Through interviews, modelling and analysis, we
identified the largest expected impacts of
physical and transitional risks.
The results of the assessment indicated that the
overall risk profile for physical risks is low. Two sites
have a higher comparative risk profile than others
within the portfolio and these will be prioritised for
future adaptation and resilience building.
These risks are discussed in more detail in our
TCFD report which is consistent with the TCFD
Recommendations and Recommended
Disclosures and is published separately to the
Annual Report due to its length, on the Group’s
website: www.rhimagnesita.com/energy-and-
climate/.
Climate risks also form part of our third CDP
climate submission, for which we were awarded a
B rating by CDP.
Governance
• Management role: The Climate Working Group of the Sustainability Steering Committee works with the Executive Management Team to assess climate risks and
opportunities and develop and implement climate strategy.
• Board oversight: The Corporate Sustainability Committee has been delegated responsibility from the Board for climate-related risk management and reviews
climate risks, strategy and performance in every quarterly meeting.
Risk
management
• This year we expanded our climate-related risk and opportunity assessment to include modelling to quantify the financial impact on our business. We completed a
comprehensive review of previously identified climate-related risks and opportunities, adding further risks and opportunities identified through interviews with key
stakeholders across the business. We assessed the likelihood and impact of these risks and opportunities in line with the RHI Magnesita Risk Taking/Management
Policy.
• Where relevant, existing controls for the risks were identified and included in our financial modelling. In 2022, our focus will be on identifying and implementing
mitigation actions to manage risks and embrace opportunities.
Strategy
We have conducted scenario analysis of all identified climate-related risks and opportunities, using 2°C and 4°C warming scenarios across short (2023), medium
(2030) and long term (2050) time horizons. Under these scenarios, our key climate risks and opportunities are:
• Physical risks: flooding and resulting disruption to our operations, including damage to property, plant and equipment
• Transitional risks: increased liability for our carbon emissions under carbon pricing schemes worldwide; and potential reputational impact and legal liability
associated with increased investor scrutiny over emissions-intensive industries.
• Opportunities: increased revenue and market share for products that support RHI Magnesita customers’ low-carbon products and/or services; and increased
revenue from RHI Magnesita products with a lower carbon footprint.
Metrics and
targets
• We measure our carbon emissions using the GHG Protocol and have set an interim target to reduce Scope 1, 2 and 3 emissions (raw materials) per tonne of product
by 15% by 2025.
• We have committed €50 million between 2021 and 2025 towards R&D of new and emerging carbon-related technologies and piloting in our plants.
• We have set a target of 10% secondary raw material in our products by 2025, reflecting our commitment to reduce our carbon footprint through reducing the
geogenic emissions associated with processing virgin materials. Achieving this target accounts for 10% of the bonus for all bonus-eligible white collar employees.
6 0
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Climate strategy
Our first target is a 15% reduction in emissions
intensity by 2025 in Scope 1, 2 and 3 emissions
(for raw materials). We intend to achieve this target
by increasing recycling, improving energy
efficiency, switching fuels and adopting
low-carbon electricity.
Total CO2 emissions (Scope 1, 2 and 3 – raw
materials) in 2021 were 4.9 million tonnes and
emissions intensity has reduced by 3.7%
compared to the baseline year of 2018. We are
continuing to work on the necessary initiatives to
deliver our target of a 15% reduction by 2025.
Around 50% of our CO2 emissions are geogenic,
which means they are released by minerals
during processing. Addressing these emissions
will require not only recycling but also new and
emerging technologies.
In addition to reducing climate risk, we aim to
capture opportunities. We see significant
opportunity in being our customers’ preferred
partner as they transition to a net-zero pathway. In
addition to reducing customer Scope 3 emissions
from refractory suppliers, we are developing
solutions that help our customers achieve
significant reductions in their own process
emissions.
Recycling
Our target is to reach 10% secondary raw material
(SRM) content in refractories by 2025. Working
towards this not only develops the circularity of
our business but is also the single most important
contributor to achieving our 2025 emissions
reduction target.
Around half (53%) of our Scope 1 CO2 emissions
are geogenic; they are released by minerals
during processing. Replacing these virgin raw
materials with recycled or secondary raw material
(SRM) avoids these emissions. Reaching our
target of 10% recycled content will therefore
avoid up to 300,000 tonnes of CO2 and 150,000
tonnes of landfill waste per year.
Progress towards our target is well underway and
we achieved 6.8% recycled content in 2021
(2020: 5.0%). These improvements are due to new
initiatives to collect, process and include more
secondary raw material. As we build on this
progress, there are four key pillars to our approach:
•
Improving the flow of spent refractories back
to our plants from customers and traders
• Developing the recycling sites and new
technologies to process spent refractories
•
Increasing consumption of recycled content in
our business
• Growing sales of products with recycled content
To increase the flow of spent refractories back to
our plants, we are developing circular contracts
with customers that include both delivery and
return of refractories. In addition, we are building
strategic relationships with small businesses who
deal with spent refractories.
We now have recycling facilities in every region
and we are planning investments in Germany,
Mexico and Brazil. For example, Mitterdorf is the
new state-of-the-art recycling facility near our
Veitsch plant. This plant will host our first sensor
sorting machine, an innovative technology to
process spent refractories into high quality
secondary raw materials. Another new technology
will remove contamination from refractories used in
cement rotary kilns so that they can be reused
whilst maintaining high performance standards.
The greater purity of our secondary raw materials,
the closer they are to primary raw materials and this
will allow us to further increase the recycled
content of our products.
Developing more recipes that include recycled
content is another key focus. Our ANKRAL LC
series of bricks includes up to 20% recycled
content and have an independently verified 13%
lower carbon footprint. Now that the series is well
established and used by 22 customers in Europe,
we are rolling the series out to other regions while
also developing a new brick with up to 50%
recycled content. A net-zero brick for the steel
industry will be launched shortly. These recipes
are gaining a positive reception from customers.
Among our top sellers, approximately 50% more
brands now contain recycled content compared
to 2020.
The challenges to further increasing recycling
content are not merely technical; we must also
change mindsets. To encourage this, we have
implemented a new internal pricing mechanism
that incentivises our salesforce to sell products
with higher recycled content, making these the
preferred choice. This is already showing
promising results in several regions, especially
Europe.
Our Rasa plant in Argentina has successfully
addressed both the technical and cultural
challenges of increasing recycling content and is
breaking new ground with a circular approach to
its operations. The average recycled content
across the plant’s magnesia-carbon production
exceeds 20%, one of the highest for any
production line across our business .
Our raw materials plants are also finding ways to
reuse primary material previously discarded as
waste. By using waste magnesite ore, for example,
our new rotary kiln in Brumado will almost halve
the virgin ore we extract from the local mine,
extending the mine’s life by over 70 years. At
Hochfilzen, we recently developed a way to use
1.6 million tonnes of flotation tailings that remain
on site from previous production methods. By
using tailings in raw material production, we
reduce waste while also reducing our need for
mined raw ore.
In 2021, we generated 108,000 tonnes of
production waste, or 0.04 tonnes per tonne of
production, compared to 107,000 t or 0.05 t/t in
2020. The bulk of this waste is non-hazardous
ceramic and mineral waste from production and
mines.
Carbon capture and utilisation
Recycling, fuel switches and energy efficiency can
only take us part of the way to net zero emissions
since around 50% of our Scope 1 emissions are
released by minerals during processing. Carbon
dioxide (CO2) is emitted when raw magnesite
(MgCO3) is processed into magnesium oxide (MgO),
the basis for many of our products.
We are therefore working to develop new
technologies that are intended to capture process
emissions then sequester them or develop a value
chain to use them. RHI Magnesita has committed to
invest €50 million by 2025 to trial such
technologies at pilot plant level. Our R&D function
and Technical Advisory Committee (“TAC”) have
worked with leading research institutes, universities
and industry partners to identify the most promising
technologies and a number of projects are now
underway.
At our Austrian raw materials site at Breitenau, we
are testing Oxyfuel technology. The process
modelling and first pre-trials are promising but
industrial trials in the kiln are now needed to
confirm theoretical calculations. Engineering
work to adapt the kiln is underway, with the next
trials planned for 2022.
At Hochfilzen in Austria and Brumado in Brazil,
two of our other key raw material sites, we
conducted tests in Australia to separate carbon
from magnesite ore. Initial results showed the
process to be energy efficient. Calix Limited is our
technology partner for this trial and we have
signed a Memorandum of Understanding to work
together on this process. Dependent on final
results, we plan to install a pilot plant at one of our
mines. At our York site in the US, we are running a
feasibility study for cryogenic carbon capture in
our rotary kilns.
Hydrogen is a carbon free energy source which
offers a promising alternative to fossil fuels for high
temperature processes. In addition to lab trials for
calcination and sintering, we are testing use of
hydrogen in production processes. The first pilot
will be conducted at our Marktredwitz plant and
we are also exploring whether we can also
generate the gas on site.
These projects are cost-intensive but are a vital
long term investment in driving down emissions in
hard-to-abate, energy-intensive industries.
Companies investing in such technologies will
therefore require an enabling political framework
that allows us to compete fairly. In addition, these
new technologies will require infrastructure
provided by third parties or governments to
provide sufficient quantities of renewable or
low-carbon energy at competitive prices, more
responsive smart grids and networks for
transporting and sequestering CO2.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
6 1
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Climate and
environment
continued
Supporting customer net-zero journeys
Our customers operate in high-emitting and
hard-to-abate sectors. For example, the steel and
cement industries, which represent more than
three-quarters of our customers, together
account for up to 15% of global CO2 emissions.
Both sectors have now set out their respective
pathways to net-zero by 2050. Our aim is to be
the preferred partner for our customers during this
transition.
We are already the leading supplier of refractories
and solutions to the growing proportion of steel
made using electric arc furnace (“EAF”) based
production. We intend to take a leadership
position in refractories for steelmaking using
direct reduced iron (“DRI”), as this method
becomes more widespread.
In addition, we are the refractory partner for
breakthrough technologies in steelmaking, such as
in our partnership with Boston Metals, which is
commercialising its groundbreaking use of
electrolysis to transform metals production. We are
also the refractory partner to K1-MET, an Austria-
based consortium breaking new ground with its
research into energy-efficient, circular and
climate-neutral metal production.
We are continuing to develop the next generation
of solutions to support low-carbon steel
production. For example, our ITEC platform has
been upgraded to support the transition to green
steelmaking, optimising for CO2 efficiency as well
as reducing refractory consumption.
Although we are developing innovative low-
carbon products, the market for them is not yet fully
developed, particularly in relation to pricing
premium. At this stage of customers’ net-zero
journeys, we therefore usually support emissions
reductions using existing technology. This includes
removing and recycling spent refractories from
customer sites, which reduces both waste and
associated emissions. In addition, we are
integrating CO2 emissions reduction into existing
solutions, such as tundish and purging, and
communicating these avoided emissions to
customers. For example, our EAF direct purging
plugs (“DPP”) system increases productivity while
reducing CO2 emissions by up to 12.7kg CO2/tonne
of steel.
We also partner with the cement industry on their
net-zero journey. Our ANKRAL low carbon (“LC”)
brick for the cement industry has up to 20%
recycled content.
Cement customers can reduce emissions in their
production processes using our Automated
Refractory Optimisation (“ARO”) technology. This
digital tool monitors conditions inside kilns to
optimise refractory consumption and minimise CO2
emissions. ARO is similar to our market-leading
technology for steel customers, Automated Process
Optimisation (“APO”). Digital supervision of kilns
allows customers to avoid energy-intensive
stoppages for traditional maintenance checks.
In addition to steel, cement and other traditional
customers, we are moving into new industries in
the low-carbon economy. For example, we will
supply refractory engineering, materials and
installation for four new waste-to-energy plants
that will supply 1.5 million Moscow residents with
renewable energy by 2023.
Reducing the carbon intensity of energy
We are switching to lower-carbon and renewable
sources of energy where feasible in order to
reduce the carbon intensity of the energy we use.
By the end of 2021, 48% of purchased electricity
was from low-carbon or renewable sources. This
is due to new contracts for renewable energy in
Germany and China and has led to a 22% drop in
our Scope 2 emissions. Similar initiatives at other
locations are being explored.
Renewables are not yet a viable primary energy
source for us due to the high temperatures and
quantities of energy required for the production of
refractories. Where possible, we are switching from
pet coke to natural gas, the fossil fuel with the
lowest carbon footprint. In 2021, gas represented
52% of our fuel use.
Nevertheless, the required gas infrastructure does
not yet exist in all locations. In Hochfilzen, we plan
to switch to gas as soon as the natural gas supply
is upgraded. In York, the pre-engineering is
underway for both rotary kilns to have new
multi-fuel burners that would allow natural gas.
We anticipate installation of the first burner in
2022 and the second in the following year.
Our energy use
2018
2019
2020
2021
Total
consumption
(GWh)
MWh/t
5,718
1.98
5,227
1.93
4,577
2.03
5,184
1.93
1 Refinement of reporting results in updated energy efficiency
KPI 2018-2021.
Increasing energy efficiency
By 2025, we have committed that energy
efficiency will be 5% higher compared to 2018.
With plants now operating at full capacity, the
results of recent energy efficiency projects are now
visible. We have improved energy efficiency 6%
since the previous year.
To build on this progress, we have now adopted
energy management standard ISO 50001. In
2021, we implemented this in our Mexico, Austria
and Turkey operations and will complete a rollout
to all global operations in 2022. By reducing the
duration and temperature required for production
processes, innovative technologies are also
helping to improve energy efficiency.
In 2021, we used 5.2 TWh of energy. Energy
efficiency projects are expected to save more than
100 GWh a year.
Responsible use of air, land and water
Climate change is not the only pressing
environmental challenge. Declining biodiversity,
water shortages and air pollution are interlinked
and will also require intervention.
RHI Magnesita aims to reduce its impacts on air,
land and water and to be a responsible user of
these precious shared resources.
Reducing NOx and SOx emissions
Our programme to reduce our emissions of
nitrogen oxides (NOx) and sulphur oxides (SOx) by
30% is underway. Following a phased approach,
we focused first on China and met our 2021 target
a year early. We are now on track to achieve
targets in the US by 2025 and we are currently
implementing the necessary process
optimisation. In Europe and South America, we
expect to reach the 30% reduction target by
2027.
6 2
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Protecting biodiversity
Biodiversity loss and ecosystem collapse are
described as one of the top five threats to face
humanity in the next decade. The links between
nature and the global economy are now better
understood, with an estimated $44 trillion of
economic value generation moderately or highly
dependent on nature.
Water stewardship
Less than 1%6,7 of the world’s water is freshwater
that is available for domestic use, agriculture,
industry and freshwater ecosystems. Demands on
this finite resource are rising. As the climate
changes, the availability of this water is becoming
less predictable, with floods and droughts
becoming more common.
RHI Magnesita recognises the threat posed by
nature loss. We aim to assess how our operations
impact nature, as well as the potential financial
risks to our business that could arise in the longer
term. We have begun the process of developing a
biodiversity strategy. As a first step, we are
assessing our mining sites for proximity to and
impact on areas that are protected, or of high
biodiversity value.
Although the refractory industry is not water-
intensive, we must still minimise water withdrawals
and use water as efficiently as possible. This is
particularly true for the 10 sites we have identified
as being situated in regions where water scarcity is
or might soon become a risk. Plants in Mexico,
Brazil, India, China and France were all identified
through water scarcity assessments we have
conducted at every production site.
We are continuing our programmes to plant native
species of trees at key locations across our
business. Our tree nursery in Brumado has grown
over 16,000 trees. RHI Magnesita planted more
than 4,000 of these in Brumado in 2021 and
donated a further 12,000 to community groups.
Similarly, our Eskişehir site planted 1,500 trees on
land bordering our mine and plant, bringing the
total planted to 197,300 since 2005.
In India, mitigation plans include our first rainwater
harvesting system. Now operational at our Clasil
plant, the system has so far replenished the
aquifer with more water than the plant withdraws,
making our local operation water positive. The six
rainwater harvesting pits protected the plant from
flooding during the monsoon while helping to
recharge the aquifer with an estimated
30,000m3 of rainwater.
We plan to expand the scheme to our Cuttack
and Bhiwadi plants.
In 2021, our water consumption was
13.0 million m3, 5% higher than 2020. Of our
total water consumption, 1.3m3 water (or 10%)
was consumed in water-scarce areas.
A sustainable supply chain
We are working to integrate environmental
sustainability into our procurement processes.
Following a comprehensive risk assessment, we
are now rolling out an assessment process
together with EcoVadis which will assess suppliers
for environmental issues ranging from energy and
CO2 emissions to waste and end of life. Based on
risk mapping, we carried out the first phase of
assessments in 2021. Our target is to cover
two-thirds of our supplier base by 2025 and all
suppliers delivering raw materials with a high CO2
intensity.
Our carbon emissions
Scope 1
of which geogenic emissions
of which fuel-based emissions
of which other emissions
Scope 2
Scope 3 (raw materials)
Total
Absolute emissions (thousand tonnes of CO2)
2018
2,396
1,305
1,045
46
206
2,851
2019
2,008
1,066
918
24
188
2,486
2020
1,973
1,075
873
25
143
2,161
5,453
4,681
4,277
2021
2,493
1,330
1,129
34
112
2,273
4,878
1 Adaptations in line with the Greenhouse Gas protocol and refinement in reporting result in updated CO2 figures and KPI 2018-2021.
Case study
New circular approach to our
business in Rasa
Our energy use by source
Our water use
Natural gas
Electricity
Fuel oil
Diesel
LPG
Coal and coke
52%
11%
15%
1%
0%
20%
Water consumption
in non-scarce areas
Water consumption
in water scarce areas
90%
10%
Our Argentinian plant at Rasa has set a
bold new benchmark for our business with its
circular approach. The plant improved
stabilisation for recycled materials and
launched a circular plan that covers everything
from sourcing and recipes to customer
relationships. The plant now only produces
products with recycled content and has been
able to exceed 20% recycled content in its
magnesia carbon refractories.
Recycled content in magnesia
carbon refractories
20%+
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
6 3
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Our people
and
communities
The world of work is changing rapidly both for
employers and employees. From the challenges of
COVID-19 and its effects on global supply chains to
the demands of decarbonisation and digitalisation,
companies face new and complex challenges.
We will only navigate these challenges
successfully if we bring our people along on the
journey, too. This means equipping employees
with new knowledge and skills. It also requires a
culture and a structure that are open, pragmatic,
that promotes innovation and rewards
performance.
Health and safety
Our employees and contractors are entitled to a
safe and healthy workplace. Since the COVID-19
pandemic, this fundamental employer obligation
has taken on even greater significance and we
have worked hard to protect employee health,
safety and wellbeing.
During 2021, we continued with strict adherence
to our COVID-19 safety protocols. Routine testing
helped to protect the safety of our workforce, as
well as the continuity of our business. Other safety
measures continued depending on local
circumstances and regulations. We maintained a
heightened focus on internal communications,
including the promotion of vaccinations. As a
result, we have avoided outbreaks in our
operations. Nevertheless, we were saddened by
the COVID-19 related deaths of 11 people,
including employees and contractors in some of
the hardest hit countries in which we operate.
Our safety performance
In parallel, we continued to progress our
occupational safety programmes. After a
consistent positive trend since 2011 for all safety
KPIs, we experienced a slight increase in injury
rates during 2021. Our lost time injury frequency
(LTIF) rose to 0.19 and our total recordable injury
frequency (TRIF) was 0.61. Most regrettably, two
contractors died as a result of workplace
accidents, one in Brazil and one in China.
Immediate investigations and remedial action
were taken in both cases.
The deterioration in our safety KPIs in 2021 broke a
continuous record of improvement since 2011 and
this was immediately investigated. Interviews and
analysis revealed these developments were
probably a result of unexpectedly high plant loads
combined with reduced staffing due to COVID.
Deteriorating safety performance is not
acceptable and the Group has a zero accidents
target. We achieved this goal for a five month
period in 2020. We are taking swift remedial
action, including a global Safety Relaunch
programme. Given the two fatalities in China and
Brazil, we are engaging closely with these client
sites and others to ensure their safety standards
are as high as the rest of our operating locations.
0.5
0.4
0.3
L
T
F
I
0.2
0.1
0.0
1.2
1.0
0.8
I
F
R
T
0.6
0.4
0.2
0.0
2018
2019
2020
2021
Total recordable injury frequency
Lost time injury frequency
6 4
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
As part of our safety integration project, we also
work with customers to develop shared training
and reporting practices. Employees contracted to
work at customer sites are already included in our
data, as are contractors on our sites.
We are extending implementation of ISO 45001
for our refractory installations business. This
occupational health and safety management
system, which we have implemented across
20 plants and production sites, ensures that
we focus on:
• Risk assessments to identify hazards and
prevent accident and injury
• Mitigating unsafe situations to prevent
accidents and learn from near-misses
• Measuring the timeliness and effectiveness of
mitigation measures
•
Investigations and root cause analyses,
sharing results across the organisation
Since unsafe behaviours are responsible for most
accidents at work, we also use the POST safety
observation programme to focus on behaviour-
based safety.
Our culture
We continue to embed our organisational culture
into our everyday business. Customer focus is at
the heart of this culture which has four key
dimensions: innovation, openness, pragmatism
and performance-driven. These qualities have
allowed us to navigate the pandemic, while
protecting the health of our employees, serving
our customers and ensuring the swift recovery of
our business.
During the pandemic, our employee engagement
largely comprised virtual townhall meetings
between our leaders and employees, as well as
online communications channels. We have now
begun to reintroduce face-to-face townhall
meetings. Our most recent global survey
(conducted in 2020) showed our employee
engagement at 79%. This exceeded global
benchmarks for business and for manufacturing
industries.
Women in leadership in 2021
F
Board
5
2020: 3 | 2019: 3
EMT
2
2020: 2 | 2019: 2
EMT Direct
Reports
9
2020: 12 | 2019: 12
EMT + EMT
Direct Reports
11
2020: 14 | 2019: 14
M
Board
8
2020: 9 | 2019: 10
EMT
5
2020: 5 | 2019: 7
EMT Direct
Reports
33
2020: 36 | 2019: 60
EMT + EMT
Direct Reports
38
2020: 41 | 2019: 67
2019
2020
2021
23%
22%
25%
29%
38%
29%
2025
target
33%
33%
16%
25%
21%
33%
17%
26%
22%
33%
Board1
EMT
EMT + direct
reports
EMT + EMT Direct
Reports
1 Percentage of women, excluding Employee Representative
Directors.
Case study
Providing local flood relief
in Germany
Our Urmitz plant is located near the site of
catastrophic flooding in Germany during
2021. Although our plant was undamaged,
the local area was severely affected. We
immediately provided a cash donation to the
German Red Cross and encouraged
employees to participate in disaster relief and
rebuilding. The local Works Council raised
funds to support an employee whose house
had been lost and we matched those
generous donations.
As we accelerate the digitalisation of our business,
we are also focusing on the people side of the
transformation. Following the success of our
culture champions, we have appointed more than
100 digital champions across our global business.
These ambassadors engage with employees,
showcasing the benefits of new tools, as well as
identifying challenges and solutions.
Promoting diversity
New skills are also required of leaders in
increasingly complex and volatile global markets.
Our new global leadership development
programme focuses on leadership in times of
change.
Our talent management system, the People
Cycle provides assessments of performance and
potential, supports personal development plans
and succession planning.
We believe that a diverse and inclusive workplace
is better for our employees and our business.
When employees feel more accepted and valued
for who they are, they are more likely to feel
engaged, share different perspectives and be
able to innovate.
Our Radenthein plant is the most technologically
advanced in the global refractory industry. It has
therefore been chosen to be the central training
hub and digital flagship plant, with more than
€1 million invested in expanding its training
facility.
Our goal is therefore to build a highly diverse
organisation where everyone feels welcome and
valued, regardless of gender, age, nationality,
ethnicity, religion, disability, sexuality or any other
difference. We have embedded diversity into our
cultural themes.
Diversity of gender, nationality and generation are
our first three priorities. To drive progress, we have
set up global and regional governance structures
that report to the Corporate Sustainability
Committee of the Board.
Our target is that by 2025 women should
represent 33% of our Board, our Executive
Management Team (EMT) and their direct reports.
Our Board already exceeds this target, with 38%
of Directors now women. Female representation
among our senior leaders was 22% at the 2021
year end so there is further progress to be made in
this area.
We are building a pipeline of future female
leaders. As we work to make our leadership reflect
the geographic diversity of our business, we
intend to appoint female leaders to roles in each
key region.
We aim to increase representation from both
younger and older age groups helps us benefit
from a multi-generational workforce. Our new
trainee programme, Refractory Factory seeks to
attract and retain young talent. Our first intake of
trainees included 10 nationalities, with 30%
female representation.
We made our first submission in 2021 to the
Parker Review on the topic of ethnicity and race.
Developing leaders
People development is critical as we transform
our business and rise to the challenges. From
digitalisation to decarbonisation, we are building
new skills to successfully address these
challenges.
The Refractory Factory is our recently launched
global trainee programme designed to build our
leadership pipeline. The two-year course offers
the chance to participate in strategic growth
projects as well as cross-functional and
international assignments.
Supporting our communities
With our operations typically in remote areas, RHI
Magnesita’s community investment projects are
mostly focused on neighbourhoods in the
immediate vicinity.
Our main focus areas are: education and youth
development, environmental protection and
emergency relief. By working in partnership with
local residents and experts, we develop
programmes that respond to local needs, improve
lives and strengthen communities.
Examples from 2021 include:
• We provided COVID-19 vaccinations to
residents living near our Indian plants.
•
•
•
In Germany, we supported emergency flood
relief efforts for communities around our
Urmitz plant. We supported the German Red
Cross and matched funds raised by our
German Workers’ Council. In addition, we
organised volunteering opportunities for
employees.
In Brazil, Building the Future is a 24-month
training programme that recruits young
people from disadvantaged neighbourhoods
near our Contagem plant and leads to a
professional qualification and practical
experience in our operations. Similarly, our
Brumado site runs Project Hexa, a technical
training programme for residents who left
school with limited opportunities or lost their
livelihoods.
In Austria, we have expanded our partnership
with the educational organisation,
Wissensfabrik. Our STEM (science,
technology, engineering and maths) project
continues to grow.
Environmental projects supported by the Group
include tree-planting, biodiversity projects, river
clean-ups, community fruit and vegetable
gardens and environmental education. We have a
longstanding tree-planting programme in Brazil
which raises awareness amongst our employees
of environmental issues such as deforestation and
biodiversity decline.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
6 5
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
EU Taxonomy
Regulation
The EU Taxonomy Regulation (“EU Taxonomy”)
applies in respect of the financial year to
31 December 2021 and requires the Group to
report annually on the proportion of its turnover,
operating expenditure and capital expenditure
attaching to economic activities that are
considered to be environmentally sustainable.
The EU Taxonomy identifies the six environmental
objectives: climate change mitigation; climate
change adaptation; the sustainable use and
protection of water and marine resources; the
transition to a circular economy; pollution prevention
and control; and the protection and restoration of
biodiversity and ecosystems. In respect of the 2021
financial year the Group is only required to report in
relation to the first two objectives.
The EU Taxonomy differentiates between
taxonomy eligibility and taxonomy alignment.
If an economic activity is described in the Annex
it can be considered eligible. In order to be
considered “aligned” further technical criteria
must be met. In respect of the 2021 financial year
the Group is only required to report economic
activities that are eligible.
No sector-specific guidance for the refractory
industry has been published and therefore the
Group is required to use its own judgement
against the eligibility criteria. In 2022 the Group
intends to report aligned activities.
The NACE codes most closely describing the
activities of the company are “23.20 Manufacture
of refractory products” and “08.99 Other mining
and quarrying”. These NACE codes are not listed
in Annex I or Annex II of the Taxonomy regulation,
but certain activities carried out by the Group do
meet the definitions of economic activities listed
in Annex I of the Regulation. As elaborated further
by the Commission on Taxonomy, if the NACE
code of an economic activity is not mentioned in
the Climate Delegated Act, but the economic
activity corresponds to the description of the
activity, it can qualify as Taxonomy eligible. This is
further elaborated in the Taxonomy eligible
activities section.
1 Other than manufacture of renewable energy technologies,
manufacture of equipment for the production and use of
hydrogen, manufacture of low carbon technologies for
transport, manufacture of batteries, manufacture of energy
efficiency equipment for buildings.
Accounting policy
RHI Magnesita N.V. prepares consolidated financial
information in accordance with generally accepted
accounting principles under IFRS, as adopted by
the EU and the financial information for turnover,
operating expenditure and capital expenditure
presented under the EU Taxonomy has been
prepared under the same accounting principles.
Taxonomy eligible activities of RHI
Magnesita referring to the activities of
Annex I and II
Economic activities of RHI Magnesita that are
described in Annex I and II of the Delegated
Regulation (EU) 2021/2139, are considered
eligible. In the case of RHI Magnesita, the
following activities are considered relevant:
• Manufacture of other low carbon technologies
• Material recovery from non-hazardous waste
• Close to market research, development
and innovation
Manufacture of other low carbon
technologies
The economic activity “Manufacture of other low
carbon technologies covers the “Manufacture of
technologies aimed at substantial GHG emission
reductions in other sectors of the economy”.1 RHI
Magnesita offers products and services which
help to make CO2-intensive processes in the steel
industry more efficient and therefore achieve
emissions reductions in the global steel industry.
Electric Arc Furnace refractories
RHI Magnesita provides refractory products
specifically designed for Electric Arc Furnaces.
Additionally, RHI Magnesita provides heat
management solutions and services to its
customers to reduce their GHG emissions,
including digital solutions as well as advanced
refractory products.
Electric Arc Furnaces (“EAF”) are a vital enabling
technology for the reduction of CO2 emissions in
the steel industry. EAFs can be powered using
electricity sourced partially or wholly from
renewable energy generation and replace the
Basic Oxygen Furnace (“BOF”) phase of the
traditional integrated steel manufacturing
process, which pairs a blast furnace with a BOF
and is highly CO2 intensive. EAF steelmaking
requires a source of scrap steel or sponge iron
produced from the reduction of iron ore.
6 6
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Direct Reduction of Iron ore (“DRI”) using
hydrogen is a new technology under
development that seeks to eliminate CO2
emissions from the reduction of iron ore in blast
furnaces using coke. If sufficient quantities of
hydrogen manufactured from renewable sources
can be accessed and if a DRI furnace can be
paired with an EAF for the second stage of the
steelmaking process that is also powered by
renewable energy, CO2 emissions from steel
production can be largely eliminated.
RHI Magnesita has a leading market position in
EAF-specific refractories, services and heat
management solutions, in part due to the unique
chemical composition of the Group’s vertically
integrated raw material supply. EAF refractories
produced by RHI Magnesita directly enable
substantial reductions in CO2 emissions at steel
plants, if the EAF output is displacing steel that
would otherwise have been produced using a
blast furnace and BOF.
Digital solutions and other products which
increase energy efficiency
RHI Magnesita offers digital solutions and
associated physical equipment which achieve
CO2 emissions reductions through process
efficiencies, such as wear monitoring and gunning
repairs to extend the safe working life of refractory
linings. Safely extending the working life of
refractory linings can achieve significant energy
savings for steel producers by reducing the
number of heating and cooling cycles required
per unit of steel output.
The Group also offers advanced refractory
products which enable its customers to
substantially reduce GHG emissions by reducing
electricity consumption, improving yield and
reducing oxygen consumption, saving up to 13kg
CO2 per tonne of steel produced.
Other solutions and products which directly
contribute to CO2 emissions reductions at
customer sites include cold setting mixes, EAF
direct purging plugs and converter inert gas
purging.
Material recovery from non-hazardous
waste
Material recovery from non-hazardous waste
covers the “construction and operation of facilities
for the sorting and processing of separately
collected non-hazardous waste streams into
secondary raw materials involving mechanical
reprocessing, except for backfilling purposes.”
RHI Magnesita aims to increase its secondary raw
material (“SRM”) input to 10% of raw material used
in production of refractories. As part of this effort,
RHI Magnesita operates facilities for the sorting
and processing of spent refractories from
customers’ industries. Secondary raw materials
which are mechanically processed by RHI
Magnesita and transformed from waste to raw
material are eligible for consideration under the
EU Taxonomy, whilst secondary raw material
processed by a third party and purchased
externally by the Group are non-eligible.
Close to market research, development
and innovation
Close to market research, development and
innovation covers “research, applied research and
experimental development of solutions,
processes, technologies, business models and
other products dedicated to the reduction,
avoidance or removal of GHG emissions (RD&I) for
which the ability to reduce, remove or avoid GHG
emissions in the target economic activities has at
least been demonstrated in a relevant
environment, corresponding to at least
Technology Readiness Level (“TRL”) 6”.
RHI Magnesita conducts close to market research,
development and innovation among others to
directly avoid GHG emissions (e.g. research on
chemically bonded bricks which do not need
firing in kilns) or which support other eligible
economic activities (e.g. material recovery from
non-hazardous waste). These R&D activities may
be included in the Operating Expenditure of the
other eligible economic activity and are therefore
excluded to prevent double counting.
KPIs
Share of Taxonomy eligible revenue, Operating
Expenditure and Capital Expenditure – Climate
change mitigation:
Turnover
The turnover KPI is calculated as the ratio of
turnover associated with taxonomy-eligible
economic activities in the reporting period to total
turnover in that period. The total turnover of the
financial year 2021 of €2,551 million forms the
denominator of the turnover key figure and can be
taken from the consolidated income statement on
page 125 of this Annual Report.
The following eligible activities have been
identified as relevant in view of turnover:
• Manufacture of other low carbon technologies
• Material recovery from non-hazardous waste
The total turnover reported in the consolidated
income statement is analysed across all group
companies to assess whether it is associated with
taxonomy-eligible activities. A detailed analysis of
the items included in the total turnover is used to
allocate the respective turnover to the taxonomy-
eligible activities.
Capital Expenditure
The Capital Expenditure KPI indicates the
proportion of capital expenditure that is either
related with taxonomy-eligible economic
activities, part of a plausible plan to expand or
achieve environmentally sustainable economic
activity, or related to the purchase of outputs and
products from taxonomy-eligible economic
activities.
The following eligible activities have been
identified as relevant regarding the Capital
Expenditure KPI:
• Manufacture of other low carbon technologies
The project descriptions of the additions of assets in
the reporting year served as a basis for the
necessary identification.
The following eligible activities have been
identified as relevant regarding the Operating
Expenditure KPI:
Total Capex consists of additions to tangible and
intangible fixed assets during the financial year,
before depreciation, amortisation and any
re-measurements, including those resulting from
revaluations and impairments, as well as excluding
changes in fair value. It includes acquisitions of
tangible fixed assets (IAS 16), intangible fixed assets
(IAS 38), right-of-use assets (IFRS 16) and
investment properties (IAS 40). Additions resulting
from business combinations are also included.
Goodwill is not included in Capex, as it is not
defined as an intangible asset in accordance with
IAS 38.
The sum of these identified additions of assets in
the reporting year equals the numerator of
taxonomy-eligible Capital Expenditure. The total
capital expenditures in line with point 1.1.2.1. Annex
1 of the Disclosure Delegated Act equal the
denominator.
Operating Expenditure
The denominator of the Operating Expenditure KPI
shall cover direct non-capitalised costs that relate
to research and development, building renovation
measures, short-term lease, maintenance and
repair, and any other direct expenditures relating
to the day-to-day servicing of assets of property,
plant and equipment by the undertaking or third
party to whom activities are outsourced that are
necessary to ensure the continued and effective
functioning of such assets.
The numerator equals to the part of the operating
expenditure included in the denominator related
with taxonomy-eligible economic activities, part
of a plausible plan to expand or achieve
environmentally sustainable economic activity, or
related to the purchase of outputs and products
from taxonomy-eligible economic activities.
• Manufacture of other low carbon technologies
• Material recovery from non-hazardous waste
• Close to market research, development and
innovation
For the identification of relevant Operating
Expenditure, costs including direct non-
capitalised costs that relate to research and
development as well maintenance and repair
have been considered.
Avoidance of double counting
To avoid double counting, data sources for the
various reported items are individually cross-
checked to identify overlapping classifications.
Where double counting is identified, data is
removed from one of the overlapping categories.
Material areas identified for removal of double
counting are as follows:
• Revenue from Electric Arc Furnace
(Manufacture of other low carbon
technologies) and revenue from Recycling
(Material recovery from non-hazardous waste)
EU Taxonomy reporting in the year to
31 December 2022
In 2022 the Group intends to obtain third party
confirmation of its classification of Taxonomy-
eligible activities relevant to climate change
mitigation, to demonstrate alignment of those
activities. The Group also intends to extend its
analysis of Taxonomy-aligned or Taxonomy-
eligible activities to cover water use, the circular
economy, pollution and biodiversity as set out in
the EU Taxonomy Regulation.
Taxonomy disclosure table
Year to 31 Dec 2021
Manufacture of other low carbon technologies
Thereof enabling or transitional activities2
Material recovery from non-hazardous waste
Thereof enabling or transitional activities
Close to market research, development and innovation
Thereof enabling or transitional activities
Total Taxonomy eligible
Thereof enabling or transitional activities
Revenue
Operating
Expenditure
Capital
Expenditure
€ million
%
€ million
%
€ million
%
€ million
%
€ million
%
€ million
%
€ million
%
€ million
%
€ million
431
16.9%
431
16.9%
82
3.2%
–
–
–
–
–
–
514
20.1%
431
16.9%
2,551
14
16.9%
14
16.9%
3
3.2%
–
–
2
2.6%
1
0.8%
18
22.7%
14
17.7%
80
6
2.3%
6
2.3%
5
2.1%
–
–
1
0.4%
1
0.4%
12
4.8%
7
2.7%
2613
• Material recovery from non-hazardous waste
Denominator
• Close to market research, development and
innovation
2 Draft Commission notice on the interpretation of certain legal provisions of the Disclosures Delegated Act under Article 8 of EU
Taxonomy Regulation on the reporting of eligible economic activities and assets (2 February 2022) applied without examination of
Technical Screening Criteria.
3 See note 12, Property plant and equipment.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
6 7
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Chairman’s
introduction
to corporate
governance
In 2021, the Board has supported the management
in navigating the business amidst a challenging
market backdrop, with stakeholders always at the
forefront of decision making.
Dear Shareholder,
On behalf of the Board, I am pleased to present
the corporate governance report for the year
ended 31 December 2021, summarising the role
of the Board in providing effective leadership in
promoting the long-term sustainable success of
RHI Magnesita.
2021 has been another challenging year, and we
have been pleased to make good progress against
our strategy as we approach 2025. We have
learnt a lot about ourselves as a company and as a
board as we operate in these volatile times. Our
governance processes and practices have
undoubtedly aided us in focusing our efforts and
attention, so as to continue to deliver value for our
shareholders and benefits for our stakeholders.
This corporate governance statement will report
on our governance approach in full and in this
introduction I outline a few key matters for your
particular attention.
Board composition
As we reported to shareholders in our 2021 report,
we undertook a search for new Non-Executive
Directors. We were delighted to welcome three
new Independent Non-Executive Directors, Jann
Brown, Marie-Hélène Ametsreiter and Sigalia
Heifetz in the course of 2021, with their
appointments being approved by shareholders at
the AGM in June. All were appointed with a
significant majority and have each brought a
diversity of skills and experience which
complemented the existing skills profile of the
Board and have strengthened the performance of
the Board with their contributions. Their
appointments ensured that we are more gender
diverse, something we have noted as being a key
deliverable from Board reviews in recent years.
Their tailored inductions have been completed in
2021 and you can read more about the structure
of the programme on pages 77 and 78.
In December 2021, the works councils of Austria
and Spain appointed two new Employee
Representative Directors for a term of four years
each, pursuant to our Articles of Association, who
became members of the Board with immediate
effect. Martin Kowatsch was appointed by the
Austrian Works Council, replacing Franz Reiter,
who stepped down from the Board and will retire
from the Company in due course. Karin Garcia
was appointed by the Spanish Works Council and
together, Martin and Karin join Michael Schwarz,
whose appointment to the Board was renewed by
the German Works Council with effect from
9 December 2021.
We wish Franz all the best for his forthcoming
retirement and thank him for his energetic and
constructive input over his years as a Board
member for RHI AG and subsequently RHI
Magnesita N.V. We welcome Karin and Martin and
look forward to a co-operative and healthy
engagement on a wide range of topics, as well as
seeking the opportunity to hear more directly
from different sections of our employees. They are
being supported with a tailored induction
programme which you can read more about on
pages 77 to 78 .
Full details of our Board and Executive succession
planning and recruitment of new members can
be found on pages 89 and 90. Their biographies
can be found on pages 83 to 85 .
Diversity
We are pleased to have exceeded the Hampton
Alexander target of a 33% female Board with a
gender diversity of 38% female Board members.
We have always calculated this percentage
excluding the ERDs as we cannot influence their
appointment. However, we are pleased that the
works council in Spain chose to appoint a female
Director and therefore, including our ERDs, we are
also at 38%.
In order to ensure that we continue to pursue
diversity of thought and experience on our Board
the Nomination Committee has recommended a
refreshed Board diversity policy in 2021, which, in
line with Dutch law changes, contains ambitious
targets for gender diversity and commits us to
reporting to the Parker Review. Whilst we are
pleased that we satisfy the ethnic diversity criteria
of the Parker Review, with one of our Board
identifying as a member of the ethnic minority
categories as defined by the UK Office of National
Statistics, we will continue to consider our
diversity as a Board and as the Company based on
our global footprint and operations in a way which
is best aligned with our growth agenda.
Independence
The independence of the Board continues to be
at the forefront of our governance agenda. With
the growth of the ERD group on our Board, we
were prompted to review how these Directors
operate and how we should calculate the Board’s
independence, given their differing process of
appointment as enshrined in European corporate
law.
The UK has embraced worker representatives in
recent years. However, workforce representatives
Herbert Cordt
Chairman
Board gender diversity1
Male
Female
62%
38%
Board independence1
Independent
Not independant
58%
42%
1 As calculated by reference to the UK Corporate
Governance Code and excluding the ERDs.
6 8
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
At RHI Magnesita, we recognise the role we play
in the lives of our employees, customers,
suppliers, shareholders, and the communities in
which we operate. You can read more about our
stakeholder engagement on pages 50 to 55.
Throughout the year we have appreciated
hearing from our shareholders on many different
topics, not least on corporate governance. You
can read more about these meetings on page 51.
A more detailed overview of the matters discussed
and debated by the Board at its meetings during
the year is presented on pages 79 to 80.
The report of our compliance 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 70.
We have reported compliance to the extent
possible and explained wherever this has not
been achievable.
As in recent years, we will again be holding our
AGM virtually, to the extent possible under Dutch
law, as we have found it to be an efficient and cost-
effective way of engaging with as many
shareholders as possible and understanding their
views through the business of the meeting.
Finally, all Directors will seek re-election at our
AGM on 25 May 2022 and we look forward to
engaging with our shareholders at that event.
Herbert Cordt
Chairman of the Board of Directors
1 A dual role held by one individual, currently John Ramsay.
You can read the role description on our website.
Following from the findings of the Board review in
2020, we implemented better technology and
processes to support the hybrid meetings,
although they are still no substitute for in-person
interaction which we hope to return to as quickly
as possible.
Board review
When we became RHI Magnesita in 2017, we
engaged in a three-year programme of external
Board reviews delivered by Lintstock. As a nascent
Board with a number of new participants and a
range of considerations to be aware of, this level of
detailed evaluation was felt to be useful, and we
have seen significant progress through these
evaluations in terms of Board dynamics, inputs to
the Board and Board composition.
As we have settled into the natural rhythms of
Board operation, following the immediate years
post-merger, it was felt that an internal evaluation
for 2021, as permitted by the UKCGC, would be
suitable. Our Company Secretary administered
the Board evaluation for 2021, working together
with the SID and the Chairman to develop the
areas for focus and the action plan based on the
findings.
We were pleased to see that our members
consider the Board to be effective, showing good
progress from 2020, despite continuing logistical
difficulties for the Board arising from COVID-19
restrictions. We identified areas for focus in 2022
and you can read more about the findings on
page 89.
Sustainability, stakeholders and strategy
Throughout the 2021 Board programme we again
devoted considerable time to the deliberation of
the Company’s strategy, particularly to assessing
progress against our 2025 strategy so far and the
execution capability required to deliver it. These
discussions were focused on the risks to the
strategy execution and how management could
mitigate these risks, focusing on our corporate
purpose and culture as a key mechanism for
delivery.
Sustainability has been a constant seam
throughout many of our conversations as a Board
and also with stakeholders. It was a cornerstone of
the strategy discussion and was discussed at each
Board meeting in the year, with Directors
recognising it as both a risk and opportunity for
the business, and our wider communities.
The Corporate Sustainability Committee (CSC)
has reported back to the Board on the
proceedings of each of its meetings and the CSC
also welcomed various Board members and key
senior management as attendees to those
meetings throughout the year, ensuring that
conversation has been taking place at the highest
levels of the organisation.
on a supervisory board, has been a cornerstone of
the DACH (being the region comprising Germany,
Austria and Switzerland) corporate legal
environment for many years. Our corporate
history and Board composition stems from this
DACH corporate legal environment. The two
systems (UK and DACH) aim for the same
outcome of broader stakeholder consideration
but may differ in their practical application.
We find, looking at other companies in a similar
position, that a differentiation when calculating
independence, and indeed other Board statistics,
is made between directors appointed by
shareholders at the AGM, and those appointed by
the workforce. The Board, management and
indeed our shareholders, can play no role in the
appointment or removal of the ERDs. As such, we
are not including our ERDs as part of the
denominator in our independence calculations.
We have always set them out as a separate
category within that calculation and this is
consistent with that.
You can read more about
the role of the ERDs on
Page 74
Furthermore, this year Wolfgang Ruttenstorfer,
who served on the supervisory board of RHI AG
from 2012, reached nine years of service. He
meets no other criteria for non-independence
suggested under the UK Corporate Governance
Code 2018 (“UKCGC”). The Company has
changed immeasurably over that period, and
Wolfgang continues to demonstrate strong
independent judgement and assessments in
Board meetings. The Board is comfortable that
Wolfgang continues to act independently,
however, under the criteria of the UKCGC, he will
be reported as a Non-Independent Non-
Executive Director going forward.
Finally, in 2021 we took steps to change our
Articles of Association to give the casting vote to
the Deputy Chairman and Senior Independent
Director1 to ensure independence be preserved in
our discussions and decisions and to give
assurance to stakeholders that an independent
non-executive director would have the power to
steer the Company, should it ever be required. It is
important to us that, whilst we individually as
Directors have a duty to exercise independent
judgement, that the Board as a whole can be
assured to be independent to our stakeholders.
You can read more about the
independence of the Board on
Page 75
COVID-19 restrictions on the Board
Once again, as a Board with international
composition, we were seriously hampered by
travel restrictions across multiple jurisdictions,
making it very difficult to facilitate physical
meetings and site visits. Nonetheless, more
interaction and engagement with the business
was possible compared to 2020, with one Board
site visit undertaken to our R&D centre in Leoben,
and other visits taken by smaller groups to
Radenthein (Austria), Bonnybridge (Scotland) and
Bhiwadi (India). The EMT and Executive Directors
were able to visit many more locations in 2021
than in 2020, and reported details back to the
Board accordingly.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
6 9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 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. A limited number of
deviations from these Codes are set out with
explanations below.
Deviations from the UK Corporate
Governance Code in 2021
The Company does not comply with Provision 9
of UKCGC which states that the Chairman of the
Board should be independent on appointment.
The Chairman is not considered to be
independent for the purposes of the UKCGC,
having served on the Board of RHI AG for more
than nine years, prior to the merger. This also
means the Company is not compliant with
Provision 19. The Board, led by the Senior
Independent Director, believes that Herbert Cordt
continues to demonstrate integrity, objective
judgement and independence of character, and
that his experience as Chairman of RHI AG’s
supervisory board is valuable to the Company,
providing continuity and corporate memory.
As detailed above, Wolfgang Ruttenstorfer is no
longer deemed to be independent under the
criteria outlined in the UKCGC, as a result of his role
on the RHI AG supervisory board from 2012. The
Board greatly benefits from Wolfgang’s financial
experience, challenge to management and his
contributions to the Audit & Compliance
Committee, and as such, Wolfgang will continue to
be a member of the Committee. We have therefore
decided to explain our position in respect of
Provision 24 of the UKCGC
Since the introduction of the current UKCGC in
2018, the Company took steps in order to be able to
report compliance with the principles and
provisions relating to remuneration. Following the
publication of FRC guidance on Corporate
Governance Reporting in 2021, we will now report
partial compliance with Provisions 36, 40 and 41.
Provision 36
The Company consulted circa 70% of its
shareholder base about the current
Remuneration Policy (the Policy) prior to its
approval at the 2021 AGM, explicitly referring to
the proposed policy for post-employment
shareholding requirements which comprises the
continuation of holding periods for annual bonus
shares and the LTIP post-cessation of
employment. Our Policy received 95.95%
support at the 2021 AGM. However the Company
notes the clarification by the Financial Reporting
Council in 2021, specifically that it is not enough
to achieve compliance with the UKCGC by
including a policy that only provides for holding
periods to continue post-employment.
The Board believes that its current Policy for
post-employment shareholding requirements is
appropriate and, with other elements of the
Policy, achieves the right balance between
providing a remuneration structure that is both
incentivising and retentive. The Policy ensures
alignment to shareholder interests and long-term
sustainable performance of the business, both
whilst the executives are employed by the
business and following their termination. In
reaching this conclusion, the Board has taken into
account the different elements of the Policy that
together achieve these aims including post-
employment holding periods for annual bonus
shares and vested LTIPs, for both good and bad
leavers, in-flight unvested LTIPs for good leavers,
as well as shares beneficially owned by the
executives.
Provisions 40 and 41
The Company benefits from employee
representation on the Board and the Board,
annually, approves executive remuneration. This
provides a mechanism for our ERDs to understand
and engage on behalf of the workforce regarding
the alignment of executive remuneration with
wider Company pay policy and to provide
feedback.
Our remuneration policies and practices,
including our approach to salary increases and
annual bonus structure are aligned throughout
the business. Given this alignment, and the extant
mechanism for engagement with the ERDs, the
Board is comfortable with the existing approach
and does not consider it necessary to provide any
additional forms of engagement with the
workforce to explain how executive remuneration
aligns with wider Company pay policy. The
Remuneration Committee will continue to keep
this under review.
Deviations from the Dutch Corporate
Governance Code in 2021
The Company does not comply with best practice
provision 2.2.2 of the DCGC which 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 Representative
Directors) has been made on the basis of
nominations for three-year terms, subject to
performance and annual re-election at the AGM.
The Board considers that the three-year term is
more consistent with UK listed company practice
and does not compromise the spirit of the DCGC
provision and does not propose to make changes
to the existing Non-Executive appointments.
As explained on page 69, going forward we do not
include our ERDs as part of the denominator in our
Board independence calculations.
