RHI Magnesita Reports Strong H2 Recovery and 2026 Guidance Amid Market Challenges

• Cash conversion 105% (Adjusted EBITA to cash) thanks to tight working capital. Working capital intensity fell to 21.7%.
• Free cash flow of €214 million broadly matched 2024, even after lower EBITDA.
• Net debt rose to €1,495 million due to the Resco purchase. Leverage at 2.9x stays within covenants and is guided to fall to around 2.6x by end‑2026.
• Dividend held at €1.80 per share, consistent with a sub‑3.0x adjusted earnings cover policy.

Watch the finance line though: net finance expenses more than doubled to €95 million, primarily from FX, lower interest income and non‑controlling interest effects. Reported EPS fell to €1.82; adjusted EPS was €4.18.

2026 guidance: rebuilding margins without a market tailwind

Management expects Adjusted EBITA to rise about 17% to €435 million at constant currency in FY 2026, or around €400 million after FX headwinds. The lift is almost entirely self‑help: more efficiency, ongoing network optimisation and actions to restore vertical integration profitability as raw material prices sit at cyclical lows. A more normal H1:H2 split is expected.

Cash conversion is guided above 90% with further deleveraging. No large M&A cash out is anticipated in 2026, though the pipeline remains core to strategy.

Market tone is still cautious. Steel sits at cyclical lows globally. Industrial project visibility is limited, with modest improvement in Non‑ferrous and no clear rebound in Glass before late 2026. Potential regulatory support in the EU and Brazil is not expected to materially help before 2027.

Why it matters for investors

Positives I like

• H2 execution proves the cost and footprint programme is working, with a 530 bps margin swing from H1 to H2.
• North America scale-up via Resco gives RHIM a strong, tariff‑resilient local base and a broader Industrial mix.
• Cash discipline is excellent. 105% cash conversion with lower working capital intensity is a sign of real operational grip.
• Clear 2026 plan driven by controllables rather than a market bounce, plus tangible actions to improve vertical integration returns.
• Dividend maintained and covered, with leverage set to trend down.

Things to keep an eye on

• Macro still soft: order books in Steel and Glass do not signal an imminent upcycle.
• Pricing pressure from Chinese exports across multiple regions could crimp margins if discipline elsewhere wobbles.
• FX and interest costs hit the P&L in 2025. Another year of FX headwinds is baked into guidance.
• Vertical integration contribution remains low. The improvement path is laid out, but early 2026 delivery will be scrutinised.

My take

This reads like a well‑run business doing the hard yards through a downturn. The H2 improvement is not a fluke. It is the product of specific, sometimes painful actions: plant closures, SG&A resets, local-for-local manufacturing and sharper pricing. Resco strengthens the high‑quality North American profit pool and helps reduce tariff risk. Cash generation and working capital management are standout strengths.

Near term, the market is not doing RHIM many favours. That makes the 2026 guidance more credible in my view, because it rests on levers the company controls. If industrial project activity normalises into late 2026 and 2027, there is operating leverage to come on top. Until then, expect steady blocking and tackling: margin rebuild, cash discipline, and debt edging down while the dividend is held.

For investors, this is a margin‑recovery and cash‑compounding story with optionality on a cyclical upturn. The main swing factors are FX, Chinese export pressure and the pace of improving raw material integration returns. On balance, H2 shows the engine has torque. 2026 is about keeping the foot down.