RHI Magnesita H1 2025 Profit Slumps 26% Amid Industrial Project Deferrals

The Resco acquisition has pushed Net Debt/Pro Forma Adjusted EBITDA to 3.1x, well above the company’s stated target range of 1.0-2.0x through the cycle (or up to 2.5x for compelling M&A). Management expects gearing to reduce to ~2.8x by year-end and further into 2026. This elevated leverage is the unavoidable consequence of the aggressive M&A-led consolidation strategy in a cyclical downturn. While the strategy has merit long-term, it undeniably increases financial risk in the near term, especially if the H2 recovery falters.

Operational & Regional Nuances: Not All Gloom

Digging deeper reveals a mixed regional picture:

• North America (Up 18%): The Resco acquisition provided a significant boost (€90m revenue). The base business dipped slightly (-4%), but integration is progressing, and the new US recycling JV with BPI offers future promise. Steel demand was stable, though tariffs pose a complex risk/reward dynamic.
• Europe & CIS (Down 10%): The hardest hit region, suffering from structural steel decline (-11.6% in Germany!), project deferrals, weak Glass markets, and tariff impacts. Plant closures (Wetro, Mainzlar) are a direct response to overcapacity. Recycling rates shone (22.5%).
• India (Flat Revenue, But Margins Crushed): Volumes grew 7%, but ferocious price competition (from imports and domestic players) caused a 7% drop in average prices and a 40% plunge in gross profit. Margins collapsed to 12.7% (from 21.0%). New steel tariffs offer some hope.
• Latin America (Down 14%), China & East Asia (Down 5%), META (Down 15%): All faced volume declines, pricing pressure, and specific regional challenges (import competition, weak construction, FX).

Strategically, the Resco integration and network optimisation remain central. The closure of two German plants is just the start of addressing structural overcapacity, particularly in Europe.

Steel vs. Industrial: A Tale of Two Divisions

The split between the core Steel business (68% of revenue) and Industrial (32%) was stark:

• Steel: Revenue down 3%, Adjusted EBITA down 19%. Volumes ex-M&A down 1%, pricing down 5%. Characterised as “low but stable” demand, with regional divergence (India/NAM growth vs. Europe decline). The battleground is price in commoditised segments.
• Industrial: Revenue down 2%, but Adjusted EBITA plummeted 36%. The double whammy of project deferrals (especially Non-ferrous Metals & Glass) and a mix shift to lower-margin Cement/repair work devastated profitability. Cement showed some resilience (+5% revenue).

The H2 recovery hinges heavily on the anticipated rebound in Industrial project execution.

Conclusion: Navigating Turbulence with a Clear, if Risky, Compass

RHI Magnesita’s H1 was undeniably tough. Industrial project deferrals, intense price competition, and cost pressures combined to deliver a sharp profit decline. The balance sheet is stretched following the Resco deal. Management’s response is robust – a detailed €120m H2 uplift plan combining project delivery, price action, cost cuts, and synergies. The revised €370-390m FY guidance reflects both the H1 miss and ongoing FX headwinds.

The maintained dividend offers shareholder reassurance, but the elevated debt (3.1x) is the key watchpoint. Execution of the H2 plan is paramount to start deleveraging. While the near-term outlook remains challenging, particularly in Europe and amidst global trade tensions, the long-term M&A-led consolidation strategy in a fragmented market still holds logic. However, investors will need patience and a strong stomach for volatility. The next six months are critical for proving the resilience of the model and the efficacy of management’s countermeasures.