Corporate governance declaration
In complying with the requirements of the DCGC,
the Company publishes this corporate
governance statement including its compliance
with the DCGC. The information required to be
included in this corporate governance statement
can be found in the following chapters, sections
and pages of this Annual Report (the “Annual
Report”) and are deemed to be included and
repeated in this statement:
•
•
•
•
•
•
the information concerning compliance with
the DCGC can be found on page 70;
the information concerning the Company’s main
features of the internal risk management and
control systems relating to the financial reporting
process can be found on pages 38 to 41;
the information regarding the functioning of
the General Meeting and its main authorities
and the rights of the Company’s shareholders
and holders of depositary interests in respect
of shares in the Company and how they can be
exercised can be found on pages 68 to 121;
the information regarding the composition and
functioning of the Board and its Committees
can be found on pages 88 to 121;
the diversity policy with regard to the
composition of the Board and their Committees,
can be found on page 89 and
the information concerning the disclosure of
the following items, where they exist, may be
found on pages 71 to 81:
– participations in the Company for which a
disclosure obligation exists;
– special control rights attached to shares
and the name of the person entitled to
such rights;
– any limitation of voting rights, deadlines for
exercising voting rights and the issue of
depository interests for shares with the
co-operation of the Company;
– the regulations in respect of the
appointment and dismissal of Executive
Directors and Non-Executive Directors and
amendments to the Articles of Association;
– the powers of the Board, in particular to
issue shares and to acquire own shares by
the Company; and
– the number of shares without voting rights
and the number of shares which do not give
any, or only a limited, right to share in the
profits or reserves of the Company, with an
indication of the powers which they confer.
7 0
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Corporate governance structure
RHI Magnesita Board
Chief
Executive
Officer
Remuneration
Committee
Nomination
Committee
Audit
Committee
Corporate
Sustainability
Committee
Executive
Management
Team
Listing Rules information
Major shareholdings
Certain information is required to be published by
the Listing Rules (LR 9.8.4C R and LR 9.8.4 R) and
this information can be found in the Annual
Report as set out in the table below:
At 25 February 2022, 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:
1.
Interest capitalised
2. Publication of unaudited
financial information
3. Details of long-term
incentive schemes
4. Waiver of emoluments
by a Director
Shareholder5
MSP Stiftung1
n/a
n/a
Number
of shares
%
based on
13,333,340
28.37%
Fidelity Management &
Research Company LLC
E. Prinzessin zu Sayn-
Wittgenstein Berleburg2
4,259,559
9.06%
2,088,461
4.44%
Pages 97-121
n/a
the shares instead of legal title. Nederlands
Centraal Instituut voor Giraal Effectenverkeer B.V.
(also known as Euroclear Nederland) holds the
legal title to the underlying shares.
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.
K.A. Winterstein3
2,088,461
4.44%
Transactions with majority shareholders
5. Waiver of future emoluments
n/a
Erste Group
1,810,282
3.85%
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
n/a
n/a
n/a
n/a
10. Provision of services by a
Refer to Note 61
controlling shareholder
11. Shareholder waiver of dividends
12. Shareholder waiver
of future dividends
13. Agreements with
controlling shareholders
n/a
n/a
Refer to Note 61
Fidelity Worldwide
Investment (FIL)
1,783,045
3.79%
Man Group PLC
1,701,815
3.62%
W. Winterstein4
1,590,000
3.38%
1 Held directly by MSP Stiftung. 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.
5 The Company holds 5.01% of its own shares in treasury as a
result of the buybacks undertaken 2019-2021.
There are no restrictions on voting and profit rights
and no holders of any securities with special
control rights. Depositary interests in respect of
the Company’s shares have been issued by the
Company with the Company’s co-operation,
which can be settled electronically through, and
held in the system of CREST. The depositary
interest holders hold the beneficial ownership in
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 and
impacts of Brexit
No anti-takeover measures have been
implemented. As previously reported, the
Company acquired a secondary listing in 2019 on
the Vienna Stock Exchange (Wiener Börse) to
extend regulatory protections to its shareholders,
which could have been lost as a result of the UK’s
exit from the European Union (EU). Austria has
become the sole host member state and the
Netherlands continues to be RHI Magnesita’s
home member state.
The main effect of this is that the Company notifies
disclosures, such as share dealing, to each of the
three authorities in UK, Netherlands, and Austria.
The Company complies with the relevant
corporate and listing regulations across all three
jurisdictions. The Company’s governance structure
continues to be primarily derived from its primary
listing status in the UK, although there are minor
areas in which regulations in other jurisdictions take
precedence.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
7 1
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Corporate governance statement
continued
The UK’s exit from the European Union (EU)
required that the Company restructure its
depositary interests to be held by an EU entity in
order that they could settle in CREST and be
traded in the normal course of business.
Accordingly, on 2 June 2021, a transfer of the
depositary interests was undertaken. No
disruption occurred to the settlement of shares
and compliance with post-Brexit regulations was
assured.
Share buyback
Under the authority given by shareholders at the
Annual General Meeting (AGM) in 2020 to
purchase a maximum of 10% of the issued share
capital of the Company at the date of acquisition
(the “2020 authority”), the Company
commenced a share buyback programme on
16 December 2020 to return value to
shareholders. This programme concluded on
13 April 2021 and a further programme
commenced on 5 May 2021, ending on 4 August
2021. The 2020 authority expired at the AGM in
2021 when a further authority was obtained for
purchase of up to 10% of the issued share capital
was obtained at the AGM 2021. The remainder of
the buyback programme was completed under
this authority.
These buybacks, totalling €98 million, were
conducted on a non-discretionary basis with
Barclays Bank Ireland PLC, which made the share
purchases on the Company’s behalf,
independently of, and uninfluenced by, the
Company. The purchases were made on market
terms and the average price per share was
disclosed in each daily report. The overall average
price of the first tranche, ending on 13 April 2021,
was 3946 pence per share whilst the second
tranche, ending on 4 August 2021, was at an
overall average price of 4254 pence per share.
The remaining amount authorised under the
resolution passed at the AGM 2021, as at
25 February 2022, is 8.61%. This will expire at the
end of the 2022 AGM or the date which falls 15
months from the 2022 AGM.
You can read more about
these share buybacks on
Page 39
As at 31 December 2021, the Company held a
total of 2,478,686 ordinary shares in Treasury
which represent 5.01% of the issued share capital
at the date of acquisition of the shares. The
Company continues to assess the treatment of
these treasury shares and they may be used to
satisfy awards made under the terms of the
Company’s Long-Term Incentive Plan or
cancelled in due course.
Before engaging on the programme of share
buybacks, the Board discussed the risks and
benefits of such a programme and closely
considered the medium-term liquidity, leverage
profile, outlook and going concern of the
Company with detailed presentations from
management and consultations with our
corporate brokers. The matter was considered in
the context of shareholder returns, within the
Group’s broader capital allocation strategy, and
deemed to be in the best interests of a sustainable
company, its shareholders and its other
stakeholders. The Board will continue to evaluate
the potential for additional share buyback
programmes to further enhance shareholder
returns, after taking into account market
conditions and the Group’s wider capital
allocation priorities.
Board powers, responsibilities and
representation
The Board is collectively responsible for the
leadership and management of the Company
and its business. Its role is to establish the strategy,
purpose and values to ensure the Group’s
long-term and sustainable success. The Board
assesses the strategic risks it is willing to take in
pursuit of this strategy, ensures sufficient
resources, 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 Rules and Matters Reserved to the
Board, which are available on the website, set out
those matters which are reserved for the Board to
consider, including among other items, overall
responsibility for strategy and management,
major acquisitions and investments, structure and
capital, financial reporting and controls, and
corporate governance. You can read more about
the matters considered by the Board in 2021 on
pages 79 and 80.
The Board has delegated responsibility for
day-to-day management of the Company to the
CEO and his Executive Management Team (the
EMT). There is a clear separation of responsibilities
between the Board and the EMT, and the main
responsibilities of the EMT are to assist the Board
with its oversight of strategy, which involves
making strategic recommendations to the Board,
being accountable for implementing the Board’s
decisions, and being responsible for directing and
overseeing the Company’s operations.
The Board has delegated some responsibilities to
Committees of the Board, which are outlined in
the Committee Terms of Reference, available on
the Company website, and summarised in their
individual reports on pages 88 to 121. 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 review 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 88 to 121.
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. 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 them.
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. You can read
more about stakeholder engagement on pages
50 to 55.
The Board as a whole is entitled to represent the
Company. Additionally, (i) the CEO and the
Chairman, (ii) the Senior Independent Director
and Deputy Chairman1 and the Chairman and (iii)
two Executive Directors, acting jointly, are also
authorised to represent the Company. 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. You can find our Articles of
Association and the role profiles of the above roles
on our website.
7 2
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
1 A dual role held by one individual, currently John Ramsay.
You can read the role description on our website
Where not all the Board were able to attend the
site visits, updates were given at the following
meeting to share the learnings and perspectives
from the experience.
Board appointment
Board site visits
Pursuant to the Articles of Association, the
Directors, other than the Employee
Representative Directors, are appointed by the
General Meeting by a majority of votes cast,
irrespective of the represented capital. The Board
makes nominations to the General Meeting for
such appointments. A resolution to appoint the
Director other than in accordance with a
nomination by the Board may be adopted by the
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 reappointment by the
General Meeting. 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
reappointed for an unlimited number of terms, but
the Board’s consideration of Non-Executive
Directors (other than Employee Representative
Directors) for reappointment for a third term would
always take into account overall Board
independence and stakeholder views, as well as
relevant Corporate Governance Codes.
The General Meeting has 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 General Meeting
is authorised to resolve to amend the Articles of
Association, on the proposal of the Board.
Conflict of interest
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.
The agreed Board pattern is that one Board
session per annum, typically over a week in April,
is held at a location other than the Vienna
headquarters. In April 2021 travel was still very
difficult, and with the intention to bring in three
new Directors, it was agreed that the visit be
postponed to later in the year.
In September 2021, the majority of the Board met
in person for the first time since January 2020,
giving Directors the opportunity to meet
colleagues in person, some for the first time, and
to build important personal relationships. This
meeting took place in Leoben, (left) at our R&D
centre, and the Board visited the technology
centre, receiving presentations from specialists
within the business on topics pertinent to our
strategy such as our net-zero brick range, Flow
Control, use of secondary raw materials, quality
assessment, tools such as computed tomography
water modelling. They were able to meet and
engage with a broad section of the Company,
hearing employees’ experiences, about their
areas of focus, about their perspective on the
strategic initiatives and viewpoints from other
stakeholders such as customers, innovation
partners and suppliers, with whom the employees
engage with regularly. This provided invaluable
viewpoints for the Directors on culture and
stakeholder experience.
The experience was felt to be overwhelmingly
positive, especially for our new Directors, who
received a comprehensive overview of the
underlying aspects of production, were able to
meet specialists in various fields and form deeper
relationships with their colleagues on the Board,
as well as with the EMT. The existing Directors
similarly saw a refreshment in their relationships
with their colleagues and the value of meeting in
person was substantially reinforced.
Other site visits took place in smaller groups
throughout 2021 when and where travel was
possible:
• The UK-based Directors visited the
Bonnybridge plant, hearing from the
management there on safety standards,
operational processes, and the plant’s
contribution to ,and role in, Flow Control.
• The CSC held a meeting of the Committee in
Radenthein, seeing the digital innovation and
supply chain in action, meeting not only local
management, but also attendees of the
Committee from the Rotterdam office, Brazil,
and Germany, as well as colleagues based in
Austria.
• The Executive Directors and David Schlaff
visited the Bhiwadi plant in India and were
present at the opening of the new R&D centre.
They saw the plans for improvements, the
automation of production to expand capacity
and capability to develop in India, the Middle
East and Africa, and met the workforce
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
7 3
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Corporate governance statement
continued
Culture and purpose
Culture continues to play a large role in Board
discussions and the Board took all the available
opportunities to engage with colleagues in the
business in order to observe and understand the
culture within the Company.
Cultural values support the Company Purpose,
and the Purpose underpins the Company’s
stakeholder engagement, demonstrating the
Company’s place within our wider environment
and society. You can read more about how the
Board incorporates stakeholder viewpoints into its
decision making process on pages 50 to 55.
Read more about our
culture on
Page 64
As the Board considered the various operational
difficulties in the year, culture was a continuous
theme when discussing root causes and solutions.
Management devoted significant time and
attention to culture, discussing cultural
information in detail with the Board throughout
the year.
With limited in-person exposure to colleagues at
levels across the business because of travel
restrictions, the Board sought input from
management, received Board presentations in
meetings, and requested insight into how a team
operated or a region approached problems.
Culture has remained an integral element of
Board discussions and the Board and its
Committees use many sources to assess culture.
Given that culture can arguably best be described
as “the way we do things around here”, it is difficult
to use quantitative metrics that accurately
communicate the culture to the Board.
Nonetheless, data used by the Directors to
measure culture include whistleblowing reports,
Code of Conduct compliance reports, employee
engagement survey results, health and safety
reports, responses to Internal Audit reports and
the corresponding outstanding actions, workforce
remuneration and attrition levels throughout the
annual cycle. Directors engage directly with
management, throughout the meeting cycle and
also beyond, which enables their assessment of
management culture.
Culture continues to be a central part of
performance evaluations for employees and the
Company’s internal communications are
underpinned by our cultural values. The Board
considered the extent to which cultural values
were promoted and embodied as part of all
succession planning decisions. Given the
multiple global locations of operations, local
culture is also discussed by the Board when
considering the impact and likely success of
initiatives. The compliance reports to Directors
refer to culture, hand in hand with training and
Code of Conduct compliance levels. The Internal
Audit reports to the Audit Committee
demonstrate that organisational culture is a key
factor in achieving good audit results and, where
there are improvements, culture is a focus to
enable successful implementation. Culture is
considered in discussions to identify trends and
challenges facing the business. The Corporate
Sustainability Committee specifically considers
behaviour and culture as key success factors of
health and safety campaigns, you can find more
details on page 64.
The consideration of culture at Board level 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 Board has considered the culture
of different teams, and discussed with
management how that culture has contributed to
decision making and performance levels of the
business. The Board continues to consider how
best to effectively measure and assess culture at
Board level. The following key cultural themes
determine the actions of the Company and
specifically feed into performance reviews across
the Group, succession planning and risk
management:
customer
focus
innovative
We live innovation to create
value for our customers, by
being bold and providing
the best digital and
sustainable solutions.
performing
Our high performance
is rooted in accountability
and responsibility. We are
a reliable partner that
decides and delivers
based on our
customers' needs.
open
Our open mindset and
transparent way of working is
flanked by a diverse, respectful
and friendly business
environment, where we care
about our customers
and colleagues.
pragmatic
We act pragmatically to
enable fast and simple
collaboration across functions
and regions to serve
our customers best.
74
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Whistleblowing
Potential concerns about business ethics or any
matters can be reported by all stakeholders to an
independently operated, confidential and
anonymous whistleblowing hotline, available
across all our key operating locations and in the
main languages used within the Company.
Contact details are publicised throughout the
business and are available externally on the
website. All reports are assessed by the Head of
Internal Audit, Risk & Compliance and then
addressed on a case by case basis, typically
engaging senior leaders from Legal and HR. 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 to address the root causes are
completed.
The Audit Committee report
contains more details on
Page 92
Board workforce engagement
RHI Magnesita’s corporate structure has, from
the beginning, included Employee
Representative Directors. This was a
requirement from the merger in 2017 and
reflects the approach in continental Europe,
particularly the DACH region. The Employee
Representative Directors, currently Michael
Schwarz, Karin Garcia and Martin Kowatsch,
have been appointed by their respective works
councils in line with the Company’s Articles of
Association, and, with experience of the
frontline of operations, seek to directly
represent the views of the workforce at the
highest level of the Company.
The Board welcomes the different viewpoints
they provide, bringing increased opportunity
for challenge of the executive management,
and holding them to account from a different
perspective, being that of the workforce who
are on the ground, amongst colleagues. The
ERDs can attest to the impact of the
executives’ actions within the business and
contribute to the Board accordingly. Not only
do the ERDs have the ability to challenge
management, but they can also contribute to
the NEDs’ view of management and
understanding of the Company culture,
strengthening the independence the NEDs
have through providing a broader knowledge
of the Company.
The information and discussions at Board
meetings helps the ERDs’ support of the
workforce and provide a mutually beneficial
link between colleagues and the Board.
Specific details are included in the Board
stakeholder engagement report on pages 52
to 53.
Board composition
The Board is composed of 16 Directors which
includes two Executive Directors, three Employee
Representative Directors and 11 Non-Executive
Directors.
The size of the Board at 16 Directors continues to
be a challenge, as seen in findings of the Board
reviews. However this is mitigated by the careful
behaviour of Directors in meetings, the dedicated
work of the Committees who then feed their
pre-work on matters into the Board meetings and
the familiarity of the Board with the nuances of
being a dual-listed Company with obligations in
three jurisdictions.
Independence
In previous years Wolfgang Ruttenstorfer has
been considered independent under the UKCGC
and non-independent under the DCGC. This is
because he was interim CEO for RHI AG for six
months when there was an urgent requirement,
following the health-related absence of the CEO.
Best practice provision 2.1.8 i. of the DCGC
contains a window of five years which Wolfgang is
no longer within. Therefore, under the DCGC he
is now classed as independent.
Under the UKCGC, the practice has been to
include the service of those Directors who were
on the RHI AG board when calculating the time
served. On this basis, Wolfgang no longer meets
the independence criteria of the UKCGC, having
joined RHI AG’s supervisory board in 2012 and
therefore exceeding nine years of service in 2021.
He meets no other criteria in Provision 10 of the
UKCGC and the Board continues to be
comfortable that he provides strong independent
challenge to management.
Additionally, per the Chairman’s introduction to
corporate governance, as European corporate law
requires the Company to allow for a significant
portion of the Board to be ERDs, the Board feels it
is appropriate to follow the process of calculating
independence as it is undertaken in the relevant
jurisdiction. Which is to say that only Directors
who can be appointed by shareholders are
counted in the calculation and ERDs are excluded
from the denominator.
Accordingly, the Board has seven Directors out of
12 eligible Directors, who are deemed
independent (as set out in the table on page 76),
thereby constituting a Board which is composed
of at least half Non-Executive Directors (excluding
the Chairman) considered by the Board to be
independent.
The Board has considered the independence of
the Non-Executive Directors, including potential
conflicts of interest. Each of these Directors has
also confirmed that there is no reason why they
should not continue to be considered
independent.
Skills and experience
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. The Board 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.
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.
Read about Board diversity in the Nomination
Committee report on page 88 and 89.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
7 5
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Corporate governance statement
continued
At the date of this Annual Report, the Board is composed as follows:
Name
Herbert Cordt
John Ramsay
Stefan Borgas
Ian Botha
Janet Ashdown
David Schlaff
Position
Chairman1
Deputy Chairman and Senior Independent Director2, 3
Executive Director (CEO)4, 5
Executive Director (CFO)4, 5
Independent Non-Executive Director2, 3
Non-Independent Non-Executive Director4, 5
Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg
Non-Independent Non-Executive Director4, 5
Fiona Paulus
Jann Brown
Karl Sevelda
Independent Non-Executive Director2, 3
Independent Non-Executive Director2, 3
Independent Non-Executive Director2, 3
Marie-Hélène Ametsreiter
Independent Non-Executive Director2, 3
Sigalia Heifetz
Independent Non-Executive Director2, 3
Wolfgang Ruttenstorfer
Non-Independent Non-Executive Director6
Year of birth
Date of
appointment
Expiry/
reappointment date
1947
1957
1964
1971
1959
1978
1965
1959
1955
1950
1970
1961
1950
20 June 2017
2022 AGM
6 October 2017
2022 AGM
20 June 2017
2022 AGM
6 June 2019
2022 AGM
6 June 2019
2022 AGM
6 October 2017
2022 AGM
6 October 2017
2022 AGM
6 June 2019
2022 AGM
10 June 2021
2022 AGM
6 October 2017
2022 AGM
10 June 2021
2022 AGM
10 June 2021
2022 AGM
20 June 2017
2022 AGM
Karin Garcia
Martin Kowatsch
Michael Schwarz
Employee Representative Director4, 5
1970
9 December 2021
9 December 2025
Employee Representative Director4, 5
1972
14 December 2021
14 December 2025
Employee Representative Director4, 5
1966
8 December 2017
9 December 2025
1 Herbert Cordt was a member of the supervisory board of RHI AG and thus not deemed to be independent on appointment within the meaning of the UKCGC but independent on appointment within the
meaning of the DCGC, due to a difference in independence requirements under the respective codes.
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.
5 Non-Independent within the meaning of the DCGC.
6 Wolfgang Ruttenstorfer is considered independent under the DCGC and non-independent under the UKCGC.
Individual roles
Roles of Chairman, SID & Deputy Chairman and
CEO
The roles of Chairman, the CEO, SID & Deputy
Chairman have been formally recorded by the
Board. All of these documents 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.
Non-Executive roles
The Employee Representative, Non-Independent
and Independent Non-Executive Directors
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 viewpoints of the
Company’s key stakeholders are represented. All
Directors are required to exercise their
independent judgement and act in the best
interests of the Company, taking into account the
interests of its stakeholders, in their decision-
making.
Non-Independent Non-Executive Director roles
Herbert Cordt, Stanislaus Prinz zu Sayn-
Wittgenstein-Berleburg, David Schlaff and
Wolfgang Ruttenstorfer 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 with the benefit of
historical experience of the operations and
industry of the business. Stanislaus Prinz zu
Sayn-Wittgenstein-Berleburg and David Schlaff
can provide an investor perspective to the
management team and challenge them
accordingly. The detail of all the Directors’
independence and the detail of compliance with
the criteria of each Code can be found above and
on page 70 respectively.
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’s School
of Foreign Service for its MSFS
Program
Advisory Board member
Quality Metalcraft/Experi-
Metal, Inc.
Advisory Board member
Cooper & Turner Group
Advisory Board member
7 6
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
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
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.
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 instructing an auditor to audit the Company’s
annual accounts if the General Meeting fails to do
so; 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.
Company Secretary
Sally Caswell was appointed by the Board as
Company Secretary in January 2020. All
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. In 2021, she assisted the
Chairman and the SID & Deputy Chairman in
administering the Board Review.
Delegation of Authority
The Board has documented the matters reserved
for its approval including approvals of major
expenditure, investments and key policies. This
was revisited and revised in 2021 to ensure it
reflected the current organisational structure, and
provided as much clarity as possible to the Board
and the organisation as a whole to enable
effective delegation of authority.
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 members
of the Board, regardless of the allocation of tasks.
Board and Committee structure
Induction
The Company has a one-tier board structure, with
a Board consisting of both Executive Directors and
Non-Executive Directors (collectively the
“Directors” or the “Board”). As at the date of this
Annual Report, the provisions of Dutch law that
are commonly referred to as the “large company
regime” (structuurregime) do not apply to the
Company.
The Board has four Board Committees to ensure a
strong governance framework for decision making
and assessment of performance against the
Company’s strategy: the Audit Committee, the
Remuneration Committee, the Corporate
Sustainability Committee and the Nomination
Committee. Each Committee receives support
from the Company Secretary. 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 2021, can be found on pages 88 to
121.
Upon joining the Board, any new Director is
offered a comprehensive and tailored induction
programme covering all aspects of the value
chain, with visits to key sites and meetings with
senior managers and other colleagues or advisers
as required. 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.
In 2021, five Directors joined the Board. Those
joining in June 2021 have been provided with an
induction programme tailored to their experience
and their role within the Board and the
Committees they were joining. The new ERDs’
induction programme is ongoing and is covering
similar aspects, whilst being tailored to their
existing knowledge of the Company.
Directors spent time with senior management,
and covered the following topics:
• strategy;
Information and support for Directors
• value chain;
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. The strategy meeting involved multiple
break-out sessions to provide detail on certain
areas of business focus such as CO2 emissions and
digitalisation. The tour of the R&D centre in Leoben
also provided opportunity for the Directors to hear
from R&D specialists as outlined above.
Training sessions were provided to Directors on
topics such as Sustainability & TCFD, cyber
security, developments in Dutch law, and a case
study on the role of Audit Committees in recent
corporate failures. The corporate training portal,
used by employees across the organisation, was
also made available to Directors, covering topics
such as market abuse and anti-bribery &
corruption.
Training and additional information sessions on
areas such as EU CO2 certification scheme, have
been provided by management on a one-to-one
basis for Directors throughout the year. Directors
also maintain their own individual non-executive
training schedule based on their areas of need
and interest and attended a variety of virtual
training events hosted by external providers.
There is an established procedure for Directors to
seek 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.
• end markets served by RHI Magnesita;
• driving market forces;
•
•
refractories industry;
recent corporate history and key corporate
subsidiaries;
• competitors and peers, and
• stakeholders such as employees, customers,
shareholders, regulators, and local
government.
They also met with the Chairmen of each Board
Committee to discuss the role of each Committee
and, where they were to serve on the Committee,
they took additional time with the Chairmen to
delve into the detail of the Committee, their role
on the Committee, recent topics and ongoing
discussions with management and key areas of
focus. Where new Directors joined a Committee,
they also met key management associated with
that Committee to discuss the operational detail,
history to topics, and structure beneath the
Committee. For example, on joining the Audit &
Compliance Committee, Jann Brown met with
the Finance leadership team covering topics such
as the Company’s tax structure, foreign exchange
hedging strategy, pensions, insurance, funding
structure, including trade finance, and an
overview of the Company’s control environment
The new Directors received access to the Board
portal, containing key constitutional documents,
corporate policies, historic meeting papers,
minutes, and reports.
They also met with the Company Secretary to
discuss their duties as Directors, the Company’s
corporate make-up, listing requirements in
London and Vienna, disclosure requirements and
corporate governance matters pertinent to the
Company. She also covered Board processes and
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
7 7
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION In the meetings, the Chairman takes care to
ensure that each Director has opportunity to
comment and be heard, whilst enabling an
orderly flow.
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 discuss the Chairman’s performance
in the course of the year, with input also provided
from the Board review. The Chairman and other
Non-Executive Directors hold regular informal,
individual, meetings with the Executive Directors
and other senior managers in the business,
providing the opportunity to raise questions and
cover points of interest, which contributes to the
development of both the Non-Executive Director
and the management members.
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 Chairman is
assisted in this responsibility by the Company
Secretary and CEO through the careful
preparation of agendas and the timely provision of
papers to the Board. The management team
continues to take feedback from the Board via the
review 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.
The Board takes the views of its key stakeholder
groups into account when challenging
management, and in its discussions and
decision-making. Inputs to this process include
the Company’s Net Promoter Score, employee
engagement surveys, the Employee
Representative Directors’ views, regular Investor
Relations reports, analyst coverage and views of
the two Non-Independent Non-Executive
Directors who represent shareholders on the
Board.
Corporate governance statement
continued
procedures, with reference to Board policies, the
Matters Reserved and Board Rules.
Board attendance 2021
Total
attended
Total meetings
eligible to attend
All of these induction sessions took place via
video call and the feedback from the new
Directors was very positive.
In addition, the Remuneration and Nomination
Committees welcomed new members who were
already on the Board. These new members were
offered inductions specific to the Committee;
each received access to all the historic
Committee documents and met with key
members of management to understand the
details of ongoing matters at the Committees.
Additional external training on remuneration was
provided to give an overview of stakeholder
expectations, regulations and market practice.
The Committee Chairmen made time available to
discuss the key relationships, stakeholder views
and recent decisions taken. Finally, each new
joiner attended meetings from January 2021
onwards as observers, prior to their membership
commencing from the June 2021 AGM. This
allowed them to be fully briefed and cognisant of
the Committee matters and its mode of operation.
Board attendance
Seven Board meetings were planned for the year
(2020: seven), with certain matters approved by
circular resolution outside of Board meetings
where three meetings held at short notice on
specific items. Given the increased travel
restrictions, the Board meetings were held largely
via videoconferencing facilities in 2021 and the
Board made use of various digital tools to facilitate
the meetings, building on feedback from the
2020 Board review to improve the experience for
Directors.
The table below shows the number of scheduled
meetings attended and the maximum number of
scheduled meetings which the Directors were
eligible to attend. Jann Brown, Marie-Hélène
Ametsreiter and Sigalia Heifetz were invited to
attend meetings from April onwards as observers
until they were appointed by the AGM as
Directors. The meetings where they were
observers are included in the following table.
Only in exceptional circumstances would
Directors not attend Board and Committee
meetings. None of our Non-Executive Directors
have raised concerns over the time commitment
required of them to fulfil their duties and the
Nomination Committee considered the time
required of Non-Executive Directors as part of its
regular programme.
Herbert Cordt
John Ramsay
Stefan Borgas
Ian Botha
Janet Ashdown
David Schlaff
Stanislaus Prinz zu
Sayn-Wittgenstein-
Berleburg
Fiona Paulus
Jann Brown2
Karl Sevelda
Marie-Hélène Ametsreiter2
Sigalia Heifetz2, 3
Wolfgang Ruttenstorfer
Karin Garcia2
Martin Kowatsch2
Michael Schwarz
Celia Baxter2
Andrew Hosty2
7
7
7
7
7
7
7
7
5
7
5
3
7
0
0
7
4
4
7
7
7
7
7
7
7
7
5
7
5
5
7
0
0
7
4
4
1 In the year, three 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 These persons were only Directors for part of the year. For those
appointed, it includes meetings where they were observers.
3 Sigalia Heifetz had to undergo medical treatment and is now
fully recuperated.
Board operation
The Board meets regularly throughout the year
with seven Board and Committee sessions, which
are usually spread over two days, in person in
Vienna. Board meetings can also be convened as
deemed necessary by the Chairman or the Senior
Independent Director and Deputy Chairman.
There was one meeting in 2021, where the
majority of the Board were together in person. The
remainder were held through a combination of
in-person attendance and video conferencing.
Technology and equipment were developed
wherever possible to achieve the best outcomes
for attendees in the circumstances and optimise
the input from individuals. The structure of the
meetings was adjusted to address the needs of
those attending on video conference and
wherever in-person meeting was permitted
under local guidelines, relevant health and safety
measures were abided by, such as masks,
temperature checks, social distancing, ventilation
of the rooms, vaccination passes and COVID-19
testing.
7 8
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Markets and sales
• Received updates at each meeting on sales
performance, market share and progress
against sales initiatives, particularly with
reference to customers and the impacts from
COVID-19.
• Considered product pricing and costs of
production.
• Received reports on recycling and digital
initiatives designed to meet customer
expectations and develop the Company’s
offering.
The Board recognises the importance of
balancing stakeholder views, whilst acting in the
best interests of the Company. In the event of a
decision which has a potentially negative impact
on a specific stakeholder group, efforts are made
to mitigate these. As an example, in the event of
an organisational restructure, which does not
benefit certain employees, a transparent
communications strategy is implemented to
explain the decision and employee are treated in a
respectful and generous manner. This aligns with
the Company values to be open in decision-
making and accountable for actions taken. See
the stakeholder engagement report on pages 50
to 55 for more examples of this.
The Board review in 2021, which comprised
reviews of the Board, its Committees, the
Chairman and individual Directors’ self-
evaluation, confirmed that the Board was
functioning effectively and more detail on the
Board review process and outcomes can be found
on page 88.
Key areas of Board focus and activity in
2021
Amongst other matters, the Board focused on the
following areas in the year:
Group strategy
• Annual two-day strategy meeting session with
members of the EMT and senior management
teams to examine the current strategy and
ensure it was fit for purpose. As part of these
discussions, the Board considered the global
outlook of economic recovery and
macroeconomic trends, developments in key
markets in each region, structural trends,
technical innovation, review of the business
model, and the competitive environment for
each region and product area.
• As part of the strategy session, undertook risk
management workshop aligned with the
strategic opportunities and focused break-out
sessions on future opportunities and current
position of topics such as the European steel
markets and digitalisation.
• Received reports throughout the year
outlining potential business development
opportunities as they arose, including strategic
M&A.
• Approved disposals and acquisitions.
• Considered geopolitical and macro-
economic trends and factors.
• Progress against the 2025 strategy, through
consideration of a strategic initiatives
dashboard, and discussed the execution of the
strategy and any associated barriers.
People, succession and leadership
• Board composition, appointing three new
NEDs and receiving two ERDs.
• Reviewed Board Committee membership and
received updates from the Nomination
Committee, including the recommendation
for a refreshed Board diversity policy.
• Considered the executive management and
CEO succession plans and related actions.
• Considered the 2021 internal Board review
and the actions relating to the review,
including progress against the actions
identified in the year. See pages 88 to 89for
further details.
• Reviewed and approved the bonus for 2020
performance and the remuneration of the
Chairman, Executive Directors and EMT.
• Discussed retention, performance and
resourcing and recommendations made to
management in respect of training,
incentivisation and external support.
• Discussed employee engagement, morale
and wellbeing, particularly in respect of the
impact of COVID-19 pandemic.
Financial performance
• Approved the annual budget for 2021.
• Reviewed and approved the Group’s full-year
2020 and half-year 2021 results together with
the 2020 Annual Report, including ensuring
that it is fair, balanced and understandable
and confirming that the Group was a going
concern. As part of this, the Board considered
the external auditor’s reports and the key
matters raised.
• Received regular financial updates covering
revenue, costs, performance year-to-date,
and outlook on a monthly basis.
• Reviewed the Group’s debt, capital and funding
arrangements, particularly in respect of
ensuring the ability to take advantage of any
opportunities as they arise. Approved entry into
an ESG ratings-linked financial instruments.
• Reviewed liquidity, cash flow and scenario
planning, particularly with reference to the
impact from COVID-19 and macro factors
such as inflation, supply chain issues, and
political changes in China requiring careful
management of inventory.
• Considered capital allocation and payment of
dividends, including the approval of the
interim dividend and the share buyback.
• Considered disclosures to the market and
noted the work of the Disclosure Committee to
continually monitor matters at hand.
• Appraised the principal risks, mitigating
actions and controls.
• Received updates on the Company’s tax
strategy and matters at hand with local
authorities in various locations.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
7 9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Corporate governance statement
continued
Operational performance
• Received updates at each meeting on
Stakeholder engagement and governance
• Approved the Notice and business of the
AGM.
• Received input from the Employee
Representative Directors on the Board.
• Considered the Company culture and reports
on the Company values.
• Received reports on investor engagement at
each Board meeting, including verbatim
feedback, the discussions held as part of the
annual roadshow, and the detailed perception
study.
• Received presentations on diversity, and
sustainable supplier processes.
• Approved the statement for the Modern
Slavery Act and California Transparency in
Supply Chains Act.
• Received report on customer satisfaction
levels, including Net Promoter Score.
• Reviewed remuneration of senior
management, the Executive Directors and the
Group-wide bonus scheme on
recommendation from the Remuneration
Committee.
• Received regular updates on corporate
governance and other matters from the
Company Secretary, including reviews of any
potential conflicts of interest.
operational performance, including any
impacts to customers and current health and
safety compliance levels.
• Received briefings on operational projects,
including project management, business
cases for payback, timescales, and any barriers
to completion.
• Considered individual plant performance and,
with reference to the Company’s strategy and
impacts from COVID-19, noted management’s
decisions to pause production at plants as
required.
• Received frequent reports on supply chain
disruption, the task force set up to address the
issues and considered management’s
proposals to improve performance across the
value chain.
Technical innovation and sustainability
• Considered the budget dedicated to R&D and
particularly the costs of feasibility studies.
• Received updates on the development of
low-carbon products and market
developments in carbon capture and storage.
• Considered future strategy, partnerships with
external parties, and processes to encourage
innovation.
Legal and compliance matters
• Received regular updates on whistleblowing,
including an annual review of the process.
• Received the Code of Conduct compliance
report.
• Received updates on the Group’s compliance
and cyber security programmes.
• Considered compliance reports, and also
received a benchmarking report on the
number of compliance cases compared with
peers.
• Received updates on any legal developments
as they related to the Company.
• Considered and approved revised share
dealing and inside information policies,
Matters Reserved to the Board, the associated
Delegation of Authority matrix, and Board
Rules.
Board review
In 2021, the Board considered the externally
facilitated 2020 Board review and the progress
against actions. Whilst COVID-19 continued to
hamper Board activity, progress was made with
new appointments to the Board, increasing
diversity and digital expertise, and with the inputs
to the Board, including updates to Directors on
key topics in between meetings and more
information to the Board on sustainability and
stakeholder groups made available. Time
management in meetings and quality of papers
was also felt to have improved, as well as the
effectiveness of remote meetings through
introduction of better equipment to facilitate the
hybrid meetings.
As outlined in the Chairman’s introduction, in
2021 the Board decided to conduct an internal
Board review, facilitated by the Company
Secretary. The Board members completed a
comprehensive review on the overall Board
performance, the Chairman and their own
individual performance in 2021. The review
covered core areas of the Board and Committee
performance, with particular focus on:
• Board composition and diversity;
• stakeholder oversight;
• culture and execution of strategic goals;
• Board dynamics, communication and
cohesion;
• Board support, effectiveness of remote
meetings, meeting management and focus;
• Board Committee effectiveness;
• support and challenge of the EMT, quality of
discussion, and relationships between
Directors and management;
• strategic oversight and discussion;
•
risk management and internal controls; and
• succession planning, talent management and
human resource management.
The review also included questions on the
ongoing response to COVID-19 pandemic and
the impact on risk management.
The Board considered the themes and output
from 2021 review (with outcomes discussed in the
Nomination Committee report on page 88) and
was pleased to note that, even with the impacts
felt from COVID-19 restrictions, the Board was
assessed as having maintained or improved its
performance from 2020. An action plan, aligned
to the outcomes of the 2021 review, to drive
further progress through 2022 has been drawn
up and progress will be reported in the 2022
Annual Report.
8 0
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Statement of Directors’ responsibilities
The Directors are responsible for preparing the
Company’s Annual Report. The Company’s
Annual Report comprises, among others, the
Strategic Report, the Governance Report, the
Consolidated Financial Statements. The Directors
are responsible for preparing the Annual Report
for each financial year in accordance with
applicable law and regulations, including 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 Company and its consolidated Group
companies 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, 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.
Each of the Directors, whose names and functions
are listed on pages 82 to 85, 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
its consolidated Group companies and
includes a description of the principal risks and
uncertainties that the Company faces; and
• having taken all matters considered by the
Board and brought to the attention of the
Board during the financial year into account,
the Directors consider that the Annual Report,
taken as a whole is fair, balanced and
understandable. The Directors believe that
the disclosures set out in the Annual Report
provide the information necessary for
shareholders to assess the Company’s
position, performance, business model and
strategy.
After conducting a review of management
analysis, the Directors have reasonable
expectation that the Group has adequate
resources to continue in operational existence for
the foreseeable future. For this reason, the
Directors consider it appropriate to adopt the
going concern basis in preparing the Annual
Report. Directors are also required to provide a
broader assessment of viability over a longer
period which can be found on pages 43 and 44
(the “Viability Statement”) of the integrated report
and accounts. The consolidated financial
statements on pages 126 to 203 were approved
and signed by the Board on 27 February 2022.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
8 1
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Board of Directors
1
6
2
7
3
8
4
9
5
10
11
12
13
Employee Representative Directors
14
15
16
8 2
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Chairman
Senior Independent Director
and Deputy Chairman
Chief Executive Officer
Chief Financial Officer
1. Herbert Cordt
Chairman
N
2. John Ramsay
Independent Non-Executive Director
A N
3. Stefan Borgas
Chief Executive Officer
4. Ian Botha
Chief Financial Officer
Appointment date: June 2017
Nationality: Austrian
Appointment date: October 2017
Nationality: British
Appointment date: June 2017
Nationality: German
Appointment date: June 2019
Nationality: South African/British
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. 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
the University of Vienna, graduated from
the Diplomatic Academy of Vienna and
received a Master’s of Science degree in
Foreign Service from Georgetown
University Washington D.C.
Current 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’s School of Foreign Service for
its MSFS Program (Advisory Board
Member).
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.
Current external appointments:
Koninklijke DSM N.V. (Supervisory
Board Member), Croda International plc
(Non-Executive Director, Chair of Audit
Committee) and Babcock International
plc (Non-Executive Director).
Stefan’s career has focused on business
transformations. He 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 has a business administration
degree from the University
Saarbrücken and an MBA from the
University of St. Gallen-HSG.
Current external appointments:
Afyren SAS (Chairman) and
Borgasadvisory GmbH (owner).
Ian 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.
Current external appointments: none.
Board Committee member
N
A
S
R
Nomination Committee
Audit & Compliance Committee
Corporate Sustainability Committee
Remuneration Committee
Chairman of Committee
Directors
by length of tenure
Directors
by ethnicity
Directors
by age
Directors
by nationality
0-3
3-5
5-9
9+
6
2
1
4
White
Prefer not to say
Other ethnic groups
69%
23%
8%
40–49
50–59
60–69
70–80
8%
31%
38%
23%
Austrian
British
German
Israeli
South African / British
38%
31%
15%
8%
8%
As described in the Corporate Governance Statement, these statistics do not include the Employee Representative Directors.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
8 3
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Board of Directors
continued
Non-Independent
Non-Executive Directors
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 from 2001. He
has been a Supervisory Board member on
several “Stadtwerke” (municipality owned
utilities) as well as undertaking senior
executive roles, including CEO and CFO, in
the energy industry. He has deployed
industrial knowledge combined with
financial detail throughout his career, and
was an Investment Banking Director at
Deutsche Bank AG. Over the past five years
he has focused on private equity work in a
German mid-cap environment and also
engages in a broad range of asset
management activities in a family office
environment.
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).
Current external appointments: STUV
Steinbach & Vollmann Holding GmbH
(CEO).
6. David 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.
Current external appointments: M-Tel
Holding GmbH (Chief Investment Officer
and Joint Managing Director).
Independent Non-Executive Directors
7. Wolfgang Ruttenstorfer
Non-Independent Non-Executive Director
A
8. Janet Ashdown
Independent Non-Executive Director
S R
9. Fiona Paulus
Independent Non-Executive Director
S R
10. Janice “Jann” Brown
A
11. Karl Sevelda
R N
12. Marie-Hélène Ametsreiter
S
13. Sigalia Heifetz
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Appointment date: June 2017
Nationality: Austrian
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.
Current external appointments:
Flughafen Wien Aktiengesellschaft
(Supervisory Board member) and Erne
Fittings GmbH (Supervisory Board
member).
Appointment date: June 2019
Nationality: British
Appointment date: June 2019
Nationality: British
Appointment date: June 2021
Appointment date: October 2017
Appointment date: June 2021
Appointment date: June 2021
Nationality: British
Nationality: Austrian
Nationality: Austrian
Nationality: Israeli
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 and
resources sectors on various strategic
initiatives, including M&A, equity and
debt financings, and risk management.
Fiona has a BA in Economics from
the University of Durham.
Current external appointments: Interpipe
Group (Non-Executive Director),
Redcliffe Advice (Managing Director) and
Gleacher Shacklock LLP (Senior Advisor).
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 and sustainability matters.
Janet holds a BSc in Energy Engineering
from Swansea University.
Current external appointments:
Nuclear Decommissioning Authority
UK (Non-Executive Director and Chair
of Safety & Sustainability), Victrex
plc (Non-Executive Director, Chair
of Remuneration) and Stolt-Nielsen
Limited (Non-Executive Director).
Jann started her career with KPMG,
Karl progressed to CEO of Raiffeisen
Marie-Hélène has been a General
Sigalia served in the Israeli Air Force as
where she qualified as a Chartered
Bank International AG after being Deputy
Partner with Speedinvest, a leading
Operation Room Controller and Training
Accountant and a Chartered Tax Adviser,
CEO and undertaking management
European Venture Capital firm, since
Commander and later joined BDO. She
moving into industry in 1998 and since
roles in the Raiffeisen Bank group
2014. As the lead partner of the Industrial
was a member of professional
then has worked in a number of roles,
where he was responsible for corporate
Tech team, she drives seed stage
committees at the Israeli Institute of CPAs
both executive and non-executive,
customers and corporate trade and
investments in start-ups supporting the
until 1997, when she became a Partner at
primarily in the energy sector but also in
export finance worldwide. Prior to this
digitisation of Europe’s industrial sector,
BDO until 2003. Since 2008 Sigalia has
engineering services, manufacturing and
he held several senior management
including manufacturing, logistics,
provided consulting services to
investment management. As a result of
positions in Creditanstalt-Bankverein
construction and climate technology.
international investors. She holds
these roles, Jann has extensive
where he focused on corporate and
Before Speedinvest, Marie-Hélène was
non-executive directorships at a number
international business experience,
export finance. Additionally, he has held
responsible for the Corporate
of leading public corporations across a
particularly in India and the Middle East.
the position of Secretary to the Federal
Sustainability Program at OMV, a leading
range of sectors and industries. She
Her listed company board experience,
Minister for Trade and Industry of Austria.
Austrian oil and gas producer, and prior to
brings a wealth of international
that was CEO of the Croatian mobile
experience and geopolitical exposure,
Karl holds a Master’s and Doctorate
Degree from Vienna University
of Economics and Business.
telecom operator Vipnet. She has
extensive skills and experience in
sustainability, digitisation and
Current external appointments:
automation.
alongside solid business and financial
acumen.
Sigalia holds a BA in Accounting &
Economics from the University of Tel Aviv
both as an executive and a non-
executive, brings an awareness of the
importance of governance, culture and
strong ethics. She is an experienced
financial professional and is a Past
Accountants of Scotland.
Jann is a Chartered Accountant, and also
holds an Honours Degree in History from
Edinburgh University.
Current external appointments: Pharos
Energy plc (Managing Director), and ICAS
Foundation (Trustee and board member).
President of the Institute of Chartered
SIGNA Prime Selection AG (Supervisory
Board member), Liechtensteinische
Landesbank AG (Non-Executive
Director), and Custos Privatstiftung
(Management Board member).
Marie-Hélène graduated in Business
(Israel) and is a Certified Public
Administration from the Vienna University
Accountant. She has completed two
of Economics and studied at the
Executive MBAs with INSEAD (France)
University of California.
and Tsinghua (China).
Current external appointments:
Greyparrot.ai Ltd (Non-Executive
Current external appointments:
Plus500 Ltd (Non-Executive Director),
Director), Conundrum Industrial Ltd
Maman Cargo Terminals and Handling
(Non-Executive Director), AMODO, Inc.
Ltd (Non-Executive Director), Tamar
(Non-Executive Director) and
Petroleum Ltd (Non-Executive Director),
Speedinvest Deutschland GmbH
Clal Biotechnology Industries Ltd
(Managing Director).
(Non-Executive Director, including Clal
Industries and subsidiaries within the
group) and Vesta Investment and
Management Ltd (Owner).
Employee Representative Directors
14. Karin Garcia
Employee Representative Director
15. Martin Kowatsch
Employee Representative Director
16. Michael Schwarz
Employee Representative Director
Appointment date: December 2021
Nationality: Spanish
Appointment date: December 2021
Nationality: German
Appointment date: December 2017
Nationality: German
Karin studied at the University of Oviedo
and finished her degree in computer
science in 1994, specialising in systems
support. She started with the Group at
RHI in 1997, first working in the
commercial execution team and then she
transferred to the IT on-site support in
Oviedo as a Regional Site Service
Coordinator where she continues to work
as a senior site coordinator.
Karin has been appointed as an Employee
Representative Director by the Spanish
Works Council.
Current external appointments: none.
Martin has been with the Group since
1987 and is the Chairman of the works
council at the Flagship Digital Plant
Flagship in Radenthein. He is a trained
Company electrician, completed an
one-year Chamber of Labour/trade union
training, then studied education/group
dynamics and organisational
development.
Martin graduated from the Alpen Adria
University.
Martin has been appointed as an
Employee Representative Director by the
Austrian Works Council.
Current external appointments: none.
Michael has been with the Group since
1983 and is a member of the works
council at RHI Magnesita Deutschland
AG.
Michael has been appointed as an
Employee Representative Director by the
German Works Council.
Current external appointments: none.
8 4
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Independent Non-Executive Directors
Janet has had a distinguished career
Fiona has over 37 years’ global
working for BP plc for over 30 years,
investment banking experience, having
holding a number of international
held senior management roles with
executive positions throughout the
a number of leading international
value chain. Until the end of 2012,
investment banks, such as Credit Suisse,
Janet was CEO of Harvest Energy
Royal Bank of Scotland, Deutsche
Ltd and throughout her career has
Bank and Citigroup. During her career,
provided leadership through change.
Fiona has led and managed a variety
Janet also has a wide range of board
of global banking businesses, from
and committee experience as a Non-
start-ups to businesses with US$4
Executive Director, including the UK
billion in total revenues. Additionally,
Nuclear Decommissioning Authority,
Fiona has advised companies in over
a public body where she chairs the
70 countries in the global energy and
Safety and Sustainability Committee.
resources sectors on various strategic
Her experience in the energy sector
initiatives, including M&A, equity and
has provided her with significant skills
debt financings, and risk management.
in general management, particularly in
environmental and sustainability matters.
Janet holds a BSc in Energy Engineering
from Swansea University.
Fiona has a BA in Economics from
the University of Durham.
Current external appointments: Interpipe
Group (Non-Executive Director),
Current external appointments:
Redcliffe Advice (Managing Director) and
Nuclear Decommissioning Authority
Gleacher Shacklock LLP (Senior Advisor).
UK (Non-Executive Director and Chair
of Safety & Sustainability), Victrex
plc (Non-Executive Director, Chair
of Remuneration) and Stolt-Nielsen
Limited (Non-Executive Director).
8. Janet Ashdown
S R
9. Fiona Paulus
S R
Independent Non-Executive Director
Independent Non-Executive Director
10. Janice “Jann” Brown
Independent Non-Executive Director
A
11. Karl Sevelda
Independent Non-Executive Director
R N
12. Marie-Hélène Ametsreiter
Independent Non-Executive Director
S
13. Sigalia Heifetz
Independent Non-Executive Director
Appointment date: June 2019
Appointment date: June 2019
Nationality: British
Nationality: British
Appointment date: June 2021
Nationality: British
Appointment date: October 2017
Nationality: Austrian
Appointment date: June 2021
Nationality: Austrian
Appointment date: June 2021
Nationality: Israeli
Jann started her career with KPMG,
where she qualified as a Chartered
Accountant and a Chartered Tax Adviser,
moving into industry in 1998 and since
then has worked in a number of roles,
both executive and non-executive,
primarily in the energy sector but also in
engineering services, manufacturing and
investment management. As a result of
these roles, Jann has extensive
international business experience,
particularly in India and the Middle East.
Her listed company board experience,
both as an executive and a non-
executive, brings an awareness of the
importance of governance, culture and
strong ethics. She is an experienced
financial professional and is a Past
President of the Institute of Chartered
Accountants of Scotland.
Jann is a Chartered Accountant, and also
holds an Honours Degree in History from
Edinburgh University.
Current external appointments: Pharos
Energy plc (Managing Director), and ICAS
Foundation (Trustee and board member).
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.
Current external appointments:
SIGNA Prime Selection AG (Supervisory
Board member), Liechtensteinische
Landesbank AG (Non-Executive
Director), and Custos Privatstiftung
(Management Board member).
Marie-Hélène has been a General
Partner with Speedinvest, a leading
European Venture Capital firm, since
2014. As the lead partner of the Industrial
Tech team, she drives seed stage
investments in start-ups supporting the
digitisation of Europe’s industrial sector,
including manufacturing, logistics,
construction and climate technology.
Before Speedinvest, Marie-Hélène was
responsible for the Corporate
Sustainability Program at OMV, a leading
Austrian oil and gas producer, and prior to
that was CEO of the Croatian mobile
telecom operator Vipnet. She has
extensive skills and experience in
sustainability, digitisation and
automation.
