Displaying items by tag: Refractory

Europe: RHI and Magnesita have announced divestment agreements ahead of their proposed merger. RHI has signed a contract with a European refractories supplier for an undisclosed sum regarding the sale of its dolomite business in the European Economic Area. The sale consists of the production sites at Marone in Italy and Lugones in Spain. Magnesita has entered into a definitive agreement with Intocast to divest its business related to the production and supply of magnesia carbon bricks produced at the company's Oberhausen plant in Germany for Euro20.3m. Both sales were required by the European Commission as part of the merger process.

“With the sale of the two sites, the combination of RHI with Magnesita is also still right on schedule,” said RHI’s chief executive officer Stefan Borgas with regards to his company’s divestments “We expect the confirmation by the European Commission in the near future.”

RHI signed a contract in August 2017 to sell its production sites at San Vito in Italy and Sherbinska in Russia that produce fused cast refractories for the glass industry. Production at the company’s plant at Aken in Germany was stopped in the first half of 2017 for an indefinite period. RHI plans to sell or close the plant to maintain its production utilisation rate across the business.

US: Plibrico Company has opened its new corporate headquarters and research and development laboratory in Northbrook, Illinois. Previously located in Chicago, Illinois, the new Northbrook location offers a larger, more user-friendly space for staff and visitors. The company is a manufacturer and installer of aluminosilicate and high alumina monolithic refractories that are used in a variety of industries including cement.

Belgium: The European Commission has cleared a proposed merger between Brazil’s Magnesita and Austria’s RHI Group subject to the divestment of a number of production sites in Europe. Magnesita is required to sell its plant in Oberhausen, Germany along with its Oberhausen business in the European Economic Area (EEA). RHI is required to sell its dolomite business in the EEA including plants in Maroni, Italy, and Lugones, Spain. Magnesita and RHI said they are speaking to potential buyers at present.

“With today’s milestone, we have come significantly closer to the planned merger with Magnesita – and thus a globally leading company in the refractory industry which optimally combines the strengths of both companies,” explains Stefan Borgas, chief executive officer (CEO) of RHI and designated CEO of the future RHI-Magnesita Group.

Outstanding approvals required to complete the merger include that from the Brazilian Antitrust Authorities and the approval of the cross-border merger, of RHI AG with its subsidiary RHI MAG NV in the Netherlands, by the RHI General Meeting.

US: HarbisonWalker International has broken ground on its new monolithic refractory plant at the Point Industrial Park in South Point, Lawrence County, Ohio. The US$30m plant was first announced in February 2017 and will be operational by early 2018. It will have a production capacity of 80,000t/yr.

France: Julien Soum has been appointed as the European business development manager at Anderman Ceramics. Soum has worked as a commercial engineer in Europe for the last five years with knowledge of the refractory markets for cement and steel working for Refractaria and Hepha. He was educated at the University of Montpellier and the Kedge Business School in Marseille.

Uzbekistan: Uzqurilishmateriallari, with the Government of Uzbekistan, and Eurocement Group have signed a memorandum of cooperation in connection to joint projects including the construction of a cement plant. Filaret Galchev, Eurocement’s chairman of the board of directors, and Elyor Ganiev, the Ministry of Foreign Economic Relations, Investments and Trade, signed the agreement, according to Uz Daily. The deal includes cooperation towards building a 2.4Mt/yr cement plant with Eurocement’s local subsidiary Akhangarancement and plans for refractory and insulation materials projects. Altogether the investment is around US$220m. The agreement also includes cooperation in producing new ‘export-orientated’ building materials.

US: HarbisonWalker International (HWI) plans to build a new monolithic refractories plant at the Point Industrial Park in South Point, Lawrence County, Ohio. The site is subject to completion of the company’s due diligence and finalisation of one additional grant application that is in process. HWI announced in February 2017 that it was spending US$30m on building a new 80,000t/yr refractory plant to start operation by early 2018.

UK: Calderys has completed its acquisition of NG Johnson Northern, a refractory installation company based in Ellesmere Port. It aims to retain the brand and expand its Engineering, Design and Supervision activities in the UK market. NG Johnson Northern focuses on incineration, petrochemical and aluminium industries and its clients include Hanson, LafargeHolcim and Quinn Cement.

