RHI Magnesita LON:RHIM the FTSE250-listed, Vienna-based, manufacturer of refractory products has seen its share price perform well in the last couple of months.
The company closed trading yesterday (12th October) at 2,784p, and has taken off and been on an upward trajectory since the end of May. The company has offered a 24.6% return year-to-date, and 72.3% return over one year. However, between the start of February and the end of May the share price took something of a nosedive from 2,740p to 2,050p, and then put on 35% in a sustained rally. The company now has a market capitalisation of GBP1.32bn. The company’s shares have ranged between 1,557p and 3,118p over a 52-week period.
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RHI Magnesita makes refractory products. What are they?
Refractory products are materials that can withstand high temperatures and other harsh conditions and are used in a wide range of industries, including steelmaking, cement production, glassmaking, and non-ferrous metals processing. Thy are typically made from ceramic materials, such as alumina, magnesia, and silica as these materials have high melting points and are resistant to chemical attack. Refractory products can be formed into a variety of shapes, including bricks, linings, and flow control products.
RHI has been around since 1908, established by mining engineer, Josef Hörhager who on a walk through the Austrian Alps – obviously appreciating that the hills were alive with The Sound of Music – also noticed that there was quite a bit of magnesite, a member of the calcite group of carbonate minerals and principal source of magnesium – lying around. Hörhager set up RHI to exploit the deposit and used it to make refractory products after buying a local brick and tile company.
Today the company produces around three million tons of refractory products each year from 47 main production sites and 12 main raw material sites around the world. But the company is also at the forefront of research and development into refractory products, with the bold claim to be aiming to take the industry beyond 1,200oC. Refractory products are used to line the inside of furnaces, kilns, and other high-temperature equipment. They protect the equipment from the damaging effects of heat and chemicals. Refractory products also help to insulate the equipment, which can save energy and reduce costs.
RHI makes over 120,000 products ranging from refractory bricks and lining mixes to flow control products for the metals industry such as slide gates, nozzles and plugs. Their service lives range from a few cycles within a day to as long as 10 years. The base materials used to make them are magnesite and dolomite – remarkable materials which themselves require skillful handling: the melting point of fused magnesia is above 2,800°C.
Rhone Group offer values the company at £1.38bn
The big May jump came after Ignite Luxembourg Holdings, an investment boutique controlled by private equity shop, Rhone Group from New York made an offer to buy 20% of RHI at a price of 2,850p a share which was inclusive of a dividend RHI paid out to shareholders, valuing the company at GBP1.38bn. RHI thought Ignite undervalued the company, so Ignite upped their offer to 29.9% a month later.
It seemed at the time that RHI was a bit caught out by the offer, which came from leftfield, given that the company had just published fair, but not outstanding results for the half-year to end June 2023 where it saw a 9% increase in revenue year-on-year to EUR1.7bn, EBITDA up 8% y-o-y to EUR265m, and saw net debt fall 9% to EUR1.1bn and EPS fall 2% to 2.53c. Profit before tax was also down to EUR111m from EU142m the year before.
The company also made five new acquisitions in the first half of the year for EUR208m. The company also made a EUR45m acquisition of Preiss-Daimler Group which has aluminia-based refractory facilities in Germany, Czech Republic and Slovenia earlier this month.
RHI Magnesita was a bit downbeat in its last results, saying that it had been experiencing challenging conditions, and that competitive pressure could arise in the coming months. However, with the offer on the table it will be worth to keep an eye on this stock in the coming year.