Marie-Hélène graduated in Business
Administration from the Vienna University
of Economics and studied at the
University of California.
Current external appointments:
Greyparrot.ai Ltd (Non-Executive
Director), Conundrum Industrial Ltd
(Non-Executive Director), AMODO, Inc.
(Non-Executive Director) and
Speedinvest Deutschland GmbH
(Managing Director).
Directors serving part of the year
Franz Reiter
Employee Representative Director
Celia Baxter
Independent Non-Executive Director
Andrew Hosty
Independent Non-Executive Director
Appointment date: December 2017
Nationality: Austrian
Appointment date: October 2017
Nationality: British
Appointment date: October 2017
Nationality: British
Franz stepped down from the Board on
14 December 2021, and was replaced by
Martin Kowatsch.
As reported in the 2020 Annual Report,
Celia did not stand for re-election at the
June 2021 AGM
As reported in the 2020 Annual Report,
Andrew did not stand for re-election at
the June 2021 AGM.
Sigalia served in the Israeli Air Force as
Operation Room Controller and Training
Commander and later joined BDO. She
was a member of professional
committees at the Israeli Institute of CPAs
until 1997, when she became a Partner at
BDO until 2003. Since 2008 Sigalia has
provided consulting services to
international investors. She holds
non-executive directorships at a number
of leading public corporations across a
range of sectors and industries. She
brings a wealth of international
experience and geopolitical exposure,
alongside solid business and financial
acumen.
Sigalia holds a BA in Accounting &
Economics from the University of Tel Aviv
(Israel) and is a Certified Public
Accountant. She has completed two
Executive MBAs with INSEAD (France)
and Tsinghua (China).
Current external appointments:
Plus500 Ltd (Non-Executive Director),
Maman Cargo Terminals and Handling
Ltd (Non-Executive Director), Tamar
Petroleum Ltd (Non-Executive Director),
Clal Biotechnology Industries Ltd
(Non-Executive Director, including Clal
Industries and subsidiaries within the
group) and Vesta Investment and
Management Ltd (Owner).
Board Committee member
N
A
S
R
Nomination Committee
Audit & Compliance Committee
Corporate Sustainability Committee
Remuneration Committee
Chairman of Committee
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
8 5
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Executive Management Team
The EMT combines broad experience and
complementary skill sets to deliver the
Group’s strategic priorities.
1
5
2
6
3
7
4
Executive serving for
part of the year
8
8 6
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
1. Stefan Borgas
Chief Executive Officer
3. Gustavo Franco
Chief Sales Officer
5. Rajah Jayendran
Chief Operations Officer
2. Ian Botha
Chief Financial Officer
For full biographies, see
Page 83
Gustavo was appointed Chief Sales
Officer in January 2020, 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. Luis Rodolfo Bittencourt
Chief Technology Officer
Luis started working for Magnesita in 1986
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 the Brazilian
Refractory Producers Association and the
Latin America 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.
Rajah has held various senior operational
and strategic development roles at
multinational companies such as
Thyssen-Krupp Uhde GmbH, Bayer
MaterialScience AG, Lonza AG, and
ChemChina-Bluestar Group Co, working
in China, Singapore and Switzerland. He
has valuable experience in the industry in
Asia. He also has experience in renewable
solutions and operational performance
management. In 2018, Rajah became a
key team member at RHI Magnesita,
holding the position of Senior Vice
President Operations Europe/CIS/Turkey
until, in October 2021, he joined the EMT
as Chief Operations Officer (COO). Rajah
brings a detailed knowledge of the
Company’s global operations and
expertise in production efficiencies.
Rajah graduated in engineering from TU
– Ruhr-Universität Bochum.
6. Simone Oremovic
Executive Vice President People, Project
& Value Chain
Simone joined RHI Magnesita in an
executive capacity in November 2017,
and her role covers People, Culture,
Corporate Communications as well as all
global projects for the Group. 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. Her role since October
2021 covers People, Culture, Global
Projects for the Group as well as building
the new end-to-end Value Chain and
running the operational supply chain.
Simone has a degree from the European
Business School (Paris) and from the
Economic University of Vienna.
7. Ticiana Kobel
Executive Vice President Legal,
Corporate Communications
& Purchasing
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, the
service sector and engineering industries.
In these roles. She was in charge of
crucial projects pertaining to varied
matters, such as complex strategic
procurement, 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 the
Federal University of Minas Gerais and an
LLM in International Economic Law and
European Law at the University of
Geneva.
Executive serving for
part of the year
8. Gerd Schubert
Gerd served as Chief Operations Officer
until 1 October 2021 when he stepped
down from the Executive Management
Team to lead projects in the Company
focusing on sustainability and innovation
in manufacturing processes, prior to his
intended retirement.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
8 7
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Nomination Committee report
Committee purpose, roles and
responsibilities
The Committee’s purpose is to ensure that the
Company has the competencies and depth of
skills within the Board and senior executives to
meet the demands of a global business and to
support the development of the Group’s strategy,
whilst paying particular attention to
independence and diversity.
Roles and responsibilities:
•
review the structure, size and composition
(including the skills, knowledge, experience
and diversity) of the Board and its Committees
and to recommend any changes to the Board;
• succession planning for Directors and other
senior executives;
•
lead the process for recruitment of any
new Directors, including the Chairman,
and their recommendation to shareholders;
• assess annually the time commitment
required from Non-Executive Directors
(NEDs); and
•
review the results of the Board performance
review relating to composition of the Board or
the effectiveness of any individual Director.
More detail on the duties of the Committee can be
found in its Terms of Reference on the corporate
governance section of our website.
Activities in 2021
The Committee met four times in 2021, covering
the roles and responsibilities set out above and in
particular, the Committee considered the
following matters:
Time commitment from NEDs
The Committee considered, as it does annually,
the review of time required from the NEDs to fulfil
their duties satisfactorily. This covered meetings,
the preparation time, additional time Directors
spent outside of meetings in discussion with
management, and recognised the additional
complexity of Company operations, given the
impacts of COVID-19 and operational disruption.
No NED has raised any concerns about the time
requested of them.
Prior to recommending the new NEDs who
joined the Board in June 2021, the Nomination
Committee carefully considered their roles
held elsewhere, with reference to the
recommendations by proxy voting agencies
and the UK Corporate Governance Code, and
were satisfied they had sufficient time available
to dedicate to the Company.
The Board received a report outlining external
appointments held by Directors and were
comfortable that none of the Directors are
compromised by their other commitments in
the time they can dedicate to the Company.
Board review
The Committee takes responsibility for the
preparation of the annual Board reviews. In 2021,
following three years of external reviews
facilitated by Lintstock, the Board review was
undertaken internally, and the Company
Secretary worked closely with the SID & Deputy
Chairman to prepare the questionnaires, covering
Board performance, individual performance, and
the Chairman’s performance.
Herbert Cordt
Chairman of the Committee
Committee members and
meeting attendance
Attendance
in 2021
Member
since
Herbert Cordt
(Chairman)
Celia Baxter
John Ramsay
Karl Sevelda1
4/4 October 2017
3/3 October 2017,
resigned
June 2021
4/4 October 2020
1/1
June 2021
1 Karl Sevelda was appointed to the Committee
from 10 June 2021. He was present at meetings
from the beginning of 2021 as an attendee.
The Committee has
delivered greater Board
diversity in 2021 and
continues to consider
how the considerable
skills and experience
now available on the
Board are best used
to guide and help
management to achieve
their strategic ambitions.
8 8
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Succession planning
EMT succession planning
The Committee monitors the development of the
executive team (“EMT”) below the Board to ensure
that there is a diverse supply of senior executives
and potential future Executive Directors with
appropriate skills and experience.
The Committee considers the skills and
experience of individuals at different levels
in the organisation with an indication of their
expected time to develop to the next level, and
requirements in order to achieve that progression,
such as experience of a different business
function or additional training. Furthermore, it
considered how succession planning would be
treated in different scenarios (e.g. in an immediate
scenario or in an orderly fashion). A summary
of this was provided to the Board for its
consideration. Diversity is considered as part of
succession planning, and management are
encouraged to incorporate tools and measures
to further generate and encourage diversity in
the pipeline of the organisation. The decrease in
gender diversity of the direct reports of the EMT
and the associated causes has been noted and
in Board discussions, management have been
encouraged to refocus their efforts in order to
drive progress in 2022. Information on the gender
diversity of the EMT and its direct reports is on
page 65.
During 2021 Gerd Schubert stepped down from
his role as COO and Rajah Jayendran succeeded
him. This was part of an orderly succession plan,
with Gerd retiring in due course.
The Board considered the overall themes arising
from the 2021 review and each committee then
reviewed the specifics of the evaluation relating
to the respective committees and their scope
of work. Actions were agreed as required.
The findings of the 2021 review still showed
significant impacts arising from COVID-19
restrictions; as no doubt was the case for
other international Boards. Board members
regretted the absence of meeting colleagues
within the organisation and getting a sense for
the operational culture on a regular basis. In
September 2021 a Board site visit was achieved
and the feedback showed how valuable a visit
this had been. The intention is to continue
physical meetings as much as possible in
2022. Nonetheless, despite the limitations on
personal interaction, the responses showed
a feeling of greater cohesion compared to
2020 and the Chairman’s role in generating
this was appreciated.
During the year a significant advance was made
in Board diversity, with the appointment of three
new female NEDs in June 2021. Progress was also
seen in the integration of sustainability within the
operations and strategy of the Company, albeit
with more to be achieved in future, given the
importance of sustainable production for the
Company’s stakeholders.
The Board agreed actions for the year ahead,
with a view to further improving its effectiveness.
Key points considered included:
Area of
assessment
Stakeholder
oversight
Delivery of the
2025 strategy
Board papers
Board skills
Culture
Agreed action
Continue to explore ways of
understanding stakeholder views more
comprehensively and incorporate them
into decision making.
Sustained focus in Board discussions on
execution of strategy, particularly
around ensuring lessons learned and
engaging with constructive criticism.
Further focus on style and structure of
papers; consideration of improvements
in the Board paper portal.
More structured ongoing training
sessions for NEDs, to further both
professional development and industry
knowledge.
Maintaining Board oversight of
Company culture and continuing to
take opportunities to experience the
culture.
The Board was satisfied to see sustained
improvement in Board effectiveness since listing
in 2017, with its members unanimously agreeing
that discussions and debates were open, honest
and constructive, whilst continuing to hear ideas
for improvement and more varied perspectives
from its new members.
The Committee also considered its own
effectiveness arising from the Board review
output. This concluded that the performance of
the Committee continued to be effective but
needed to engage the full Board earlier on
emerging issues.
Board diversity
The Committee and the Board have dedicated
time in the annual schedule to discussing diversity,
both at Board level and within the organisation.
Board gender diversity has increased to 38%,
exceeding our target of 33% by 2021, and the
Board adopted a formal Board diversity policy,
which was recommended by the Committee
which was recommended by the Committee.
Furthermore, half of the Board Committees are
chaired, or the seats filled, by women.
The Company reported to the Hampton
Alexander Review and Parker Review in
respect of 2021, meeting each of these reviews’
recommendations for FTSE250 boards. As
discussed in the Corporate Governance Report
the Employee Representative Directors, being
appointed by the workforce with no input by
the Board or shareholders, are not able to be
influenced in terms of appointment. Therefore,
the Board’s view is that it is inappropriate to
include them in any calculation of Board diversity.
Nonetheless, the Board were pleased that the
nomination from the Spanish works council was of
a female Director and welcomed Karin Garcia to
the Board in December 2021.
The Committee and the Board will continue to
support the Company’s approach in facilitating
people development, ensuring that talent,
regardless of age, gender and background, enjoys
career progression within the Group. Diversity of
nationality, culture and ethnicity are all important
factors to engender diversity of thought.
The Committee believes that the diversity of
nationalities and culture represented amongst
the Board and EMT provides a diverse and global
perspective; 43% of the EMT are of Brazilian
heritage, representing our legacy as a Company
and the spread of our operations. More details
on the Group’s diversity and inclusion work can be
found on page 23.
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8 9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION The Nomination Committee ensured that the
refreshment of Board Committee composition
made use of our Directors’ skill sets and
experience. The induction plans provided gave
opportunity for greater understanding of these
areas and the Committees are benefiting from
fresh perspectives.
The membership of Board Committees can be
seen on pages 83 to 85.
Herbert Cordt
Chairman of the Committee
Nomination Committee report
continued
In 2021, the Committee also considered, with
reference to Board composition, the impact of the
change in ERDs, nominated to the Board by the
workforce, and how the Company could support
their induction and contributions to the Board.
Additionally, the Committee considered the
independence of the Board directors, as outlined
in detail on page 75.
On an ongoing basis, the Committee considers
the tenure of Directors with reference to the
retirement and resignation profile, which can be
found on the website. In thinking about future
recruitment to the Board, the Committee
continues to monitor Directors’ skills and
experiences, as well as diversity to engender
constructive debate and a varied mix of ideas.
The Board profile is published on the website:
https://ir.rhimagnesita.com/wp-content/
uploads/2022/01/bod-diversity-policy-for-
upload.pdf
As of June 2021 there were the following changes
in Board Committee composition:
• Janet Ashdown became Chairman of the
Remuneration Committee
• Fiona Paulus became a member of the
Remuneration Committee, stepping down
from the Audit & Compliance Committee
• Jann Brown joined the Audit & Compliance
Committee
• Marie-Hélène Ametsreiter became a member
of the Corporate Sustainability Committee
• Karl Sevelda joined the Nomination
Committee
As a result of the supply chain focus required
in the year, the EMT, supported by the Board,
took steps to reorganise the allocation of
responsibilities to ensure due time and attention
could be dedicated to these priorities. Ticiana
Kobel took on additional responsibilities of
Corporate Communications and Purchasing,
which aligned with her skill set and experience
and streamlined the Operations Department
scope. Simone Oremovic used her project
management skills to build a focused taskforce
to address immediate issues within the supply
chain. This provided great opportunity for
widening their experience within the Company
and the organisation has benefited from their
fresh perspective on matters.
Board succession planning and composition
Since the Committee last reported to
shareholders, Andrew Hosty and Celia Baxter
stood down from the Board at the end of their
three-year term at the June 2021 AGM, and
three new Non-Executive Directors were
recommended by the Committee to the Board
to be appointed by shareholders, three Non-
Executive Directors Jann Brown, Marie-Hélène
Ametsreiter and Sigalia Heifetz. The appointment
process started with a clear scope of desired
attributes, skills and experience. A range of
candidates were considered, and in order to make
a selection, a shortlist proceeded through a
thorough interview process, with a number of
different Directors, and detailed references. The
Committee were aided in the comprehensive
search by Egon Zehnder, signatory to the
Voluntary Code of Conduct for Executive Search
Firms. Egon Zehnder has no other connection to
the Company or individual Directors.
The Committee considers the succession
planning for the CEO and CFO on an ongoing
basis, both on the basis of immediate and orderly
succession. The development of internal
candidates for these roles is considered by the
Committee and the Board.
9 0
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Corporate Sustainability
Committee report
Committee purpose, roles and
responsibilities
The role of the Corporate Sustainability
Committee is to support the Board and act as
an advisory body to ensure the long-term
sustainability of the business.
• Through the oversight of relevant KPIs and the
Group’s performance against them, the
Committee ensures that the Group’s activities
generate sustainable value, not only for
customers and shareholders, but also for
employees, suppliers and communities
wherever the Group operates.
• On behalf of the Board, the Committee
oversees the effective management of risks
associated with climate change, health and
safety, along with other ESG risks.
More detail can be found in the Terms of
Reference in the corporate governance section
of our website.
Health & Safety
• Received reports on the company’s COVID-19
related safety protocols
• Considered safety performance at operational
sites for both employees and contractors.
After a decade of consistent improvement,
our safety performance deteriorated slightly
in 2021. Root causes for this were considered
and management were challenged to
deliver improvements
Diversity
• Received reports on the Group’s strategy
to improve diversity in its leadership
and workforce
• Monitored progress against diversity targets
Sustainable Supply Chain
• Reviewed a new sustainable procurement
initiative to assess suppliers using
environmental, social and ethical criteria
Activities in 2021
External ESG ratings
The Corporate Sustainability Committee (CSC)
met four times in 2021. In addition to performing
the duties listed above, the Committee addressed
the following issues:
Climate Change
• Reviewed progress against RHI Magnesita’s
CO2 emissions intensity reduction targets and
the Group’s €50 million investment in carbon
capture technologies; reviewed opportunities
to reduce customer CO2 emissions
The Committee was pleased to note that
RHI Magnesita received another industry-
leading score from CDP and a Gold rating from
EcoVadis, amongst other positive ratings from
independent analysts.
• CDP – B
• EcoVadis – Gold
• MSCI – AA
• Sustainalytics – medium
• Noted that the increased use of renewable
electricity and progress of energy efficiency
projects, which remain on track
More information on our performance and
approach to sustainability issues can be found
on pages 56 to 59.
• Monitored the increased use of secondary raw
materials, including a new internal pricing
mechanism to incentive sales of products with
higher recycled content
• Took part in a joint CSC and Audit Committee
TCFD workshop and approved the Group’s
first comprehensive TCFD disclosure
Janet Ashdown
Chairman of the Committee
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
9 1
Janet Ashdown
Chairman
Committee members and
meeting attendance
Janet
Ashdown
Fiona Paulus
Marie-Hélène
Ametsreiter1
Andrew Hosty2
Attendance
in 2021
Member
since
4/4
June 2019
4/4
2/2
June 2019
June 2021
2/2 June 2019 to
April 2021
1 Marie-Hélène Ametsreiter was appointed to
the Committee following the 2021 AGM.
2 Andrew Hosty resigned as a Director and
ceased to be a Committee member at the
2021 AGM.
RHI Magnesita improved
its CO2 emissions
intensity in 2021
through the increased
use of secondary raw
materials and renewable
electricity. This year we
have published our first
comprehensive TCFD
disclosure, setting out
the climate related risks
and opportunities for our
business.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Audit & Compliance
Committee report
Committee purpose, roles and
responsibilities
The purpose of the Committee is to ensure the
integrity and transparency of corporate reporting,
the quality of work and independence of the
external auditor and to evaluate the robustness of
internal controls and risk management processes.
The Committee’s main roles and responsibilities
are:
• advising the Board on the Group’s overall risk
appetite, tolerance, current risk exposures and
future risk mitigation strategy;
• supervising the recording, management and
submission of financial information by the
Group and advising the Board on whether,
taken as a whole, the reported financial
information is fair, balanced and
understandable;
• 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 relationship with the external
auditor, including in particular, assessing its
independence, effectiveness, remuneration
and non-audit related work for the Group;
• supervising the compliance with
recommendations and observations of the
internal auditor and the external auditor;
• supervising the financing of the Group and
the policy of the Group on tax planning;
•
•
reviewing the adequacy and effectiveness
of the Group’s Compliance function; and
recommending the appointment of an
external auditor by the Annual General
Meeting (AGM).
More detail on the duties of the Committee can be
found in the Terms of Reference on the corporate
governance section of our website.
Activities in 2021
The Committee met six times in 2021. Due to
COVID-19 limitations video conferencing was
used for some members and attendees during
these meetings.
Discussions at the meetings covered the
responsibilities outlined above, with a particular
focus on the continued impact of COVID-19 on
the risk profile of the Group, the emerging issues
relating to supply chain, the effectiveness of
end-to-end business processes and other issues
arising in 2021.
The Chairman, the Chief Financial Officer, the
Head of Financial Reporting, the Head of Internal
Audit, Risk and Compliance, the General Counsel
and the External Auditor attend the Committee
meetings and the Company Secretary acts as
Secretary to the Committee. Board members can
attend at their discretion; the Chief Executive
Officer typically attends each meeting and other
Company executives are invited to attend for
specific agenda items. The Chairman of the
Committee has had regular private discussions
with the External Auditor, the Head of Internal
Audit, Risk and Compliance and the Chief
Financial Officer during the year.
Specific areas of scrutiny for the
Committee in 2021 included:
Review of Going Concern Statement
and Scenario Modelling
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 the debt covenant in future
years. The Committee assessed the forecast
levels of net debt, headroom on existing
borrowing facilities, compliance with the debt
covenant and the debt maturity profile. This
analysis covered the period to 31 December 2023
and considered a range of downside sensitivities,
including the impact of lower production volumes
and higher costs. In these discussions the
Committee sought the opinion of the External
Auditor and ensured that the External Auditor
challenged management sufficiently on the
breadth, depth, and variety of scenarios, as well as
sought confirmation that sufficient substantiation
to the key assumptions in the scenarios was
validated. The Committee concluded it was
appropriate to adopt the going concern basis.
John Ramsay
Chairman of the Committee
Committee members and
meeting attendance
John Ramsay
(Chairman)
Jann Brown
Wolfgang
Ruttenstorfer
Fiona Paulus
Attendance
in 2021
Member
since
6/6 October 2017
3/3
June 2021
6/6 October 2017
3/3
September
2019 to June
2021
The Committee
effectively delivered
review, insight and
challenge to respond
to the demands of
2021 and ensure the
continued improvement
of corporate
governance standards
within the Group
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R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
The Committee received a series of risk and
financially based updates on the supply chain
and related challenges in 2021. The Committee
posed a series of questions to examine the
impact on the results in 2021, the internal control
framework improvements prompted by these
events and the extent to which these events
were included in future modelling scenarios.
Alternative performance measures:
Adjusted EBITA and Adjusted EPS
RHI Magnesita continues to use a number of
alternative performance measures (“APMs”),
which reflect the way in which management
assesses the underlying performance of the
business.
Read more about APMs on
Page 211
The Group’s APM policy defines criteria for
calculation of Adjusted EBITA and Adjusted EPS.
The Committee considered both the overall
policy and the use of each APM, as well as the
impact that they may have on the clarity and
understandability of the financial statements
together with regulatory positioning on such
reporting. The Committee enquired as to any
investor feedback received by Management on
the use of APMs. A robust discussion led by the
Committee reviewed each of the adjustments
made in Adjusted EBITA and Adjusted EPS and
concluded that their use is appropriate.
Benchmarking and Stakeholder feedback
on the financially-based end-to-end
Company processes
The Committee received a comprehensive
report encompassing external perspectives
and feedback from internal stakeholders on
the performance of financially based processes
within the Company. The Committee engaged
in a discussion with Management on the issues
raised and the options considered for delivering
the cross-functional improvements identified.
The Committee endorsed the Management plans
and will monitor the delivery of the actions
through 2022 and beyond.
Impact of the increased level of regional
based governance
The Committee held a detailed discussion
with Management over the governance
approach being delivered in each of the regions
within the Company. The Committee received
observations from Internal Audit, Risk &
Compliance comparing the governance
performance across the regional footprint. The
Committee sought to understand the history,
capability levels and plans to develop the regional
governance structure. The resultant discussions
led by the Committee highlighted that the
regionalisation activity had started from different
base points in each region and been subject to
different COVID-19 impacts. The Committee
challenged Management on the root causes
presented to explain the variation in governance
performance across the regions.
Tax strategy
The Committee dedicated significant focus in
2021 to the review and challenge of the tax
strategy. The Committee received updates
through 2021 as the tax strategy evolved, actions
were executed and Management outlined the
responses to the continuing engagement with
the Austrian and Netherlands tax authorities.
The Committee considered the risks of the tax
strategy, the effectiveness of actions being
executed and encouraged insight from the
External Auditor. The Committee endorsed the
tax strategy as presented at each meeting and will
continue to monitor the progress of the projects
impacting the tax position.
Information security risks
The Committee continued to give high focus to
information security risks, particularly as specified
in the Dutch Corporate Governance Code. Cyber
and information security risk is included amongst
the Group’s principal risks on pages 44 to 49.
Multiple presentations were received by the
Committee to both inform the Committee of the
emerging risks and outline the internal controls.
The Committee gave specific attention to the
results of “phishing” tests and the measures taken
by Management to improve awareness levels
amongst staff of this risk. The Committee
requested a greater insight into the Company
Crisis Management plans and their application to
any information security risk based incident.
Compliance programme
The Committee reviewed and challenged the
annual Compliance programme as presented by
Management. The Committee sought to ensure
that the Compliance programme remains fresh
and that the volume of material is comprehensive
whilst also being succinct to have impact and
make an efficient use of Management time.
The Committee enquired how the Compliance
activity is benchmarked and the basis on which
the success of Compliance activities is measured.
Compliance with Market Abuse
Regulations (MAR)
The Committee reviewed the completion
of internal trainings on MAR and sought
explanations from Management for the
regional variation in training completion levels.
Management outlined broader actions to promote
Compliance (including training completion).
Treasury and foreign exchange risk
management
The Committee reviewed the treasury policy and
made enquiries of Management in relation to the
funding options to support the Company strategy
delivery.
Insurance strategy
The Committee reviewed the Insurance strategy
and continued to monitor the plans for a captive
insurance scheme.
Pension scheme liabilities
The Committee received an update on the status
of the various pension schemes in geographies
across the Group and specific updates on the
funding and liabilities of the schemes. Following
discussion, the Committee gave positive feedback
on the quality of the information produced, the
management of the pension schemes and the
future actions proposed by Management.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
9 3
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Audit & Compliance
Committee report
continued
Response to Consultation on “Restoring
trust in corporate governance and audit”
The Committee and Management jointly
prepared the Company response to the UK
Department of Business, Energy and Industrial
Strategy (“BEIS”) consultation exercise on the
white paper “ Restoring trust in corporate
governance and audit“. While supportive of
the general principles contained within the
paper, the discussions with the Committee
and Management and the subsequent
response submitted highlighted some
practical implementation concerns and
some cost burdens for companies.
Core Committee activity performed in
2021 included:
Whistleblowing programme
The whistleblowing programme, which is
monitored by the Committee and overseen by
the Board of Directors, is designed to enable
employees, customers, suppliers, managers,
or other stakeholders to raise concerns on a
confidential basis where conduct is deemed to
be in violation of our Code of Conduct or contrary
to our values.
The Committee discussed with management the
broadly static level of whistleblower reports
received in 2021 compared to 2020. The wide
range of topics raised in these reports and the
large geographical spread of the reports were
observed by the Committee. Management
described that the majority of the reports arise
from Brazil (as in previous years) where employees
typically prefer to use the whistleblowing
programme to raise Human Resources related
concerns.
The Committee made enquiries of management
in relation to the reports received on the
whistleblowing programme in order to conclude
its effectiveness during 2021. The Committee
accepted Management’s explanation that the
cases in 2021 each related to individual
circumstances and had been appropriately
investigated and root causes addressed.
Risk management
Risk management is the responsibility of the
Board and is integral to the achievement of the
Group’s 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 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 on
pages 38 to 49.
The Committee receives quarterly reports on
risk management and made enquiries to
management to assess and monitor the
effectiveness of the approach. The Committee
specifically considered Fraud Risks based on a
management assessment. The Committee also
includes risk-based challenge in all its subject
matter deep dives performed in 2021.
The Committee specifically challenged
Management on the effectiveness with which
“Black Swan” risk events were being captured
or considered within the risk management
framework. The Committee encouraged
Management to use the learnings from the supply
chain challenges in 2021 as a prompt to develop
an enhanced approach for identifying and
evaluating potential future “Black Swan” events.
Reviewing the results of Internal Audit work
and the 2021 plan
The Committee reviewed the effectiveness and
resources of the Internal Audit department and
concluded that the Internal Audit function
is effective and has adequate resources.
The Committee continued to assess the
independence of Internal Audit within the
combined departmental model of Internal
Audit, Risk & Compliance. The Committee paid
particular attention to the results of the External
Quality Assessment of Internal Audit performed
in 2021. The Committee ensures that this timing
meets the requirement of such an assessment
being performed at least every five years. The
Committee considered the positive results
showing the required level of Internal Audit
independence and the high quality of the work
performed. The Committee will monitor the
delivery in 2022 of the improvement points raised
in the assessment which largely focused on
detailed process enhancements.
Based on the reports received on the results of
Internal Audit work, the Committee satisfied itself
that the 2021 internal audit plan was on track and
discussed areas where control improvement
opportunities were identified. The Committee
also reviewed progress in completion of agreed
management actions.
The Committee reviewed the proposed 2022
Internal Audit plan. The current Chief Audit
Executive will be released from this role in early
2022 to lead a process improvement project with
a specific emphasis on internal financial controls.
The Committee discussed the approach to
appoint a successor or engage a temporary Chief
Audit Executive. The Committee raised a series of
challenges to the plan focusing on any impact to
Internal Audit quality and independence and
following receiving appropriate assurances and
supplementary information, the Committee
approved the proposed approach. The
Committee approved the 2022 Internal Audit
plan, having discussed the scope of work and its
relationship to the Group’s risks.
External audit
The Group’s External Independent Auditor,
PricewaterhouseCoopers Accountants N.V.
(“PwC”), was first appointed as the Group auditor
following the Company’s first appointment
process at the AGM held on 4 October 2017,
shortly before the listing of the newly formed RHI
Magnesita. PwC has performed this role in each
subsequent year. PwC will be proposed for
reappointment at the 2022 AGM. In line with the
External Auditor engagement partner rotation
rules, the Committee has undertaken meetings
to support the nomination by PwC of a new
engagement partner for 2022.
In assessing the performance of PwC, the
Committee discussed and agreed with PwC
three key areas of continued focus:
•
Improving the audit approach especially
aligning the scoping to Company processes;
• Adjusting the external audit process to match
the accelerated reporting timetable; and
• More efficient and consistent communication
and coordination especially with the
respective component audit teams.
The Committee received a description of the
manner in which the External Auditor plan was
aligned with business priorities, the plans to
address the areas of focus , major change projects
and the risk assessments. Having discussed the
proposals from PwC to address these issues, the
Committee approved the audit plan together
with the audit fee. This process involved active
discussion of the audit approach, (the assessment
of work conducted on) key audit matters,
materiality level and audit risks.
9 4
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
The Committee considered and challenged the
document presented describing the rationale
and work performed by PwC in reaching their
assessment of key audit matters and key risks.
The Committee discussed the report presented
by the External Auditor on the year end audit.
The Committee requested more insight from
Management on the root causes of the matters
raised by the External Auditor and sought to form
an expectation of the typical level of such issues.
The Committee also discussed observations from
the External Auditor on the IT elements of their
year end audit work.
The Committee also received updates during
the year on the external audit process, including
how the Auditor had challenged the Group’s
assumptions on the issues noted in this report.
The External Auditor had unrestricted access
to, and attended all, Committee meetings in
2021. They also had private meetings with the
Committee in the absence of management.
They were asked for their input and opinion on
a range of topics throughout the year.
External Auditor’s independence
The External 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. Following
due review and scrutiny, the Committee
recommended that PwC and Esther van der
Vleuten should continue as the External
Independent Auditor and designated auditor for
the financial year 2021.
In 2021, the Group maintained the non-audit
services policy for the External Auditor as
reviewed in 2020. This 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 (2019).
The definition of permitted 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,
non-pervasive to the Group, by a local (non-
Dutch) PwC firm, is only undertaken where there
is commercial sense, where pre-approval is
obtained from the Committee and when the
ultimate Responsible Independence Partner at
PwC Netherlands has approved the allowance of
such non-audit work abroad. During 2021, very
limited non-audit work to local RHI Magnesita
entities for a total of €0,0 million (2020:
€0.1 million) was performed by local PwC offices.
Non-audit fees represented are disclosed in Note
59 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.
It is proposed that the next external audit tender
is undertaken in 2025, The committee has formed
this proposal to match the next scheduled partner
rotation for PwC. The committee considered an
earlier tender process and balanced the benefits
of a tender process against the workload of
undertaking a tender and believes that the
approach proposed is in the best interests of
the Company.
Fair, balanced and understandable financial
statements
The Group’s financial statements should be fair,
balanced, understandable and provide the
information necessary for stakeholders to assess
the Group’s position, performance, business
model and strategy. The Committee and the
Board are satisfied that the 2021 Annual Report
meets this requirement, with appropriate weight
having been applied to both positive and negative
developments throughout the year.
In justifying this statement, the Committee has
taken into consideration the preparation process
for the Annual Report and Accounts, including:
• detailed timetable and instructions are
provided to all contributors;
• updates and/or revisions to regulatory
reporting requirements are continuously
monitored and provided to contributors;
• early-warning meetings are conducted
between the finance function and the External
Auditor in advance of the year-end reporting
process;
• external advisers provide advice to
management and the Committee on best
practice regarding the preparation of the
Annual Report;
• a Committee meeting was held in Q1 2022 to
review and approve the draft 2021 Annual
Report and Accounts in advance of the final
sign-off by the Board;
•
review of significant accounting matters as
explained in the notes to the Consolidated
Financial Statements; and
• conclusions drawn by the External Auditor
concerning key audit matters contributing to
their audit opinion, specifically impairments
taxation, fraud risk, climate change and other
Environmental, Social and Governance
components were considered by the Audit
Committee.
Committee Governance
The Committee held training sessions in the year,
covering topics such as TCFD and a case study on
the role of Audit Committees in recent corporate
failures. These sessions were on topics suggested
by the Committee members but were made
available to all Directors. Individual members
took actions to continue their own professional
development. You can read more about induction
plans for new members on page 90.
The Committee considered its performance in
2021, aided by feedback from the Board Review
process. This review concluded that the
Committee has been operating highly effectively.
Focus in 2022 will be given to supporting and
guiding management as they seek to deliver
greater transparency in financial information and
systems. Plans to implement additional training
for Committee members will be enacted once
the practical restrictions of COVID-19 allow.
The Board considered the independence status
of Wolfgang Ruttenstorfer, a member of the
Committee, and under the criteria of the UK
Corporate Governance Code, Wolfgang is no
longer deemed independent. He is however
independent under the Dutch Corporate
Governance Code. The Committee’s Terms of
Reference are clear that a member should be
independent under either Code and the Directors
remain comfortable that Wolfgang remains
independent in his approach and actions as a
Director and member of the Committee. Further
explanation of the position under Provision 24 of
the UK Corporate Governance Code can be
found on page 70.
John Ramsay
Chairman, Audit Committee
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
9 5
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Remuneration Committee report
Current Committee membership and
operation
• Reviewing and amending the Terms of
Reference of the Committee.
Janet Ashdown is the Chairman of the Committee
and at the time of appointment as Chairman, had
extensive experience on other listed companies’
remuneration committees and so comfortably
met the requirement for at least one years’
experience prior to chairing a Remuneration
Committee. Fiona Paulus and Karl Sevelda are
current members of the Committee. All
Committee members are Independent Non-
Executive Directors (NEDs) 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
Chairman of the Board, the Chief Executive
Officer, the Executive Vice President People,
Projects & Value Chain (who is responsible for
Human Resources), 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.
Committee purpose, roles and
responsibilities
The Remuneration Committee’s purpose is to
develop a reward package for Executive Directors
and senior managers that supports our vision and
strategy as a Group, and to ensure the rewards
are performance based, encourage long term
shareholder value creation, and take account
of the remuneration of the whole workforce.
Terms of Reference
Changes of the Committee
Celia Baxter stepped down from the Board at the
2021 AGM and Janet Ashdown assumed the role
of Chairman of the Committee. Fiona Paulus
joined the Committee as a member following
the 2021 AGM.
Activities in 2021
The key activities and decisions taken throughout
the year were:
• Bringing the new Remuneration policy to the
AGM for approval. It was approved by a majority
of 95.95% of votes represented at the AGM.
• Considering market and corporate
governance trends and how they might apply
to the Company
• Discussing the output from the Committee
evaluation and agreeing actions in response
• Considering the retention mechanisms
available for Executive Directors (EDs),
Executive Management Team (“EMT”), and
senior management in light of LTIPs
continuing not to vest
• Considering the outturn of the 2020 and 2021
bonus, the performance of in-flight LTIPs,
reviewing the 2022 bonus and LTIP
performance conditions and targets.
• Reviewing the remuneration of the EDs, EMT,
and senior management within the context of
wider global workforce remuneration and
where there were changed responsibilities.
• Reviewing the fee for the Chairman of the
Board.
•
In November, Janet Ashdown took part in an
investor roadshow, where topics discussed
included Executive Director remuneration,
views on evolving incentive structures in the
market, the performance conditions used, how
incentives could drive progress against the
Company’s sustainability strategy and how the
performance against newer ESG KPIs would
be assured.
• Approval of a refreshed expenses policy for
the Board
• Review of the performance of remuneration
advisers and their scope of services.
Dear Shareholders
This is my first report since taking over as Chairman
of the Committee in June 2021. I would like to take
the opportunity to thank Celia for her dedicated
service to both the Committee and the wider Board.
On behalf of the Board, I present our 2021
Directors’ Remuneration Report. This report
includes my letter to the shareholders, our
Directors’ Remuneration Policy, approved by
shareholders at the 2021 Annual General
Meeting and our Annual Report on Remuneration
for the year ending 31 December 2021, which sets
out how our Directors’ Remuneration Policy was
implemented during the year and will be
operated in 2022.
Janet Ashdown
Chairman of the Committee
Committee members and
meeting attendance
Janet
Ashdown
(Chairman)
Karl Sevelda
Fiona Paulus2
Celia Baxter1
Attendance
in 2021
Member
since
5/5 October 2020
5/5 October 2017
5/5
June 2021
2/2 October 2017,
resigned June
2021
1 Celia Baxter resigned as a Director and so
ceased to be Committee Chairman at the
2021 AGM when she stepped down from
the Board.
2 Fiona Paulus was appointed to the
Committee following the 2021 AGM. She
was present at the January and February
meetings as an attendee.
The Remuneration
Committee is
committed to its role
in promoting the
delivery of long-term
value. Remuneration is
closely aligned to RHI
Magnesita’s strategy,
culture and operations.
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R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
RHI Magnesita is incorporated and registered in
the Netherlands, making it subject to Dutch
corporate law. It has its primary listing on the
London Stock Exchange and a secondary listing
on the Vienna Stock Exchange. As a result, we are
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 voluntary disclosures.
This letter on pages 96 to 98, the summary on
page 99 and the Annual Report on Remuneration
on pages 112 to 112 will also be presented for
approval by an advisory vote at the AGM on
25 May 2022.
Remuneration is aligned with our strategy,
culture and operations
Our Remuneration Policy continues to support
our strategy, culture and operations. Our bonus
targets for management throughout the
Company are aligned to those of the executive
and senior management. This provides a clear
line of sight of Company objectives, supports our
organisational culture, fosters teamworking, and
incentivises appropriate behaviours across the
workforce. The Directors led the Company’s
strategy review process in September 2021,
which supported the subsequent agreement
of bonus KPIs being are directly aligned with
the three pillars of our strategy.
Our long-term incentive plan (“LTIP”) rewards the
creation of shareholder value and profitability.
Totals hareholder return (“TSR”) and EPS are
used as LTIP KPIs to incentivise the creation of
long-term value. In order to support achievement
of our 2025 strategy to reduce carbon emissions,
putting us on the path towards net zero carbon
emissions and assisting in the reduction of our
customer’s carbon footprint, we have included
CO2 emission intensity targets in our incentives
since 2021. We have recognised that the
reduction of CO2 emissions intensity is a target
better achieved over a longer time-frame and
have therefore moved the reduction of CO2
emissions for 2022 from our bonus to our LTIP and
focused on the use of secondary raw material as a
bonus target for 2022 where results can be more
easily recognised over the shorter term. You can
read more about this on page 121. LTIP awards vest
after a three-year performance period to the
extent targets are met, with a further two-year
holding period for the Executive Management Team.
RHI Magnesita’s performance during 2021
2021 was a difficult year for RHI Magnesita with
business volatility continuing as COVID-19
restrictions continued to impact production,
and global supply chain pressures impacted
operations. Costs increased, mainly due to high
sea freight, which could not be fully passed on
to our customers, negatively impacting margins.
Nevertheless, we are facing strong demand and
good shipping volumes. Our working capital has
also increased due to increases in raw material
inventories ahead of anticipated shortages
as detailed on page 35. As laid out in the
Chairman’s Statement and the Chief Executive
Officer’s Review, despite all these difficulties,
the Group recorded in 2021 a robust revenue of
€2,551 million, which means an increase of 12.9%
against the prior year; adjusted EBITA of €280
million, an increase of 8% compared to 2020;
and a decrease in operating free cash flow of
-€236 million compared to €290 million in
2020. It has been within this context that the
Committee has considered the Annual Bonus
scheme, the 2021 outturn and the 2022 targets,
as well as reviewing 2019 LTIP performance and
agreeing 2022 performance conditions.
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
The 2021 annual bonus outcome results in a 24%
annual bonus for the CEO and CFO. This is as a
result of good performance against the strategic
initiatives. Although neither of the Adjusted EBITA
or Operating Cash Flow metrics were achieved,
the Committee noted that a robust level of profit
had been delivered against a challenging target
range, particularly when taken in the context of
the market challenges already noted above. The
Committee also considered that management
had managed the business effectively over the
year, managing strong volume demand with rising
cost pressures, while ensuring strong levels of
liquidity with good progress against the important
strategic elements of the bonus. In the
circumstances, the Committee agreed that the
level of formulaic bonus which aligned to bonuses
payable to eligible members of the workforce was
appropriate and the exercise of discretion was
not required. Further details of our performance
against 2021 bonus targets can be seen on page
113. No adjustments have been made to the
targets due to COVID-19.
The Company has continued its practice of not
taking any state issued COVID-19 related support.
LTIP
An LTIP award was made in 2019, based on three
performance conditions. The performance period
of this award was the three financial years 2019,
2020 and 2021. More details are available on
page 113. None of the performance targets have
been met and the awards will therefore lapse.
The Committee is comfortable that the Policy
operated as intended during the year.
LTIP awards granted in the year
LTIP awards were made to the CEO and CFO on
15 March 2021 at normal grant levels of 200%
of salary for the CEO and 150% of salary for the
CFO. The Committee carefully considered
appropriate performance measures, taking into
account the economic and business outlook.
The measures for the 2021 awards were of 50%
adjusted EPS, 25% absolute TSR and 25% Use of
secondary raw material to support management’s
focus on delivering material increases in the share
price (plus dividends) and sustained aggregate
EPS over the performance period as well as our
environmental commitments . Details of the
awards and performance conditions can be
found on page 114.
Implementation of the Remuneration
Policy for 2022
The base salaries of the CEO and CFO were
increased by 4.45% and 4.44% respectively,
with effect from 1 January 2022. Both of these
executives are employed in Austria, and this
compares with an average of 4.45% for the
majority of Austrian based employees.
Annual bonus maximum opportunity for 2022
is unchanged from 2021 at 150% of salary. The
bonus metrics and weightings were reviewed for
2022. The bonus will continue to be based on
EBITA and operating cash flow recognising that
both these metrics continue to reflect our key
financial priorities. In addition, an element of the
bonus will once again be focused on achievement
of our strategic priorities, including an ESG
measure, as drivers of future profitability and
growth. The targets and performance against
them will be disclosed retrospectively in the 2022
Remuneration Report, provided they are not
considered to be commercially sensitive at
that time.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
9 7
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Remuneration Committee report
continued
The Committee continues to reflect on
remuneration approach for the workforce and
the executive team, particularly as the world
transitions to a post-COVID-19 world. With all the
macro-social economic changes around us, the
Directors feel it is appropriate to take the time, as
we go into 2022, to consider the Company’s
practices and Remuneration Policy afresh to
ensure it remains fit for purpose. We will also
closely monitor the market for best practice and
emerging trends. Any changes would of course
be made with shareholders and stakeholder
experience in mind, and consultation as
appropriate. The Committee values shareholder
feedback and finds it most useful to hear their
opinions, guidance and their concerns. We
carefully consider all input when reviewing the
reward design and determining outcomes. You
can read more about this in the stakeholder
engagement report on pages 107 and 108.
As outlined in the Corporate Governance
Statement on page 70, we are reporting partial
compliance with Provisions 36, 40 and 41
of the UK Corporate Governance Code on
Remuneration. We explain our partial compliance
in the Corporate Governance Statement and will
continue to keep our practices under review in
respect of these provisions.
At the 2022 AGM, shareholders will be asked
to vote on the Directors’ Remuneration Report.
I hope that the Committee will have your support.
As Committee Chairman, I continue to be
available to engage with shareholders wishing
to discuss remuneration matters.
Janet Ashdown
Chairman of the Remuneration Committee
The quantum of the CEO and CFO’s LTIP awards
for 2022 remain unchanged with a face value of
200% and 150% of salary, respectively. The
awards will be made in March 2022 based on the
share price at that time. Executives will receive the
award shares in 2027 (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 continue to be based on absolute TSR
and Adjusted EPS targets reflecting the ongoing
focus of management to deliver material
increases in the share price (plus dividends) and
sustained EPS growth. For 2022 the Committee
has included as its third ESG related performance
measure the reduction of CO2 emissions intensity
to support the longer-term focus of management
on achieving the 2025 strategy to reduce carbon
emissions. The performance targets are set out on
page 121. The Committee is comfortable, taking
into account the ongoing economic and market
uncertainty as well as the business outlook that
the targets are as challenging as those set for prior
LTIP awards, whilst also acting as a retention tool.
The Committee has the ability to scale back the
level of vesting if it considers the outcome to be
reasonably unacceptable, or to avoid any
“windfall gain” or if it is not reflective of the
underlying performance of the Company.
How our remuneration practices support
our strategy
Strategic Pillar
Element
of reward Metrics
Market
Leadership
Enhance
Business
Model
Execute
Cost
Reductions
Bonus Profit
Free Cash
Flow
Strategic
initiatives
Earnings Per
Share
LTIPs
Total
Shareholder
Return
Economic
Profit
Use of
Secondary
Raw Materials
Reduction of
CO2
emissions
ESG metrics
The Committee was pleased to be a leader in the
refractory industry in introducing ESG related
measures as part of the reward structure for the
Group in 2021 and in 2022 will continue to
include ESG metrics in the structure of incentives.
Representatives of the Committee consulted with
investors during 2021 and shareholders were
supportive of the linking of management
incentives to sustainability targets.
The chosen metrics are aligned with the
Company’s strategy and sustainability targets,
which aim to reduce CO2 emissions intensity by
15% by 2025 and increase the use of secondary
raw material to 10%. To achieve further emissions
reduction in the longer term, the Group is
investing €50 million into the development
of new technologies to capture, store and utilise
its CO2 emissions.
The Committee is comfortable that the ESG
targets in the LTIP and the annual bonus are
both material and stretching for the business.
In deciding on the targets, it has received data
on the progress in these areas to date and the
expected development in the coming years to
reach the overall strategy. The Chairman of the
Committee is also the Chairman of the Corporate
Sustainability Committee and Fiona Paulus is
a member of both committees. The Committee
is therefore well positioned to assess progress
against the sustainability strategy and devise
appropriate links to management incentives.
The targets set are quantifiable, based on
regularly reported operational and management
information and CO2 emissions intensity in the
target scope are assured by an independent third
party. The use of secondary raw materials is
included as an annual bonus target this year
(having been included in the 2021 LTIP) to focus
performance since it is a key lever to deliver
progress in reducing Scope 1 CO2 emissions
in the short term.
Our conversation with our shareholders
At the 2021 AGM the Committee proposed
the new Remuneration Policy which was
approved by a majority of 95.95% of votes
from and as a result we are comfortable that
the Policy meets shareholder expectations.
The Committee believes that the remuneration
policy has operated as intended during 2021.
The remuneration outcomes for 2021 are aligned
to the Company’s strategy, the complex structure
of the business and the long-term shareholder
interests.
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R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
At a glance: Operation of Remuneration Policy for the financial year ending 31 December 2021
Policy element
S Borgas (CEO)
Base salary from 1 January 2021
€1,052,000
% Increase from prior year
2.5%
Retirement allowance
Allowance of 15% of base salary
Annual bonus
Up to 150% of base salary
I Botha (CFO)
€615,000
2.5%
Allowance of 15% of base salary
Up to 150% of base salary
Annual bonus metrics
Adjusted EBITA (35%) and Operating Cash Flow (35%) measured on a constant currency basis and Strategic deliverables (30%) . The
strategic element was equally weighted on; Increase global value market share, reduce conversion cost and reduce CO2 emission
intensity.
Amount paid for threshold performance
0%
0%
Amount paid for target performance
75% of salary (50% of maximum annual bonus)
Actual bonus result for 2021 performance
Bonus paid €374,775 (24% of maximum)
Bonus paid €219,094 (24% 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
LTIP Award
LTIP metrics
Payment for threshold performance
Performance and post vesting holding
periods
Malus and clawback
200% of base salary
150% of base salary
50% of the award: Adjusted EPS (cumulative for the three-year performance period)
25%of the award: Absolute TSR
25% of the award: Use of Secondary raw material
25%
Three years and two years respectively
Malus applies to the period prior to vesting for LTIP awards and payment of the annual bonus
Clawback applies to cash bonus and LTIP awards for a period of three years following the date of vesting and three years following any
cash payment
Dividends on vested awards
Shareholding requirement
Shareholding as % of salary at 2021
year-end
80%
1 Calculated assuming a tax rate of 50%.
Participants are eligible for dividend equivalents on performance shares awarded under the LTIP
200% of base salary to be met within five years
53%1
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
9 9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Directors’ Remuneration Policy
• Proportionality: The link between the delivery
of strategy, long-term performance,
shareholder return and the remuneration
of the Executive Directors is set out in the
Remuneration Report.
Alignment to culture: As explained above and in
the rest of this report, the approach to Directors’
remuneration is consistent with the Group’s
culture and values.
When determining the implementation of the
remuneration policy, the Committee also reviews
and considers those matters referred to aspects in
section 3.1.2 of the Dutch Corporate Governance
Code which comprise: long-term value creation,
scenario analyses, ratio of fixed to variable
remuneration components, market price of
shares, terms and conditions governing share and
share option awards.
When reviewing the Remuneration Policy, the
Committee will follow the process set out below:
• The Committee will consider market and
governance developments (including the UK
Corporate Governance Code and Dutch
Corporate Governance Code) as well as wider
pay context, such as pay ratios and Group
reward arrangements
• The Committee will consider the guidelines of
shareholder representative bodies, proxy
agencies and investor expectations.
• The Committee will consult with shareholders
and employees ahead of any future
AGMs where the remuneration policy is put to
a vote.
• All changes, adoption or revisions to the
existing policy will be brought to shareholders
for approval.
This Directors’ Remuneration Policy was approved
by over 95% of voting shareholders at the June
2021 AGM and became effective from 1 January
2021. The full Remuneration Policy as approved
by shareholders is available in the 2020 Annual
Report on our website.
•
•
Policy overview
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 policy is aligned to and supports our cultural
values which are set out below:
•
Innovative
• Open
• Pragmatic
• Performing
The mission of the Company is “Taking innovation
to 1200°C and beyond”. Achieving our mission
requires 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 by:
• providing a fair and appropriate level of fixed
remuneration that does not result in
overreliance on variable pay and undue
risk-taking, thereby encouraging the
executives to focus on sustained long-term
value creation.
• 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.
•
requiring executives to acquire and retain
shares in the Company.
• 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.
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; and
incorporating metrics focused on long-term
shareholder value, such as total shareholder
return and reduction of both our and our
customers’ carbon emissions through the
increased use of secondary raw material.
When implementing the Remuneration Policy,
the Remuneration Committee considered the six
factors listed under Provision 40 of the UK
Corporate Governance Code:
• Clarity: The Policy and the way it is
implemented is clearly disclosed in this policy
section of the Remuneration Report and the
Annual Statement and supporting reports,
with full transparency of all elements of
Directors’ remuneration.
• Simplicity: The Policy is simple and
straightforward, based on a mix of fixed and
variable pay. The annual bonus and LTIP
include performance conditions which are
aligned with key strategic objectives and
drivers of the RHI Magnesita business.
• Risk: The Committee believes that the
performance targets in place for the incentive
schemes provide appropriate rewards for
stretching levels of performance without
driving behaviour which is inconsistent with
the Company’s risk profile. Potential reward is
aligned with market levels of peer companies
and the reputational risk from a perception of
“excessive” pay-outs is limited by the
maximum award levels set out in the Policy
and the Committee’s discretion to adjust
formulaic remuneration outcomes. To avoid
conflicts of interest, Committee members are
required to disclose any conflicts or potential
conflicts ahead of Committee meetings.
No Executive Director or other member
of management is present when their own
remuneration is under discussion.
• Predictability: The Policy includes full details
of the individual limits in place for the
incentive schemes as well as “scenario charts”
which set out potential pay-outs in the event
of different levels of performance, based on a
number of reasonable assumptions. Any
discretion exercised by the Committee in
implementing the Policy will be fully
disclosed.
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R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Policy table for Executive Directors
Element and purpose
How it operates
Maximum opportunity
Performance-related framework and recovery
Base salary
To assist in the recruitment and
retention of appropriate talent.
To provide a fair fixed level of
pay commensurate for the role
ensuring no overreliance
on variable pay.
Salaries are paid monthly and reviewed annually.
The Company’s policy is to set salaries at market
competitive 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.
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.
Decisions on salary are influenced by:
• 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 of the workforce
across the Group including salary increases
• Rates of inflation and market-wide increases
across international locations
• The geographic location of the Executive Director
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. The pension will be
set at a rate aligned to the majority of the workforce
in the country of the Executive Director’s appointment,
structured as required by the local regulation
in the country of appointment, and in line with
industry norms.
None
Pension is capped at the rate
applicable to the majority of
employees in the country of
appointment for the Executive
Director (currently Austria where
it is 15% of salary).
Benefits currently provided 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
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.
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 wellbeing of the
Executive Director.
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 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 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.
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
objectives.
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.
Up to 150% of base salary.
Target potential opportunity is
50% of maximum opportunity.
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 will normally be 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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R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Policy table for Executive Directors continued
Element and purpose
How it operates
Maximum opportunity
Performance-related framework and recovery
Awards granted under the
RHI Magnesita Long-Term
Incentive Plan (LTIP awards)
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.
LTIP 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 LTIP 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 LTIP award is appropriate.
LTIP 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
to promote 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.
200% of salary
None.
Executive Directors are expected to hold 200% of
salary in shares. The Committee normally expects this
requirement to be met within five years of appointment
and for the CEO 7 June 2018 being the date of approval
of the Company ´s first Directors’ Remuneration Policy.
Holding periods for annual bonus shares and
long-term incentive awards continue post cessation
of employment in respect of bonus shares acquired
with 2021 bonus and LTIP awards granted in 2021 and
future years, thereby providing a post-employment
shareholding requirement.
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Directors’ Remuneration Policy
continued
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
To provide fees reflecting
the 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 the 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.
The cash fee is normally paid quarterly in arrears. 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.
There is no prescribed maximum
annual fee or fee increase.
None.
The Board is guided by the
general increase in the
non-Executive market and the
Group’s global workforce, 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.
Performance 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 LTIP 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, as it will do for 2022’s award. 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, and the performance against the goals will be independently assured.
The short term financial and non-financial criteria of our variable remuneration may, as noted above, vary from year to year to ensure alignment with the
strategic plans of the Company. Set out below is a summary of the measures for 2022 and other measures that have been used since 2018 and may be
incorporated again (in addition to other measures) for future incentives:
Annual bonus
Financial criteria
• Adjusted EBIT and EBITA are a reflection of the Company’s operating profits, operating performance and business efficiency supporting the value of RHI
Magnesita for the shareholders. They reflect the way in which management assesses the underlying performance of the business, excluding certain
non-recurring items from the adjusted figures.
• Operating cash flow supports the Company’s capacity to expand its operations or investment in additional assets/ acquisitions, as well as dividends paid
to shareholders. It is calculated by taking adjusted EBITDA plus changes in working capital and in other assets/liabilities minus capex spend.
Non-financial criteria
• Strategic deliverables supporting financial targets such as adjusted EBIT or EBITA and operating cash flow with initiatives and strategic projects,
such as enhancing the current business model or Company’s footprint and global value market share and ESG measures such as CO2 emissions intensity
reduction, use of secondary raw materials and reducing conversion costs.
LTIP
Financial criteria
• TSR – combination of movements in share price and dividends earned on shares reflecting the total return earned by holding the Company’s shares.
• Adjusted EPS – reflects the income statement in a clear way and takes the equity structure into account and the Board believes Adjusted EPS to be one
of the indicators which demonstrates the value created for its shareholders.
• Economic Profit Growth – measures value creation, considering all economic resources employed within the business, taking into account the costs
of making and selling a product/service.
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R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Bonus & LTIP
Non-financial criteria
• Use of secondary raw materials – measures the rate at which secondary raw material is used in our production network compared to virgin raw materials.
Despite this not being a wholly financial target, this will nonetheless be independently verified by an external provider.
• Reduction of CO2 emissions intensity – to reduce the tonnes of CO2 emitted per tonne of production by 15% by 2025 compared to 2018 baseline,
including Scope 1 emissions, Scope 2 emissions and Scope 3 emissions from raw materials.
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 for the annual bonus and for LTIP awards is set out on pages 113 and 114..
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 LTIP 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).
Malus and clawback
The Committee may, at any time within three years from the date of LTIP awards vesting or payments under the annual bonus plan, determine that malus
or clawback provisions may apply. Malus enables the Committee to reduce bonus or share awards (including to nil) before they vest. Clawback enables the
Committee to reclaim shares acquired from share awards and/or bonuses paid including the cash value of shares and dividends. The Committee can also
operate clawback through the reduction including to nil of other awards held by the individual before they vest or bonus before it is paid. The provisions
apply in the following circumstances: (i) material misstatement of the Company’s financial results; (ii) an error in calculating the level of grant or level of
vesting or payment; (iii) a failure of risk management including the liquidation of the Group (iv) 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.
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.
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Directors’ Remuneration Policy
continued
Service contracts and loss of office
Name
Stefan Borgas
Ian Botha
Position
CEO
CFO
Date of appointment
20 June 2017
1 April 2019
Notice period
12 months
12 months
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. Whilst not part of
the formal policy, in the event of a change of control, LTIP awards will vest based on performance to the change of control. In addition, awards will normally
be scaled back pro rata to the proportion of the performance or vesting period served, with the Remuneration Committee having the discretion to reduce
the scale back in exceptional circumstances if it deems it to be appropriate.
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 termination
Annual bonuses and LTIP awards are non-contractual and are dealt with in accordance with the rules of the relevant plans.
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 LTIP under which 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 will be set in accordance with the terms of our Policy. On recruitment, the 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 LTIP 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 for use in exceptional circumstances for the Company to be able to attract and
secure the right candidate if required. A LTIP award may be made shortly after an appointment if the usual annual award date has passed.
With internal appointments, any variable pay element awarded in respect of the candidate’s 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, acting in the best interests of the
Company’s stakeholders 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 LTIP 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.
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AGM 2024
AGM 2024
AGM 2024
AGM 2024
AGM 2022
AGM 2024
AGM 2024
AGM 2024
AGM 2024
AGM 2024
AGM 2022
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.
Position
Date of initial appointment
Expiry date of current term
Name
Herbert Cordt
David Schlaff
Stanislaus Prinz zu Sayn-Wittgenstein-
Berleburg
John Ramsay
Janet Ashdown
Sigalia Heifetz
Non-Independent Non-Executive Director, Chairman
20 June 2017
Non-Independent Non-Executive Director
Non-Independent Non-Executive Director
6 October 2017
6 October 2017
Independent Non-Executive Director
6 October 2017
Independent Non-Executive Director
Independent Non-Executive Director
Marie-Hélène Ametsreiter
Independent Non-Executive Director
Jann Brown
Independent Non-Executive Director
Wolfgang Ruttenstorfer
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Karl Sevelda
Fiona Paulus
Michael Schwarz
Karin Garcia
Martin Kowatsch
Employee Representative Director
8 December 2017
9 December 20251
Employee Representative Director
9 December 2021
9 December 20251
Employee Representative Director
14 December 2021
14 December 20251
1
Michael Schwarz, Karin Garcia and Martin Kowatsch are the Employee Representative Directors and have been selected in accordance with the applicable local law provisions by the employee
representatives. They are appointed for a term of not more than four years.
How the views of shareholders and employees are taken into account
Owing to the Board members’ wide range of experience and backgrounds, and with Employee Representatives members and shareholders represented in
person, there is ample opportunity for stakeholder feedback on the Policy and its implementation on an ongoing basis.
The Committee formally consults directly with employees on executive pay via the Employee Representative Directors appointed to the Board. Other
engagement activities include employee surveys, CEO calls, regular townhall meetings and an active CEO Channel, as part of the MyRHIMagnesita app,
where employees can ask questions on any issues including executive pay. The Committee receives periodic updates from the CEO and the Executive VP
People, Projects and Value Chain which include employee feedback received on remuneration practices across the Group. 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.
The Committee Chairman meets directly with representatives of various institutional shareholders on remuneration and appreciates the opportunity to
understand their questions, seek to understand their expectations and then provide those views to the Committee and to the wider Board as required. In
November 2021, the Committee Chairman participated in an investor roadshow with the Senior Independent Director and the Deputy Chairman where
remuneration, and particularly the links with the sustainability agenda, were discussed with five institutional shareholders. The Committee, and the wider Board,
found the sessions very useful to hear direct feedback from investors and understand their expectations for the future in terms of driving management
performance through incentives.
The Committee Chairman seeks feedback from shareholders on any substantive remuneration matters and any consultation exercise would typically cover
over 70% of shareholders. This feedback, best practice in the market, and any views also received from time to time, as well as guidance from shareholder
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6 June 2019
10 June 2021
10 June 2021
10 June 2021
20 June 2017
6 October 2017
6 June 2019
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Directors’ Remuneration Policy
continued
representative bodies more generally, will be considered as part of the Company’s annual review of Remuneration Policy and implementation of that policy.
The Committee has engaged with shareholders regarding the changed Policy and investors approved at in the last AGM.
How the views of shareholders and employees are taken into account continued
In addition to this, the website provides an important tool for investor engagement. 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 rules, our investor calendar, financial results, presentations, press
releases, with news relating to RHI Magnesita financial and operational performance and contact details.
Remuneration market data for companies of a comparable size and complexity to the Company was considered as part of the Committee’s formulation
of the Policy. This remuneration data 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.
You can read more on our stakeholder engagement on page 50.
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 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 key difference between the 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 targets are the same for Executive Directors and for all eligible white-collar employees.
All our employees take part in annual discretionary bonus schemes, which is based on the same metrics as those applicable to the Executive Directors
as shown in Annual Report on Remuneration. Our approach is to incentivise our employees to focus on and contribute to the Company’s key goals.
LTIP awards are awarded to those employees identified as having the greatest potential to influence strategic outcomes. 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 below.
Competitive pay and cascade of incentives
Organisational level
Executive Directors
Executive Management Team
Senior Leaders
Functional Directors
Senior Managers
Managers
Specialists
Professionals
Other bonused employees
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)
2
5
c30
c90
c150
c450
c1,600
c1,900
c8,100
150%
80-140%
40%
30%
25%
20%
10%
5%
Various3
75%1
85%2
100%
100%
100%
100%
100%
100%
100%
25%1
15%2
0%
0%
0%
0%
0%
0%
0%
Maximum LTIP
award based on
annual salary
150-200%
80-150%
20-50%
0%
0%
0%
0%
0%
0%
1 Half of annual bonus in excess of target, after tax, is used by the Executive Directors 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.
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Summary of remuneration structure for employees below the Board
Element
Salary
Read more on
page 101
Pensions and benefits
Read more on
page 101
Policy features for the wider workforce
Comparison with Executive Director remuneration
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.
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 aligned with the wider workforce in Europe and
North America, except in exceptional circumstances.
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.
Annual bonus and LTIP
Read more on
pages 102 and 103
Our white-collar global workforce participates in an annual cash bonus
plan. The plan is based on our 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.
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.
LTIP are provided to our senior executives and senior roles who
have influence on the overall performance of the Company.
Pay ratios
The Dutch Corporate Governance Code recommended from the financial year 2018, and the UK Directors’ Reporting Regulations required 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. The total employee remuneration figure used for the ratio below 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.
RHI Magnesita is positioned around the median CEO pay ratio of other basic materials and industrial companies of a similar size listed on the FTSE.
A significant proportion of the Executive Directors’ remuneration is delivered through incentives, annual bonus and LTIP, where awards are linked to
Company performance and share price movement over the longer term. This means that the pay ratio will depend on the incentive outcome. No LTIP vested
during the last two years.
The table below shows the pay ratio in respect of each year from 2018 to 2021:
Pay ratio
CEO
CFO
2021
21.1
13.1
20201
41:1
25:1
2019
34:1
16:12
2018
49:1
N/A
1 Pay ratio is lower due to not achieving target bonus KPIs.
2 The pay ratio rose due to the increase in base salary for the CEO and CFO in 2020.
3 CFO pay ratio is lower as Ian Botha joined the Company on 1 April 2019; with the full salary and bonus, the ratio would be 21:1.
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 2022 is approximately 40% for fixed pay and 60% variable remuneration on a target basis
(calculated on the same basis as the target scenario shown below). Variable pay is split between the annual bonus, with 50% of payment over target being
held in shares, and long-term incentive.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
1 0 9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Directors’ Remuneration Policy
continued
Remuneration scenarios for Executive Directors
The 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 LTIP 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 2022 maximum annual bonus opportunity for the CEO and CFO with 50% vesting of the 2022 LTIP award.
Maximum: Fixed pay plus maximum annual bonus opportunity and 100% vesting of 2022 LTIP award with an assumed share price appreciation of 50%
for the LTIP award during the performance period.
As required under the Dutch Corporate Governance Code, scenario analysis was 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 overreliance 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
Values in €
CFO
Values in €
Maximum
20%
27%
35%
18%
6,223,403
Maximum
24%
30%
30%
15%
3,159,763
Target
40% 26%
34%
3,201,703
Target
44%
28%
28%
1,714,363
Minimum
100%
1,278,803
Minimum
100%
750,763
Fixed pay
Annual bonus
LTIP
50% share price growth on LTIP
1 1 0
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Annual Report on Remuneration
Annual Report on Remuneration
The following section provides details of how the Company’s Directors were paid during the financial year to 31 December 2021.
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 determined to provide certain voluntary disclosures recognising the importance of transparency of reporting
and investor expectation as a UK listed company to comply with the UK Directors’ Remuneration Reporting Regulations. This Annual Report is compiled
on this basis.
The Remuneration Committee members, activities and meetings during the year are set out on page 96, along with the Committee’s purpose,
roles and responsibilities and is thereby included in this part of the report by reference.
Advisers
Korn Ferry (“KF”) signatories to the UK Remuneration Consultants Group’s Code of Conduct (“Code of Conduct”) and was 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 UK governance including consulting on the remuneration report and analysing market trends.
The Committee was satisfied that the advice provided by Korn Ferry was objective and independent having noted their commitment to the Code of
Conduct. Korn Ferry’s fees for advice to the Committee in 2021 were £52,215. Korn Ferry’s fees were charged on the basis of the time spent advising the
Committee. Korn Ferry provided other human capital related services during the year to a separate part of the business, but these services were carried
out by a team wholly separate to the remuneration advisory team. The Committee is comfortable that the controls in place at Korn Ferry do not result
in the potential for any conflicts of interest to arise.
Statement of voting at AGM
At last year’s AGM, held on 10 June 2021, votes on the business pertaining to remuneration, were cast as follows:
Resolutions
Votes for
% of votes
cast
Votes
against
% of votes
cast
Total votes
validly cast
Total votes
cast as a % of
the relevant
shares in
issue
Number of
votes
withheld
Advisory vote on Annual Report on Remuneration
36,339,606
95.83
1,582,904
4.17
39,070,758
81.53%
1,148,248
Adopt the Directors’ Remuneration Policy which takes
effect from 1 January 2021
37,487,854
95.95
1,582,904
4.05
39,070,758
81.53%
0
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 47,924,771.
A “Vote withheld” is not a vote in law and is not counted in the calculation of the % of shares voted “For” or “Against” a resolution.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
1 1 1
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Annual Report on Remuneration
continued
Single total figure table (audited)
The following table shows a single total figure of remuneration in respect of qualifying services for the 2021 financial year for each Executive and
Non-Executive Director of the Company, together with comparative figures for 2020.
Salary
Taxable benefits2
Pension3
Bonus
LTIP
Total remuneration
Total fixed remuneration
Total variable
remuneration
2021
2020
2021
2020
2021
2020
2021
20203
2021
2020
2021
2020
2021
2020
2021
2020
Director1
Executive Directors
Stefan Borgas
Ian Botha
€1,052,000 €969,000
€183
€8,823 €157,800
€145,539
€374,775
€769,500
€615,000
€566,667
€12,003 €21,277
€92,250
€85,110
€219,094 €450,000
Non-Executive Directors
Herbert Cordt
£241,000
£227,167
John Ramsay
£122,900
£93,163
Janet Ashdown
£104,522
£87,163
David Schlaff
£71,100
£67,087
Stanislaus Prinz zu
Sayn Wittgenstein-
Berleburg
Fiona Paulus
Jann Brown
Karl Sevelda
Marie-Hélène
Ametsreiter
Sigalia Heifetz
Wolfgang
Ruttenstorfer
Celia Baxter4
£71,100
£67,087
£84,728
£79,943
£52,566
–
£82,314
£74,820
£48,017
£48,017
£79,300
£74,820
£42,234
£90,287
Andrew Hosty4
£36,182
£77,333
Michael Schwarz5
Karin Garcia5
Martin Kowatsch5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0
0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– €1,584,758
€1,892,862 €1,209,983
€1,123,362
€374,775
€769,500
–
€938,347
€1,123,054
€719,253
€673,054
€219,094 €450,000
£241,000
£227,167
£241,000
£227,167
£122,900
£93,163
£122,900
£93,163
£104,522
£87,163
£104,522
£87,163
£71,100
£67,087
£71,100
£67,087
£71,100
£67,087
£71,100
£67,087
£84,728
£79,943
£84,728
£79,943
–
£52,566
–
£52,566
–
£82,314
£74,820
£82,314
£74,820
£48,017
£48,017
£48,017
£48,017
£79,300
£74,820
£79,300
£74,820
£42,234
£90,287
£42,234
£90,287
£36,182
£77,333
£36,182
£77,333
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 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.
2 Benefits in 2021 for Stefan Borgas of €183 (garage and insurance) for the year; Stefan exchanged his car to an electric car during 2021. Under Austrian tax law, electric cars are not taxable employee
benefits which results in a significant reduction in CEO taxable benefits for 2021. The benefits for Ian Botha included a car benefit of €11,694 and €309 garage and insurance benefits.
3 Pension figures represent the 15% of salary cash allowance received by Executive Directors.
4 Andrew Hosty and Celia Baxter stepped down from their Board roles on 10 June 2021 therefore their fees were prorated accordingly.
5 Employee Representative Directors do not receive additional remuneration for this role as they are remunerated as employees of the Group.
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.
1 1 2
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
2021 annual bonus performance against targets (audited)
The targets set for the annual bonus and performance against them are set out below. For 2021, the Committee reintroduced a strategic element to the
bonus once again to provide drivers for profitability aligned with the Company’s refreshed strategy and CO2 emissions intensity reduction targets. The
financial targets focused on driving earnings and cash flow, thereby preserving the Group’s balance sheet strength and financial liquidity. The Committee
is comfortable that this bonus payment represents a fair level of reward for the performance achieved by the Executive Directors and the business.
There is a payment of 24% of maximum annual bonus for the CEO and CFO as a result of good performance against the strategic initiatives, including
growing market share. Although neither of the Adjusted EBITA or Operating Cash Flow metrics were achieved, the Committee noted that a robust level
of profit had been delivered against a challenging target range, particularly when taken in the context of the market challenges already noted above. The
Committee also considered that management had managed the business effectively over the year, managing strong volume demand with rising cost
pressures, while ensuring strong levels of liquidity with good progress against the important strategic elements of the bonus. In the circumstances, the
Committee agreed that the level of formulaic bonus which aligned to bonuses payable to eligible members of the workforce was appropriate.
Measure
Weighting
Threshold
(0% of
maximum)
Target
(50% of
maximum)
Max
(100% of
maximum)
Actual
performance
Pay-out
(% of max) 2
Pay-out
(% of salary)
Adjusted EBITA (€m)
Operating Cash Flow (€m) ¹
Increase global value market share
Reduce conversion cost
Reduce CO2 emissions4
Total
35%
35%
10%
10%
10%
100%
291
157
14,0%
-6,0%
-0,8%
–
322
189
14,4%
-7,0%
-1,2%
–
354
212
14,7%
-7,5%
-1,4%
–
280
-236
14.3%
-11.9%
-3.7%
–
0%
0%
37%
100%
100%
24%
Pay-out (€)3
CEO
€0
€0
CFO
€0
€0
€59,175
€34.594
€157,800
€92.250
€157,800
€92.250
0%
0%
6%
15%
15%
36%
€374,775
€219.094
1 Operating cash flow at constant currency. EBITA w/o restructuring expenses + capex + change in working capital + cash tax.
2 The maximum CEO and CFO annual bonus in 2021 was 150% of salary.
3 Executive Directors 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. As the target bonus as a
percentage of salary was not achieved (75%), the bonus is payable wholly in cash.
4 You can read more on the reduction of CO2 emissions intensity on page 91.
LTIP awards where vesting is based on performance periods ending during the financial year ending 31 December 2021 (audited)
LTIP awards vesting
The details for the LTIPs due to vest in 2022 are shown below:
The LTIP awards¹ granted on 19 August 2019 and vesting in 2022 were based on performance to the year ended 31 December 2021. The performance
targets for these awards and actual performance against those targets were as follows:
Metric
Relative TSR2
Adjusted EPS (final year of performance period)
Cumulative economic profit
Total
1 Awards are structured as nil cost options .
2 Measured against the FTSE 350, excluding sectors with limited direct relevance to RHI Magnesita.
3 Awards vest on a straight-line basis between threshold and maximum.
Weighting
33.33%
Threshold
target
(25% vests)
Stretch
target
(100% vests)
50th
percentile
(27.90%)
75th
percentile
and above3
(73.81%)
Actual
% Vesting
-3.75%
0%
33.33%
€7.80 per
share
€9.00 per
share
€4.46 per
share
33.33%
€600 M
€670 M
€340 M
100%
0%
0%
0%
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
1 1 3
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Annual Report on Remuneration
continued
LTIP awards where vesting is based on performance periods ending during the financial year ending 31 December 2021 (audited)
continued
LTIP awards vesting continued
The details of the LTIPs vesting in 2022 as a result of performance noted above are shown below:
Executive
Stefan Borgas
Ian Botha
Grant date
Vest date
19 August 2019
19 August 2022
19 August 2019
19 August 2022
19 August 2019
19 August 2022
Number of
shares
granted
38,397
16,840
16,841
Number of
shares to vest
Dividend
equivalent
Estimated
value
0
0
0
0
0
0
0
0
0
1 In 2019, Ian Botha received two grants of performance shares. The grant of 16,840 shares represents the annual LTIP grant. The grant of 16,841 shares represents the buy-out award for the performance
share awards forfeited when joining RHIM. The buyout award vests three years after grant subject to meeting 2019 corporate performance conditions for 2019 PS awards shown above.
LTIP awards awarded during the financial year ending 31 December 2021 (audited)
During the year, the CEO received an LTIP award of 200% of salary and the CFO received an LTIP award of 150% of salary.
Details of the LTIP award and the performance targets that will determine the extent to which the award vests are set out below.
Director
Stefan Borgas
Ian Botha
Scheme
Basis of award
Date of award
Percentage of
salary award
Share price
used1
Face value
€000
Percentage
vesting at
threshold
performance
Number of
shares
End of
performance
period
LTIP
LTIP
Annual award3
15 March 2021
200%
€48.28
Annual award3
15 March 2021
150%
€48.28
2,104
922.5
25%
25%
43,579
15 March 2024
19,107
15 March 2024
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 £41.38 converted to € (using average FX rate over the same
five-day period of €0,857to £1 = €48.28).
2 Awards are structured as nil cost options.
Performance targets for 2021 LTIP awards
Performance measure
Absolute TSR
Adjusted EPS (cumulative for the three-year performance period)
Use of Secondary Raw Material3
1 Awards vest on a straight-line basis between threshold intermediate and maximum.
Weighting
Threshold
(25% vesting) ¹
Intermediate
(75% of vesting) ¹
13%
20%
Maximum
(100%
vesting) ¹
25% and
above
Performance
period2
15 March 2021 to
15 March 2024
€12.00
6.5%
€14.50
€16.89
7.5%
8.0%
1 January 2021 to
31 December 20234
25%
50%
25%
2 For the TSR element, measured from date of grant to third anniversary on 15 March 2024 with a two-month average TSR before each date and for the EPS element and Secondary Raw Material Element,
three financial years until 31 December 2023.
3 Use of secondary raw material as a percentage of total raw materials used, evaluated at the end of 2023 based on the current production network (and excluding any changes in raw material usage due to
any future M&A activity).
4 In line with the Remuneration Policy, a two-year holding period post vesting holding period applies.
1 1 4
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Performance targets for 2020 LTIP awards
Performance measure
Absolute TSR
Weighting
50%
Threshold ¹
(25% vesting)
Intermediate ¹
(75% of vesting)
30%
cumulative
TSR growth
over the 3
years
30%
cumulative TSR
growth over the
3 years
Maximum ¹
(100%
vesting)
30%
cumulative
TSR growth
over the 3
years
Performance
period2
8 April 2020 to
7 April 2023
Cumulative Underlying Earnings Per Share
50% €6.50/share
€8.00/share
€9.50/
share
1 January 2020 to
31 December 2022
1 Awards vest on a straight-line basis between threshold, intermediate and maximum.
2 For the TSR element, measured for a period of three years from the date of grant with a two-month average before each date. The EPS element is three financial years until 31 December 2022.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
1 1 5
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 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 2021 year-end, the Executive Directors each held shares in the Company
as detailed below. Shares are valued using the Company’s closing market share price on 31 December 2021 of £33.06.
The table below shows how each Director complies with the shareholding guidelines on 31 December 2021
Shares
held at 31
December
2021
Shares held
by
connected
persons
Shares
held at 31
December
2020
Number
of shares
Number of
options
Unvested
and subject
to a service
requirement
only
Unvested and
subject to
performance
conditions
Vested but
unexercised
Exercise
during
the year
Shareholding
requirement
Current
shareholding
% salary¹
Requirement
met?
Executive Directors
Stefan Borgas
21,300¹
1,150
18,600
21,300
172,372
–
172,372
Ian Botha
–
–
–
– 109,027
16,592
92,435
–
–
– 200% salary
– 200% salary
80%2
53%3
No
No
Non-Executive Directors
Herbert Cordt
350,000
– 350,000
John Ramsay
2,130
Janet Ashdown
David Schlaff4
Stanislaus Prinz zu
Sayn-Wittgenstein-
Berleburg 5
Fiona Paulus
Jann Brown
–
–
–
–
–
–
–
–
–
2,130
–
–
–
–
Karl Sevelda
2,000
–
1,000
Marie-Hélène
Ametsreiter
Sigalia Heifetz
Wolfgang
Ruttenstorfer
–
–
–
–
Celia Baxter6
1,002
Andrew Hosty6
Karin Garcia
389
–
Martin Kowatsch
1,223
Michael Schwarz
–
–
–
–
–
–
1,002
389
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Shareholding determined using an FX rate of 1.1943 for GBP to EUR on 31 December 2021.
2 Includes shareholdings of connected persons.
3 Includes unvested shares which are subject to a service requirement and assumes a tax rate of 50%.
4 According to the latest disclosures by the shareholder: 13,333,340 held directly by MSP Stiftung. MSP Stiftung is a foundation under Liechtenstein law, whose founder is Mag. Martin Schlaff.
5 According to the latest disclosures by the shareholder: 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 Shareholding for Celia Baxter and Andrew Hosty are only considered until 10 June 2021, when they stepped down from the Board.
There were no changes in the Directors’ shareholdings and share interests between the end of the year and 25 February 2022.
1 1 6
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Directors’ interests in RHI Magnesita’s LTIP
The table below details outstanding share awards including the annual LTIP awards granted to the CEO and CFO during 2021.
Scheme
Award date
Share price
used
€
Share awards
held at
1 January 2021
Awarded
during
the year
Vested
during
the year
Share awards
lapsed
during
the year
Share awards
held at
31 December
2021
Total share
value at award
(face value)
€
Vesting
date
Stefan Borgas Performance shares
7 June 2018
57.773
28,594
Performance shares
19 August 2019
44.534
38,397
Performance shares
8 April 2020
22.7
90,396
–
–
Performance shares
15 March 2021
48.28
43,579
Ian Botha
Performance shares
19 August 2019
44.534
16,840
Performance shares
19 August 2019
44.534
16,841
–
–
–
–
28,5946
–
1,652,0001
7 June 2021
–
38,397
1,709,9722
19 August 20225
90,396
2,052,0004
8 April 2023
43,579
2,104,0005
15 March 2024
16,840
750,0002
19 August 2022
16,841
750,0002
19 August 2022
–
–
Performance shares
8 April 2020
22.7
39,647
39,647
900,0004
8 April 2023
Performance shares
15 March 2021
48.28
19,107
19,107
922,5005
15 March 2024
Conditional Award
26 November 2019
45.202
16,592
–
–
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 LTIP 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 LTIP 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 LTIP 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).
4 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 £19.976 converted to € (using average FX rate over the same five
day period of €0,881 to £1 = €22.7).
5 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 £41.38 converted to € (using average FX rate over the same
five-day period of €0.857 to £1 = €48.28).
6 Following the testing of the performance conditions, this award has now lapsed.
Review of past performance and CEO remuneration table (unaudited)
Share price performance
Shares are valued using the Company’s closing market share price on 31 December 2021 of £33.06 (2020: £35.06). During 2021, the shares traded in the
range of £29.46 – £47.04.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
1 1 7
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Annual Report on Remuneration
continued
RHI Magnesita total shareholder return
The graph below compares the Total Shareholder Return of the Company with the FTSE 350 Index from Admission date of 27 October 2017 to 31 December
2021. This is considered an appropriate comparator for RHI Magnesita because it is a constituent of the index.
180
160
140
120
100
80
60
40
27/10/18 31/12/18
31/12/19
31/12/20
31/12/21
RHI Magnesita
FTSE 350
Source: Datastream (Thomson Reuters).
Remuneration of the CEO
Single figure of total remuneration1
Stefan Borgas
Annual bonus pay-out as % of maximum2, 3
Stefan Borgas
Long-term incentive vesting rates as % of maximum4
2017
2018
2019
2020
2021
€476,981 €2,073,350
€1,490,427
€1,892,862
€1,584,758
83.16%
88.04%
38.9%
50%
24%
Stefan Borgas
N/A
N/A
N/A
0%
0%
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 N.V.
3 The percentage of maximum shown for the 2020 annual bonus is the amount paid to the CEO. The formulaic bonus outcome is 100% of maximum.
4 A long-term incentive plan was introduced when the Company was formed in October 2017. The first 2018 LTIP award was eligible to vest in 2021 based on a performance period ending 31 December
2020 (and to 31 January 2021 for the TSR element). The performance conditions were not met. The 2019 awards vest in 2022 based on a performance period ending 31 December 2021. As detailed
elsewhere, no 2019 LTIP award is payable as performance conditions have not been met. See page 114.
Annual percentage change in remuneration of the CEO (unaudited)
The table below illustrates the percentage change in annual salary, benefits and bonus between 2020 and 2021 for the CEO and the average for all
Austrian employees of the Company. The CEO is an Austrian-based employee; therefore, 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
(2020 to 2021)
Benefits change
(2020 to 2021)
Annual bonus
change (2020
to 2021)
2.5%
2.9%
-2.3%1
-5.5%1
-51.3%
-49.0%
1 Eligible employees have exchanged their car to an electric car during 2021. Due to Austrian tax law electric cars are not a taxable employee benefit (compared to non-electric cars). Therefore CEO and
employee taxable benefits for 2021 fell slightly.
1 1 8
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Directors and employee remuneration over time (unaudited)
The table below shows the Directors’ total remuneration year on year change (on a full-time equivalent basis)
Year
Executive Directors2
Stefan Borgas
Ian Botha
Non-Executive Directors
Herbert Cordt
John Ramsay
Janet Ashdown
David Schlaff
Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg
Fiona Paulus
Jann Brown
Karl Sevelda
Marie-Hélène Ametsreiter
Sigalia Heifetz
Wolfgang Ruttenstorfer
Karin Garcia5
Martin Kowatsch5
Michael Schwarz5
Celia Baxter6
Andrew Hosty6
Company performance
Adjusted EPS
Reported EBIT in € million
Operating Cash Flow in € million
Total
remuneration
in FY 2021
Change %
2020 to 2021
Change %
2019 to 2020
Change % from
2018 to 20191
€1,584,758
-16.28%3
€938.347
-16.45%4
£241,000
£122,900
£104,522
£71,100
£71,100
£84,728
£52,566
£82,314
£48,017
£48,017
6.09%
31.92%
19.92%
5.98%
5.98%
5.99%
N/A4
10.02%
N/A4
N/A4
27%
N/A4
3.2%
12.9%
N/A4
3.2%
3.2%
N/A4
–
3.2%
–
–
£79,300
5.99%
3.2%
–
–
–
£42.234
£36.182
4.46
213,8
-236
–
–
–
N/A4
N/A4
36.0%
77.3%
-181.4%
–
–
–
3.1%
-3.9%
-41.1%
-55.8%
-28.1%
N/A4
–
–
6.4%
N/A4
–
–
N/A
–
–
–
–
–
–
–
–
6.1%
3.8%
4.8%
-4.4%
1.7%
-23.0%
Average remuneration (on a full-time equivalent basis)
Employees of the Company7
€73,962
-3.4%
7.7%
4.1%
1 For notes on the change from 2018 to 2019, please see the 2019 Annual Report and for the change from 2019 to 2020 the 2020 Annual Report.
2 The Executive Directors waived 20% of basic salary and the Non-Executive Directors took a voluntary fee reduction of 10 % for a four-month period from 1 April 2020. The percentage change from 2020
to 2021 reflects this reduction.
3 Due to not reaching target on Company KPIs the bonus decreased and therefore the overall remuneration dropped also.
4 Where the incumbent did not serve for the full year, the calculation has not been made as it is unrepresentative.
5 Employee Representative Directors do not receive remuneration for that role, they are remunerated as employees of the Group.
6 Andrew Hosty and Celia Baxter ceased to be Directors on 10 June 2021.
7 The group of RHIM employees covers the parent company, namely all employees within the Austrian subsidiaries.
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
1 1 9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Annual Report on Remuneration
continued
Relative importance of spend on pay (unaudited)
The following table sets out the change in distributions to shareholders by way of dividend and share buyback and overall spend on pay in the financial year
ended 31 December 2020 compared with the financial year ended 31 December 2021.
Total gross employee pays
Dividends
Share buyback
You can find more information on the share buyback on page 37.
Payments to past Directors (audited)
2021
€ million
2020
€ million
Percentage
change
547.6
575.6
-4.86%
71.2
95.5
73.5
2.6
-4.22%
There were no payments to past Directors in the period 1 January to 31 December 2021. Andrew Hosty and Celia Baxter stepped down from the Board
on 10 June 2021 and received fees to that date (£36,182 and £42,234 respectively).
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 2021.
2022 remuneration (unaudited)
Set out below is how the Directors’ Remuneration Policy will be implemented during 2022. There are no significant changes in the way that the
Remuneration Policy will be implemented in 2022.
Salaries and fees for 2022
Directors’ salaries and fees (on a full-time equivalent basis)
Subject to approval at the 2022 AGM, the Directors’ salaries and fees will be increased in alignment with the general workforce increases (4.44%) from
1 January 2022. Owing to rounding, the exact percentages of increase differ but are never more than 4.45% which was the average increase of the Austrian
workforce.
Executives
Stefan Borgas
Ian Botha
Non-Executives
Chairman (inclusive of all Committee fees)
Non-Executive Directors
Deputy Chairman & Senior Independent Director
Chairmen of Audit & Compliance Committee, Remuneration Committee, Nomination Committee
(unless held by the Chairman) and Corporate Sustainability Committee
Membership of the Audit and Compliance and Remuneration Committees
Membership of the Nomination and Corporate Sustainability Committee
1
Fee and salary increases are rounded to the nearest 100.
20222
20212
Percentage
change
€1,098,800
€1,052,000
€642,300
€615,000
4.45%
4.44%
£251,700
£241,000
4. 44%
£74,200
£71,100
£28,500
£27,300
£19,900
£19,100
£8,500
£5,600
£8,200
£5,400
4.36%
4.40%
4.19%
3.66%
3.70%
The Company does not contribute to defined benefit pension schemes on behalf of Executive Directors or Non-Executive Directors. No director has a
prospective entitlement under a defined benefit scheme.
1 2 0
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
Annual bonus for 2022
The maximum potential annual bonus opportunity for FY22 remains at 150% of salary for both the CEO and CFO. The Committee has set bonus KPIs for
2022 which focus on key 2022 financial measures as well as our strategic priorities. Both 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.
Performance criteria
Adjusted EBITA
Operating Cash Flow
Strategic Initiatives ¹
Increase global value market share
Reduce conversion cost
Reduce CO2 emissions
Use of Secondary Raw Material
Weighting
2021
35%
35%
10%
10%
10%
N/A
2022
35%
35%
10%
10%
N/A
10%
1
The specific targets relating to the 2022 bonus have not been disclosed at this stage as they are considered by the Committee to be commercially sensitive, and it is not considered in the interests
of shareholders to disclose further details on a prospective basis. Details will be provided on a retrospective basis in next year’s Annual Report on Remuneration.
2022 LTIP awards
The CEO will be granted a LTIP award over shares with a value at grant of 200% and the CFO will be granted a LTIP award over shares with a value at grant of
150% of salary. Taking into account the ongoing market and economic outlook and uncertainty, the Committee decided to retain the focus on absolute
(rather than relative) total shareholder return, and total cumulative EPS. As outlined earlier in this report, the Committee recognises the importance of
attaining our targets for the reduction of carbon emissions. For 2022 we have moved our CO2 emission target from the annual bonus to the LTIP aligning it to
our long-term reduction strategy. The measures and the targets are set out below.
Performance measure
TSR1
Adjusted EPS (cumulative for the three-year performance period)2
Reduce CO2 emissions per tonne against 2018 2
Weighting
25%
50%
25%
1 Measured from the date of grant to third anniversary with a two-month average before each date.
2 Measured over the three financial years to 31 December 2024.
3 Awards vest on a straight- line basis between threshold intermediate and maximum.
Threshold
(25%
vesting)
Intermediate
(75% of
vesting)
Maximum
(100%
vesting)
Performance
period
15%
22%
14.25/ps
16.50/ps
-11.5%
-12.5%
19.25/ps
27% 2022 to 2024
(+2 year
holding
period post
vesting)
-13.0%
This report was reviewed and approved by the Board on 25 February 2022 and signed on its behalf by order of the Board.
Janet Ashdown
Chairman of the Remuneration Committee
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
1 2 1
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Financial Statements
123 Consolidated Statement of Financial Position
124 Consolidated Statement of Profit or Loss
125 Consolidated Statement of Comprehensive Income
126 Consolidated Statement of Cash Flows
127
129 Notes
190 Company Financial Statements of RHI Magnesita N.V.
194 Notes
Consolidated Statement of Changes in Equity
Independent auditor’s report
Alternative performance measures (APMs)
Other Information
201
211
212 Glossary
213
Shareholder information
1 2 2
R H I M A G N E S I T A A N N U A L RE P O R T 2 0 2 1
STRATEGIC REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
OTHER
INFORMATION
Consolidated Statement of Financial Position
as of 31.12.2021
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
Assets disposal groups
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
Liabilities disposal groups
Note
31.12.2021
31.12.2020
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(5)
(22)
(23)
(24)
(25)
(26)
(16)
(27)
(28)
(29)
(30)
(25)
(26)
(31)
(32)
(33)
(5)
114.4
282.6
1,089.7
5.7
14.6
41.2
202.4
1,750.6
976.5
568.2
35.1
2.9
580.8
0.0
2,163.5
3,914.1
49.5
736.4
785.9
36.3
822.2
1,321.0
106.0
48.4
269.0
68.7
63.6
5.9
110.8
265.7
958.6
16.3
14.5
26.6
199.2
1,591.7
477.4
351.8
27.7
0.3
587.2
16.6
1,461.0
3,052.7
49.5
596.6
646.1
20.0
666.1
983.0
88.8
45.0
303.6
70.5
62.6
4.8
1,882.6
1,558.3
218.1
19.2
878.8
38.2
55.0
0.0
1,209.3
3,914.1
131.5
44.0
522.7
25.8
86.4
17.9
828.3
3,052.7
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 2 1
123
Consolidated Statement of Profit or Loss
from 01.01.2021 to 31.12.2021
in € million
Revenue
Cost of sales
Gross profit
Selling and marketing expenses
General and administrative expenses
Restructuring
Other income
Other expenses
EBIT
Interest income
Interest expenses on borrowings
Net income/(expense) on foreign exchange effects and related derivatives
Other net financial expenses
Net finance costs
Result from 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
Note
(34)
(35)
(36)
(37)
(38)
(39)
(40)
(41)
(42)
(43)
(13)
(44)
(24)
(51)
2021
2,551.4
(1,967.9)
2020
2,259.0
(1,708.9)
583.5
(108.1)
(217.4)
(58.8)
29.1
(14.5)
213.8
14.2
(20.7)
2.8
(21.2)
(24.9)
100.2
289.1
(39.4)
249.7
243.1
6.6
550.1
(110.9)
(198.3)
(113.8)
19.7
(26.2)
120.6
5.9
(20.1)
(42.8)
(29.7)
(86.7)
7.6
41.5
(13.9)
27.6
24.8
2.8
5.10
5.05
0.51
0.50
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 2 1
STRATEGIC REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
OTHER
INFORMATION
Consolidated Statement of Comprehensive Income
from 01.01.2021 to 31.12.2021
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
Reclassification to profit or loss - Disposal subsidiaries
Cash flow hedges
Unrealised fair value changes
Deferred taxes thereon
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
Reclassification to other reserves due to disposal 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
Note
2021
249.7
2020
27.6
(227.8)
39.9
3.7
15.8
(2.0)
(2.0)
0.3
0.0
(3.6)
0.9
(174.7)
(0.7)
0.6
0.0
0.0
(0.1)
70.5
0.6
0.1
(14.1)
3.5
0.0
0.0
(7.9)
8.7
(2.1)
59.3
25.3
(5.2)
0.6
(0.5)
20.2
79.5
(174.8)
329.2
320.5
8.7
(147.2)
(147.5)
0.3
(6)
(44)
(55)
(40)
(5)
(54)
(44)
(27)
(44)
(13)
(24)
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 2 1
125
Consolidated Statement of Cash Flows
from 01.01.2021 to 31.12.2021
in € million
Cash (used in) / generated from operations
Income tax paid less refunds
Net cashflow from operating activities
Investments in property, plant and equipment and intangible assets
Investments in subsidiaries net of cash acquired
Cash flows from sale of subsidiaries net of cash disposed of
Cash receipts from the sale of equity instruments of interests in joint ventures
Cash inflows from the sale of property, plant and equipment
Dividends received from joint ventures and associates
Investment subsidies received
Interest received
Cash outflows / inflows from non-current receivables
Net cashflow from investing activities
Acquisition of treasury shares
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 cashflow from financing activities
Total cash flow
Change in cash and cash equivalents
Cash and cash equivalents at beginning of year1)
Foreign exchange impact
Cash and cash equivalents at year-end
1) thereof shown under assets held for sale €2.0 million as of 31.12.2020.
Note
(47)
(49)
(49)
(48)
(21)
2021
(53.3)
(38.5)
(91.8)
(252.1)
3.2
(4.8)
100.0
12.2
7.6
2.4
2.7
(0.1)
2020
366.6
(47.6)
319.0
(156.9)
(8.5)
0.0
0.0
10.5
10.8
0.0
6.0
0.2
(128.9)
(137.9)
(95.5)
(71.2)
(1.4)
516.1
(112.7)
5.5
(26.6)
(16.3)
(1.1)
0.9
197.7
(23.0)
(23.0)
589.2
14.6
580.8
(2.7)
(49.1)
(1.1)
97.6
(23.7)
7.4
(30.5)
(15.8)
(1.3)
1.5
(17.7)
163.4
163.4
467.2
(41.4)
589.2
126
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 2 1
Consolidated Statement of Changes in Equity
from 01.01.2021 to 31.12.2021
Group reserves
Accumulated other comprehensive income
Mandatory
reserve
Retained
earnings
Cash flow
hedges
Defined
benefit plans
Currency
translation
Accumulated
other
comprehensive
income/expenses
relating to
disposal groups
Equity
attributable
to shareholders
of RHI
Magnesita N.V.
Non-
controlling
interests
Share
capital
(22)
49.5
Treasury
shares
(23)
(21.5)
Additional
paid-in
capital
(23)
361.3
in € million
Note
31.12.2020
Profit after income tax
Currency translation differences
Market valuation of cash flow hedges
Remeasurement of defined benefit plans
Share of other comprehensive
income of joint ventures and
associates
Other comprehensive income after
income tax
Total comprehensive income
Dividends
Shares repurchased 1)
Reclassification of puttable non-
controlling interests without change of
control2)
Change in non-controlling interests
due to addition to consolidated
companies
Reclassification of puttable non-
controlling interests without a change
of control
Share-based payment expenses
Transactions with shareholders
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(95.5)
-
-
-
-
(95.5)
(117.0)
(23)
288.7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(23)
376.8
243.1
-
-
-
(0.5)
(0.5)
242.6
(71.2)
-
(1.6)
-
(20.0)
6.2
(86.6)
532.8
(23)
(13.7)
-
-
6.6
-
-
6.6
6.6
-
-
-
-
-
-
-
(23)
(23)
(145.7)
(257.1)
-
-
-
20.0
0.6
20.6
20.6
-
-
-
-
-
-
-
-
58.5
-
-
-
58.5
58.5
-
-
1.4
-
-
-
1.4
7.8
-
(7.9)
-
0.1
-
(7.8)
(7.8)
-
-
-
-
-
-
-
(7.1)
(125.1)
(197.2)
0.0
31.12.2021
49.5
361.3
288.7
1) The share buyback programme initiated in December 2020 has been completed in April 2021. The share buyback program was subsequently extended in May 2021 and completed in August 2021.
2) Further information is provided under Note (5) and Note (53).
646.1
243.1
50.6
6.6
20.1
(24)
20.0
6.6
2.1
-
-
Total
equity
666.1
249.7
52.7
6.6
20.1
0.1
-
0.1
77.4
320.5
(71.2)
(95.5)
2.1
8.7
(1.4)
-
79.5
329.2
(72.6)
(95.5)
(0.2)
9.0
8.8
-
3.4
3.4
(20.0)
6.2
(180.7)
785.9
(3.4)
(23.4)
-
7.6
6.2
(173.1)
36.3
822.2
S
T
R
A
T
E
G
C
R
E
P
O
R
T
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
R
M
A
T
O
N
I
1
2
8
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
2
1
in € million
Note
31.12.2019
Share
capital
(22)
49.5
Treasury
shares
(23)
(18.8)
Additional
paid-in
capital
(23)
361.3
Profit after income tax
Currency translation differences
Market valuation of cash flow hedges
Remeasurement of defined benefit plans
Other comprehensive income after
income tax
Total comprehensive income
Dividends
Shares repurchased
Share-based payment expenses
Transactions with shareholders
-
-
-
-
-
-
-
-
-
-
31.12.2020
49.5
-
-
-
-
-
-
-
(2.7)
-
(2.7)
(21.5)
Group reserves
Accumulated other comprehensive income
Mandatory
reserve
Retained
earnings
Cash flow
hedges
(23)
288.7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(23)
379.6
24.8
-
-
-
-
24.8
(24.5)
-
(3.1)
(27.6)
376.8
Defined
benefit
plans
(23)
(145.6)
-
-
-
(0.1)
(0.1)
(0.1)
-
-
-
-
(23)
(11.0)
-
-
(2.7)
-
(2.7)
(2.7)
-
-
-
-
Accumulated
other
comprehensive
income/expenses
relating to
disposal groups
Equity
attributable to
shareholders
of RHI
Magnesita N.V.
Currency
translation
Non-
controlling
interests
Total equity
(23)
(79.8)
-
(177.3)
-
-
(177.3)
(177.3)
-
-
-
-
-
-
7.9
-
(0.1)
7.8
7.8
-
-
-
-
823.9
24.8
(169.4)
(2.7)
(0.2)
(172.3)
(147.5)
(24.5)
(2.7)
(3.1)
(30.3)
646.1
(24)
20.8
2.8
(2.5)
-
-
(2.5)
0.3
(1.1)
-
-
(1.1)
20.0
844.7
27.6
(171.9)
(2.7)
(0.2)
(174.8)
(147.2)
(25.6)
(2.7)
(3.1)
(31.4)
666.1
361.3
288.7
(13.7)
(145.7)
(257.1)
7.8
STRATEGIC REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
OTHER
INFORMATION
Notes
to the Consolidated Financial Statements 2021
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”) are 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 chemicals (petrochemicals) sectors.
The shares of RHI Magnesita N.V. are listed on the Main Market of the London Stock Exchange and are included in the FTSE 250 Index, with a secondary listing
on the Vienna Stock Exchange.
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.
For the following German entities the exemption clause pursuant to section 264 paragraph 3 HGB (German commercial Code) was applied: RHI Urmitz AG &
Co. KG (Koblenz), Magnesita Refractories GmbH (Wiesbaden), RHI Dinaris GmbH (Wiesbaden), RHI GLAS GmbH (Wiesbaden), RHI Magnesita Services Europe
GmbH (Cologne), RHI Refractories Site Services GmbH (Wiesbaden), RHI Sales Europe West GmbH (Coblenz), RHI Magnesita Deutschland AG (Wiesbaden).
The Consolidated Financial Statements for the period from 1 January 2021 to 31 December 2021 were drawn up in accordance with all International Financial
Reporting Standards (IFRSs) mandatory at the time of preparation as adopted by the European Union (EU). The presentation in the Consolidated Statement of
Financial Position distinguishes between current and non-current assets and liabilities. Assets and liabilities are classified as current if they are due within one
year or within a longer normal business cycle or if the company does not have an unconditional right to defer settlement of the liability for at least 12 months
after the reporting date. Inventories as well as trade receivables and trade payables are generally presented as current items. Deferred tax assets and liabilities as
well as assets and provisions for pensions and termination benefits are generally presented as non-current items.
The Consolidated Statement of Profit or Loss is drawn up in accordance with the cost of sales method.
With the exception of specific items such as derivative financial instruments and plan assets for defined benefit obligations, the Consolidated Financial
Statements are prepared on a historical cost basis unless otherwise stated.
Basis for preparation
The preparation of the Consolidated Financial Statements in accordance with generally accepted accounting principles under IFRS, as adopted by the EU,
requires the use of estimates and assumptions that influence the amount and presentation of assets and liabilities recognised as well as the disclosure of
contingent assets and liabilities as of the reporting date and the recognition of income and expenses during the reporting period. Although these estimates
reflect the best knowledge of management based on experience from comparable transactions, the actual values recognised at a later date may differ from
these estimates. The financial statements are prepared on a going concern basis.
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 27 February 2022 and will be submitted for adoption to the Annual General Meeting of shareholders on 25 May
2022.
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 2 1
129
Notes continued
2. Initial application of new financial reporting standards
The following amendments of standards have become effective during the reporting period. None of these amendments will have an effect on the Group’s
accounting and measurement principles.
Standard
Title
Amendments of standards
Publication
(Effective date)1)
Effects on RHI Magnesita Consolidated
Financial Statements
IFRS 16
Amendment to IFRS 16 Leases Covid 19-Related Rent Concessions
beyond 30 June 2021
IFRS 4
Amendments to IFRS 4 Insurance Contracts - deferral of IFRS 9
IFRS 9, IAS 39,
IFRS 7, IFRS 4
and IFRS 16
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Interest
Rate Benchmark Reform - Phase 2
1) According to EU Endorsement Status Report of 01.02.2022.
31.03.2021
(01.04.2021)
25.06.2020
(01.01.2021)
27.08.2020
(01.01.2021)
No effect
Not relevant
No effect
IFRS 7, IFRS 9, IAS 39, IFRS 16, IFRS 4 “Interest Rate Benchmark Reform”
In 2019 RHI Magnesita elected to early adopt the Phase 1 amendments to IAS 39 and IFRS 7 Interest Rate Benchmark Reform (IBOR) issued in September 2019
and is still applying the Phase 1 amendments in the Consolidated Financial Statements of 2020. 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 Phase 1 amendments provided temporary relief from applying specific hedge accounting requirements to hedging relationships
directly affected by the IBOR reform by assuming that the interest rate benchmark is not altered as a result of the IBOR reform. The reliefs stipulated in the IBOR
reform should not cause hedge accounting to terminate in general. However, any hedge ineffectiveness was continued and continues to be recorded in the
Consolidated Statement of Profit or Loss. 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.
In August 2020 the Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 were issued, which focus on the treatment of accounting impacts arising
from the actual transition from the currently used to an alternative benchmark interest. The Phase 2 amendments are effective for annual periods beginning on
or after 1 January 2021 and are to be applied retrospectively. 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 mid-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). The applicable 3-month USD LIBOR is continued to being published until 30 June 2023 - which is after the last interest fixing date
of the USD 200 million debt and interest rate swap. Therefore, the potential risk of any hedge ineffectiveness can be considered immaterial. Even in the unlikely
scenario of discontinuation of USD LIBOR before 2023, management considers that the hedged debt would move to the same alternative benchmark rate as
the swap, without any material effect on the Group.
One of the main uncertainties regarding LIBOR, even if not directly impacting the Group’s structural debt, is the use of its replacement rates after 31 December
2021. As USD LIBOR cannot be applied to new contracts starting 1 January 2022, the Group is being exposed to LIBOR replacement rates for its working capital
and short-term financings in USD. Currently, the market predominantly uses a combination of the Secured Overnight Financing Rate (SOFR), plus a fixed credit
spread adjustment that is based on a lookback period comparing credit spreads between SOFR and USD LIBOR, ranging from two to five years. As for the SOFR
rate, either the simple overnight rate or specific Term-SOFR is used depending on the bank and product. There are still uncertainties in the market whether a
true benchmark rate will prevail, that is as easily comparable and widely used as the USD LIBOR, however management is in close contact with banking
counterparts to understand how the pricing of each underlying transaction is formed.
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€305.6 million and its corresponding 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
alternative benchmark rate as the swap.
RHI Magnesita is continuing to closely monitor the developments of the IBOR reform and is in regular communication with the banks to minimise any
mismatches going forward.
IFRS 16 “Amendment to IFRS 16 Leases Covid-19-Related Rent Concessions”
The amendment permits lessees, as a practical expedient, not to assess whether particular rent concessions occurring as a direct consequence of the COVID-
19 pandemic are lease modifications and instead to account for those rent concessions as if they are not lease modifications.
The practical expedient only applies to rent concessions occurring as a direct consequence of the COVID-19 pandemic and only if the following conditions are
met cumulatively:
•
•
•
The change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the
lease immediately preceding the change;
Any reduction in lease payments affects only payments due on or before 30 June 2022; and
There is no substantive change to other terms and conditions of the lease.
RHI Magnesita has evaluated the effect of applying the amendment to IFRS 16 Leases “COVID-19-Related Rent Concessions” with the conclusion that the
Company will not make use of the practical expedient and that there is no effect to be expected to the Group.
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 2 1
STRATEGIC REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
OTHER
INFORMATION
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 2021.
The following financial reporting standards have not yet been adopted by the EU and were not applied early on a voluntary basis. They are not expected to have
a significant impact on RHI Magnesita.
Standard
Title
New standards and interpretations
IFRS 14
Regulatory Deferral Accounts
IFRS 17
Insurance Contracts; including amendments to IFRS 17
Amendments of standards
Publication1)
Mandatory
application for
RHI Magnesita
Expected effects on
RHI Magnesita
Consolidated
Financial
Statements
30.01.2014
18.05.2017
(09.12.2021)
No EU
endorsement
Not relevant
01.01.2023
Not relevant
IAS 1
IAS 1
IAS 8
IAS 12
Classification of Liabilities as Current or Non-current
23.01.2020
01.01.2023
Amendments to IAS 1 Presentation of Financial Statements and IFRS
Practice Statement 2: Disclosure of Accounting policies
Amendments to IAS 8 Accounting policies, Changes in Accounting
Estimates and Errors: Definition of Accounting Estimates
12.02.2021
01.01.2023
12.02.2021
01.01.2023
Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and
Liabilities arising from a Single transaction
07.05.2021
01.01.2023
No material
effects expected
No material
effects expected
No material
effects expected
No material
effects expected
1)According to EU Endorsement Status Report of 01.02.2022.
The following financial reporting standards have been adopted by the EU and were not applied early on a voluntary basis. They are not expected to have a
significant impact on RHI Magnesita.
Standard
Title
New standards
Amendments of standards
Publication
(EU endorsement)1)
Mandatory
application for
RHI Magnesita
Expected effects on
RHI Magnesita
Consolidated
Financial
Statements
IFRS 17
IFRS 17 Insurance Contracts (issued on 18 May 2017);
including Amendments to IFRS 17
IFRS 3, IAS 16, IAS 37
Amendments to IFRS 3 Business Combinations; IAS 16 Property Plant
and Equipment; IAS 37 Provisions, Contingent Liabilities and
Contingent Assets as well as Annual Improvements 2018-2020
25.06.2020
01.01.2023
not relevant
14.05.2020
01.01.2022
No material
effects expected
1)According to EU Endorsement Status Report of 01.02.2022.
4. Other changes in comparative information
Segment reporting
As foundry is a very fragmented small customer industry and Segment Industrial is used to serve many more customers than only Segment Steel, given the
multitude of different customer industries RHI Magnesita delivers to, the responsibility of the foundry business has been moved from the Segment Steel to
Segment Industrial in 2021. The information for the previous year was adjusted accordingly, impacting segment revenue by €12.9 million, segment gross profit
by €3.6 million and segment assets by €11.3 million.
5. 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.
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 2 1
131
Notes continued
The main operating companies of the RHI Magnesita Group and their core business activities are as follows:
Name and registered office of the company
RHI Magnesita Deutschland AG, 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
RHI Magnesita India 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. Intangible assets which were previously not
recognised in the separate Financial Statements of the company acquired are also measured at fair value. Intangible assets identified when a company is
acquired, including for example technology, mining rights and customer relations, are only measured separately at the time of acquisition if they are identifiable
and are in the control of the company and a future economic benefit is expected.
For acquisitions where less than 100% of shares in companies are acquired, IFRS 3 allows an accounting policy choice whereby either goodwill proportionate
to the share held or goodwill including the share accounted for by non-controlling interests can be recognised. This accounting policy choice can be exercised
individually 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 in 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 in 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 result in 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 deconsolidated on the day
control ceases.
Foundation of RHI Magnesita (Chongqing) Co., Ltd., Chongqing, China
On 2 November 2021 RHI Magnesita Group has founded RHI Magnesita (Chongqing) Co., Ltd., Chongqing, China (RHIMNGG). The Group holds a stake of 51%
in the share capital of the company.
RHI Magnesita Group exercises control over RHIMNGG, as through voting rights and management representation, it has the power to steer the relevant
activities of the business and can use this power to affect the variable returns from the company that it is exposed to. Therefore, RHIMNGG is a fully consolidated
entity.
The non-controlling interests have the option to put the remaining equity stake to RHI Magnesita in 2031. RHI Magnesita opts to account for the non-
controlling interests in accordance with IFRS 10. Thus, the non-controlling interests are initially recognised in accordance with IFRS 3 within equity while the
132
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 2 1
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GOVERNANCE
FINANCIAL
STATEMENTS
OTHER
INFORMATION
put option liability is initially recognised against the non-controlling interest, reducing it to zero. The put option liability is recognised as a financial liability in
accordance with IFRS 9. Further information on the fair value of the put option is provided under Note (53).
Disposal of RHI NORMAG AS and Premier Periclase Limited
In line with the Group’s raw material strategy, the Group completed the disposal of RHI Normag AS, Porsgrunn, Norway and Premier Periclase Limited,
Drogheda, Ireland on 1 February 2021, being classified as held for sale as at 31 December 2020. The fair value less cost of disposal of the disposal group was
determined with reference to the compensation payable to the purchaser. The total gain on loss of control of €6.0 million recognised in the Consolidated
Statement of Profit or Loss predominantly relates to the recycling of certain components of Other Comprehensive Income of the entities within the disposal
group.
The gain on loss of control is presented as follows:
in € million
Loss on derecognition of net assets
Recycling of OCI components to P&L
Result from deconsolidation
Cash consideration payable to the purchaser
Gain from loss of control
01.02.2021
(1.2)
8.0
6.8
(0.8)
6.0
As of 31 December 2021, further provisions for restructuring costs amounting to €4.2 million have been recognised for the exposure to an environmental
guarantee and unfavourable contracts, see Note (33).
The following assets and liabilities were disposed of as at 1 February 2021:
in € million
Non-current assets
Inventories
Trade receivables and other current assets
Cash and cash equivalents
Assets
Non-current liabilities
Current liabilities
Liabilities
01.02.2021
5.3
7.2
2.0
4.0
18.5
1.4
15.9
17.3
Merger of Indian entities
In June 2021 the two Indian subsidiaries RHI CLASIL Private Limited and RHI India Private Limited were merged into RHI Orient Refractories Limited (ORL), now
renamed to RHI Magnesita India Limited, leaving RHI Magnesita with a share of 70.19% in ORL. As a result of this transaction, put options held by the minority
shareholders were waived and consequently the current financial liability of €8.8 million was reclassified to non-controlling interest within equity. Further
information is provided under Note (24) and (53).
Joint ventures and associates
Shares in joint ventures and associates are accounted for using the equity method. A joint venture is a joint arrangement between the RHI Magnesita Group and
one or several other partners whereby the parties that have joint control over the arrangement have rights to the net assets of the arrangement.
An associate is an entity over which the RHI Magnesita Group has significant influence. Significant influence is the power to participate in the investee’s
financial and operating policy decisions without control or joint control. There is the rebuttable presumption that if a company holds directly or indirectly 20%
of the shares of the investee or has other possibilities (e.g. through seats in the supervisory board) to influence the company’s financial and operating policy
decisions it has significant influence over the investee.
At the date of acquisition, a positive difference between the acquisition costs and the share in the fair values of identified assets and liabilities of the joint
ventures and associates is determined and recognised as goodwill. Goodwill is shown as part of investments in joint ventures and associates in the Statement of
Financial Position.
The carrying amount of investments accounted for using the equity method is adjusted each year to reflect the change in 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 upon consolidation, if material.
RHI Magnesita examines at every reporting date whether there exist any objective indications of an impairment of the shares in joint ventures and associates. If
such indications exist, an impairment loss is determined as the difference between the recoverable amount and the carrying amount of the joint ventures and
associates and is recognised in profit and loss in the item share of profit of joint ventures and associates.
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 2 1
133
Notes continued
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.
Acquisition of Chongqing Boliang Refractory Materials Co., Ltd, Chongqing, China
On 30 December 2021 RHI Magnesita Group has acquired a 51% ownership stake over Chongqing Boliang Refractory Materials Co., Ltd, Chongqing, China
(RHIMNU), for a cash consideration of €5.2 million.
RHI Magnesita Group has determined that it does not control Chongqing Boliang Refractory Materials Co., Ltd even though the Group owns 51% of the issued
capital of this entity. The Group is not represented in the management board of the entity and does not have the power to direct the relevant activities of the
entity, but participates in central financial policy-making choices, including decisions about dividends. RHI Magnesita Group has significant influence over
RHIMNU. RHI Magnesita Group has the option to purchase the remaining equity stake from the JV partner in 2031 therefore.
Disposal of Magnifin
As MAGNIFIN Magnesiaprodukte GmbH & Co KG (“MAGNIFIN”), is not core to RHI Magnesita’s growth strategy, the 50% stake in Magnifin was sold as of
30 December 2021 for a cash consideration of €100.0 million to the joint venture partner J.M. Huber Corporation. The book value as of 31 December 2021 of
the interest in the joint venture amounts to €0.0 million (31.12.2020: €15.8 million). Most of its profits are distributed and RHI Magnesita is entitled to receive the
share of the dividend accordingly until closing. Further information is provided under Note (13).
6. Foreign currency translation
Functional currency and presentation currency
The Consolidated Financial Statements are presented in Euro, which represents the functional and presentation currency of RHI Magnesita N.V.
The items included in the Financial Statements of each Group company are based on the currency of the primary economic environment in which the
company operates (functional currency).
Foreign currency transactions and balances
Foreign currency transactions in the individual Financial Statements of Group companies are translated into the functional currency based on the exchange
rate in effect on the date of the transaction. Gains and losses arising from the settlement of such transactions and the measurement of monetary assets and
liabilities in foreign currencies at the closing rate are recognised in profit or loss under net expense on foreign exchange effects and related derivatives.
Unrealised currency translation differences from monetary items which form part of a net investment in a foreign operation are recognised in other
comprehensive income in equity. 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 denominated in foreign currency are carried at historical rates.
If foreign companies are deconsolidated, the currency translation differences are recycled to 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.
Group companies
The Annual Financial Statements of foreign subsidiaries that have a functional currency differing from the Group presentation currency are translated into
Euros as follows:
Assets and liabilities are translated at the closing rate on the reporting date of the Group, while monthly income and expenses and consequently the profit 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 forward from the prior year are recorded under other comprehensive
income without recognition to profit or loss. Monthly cash flows are translated at the respective closing rates of the previous month. Goodwill and adjustments
to the fair value of assets and liabilities related to the purchase price allocations of a subsidiary outside the European currency area are recognised as assets and
liabilities of the respective subsidiary and translated at the closing rate.
RHI Magnesita has evaluated the effect of applying IAS 29 “Financial Reporting in Hyperinflationary Economies” in Argentina with the conclusion that the
effect on the Consolidated Financial Statements is considered immaterial to the Group.
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STATEMENTS
OTHER
INFORMATION
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
Chinese Renminbi Yuan
Indian Rupee
Mexican Peso
Norwegian Krone
Pound Sterling
Swiss Franc
South African Rand
Turkish Lira
US Dollar
Closing rate
Average rate1)
1 € =
ARS
BRL
CAD
CNY
INR
MXN
NOK
GBP
CHF
ZAR
TRY
USD
31.12.2021
31.12.2020
116.25
6.30
1.44
7.20
83.89
23.12
9.98
0.84
1.03
17.97
15.01
1.13
103.47
6.38
1.57
8.03
89.83
24.45
10.50
0.90
1.08
17.97
9.07
1.23
2021
111.99
6.38
1.49
7.68
87.76
24.20
10.21
0.86
1.08
17.60
10.29
1.19
2020
79.35
5.83
1.53
7.89
84.13
24.48
10.76
0.89
1.07
18.72
7.96
1.14
1) Arithmetic mean of the monthly closing rates.
7. 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.
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. Given that globally there are currently few or no
viable alternatives for the construction and automotive segments to use other than Steel and Industrial products such as Cement and Glass and given the
production process for Steel and Industrial products is moving towards green production, which will still require very high temperatures, our refractory products,
also in the green economy, will remain to be required. The raw materials to our refractory products, that are extracted from our mines, will therefore continue to
be used in line with previously assessed economic useful life terms, based on our current assessment. However, there remains a level of uncertainty and our
views may change over time. Therefore the number of years of depreciation and cash generation to offset the carrying value of these assets, have remained
unchanged in our assessment.
Customer relations were recognised in the course of purchase price allocations of acquired subsidiaries and are amortised on a straight-line basis over their
expected useful life.
Research costs are expensed in the year incurred and included in general and administrative expenses.
Development costs are only capitalised if the allocable costs of the intangible asset can be measured reliably during its development period. Moreover,
capitalisation requires that the product or process development can be clearly defined, is feasible in technical, economic and capacity terms and is intended for
own use or sale. In addition, future cash inflows which cover not only normal costs but also the related development costs must be expected. Capitalised
development costs are amortised on a straight-line basis over the expected useful life, however, with a maximum useful life of ten years. Amortisation is
recognised in cost of sales.
The development costs for internally generated software are expensed as incurred if their primary purpose is to maintain the functionality of existing software.
Expenses that can be directly and conclusively allocated to individual programmes and represent a significant extension or improvement over the original
condition of the software are capitalised as production costs and added to the original purchase price of the software. These direct costs include the personnel
expenses for the development team as well as a proportional share of overhead costs. Software is predominantly amortised on a straight-line basis over a period
of four years.
Purchased intangible assets are measured at acquisition cost, which also includes acquisition-related costs, less accumulated amortisation and impairments.
Intangible assets with a finite useful life are amortised on a straight-line basis over the expected period of useful life. The following table shows useful lives of the
Group’s main classes of intangible assets:
Customer relationships
Internally generated intangible assets
Other intangible assets
6 to 15 years
4 to 18 years
4 to 65 years
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Notes continued
Property, plant and equipment
Property, plant and equipment is measured at acquisition or construction cost, less accumulated depreciation and accumulated impairment losses. 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.
Construction costs of assets comprise of direct costs as well as a proportionate share of capitalisable overhead costs and borrowing costs. If borrowed funds are
directly attributable to an investment, borrowing costs are capitalised as production costs. If no direct connection between an investment and borrowed funds
can be demonstrated, 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 recognition
criteria are a legal or constructive obligation towards a third party and the ability to reliably estimate future cost.
Stripping costs incurred in the development phase to gain access to mines are recognised as a separate other non-current asset. These capitalised prepaid
expenses are subsequently depreciated by reference to the actual depletion of the mineral resources of the mine during the production phase.
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:
Real estate, land and buildings
Technical equipment, machinery
Other plant, furniture and fixtures
8 to 50 years
8 to 50 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 nine years for land and buildings, five years for technical equipment and three years for other equipment, furniture and
fixtures. Impacts resulting from extension and termination options, as well as residual value guarantees are immaterial.
RHI Magnesita makes use of the following practical expedients of IFRS 16:
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.
Since 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 principal payments on the liability and finance cost. The finance cost is charged to profit or loss over the lease
term 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 payments 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 3.62%.
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 conditions 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 carrying amount of the Right-of-use asset and the lease liability
has to be increased accordingly.
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OTHER
INFORMATION
Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised 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. Expenses for short-
term, low-value and variable lease payments in 2021 amount to €2.2 million (31.12.2020: €4.5 million). The total cash outflow for leases in 2021 amounts to
€19.6 million (31.12.2020: €21.7 million).
The residual values and economic useful lives of property, plant and equipment, intangible assets and Right-of-use assets are reviewed regularly and adjusted
if necessary.
When components of plant or equipment have to be replaced at regular intervals, the relevant replacement costs are capitalised as incurred if the criteria per
IAS 16 have been met. The carrying amount of the replaced components is derecognised. Regular maintenance and repair costs are expensed as incurred.
Gains or losses from the disposal of property, plant and equipment, which result as the difference between the net realisable value and the carrying amount, are
recognised as income or expense in the Consolidated Statement of Profit or Loss.
Impairment of property, plant and equipment, goodwill and other intangible assets
Property, plant and equipment, including Right-of-use assets, and intangible assets, are tested for impairment if there is any indication that the value of these
items may be impaired. Intangible assets with an indefinite useful live and goodwill are tested for impairment at least annually.
An asset is considered to be impaired if its recoverable amount is less than its 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 in
profit or loss.
In the case of impairment losses related to cash-generating units (CGUs) to which goodwill is allocated, the goodwill is reduced first. If the impairment loss
exceeds the carrying amount of goodwill, the difference is apportioned proportionately to the remaining non-current tangible and intangible assets of the CGU
on the basis of their carrying amounts. Reversals of impairment losses recognised on goodwill are not permitted and are therefore not considered.
If there is an indication for an impairment of a specific asset or a group of assets, only this specific asset will be tested for impairment. The recoverable amount is
determined as the asset’s fair value. If the fair value is lower than the carrying amount, an impairment loss is recorded in EBIT. If impairment losses arise due to
restructuring, they are recorded 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 presented for individual
assets. As a result, the assets are combined in CGUs, which largely generate independent cash inflows. These units are combined in strategic business units
and reflect the market presence and market appearance and are as such responsible for cash inflows. CGUs are determined based on group of assets that can
generate cash inflows independent of other assets.
The organisational structures of the Group reflect these units. In addition to the joint management and control of the business activities in each unit, the sales
know-how, the knowledge of RHI Magnesita’s long-standing customer relationships or knowledge of the customer’s production facilities and processes further
support these units. Product knowledge is manifested in the application-oriented knowledge of chemical, physical and thermal properties of RHI Magnesita
products. The services offered extend over the life cycle of RHI Magnesita products at the customer’s plant, from the appropriate installation and support of
optimal operations, to environmentally sound disposal with the customer or the sustainable reuse in 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 business unit, each industry line of business (Glass, Cement/Lime, Non-Ferrous Metals and Environment, Energy, Chemicals) forms a separate
CGU. All raw material producing facilities are combined in one CGU.
Major assumptions
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 assumptions were updated considering the latest developments of the COVID-19 pandemic, energy and raw material
prices. The detailed planning period was shortened by one year compared with the previous period and is now based on the Budget and Long-Term Plan for
the next four years. This is a change in estimate compared to prior period.
The detailed planning of the first four years is congruent with the strategic business and financial planning. Based on the detailed planning period, it is geared
to a steady-state business development, which balances out possible economic or other non-sustainable fluctuations in the detailed planning period and
forms the basis for the calculation of the terminal value. As in the previous year, the terminal value is based on a growth rate derived from the difference of the
current and the possible degree of utilisation of the assets.
RHI Magnesita is subject to environmental and other laws and regulations in various countries in which it operates and has established environmental policies
and procedures aimed at compliance with these laws. RHI Magnesita has incorporated considerations for increased energy and raw material prices in its Budget
and Long-Term Plan 2023-2025 and estimates the total increase in investments in research and development costs (related to both capitalisable assets and
expenditure) until 2025 at approximately €50 million. Current technology used by the industries requiring advanced heat-resistant materials for their
production depend on refractory materials and in our view will remain in use in the observable future. The impact of climate related risks on major assumption
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Notes continued
incorporated in forecasts and disclosures to relevant assets and obligations remains uncertain and therefore our estimations were not adjusted accordingly. This
will remain an area of increased focus in the upcoming reporting period.
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 7.7% and 9.8% in the year 2021. In the previous year, the discount rates ranged between
7.4% and 9.5%.
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 in the estimated future cash flows for impairment testing 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. Cash flows for other expansion investments are excluded from the DCF model; this applies in particular to expansion
investments that have been decided on but that have 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 2022 Budget and Long-Term Plan 2023 to 2025, which was approved by the Board, and developed with the growth rates
used in the forward-looking business plan. To forecast the CGUs’ cash flows, management predicts the growth rate using external sources for the development
of the customer’s industries and expert assumptions. This includes forecasts about the regional growth of the steel production and the output of the non-steel
clients. In combination with the development of the specific refractory consumption, which considers 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
2021
Steel Division - Linings
Steel Division - Flow Control
8.4%
8.7%
0.9%
0.9%
83.5
29.6
8.2%
8.1%
0.9%
0.9%
2020
Goodwill
in € million
84.2
25.0
The remaining immaterial portion of goodwill amounting to €1.3 million (31.12.2020: €1.6 million) is allocated to the remaining CGUs, all of them having
sufficient headroom.
Given that globally there are currently few or no viable alternatives for the construction and automotive segments to use other than Steel and Industrial
products such as Cement and Glass and given the production process for Steel and Industrial products is moving towards green production, which will still
require very high temperatures, our refractory products, also in the green economy, will remain to be required. As a result, the goodwill that produces our
refractory products will therefore continue to be used in line with previously assessed economic useful life terms, based on our current assessment. However,
there remains a level of uncertainty and our views may change over time. Therefore the number of years of depreciation and cash generation to offset the
carrying value of these assets, have remained unchanged in our assessment.
Result of impairment test
Based on the impairment test conducted at 31 December 2021, the recoverability of the assets was demonstrated for all CGUs.
As in the previous year, no reversals of impairments were made in the financial year 2021.
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. In general,
financial instruments can be classified to be measured subsequently as at amortised cost, at fair value through profit or loss or at fair value through other
comprehensive income. Classification of financial assets depends on the contractual terms of the cash flows as well as on the entity’s business model for
managing the financial assets. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets,
or both.
Further information on the Group’s financial assets and liabilities, as well as on the fair value measurement is provided under Note (53).
Other financial assets and liabilities
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 and in the previous reporting period a financial liability relating to the termination of an energy supply contract.
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OTHER
INFORMATION
Financial assets are classified as at amortised cost, if the contractual cash flows of the financial asset include solely payments of principal and interest and they
are held in order to collect the contractual cash flows. If the contractual cash flows of financial assets include solely payments of principal and interest, but they
are held in order to both collect the contractual cash flows and sell the financial asset, then the financial assets are classified as at fair value through other
comprehensive income. If the contractual cash flows of financial assets do not solely include payments of principal and interest, then these financial assets are
classified as at fair value through profit or loss.
The Group initially recognises securities on the trading date when the entity becomes a party to the contractual provisions of the instruments. All other
financial assets and financial liabilities are initially recognised on the date when they are originated. Financial instruments, except for trade receivables, are
initially recognised at fair value. Financial assets are derecognised if the entity transfers substantially all the risks and rewards or if the entity neither transfers nor
retains substantially all the risks and rewards and has not retained control. Financial liabilities are derecognised when the contractual obligations are settled,
withdrawn or have expired.
The Group’s investment in debt securities is subsequently measured at fair value through profit and loss, as the contractual terms of cash flows do not solely
include payments of principal and interest.
The Group’s investments in equity securities are of minor importance and are subsequently measured at fair value through profit or loss, since the irrevocable
option for subsequent measurement at fair value through OCI was not exercised.
Shares in non-consolidated subsidiaries (RHI Magnesita exercises control but the subsidiary is not-fully consolidated due to materiality reasons), shares in other
companies as well as securities are classified as at fair value through profit or loss in the RHI Magnesita Group. For materiality reasons if such financial assets are
of minor significance cost serves as an approximation of fair value. Directly attributable transaction costs are recognised in profit or loss as incurred. Securities at
fair value through profit or loss are measured at fair value and changes therein, including any interest income, are recognised in profit or loss.
Financial receivables are measured at amortised cost applying the effective interest method. Any doubt concerning the collectability of the receivables is
reflected in the use of the lower present value of the expected future cash flows according to the impairment model described below. Foreign currency
receivables are translated at the closing rate.
Derivative financial instruments, which are not designated in an effective hedging relationship in accordance with IFRS 9, must be carried 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 of either contracting party as well as interest rate
swaps.
The measurement of forward exchange contracts and embedded derivatives in open orders denominated in a currency other than the functional currency of
either contracting party 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,
including forward premiums and discounts. Unrealised valuation gains or losses and results from the realisation are recognised in the Statement of Profit or Loss
in net expense of foreign exchange effects and related derivatives.
For derivative financial instruments, which are designated in an effective hedging relationship in accordance with IFRS 9, the provisions regarding hedge
accounting are applied. RHI Magnesita has concluded interest rate swaps to hedge the cash flow risk of financial liabilities carrying variable interest. Hedging
transactions are shown as part of cash flow hedge accounting. The interest rate swaps as hedging instruments are measured at fair value, which corresponds to
the amount which RHI Magnesita would receive or has to pay on the reporting date when the financial instrument is terminated. The fair value is calculated
using the interest rates and yield curves relevant on the reporting date. The effective part of the fair value changes is initially recorded in other comprehensive
income as an unrealised gain or loss. Only at the time of the realisation of the underlying transaction, the contribution of the hedging instrument is recycled to
the Statement of Profit or Loss. Ineffective parts of the cash flow hedges are recognised immediately in the Statement of Profit or Loss. If the hedged transaction
is no longer expected to take place, the accumulated amount previously recorded in other comprehensive income is reclassified to the Statement of Profit or
Loss.
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the
effective portion of the hedge are recognised in Other Comprehensive Income and presented in the currency translation 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 Income is reclassified to the Statement of Profit or Loss. The Group uses a loan to hedge
its exposure to foreign exchange risk on its investments in foreign subsidiaries.
Capital shares of non-controlling interests in subsidiaries with a fixed term are recognised under other financial liabilities in the Consolidated Statement of
Financial Position in accordance with IAS 32. The liabilities are measured at amortised cost. The share of profit attributable to non-controlling interests is
recognised under other net financial expenses in the Statement of Profit or Loss. Dividend payments to non-controlling interests reduce liabilities.
Furthermore, the RHI Magnesita Group entered into purchase obligations with non-controlling shareholders of a subsidiary. Based on these agreements, the
shareholders received 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 for puttable non-controlling interests was
measured at amortised cost and changes were recorded in net finance costs. In 2021 the puttable non-controlling interests within equity were reclassified to
equity upon completion of the merger of the Indian entities. Further information is provided under Note (24) and (53).
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Notes continued
Impairment of financial assets
Impairment of certain financial assets is based on expected credit losses (ECL). Expected credit losses are defined as the difference between all contractual cash
flows the entity is entitled to according to the contract and the cash flows that the entity expects to receive. The measurement of expected credit losses is
generally a function of the probability of default, loss given default and the exposure at default.
RHI Magnesita recognises a loss allowance for expected credit losses on debt instruments that are measured at amortised cost, trade receivables and contract
assets. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial
instrument.
The Group recognises lifetime ECL for trade receivables and contract assets by applying the simplified approach. The expected credit losses on these financial
assets are generally estimated using a provision matrix based on the Group’s historical credit loss experience for customer groups located in different
geographic regions. Forward-looking information is incorporated in the determination of the applicable loss rates for trade receivables. For the Group, the
general economic development of the countries in which it sells its goods and services is the relevant for the determination if adjustment of the historical loss
rates is necessary.
For all other financial instruments, the Group recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. However,
if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial
instrument at an amount equal to 12-month ECL.
Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-
month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after
the reporting date.
RHI Magnesita 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 of 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 at 34.0%. Tax
rates from 13.0% to 35.0% (31.12.2020: 12.5% to 34.0%) were applied to the other companies.
Deferred tax assets and liabilities are offset if there is an enforceable right to offset current tax receivables against current tax liabilities, and if the deferred taxes
relate to income taxes due from/to the same tax authorities.
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FINANCIAL
STATEMENTS
OTHER
INFORMATION
Inventories
Inventories are stated at the lower of cost or net realisable value as of the reporting date. The determination of acquisition cost of purchased inventories is based
on the average cost. Finished goods and work in progress are valued at fixed and variable production cost. The net realisable value is the estimated selling price
in the ordinary course of business minus any estimated cost to complete and to sell the goods. Impairments due to reduced usability are reflected in the
calculation of the net realisable value.
Trade and other current receivables
Trade receivables are 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. Valuation allowances are calculated in accordance
with the simplified approach of the impairment model for financial instruments (see impairment of financial assets above).
In case of factoring arrangements trade receivables are derecognised if RHI Magnesita transfers substantially all the risks and rewards associated with the
financial assets.
Receivables denominated in foreign currencies are translated using the closing rate.
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 in
accordance with 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. Non-current assets are not depreciated as long as they are classified as held for sale.
Borrowings and other financial liabilities
Financial liabilities include liabilities to financial institutions and other lenders and are measured at fair value less directly attributable transaction costs at initial
recognition. In subsequent measurements these liabilities are measured at amortised cost applying the effective interest method. Financial liabilities in foreign
currency are translated at the closing rate.
A financial liability is derecognised when the obligation under the liability is discharged (by payment or legal release), cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The terms
are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and
discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original
financial liability. The difference in the respective carrying amounts is subsequently recognised in the Statement of Profit or Loss, including any costs or fees.
Provisions
Provisions are recognised when the Group incurs a legal or constructive obligation as a result of past events, and it is probable that an outflow of resources will
be required to meet this obligation, and the amount of the obligation can be reliably estimated.
Non-current provisions are measured at their discounted settlement value as of the reporting date if the discounting effect is material.
If maturities cannot be estimated, they are shown under current provisions.
Provisions for pensions
With respect to post-employment benefits, a differentiation is made between defined contribution and defined benefit plans.
Defined contribution plans limit the company’s obligation to the agreed amount of contributions to earmarked pension plans. The related expenses are shown
in the functional areas and thus in EBIT.
Defined benefit plans require the company to provide the agreed amount of benefits to active and former employees and their dependents, with a
differentiation made between pension systems financed through provisions and pension systems financed by external funds.
For pension plans financed by way of external funds, the pension obligation according to the projected unit credit method is netted against the fair value of the
plan assets. If the plan assets are not sufficient to cover the obligation, the net obligation is recognised as a provision for pensions. However, if the plan assets
exceed the obligations, the asset recognised is limited to reductions of future contribution payments to the plan and is presented as an other non-current asset
on the face of the statement of financial positions.
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Notes continued
The present value of defined benefit obligations for current pensions, future pension benefits and similar obligations and the related expenses are calculated
separately for each plan annually by independent qualified actuaries in accordance with the provisions of IAS 19. The present value of future benefits is based
on the length of service, expected wage/salary developments and pension adjustments.
The expense to be recognised in a period includes current and past service costs, settlement gains and losses, interest expenses from the interest accrued on
obligations, interest income from plan assets and administration costs paid from plan assets. The net interest expense is shown separately in net finance costs.
All other expenses related to defined benefit plans are allocated to the costs of the relevant functional areas.
Actuarial assumptions required to calculate these obligations, include the discount rate, increases in wages/salaries and pensions, retirement starting age and
probability of employee turnover and actual claims. The calculation is based on local demographic parameters.
Interest rates used are the rates on high-quality corporate bonds issued with comparable maturities and currencies are applied to determine 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 or when the employee retires. The termination payment depends on the relevant salary at the time of
the termination as well as the number of years of service and ranges between two and 12 monthly salaries. These obligations are measured in accordance with
IAS 19 using the projected unit credit method applying an accumulation period of 25 years. Remeasurement gains and losses are recorded directly to other
comprehensive income after considering tax effects.
For employees who joined an Austrian company after 31 December 2002, employers are required to make regular contributions equal to 1.53% of the monthly
wage/salary to a statutory termination benefit scheme. The company has no further obligations. Claims by employees to termination benefits are filed with the
statutory termination benefit scheme, while the continuous contributions are treated as defined contribution pension plans and included in the 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 years of
uninterrupted 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.
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 shareholders approved the Rules Of The RHI Magnesita Long-Term Incentive Plan (the Rules). Share-options are granted to members of senior
management of the Group in accordance with these Rules. 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 goods or after the service has been provided. The amounts of the provisions
are based on the expected or actual warranty claims.
Provisions for restructuring are created providing a detailed formal restructuring plan has been developed and announced prior to the reporting date or whose
implementation was commenced prior to the reporting date.
The Group recognises provisions for demolition and disposal costs and environmental damages. RHI Magnesita’s facilities and its refractory, exploration and
mining operations are subject to environmental and governmental laws and regulations in each of the jurisdictions in which it operates. These laws govern,
among other things, reclamation or restoration of the environment in mined areas and the clean-up of contaminated properties. Provisions for demolition and
disposal costs and environmental damages include the estimated demolition and disposal costs of plants and buildings as well as environmental restoration
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INFORMATION
costs arising from mining activities, based on the present value of estimated cash flows of the expected costs. The estimated future costs of asset retirements 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. Provisions are measured at the present value of the unavoidable costs of meeting the obligation under the
contract which exceed the economic benefits expected to arise from that contract.
Provisions for labour and civil contingencies are recognised for all risks referring to legal proceedings that represent probable loss. Assessment of the likelihood
of loss includes analysis of available evidence, including the opinion of internal and external legal advisors of the RHI Magnesita Group.
Trade payables and other current liabilities
These liabilities are initially recognised at fair value, and subsequently measured at amortised cost. Liabilities denominated in foreign currencies are translated at
the closing rate.
Government grants
Government grants to promote investments are recognised as deferred income and released through profit or loss over the useful life of the relevant asset
distributed on a straight-line basis.
Grants that were granted as compensation for expenses or losses are recognised to profit or loss in the periods in which the subsidised expenses are incurred. In
the RHI Magnesita Group, they mainly include grants for research and employee development. Grants for research are recorded as income in general and
administrative expenses.
Revenue, income and expenses
Revenue from contracts with customers
Revenue from the sale of goods and services is recognised at an amount that reflects the consideration to which the Group expects to be entitled in exchange
for those goods or services. The transaction price is the expected consideration to be received, to the extent that it is highly probable that there will not be a
significant reversal of revenue in future periods. If the consideration in a contract includes a variable amount, the Group estimates the amount of consideration
to which it will be entitled in exchange for transferring the goods or services to the customer. The variable consideration is estimated at contract inception and
constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated
uncertainty with the variable consideration is subsequently resolved. The average credit term is 60 days upon transfer of goods or service. The Group applies
the practical expedient in IFRS 15 and does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at
contract inception, that the period between the transfer of the promised good or service to the customer and payment will be one year or less. At contract
inception, the Group identifies the goods or services promised in the contract and assesses which of the promised goods or services shall be identified as
separate performance obligations. Promised goods or services give rise to separate performance obligations if they are capable of being distinct. Revenue is
recognised as control is transferred, either over time or at a point of time. Control is defined as the ability to direct the use of and obtain substantially all of the
economic benefits from an asset.
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 performance obligation to which a part of revenue would
have to be allocated, as this service is performed before control of the products is transferred to the customer.
In consignment arrangements, RHI Magnesita Group ships products to a customer but retains control of the goods until a predetermined event occurs.
Revenue is not recognised on delivery of the products to the customer if the delivered products are held on consignment, but generally when the withdrawal of
the products from the consignment stock occurs. Most of the products within consignment arrangements have a high stock turnover rate.
The Group provides services (e.g. supervision, installation) that are either sold separately or bundled together with the sale of products to a customer. Contracts
for bundled sales of products and installation services are comprised of two performance obligations as the promises to transfer products and to provide
services are capable of being distinct and separately identifiable in the context of the contract. Accordingly, the allocation of the transaction price 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 performance) 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 (9). With regards to these contracts, revenue is recognised over time on the basis using the output-oriented method (e.g. quantity of
steel produced in the customer aggregate serviced).
Expected penalty fees from guaranteed durabilities when using refractory products are considered as a variable consideration in the form of a contract or a
refund liability. Based on the expected value method, the amount of the variable consideration is estimated. The estimation of the variable consideration is not
subject to a constraint as the Group has significant experience with promising durabilities. 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 warranties. Consequently, no separate distinct performance obligation to the customer exists.
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Notes continued
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 comes first). A contract liability is an entity’s obligation to transfer goods or services to a customer for
which the entity has received consideration (or an amount of consideration is due) from the customer.
Contract costs are the incremental costs of obtaining a contract and must be recognised as an asset if the company expects to recover those costs. As a
practical expedient, RHI Magnesita expenses such costs when incurred, if the amortisation period would be 12 months or less.
In general, the term of customer contracts in accordance with IFRS 15 is no longer than one year. Therefore, the Group decided, as a practical expedient, not to
disclose the remaining performance obligations for contracts with original expected duration of less than one year.
Further income and expenses
Expenses are recognised in 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.
Current income taxes are recognised according to the local regulations applicable to each company. Current and deferred income taxes are recognised in the
Statement of Profit or Loss unless they are related to items which were recorded directly in equity or in other comprehensive income. In such a case, income
taxes are also recorded in equity or other comprehensive income.
Since 2020 RHI Magnesita N.V., tax resident of Austria, acts as the head of a corporate tax group in Austria. Until 31 December 2019 RHI Magnesita GmbH,
Vienna, Austria, acted as the head of a corporate tax group in Austria. According to the group and tax compensation agreement, the members of the group
have to pay a positive tax compensation of 20% of the taxable profit to the head of the Group if the result is positive, as long as tax loss carry forwards exist with
the head of the group; subsequently 25% of the taxable profit have to be paid. In case of a tax loss of the group member, the head of the group has to pay a
negative tax compensation to the member of the group, with a rate of 12.5% being applied insofar as the loss can be utilised within the group. In case the losses
of a group member were compensated (negative tax allocation payment) and this group member generates taxable income within the next three years (after
compensation), the positive tax allocation amounts to 12.5%. In case of a loss in the tax group, an unused tax loss of a group member is retained and offset
against future taxable profits of the group member. When the contract is terminated, a compensation payment is agreed for unused tax losses of a group
member, which were allocated to the head of the group.
In Germany, RHI Magnesita Deutschland AG, Wiesbaden, acts as the head of a tax group for corporate and trade tax purposes. The five tax group members are
obliged to transfer their profit or loss to RHI Magnesita Deutschland AG based on a profit or loss transfer agreement. Additionally, RHI Magnesita Deutschland
AG, Wiesbaden, acts as the head of a tax group for VAT purposes with eight 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.
8. 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 providing services at the customers’ sites.
The globally located manufacturing sites, which extract and process raw materials, are combined in one strategic business unit. The allocation of
manufacturing cost of the production plants to the Steel and Industrial Divisions is based on the supply flow.
Statements of Profit or Loss up to gross profit are available for each segment. The gross profit serves the management of the RHI Magnesita Group for internal
performance management. Selling and marketing expenses, general and administrative expenses, 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 management for control and
measurement, as well as property, plant and equipment, goodwill and other intangible assets, which are allocated to the segments based on the capacity of the
assets provided to the segments. All other assets are not allocated. The recognition of segment assets is determined on the basis of the accounting and
measurement methods applied to the IFRS Consolidated Financial Statements.
Data on revenue by country are disclosed by the sites of the customers. Data on non-current assets (goodwill, intangible assets and property, plant and
equipment) are disclosed on the basis of the respective locations of the companies of the RHI Magnesita Group.
9. Critical accounting judgements 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.
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The estimates are based on comparable values in the past, plan data and other findings regarding transactions to be accounted. The actual values may
ultimately deviate from the assumptions and estimates made. The resulting changes in value of assets, liabilities, revenue and expenses are accounted for in the
reporting period in which the change is made and in the affected future reporting periods.
Critical accounting judgements
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.
Own use exemption on physical delivery CO2-certificate forwards
Due to the reduction of free CO2 emission certificates and the expectation of increased CO2 market prices, the Group is hedging the price risk by use of
physical delivery forward purchases (for “own use”). The “Own use exemption” is important to prevent fair value accounting and thus avoid P&L volatility. The
“Own use exemption” requires that all purchases via forward contracts will be utilised. Any surpluses from forwards must be settled and kept for future use. If the
own use exemption is not met, the forwards will be recognised on Balance Sheet at fair value, with fair value remeasurement through P&L for the entire CO2
forward portfolio. The Group settles the forwards through physical delivery and does not intend to sell any (unexpected) surplus of CO2 emission certificates for
speculative purposes. Therefore, in accordance with IFRS 9, the forward contracts are assessed to be off-balance executory contracts.
There are no other critical accounting judgements made in the preparation of the Consolidated Financial Statements.
Key sources of estimation uncertainty
Business combinations (initial consolidation)
Estimates relating to the calculation of fair values of acquired assets, liabilities and contingent liabilities are required within the context of business
combinations.
If intangible assets are identified, estimates are necessary for the determination of fair values by means of discounted cash flows, including the duration, amount
of future cash flows, and discount rate. When determining the fair value of land, buildings and technical plant, above all the estimate of comparability of the
reference objects with the objects subject to valuation is discretionary.
When making estimates in the context of purchase price allocations on major acquisitions, RHI Magnesita consults with independent experts who accompany
the execution of the discretionary decisions and record it in appraisal documents.
Impairment of intangible assets with finite useful lives and property, plant and equipment
Intangible assets with a finite useful life and property, plant and equipment must be tested for impairment when events or a change in circumstances indicate
that the carrying amount of an asset may not be recoverable. The carrying amounts of these assets amounted to €1,370.5 million at 31 December 2021
(31.12.2020: €1,222.5 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 considering 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 2021 or by minus 10% in the contribution margin would not
result in an impairment of goodwill recognised (carrying amount 31.12.2021: €114.4 million, 31.12.2020: €110.8 million) nor in an impairment charge to
intangible assets with indefinite useful lives (carrying amount at 31.12.2021: €1.8 million and 31.12.2020: €1.8 million).
Intangible assets and property, plant and equipment
Management uses its experience to estimate the remaining useful life of an asset. The actual useful life of an asset may be impacted by an unexpected event
that may result in an adjustment to the carrying amount of the asset.
Provisions for pensions and termination benefits
The present value of pension and termination benefit obligations depends on 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.
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Notes continued
The following sensitivity analysis shows the change in present value of the pension and termination benefit obligations if one key parameter changes, while the
other influences are maintained constant. In reality, 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
31.12.2021
Termination
benefits
Pension plans
31.12.2020
Termination
benefits
+0.25
(0.25)
+0.25
(0.25)
+0.25
(0.25)
+1 year
(1) year
495.0
(14.8)
15.6
0.7
(0.7)
11.3
(10.9)
19.8
(20.6)
44.1
(1.4)
1.5
1.4
(1.4)
-
-
-
-
523.3
(16.2)
16.9
1.6
(1.5)
12.5
(11.0)
21.3
(20.7)
46.4
(1.3)
1.4
1.3
(1.3)
-
-
-
-
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. Further information on pensions is provided under Note (27).
Other provisions
The recognition and measurement of other provisions totalling €118.6 million (31.12.2020: €149.0 million) were based on the best possible estimates using the
information available at the reporting date. The estimates take into account the underlying legal relationships and are performed by internal experts or, when
appropriate, also by external experts. Despite the best possible assumptions and estimates, cash outflows expected at the reporting day may deviate from actual
cash outflows. As soon as additional information is available, the estimates made are reviewed and provisions are also adjusted.
The majority of the provisions refers to an unfavourable contract which was recognised in the course of the acquisition of Magnesita and is mainly based on an
estimate of forgone profit margins compared to market conditions.
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 €154.0 million (31.12.2020: €154.2 million) would have to be increased by €0.1 million (31.12.2020: €0.3 million)
or reduced by €0.2 million (31.12.2020: €0.3 million).
Additional sources of estimation uncertainty with regard to climate change
Net realisable value of inventories
As stricter climate-related laws and regulations are expected to increase the demand for higher quality refractory products in customer industries, RHI
Magnesita assesses that, overall, these events will not have an adverse effect on the net realisable value of the Group’s inventories.
Useful lives and residual values
Given that globally there are currently few or no viable alternatives for the construction and automotive segments to use other than Steel and Industrial
products such as Cement and Glass and given the production process for Steel and Industrial products is moving towards green production, which will still
require very high temperatures, our refractory products, also in the green economy, will remain to be required. As a result, the PPE that produces our refractory
products will therefore continue to be used in line with previously assessed economic useful life terms, based on our current assessment. However,
there remains a level of uncertainty and our views may change over time. Therefore the number of years of depreciation and cash generation to offset the
carrying value of these assets, have remained unchanged in our assessment.
Due to the high degree of estimation uncertainty around the impact of climate change and consequential changes in legislature, this conclusion may change
in the future.
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NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION
10. Goodwill
Goodwill developed as follows:
in € million
Carrying amount at beginning of the year
Additions initial consolidation
Currency translation
Carrying amount at year-end
11. Other intangible assets
Other intangible assets changed as follows in the financial year 2021:
2021
110.8
0.0
3.6
114.4
Mining rights
Customer
relationship
Internally
generated
intangible assets
Other intangible
assets
in € million
Cost at 31.12.2020
Currency translation
Additions
Retirements and disposals
Reclassifications
Cost at 31.12.2021
Accumulated amortisation 31.12.2020
Currency translation
Amortisation charges
Impairment charges
Retirements and disposals
Reclassifications
Accumulated amortisation 31.12.2021
Carrying amounts at 31.12.2021
133.1
6.2
0.0
0.0
0.0
139.3
8.5
0.5
2.1
0.0
0.0
0.0
11.1
128.2
Other intangible assets changed as follows in the previous year:
in € million
Cost at 31.12.2019
Currency translation
Additions
Retirements and disposals
Disposal group IFRS 5
Reclassifications
Cost at 31.12.2020
Accumulated amortisation 31.12.2019
Currency translation
Amortisation charges
Impairment charges
Retirements and disposals
Disposal group IFRS 5
Accumulated amortisation 31.12.2020
Carrying amounts at 31.12.2020
Mining rights
169.1
(36.0)
0.0
0.0
0.0
0.0
133.1
8.0
(1.7)
2.2
0.0
0.0
0.0
8.5
124.6
95.1
4.2
0.0
(0.1)
0.0
99.2
27.9
1.6
5.8
0.0
0.0
0.0
35.3
63.9
Customer
relationship
109.3
(14.2)
0.0
0.0
0.0
0.0
95.1
25.2
(3.4)
6.1
0.0
0.0
0.0
27.9
67.2
62.0
0.2
8.8
(0.1)
0.0
70.9
40.7
0.2
4.0
0.0
(0.1)
0.0
44.8
26.1
121.3
4.9
9.9
(4.1)
13.4
145.4
68.7
2.3
10.5
3.7
(3.8)
(0.4)
81.0
64.4
Internally
generated
intangible assets
Other intangible
assets
52.4
(0.3)
9.9
0.0
0.0
0.0
62.0
37.1
(0.1)
3.7
0.0
0.0
0.0
40.7
21.3
134.1
(8.9)
3.1
(11.0)
(0.2)
4.2
121.3
75.6
(3.6)
7.4
0.3
(10.8)
(0.2)
68.7
52.6
2020
117.5
3.8
(10.5)
110.8
Total
411.5
15.5
18.7
(4.3)
13.4
454.8
145.8
4.6
22.4
3.7
(3.9)
(0.4)
172.2
282.6
Total
464.9
(59.4)
13.0
(11.0)
(0.2)
4.2
411.5
145.9
(8.8)
19.4
0.3
(10.8)
(0.2)
145.8
265.7
Internally generated intangible assets comprise capitalised software and product development costs.
The customer relations of Magnesita have a carrying amount of €63.6 million (31.12.2020: €66.9 million) and a remaining useful life of 7 to 11 years.
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 2 1
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Notes continued
Other intangible assets include in particular acquired patents, trademark rights, software, and land use rights. The land use rights have a carrying amount of
€20.0 million (31.12.2020: €21.1 million) and a remaining useful life of 16 to 56 years.
There are no restrictions on the sale of intangible assets.
12. Property, plant and equipment
Property, plant and equipment developed as follows in the year 2021 and in the previous year:
in € million
Cost at 31.12.2020
Currency translation
Additions
Reassessment / Modification of leases
(IFRS 16)
Retirements and disposals
Reclassifications
Cost at 31.12.2021
Accumulated depreciation 31.12.2020
Currency translation
Depreciation charges
Impairment charges
Retirements and disposals
Reclassifications
Accumulated depreciation 31.12.2021
Carrying amounts at 31.12.2021
Real
estate,
land and
buildings
561.7
17.8
24.8
0.0
(4.1)
31.6
631.8
253.3
4.6
11.9
18.3
(1.2)
(0.3)
286.6
345.2
Raw material
deposits
36.9
0.7
0.5
0.0
0.0
0.4
38.5
23.8
0.2
0.9
0.0
0.0
0.0
24.9
13.6
Technical
equipment,
machinery
1,039.4
32.7
47.5
0.0
(18.5)
42.5
1,143.6
720.5
19.2
56.3
14.6
(16.7)
(0.5)
793.4
350.2
Other plant,
furniture and
fixtures
Prepayments
made and
plant under
construction1)
Right-of-use
assets
330.9
8.3
17.9
0.0
(5.4)
27.7
379.4
230.9
5.8
23.4
4.3
(4.9)
0.8
260.3
119.1
164.9
4.0
156.8
0.0
0.0
(116.0)
209.7
1.1
0.0
0.0
0.4
0.0
0.0
1.5
208.2
76.8
2.5
13.3
0.1
(5.6)
0.0
87.1
22.4
0.7
16.0
0.0
(5.4)
0.0
33.7
53.4
1) Prepayments made and plant under construction include €6.0 million relating to intangible assets.
in € million
Cost at 31.12.2019
Currency translation
Additions
Additions initial consolidation
Reassessment / Modification of leases
(IFRS 16)
Retirements and disposals
Disposal group IFRS 5
Reclassifications
Cost at 31.12.2020
Accumulated depreciation 31.12.2019
Currency translation
Depreciation charges
Impairment charges
Retirements and disposals
Disposal group IFRS 5
Reclassifications
Accumulated depreciation
31.12.2020
Carrying amounts at 31.12.2020
Real
estate,
land and
buildings
641.3
(50.8)
6.3
2.0
0.0
(5.4)
(47.8)
16.1
561.7
283.3
(6.6)
12.3
11.2
(2.8)
(46.3)
2.2
253.3
308.4
Raw material
deposits
Technical
equipment,
machinery
Other plant,
furniture and
fixtures
Prepayments
made and
plant under
construction
Right-of-use
assets
36.6
(2.1)
2.9
0.0
0.0
(0.3)
0.0
(0.2)
36.9
23.6
(0.6)
1.1
0.0
(0.3)
0.0
0.0
23.8
13.1
1,210.4
(92.3)
13.8
0.3
0.0
(61.2)
(57.6)
26.0
1,039.4
777.1
(37.8)
70.6
26.0
(57.2)
(54.0)
(4.2)
720.5
318.9
321.6
(9.2)
6.7
0.1
0.0
(10.1)
(25.0)
46.8
330.9
237.8
(4.9)
20.3
5.1
(7.5)
(24.9)
5.0
230.9
100.0
173.5
(17.1)
105.2
0.0
0.0
0.0
(1.9)
(94.8)
164.9
6.0
(0.3)
0.0
2.7
0.0
(1.5)
(5.8)
1.1
163.8
76.1
(7.6)
24.5
0.0
2.5
(8.6)
(10.1)
0.0
76.8
24.9
(2.8)
16.0
1.5
(7.1)
(10.1)
0.0
22.4
54.4
1,252.0
958.6
Total
2,210.6
66.0
260.8
0.1
(33.6)
(13.8)
2,490.1
1,252.0
30.5
108.5
37.6
(28.2)
0.0
1,400.4
1,089.7
Total
2,459.5
(179.1)
159.4
2.4
2.5
(85.6)
(142.4)
(6.1)
2,210.6
1,352.7
(53.0)
120.3
46.5
(74.9)
(136.8)
(2.8)
148
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 2 1
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GOVERNANCE
FINANCIAL
STATEMENTS
OTHER
INFORMATION
The item prepayments made and plant under construction includes plant under construction with a carrying amount of €179.2 million (31.12.2020:
€147.6 million), with the expansion of a dolomite plant in Austria, representing the largest investment project under construction in 2020 and the expansion of
a magnesite plant in Brazil representing the largest investment project under construction in 2021.
There are no restrictions on the sale of property, plant and equipment.
The Right-of-use assets per category developed as follows as of 31 December 2021:
in € million
Cost at 31.12.2020
Currency translation
Additions
Reassessment / Modification of leases (IFRS 16)
Retirements and disposals
Cost at 31.12.2021
Accumulated depreciation 31.12.2020
Currency translation
Depreciation charges
Retirements and disposals
Accumulated depreciation 31.12.2021
Carrying amounts at 31.12.2021
Right-of-use assets
land and buildings
Right-of-use assets
technical
equipment and
machinery
Right-of-use assets
other equipment,
furniture and
fixtures
40.4
1.0
8.5
0.2
(2.3)
47.8
9.3
0.2
8.2
(2.3)
15.4
32.4
30.7
1.3
1.7
(0.1)
(1.7)
31.9
9.8
0.4
5.8
(1.6)
14.4
17.5
5.7
0.2
3.1
0.0
(1.6)
7.4
3.3
0.1
2.0
(1.5)
3.9
3.5
The Right-of-use assets per category developed as follows as of 31 December 2020:
in € million
Cost at 31.12.2019
Currency translation
Additions
Reassessment / Modification of leases (IFRS 16)
Retirements and disposals
Disposal group IFRS 5
Cost at 31.12.2020
Accumulated depreciation 31.12.2019
Currency translation
Depreciation charges
Impairment charges
Retirements and disposals
Disposal group IFRS 5
Accumulated depreciation 31.12.2020
Carrying amounts at 31.12.2020
Right-of-use assets
land and buildings
Right-of-use assets
technical
equipment and
machinery
Right-of-use assets
other equipment,
furniture and
fixtures
39.5
(2.0)
13.3
2.8
(3.4)
(9.8)
40.4
15.5
(1.1)
7.2
0.0
(2.5)
(9.8)
9.3
31.1
30.0
(5.2)
10.2
0.0
(4.1)
(0.2)
30.7
7.0
(1.4)
6.7
1.3
(3.6)
(0.2)
9.8
20.9
6.6
(0.4)
1.0
(0.3)
(1.1)
(0.1)
5.7
2.4
(0.3)
2.1
0.2
(1.0)
(0.1)
3.3
2.4
Further detail on IFRS 16 related information is provided under Note (7) and (26).
Total
76.8
2.5
13.3
0.1
(5.6)
87.1
22.4
0.7
16.0
(5.4)
33.7
53.4
Total
76.1
(7.6)
24.5
2.5
(8.6)
(10.1)
76.8
24.9
(2.8)
16.0
1.5
(7.1)
(10.1)
22.4
54.4
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 2 1
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Notes continued
13. 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 and associates
Carrying amount at year-end
31.12.2021
31.12.2020
5.7
5.7
16.3
16.3
Joint ventures
The RHI Magnesita Group held a share of 50% (2020: 50%) in MAGNIFIN Magnesiaprodukte GmbH & Co KG (“MAGNIFIN”), a private company based in St.
Jakob, Austria. until 30 December 2021. The company’s core business activity is the production and sale of halogen-free flame retardants for plastics. The
investment in MAGNIFIN was treated as a financial investment. MAGNIFIN was set up as an independent vehicle. RHI Magnesita had 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. Further information on the sale of
the equity stake in Magnifin is provided under Note (5).
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 gains/(losses))
Dividends
Other changes in value
Proportional share of net assets
Goodwill
Disposal
Carrying amount of investment
31.12.2021
31.12.2020
10.9
9.3
0.1
(16.2)
0.0
4.1
4.9
(9.0)
0.0
14.1
7.7
(0.1)
(10.9)
0.1
10.9
4.9
0.0
15.8
In addition, the Group holds interests in an immaterial joint venture with a carrying amount of €0.5 million as of 31 December 2021 (31.12.2020: €0.5 million).
The Group’s share of the profit after income tax, other comprehensive income and total comprehensive income in 2021 amounts to €0.0 million (2020: less
than €0.1 million).
Associates
On 30 December 2021 RHI Magnesita Group has acquired a 51% ownership stake over Chongqing Boliang Refractory Materials Co., Ltd, Chongqing, China
(RHIMNU), for a cash consideration of €5.2 million. Further information on this acquisition is provided under Note (5).
In 2019 the Group decided to restructure its Sinterdolime sourcing options in Europe and increase its vertical integration. As a result, operations will be
suspended in the first quarter of 2022 and the equity accounted investment in Sinterco will be liquidated in 2023. 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.
14. 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
Other non-current financial receivables
Other non-current financial assets
31.12.2021
31.12.2020
0.6
13.7
0.3
14.6
0.6
13.5
0.4
14.5
Accumulated impairments on investments, securities and shares amount to €3.6 million (31.12.2020: €3.7 million).
150
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GOVERNANCE
FINANCIAL
STATEMENTS
OTHER
INFORMATION
15. 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
31.12.2021
31.12.2020
27.1
9.3
3.5
0.9
0.4
41.2
14.5
8.4
2.9
0.2
0.6
26.6
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.
16. Deferred taxes
Deferred taxes are related to the following significant balance sheet items and tax loss carryforwards:
in € million
Deferred tax assets
Deferred tax
liabilities
(Expense)/Income
Deferred tax assets
Deferred tax
liabilities
(Expense)/Income
31.12.2021
2021
31.12.2020
2020
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
41.3
16.3
25.0
61.7
25.5
20.4
102.3
(90.1)
202.4
109.6
11.0
5.2
0.2
0.3
12.2
0.0
(90.1)
48.4
17.0
(12.5)
(0.8)
(3.2)
(1.4)
(11.3)
16.0
0.0
3.8
36.5
20.7
25.1
70.5
26.3
24.8
88.6
(93.3)
199.2
117.4
3.9
4.1
0.8
0.4
11.7
0.0
(93.3)
45.0
11.2
(5.5)
20.8
(5.3)
11.8
(36.6)
16.8
0.0
13.2
As of 31 December 2021, subsidiaries that generated tax losses in the past year or the previous year recognised net deferred tax assets on temporary differences
and tax loss carryforwards of €160.8 million (31.12.2020: €116.3 million). Deferred tax assets have been recognised because the companies concerned are
expected to generate taxable income in the future.
Regarding the recognition of tax expenses, deferred tax assets, and deferred tax liabilities, RHI Magnesita has evaluated the economic scenario’s impacts arising,
mainly, out of COVID-19’s implications to a global downturn. In this context, the relevant uncertainties and potential negative effects of the downturn for the
Group’s financial results were considered when evaluating the recoverability of the tax assets. Particular focus was given to working with the most reliable
forecasts and assumptions to minimise the effects of economic uncertainty to reach an assessment that reflects the best analysis possible, considering the
circumstances and information available. Based on this analysis it was concluded that there is no need for a material impairment of deferred tax assets.
Tax loss carryforwards totalled €477.0 million in the RHI Magnesita Group as of 31 December 2021 (31.12.2020: €413.8 million). A significant part of the tax loss
carryforwards originated in Brazil and Austria where their deduction can be carried forward indefinitely. Furthermore, there are substantial tax loss carryforwards
in China expiring within the next five years. The annual compensation of tax loss carryforwards in Austria is limited to 75% and to 30% in Brazil’s respective
taxable profits. Deferred taxes were not recognised on tax losses of €118.7 million (31.12.2020: €115.3 million). Of these losses, €0.4 million will expire in
2022,€9.3 million in 2023, €7.6 million in 2024, €1.9 million in 2025, €2.4 million in 2026, €0.2million in 2027, €0.3 million in 2028 (31.12.2020:
€0,4 million in 2022, €5.2 million in 2023, €6.9 million in 2024, €1.2 million in 2025, €0.2 million in 2027 and €0.3 million in 2028), while the remainder
will be carried forward indefinitely.
Besides, no deferred tax assets were recognised for temporary differences totalling €216.0 million (31.12.2020: €89.7 million), which reverse until 2034.
Taxable temporary differences of €814.4 million (31.12.2020: €721.0 million) and temporary deductible differences of €116.8 million (31.12.2020:
€456.0 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.
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 2 1
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Notes continued
The maturity structure of deferred taxes is shown in the table below:
in € million
Deferred tax assets
Deferred tax liabilities
Current
Non-current
53.2
(10.4)
149.2
(38.0)
31.12.2021
Total
202.4
(48.4)
Current
Non-current
69.1
(3.1)
130.1
(41.9)
31.12.2020
Total
199.2
(45.0)
17. 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
31.12.2021
31.12.2020
300.2
151.5
512.4
12.4
976.5
92.7
102.5
272.2
10.0
477.4
Inventories include €6.9million (31.12.2020: €1.4 million) carried at net realisable value. Net write-down expenses amount to €3.4 million (2020: € 1.4 million).
The Group has increased its stock of raw materials and finished goods to mitigate supply chain disruptions and to meet expected demand in 2022.
There are no restrictions on the disposal of inventories.
18. 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 dividends
Receivables from employees
Prepaid expenses
Prepaid transaction costs related to financial liabilities
Receivables from joint ventures and associates
Receivables from property transactions
Receivables from non-consolidated subsidiaries
Emission rights
Other current receivables
Trade and other current receivables
thereof financial assets
thereof non-financial assets
31.12.2021
31.12.2020
403.7
3.6
113.7
8.7
5.4
3.9
2.6
0.8
1.3
0.3
0.0
24.2
568.2
414.4
153.8
254.3
1.8
58.4
0.0
8.9
4.2
2.3
1.1
1.6
0.2
2.0
17.0
351.8
255.6
96.2
RHI Magnesita entered into factoring agreements and sold trade receivables to financial institutions. The balance sold totalled €178.1 million as of 31 December
2021 (31.12.2020: €177.6 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. The increase compared to
the prior year mainly results from the previous financial year’s low balance as well as import transactions and acquisitions of fixed assets at year-end. Further, this
position contains a receivable of €12.1m (31.12.2020 €0.0m) that was recognised as a result of a successful judicial proceeding against tax authorities in Brazil
relating to revenue based taxes.
Other current receivables mainly consist of advances to suppliers not related to inventories. The increase compared to prior financial year mainly results from
advances for IT services as well as custom and import related services and costs.
19. Income tax receivables
Income tax receivables amounting to €35.1 million (31.12.2020: €27.7 million) are mainly related to income tax receivables relating to prior periods, tax
prepayments and deductible withholding taxes.
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STATEMENTS
OTHER
INFORMATION
20. Other current financial assets
This item of the Consolidated Statement of Financial Position consists of the following components:
in € million
Derivatives in open orders
Forward exchange contracts
Current portion of non-current loans
Other current financial assets
Accumulated impairments on other current financial receivables amount to €0.0 million (31.12.2020: €0.6 million).
21. 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
31.12.2021
31.12.2020
2.4
0.1
0.4
2.9
0.0
0.3
0.0
0.3
31.12.2021
31.12.2020
564.0
15.4
1.3
0.1
580.8
571.2
14.8
1.0
0.2
587.2
Cash and cash equivalents include restricted cash totalling €19.7 million at 31 December 2021 (31.12.2020: €21.6 million). Restricted cash is mainly related to
cash and cash equivalents at subsidiaries (mainly in China, India and Colombia) to which the Company only has limited access due to foreign exchange and
capital transfer controls. In addition, €2.0 million (31.12.2020: 0.0 million) are held in escrow in Austria and are therefore not available for use by the Group.
€17.3 million cash and cash equivalents (31.12.2020: €12.2 million) are accounted for by subsidiaries with non-controlling interests.
22. Share capital
As at 31 December 2021 the authorised share capital of RHI Magnesita N.V. amounts to €100,000,000 divided into 100,000,000 ordinary shares, of which
46,999,019 (31.12.2020: 49,008,955) fully paid-in ordinary shares are issued and outstanding, taking into consideration the treasury shares amounting to
2,478,686 (31.12.2020: 468,750). All outstanding RHI Magnesita shares grant the same rights. The shareholders are entitled to dividends and have one voting
right per share at the Annual General Meeting. There are no RHI Magnesita shares with special control rights.
23. Group reserves
Treasury shares
In the course of the share buyback program which was initiated on 16 December 2020, completed on 13 April 2021, extended on 5 May 2021 and completed
on 4 August 2021 the Company acquired additional 2,078,686 shares in treasury, Thereof 2,009,936 shares in treasury equalling €95.5 million in 2021 and
68,750 shares in treasury equalling €2.7 million in 2020.
Additional paid-in capital
At 31 December 2021 as well as at 31 December 2020, 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 distributions, allocations or
additions may be made and no losses of the Company may be allocated to the mandatory reserve.
Retained earnings
Retained earnings includes the result of the financial year and results that were earned by consolidated companies during prior periods, but not distributed.
Accumulated other comprehensive income
Cash flow hedge reserves 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.
Reserves for 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 designated as the hedging instrument in net investment hedge in a
foreign operation.
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Notes continued
24. Non-controlling interests
Non-controlling interests in Orient Refractories Ltd.
In June 2021 the two Indian subsidiaries RHI CLASIL Private Limited and RHI India Private Limited were merged into RHI Orient Refractories Limited (ORL), now
renamed to RHI Magnesita India Limited, leaving RHI Magnesita with a share of 70.19% in ORL. As a result, non-controlling interests hold a share of 29,81%
(31.12.2020: 33.5%) in the listed company RHI Magnesita India Ltd. (in the following “ORL”), based in New Delhi, India. ORL is allocated to the Steel segment.
The current reporting period and the previous reporting period need to be read in conjuction but are non- comparable as a consequence of the merger.
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
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
31.12.2021
31.12.2020
51.1
153.9
(2.8)
(80.9)
121.3
(0.5)
120.8
29.8%
36.0
2021
167.4
(146.9)
20.5
1.2
21.7
6.6
2021
21.7
8.0
29.7
8.7
2021
(1.4)
(5.2)
(3.6)
(10.2)
29.1
56.1
(3.5)
(23.0)
58.7
(0.1)
58.6
33.5%
19.6
2020
77.0
(68.6)
8.4
0.1
8.5
2.8
2020
8.5
(7.5)
1.0
0.3
2020
8.1
(3.5)
(3.2)
1.4
Net cash flow from financing activities includes dividend payments to non-controlling interests amounting to €1.4 million (2020: €1.1 million).
In addition, non-controlling interests hold a share of 29,81% (31.12.2020: 33,5%) in one immaterial subsidiary with a carrying amount of the non-controlling
interests amounts to €0.3 million as of 31 December 2021 (31.12.2020: €0.4 million) and a share of 49.0% in RHIMNGG founded on 2 November 2021 with a
carrying amount of the non-controlling interests of €0.0 million as of 31 December 2021. Further information is provided under Note (5).
154
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STATEMENTS
OTHER
INFORMATION
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 31.12.2020
Unrealised results from currency translation
Accumulated other comprehensive income 31.12.2021
25. Borrowings
Borrowings include all interest-bearing liabilities due to financial institutions and other lenders.
Borrowings have the following contractual remaining terms:
Currency
translation
(4.3)
2.1
(2.2)
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
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
Total
Remaining term
31.12.2021
up to 1 year
2 to 5 years
over 5 years
791.5
650.0
88.2
4.4
1,534.1
7.4
(2.4)
1,539.1
58.3
65.0
88.2
4.4
215.9
3.2
(1.0)
218.1
733.2
282.5
0.0
0.0
1,015.7
4.2
(1.3)
1,018.6
0.0
302.5
0.0
0.0
302.5
0.0
(0.1)
302.4
Total
Remaining term
31.12.2020
up to 1 year
2 to 5 years
over 5 years
613.0
400.0
88.2
4.4
1,105.6
11.9
(3.0)
1,114.5
40.6
0.0
83.4
4.4
128.4
4.3
(1.2)
131.5
572.4
100.0
4.8
0.0
677.2
7.6
(1.7)
683.1
0.0
300.0
0.0
0.0
300.0
0.0
(0.1)
299.9
In March 2021 RHI Magnesita took out a €65.0 million credit facility, maturing in March 2022. In October 2021, this facility was increased by €50.0 million to a
total amount of €115.0 million and maturity has been extended until April 2023. A part of the proceeds of the loan were used to repay a €60.0 million 2-year
revolving credit facility guaranteed by the Austrian export credit agency (OeKB), which remains committed and can be utilised until its maturity in March 2022.
In August 2021 the CNY 100.0 million term loan in China, from which CNY 47.5m have been outstanding as of 31 December 2020 has been fully repaid.
In November 2021 the Group exercised its second extension option and thereby extended the maturity of the revolving credit facility (€600.0 million) by one
year to 2027. The third and last extension option could be requested in November 2022 and would further extend the maturity of the revolving credit facility to
2028.
In December 2021 RHI Magnesita issued a Schuldscheindarlehen (“SSD”) bonded loan in the amount of €250.0 million with tenors ranging from 5.5 years to
10 years as well as a new term loan in the amount of €150.0 million and a maturity of 3.5 years. The proceeds of the new instruments will be used for general
corporate purposes, including for example refinancing and potential acquisitions.
The introduction of ESG-related pricing mechanics into the Group's financing facilities highlights RHI Magnesita’s commitment to sustainability. The margin
under the USD term loan (USD 200.0 million) and revolving credit facility (€600.0 million) as well as the newly issued SSD bonded loan (€250.0 million) and
EUR term loan (€150.0 million) will be adjusted based on the Group's EcoVadis rating performance. RHI Magnesita is currently rated 'Gold' by EcoVadis and will
seek to further improve its ESG performance and ratings through the execution of its sustainability strategy.
Net debt excluding lease liabilities/adjusted EBITDA is the main financial covenant of the loan agreements and is shown under Note (56). Compliance with the
covenants is measured on a semi-annual basis. Covenant ratio is limited at 3.5x as at 31 December 2021. Breach of covenants leads to an anticipated maturity of
loans. During 2021 and 2020, the Group met all covenant requirements.
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 2 1
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Notes continued
Considering interest swaps, 70% (31.12.2020: 53%) of the liabilities to financial institutions carry fixed interest and 30% (31.12.2020: 47%) carry variable
interest.
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
2022
EURIBOR + margin
1.87%
Variable rate + margin
Various - Variable rate
2023
0.79%
2024
2025
2027
2028
2029
2031
4.09%
3.10%
1.00%
1.00%
0.92%
1.52%
1.28%
Cur-
rency
EUR
EUR
EUR
Var.
EUR
USD
EUR
EUR
EUR
EUR
EUR
EUR
31.12.2021
Carrying amount
in € million
Interest
terms fixed
until
Effective annual interest rate
403.3 2021
EURIBOR + margin
65.0
LIBOR + margin
Interbank Deposit Certificate
(CDI) + Margin
Various - Variable rate
Variable rate + margin
1.87%
0.83%
3.94%
3.10%
1.10%
1.52%
34.0
12.5
374.7 2022
176.8 2023
35.0
177.0 2024
152.0 2026
86.5 2029
8.0
5.0
1,529.8
Cur-
rency
EUR
USD
CNY
Var.
EUR
EUR
EUR
USD
EUR
EUR
EUR
31.12.2020
Carrying amount
in € million
380.7
15.3
19.9
3.3
94.0
65.0
290.3
162.6
35.0
27.0
8.0
1,101.1
The table above shows how long the interest rates are fixed, rather than the maturity of the underlying instruments. In some cases, the terms to maturity of the
contracts are substantially longer than the period during which interest terms are fixed.
26. Other financial liabilities
Other financial liabilities include the negative fair value of derivative financial instruments as well as lease liabilities, fixed-term and puttable non-controlling
interests in Group companies. The puttable non-controlling interests have been reclassified to non-controlling interests within equity upon completion of the
merger of the Indian entities. Additional explanation on derivative financial instruments is provided under Note (54).
This item of the Consolidated Statement of Financial Position consists of the following items:
31.12.2021
31.12.2020
in € million
Current
Non-current
Derivatives from supply contracts
Interest rate swaps
Derivatives in open orders
Derivative financial liabilities
Lease liabilities
Power supply contract Norway
Fixed-term or puttable non-
controlling interests
Other financial liabilities
0.0
0.0
0.1
0.1
16.1
0.0
3.0
19.2
0.0
9.6
0.0
9.6
39.4
0.0
57.0
106.0
Total
0.0
9.6
0.1
9.7
55.5
0.0
60.0
125.2
Current
Non-current
1.6
0.0
1.8
3.4
12.2
15.5
12.9
44.0
0.0
18.3
0.0
18.3
44.6
0.0
25.9
88.8
Total
1.6
18.3
1.8
21.7
56.8
15.5
38.8
132.8
Further information on IFRS16 related information is provided under Note (7) and (43).
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OTHER
INFORMATION
27. 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
Deficit of funded plans
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
31.12.2021
31.12.2020
495.0
(255.5)
239.5
28.6
268.1
0.9
269.0
523.3
(240.2)
283.1
20.5
303.6
0.0
303.6
31.12.2021
31.12.2020
88.4
68.4
338.2
495.0
101.0
72.9
349.4
523.3
31.12.2021
31.12.2020
2.3%
2.5%
2.1%
1.7%
2.4%
1.7%
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 €100.5 million (31.12.2020: €111.8 million) of the present value of pension obligations and for €20.6 million
(31.12.2020: €23.0 million) of the plan assets. The agreed benefits include pensions, invalidity benefits and benefits for surviving dependents. Commitments in
the form of company or individual agreements depend on the length of service and the salary at the time of retirement. For the majority of commitments the
amount of the company pension subsidy is limited to 75% of the final remuneration including a pension pursuant to the General Social Insurance Act (ASVG).
RHI Magnesita has concluded pension reinsurance policies for part of the commitments. The pension claims of the beneficiaries are limited to the coverage
capital required for these commitments. Pensions are predominantly paid in the form of annuities and are partially indexed. For employees joining the Company
after 1 January 1984, no defined benefits were granted. Rather, a defined contribution pension model is in place. In addition, there are commitments based on
the deferred compensation principle, which are fully covered by pension reinsurance policies, and commitments for preretirement benefits for employees in
mining operations.
The pension plans of the German group companies account for €146.3 million (31.12.2020: €155.2 million) of the present value of pension obligations and for
€0.7 million (31.12.2020: €0.7 million) of plan assets. The benefits included in company agreements comprise pensions, invalidity benefits and benefits for
surviving dependents. The amount of the pension depends on the length of service for the majority of the commitments and is calculated as a percentage of
the average monthly wage/salary of the last 12 months prior to retirement. In some cases, commitments to fixed benefits per year of service have been made.
The pensions are predominantly paid in the form of annuities and are adjusted in accordance with the development of the consumer price index for Germany.
The pension plans are closed for new entrants, except one contribution-based plan. There is no defined contribution model on a voluntary basis. Individual
commitments have been made, with major part of them being retired beneficiaries.
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Notes continued
The pension plan of the US group company Magnesita Refractories Company, York, USA, accounts for €86.8 million (31.12.2020: €86.0 million) of the present
value of pension obligations and for €79.0 million (31.12.2020: €70.2 million) of the plan assets. The pension plan is a non-contributory defined benefit plan
covering a portion of the employees of the company. The plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Effective 21 June 1999, the company offered the participants the opportunity to elect to participate in a single enhanced defined contribution plan. Participants
who made this election are no longer eligible for future accruals under this plan. All benefits accrued as of the date of transfer will be retained. Employees hired
after 21 June 1999 and employees that did not meet the plan's eligibility requirements as of 21 June 1999 are not eligible for this plan. The pensions are
predominantly paid in the form of annuities and are adjusted annually based on the US consumer price index. The company's contributions for the year ended
31 December 2021 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 €67.1 million (31.12.2020: €63.7 million) of
the present value of pension obligations and holds €95.7 million (31.12.2020: €84.2 million) of assets, although only €67.1 million (31.12.2020: €63.7 million)
of the plan assets are reflected on the balance sheet due to the application of IFRIC 14 (asset ceiling). The company sponsors a funded defined benefit pension
plan for qualifying UK employees. The plan is administered by a separate board of trustees which is legally separate from the company. The trustees are
composed of representatives of both the employer and employees, plus an independent professional trustee. The trustees are required by law to act in the
interest of all relevant beneficiaries and are responsible for the investment policy with regard to the assets plus the day to day administration of the benefits.
Under the plan, employees are entitled to annual pensions on retirement at age 65.
The pension liabilities of the Brazilian group company Magnesita Refratários S.A. account for €44.1 million (31.12.2020: €52.3 million) of the present value of
pension obligations and for €24.6 million (31.12.2020: €26.9 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:
2021
303.6
2.5
8.5
(26.0)
(17.6)
(2.9)
268.1
2021
523.3
15.4
4.2
8.9
(3.7)
(24.1)
6.0
(34.4)
0.5
(1.1)
495.0
2020
328.1
(13.2)
10.3
0.6
(18.6)
(3.6)
303.6
2020
557.9
(34.7)
4.6
10.9
(1.0)
24.3
(8.6)
(30.6)
0.5
0.0
523.3
in € million
Net liability from pension obligations at beginning of year
Currency translation
Pension cost
Remeasurement (gains)/losses
Benefits paid
Employers' contributions to external funds
Net liability from pension obligations at year-end
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
Interest cost
Remeasurement (gains)/losses
from changes in demographic assumptions
from changes in financial assumptions
due to experience adjustments
Benefits paid
Employee contributions to external funds
Disposal due to settlement
Present value of pension obligations at year-end
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STATEMENTS
OTHER
INFORMATION
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 on plan assets less interest income
Benefits paid
Employers' contributions to external funds
Employee contributions to external funds
Disposal due to settlement
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
Losses/(gains) from changes in asset ceiling less interest expense
Asset ceiling at year-end
At 31 December 2021 the weighted average duration of pension obligations amounts to 12 years (31.12.2020: 13 years).
The following amounts were recorded in the Consolidated Statement of Profit or Loss:
in € million
Current service cost
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 on plan assets less interest income
Losses/(gains) from changes in asset ceiling less interest expense
Reclassification to other reserves
Accumulated remeasurement losses at year-end
2021
240.2
14.5
5.1
(0.2)
10.4
(16.8)
2.9
0.5
(1.1)
2020
248.0
(22.9)
6.0
(0.4)
17.4
(12.0)
3.6
0.5
0.0
255.5
240.2
2021
20.4
1.6
0.4
6.2
28.6
2021
4.2
8.9
(5.1)
0.4
0.2
8.6
2021
170.0
(21.8)
(10.4)
6.2
(0.4)
143.6
2020
18.0
(1.0)
0.4
3.0
20.4
2020
4.6
10.9
(6.0)
0.4
0.4
10.3
2020
169.7
14.7
(17.4)
3.0
0.0
170.0
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159
Notes continued
The present value of plan assets is distributed to the following classes of investments:
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
48.8
97.0
11.2
49.9
206.9
43.8
0.0
3.3
0.1
1.4
48.6
31.12.2021
Total
43.8
48.8
100.3
11.3
51.3
255.5
Active market
No active market
0.0
5.5
60.5
2.1
48.7
116.8
41.0
35.4
38.0
6.5
2.5
123.4
31.12.2020
Total
41.0
40.9
98.5
8.6
51.2
240.2
The present value of the insurances to cover the Austrian pension plans corresponds to the coverage capital. Insurance companies predominantly invest in
debt instruments and to a low extent in equity instruments and properties.
Plan assets do not include own financial instruments of the Group or assets utilised by the RHI Magnesita Group.
RHI Magnesita works with professional fund managers for the investment of plan assets. They act on the basis of specific investment guidelines adopted by the
pension fund committee of the respective pension plans. The committees consist of management staff of the finance department and other qualified
executives. They meet regularly in order to approve the target portfolio with the support of independent actuarial experts and to review the risks and the
performance of the investments. In addition, they approve the selection or the extension of contracts of external fund managers.
The largest part of the other assets is invested in pension reinsurance, which creates a low counterparty risk towards insurance companies. In addition, the
Group is exposed to interest risks and longevity risks resulting from defined benefit commitments.
The Group generally endows the pension funds with the amount necessary to meet the legal minimum allocation requirements of the country in which the
fund is based. Moreover, the Group makes additional allocations at its discretion from time to time. In the financial year 2022, RHI Magnesita expects employer
contributions to external plan assets to amount to €3.0 million and direct payments to entitled beneficiaries to €19.2 million. In the previous year, employer
contributions of €3.1 million and direct pension payments of €22.5 million had been expected for the financial year 2021.
28. 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
Other personnel provisions
Provisions for termination benefits
Provisions for termination benefits were based on the following weighted average measurement assumptions:
in %
Interest rate
Future salary increase
31.12.2021
31.12.2020
44.1
21.4
0.0
3.2
68.7
46.4
19.4
0.1
4.6
70.5
31.12.2021
31.12.2020
1.3%
3.5%
0.9%
3.5%
The interest rate for the measurement of termination benefit obligations in the Euro area was determined taking into account the Company specific duration of
the portfolio.
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STATEMENTS
OTHER
INFORMATION
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
Interest cost
Remeasurement losses/(gains)
from changes in financial assumptions
from changes in demographic assumptions
due to experience adjustments
Benefits paid
Loss / (Gain) on settlement
Provisions for termination benefits at year-end
2021
46.4
0.0
1.2
0.4
(1.8)
1.9
0.5
(4.8)
0.3
44.1
2020
52.0
(0.1)
1.3
0.6
2.1
0.0
(1.9)
(7.5)
(0.1)
46.4
Payments for termination benefits are expected to amount to €2.3 million in the year 2022. In the previous year, the payments for termination benefits
expected for the year 2021 amounted to €2.9 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)
Reclassification to other reserves
Accumulated remeasurement losses at year-end
2021
27.6
0.6
(0.5)
27.7
2020
27.5
0.1
0.0
27.6
At 31 December 2021 the weighted average duration of termination benefit obligations amounts to 14 years (31.12.2020: 12 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% (31.12.2020: 0.5%) and considers salary
increases of 4.1% (31.12.2020: 3.5%).
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
31.12.2021
31.12.2020
7.6
(4.4)
3.2
7.8
(3.2)
4.6
External plan assets are ring-fenced from all creditors and exclusively serve to meet semi-retirement obligations.
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Notes continued
29. Other non-current provisions
The development of non-current provisions is shown in the table below:
in € million
31.12.2020
Currency translation
Reversals
Additions
Additions interest
Reclassifications
31.12.2021
Onerous/unfavourable
contracts
Labour and civil
contingencies
Demolition/disposal
costs,
environmental
damages
45.2
0.5
0.0
0.0
5.2
(7.8)
43.1
6.7
0.0
(1.5)
1.9
0.0
0.0
7.1
10.7
0.9
0.0
0.4
0.3
1.1
13.4
Total
62.6
1.4
(1.5)
2.3
5.5
(6.7)
63.6
In November 2017, RHI Magnesita sold a plant located in Oberhausen, Germany, in order to satisfy the conditions imposed by the European Commission in
connection with their approval of the Acquisition of Control of Magnesita. As RHI Magnesita is obligated to provide raw materials at cost, the Group has
recognised a provision for unfavourable contracts as part of the purchase price allocation to reflect the foregone profit margin. The non-current portion of this
contract obligation amounts to €43.1 million as of 31.12.2021 (31.12.2020: €45.2 million).
The provision for labour and civil contingencies primarily comprises labour litigation provisions against RHI Magnesita totalling 258 cases amounting to €4.9
million (31.12.2020: €5.2 million).
The provision for demolition and disposal costs and environmental damages primarily includes provisions for the estimated costs of mining site restoration of
several mines in Brazil amounting to €2.9 million (31.12.2020: €2.3 million) and various sites in the United States amounting to €6.0 million (31.12.2020:
€5.3 million).
30. Other non-current liabilities
Other non-current liabilities consist of the following items:
in € million
Deferred income for subsidies received
Liabilities to employees
Miscellaneous non-current liabilities
Other non-current liabilities
thereof financial liabilities
thereof non-financial liabilities
31.12.2021
31.12.2020
4.7
0.5
0.7
5.9
0.0
5.9
3.1
0.8
0.9
4.8
0.0
4.8
31. 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
Payables from property transactions
Payables from commissions
Liabilities to joint ventures and associates
Liabilities to non-consolidated subsidiaries
Dividend liabilities
Other current liabilities
Trade payables and other current liabilities
thereof financial liabilities
thereof non-financial liabilities
31.12.2021
31.12.2020
649.2
57.9
80.9
29.3
24.3
7.3
1.3
0.7
0.4
27.5
878.8
688.5
190.3
318.6
46.2
88.8
27.0
9.9
5.6
1.2
0.7
0.4
24.3
522.7
337.6
185.1
Trade payables increased in line with the Group’s replenishment of raw material and finished goods stock, see Note (17).
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OTHER
INFORMATION
Trade payables include an amount of €142.0 million (31.12.2020: €43.5 million) for raw material purchases subject to supply chain finance arrangements. The
increase in forfaiting considers to match the inventory ramp up of the company in order to avoid supply chain disruptions.
Contract liabilities mainly consist of prepayments received on orders. In 2021 €46.2 million revenue was recognised related to contract liabilities recognised as
at 31 December 2020.
The item liabilities to employees primarily consists of obligations for wages and salaries, payroll taxes and employee-related duties, performance bonuses,
unused vacation and flextime credits.
As a result of the increase in prepayments made and plant under construction for property, plant and equipment payables from property transactions increased
accordingly in 2021.
Other current liabilities include €1.0 million (31.12.2020: €0.6 million) investment reimbursement obligation to the former subsidiary Dolomite Franchi S.p.A.,
and other accrued expenses.
32. Income tax liabilities
Income tax liabilities amounting to €38.2 million (31.12.2020: €25.8 million) primarily include income taxes for the current year and previous years, which
domestic and foreign tax authorities have not definitively assessed. Considering many factors, including the interpretation and jurisprudence on the respective
tax laws and previous experiences, adequate liabilities were recognised.
33. Current provisions
The development of current provisions is shown in the table below:
in € million
31.12.2020
Currency translation
Disposal of subsidiaries
Utilised
Reversals
Additions
Reclassifications
31.12.2021
Restructuring costs
Demolition/ disposal
costs,
environmental damages
Warranties
Onerous/unfavourable
contracts
53.4
(0.1)
0.0
(23.7)
(5.5)
9.4
0.0
33.5
7.8
0.0
0.0
(0.7)
(0.4)
0.5
(1.1)
6.1
9.9
0.1
0.0
(4.3)
(3.4)
1.8
0.0
4.1
12.9
0.2
(3.3)
(9.2)
0.0
2.4
7.8
10.8
Other
2.4
0.0
0.0
(1.1)
(0.2)
0.1
(0.7)
0.5
Total
86.4
0.2
(3.3)
(39.0)
(9.5)
14.2
6.0
55.0
Provisions for restructuring costs amounting to €33.5 million as of 31 December 2021 (31.12.2020: €53.4 million) primarily consist of estimated benefit
obligations to employees due to termination of employment and dismantling costs. Thereof, €14.9 million (31.12.2020: €22.5 million) relate to the plant closure
in Mainzlar, Germany, €4.6 million (31.12.2020: €9.2 million) to the plant closure in Kruft, Germany, € 4.5 million (31.12.2020: €1.2 million) to the plant closure
in Trieben, Austria and €1.0 million (31.12.2020: €0.5 million) to the plant closure in Evergem, Belgium. Further, € 3.1 million (31.12.2020: € 15.4 million) relate
to other cost saving initiatives. In addition, provisions for restructuring costs amounting to €4.2 million relate to the sale of the plants in Porsgrunn, Norway and
Drogheda, Ireland. Thereof, 3.9 million have been recognised for the exposure from an environmental guarantee. In 2021 €5.5 million (2020: €1.1 million) of
provisions for restructuring costs were reversed mainly as a consequence of a revision of the estimate of redundancy costs payable.
The item demolition and disposal costs, environmental damages includes an amount of €2.3 million (31.12.2020: €2.5 million) which refers to the former site in
Aachen, 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 supply contract obligation amounting to €8.0 million (31.12.2020:
€7.6 million). The amortisation of this provision led to an income of €7.5 million in 2021 (31.12.2020: €13.1 million). In addition, provisions for other unfavourable
contracts amount to €2.9 million (31.12.2020: €2.0 million).
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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Notes continued
NOTES TO THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS
34. Revenue
Revenue is essentially generated by product deliveries and by performing management refractory services. The distribution of revenue by product group,
division and country is given in the explanations to segment reporting under Note (50).
35. Cost of sales
Cost of sales comprises the production cost of goods sold as well as the purchase price of merchandise sold. In addition to direct material and production costs,
it also includes overheads including depreciation charges on production equipment, amortisation charges of intangible assets as well as impairment losses and
reversals of impairment losses of inventories. Moreover, cost of sales also includes the costs of services provided by the Group or services received.
36. 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.
37. 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 €36.7 million (2020: €37.8 million), of which development costs amounting to €8.7 million (2020: €7.2 million)
were capitalised. Income from research grants amounted to €4.0 million (2020: €3.9 million) in 2021. Amortisation and impairment of development costs
amounting to €3.5 million (2020: €3.6 million) are recognised under cost of sales.
38. Restructuring
Production Optimisation Plan
The Group continued the Production Optimisation Plan initiated in 2019 throughout 2021, which led to restructuring expenses amounting to €2.8 million
(2020: €46.5 million) and non-current asset write-downs amounting to €41.3 million (2020: €28.1 million). Thereof €17.4 million (2020: €19.1 million) are
allocated to Segment Steel and €23.9 million (2020: €9.0 million) are allocated to Segment Industrial.
In September 2021, the plant in Dashiqiao, China, was shut down and production suspended. At the same time, the Group entered negotiations with the joint
venture partner to exit the Liaoning RHI Jinding Magnesia Co., Ltd. undertaking, to give up the entity’s net assets in exchange for a waiver of the dividend
payable amounting to €23.5 million as per 31 December 2021. These negotiations are still ongoing. The recoverable amount of Dashiqiao’s assets is deemed to
be equal to the fair value less costs of disposal and was estimated with reference to the difference between net assets to be given up and the amount of the
expected waiver of the dividend liability as per 31 December 2021. As a result, write-down expenses of €29.0 million have been recognised, of which €8.7
million are attributable to Segment Steel and €20.3 million are attributable to Segment Industrial. Further €2.4 million of idle costs were incurred until
31 December 2021 and recorded as restructuring expenses.
For the final closure of plant Trieben, Austria, restructuring expenses amounting to €16.3 million have been recognised in 2021. These expenses mainly relate
to dismantling and site clean-up costs amounting to €3.1 million and write-down expenses recognised on non-current assets amounting to €12.2 million, of
which €8.6 million are attributable to Segment Steel and €3.6 million to Segment Industrial. The recoverable amount of these assets was estimated with
reference to their expected scrap value, which is deemed negligible.
In the course of the plant closure in Hagen, Germany, restructuring expenses totalling to €0.6 million have been recognised and land has been sold resulting
in a gain from disposal amounting to €4.1 million in 2021.
Organisational restructuring
In 2020 management conducted a detailed and far-reaching review of the Group’s cost base on a long-term basis, to make sure the business is right-sized and
prepared for the challenges and opportunities ahead, including reduction of management and implementation of a new structure. As this project is still
ongoing, further restructuring expenses related to termination of employment costs amounting to €4.7 million (2020: €22.2 million) have been recognised in
2021.
Divestment Norway and Ireland
Following the sale of plants in Drogheda, Ireland, and Porsgrunn, Norway, in February 2021 expenses amounting to €9.9 million have been recognised.
Thereof, expenses amounting to €6.6 million were incurred for the exposure to environmental risks. In 2020, write-down expenses on non-current assets
amounted to €18.7 million.
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STATEMENTS
OTHER
INFORMATION
Summary of restructuring and write-down expenses recognised:
in € million
Production Optimisation Plan
Organisational restructuring
Divestment Norway and Ireland
Other
Restructuring and write-down expenses
39. Other income
The individual components of other income are:
in € million
Amortisation of Oberhausen provision
Result from deconsolidation incl. recycling of OCI components to P&L
Income from the disposal of non-current assets
Result from derivatives from supply contracts
Reversal of provisions
Miscellaneous income
Other income
2021
(44.1)
(4.7)
(9.9)
(0.1)
(58.8)
2021
7.5
6.8
6.2
1.6
0.5
6.5
29.1
2020
(74.6)
(22.2)
(19.5)
2.5
(113.8)
2020
13.1
0.0
1.8
0.0
0.5
4.3
19.7
The result from deconsolidation amounting to €6.8 million relates to the disposal of RHI Normag AS, Porsgrunn, Norway and Premier Periclase Limited,
Drogheda, Ireland.
40. Other expenses
Other expenses include:
in € million
Expenses for strategic projects
Losses from the disposal of non-current assets
Result from deconsolidation incl. recycling currency translation differences
Result from derivatives from supply contracts
Miscellaneous expenses
Other expenses
2021
(4.7)
(2.6)
(1.6)
0.0
(5.6)
(14.5)
2020
(6.9)
(6.4)
(0.3)
(9.6)
(3.0)
(26.2)
Expenses for strategic projects amounting to €4.7 million (2020: €6.9 million) mainly include legal and consulting fees related to organisational streamlining
and M&A. Miscellaneous expenses mainly consist of expenses related to prior years.
41. Interest income
This item includes interest income on securities and shares amounting to €0.6 million (2020: €0.7 million) as well as on cash at banks and similar income
amounting to €13.6 million (2020: €5.2 million) of which €10.9 million are related to the successful judicial proceeding against tax authorities in Brazil.
Additional information is provided under Note (18).
42. Foreign exchange effects and related derivatives
The net gain and 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 gain (expense) on foreign exchange effects and related derivatives
2021
119.7
9.2
(121.7)
(4.4)
2.8
2020
147.1
1.9
(190.4)
(1.4)
(42.8)
The net gain on foreign exchange effects in the current reporting period resulted mainly from the revaluation of the US Dollar against the Euro.
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Notes continued
43. 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
Reversal of impairment losses on securities
Impairment losses on securities
Income/Expenses from the valuation of NCI put options
Other interest and similar expenses
Other net financial expenses
44. 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
2021
4.7
(8.9)
(0.4)
0.0
(4.6)
(6.8)
(5.2)
(1.1)
0.2
0.0
1.1
(4.8)
(21.2)
2021
(43.2)
(12.2)
16.0
3.8
(39.4)
2020
5.9
(11.2)
(0.6)
(0.2)
(6.1)
(9.6)
(3.7)
(1.3)
0.0
(0.2)
(1.6)
(7.2)
(29.7)
2020
(27.1)
(3.7)
16.9
13.2
(13.9)
The current tax expense of the year 2021 includes tax expenses for previous periods of €3.8 million (2020: €2.5 million) and income from income tax relating
to prior periods of €12.2 million (2020: €8.3 million).
In 2021 the income tax for prior periods mainly includes an income resulting from tax audits of RHI Magnesita Group amounting to €9.2 million. In 2020 the
income tax for prior periods mainly included income from revised tax returns in the Netherlands amounting to €3.8 million and income from a change in
estimate of prior-year tax provisions in Germany amounting to €1.4 million.
Regarding the recognition of tax expenses, deferred tax assets, and deferred tax liabilities, RHI Magnesita has evaluated the impacts of the economic scenario
arising, mainly, out of COVID-19’s potentially delayed global recovery. In this context, the relevant uncertainties and potential negative effects of the downturn
for the Group’s financial results were taken into consideration when evaluating the recoverability of the tax assets. Special focus was given to working with the
latest forecasts and assumptions to minimise the effects of economic uncertainty to reach an assessment that reflects the best analysis possible, considering
the circumstances and information available. Based on this analysis it was concluded that there is no need for an impairment of deferred tax assets. Information
on tax contingencies is provided under Note (57).
In addition to the income taxes recognised in the Statement of Profit or Loss, a tax expense totalling €3.1 million (2020: income totalling €41.1 million), which is
attributable to other comprehensive income, was also recognised in other comprehensive income.
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STATEMENTS
OTHER
INFORMATION
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% (2020: 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 write down on deferred tax assets
Deferred taxes not usable due to plant sale or closure
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 %)
2021
289.1
72.3
5.1
17.6
(17.2)
0.0
(4.0)
(37.9)
1.0
8.2
(0.2)
2.6
(8.4)
0.3
39.4
13.6%
2020
41.5
10.4
0.3
14.6
(5.0)
6.4
(3.4)
(14.2)
0.3
16.0
(6.6)
0.4
(5.9)
0.6
13.9
33.5%
In 2021 expenses not deductible for tax purposes included non-deductible personnel related expenses in Austria of €1.4 million, non-creditable withholding
taxes of €1.8 million, non-deductible expenses for a debt waiver of€ 1.6 million, IT costs recharged from subsidiaries being non-deductible of €1.8 million, €2.6
million in Brazil relating to Transfer Price adjustments and non-deductible expenses due to thin capitalisation of €1.2 million in Argentina. In 2020 expenses
not deductible for tax purposes included non-deductible voluntary leave payments in Austria of €1.7 million, nondeductible expenses for a share sale of €0.2
million, €4.9 million in Brazil, mainly due to taxation on foreign income of Brazilian controlled subsidiaries and non-deductible expenses due to thin
capitalisation of €1.1 million in Argentina.
Non-taxable income and tax benefits include non-taxable income from restructuring of €1.3 million in Austria, income of foreign permanent establishments
non-taxable in Austria of €1.8 million, tax incentives from the SUDENE tax regime in Brazil of € 1.6 million and a tax depreciation of €7.5 million. In 2020 non-
taxable income and tax benefits included non-taxable portions of a capital gain of €0.8 million or statutory adjustments of €0.7 million.
Previously unrecognised temporary differences of €3.4 million could be utilised in Norway due to an asset sale. Furthermore, a deferred tax asset of €37.7
million was recognised resulting from a tax depreciation for future periods. On tax losses and temporary differences €9.1 million of potential deferred tax assets
have not been recognised in China, thereof relating €8.2 million to a plant closure creating deferred tax assets not usable anymore due to limited planned
taxable income in future years or leading to the write down of existing deferred tax assets. In 2020 the major effects include €9.4 million of deferred tax assets
being recognised due to increased planned taxable income due to a restructuring and €16.0 million impairment of deferred tax assets in Norway due to the
sale of the company holding those tax assets.
Due to tax rate changes in Argentina from 30% to 35% an amount of €0.3 million increased the income from deferred income taxes in 2021. In 2020 due to
tax rate changes in Brazil from 15,25% to 34% in relation to the SUDENE tax regime an amount of €6.5 million increased the income from deferred income
taxes.
45. Expense categories
The presentation of the Consolidated Statement of Profit or Loss is based on the function of expenses. The following table shows a classification by expense
category for 2021 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, administrative and restructuring expenses
2021
(259.0)
1,414.9
547.6
131.1
41.3
(41.2)
502.9
2,337.6
2020
19.3
1,013.1
575.6
139.7
52.1
(32.4)
371.0
2,138.4
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Notes continued
Cost of materials includes expenses for raw materials and supplies and purchased goods of €1,189.4 million (2020: €827.9 million) as well as expenses for
services received, especially energy, amounting to €225.5 million (2020: €185.2 million).
Amortisation charges of intangible assets are largely recognised in cost of sales. Other expenses mainly include freight costs, commissions, travel costs as well
as consulting and other outside services.
46. Personnel costs
Personnel costs consist of the following components:
in € 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
Personnel expenses (without interest expenses)
2021
415.2
4.4
4.8
1.2
1.4
7.8
86.6
26.2
547.6
2020
443.3
5.1
6.2
1.7
1.4
19.1
73.7
25.1
575.6
Personnel costs do not include amounts resulting from the interest accrued on personnel provisions. They amount to €4.6 million (2020: €6.0 million) and are
recorded in other net financial expenses.
The expenses for wages and salaries include €6.2 million (2020: €-3.0 million) for share based payments.
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FINANCIAL
STATEMENTS
OTHER
INFORMATION
NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
The Statement of Cash Flows shows how cash and cash equivalents of the Group change through cash inflows and cash outflows during the reporting year. In
accordance with IAS 7, cash flows from operating activities, from investing activities and from financing activities are distinguished. Cash flows from investing
and financing activities are determined on the basis of cash payment, while cash flow from operating activities is derived from the Consolidated Financial
Statements using the indirect method.
The respective monthly changes in items of the Statement of Financial Position of companies that report in foreign currencies are translated at the closing rate
of the previous month and adjusted for effects arising from changes in the group of consolidated companies or in other businesses. Therefore, the Statement of
Cash Flows cannot be derived directly from changes in items of the Consolidated Statement of Financial Position. As in the Statement of Financial Position,
cash and cash equivalents are translated at the closing rate. The effects of changes in exchange rates on cash and cash equivalents are shown separately.
47. Cash generated from operations
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
gains / losses from the disposal of property, plant and equipment
gains / losses from the disposal of subsidiaries
net interest expense and derivatives
result from 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 (used in) / generated from operations
2021
249.7
39.4
108.7
22.4
41.3
(0.9)
(0.2)
(6.3)
(5.2)
24.4
(100.2)
(12.7)
(474.3)
(132.6)
(1.6)
314.8
10.7
(56.9)
(49.0)
(24.8)
(53.3)
2020
27.6
14.0
120.3
19.4
46.8
(0.6)
0.2
0.1
0.3
36.0
(7.6)
23.2
64.2
35.9
(0.1)
(5.8)
3.1
13.1
(4.1)
(19.4)
366.6
In 2021 cash generated from operations was negative due to the supply chain disruptions impacting the business, which resulted in increased working capital,
especially in increased level of inventory of raw materials and finished goods. This is a non-recurring effect, as supply chains are expected to stabilise im 2022.
Other non-cash expenses and income include mainly the net interest expenses for defined benefit pension plans amounting to €4.6 million (2020:
€6.1 million), net remeasurement gains of monetary foreign currency positions and derivative financial instruments of €6.4 million (2020: €-4.3 million),
foreign exchange effects and the amortisation of Oberhausen provision (see Note 39).
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Notes continued
48. 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:
in € million
Liabilities to financial institutions
Lease liabilities
Liabilities to fixed-term or
puttable non-controlling interests
Other financial liabilities and
capitalised transaction costs
Changes of financial liabilities
and assets arising from
financing activities
in € million
Liabilities to financial institutions
Lease liabilities
Liabilities to fixed-term or
puttable non-controlling interests
Other financial liabilities and
capitalised transaction costs
Changes of financial liabilities
and assets arising from
financing activities
Cash changes
Non-cash changes
31.12.2020
1,105.6
56.8
38.8
8.9
Changes in
foreign
exchange rates
Interest expense
and other
changes
Additions and
modifications of
leases (IFRS 16)
Reclass
390.1
(17.4)
(1.3)
(5.4)
15.0
1.6
3.7
0.3
0.0
0.0
(8.8)
0.0
23.4
1.1
27.6
1.2
0.0
13.4
0.0
0.0
31.12.2021
1,534.1
55.5
60.0
5.0
1,210.1
366.0
20.6
(8.8)
53.3
13.4
1,654.6
Cash changes
Non-cash changes
31.12.2019
1,043.1
61.9
35.8
11.9
Changes in
foreign
exchange rates
Disposal group
IFRS 5
Interest
expense and
other changes
Additions and
modifications of
leases (IFRS 16)
51.1
(17.1)
(1.6)
(2.6)
(15.1)
(6.7)
(0.8)
(1.7)
0.0
(9.6)
0.0
0.0
26.5
1.3
5.4
1.3
0.0
27.0
0.0
0.0
31.12.2020
1,105.6
56.8
38.8
8.9
1,152.7
29.8
(24.3)
(9.6)
34.5
27.0
1,210.1
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FINANCIAL
STATEMENTS
OTHER
INFORMATION
The reconciliation of the cash impact of net financing in 2021 and 2020 is shown in the tables below:
2021
in € million
Interest income
Interest expenses on borrowings
Net expense on foreign exchange effects and related derivatives
Other net financial expenses
Net finance costs
2020
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
14.2
(20.7)
2.8
(21.2)
(24.9)
0.0
(4.4)
0.0
(1.3)
11.5
(4.4)
1.9
(16.6)
2.7
(20.7)
0.9
(5.9)
(23.0)
Reconciliation to cash net finance cost
Profit or loss
financing cash
movements
other cash and
non-cash
movements
Cash impact of net
financing costs
5.9
(20.1)
(42.8)
(29.7)
(86.7)
0.0
(4.2)
0.0
(3.1)
(0.1)
(4.4)
(44.3)
(22.2)
6.0
(19.9)
1.5
(10.6)
(23.0)
Non cash-movements in interest income mainly consist of accrued interest on a tax benefit that was recognised as a result of a successful judicial proceeding
against tax authorities in Brazil relating to revenue based taxes. Non-cash movements in other net financial expenses are mainly related to net interest expenses
on personnel provisions and non-controlling interests as well as to expenses from the discount on provisions.
49. Total interest paid and interest received
Total interest paid amounts to €29.8 million in the reporting period (2020: €31.7 million), of which €0.0 million (2020: €1.0 million) is included in cash flow
from operating activities, €3.2 million (2020: €0.2 million) in cash flow from investing activities and €26.6 million (2020: €30.5 million) in cash flow from
financing activities.
Total interest received amounts to €2.7 million for the financial year 2021 (2020: €6.1 million), of which €0.0 million (2020: €0.2 million) are included in cash
flow from operating activities and €2.7 million (2020: €5.9 million) in cash flow from investing activities.
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Notes continued
OTHER DISCLOSURES
50. Segment reporting
Segment reporting by operating company division
The following tables show the financial information for the operating segments for the year 2021 and the previous year:
2021 in € million
Revenue
Gross profit
EBIT
Net finance costs
Result from joint ventures and associates
Profit before income tax
Steel
1,822.9
Industrial
Group 2021
728.5
2,551.4
393.7
189.8
583.5
213.8
(24.9)
100.2
289.1
Depreciation and amortisation charges
(93.1)
(38.0)
(131.1)
Segment assets 31.12.2021
Investments in joint ventures and associates 31.12.2021
Reconciliation to total assets
2,146.3
724.2
2,870.5
5.7
1,037.9
3,914.1
Investments in property, plant and equipment and intangible assets (according to non-
current assets statement)
196.0
83.5
279.5
2020 in € million
Revenue
Gross profit
EBIT
Net finance costs
Result from joint ventures and associates
Profit before income tax
Steel1)
Industrial1)
Group 2020
1,569.9
689.1
2,259.0
367.8
182.3
550.1
120.6
(86.7)
7.6
41.5
Depreciation and amortisation charges
(98.5)
(41.2)
(139.7)
Segment assets 31.12.2020
Investments in joint ventures and associates 31.12.2020
Reconciliation to total assets
1,514.7
553.9
2,068.6
16.3
967.8
3,052.7
Investments in property, plant and equipment and intangible assets (according to non-
current assets statement)
127.1
47.7
174.8
1) Adjusted to reflect the changes in presentation.
No single customer contributed 10% or more to consolidated revenue in 2021 and in 2020. Companies which are known to be part of a group are treated as
one customer.
When allocating revenue to product groups, a distinction is made between shaped products (e.g. hydraulically pressed bricks, fused cast bricks, isostatically
pressed products), unshaped products (e.g. repair mixes, construction mixes and castables), refractory management services (e.g. full line service, contract
business, cost per performance) as well as other revenue. Other mainly includes revenue from the sale of non-group refractory products.
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STATEMENTS
OTHER
INFORMATION
In the reporting year, revenue is classified by product group as follows:
in € million
Shaped products
Unshaped products
Management refractory services
Other
Revenue
In 2020, 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
842.7
338.2
575.0
67.0
1,822.9
Industrial
Group 2021
518.9
146.0
0.0
63.6
728.5
1,361.6
484.2
575.0
130.6
2,551.4
Steel1)
Industrial1)
Group 2020
738.5
279.1
481.2
71.1
1,569.9
484.3
143.9
0.0
60.9
689.1
1,222.8
423.0
481.2
132.0
2,259.0
Total revenue includes revenue from Solution Business amounting to €749.2 million (2020: €618.3 million). Thereof, €659.9 million (2020: €537.5 million)
are attributable to Segment Steel and €89.3 million (2020: €80.8 million) are attributable to Segment Industrial. Solution Business is a customer classification,
where RHI Magnesita sums up all customer relations in which we enable our customers to focus on their core competences. It is typically characterised by sales
of end-to-end solutions covering large parts of the customer process chain. Examples of this would be CPP/FLS, but also customers where we focus on
technological development of bespoke products or where we are a strategic partner.
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 €48.0 million (2020: €55.2 million) is transferred over time and an amount of €82.6 million (2020:
€76.8 million) is transferred at a point of time.
Segment reporting by country
Revenue in 2021 is classified by customer sites as follows:
in € million
Netherlands
All other countries
USA
India
Brazil
PR China
Mexico
Germany
Italy
Canada
Russia
Other countries, each below €44.3 million
Revenue
Steel
6.0
364.1
221.3
191.5
73.8
89.1
78.9
73.8
45.8
52.7
625.9
1,822.9
Industrial
2.2
52.7
34.1
60.5
127.4
40.7
45.6
23.6
41.5
21.6
278.6
728.5
Group
8.2
416.8
255.4
252.0
201.2
129.8
124.5
97.4
87.3
74.3
904.5
2,551.4
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 2 1
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Notes continued
Revenue in 2020 is classified by customer sites as follows:
in € million
Netherlands
All other countries
USA
Brazil
India
PR China
Mexico
Germany
Italy
Russia
Canada
Other countries, each below €55.6 million
Revenue
1) Adjusted to reflect the changes in presentation.
Steel1)
6.3
Industrial1)
6.0
323.8
173.8
161.7
67.2
82.6
68.4
61.5
59.5
39.5
525.6
1,569.9
60.5
56.3
25.9
99.9
31.4
45.2
24.5
17.9
35.5
286.0
689.1
Group
12.3
384.3
230.1
187.6
167.1
114.0
113.6
86.0
77.4
75.0
811.6
2,259.0
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
Austria
USA
PR China
Germany
India
Mexico
France
Turkey
Other countries, each below €16.8 million (31.12.2020: €15.9 million)
Goodwill, intangible assets and property, plant and equipment
31.12.2021
31.12.2020
396.5
331.4
229.3
161.8
149.9
71.0
35.7
32.9
27.8
50.4
338.2
259.4
220.5
177.4
139.6
61.6
34.9
27.5
28.5
47.5
1,486.7
1,335.1
51. Earnings per share
In accordance with IAS 33, earnings per share are calculated by dividing the profit or loss attributable to the shareholders of RHI Magnesita N.V. by the weighted
average number of shares outstanding during the financial year.
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 €)
2021
243.1
2020
24.8
47,629,647
49,075,426
519,546
363,519
48,149,193
49,438,945
5.10
5.05
0.51
0.50
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 2021, there are 554,238 diluting options (31.12.2020: 363,519).
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FINANCIAL
STATEMENTS
OTHER
INFORMATION
52. Dividend payments and proposed dividend
The proposed dividend is subject to the approval of the Annual General Meeting on 25 May 2022 and was not recognised as a liability in the Consolidated
Financial Statements 2021. Together with the already paid interim dividend of €0.50 per share in September, the final proposed dividend for 2021 will amount
to €1.00 per share (2020:€1.50 per share).
In line with the Group’s dividend policy the Board paid out an interim dividend in September 2021 of €0.50 per share for the first half of 2021 amounting to
€24 million.
Based on a resolution adopted by the Annual General Meeting of RHI Magnesita N.V. on 10 June 2021 the final dividend amounted to €1.00 per share for the
shareholders of RHI Magnesita N.V for 2020. Together with the already paid interim dividend of €0.50 per share in December, the total dividend for 2020
amounted to €1.50 per share.
Dividend payments to the shareholders of RHI Magnesita N.V. have no income tax consequences for RHI Magnesita N.V.
53. Additional disclosures on financial instruments
The following tables show the carrying amounts and fair values of financial assets and liabilities by measurement category and level and the allocation to the
measurement category in accordance with IFRS 13. In addition, carrying amounts are shown aggregated according to measurement category.
in € million
Other non-current financial assets
Interests in subsidiaries not consolidated
Marketable securities
Shares
Other non-current financial receivables
Trade and other current receivables
Other current financial assets
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
interests2)4)
Power supply contract Norway3)
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
31.12.2021
31.12.2020
FVPL
FVPL
FVPL
AC
AC
FVPL
AC
AC
AC
AC
AC
FVPL
-
AC
AC
AC
3
1
3
-
-
2
-
-
2
2
2
2
2
2/3
2
-
0.6
13.2
0.5
0.3
414.4
2.5
0.4
580.8
1,012.7
0.6
13.2
0.5
-
-
2.5
-
-
0.6
13.0
0.5
0.4
255.6
0.3
0.0
587.2
857.6
0.6
13.0
0.5
-
-
0.3
0.0
-
1,534.1
1,551.6
1,105.6
1,118.3
-
-
3.4
18.3
38.8
15.5
-
5.0
55.5
0.1
9.6
60.0
0.0
688.5
2,352.8
16.8
995.5
2,343.1
0.1
-
-
0.1
9.6
60.0
0.0
-
8.9
56.8
3.4
18.3
38.8
15.5
337.6
1,584.9
14.4
843.2
1,563.2
3.4
1) FVPL: Financial assets/financial liabilities measured at fair value through profit or loss.
AC: Financial assets/financial liabilities measured at amortised cost.
2) Reclassification of puttable non-controlling interests amounting to €8.8m to non-controlling interest within equity upon completion of the merger of the Indian entities, see Note (5).
3) Relating to the termination of the power supply contract in the course of the sale of NORMAG; termination fee paid in January 2021.
4) Including the put option of the newly founded RHIMNGG amounting to €23.4 million, see Note (5).
In the RHI Magnesita Group marketable securities, derivative financial instruments, shares, and interests in subsidiaries not consolidated are measured at fair
value.
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Notes continued
Fair value is defined as the amount for which an asset could be exchanged, or a liability settled, between market participants in an arm's length transaction on
the day of measurement. When the fair value is determined it is assumed that the transaction in which the asset is sold or the liability is transferred takes place
either in the main market for the asset or liability, or in the most favourable market if there is no main market. RHI Magnesita considers the characteristics of the
asset or liability to be measured which a market participant would consider in pricing. It is assumed that market participants act in their best economic interest.
RHI Magnesita takes into account the availability of observable market prices in an active market and uses the following hierarchy to determine fair value:
Level 1:
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 if such instruments are immaterial to the
Group, in which case amortised cost serves as an approximation of fair value.
The fair value of interest derivatives in a hedging relationship (interest rate swaps) is determined by calculating the present value of future cash flows based on
current yield curves taking into account the corresponding terms (Level 2).
The fair value of other derivative contracts corresponds to the market value of the forward exchange contracts and the embedded derivatives in open orders
denominated in a currency other than the functional currency, as well as the market value of a short-term power supply contract. These derivatives are
measured using quoted forward rates that are currently observable (Level 2).
RHI Magnesita takes into account reclassifications in the measurement hierarchy at the end of the reporting period in which the changes occur. Other than
those 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 disclosed 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 carrying amount of other financial liabilities approximate their fair value at the reporting date. Puttable non-controlling interests in the amount of €8.8
million have been reclassified to non-controlling interest within equity upon completion of the merger of the Indian entities. Further information is provided
under Note (5). In December 2021, RHI Magnesita recognised a put option liability related to the newly founded group company RHIMNGG in China (see Note
5), amounting to €23.4 million. The fair value is based on the present value of performance-related contractual cashflows with a maturity in 2031. The principal
valuation parameters are deemed to be non-observable (Level 3). Other liabilities to fixed-term or puttable non-controlling interests are valued at Level 2 of the
fair value hierarchy.
The carrying amounts of financial receivables approximately correspond to their fair value as due to the amount of the existing receivables no material deviation
between the fair value and the carrying amount is assumed and the credit default risk is accounted for by forming valuation allowances.
Trade and other current receivables and liabilities as well as cash and cash equivalents are predominantly short-term. Therefore, the carrying amounts of these
items approximate fair value at the reporting date.
No contractual netting agreement of financial assets and liabilities were in place as at 31 December 2021 and 31 December 2020.
Net results by measurement category in accordance with IFRS 9
The effect of financial instruments on the income and expenses recognised in 2021 and 2020 is shown in the following table, classified according to the
measurement categories defined in IFRS 9:
in € million
Net loss from financial assets and liabilities measured at fair value through profit or loss
Net loss from financial assets and liabilities measured at amortised cost
2021
7.2
(20.9)
2020
(4.9)
(73.9)
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 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 options. The net loss is mainly related to financial
liabilities measured at amortised cost.
Net finance costs include interest income amounting to €14.2 million (2020: €5.9 million) and interest expenses of €33.0 million (2020: €32.6 million),
which result from financial assets and liabilities which are not carried at fair value through profit or loss.
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OTHER
INFORMATION
54. Derivative financial instruments
Commodity forward
RHI Magnesita Group terminated its energy supply contract following the closure of the fused magnesia plant in Porsgrunn, Norway. The original contract
term was December 2023 and the settlement payment amounts to €24.0 million. The first payment installment was made in July 2020 (€8.5 million), the
second in January 2021 (€15.5 million). Since 2015 this energy supply contract had been accounted for as a derivative financial instrument in accordance with
IFRS 9, as the “own-use-exemption” was no longer applicable as the majority of the contracted electricity was sold on the market. From 30 June 2020 onward
until final settlement, measurement of this financial instrument was based on the settlement payment and recognised as other financial liability.
In addition, Magnesita Refratários S.A., Contagem, Brazil signed a commodity forward contract for electricity in January 2012 which is accounted for as a
financial instrument in accordance with IFRS 9 since 1 January 2020 as the “own-use exemption” no longer applied. The term of the contract expired in the
fourth quarter of 2021 and the corresponding financial liability has been reduced to €0.0 million (31.12.2020: €1.6 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 Group has established a hedge ratio of 1:1 and the cash flow changes of the underlying
hedged items, which result from the changes of the variable interest rates, are balanced out by the cash flow changes of the interest rate swaps. These hedging
measures pursue the objective to transform variable-interest financial liabilities into fixed interest financial liabilities, thus hedging the cash flow from the
financial liabilities. Potential hedge ineffectiveness could arise out of the credit value/debit value adjustment on the interest rate swaps which is not matched by
the loan or out of differences in critical terms between the interest rate swaps and the loans. Credit risk may affect hedge effectiveness, however this risk is
assessed to be very low at RHI Magnesita as only first class international banks are involved.
In the year 2018, RHI Magnesita concluded an amortising interest rate swap with a nominal volume of €305.6 million maturing in 2023. As of December 2021,
the outstanding amount of the interest rate swap was €259.7 million (31.12.2020: €290.3 million). The interest and compensation payments are due on a
quarterly basis. Fixed interest rate amounts to 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 3.1%, the variable interest rate is based on the USD LIBOR. In December 2021, RHI Magnesita hedged two of the floating
tranches from the issued €250.0 million bonded loans (“Schuldscheindarlehen”). One interest rate swap amounting to €97.5 million maturing in 2027 was
fixed at 0.38%, the other interest rate swap amounting to €12.0 million maturing in 2028 was fixed at 0.48%. The interest and compensation payments for
both swaps are due on a half-year basis.
The fair values of the interest rate swaps totalled €-9.6 million at the reporting date (31.12.2020: €-18.3 million) and are shown in other non-current financial
liabilities in the Consolidated Statement of Financial Position. For the reporting period 2021, €8.7 million (2020: €-3.6 million) have been recognised in other
comprehensive income and an income amounting to €0.0 million (2020: €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 or loss.
The financial effect of the hedged item and the hedging instrument for the period 2021 and 2020 is shown as follows:
in € million
Carrying amount
Statement of Financial Position
Change in fair value used for
measuring ineffectiveness
(9.6)
(18.3)
Other non-current
financial liabilities
Other non-current
financial liabilities
8.7
(3.6)
Nominal amount
USD 200 million
EUR 369.2 million
USD 200 million
EUR 290.3 million
2021
2020
in € million
2021
2020
Change in fair value used for
measuring ineffectiveness
Change in fair value used to
measure ineffetiveness net of
deferred tax
8.7
(3.6)
6.6
(2.7)
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Notes continued
Forward exchange contracts
A forward exchange contract was put into place as of 31 December 2020, selling USD 100.0 million against EUR. As of 31 December 2021 there is no USD/EUR
forward exchange contract outstanding.
In addition, a forward exchange contract was put into place as of 30 June 2021 selling BRL 100.0 million against USD. The instrument has been rolled on a
monthly basis, with a forward exchange contract in place as of 31 December 2021, in the amount of BRL 80.0 million, selling BRL against USD. Forward
exchange contracts are renewed and rolled on a monthly basis depending on the current next exposure to the currency pairs.
The nominal value and fair value of forward exchange contracts as of 31 December 2021 are shown in the table below:
Purchase
USD
EUR
Forward exchange contracts
Sale
BRL
USD
31.12.2021
Nominal value
in million
Fair value in €
million
BRL
USD
80.0
0.0
0.1
0.0
0.1
The nominal value and fair value of forward exchange contracts as of 31 December 2020 are shown in the table below:
Purchase
EUR
Forward exchange contracts
Sale
USD
31.12.2020
Nominal value
in million
Fair value in €
million
USD
100.0
0.3
0.3
55. 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 €1,012.7 million (31.12.2020: €842.2 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 carried 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
31.12.2021
31.12.2020
300.4
103.3
403.7
(206.2)
197.5
183.3
71.0
254.3
(83.2)
171.1
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OTHER
INFORMATION
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
31.12.2021
31.12.2020
59.9
6.1
2.7
2.3
332.7
403.7
39.8
7.2
6.8
3.7
196.8
254.3
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
2021
2020
Accumulated valuation allowance at beginning of year
Currency translation
Addition
Use
Reversal
Net remeasurement of loss allowance
Accumulated valuation allowance at year-end
Individually
assessed -
credit impaired
Collectively
assessed -
not credit impaired
Individually
assessed -
credit impaired
Collectively
assessed -
not credit impaired
30.0
0.3
3.5
(5.2)
(5.4)
0.0
23.2
0.6
-
-
-
-
-
0.6
32.3
(1.6)
7.7
(6.3)
(2.1)
0.0
30.0
1.3
-
-
-
-
(0.7)
0.6
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. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and
the days past due.
in € million
31.12.2021
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
Trade receivables - days past due
Expected credit loss rate in %
0.03-0.37%
0.06-0.86%
0.25-8.09%
0.52-17.84%
0.91-27.98%
3.01-50.55%
Gross carrying amount
Life time expected credit loss
351.9
(0.4)
26.3
(0.1)
4.6
(0.1)
2.2
(0.1)
1.7
(0.1)
(1.3)
(0.2)
385.4
(1.0)
in € million
31.12.2020
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
Trade receivables - days past due
Expected credit loss rate in %
0,02-0,53%
0,03-1,23%
0,08-9,46%
0,15-18,77% 0,26-26,25%
0,91-55,39%
Gross carrying amount
Life time expected credit loss
222.8
0.30
13.3
0.04
2.80
0.02
1.30
0.03
2.00
0.05
0.2
0.20
242.4
0.6
Climate-related events or adverse changes in climate-related legislature could potentially affect the creditworthiness of customers, e.g. due to business
interruption or lower profitability. RHI Magnesita has incorporated these considerations when incorporating forward-looking information into the expected
credit loss estimation, and assessed that such events would have an immaterial impact on the estimated loss rates.
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 2021, RHI Magnesita has a committed Revolving Credit Facility (RCF) of €600.0 million,
which was fully unutilised (31.12.2020: committed RCF was €600.0 million and was also unutilised). The €600.0 million committed RCF is a syndicated
facility with multiple international banks and matures in 2027. The liquidity of the subsidiaries of the RHI Magnesita Group is managed regionally, continued
access to liquidity and optimised cash levels is ensured by Corporate Treasury, which supports business needs and lowers borrowing costs.
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Notes continued
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
31.12.2021
534.0
1,000.1
5.0
55.5
60.0
688.5
Cash
outflows
551.4
1,022.9
5.4
59.9
197.9
688.5
2,343.1
2,526.0
Remaining term
up to 1 year
2 to 5 years
over 5 years
69.9
154.3
2.3
16.9
3.0
688.5
934.9
337.3
706.7
3.0
29.7
20.0
0.0
144.2
161.9
0.1
13.3
174.9
0.0
1096.7
494.4
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
Power supply contract Norway
Trade payables and other current liabilities
Non-derivative financial liabilities
Carrying amount
31.12.2020
135.0
970.6
8.9
56.8
38.8
15.5
337.6
1,563.2
Cash
outflows
144.7
994.2
11.3
61.8
170.2
15.5
337.6
1,735.3
Remaining term
up to 1 year
2 to 5 years
over 5 years
2.7
131.2
4.4
14.2
12.9
15.5
337.6
518.5
106.2
594.3
6.9
32.3
11.9
0.0
0.0
751.6
35.8
268.7
0.0
15.3
145.4
0.0
0.0
465.2
Derivative financial instruments
The remaining terms of derivative financial instruments based on expected undiscounted cash flow as of 31 December 2021 and 31 December 2020 are shown
in the table below:
in € million
Receivables from derivatives with net settlement
Forward exchange contracts
Derivatives in open orders
Liabilities from derivatives with net settlement
Interest rate swaps
Derivatives in open orders
Carrying amount
31.12.2021
Cash flows
up to 1 year
2 to 5 years
over 5 years
Remaining term
0.1
2.4
9.6
0.1
0.1
2.4
12.5
0.1
0.1
2.4
7.5
0.1
0.0
0.0
4.9
0.0
0.0
0.0
0.1
0.0
in € million
Receivables from derivatives with net settlement
Forward exchange contracts
Liabilities from derivatives with net settlement
Derivatives from supply contracts
Interest rate swaps
Derivatives in open orders
Carrying amount
31.12.2020
Cash flows
up to 1 year
2 to 5 years
over 5 years
Remaining term
0.3
1.6
18.3
1.8
0.3
1.6
9.6
1.8
0.3
1.6
4.7
1.8
0.0
0.0
4.9
0.0
0.0
0.0
0.0
0.0
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OTHER
INFORMATION
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 Group level and analysed with respect to hedging options. Usually the net position of the Group in the respective
currency serves as the basis for decisions regarding the use of hedging instruments.
Foreign currency risks are created through financial instruments which are denominated in a currency other than the functional currency (in the following:
foreign currency) and are monetary in nature. Important primary monetary financial instruments include trade receivables and payables, cash and cash
equivalents as well as financial liabilities as shown in the Consolidated Statement of Financial Position. Equity instruments are not of a monetary nature, and
therefore not linked to a foreign currency risk in accordance with IFRS 7.
The majority of foreign currency financial instruments in the RHI Magnesita Group result from operating activities, above all from intragroup financing
transactions, unless the foreign exchange effects recognised to profit or loss on monetary items, which represent part of a net investment in a foreign operation
in accordance with IAS 21, are eliminated or hedged through forward exchange contracts. Significant provisions denominated in foreign currencies are also
included in the analysis of risk.
The following table shows the foreign currency positions in the major currencies as of 31 December 2021:
in € million
Financial assets
Financial liabilities, provisions
Net foreign currency position
USD
654.7
(622.9)
31.8
EUR
56.0
(72.8)
(16.8)
The foreign currency positions as of 31 December 2020 are structured as follows:
in € million
Financial assets
Financial liabilities, provisions
Net foreign currency position
USD
663.6
(358.1)
305.5
EUR
72.6
(98.2)
(25.6)
GBP
14.5
(14.2)
0.3
GBP
21.8
3.5
25.3
INR
30.3
(0.4)
29.9
INR
9.4
0.0
9.4
Other
68.4
(17.6)
50.8
Other
40.6
(32.9)
7.7
Total
823.9
(727.9)
96.0
Total
808.0
(485.7)
322.3
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 2021 would have had the
following effect on profit or loss and equity (both excluding income tax):
in € million
US Dollar
Euro
Indian Rupee
Other currencies
Appreciation of 10%
Devaluation of 10%
Gain/(loss)
Equity
Gain/(loss)
(19.1)
1.8
(2.7)
(4.0)
(8.6)
6.3
(2.7)
(4.0)
23.3
(2.1)
3.3
4.8
Equity
10.6
(7.7)
3.3
4.8
The hypothetical effect on profit or loss at 31 December 2020 can be summarised as follows:
in € million
US Dollar
Euro
British Pound Sterling
Indian Rupee
Other currencies
Appreciation of 10%
Devaluation of 10%
Gain/(loss)
(42.9)
2.0
(2.0)
(0.9)
(0.7)
Equity
(33.3)
12.0
(2.0)
(0.9)
(0.7)
Gain/(loss)
52.4
(2.5)
2.4
1.0
0.9
Equity
40.7
(14.7)
2.4
1.0
0.9
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Notes continued
Net investment hedge
Non-current borrowings as of 31 December 2021 include USD 200.0 million which have been designated as a hedge of the net investments 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 ineffectiveness to be recorded from net investments hedges.
The impact of the hedging instrument for the period 2021 and 2020 is shown as follows:
in € million
2021
2020
Carrying amount
Statement of Financial Position
Change in fair value used for
measuring ineffectiveness
176.8
162.6
Non-current borrowings
Non-current borrowings
(14.1)
15.8
Nominal amount
USD 200 million
USD 200 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 recognised in Other
Comprehensive Income within the currency translation differences.
The impact of the hedged item for the period 2021 and 2020 is shown as follows:
in € million
2021
2020
Change in fair
value used for
measuring
ineffectiveness
Change in fair
value used to
measure
ineffetiveness net
of deferred tax
14.1
(15.8)
(10.6)
(11.9)
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 2021, interest rate hedges amounting to a nominal value of €369.2 million (31.12.2020: €290.3 million) and a nominal
value of USD 200.0 million (31.12.2020: USD 200.0 million) existed. In all cases, a variable interest rate was converted into a fixed interest rate through interest
rate swaps. Further information is provided under Note (54).
The exposure to interest rate risks is presented through sensitivity analyses in accordance with IFRS 7. These analyses show the effects of changes in market
interest rates on interest payments, interest income and interest expense and on equity.
The RHI Magnesita Group measures fixed interest financial assets and financial liabilities at amortised cost, and did not use the fair value option - a hypothetical
change in the market interest rates for these financial instruments at the reporting date would have had no effect on profit and loss or equity.
Changes in market interest rates on financial instruments designated as cash flow hedges to protect against interest rate-related payment fluctuations are
considered with hedge accounting have an effect on equity and are therefore included in the equity-related sensitivity analysis. If the market interest rate as of
31 December 2021 had been 25 basis points higher or lower, equity would have been €1.1 million (31.12.2020: €1.9 million) higher or lower considering tax
effects.
Changes in market interest rates have an effect on the interest result of primary variable interest financial instruments whose interest payments are not
designated as hedged items as a part of cash flow hedge relationships against interest rate risks, and are therefore included in the calculation of the result-
related sensitivities. If the market interest rate as of 31 December 2021 had been 25 basis points higher or lower, the interest result would have been €0.3 million
(31.12.2020: €0.1 million) lower or higher.
Other market price risk
RHI Magnesita holds certificates in an investment fund amounting to €13.2 million (31.12.2020: €13.0 million) to provide the legally required coverage 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.
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OTHER
INFORMATION
56. 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 capital 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
31.12.2021
31.12.2020
1,013.8
123.3%
2.61x
582.1
87.4%
1.53x
Net debt, which reflects borrowings and lease liabilities net of cash and cash equivalents and marketable securities, is managed by Corporate Treasury. The
main task of the Corporate Treasury department is to execute the capital management strategy as well as to secure liquidity to support business operations on a
sustainable basis, to use banking and financial services efficiently and to limit financial risks while at the same time optimising earnings and costs.
The net gearing ratio is the ratio of net debt to total equity.
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 liabilities. 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 1)
Net debt
Net debt excluding IFRS 16 lease liabilities
Net debt to adjusted EBITDA
Net debt to adjusted EBITDA excluding IFRS 16 lease liabilities
1) thereof shown under assets held for sale € 2.0 million in 2020.
31.12.2021
31.12.2020
213.8
22.4
58.8
(14.6)
280.4
108.7
389.1
1,539.1
55.5
580.8
1,013.8
120.6
19.4
113.8
6.5
260.3
120.3
380.6
1,114.5
56.8
589.2
582.1
958.3
525.3
2.61x
2.46x
1.53x
1.38x
In both 2021 and 2020, 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.
57. Contingent liabilities
At 31 December 2021, warranties, performance guarantees and other guarantees amount to €52.5 million (31.12.2020: €48.0 million). Contingent liabilities
have a remaining term between two months and three years, depending on the type of liability. Based on experiences of the past, the probability that
contingent liabilities are used is considered to be low.
In addition, contingent liabilities from sureties of €0.2 million (31.12.2020: €0.3 million) were recorded, of which €0.2 million (31.12.2020: €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 2021 or can potentially be exercised
against RHI Magnesita in the future. The related risks were analysed with a view to their probability of occurrence.
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Notes continued
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 obligation 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
judgements are based on a likely outcome approach based on in-house tax experts, professional firms, and previous experiences when assessing the risks.
The Group is party to several tax proceedings in Brazil which involve estimated contingent liabilities amounting to €200.8 million (31.12.2020: €169.1 million).
These tax proceedings are as follows:
There are three proceedings in which Brazilian Federal Tax Authorities issued tax assessments rejecting the amortization of goodwill generated in two corporate
operations executed between 2007 and 2008, which can be deducted for purposes of Corporate Income Taxes according to Brazilian laws and regulations.
The first group of operations analysed involved the acquisition of shares of Magnesita S.A. by the GP Investment Group. The second group of operations
analysed was the acquisition of companies outside of Brazil by the Group, whose control was then held by the Rhône Group. The Tax Authorities considered
that the Group did not observe the formal and material requirements for the goodwill tax deductions, while the Group presented defenses in all proceedings
claiming all requirements were met. The three proceedings are divided as follows:
Proceeding 1 (31.12.2021: €61.2 million; 31.12.2020: €59.3 million) comprises the deductions executed in 2008 and 2009 and is currently under
trial in the Federal Administrative Council of Tax Appeals (“CARF”). The latest decision issued cancelled more than 90% of the tax assessment but is
still subject to appeals filed by both the Group and the General Counsel to the National Treasury (“PGFN”). The final ruling for this proceeding is
expected within one to two years. After the administrative trial ends, the Group may still challenge any residual charges before Judicial courts
according to its convenience.
Proceeding 2 (31.12.2021: €40.6 million; 31.12.2020: €38.8 million) comprises the deductions executed in 2013, 2014, 2015, 2016, 2017 and 2018
and is currently under trial in CARF. The first CARF decision is expected within one to two years. After the administrative trial ends, the Group may
still challenge any residual charges before Judicial courts according to its convenience.
Proceeding 3 (31.12.2021: €28.8 million; 31.12.2020: €27.7 million) comprises the deductions executed in 2011 and 2012 and is currently under trial
in CARF. The latest decision issued cancelled 100% of the tax assessment but is still subject to appeals filed by both the Group and PGFN. The final
ruling for this proceeding is expected within two to three years. After the administrative trial ends, the Group may still challenge any residual charges
before Judicial courts according to its convenience.
The Group is party to 42 proceedings where the Brazilian Mining Authorities (“ANM”) challenge the criteria used for calculating and paying the Financial
Compensation for Exploration of Mineral Resources (“CFEM”), which are mining royalties paid to the Brazilian Federal Government by every mining company. In
essence, the Authorities claim that CFEM should be paid based on production costs incurred in a later stage of the mineral processing flow, while the Group
defends that CFEM should be paid based on production costs incurred in a prior stage of the mineral processing flow. Based on the opinion of its technical and
legal advisors, the Group has presented defenses against all assessments sent by ANM, and most of the procedures are still ongoing within ANM administrative
courts. Final decisions of the first cases are expected within four to five years. As of 31 December 2021, the potential risk amounts to €23.6 million, including
interest and penalties (31.12.2020: €10.6 million).
Furthermore, Brazilian Tax Authorities issued tax assessments against former Brazilian companies that were merged into Magnesita Refratários S.A., named
Partimag and Edelweis. The assessments relate to the offsetting of federal tax credits and debts performed by such companies up to and including 2008,
which have not been approved by Tax Authorities. Legal opinions demonstrate that the offsets executed are solidly based on supporting documentation and
therefore the Group presented administrative and judicial defenses against the assessments in 17 procedures. The first final decisions are expected within three
to four years. As of 31 December 2021, the potential risk amounts to €5.1 million, including interests and penalties (31.12.2020: €9.5 million).
In 2020, the Group received a tax assessment in which Brazilian Federal Tax Authorities claim that Social Security Taxes (“PIS/COFINS”) were not correctly
calculated in years 2017 and 2018. Authorities have stated that some financial revenues were not taxed and that some tax credits which were offset were not
allowed. The Group presented its defense and currently the proceeding awaits trial in the first instance court of the Federal Revenue Service (“RFB”). A final
decision is expected within four to five years. As of 31 December 2021, the potential risk amounts to €3.9 million, including interest and penalties (31.12.2020:
€3.8 million).
In 2020, Brazilian Federal Tax Authorities sent a tax assessment to the Group stating that some financial revenues were not taxed in year 2016 when an entity of
the Group altered its tax regime for financial revenues from a cash to an accrual-based regime. Based on opinion of its legal advisor, the Group presented
defenses claiming the assessment was void and that the calculations of the authorities were wrong and currently the proceeding awaits trial in the first instance
court of the Federal Revenue Service (“RFB”). A final decision is expected within four to five years. As of 31 December 2021, the potential risk amounts to
€3.8 million, including interest and penalties.
In 2013, Brazilian Federal Tax Authorities raised a tax assessment affirming that the Group allegedly failed to pay Social Security Contributions (“INSS”) in the
period from January to December 2009. Such contributions are calculated based on certain amounts that are included in the payroll of companies in Brazil
and the authorities claimed that some values paid to employees were unduly not taxed. Legal opinions demonstrate that the Group has grounds for reversing
the assessment. In 2021 the administrative proceeding ended, and a minor part of the assessment cancelled, therefore the Group has decided to continue
challenging the assessment before Judicial courts. The final decision is expected within five to six years. As of 31 December 2021, the potential risk amounts to
€3.7 million, including interest and penalties (31.12.2020: €3.1 million).
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STATEMENTS
OTHER
INFORMATION
In 2019, Brazilian Federal Tax Authorities rejected the offsetting of some federal tax debts with Corporate Income Tax credits the Group was entitled to in year
2015. Authorities claimed the credits were non-existent or did not comply with the formal requirements set for in Brazilian laws and regulations which allowed
their utilisation. Legal opinions demonstrate that the Group and the tax credits are based on solid legal and material grounds. Therefore, the Company
presented its defense and currently the proceeding awaits trial in the first instance court of the Federal Revenue Service (“RFB”). As of 31 December 2021, the
potential risk amounts to €2.6 million, including interest and penalties (31.12.2020: €2.5 million).
Group entities in Brazil are also involved in other minor lawsuits totaling €27.5 million (31.12.2020: €23.3 million) which relate to several assessments
concerning various taxes and related obligations.
Furthermore, Magnesita Refratários S.A., Contagem, Brazil, is party to a public civil action for damages allegedly 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. In 2021, a judgement was rendered by the Federal Regional Court, in favor of Magnesita, maintaining the understanding that the requests of the Federal
Public Attorney’s Office are devoid of legal merit. The final decision is expected in 5 years. The potential loss from this proceeding amounts to €11.6 million as of
31 December 2021 (31.12.2020: €10.6 million).
Other minor proceedings and lawsuits in which subsidiaries are involved have no significant negative influence on the financial position and performance of
the RHI Magnesita Group.
58. Other financial commitments
Capital commitments amount to €35.5 million as at 31 December 2021 (31.12.2020: €49.5 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, natural gas, strategic raw
materials as well as for the transport of raw materials within the Group. This results in other financial commitments of the nominal value of €410.8 million at the
reporting date (31.12.2020: €219.2 million). The increase in other financial commitments in the current financial year compared to the previous year mainly
results from energy supply contracts concluded or prolonged in 2021 as well as from increases in raw material and energy prices. The remaining terms of the
contracts amount to up to four years. Purchases from these arrangements are recognised in accordance with the usual course of business. Purchase contracts
are regularly reviewed for imminent losses, which may occur, for example, when requirements fall below the agreed minimum purchase volume or when
contractually agreed prices deviate from the current market price level.
59. Expenses for the Group independent auditor
The expensed fees for the activities of the Group independent auditor ‘PricewaterhouseCoopers Accountants N.V.’ 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
Tax compliance services
Other non-audit services
Total fees
2021
2.8
1.2
1.6
0.0
0.0
2.8
2020
2.6
1.2
1.4
0.0
0.1
2.7
In 2021, other audit related services, tax compliance services and other non-audit services amounting to €0.0 million (2020: €0.1 million) were performed and
invoiced by PwC network firms outside of the Netherlands.
The expensed fees for the audited financial statements in 2021 and 2020 include the half year review procedures.
60. 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
2021
5,720
6,564
12,284
2020
4,733
7,831
12,564
108 full time equivalents of salaried employees work in the Netherlands. In 2020 98 full time equivalents of salaried employees worked in the Netherlands.
61. Transactions with related parties
Related companies include subsidiaries that are not fully consolidated, joint ventures, associates and MSP Foundation, Liechtenstein, as a shareholder of RHI
Magnesita N.V. since it exercises significant influence based on its share of more than 25% in RHI Magnesita N.V. In accordance with IAS 24.9, the personnel
welfare foundation of Stopinc AG, Hünenberg, Switzerland, and Chestnut Beteiligungs GmbH, Germany also have to be considered related companies.
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 2 1
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Notes continued
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.
Related companies
In 2021 and 2020, the Group conducted the following transaction with its related companies:
in € million
Revenue from the sale of goods and services
Purchase of raw materials
Interest income
Trade and other receivables
Loans granted
Trade liabilities
Dividends received
Joint ventures
Associates
Non-consolidated subsidiaries
2021
1.0
5.0
0.1
0.0
0.0
0.0
6.8
2020
2.7
2.7
0.1
0.2
0.0
0.3
10.9
2021
0.0
14.4
0.2
0.0
0.8
1.3
0.0
2020
0.0
14.6
0.8
0.0
0.8
0.9
0.0
2021
0.0
0.0
0.0
0.3
0.0
0.7
0.0
2020
0.0
0.1
0.0
0.2
0.0
0.7
0.0
In 2021 and 2020, 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 2021 and 2020, 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 (31.12.2020: €0.8 million) from a loan agreement with Sinterco. The balances at the end of
2021 are unsecured and will be paid in cash.
In 2021 and 2020, no transactions were carried out between the RHI Magnesita Group and MSP Foundation and Chestnut Beteiligungs GmbH, with the
exception of the dividend paid.
A service relationship with respect to the company pension scheme of the employees of Stopinc AG exists between the personnel welfare foundation of
Stopinc AG and the fully consolidated subsidiary Stopinc AG. Stopinc AG makes contribution payments to the plan assets of the foundation to cover pension
obligations. The pension plan is recognised as a defined benefit plan and is included in Note (27). At 31 December 2021, no current accounts receivable existed
(31.12.2020: €0.0 million). In the past reporting period, employer contributions amounting to €0.6 million (2020: €0.6 million) were made to the personnel
welfare foundation. At 31 December 2021 a net defined benefit liability of €0.8 million (31.12.2020: €0.9 million) is recognised.
Related persons
Remuneration of key management personnel of the Group, which is subject to disclosure in accordance with IAS 24, comprises the remuneration of the active
Board of Directors and the Executive Management Team (EMT) in 2021, 2020, 2019 and in 2018 as well as the former Management Board and Supervisory
Board of RHI AG until October 2017.
For the financial year 2021, expenses for the remuneration of the Executive Directors and EMT members, active in 2021, recognised in the Consolidated
Statement of Profit or Loss total €10.4 million (2020: €9.8 million). The expenses, not including non-wage labour costs, amount to €9.4 million (2020:
€9.1 million), of which €5.5 million (2020: €7.7 million) were related to current benefits (fixed, variable and other earnings) and €3.9 million (2020:
€1.4 million) to share-based remuneration. At 31 December 2021, liabilities for performance-linked variable earnings and share-based payments for active
members of the former Management Board of €1.1 million (2020: €2.5 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 program was terminated after RHI AG merged with and into RHI Magnesita N.V and the provisioned amount was paid in 2021 (€1.0 million paid in 2020).
For Non-Executive Directors, remuneration totalling €1.2 million (2020: €1.1 million) was recognised through profit or loss in the year 2021. The compensation
paid to the Non-Executive Directors only consists of short-term employee benefits.
Employee representatives acting as Non-Executive Directors of RHI Magnesita N.V. who are employed by the Group, do not receive compensation for their
activity as Non-Executive Directors. For their activity as employees in the Company expenses of €0.4 million (2020: €0.2 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.
Share Dealing reports of persons discharging managerial responsibilities are published on the websites of RHI Magnesita N.V. and via regulatory news services.
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 121 of the Annual Report of the RHI Magnesita Group.
186
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STATEMENTS
OTHER
INFORMATION
Earnings of former members of the former Management Board amounted to €0.6 million (2020: €0.7 million), of which €0.3 million (2020: €0.2 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 parties are conducted on an arm’s-length basis and in accordance with normal business terms.
Until December 2020, Karl Sevelda held a 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 transactions.
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 € 2.6 million in 2021 (2020: € 1.9 million). 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 approved by shareholders
at the Annual General Meeting held on 7 June 2018. The Group currently operates three different share option awards, one applicable for the financial year
2021, 2020 and 2019 each. The plan for the financial year 2018 expired on 7 June 2021. None of the performance targets have been met and the awards have
therefore lapsed. The amounts recognised in equity relating to market-related performance condition were not subsequently reversed.
Each share option converts into one ordinary share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The
options carry rights to dividends but no voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry, except for
members of the Executive Management Team who have a holding period of two years.
The number of options granted is approved by the Board in accordance with the Remuneration Policy, approved by the shareholders at the Annual General
Meeting.
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.
The vesting period for each share option plan is three years. If the options remain unexercised after a period of seven years from the vesting date the options
expire. Options are generally forfeited if the employee leaves the Group before the options vest.
LTIP 2021
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 2020
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
2021
2020
Number of options
Number of options
0
172,623
0
(6,300)
166,323
0
0
0
0
0
0
0
2021
2020
Number of options
Number of options
363,519
12,158
0
(5,139)
370,538
0
0
370,014
0
(6,495)
363,519
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 2 1
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Notes continued
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
2021
2020
Number of options
Number of options
169,517
6,445
0
(1,688)
174,274
0
179,775
4,797
0
(15,055)
169,517
0
The options outstanding at 31 December 2021 have a weighted-average contractual life of 1.9 years.
The outstanding share options for the LTIP 2019, which were granted on 19 August 2019, will expire on 20 August 2022. The fair value at grant date for the
188,856 options was €46.32. The outstanding share options for the LTIP 2020, which were granted on 8 April 2020, will expire on 9 April 2023. The fair value
at grant date for the 370,014 options was €18.31. The outstanding share options for the LTIP 2021, which were granted on 15 March 2021, will expire on 16 March
2024. The fair value at grant date for the 167,037 options was €42.55.
The assessed fair value at grant date of options of the LTIP 2019 granted during the year ended 31 December 2021 was €47.18 per option. The assessed fair
value at grant date of options of the LTIP 2020 granted during the year ended 31 December 2021 was €19.70 per option. The assessed fair value at grant date of
options of the LTIP 2021 granted during the year ended 31 December 2021 was €44.31 per option. The fair value of share options with non-market performance
conditions has been calculated using the Black-Scholes option pricing model. The fair value of options with market-related performance conditions has been
measured using the Monte Carlo model. The calculation takes into account the exercise price, the term of the option, the share price at grant date and expected
price volatility of the underlying share, the expected dividend yield, the risk free interest rate for the term of the option and the correlations and volatilities of the
peer group companies.
The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payment plans for 2021, for 2020 and 2019 were as
follows:
LTIP 2021 in € million
Fair value at grant date
Expected volatility (weighted-average)
Dividend yield
Risk-free interest rate
LTIP 2020 in € million
Fair value at grant date
Expected volatility (weighted-average)
Dividend yield
Risk-free interest rate
LTIP 2019 in € million
Fair value at grant date
Expected volatility (weighted-average)
Dividend yield
Risk-free interest rate
2021
7.4
46.73%
3.68%
0.41%
2020
6.6
41.75%
4.97%
0.51%
2020
8.3
30.36%
4.28%
0.47%
2021
7.3
41.75%
4.97%
0.51%
2021
8.2
30.36%
4.28%
0.47%
For LTIP 2019 none of the performance targets have been met and the awards are therefore expected to lapse. Amounts recognised in equity relating to
market-related performance condition will not be subsequently reversed.
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.
Expenses for share based payments are disclosed in Note (46).
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OTHER
INFORMATION
62. Board of Directors of RHI Magnesita N.V.
The members of the Board of Directors are as follows:
Executive Directors
Stefan Borgas
Non-Executive Directors
Herbert Cordt
Janet Ashdown
Ian Botha
John Ramsay
David Schlaff
Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg
Fiona Paulus
Janice Brown
Marie-Hélène Ametsreiter
Wolfgang Ruttenstorfer
Employee Representative Directors
Karin Garcia
Michael Schwarz
Karl Sevelda
Sigalia Heifetz
Martin Kowatsch
63. Material events after the reporting date
RHI Magnesita has 63 staff based but no refractory production sites in Russia or Ukraine. Approximately 3.4% of Group revenues are from the CIS region in
2021. This business will be impacted by sanctions. Sanction escalation will be kept under close review to remain in full compliance. The main financial impact is
estimated to come from higher energy costs.
After the reporting date on 31 December 2021, there were no events of special significance which may have a material effect on the financial position and
performance of the RHI Magnesita Group.
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Company Financial Statements of RHI Magnesita N.V.
Company Balance Sheet as at 31 December 2021
(before appropriation of result)
in € million
ASSETS
Non-current assets
Property, plant and equipment
Non-current financial assets
Securities
Deferred tax assets
Total non-current assets
Current assets
Receivables from group companies
Other current receivables
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
Non-current liabilities
Non-current liabilities
Current liabilities
Other current liabilities
Total liabilities
Total equity and liabilities
Note
31.12.2021
31.12.2020
(A)
(B)
(C)
(D)
(E)
(F)
(I)
(G)
(H)
0.5
644.8
0.5
32.5
678.3
138.1
0.4
0.6
139.1
0.3
480.6
0.5
10.6
492.0
165.8
0.6
3.5
169.9
817.4
661.9
49.5
361.3
84.3
164.7
(117.0)
243.1
785.9
49.5
361.3
25.7
206.3
(21.5)
24.8
646.1
2.0
0.0
29.5
31.5
15.8
15.8
817.4
661.9
Company Statement of Profit or Loss for the period 1 January 2021 to 31 December 2021
in € million
General and administrative expenses
Result before taxation
Net financial result
Profit before income tax
Income tax
Net result from investments
Net result for the period
Note
(J)
(K)
(L)
(M)
2021
(25.5)
(25.5)
0.1
(25.4)
29.3
239.2
243.1
2020
(18.6)
(18.6)
0.4
(18.2)
2.3
40.7
24.8
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OTHER
INFORMATION
Notes
to the Company Financial Statements 2021
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
31.12.2020
49.5
(21.5)
361.3
(13.7)
(249.3)
288.7
206.3
24.8
646.1
Appropriation of prior
year result
Net result
Shares repurchased
Share-based expenses
Dividends
Net income / (expense)
recognised directly in
equity
(95.5)
31.12.2021
49.5
(117.0)
361.3
(24.8)
243.1
24.8
6.2
(71.2)
(1.4)
288.7
164.7
243.1
-
243.1
(95.5)
6.2
(71.2)
57.2
785.9
6.6
(7.1)
52.0
(197.3)
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
31.12.2019
49.5
(18.8)
361.3
(11.0)
(79.8)
288.7
95.0
139.0
823.9
Appropriation of prior year
result
Net result
Shares repurchased
Share-based expenses
Dividends
Net income / (expense)
recognised directly in
equity
-
-
-
-
-
-
-
-
(2.7)
-
-
-
-
-
-
-
-
-
31.12.2020
49.5
(21.5)
361.3
-
-
-
-
-
-
-
-
-
-
(2.7)
(13.7)
(169.5)
(249.3)
-
-
-
-
-
-
139.0
(139.0)
-
-
(3.1)
(24.6)
-
24.8
-
-
-
-
288.7
206.3
24.8
-
24.8
(2.7)
(3.1)
(24.6)
(172.2)
646.1
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Notes
to the Company Financial Statements 2021
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 included 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.
Fiscal Unity
For corporate income tax and sales tax purposes, RHI Magnesita NV, Vienna Branch, acts as the head of a corporate tax group in Austria with the following
companies:
RHI Magnesita GmbH
Veitscher Vertriebsgesellschaft GmbH
“Veitsch-Radex” Vertriebgesellschaft GmbH
Refractory Intellectual Property GmbH
Veitsch-Radex GmbH
Radex Vertriebsgesellschaft GmbH
RHI Refractories Raw Material GmbH
Lokalbahn Mixnitz-St. Erhard Aktien-Gesellschaft
Pursuant to the Collection of State Taxes Act, the Company and its subsidiaries are both severally and jointly liable for the tax payable of the combination.
According to the group and tax compensation agreement, the members of the group have to pay a positive tax compensation of 20% of the taxable profit to
the head of the Group if the result is positive, as long as tax loss carry forwards exist with the head of the group; subsequently 25% of the taxable profit have to
be paid. In case of a tax loss of the group member, the head of the group has to pay a negative tax compensation to the member of the group, with a rate of
12.5% being applied insofar as the loss can be utilised within the group. In case the losses of a group member were compensated (negative tax allocation
payment) and this group member generates taxable income within the next three years (after compensation), the positive tax allocation amounts to 12.5%. In
case of a loss in the tax group, an unused tax loss of a group member is retained and offset against future taxable profits of the group member. When the
contract is terminated, a compensation payment is agreed for unused tax losses of a group member, which were allocated to the head of the group, see Note (7).
All income and expenses are settled through their intercompany (current) accounts.
Significant accounting policies
Non-current financial assets
Investments in Group companies in the Company Financial Statements are accounted for using the equity method.
Receivables from Group companies
Accounts receivable are measured at fair value and are subsequently measured at amortized cost, less allowance for credit losses. The carrying amount of the
accounts receivable approximates the fair value.
Net result from investments
The share in the result of investments comprises the share of the Company in the result of these investments.
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FINANCIAL
STATEMENTS
OTHER
INFORMATION
Fixed assets
(A) Financial fixed assets
The financial fixed assets comprise investments in:
Name and registered office of the company
RHI Magnesita Deutschland AG, Wiesbaden, Germany
RHI Refractories Raw Material GmbH, Vienna, Austria
RHI Magnesita GmbH, Vienna, Austria
RHI Magnesita Trading B.V., Rotterdam, Netherlands
Country of core
activity
Germany
Austria
Austria
Netherlands
31.12.2021
31.12.2020
Share in %
Share in %
12.5
25.0
100.0
0.0
12.5
25.0
100.0
100.0
As a result of the contribution of shares of RHI Magnesita Trading B.V. from RHI Magnesita N.V. to RHI Magnesita GmbH, the share in RHI Magnesita Trading B.V.
was reduced to 0.0%.
The investments have developed as follows:
in € million
At beginning of year
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
2021
480.6
(21.7)
70.0
58.6
20.2
(2.1)
(200.0)
239.2
644.8
2020
815.3
0.0
0.0
(172.1)
(0.2)
(3.1)
(200.0)
40.7
480.6
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Notes
to the Company Financial Statements 2021
The following list, prepared in accordance with the relevant legal requirements (Dutch Civil Code, Book 2, Sections 379), shows all companies in which RHI
Magnesita N.V. holds a direct or indirect share of at least 20% (with the exception of the RHISA Employee Trust):
31.12.2021
31.12.2020
Share-
holder
Share in
%
Share-
holder
Share in
%
52.
39.
3.
-
-
100.0
100.0
100.0
0.0
52.
39.
100.0
100.0
3.
100.0
39.
100.0
0.0
10.
100.0
10.
100.0
10.
100.0
67.,103.
100.0
67.,101.
100.0
-
1.,52.
109.
10.
109.
52.
114.
115.
16.
49.
-
52.
52.,70.
52.,70.
94.
53.
0.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.9
0.0
83.3
100.0
100.0
100.0
100.0
10.
100.0
1.,52.
100.0
107.
100.0
10.
100.0
107.
100.0
52.
112.
113.
16.
49.
100.0
100.0
100.0
100.0
99.9
106.
100.0
52.
83.3
52.,70.
100.0
52.,70.
100.0
92.
53.
100.0
100.0
41.,114.
100.0
41.,112.
100.0
53.
114.
114.
52.
28.
11.
-
100.0
100.0
100.0
100.0
100.0
100.0
0.0
46.
100.0
32.,53.
100.0
112.
112.
52.
28.
46.
46.
46.
100.0
100.0
100.0
100.0
100.0
100.0
100.0
35.,114.
100.0
35.,112.
100.0
41.,114.
100.0
41.,112.
100.0
46.
3.
31.
24.
3.,4.
114.
3.
31.
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
31.,46.
100.0
3.
100.0
31.
24.
100.0
100.0
3.,4.
100.0
112.
100.0
3.
31.
100.0
100.0
Ser. no.
Name and registered office of the company
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 - Bebau, 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
RHI Magnesita Deutschland AG, 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, Wiesbaden, Germany
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
LWB Holding Company, Delaware, USA
LWB Refractories Belgium S.A., Liège, Belgium
LWB Refractories Beteiligungs GmbH & Co. KG, Wiesbaden, Germany
LWB Refractories Hagen GmbH, Wiesbaden, Germany
LWB Refractories Holding France S.A.S., Valenciennes, France
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, Wiesbaden, 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 Refractories (Canada) Inc., Montreal, Canada
Magnesita Refractories (Dalian) Co. Ltd., Dalian, PR China
Magnesita Refractories Company, York, USA
Magnesita Refractories Mexico S.A. de C.V., Monterrey, Mexico
Magnesita Refractories GmbH, Wiesbaden, Germany
Magnesita Refractories Ltd., Dinnington, United Kingdom
Magnesita Refractories Middle East FZE, Dubai, United Arab Emirates
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
194
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 2 1
Magnesita Refractories S.C.S., Valenciennes, France
28.,114.
100.0
28.,112.
100.0
STRATEGIC REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
OTHER
INFORMATION
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.
87.
88.
Ser. no.
Name and registered office of the company
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
RHI Magnesita India Limited
Premier Periclase Limited, Drogheda, Ireland
31.12.2021
31.12.2020
Share-
holder
Share in
%
114.
100.0
11.
71.
-
11.,13.,115.
-
100.0
100.0
0.0
66.5
0.0
Share-
holder
Share in
%
112.
100.0
11.
100.0
30.
100.0
106.
100.0
13.
13.
66.5
100.0
Producción RHI México, S. de R.L. de C.V., Ramos Arizpe, Mexico
87.,115.
100.0
85.,113.
100.0
Radex Vertriebsgesellschaft m.b.H., Leoben, Austria
Rearden G Holdings Eins GmbH, Wiesbaden, 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., Contagem, 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
RHI Dinaris GmbH, Wiesbaden, Germany
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 China Ltd., Shanghai, China
RHI Magnesita (Chongqing) Refractory Materials Co., Ltd.
RHI Magnesita Distribution B.V., Rotterdam, Netherlands
RHI Magnesita Trading B.V., Rotterdam, Netherlands
RHI Magnesita Vietnam Company Limited, Ho Chi Minh City, Vietnam
RHI Magnesita Services Europe Gerbstedt GmbH, Gerbstedt/Hübitz, Germany
RHI Magnesita Services Europe GmbH, Kerpen, Germany
RHI MARVO S.R.L., Ploiesti, Romania
RHI Magnesita Properties MO, LLC, Missouri, USA
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, i.l.
RHI Refractories España, S.L., Oviedo, Spain
RHI Refractories France SA, Valenciennes, France 3)
111.
31.
100.0
100.0
109.
100.0
31.
100.0
11.,56.
100.0
46.,56.
100.0
46.,54.
100.0
46.,54.
100.0
11.
100.0
46.
100.0
11.,56.
100.0
46.,56.
100.0
59.,70.
100.0
59.,70.
100.0
70.
46.
100.0
100.0
70.
46.
100.0
100.0
13.,115.
100.0
13.,113.
100.0
115.
100.0
113.
100.0
16.,115.
100.0
16.,113.
100.0
-
0.0
103.
100.0
70.
100.0
103.
100.0
113.
101.
70.
101.
53.7
100.0
100.0
100.0
-
0.0
11.,113.
100.0
70.
100.0
1.
100.0
52.
71.
74.
70.
85.
77.
10.
100.0
51.0
100.0
100.0
100.0
100.0
100.0
70.
100.0
1.
-
-
100.0
0.0
0.0
72.
100.0
1.
100.0
83.
75.
10.
100.0
100.0
100.0
52.,109.
100.0
52.,107.
100.0
110.
100.0
108.
100.0
-
52.
17.
0.0
100.0
100.0
52.
52.
17.
100.0
100.0
100.0
52.,106.
100.0
52.,104.
100.0
115.
70.
100.0
100.0
113.
70.
100.0
100.0
52.,109.
100.0
52.,107.
100.0
-
0.0
10.,12.
100.0
107.
100.0
105.
100.0
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 2 1
195
Notes
to the Company Financial Statements 2021
Ser. no.
Name and registered office of the company
31.12.2021
31.12.2020
Share-
holder
Share in
%
Share-
holder
Share in
%
RHI Refractories Ibérica, S.L., Oviedo, Spain
RHI Refractories Italiana s.r.l., Brescia, Italy
RHI Refractories Liaoning Co., Ltd., Bayuquan, PR China 1)
RHI Refractories Mercosul Ltda., Sao Paulo, Brazil
RHI Refractories Nord AB, Stockholm, Sweden
107.
100.0
-
52.
0.0
66.0
105.
105.
52.
109.,115.
100.0
107.,113.
107.
100.0
105.
RHI Refractories Raw Material GmbH, Vienna, Austria
1.,52.,70.
100.0
1.,52.,70.
89.
90.
91.
92.
93.
94.
95.
96.
97.
98.
99.
100.
101.
102.
103.
104.
105.
106.
107.
108.
109.
110.
111.
112.
113.
114.
115.
116.
117.
118.
119.
120.
121.
122.
123.
124.
125.
126.
127.
128.
129.
130.
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
RHI United Offices America, S.A. de C.V., Monterrey, Mexico
RHI Refractories España, 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
RHI Magnesita Interstop AG, 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
Vierte LWB Refractories Holding GmbH, Wiesbaden, 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
Guapare S.A, Montevideo, Uruguay
Magnesita Refractories A.B., Stocksund, Sweden
Magnesita Refractories PVT Ltd, Mumbai, India
Magnesita Refractories S.A. (Pty) Ltd., Sandton, South Africa
MAG-Tec Participações Ltda. Ltda., Contagem, Brazil; i.l.
MMD Araçuaí Holding Ltda., São Paulo, Brazil
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
Chongqing Boliang Refractory Materials Co. Ltd, Chongqing, China
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
100.0
100.0
66.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
0.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
98.7
100.0
100.0
100.0
100.0
0.0
50.0
50.0
70.0
50.0
10.
10.
100.0
100.0
13.,46.
100.0
10.,107.
100.0
52.
100.0
52.,109.
100.0
74.,87.
100.0
10.,12.
100.0
10.,95.
100.0
13.
100.0
10.
10.
13.,36.
10.,105.
52.
52.,107.
85.,100.
85.
9.,10.
13.
87.,115.
100.0
85.,113.
-
0.0
115.
100.0
-
113.
10.,52.
100.0
10.,52.
70.
104.
100.0
100.0
70.
102.
70.,112.
100.0
70.,110.
70.
70.
100.0
100.0
26.,53.
100.0
52.,70.
100.0
10.
100.0
.
10.
100.0
-
0.0
114.
100.0
70.
70.
26.,53.
52.,70.
10.
.
10.
46.
112.
53.,114.
100.0
53.,112.
41.
46.
-
54.
46.
86.
.
71.
3.
-
53.
.
-
100.0
98.7
0.0
100.0
100.0
100.0
51.0
50.0
0.0
70.0
0.0
41.
46.
46.
54.
46.
86.
.
-
3.
52.,128.
53.
.
52.
131.
MAGNIFIN Magnesiaprodukte GmbH, St. Jakob, Austria
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 RHI Magnesita Deutschland AG, RHI Dinaris GmbH and RHI GLAS GmbH.
4) Controlling influence due to contractual terms and conditions.
i.l. in liquidation
196
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OTHER
INFORMATION
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. As at 31 December
2021, RHI Magnesita N.V.’s issued and fully paid-in share capital consists of 46,999,019 ordinary shares (31.12.2020: 49,008,955 ordinary shares). For
additional information on treasury shares see (F).
(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 (55) 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 the course of the share buyback program which was initiated on 16 December 2020, completed on 13 April 2021, extended on 5 May 2021 and completed
on 4 August 2021 the Company acquired additional 2,078,686 shares in treasury, Thereof 2,009,936 shares in treasury equalling €95.5 million in 2021 and
68,750 shares in treasury equalling €2.7 million in 2020.
Non-current liabilities
(G) Other non-current liabilities
in € million
Personnel provisions
Other non-current financial liabilities
Total non-current liabilities
Current liabilities
(H) Other current liabilities
in € million
Trade payables
Payables to group companies
Accrued liabilities
Total current liabilities
31.12.2021
31.12.2020
1.7
0.3
2.0
0.0
0.0
0.0
31.12.2021
31.12.2020
1.6
21.5
6.4
29.5
1.0
9.4
5.4
15.8
The 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.
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 2 1
197
Notes
to the Company Financial Statements 2021
Employee benefits
in € million
Wages and salaries
Social security charges
Pension contributions
Other employee costs
Total wages and salaries
(J) General and administrative expenses
in € million
External services/consulting expenses
Cost for principal services Austria
Personnel expenses
Other expenses
Total general and administrative expenses
31.12.2021
31.12.2020
19.7
2.0
0.5
0.7
22.9
9.5
1.0
0.4
0.3
11.2
31.12.2021
31.12.2020
2.6
(3.0)
22.9
3.0
25.5
3.7
2.2
11.2
1.5
18.6
(K) Net financial result
The 2021 net financial result mainly consists of €0.1 million dividends received on shares held (2020: €0.3 million).
(L) Net results from investments
In year 2021 the full year results of the investments amount to a profit of €239.2 million (2020: €40.7 million) and are recognised in the Company Statement of
Profit or Loss.
(M) Net result for the period
In 2021, 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
2021
243.1
0.0
243.1
For 2021, the Board of Directors will propose a dividend of €1.00 per share for the shareholders of RHI Magnesita N.V. The proposed dividend is subject to the
approval by the Annual General Meeting on 25 May 2022.
Other notes
Number of employees
The average number of employees of RHI Magnesita N.V. during 2021 amounts to 67 (2020: 48).
Off balance sheet commitments
RHI Magnesita N.V. as an ultimate parent company provided a corporate guarantee of €1.530,3 million (31.12.2020: €1,086.5 million) for the borrowings of the
Group. The Borrowings are as disclosed in Note (25). Additionally €79.2 million (31.12.2020: €36.0 million) of corporate guarantees are issued in favor of
customers and suppliers of the Group. The increase results from the inventory ramp-up and the increase in demand following energy price highs.
Other information
Information regarding independent auditor's fees, number of employees of RHI Magnesita Group and the remuneration of the Board of Directors is included in
Note (59), (60) to (62) of the Consolidated Financial Statements.
The Company opened a branch in Vienna, Austria and started as of February 2020 to employ staff in the branch office and undertake services.
Material events after the reporting date
There were no material events after the reporting date other than those disclosed in note (63) of the Consolidated Financial Statements.
198
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FINANCIAL
STATEMENTS
OTHER
INFORMATION
Vienna, 27 February 2022
Board of Directors
Executive Directors
Stefan Borgas
Non-Executive Directors
Herbert Cordt
Janet Ashdown
Ian Botha
John Ramsay
David Schlaff
Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg
Fiona Paulus
Janice Brown
Marie-Hélène Ametsreiter
Wolfgang Ruttenstorfer
Karl Sevelda
Sigalia Heifetz
Employee Representative Directors
Karin Garcia
Michael Schwarz
Martin Kowatsch
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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 Meeting.
27.3 Distribution of profits shall be made after adoption of the annual accounts if permitted under the law given the contents of the annual accounts.
27.4 The Board may resolve to make interim distributions and/or to make distributions at the expense of any reserve of the Company, other than the Mandatory
Reserve.
27.5 Distributions on shares may be made only up to an amount which does not exceed the amount of the Distributable Equity. If it concerns an interim
distribution, the compliance with this requirement must be evidenced by an interim statement of assets and liabilities as referred to in Section 2:105 paragraph 4
of the Dutch Civil Code. The Company shall deposit the statement of assets and liabilities at the Dutch Trade Register within eight days after the day on which
the resolution to make the distribution is published.
27.6 Distributions on shares payable in cash shall be paid in Euro, unless the Board determines that payment shall be made in another currency.
27.7 The Board is authorised to determine that a distribution on shares will not be made in cash but in kind or in the form of shares, or to determine that
shareholders may choose to accept the distribution in cash and/or in the form of shares, all this out of the profits and/or at the expense of reserves, other than
the Mandatory Reserve, and all this if and in so far the Board has been designated by the General Meeting in accordance with Article 6.1. The Board shall set the
conditions under which such a choice may be made.
28 Release for payment
Distributions of profits and other distributions shall be made payable four weeks after adoption of the relevant resolution, unless the Board or the General
Meeting at the proposal of the Board determine another date.
200
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OTHER
INFORMATION
Independent auditor’s report
To: the general meeting of RHI Magnesita N.V.
Report on the financial statements 2021
Our opinion
In our opinion:
•
•
the consolidated financial statements of RHI Magnesita N.V. together with its subsidiaries (‘the Group’) give a true and fair view of the financial
position of the Group as at 31 December 2021 and of its result and 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;
the company financial statements of RHI Magnesita N.V. (‘the Company’) give a true and fair view of the financial position of the Company as at
31 December 2021 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code.
What we have audited
We have audited the accompanying financial statements 2021 of RHI Magnesita N.V., Arnhem. 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 2021;
the following consolidated statements for the year 2021: profit or loss, comprehensive income, cash flows and changes in equity; and
the notes to the consolidated financial statements, comprising the significant accounting policies and other explanatory information.
The company financial statements comprise:
the company balance sheet as at 31 December 2021;
the company statement of profit or loss for the period 1 January to 31 December 2021;
the notes, comprising the 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 for the consolidated financial statements and Part 9 of Book 2 of the Dutch Civil Code for the company financial statements.
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 responsibilities 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 statutory 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 respect to independence) and other relevant independence
regulations in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics).
Our audit approach
We designed our audit procedures in the context of our audit of the financial statements as a whole and forming our opinion thereon. The information in
support of our opinion, e.g. comments and observations regarding individual key audit matters, our audit approach regarding fraud risks and our audit approach
regarding going concern was set up in this context and we do not provide a separate opinion or conclusion on these matters.
Overview and context
RHI Magnesita N.V. is a global producer of refractory products. The Group comprises 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, and
factors listed below.
The adverse effects of the COVID-19 pandemic on the global economy diminished during 2021 with a steep increase in demand across multiple sectors,
including the steel and industrial businesses. This created global supply chain challenges, resulting in higher logistics costs, raw materials scarcity, and the
need to pass on those costs to customers through price increases in the latter half of the year. In addition, the second half of the year showed significant
unforeseen increases in energy costs. Management considered these developments when preparing its financial statements.
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 estimates that involved making
assumptions and considering future events that are inherently uncertain. We paid attention to, amongst others, the assumptions underlying the physical and
transitional climate change related risks.
In Note 9 of the 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 (due to higher complexity and subjectivity of assumptions) and related higher inherent risks of material
misstatement in the impairment assessment of goodwill and other intangible assets, and the recognition and recoverability of deferred tax assets, we
considered these matters as key audit matters as set out in the section ‘Key audit matters’ of this report.
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Other areas of focus, that were not considered as key audit matters, were the accounting of factoring agreements, accounting for the production optimisation
program, application of the own use exemption on physical delivery of CO2 certificates, valuation of a put option liability and valuation of uncertain tax
positions. In addition, we performed audit procedures on the items marked ‘audited’ in the remuneration report such as reconciling the disclosed remunerations
to underlying supporting documents.
In executing our audit, we ensured that the audit teams at both group and component levels included the appropriate skills and competences which are
needed for the audit of an international industrial products company. We therefore included experts in the areas of valuations, and employee benefits, as well
as built our team with specialists in IT and corporate income taxes.
The outline of our audit approach was as follows:
Materiality
•
Overall materiality: €12.6 million.
Audit scope
• We conducted audit work in 14 locations.
•
•
Site visits were conducted to Austria and Brazil. We have also performed remote file reviews for India,
Austria, Brazil China and the USA and held periodic video conferences with teams in Turkey, Switzerland,
Italy, Germany and Spain.
Audit coverage: 85% of consolidated revenue, 85% of consolidated total assets and 72% of consolidated
profit before tax.
Key audit matters
•
•
Recognition and recoverability of deferred tax assets
Valuation of goodwill and other intangible assets
Materiality
The scope of our audit was 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.
Overall group materiality
€12.6 million (2020: €9.7 million)
Basis for determining materiality
We used our professional judgement to determine overall materiality. As a basis for our judgement we used 5% of
profit before tax adjusted for exceptional items.
Rationale for benchmark applied
We used profit before tax adjusted for exceptional items (i.e. restructuring expenses, certain impact of purchase
price allocation from acquisitions, disposal of assets held for sale) as the primary benchmark, 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 exceptional items is an important metric for the financial performance of the Company.
Component materiality
Based on our judgement, we allocate materiality to each component in our audit scope that is less than our overall
group materiality. The range of materiality allocated across components was between €1.0 million and €12.5
million.
We also take misstatements and/or possible misstatements into account that, in our judgement, are material for qualitative reasons.
We agreed with the board of directors that we would report to them misstatements, identified during our audit, above €0.7 million (2020: €0.6 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.
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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 operations 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.
The group audit included 12 components which were subject to audits of their complete financial information, selected on the relative size of their operations.
Out of twelve, three components are individually financially significant to the Group and on which primarily focused:
RHI Magnesita GmbH, Austria
RHI US Ltd, USA; and,
Magnesita Refratários S.A., Brazil.
Additionally, we selected nine components for full scope audit procedures to achieve appropriate coverage on financial line items in the consolidated financial
statements.
In total, in performing these procedures, we achieved the following coverage on the financial line items:
Revenue
Total assets
Profit before tax
85%
85%
72%
None of the remaining components represented more than 5% of total group revenue or total group assets. For those remaining components we performed,
among other things, analytical procedures to corroborate our assessment that there were no significant risks of material misstatements within those
components.
Where component auditors performed the work, we determined the level of involvement we needed to have in their 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 calls with each of the in-scope component audit teams
during the year and upon conclusion of their work. During these calls, we discussed the significant accounting and audit issues identified by the component
auditors, their reports, the findings from their audit procedures and other matters, which could be of relevance for the consolidated financial statements.
The group engagement team visits the component teams and local management on a rotational basis, to the extent permitted by COVID-19 or other travel
restrictions. In the current year the group audit team visited RHI Magnesita GmbH (Austria) and Magnesita Refratários S.A. (Brazil) given the judgements
involved in valuation of deferred tax assets (refer to key audit matter recognition and recoverability of deferred tax assets) as well as visited Austrian operating
locations. During our visits we met with local management as well as component auditors, discussed significant business developments, accounting matters
and the areas of significant risks. Furthermore, we reviewed selected working papers of four component auditors in India, Austria, Brazil, China and the USA. We
also conducted a series of video conference meetings with local management along with our component teams. During these meetings, we discussed the
strategy and financial performance of the local businesses, as well as the audit plan and execution, significant risks and other relevant audit topics.
The group engagement team performed the audit work for the parent company RHI Magnesita N.V. as well as the Integrated Business Services (IBS) office
activities in Spain on areas such as fixed assets, cash and cash equivalents and aspects of accounts payable and accounts receivable. In addition, the group
engagement team performed the audit work over the headquarter related activities in Vienna. This includes group consolidation, inventory valuation, financial
statement disclosures, remuneration disclosures and several complex items, such as goodwill impairment testing, share based compensation and compliance
of accounting positions taken by the Group in accordance with EU-IFRS.
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 financial statements.
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The impact of climate change on our audit
In 2021 management of RHI Magnesita N.V. further expanded the climate change related risk assessment. We refer to section ‘Principal Risks’ on page 47,
‘Progress against sustainability targets’ on page 59 and ‘Climate and environment’ on pages 60 - 63 of the Group’s Strategic Report where management
defined potential physical as well as transitional risks, risk mitigating activities, risk governance, strategy and metrics. Management acknowledged that the
inherent likelihood of the climate change related risk has risen since prior year due to the increasing regulatory complexity and stakeholders’ expectations.
Therefore, the potential reputational and financial impact of this risk further crystalized and increased in the reporting period. Climate change initiatives and
commitments impact the preparation of the Group’s financial statements in a variety of ways, all with inherent uncertainties. In note 9, ‘Critical accounting
judgments and key sources of estimation uncertainty’, management highlighted that it expects additional sources of estimation uncertainty regarding climate
change to have impact on the net realizable value of inventories through the stricter regulatory sustainability requirements to the quality; and on the useful
lives and residual values of assets that could become physically unavailable or commercially obsolete earlier than initially expected. Management considers
those effects of climate risks on the financial statements 2021 to be immaterial, however concluded that due to the high degree of estimation uncertainty this
may change in the future.
As we have not been engaged in expressing assurance over the sustainability reporting, our procedures in this context consisted primarily of making inquiries
with officers of the entity and determining the plausibility of the information reported. During our planning procedures, we have made enquiries of
management to understand and assess the extent of potential impact of climate related risk on the Group’s financial statements.
We challenged the appropriateness of management’s assessment of the potential impact (e.g. estimated useful life of assets, potential diminished access to
financing) on major accounting estimates. The impact of climate related risks is not considered to be a separate key audit matter.
Audit approach fraud risks
We identified and assessed the risks of material misstatements of the financial statements due to fraud. During our audit we obtained an understanding of the
entity and its environment and the components of the system of internal control, including the risk assessment process and management’s process for
responding to the risks of fraud and monitoring the system of internal control and how the supervisory board exercises oversight, as well as the outcomes. We
refer to section “Effective risk management” of the Strategic report for management’s fraud risk assessment and section “Sustainability governance” of the
Strategic report in which management reflects on this fraud risk assessment.
We further evaluated fraud risk factors with respect to financial reporting fraud, misappropriation of assets and bribery and corruption. We assessed whether
those factors indicate that a risk of material misstatement due to fraud is present. In doing this we:
We performed an inquiry of Audit Committee members as to fraud risks and related party transactions to identify the areas of their concerns in
relation to fraud.
We inquired with the Head of Internal Audit, Risk and Compliance about fraud cases identified throughout the year and reviewed the reports of
Internal Audit function relevant to the reporting period. We also assessed the matters reported through the Group’s whistleblowing and complaints
procedure and results of management’s investigation and follow-up on such matters.
We inquired with Group and local executive management, 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 mitigating controls
addressing the risk of fraud.
We assessed the IT environment around key systems. We paid specific attention to the access safeguards in the IT system and the possibility that
these lead to violations of the segregation of duties.
Based on fraud risk factors identified we performed the following specific procedures over the identified fraud risk factors:
Identified fraud risks
Audit procedures
Risk of management override of controls
• To address this specific risk, we executed the following strategy:
It is generally presumed that management is in a unique position to perpetrate
fraud because of the available opportunity to manipulate accounting records
and prepare fraudulent financial statements by overriding controls that
otherwise appear to be operating effectively.
Where relevant to our audit, we evaluated the design and effectiveness of
controls in the processes of generating and processing journal entries. We
assessed whether deficiencies in controls, may create additional opportunities
for fraud and incorporated respective corroborative procedures in our audit
approach.
We considered the outcome of our audit procedures over the estimates and
significant accounting areas and assessed whether control deficiencies and
misstatements identified were indicative of fraud. Where necessary, we
planned and performed additional auditing procedures to ensure that fraud
risk is sufficiently addressed in our audit.
We evaluated key accounting estimates and judgements used in key
accounting areas (like goodwill valuation, valuation of assets and liabilities) for
biases, including retrospective reviews of prior year’s estimates where
available. Further reference is made to key audit matters in this auditor’s
report.
Upfront and updated throughout the year, the board of directors provides
guidance to the market on revenue and (adjusted) EBITDA. Lagging actuals
provide a risk of override or bypassing of controls as management may be
inclined to ensure meeting guidance as communicated to the market.
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Identified fraud risks
Audit procedures
In this context, we paid specific attention to non-routine transactions and
areas of significant management estimations where management bias may
result in fraudulent reporting, i.e. valuation of goodwill, intangible and
tangible assets and liabilities.
We performed data analysis and focused on journal entries related to the
fraud risk factors identified during fraud risk assessment. Where we identified
instances of unexpected journal entries, we performed additional audit
procedures to address each identified risk.
We evaluated whether the business rationale (or lack thereof) of the
significant transactions concluded in 2021 suggests that the Group may have
been entered into to engage in fraudulent financial reporting or to conceal
misappropriation of assets.
We incorporated an element of unpredictability in the nature timing and
extent of procedures.
We performed substantive testing procedures over the consolidation entries.
Our audit procedures did not lead to specific indications of fraud or suspicions
of fraud with respect to management override of the internal controls.
Risk of fraud in revenue recognition
To address this specific risk, we executed the following strategy:
Upfront and updated throughout the year, the board of directors provides
guidance to the market on revenue and (adjusted) EBITDA. In 2021, lagging
actuals provide a risk of override or bypassing of well-established controls as
management may be inclined to ensure meeting guidance as communicated
to the market to meet shareholders expectations.
In 2021, the Company faced pressure from decreasing margins and volumes
and at the same time started a price increase strategy. Therefore, identified
fraud risk factors pertain to risk of management override of controls and
possible revenue overstatement through the recording of non-existent
revenue or premature revenue recording following that the Company is under
the pressure to achieve targets and meet shareholder expectations.
We discussed with the Audit Committee and executive management (e.g. the
chief executive, finance and sales officers) the increased risk of overriding or
bypassing controls when sales targets were increased.
We discussed and inquired with the Group’s sales officer, and local sales
managers into the tone at the top, to assess to what extent not meeting targets
have an impact on career opportunities or bonuses within the Company, and
whether they have any knowledge of (suspected) fraud. In our conversations
we addressed their views on overall fraud risks within the Group and their
perspectives on the Groups mitigating controls addressing the risk of fraud in
revenue.
We updated our understanding of the revenue and receivable process
through performing an end-to end walkthrough of the process whereby
identifying individual revenue streams applicable to the Company and its
subsidiaries.
We assessed the IT environment around key systems, including IT dependent
controls related to the revenue and receivables cycle. We also assessed the
design and effectiveness of the internal control measures related to revenue
recognition and processing journal entries related to revenue. We examined
whether changes were made to internal control measures in the last months
of the year. We paid attention to whether deficiencies in controls may create
additional opportunities for fraud and incorporated respective corroborative
procedures in our audit approach.
We performed disaggregated revenue analytical procedures at significant
components and planned additional audit procedures where unusual
fluctuations were noted. No particular fraud matters were identified as a result.
Using data analysis, we identified revenue entries with a credit impact to
revenue accounts and non-regular off-sets and substantively tested them to
verify that their nature did not represent fraudulent transactions or reporting.
We performed substantive audit procedures to assess whether IFRS 15 criteria
for recognising revenue in 2021, were met. We also performed substantive
audit procedures over the credit notes issued to customers after year end
(where material) to verify that no transactions were recorded in 2021 that were
subsequently reversed through credit notes in 2022. Where material, our
component auditors were required to test rebate accruals.
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Our audit procedures did not lead to specific indications of fraud or suspicions
of fraud with respect to the accuracy of the revenue reporting.
Audit approach going concern
As disclosed in section ‘Principles and methods’ on page 129 in the financial statements, Management prepared the financial statements on the assumption
that the entity is a going concern and that it will continue its operations for the foreseeable future. Our procedures to evaluate management’s going concern
assessment included, amongst others:
Review of management’s going concern assessment. We corroborated management’s analysis with the approved budget 2022, facts and
circumstances that came to our attention from our auditing procedures.
Inquiries of corporate and local management as to their knowledge of going concern risks beyond the period of management’s assessment.
Review of management’s analysis of the forecasted levels of net debt, available undrawn borrowing facilities, compliance with debt covenants and
the debt maturity profile.
Corroboration of consistency between management’s going concern analysis, the analysis of the forecasted levels of net debt with the future cash
flow forecast as incorporated in goodwill impairment test. In evaluating management’s forecasts and cash flows, we performed a look-back analysis
to assess the accuracy of the forecasting process.
An analysis of the financial position per balance sheet date in comparison to prior year’s year-end to assess whether events or circumstances exist
that may lead to a going concern risk.
Consideration of the potential indications of the component’s going concern uncertainty based on audit procedures performed by the component
auditors. We evaluated the impact of such indications on the overall use of the going concern assumption applied by the Group.
Our procedures did not result in outcomes contrary to management’s assumptions and judgments used in the application of the going concern assumption.
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 board of directors. The key audit matters are not a comprehensive 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.
Since the amount of new restructuring efforts decreased significantly in 2021 compared to 2020, the accounting for the production optimisation program was
removed from the list of key audit matters.
Key audit matter
Our audit work and observations
Recognition and recoverability of deferred tax assets
•
Refer to note 7, 9, 16 and 44 of the consolidated financial statements
The Group recorded deferred tax assets for tax loss carryforwards and
deductible temporary differences arising on various items for the amount of
€102.3 million. Reference is made to note 16 of the financial statements.
We have requested and obtained evidence for the existence and accuracy of
the tax loss carryforwards and assessed the expiration dates per jurisdiction.
Where there was uncertainty around the acceptance of losses by the tax
authorities, we requested and received a tax opinion from the Group’s tax
advisors.
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, taking into account the available carry-
forward period. The Group also has losses and other temporary differences for
which no deferred tax asset has been recognised in these consolidated
financial statements.
Where significant management estimates and judgements involved is
susceptible to management bias, we have critically reviewed the underlying
facts to assess recognition and assessed the recoverability of deferred tax
assets. In auditing recoverability, we have critically assessed the underlying
assumptions of the forecasted taxable income through agreeing the
forecasted 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.
The Group’s principal functions are based in Austria. Consequently, after
applying transfer pricing policies, certain residual profits will be taxed in
Austria.
In addition, we have considered the local remaining carry-forward 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 judgement involved,
we considered the recoverability of deferred tax assets to be a key audit matter
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
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Our audit work and observations
for our audit.
and judgment used in the recognition and recoverability assessment of the
deferred tax assets to be supported by the available evidence.
Valuation of goodwill and other intangible assets
•
Refer to note 7, 9, 10, 11, and 38 of the consolidated financial statements
The Group capitalized goodwill of €114.4 million, mainly related to the
acquisition of the Magnesita Group in 2017. In addition, the company
capitalised intangible assets of €282.6 million. These assets form part of
cash-generating units (‘CGUs’) to the extent that they independently
generate cash inflows. If and to the extent to which these CGUs include
goodwill or intangible assets with indefinite useful lives, or show signs for
impairment, the recoverable amount is assessed. Annual planning process
data is used to make assumptions on the discount rates, profitability as well as
growth rates, and sensitivity analyses are carried out regarding any accounting
effects. The assessment did not result in an impairment.
As disclosed also in note 7 ‘Principles of accounting and measurement’ of the
financial statements, the Group has considered raw material pricing and
carbon emission pricing scenarios in assessing the impact of climate change
on the results of impairment testing of goodwill and intangible assets with
indefinite useful life. Management acknowledges the potential impact of
climate change related risks on future costs and expects to invest €50 million
over the next four years for research and development of new technologies to
reduce and capture CO2 emissions. This is not expected to have a material
impact on impairment assessment and therefore is not included in the
valuation.
We understood that during the preparation for compliance with TCFD, the
Group has identified and modelled possible risks and opportunities related to
climate change. As it is unlikely that these materialise before 2025,
management did not include them in the impairment test and the Strategic
planning that covers the period until 2025.
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, calculate 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 management.
Given that the areas where significant management estimates and
judgements involved is susceptible to management bias and creates
opportunities for fraud, we, with the support of our valuation specialists, have
evaluated management’s assumptions such as revenue and margin, the
discount 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 techniques,
assessed appropriateness of the cost of capital for the company and
comparable assets, as well as considered territory specific factors. Finally, we
assessed the appropriateness of disclosure of the key assumptions and
sensitivities underlying the tests.
Based on the audit procedures performed, we found the assumptions to be
reasonable and supported by the available evidence.
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Report on the other information included in the annual report
The annual report contains other information. This includes all information in the annual report in addition to the financial statements and our auditor’s report
thereon.
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 all the information regarding the directors’ report and the other information that is required by Part 9 of Book 2 and regarding the
remuneration report required by the sections 2:135b and 2:145 subsection 2 of the Dutch Civil Code.
We have read the other information. Based on our knowledge and the 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 and section 2:135b subsection 7 of the Dutch Civil Code and the Dutch
Standard 720. The scope of such procedures was substantially less than the scope of those procedures performed in our audit of the financial statements,
except for the audit performed on information in the remuneration report that marks ‘audited’.
The board of directors is 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. The board of directors are responsible for ensuring that the remuneration report is drawn up and published in
accordance with sections 2:135b and 2:145 subsection 2 of the Dutch Civil Code.
Report on other legal and regulatory requirements and ESEF
Our appointment
We were appointed as auditors of RHI Magnesita N.V. by the board of directors following the passing of a resolution by the shareholders at the annual meeting
held on 4 October 2017. Our appointment has been renewed annually by shareholders and now represents a total period of uninterrupted engagement of 5
years.
European Single Electronic Format (ESEF)
RHI Magnesita N.V. has prepared the annual report, including the financial statements, in ESEF. The requirements for this format are set out in the Commission
Delegated Regulation (EU) 2019/815 with regard to regulatory technical standards on the specification of a single electronic reporting format (these
requirements are hereinafter referred to as: the RTS on ESEF).
In our opinion, the annual report prepared in XHTML format, including the partially marked-up consolidated financial statements as included in the reporting
package by RHI Magnesita N.V. complies in all material respects with the RTS on ESEF.
The board of directors is responsible for preparing the annual report, including the financial statements, in accordance with the RTS on ESEF, whereby the
board of directors combines the various components into a single reporting package. Our responsibility is to obtain reasonable assurance for our opinion
whether the annual report in this reporting package, complies with the RTS on ESEF.
Our procedures, taking into account Alert 43 of the NBA (Royal Netherlands Institute of Chartered Accountants), included amongst others:
Obtaining an understanding of the entity’s financial reporting process, including the preparation of the reporting package.
Obtaining the reporting package and performing validations to determine whether the reporting package, containing the Inline XBRL instance
document and the XBRL extension taxonomy files, has been prepared, in all material respects, in accordance with the technical specifications as
included in the RTS on ESEF.
Examining the information related to the consolidated financial statements in the reporting package to determine whether all required mark-ups
have been applied and whether these are in accordance with the RTS on ESEF.
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 or its controlled entities, for the period to which our statutory audit relates, are
disclosed in note 59 to the financial statements.
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Responsibilities for the financial statements and the audit
Responsibilities of the board of directors for the financial statements
The board of directors is responsible for:
the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code; and for
such internal control as the board of directors determines 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, the board of directors is responsible for assessing the Company’s ability to continue as a going concern.
Based on the financial reporting frameworks mentioned, the board of directors should prepare the financial statements using the going-concern basis of
accounting unless the board of directors either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so. The board of
directors should disclose in the financial statements any event and circumstances that may cast significant doubt on the Company’s ability to continue as a
going concern.
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 evidence 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. Reasonable assurance is a high but not absolute level of assurance,
which makes it possible that we may not detect all material misstatements. Misstatements may arise due to fraud or error. They are considered 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.
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.
Rotterdam, 27 February 2022
PricewaterhouseCoopers Accountants N.V.
Original has been signed by E.M.W.H. van der Vleuten RA MSc
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Appendix to our auditor’s report on the financial statements 2021 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 financial 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 circumstances,
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 the
board of directors.
Concluding on the appropriateness of the board of directors’ use of the going concern basis of accounting, and based on the audit evidence
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 opinion 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 accounting 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 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 respect, we also issue an additional report to the audit
committee in accordance with article 11 of the EU Regulation on specific requirements 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 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 actions taken to
eliminate threats or safeguards applied.
From the matters communicated with the board of directors, we determine those matters that were of most significance 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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GOVERNANCE
FINANCIAL
STATEMENTS
OTHER
INFORMATION
Alternative performance measures (“APMs”)
APMs used by the Group are reviewed
below to provide a definition from each
non‐IFRS APM to its IFRS equivalent, and to
explain the purpose and usefulness of each
APM.
In general, APMs are presented externally to meet investors' requirements
for further clarity and transparency of the Group's underlying financial
performance. The APMs are also used internally in the management of
our business performance, budgeting and forecasting.
APMs are non-IFRS measures. As a result, APMs allow investors and other
readers to review different kinds of revenue, profits and costs and should
not be used in isolation. Commentary within the Half Year Results,
including the Financial Review, as well as the Consolidated Financial
Statements and the accompanying notes, should be referred to in order to
fully appreciate all the factors that affect our business. We strongly
encourage readers not to rely on any single financial measure, but to
carefully review our reporting in its entirety.
Return on invested capital (ROIC)
ROIC is calculated as adjusted net operating profit after tax (NOPAT),
divided by total invested capital for the year. Invested capital is a sum of
non-current assets including deferred tax assets, trade and other current
receivables, inventories and income tax receivables less other non-
current financial assets, deferred tax liabilities, trade and other current
liabilities, income tax liabilities and current provisions. Adjusted net
operating profit after tax (NOPAT) is calculated as sum of Adjusted EBITA,
amortisation expense and result from joint ventures less income taxes
paid.
Liquidity
Liquidity comprises cash and cash equivalents and undrawn committed
credit facilities of €600 million.
EBITA
EBIT, as presented in Consolidated Statement of Profit and Loss, excluding
amortisation and impairments.
EBITDA
EBIT, as presented in Consolidated Statement of Profit and Loss, excluding
depreciation, amortisation and impairments.
Adjusted EBITDA and EBITA
To provide further transparency and clarity to the ongoing, underlying
financial performance of the Group, adjusted EBITDA and EBITA are used.
Both measures exclude other income and expenses as presented in
Consolidated Statement of Profit and Loss.
Adjusted earnings per share (“EPS”)
Adjusted EPS is used to assess the Company's operational performance
per ordinary share outstanding. It is calculated using adjusted EBITA (as
described above) and removes the impact of 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 remaining cash flows, being those related to
acquisitions and disposals, other equity-related and debt-related funding
movements, and foreign exchange impacts on financing and investing
activities.
Working capital
Working capital and intensity provides a measure how efficient the
Company is in managing operating cash conversion cycles. Working
capital is the sum of manageable working capital, composed of
inventories, trade receivables and trade payables and other receivables
and payables. Working capital intensity is measured as a percentage of
last three months annualised 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.
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Glossary
AC
AGM
AI
APM
APO
Audit Committee
Annual General Meeting
artificial intelligence
alternative performance measures
Automated Process Optimisation
ANKRAL LC
RHI Magnesita low-carbon product series, which is
designed to support customers as they reduce emissions in
their supply chain
ANKRAL X
RHI Magnesita product series, which combines clinker melt
resistance with flexibility
BOF
BST
CAGR
Capex
CCU
CDC
CDP
CEO
CFO
basic oxygen furnace
Broadband Spectral Thermometer
compound annual growth rate
capital expenditure
carbon capture and usage
Centers for Disease Control and Prevention
global disclosure system for investors, companies, cities,
states and regions to manage their environmental impacts
Chief Executive Officer
Chief Financial Officer
CoGS
Cost of Goods Sold
COVID-19
coronavirus disease 2019
CSO
CSC
CIS
CO2
CSC
DBM
Chief Sales Officer
Corporate Sustainability Committee
commonwealth of independent states
carbon dioxide
Corporate Sustainability Committee
dead burned magnesia
DCGC
Dutch Corporate Governance Code 2016
EAF
EBIT
electric arc furnace
earnings before interest and taxes
EBITA
earnings before interest, taxes and amortisation
EBITDA
earnings before interest, taxes, depreciation and
amortisation
EEC
ED
EMT
EPS
environment, energy and chemicals
Executive Director
Executive Management Team
earnings per share
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ERD
ESG
EU
GRI
IAS
IFRS
ISO
KPI
LTIFR
LTIP
MAR
M&A
MES
NFM
NGO
Employee Representative Director
Environmental Social Governance
European Union
Global Reporting Initiative
International Accounting Standards
International Financial Reporting Standards
Isostatically pressed
key performance indicator
lost time injury frequency rate (per 200,000 working
hours)
long-term incentive plan
Market Abuse Regulations
mergers and acquisitions
manufacturing execution systems
non-ferrous metals
non-governmental organisation
NMEA
near Middle East and Africa
NOx
NPS
OIE
QCK
ROIC
RFID
SDGs
nitrogen oxides
Net Promoter Score
Other income and expenses
Quick Check
return on invested capital
radio frequency identification
United Nations Sustainable Development Goals
SG&A
selling, general and administrative expenses
SKU
SOx
SRM
STEM
TAC
TCFD
TRIF
TSR
stock-keeping unit
sulphur oxides
secondary raw materials
science, technology, engineering and mathematics
Technical Advisory Committee
Task Force on Climate-related Financial Disclosures
total recordable injury frequency
total shareholder return
UKCGC
UK Corporate Governance Code 2018
VR
WHO
virtual reality
World Health Organization
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 Kranichberggasse 6, 1120 Vienna,
Austria.
the telephone number of the Issuer is +43 50 2136200.
the Company shares, represented by depository interests, of RHI Magnesita
n.V, are listed on the premium Segment of the official list on the Main
Market of the london Stock exchange, and RHI Magnesita n.V holds a
secondary listing on the Vienna Stock exchange (Wiener Börse).
ticker symbol: RHIM
ISIn Code: nl0012650360
Investor information
the Company’s website www.rhimagnesita.com provides information for
shareholders and should be the first port of call for general queries. the
Investors section (https://ir.rhimagnesita.com/ ) contains details on the
current and historical share price, analyst presentations, shareholder
meetings as well as a “Shareholders Information” section. Annual and
Interim Reports can also be downloaded from this section.
You can also subscribe to an “Investors mail alert service” to automatically
receive an email when significant announcements are made.
Shareholding information
Investor Relations department
Kranichberggasse 6,
1120 Vienna,
Austria
t: +43 699 1870 6493
email: investor.relations@rhimagnesita.com
Corporate brokers
peel Hunt llp
Moor House
120 london Wall
london eC2Y 5et
united Kingdom
t: +44 20 7418 8900
www.peelhunt.com
Barclays Bank plC
5 the north Colonnade
Canary Wharf
london e14 4BB
united Kingdom
t: +44 20 7623 2323
www.barclays.com
Auditor
pricewaterhouseCoopers Accountants n.V,
thomas R. Malthusstraat 5
1066 JR Amsterdam
p.o. Box 90357
please contact our Registrar, Computershare for all administrative enquiries
about your shareholding, such as dividend payments, or a change of
address:
t: +31 88 792 00 20
www.pwc.nl
Computershare Investor Services plC
the pavilions,
Bridgwater Road
Bristol BS99 6ZZ
united Kingdom
www.computershare.com/uk
t: +44 (0) 370 702 0003
Financial calendar
Q1 trading update
Annual General Meeting
Half Year Results
5 May 2022
25 May 2022
27 July 2022
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