As mentioned last week, there were a number of big news stories, one of which was the planned merger between RHI and Magnesita. On 10 October 2016 both companies announced that they were combing to form a ‘leading’ refractory company with complementary assets and a completion date penned in for 2017. As Informed’s Mike O’Driscoll presents a good overview of the two companies and the general implications of the merger we will focus on the cement industry aspects of the merger here. It is worth noting here that the new company will be established in the Netherlands but its shares will be listed in London. O’Driscoll reckons that had the UK voted to stay in the European Union the new company would have been based in London.

Comparing like-with-like for RHI and Magnesita is difficult because Magnesita doesn’t publish figures on its refractory sales to the cement industry. However, RHI produced 443,000t of refractory materials in 2015 for its Industrial Division, including the cement and lime industries, and Magnesita produced 151,000t for its Industrial Division at the same time. As can be seen in Graph 1 RHI produces nearly three times as much refractory as Magnesita in this area. Sales volumes for RHI have fallen over the last five years and Magnesita’s sales hit a high in 2013. Total revenue for RHI, across all business lines, was US$1.95bn or about double that of Magnesita.

Graph 1: Refractory sales volumes to industrial divisions for RHI and Magnesita, 2011 – 2016. Sources: RHI and Magnesita financial reports. Note: Figures for Magnesita are calculated from percentages.

RHI reported that 12.6% of its revenue in 2015 came from the cement and lime industries. It pointed out that this sector of its business benefited from the growing construction industry in North America. Elsewhere, it had a tough time in most of its territories, with the exception of Indonesia where its revenue grew due to a major contract won in the lime segment. Over the last five years RHI’s revenue from its cement and lime customers dipped to a low in 2013 before recovering year-on-year since then.

However, the situation has deteriorated during the first half of 2016 with revenues from the cement and lime industries falling by 13% year-on-year. China was blamed as the biggest single factor, with business down by roughly a quarter as a result of the downturn in the construction industry, falling property prices and lower investment activities. One interesting point that RHI made at this time was that, “the globally weak economic situation and regional excess capacities are causing a decrease in repair volume.” Another was the importance the refractory producer placed on Africa and on Nigeria and Algeria in particular. This seems to belie the petrodollar woes Nigeria has experienced recently and the scaling back by Dangote Cement of its international expansion plans.

Magnesita reported that sales volumes for its industrial segments sector, including cement, dropped by 11.7% year-on-year to 133,000t in 2016. It blamed the shortfall on the declining cement industry in Brazil with problems in Venezuela also contributing. In contrast to RHI though it reported growing sales in the Middle East and Africa, notably in Saudi Arabia and Egypt. Sales revenue actually rose by 10.2% to US$145m due to favourable exchange rates on sales outside of Brazil.

In the first half of 2016 the negative trend in Brazil continued for Magnesita with sales volumes falling by 22% in its so-called ‘established’ markets. This was compensated for by Bolivia, Mexico, Argentina and the Middle East, Africa and the Commonwealth of Independent States territories. Sales volumes for its industrial segments sector rose slightly by 1.1% to 75,200t in the first half of 2016. Again, sales revenue grew on the back of exchange rates.

As with mergers between large producers in the cement industry, if global growth is stagnating, then mergers offer an alternative way for refractory companies to compensate. However, LafargeHolcim’s promise of savings and synergies has withered to periodic news bulletins of what assets the group is planning to sell next. One question to pose is whether the merger of RHI and Magnesita will herald a similar drip-drip of assets disposals in coming years or whether it will usher in a new era for the refractory industry. A large part of this will depend on the health of the steel industry, as well as minority markets such as cement.

Austria/Brazil: RHI and Magnesita are to merge to create a new refractory company called RHI Magnesita. RHI’s management board has agreed to sign a share purchase agreement with Magnesita’s controlling shareholders regarding the acquisition of a controlling stake of at least 46%, but no more than 50% plus one share of the total share capital of Magnesita, pending RHI’s supervisory board approval. The purchase price for the 46% stake will be paid in cash amounting to Euro118m and 4.6 million new shares to be issued by RHI Magnesita. The new company will be established in the Netherlands and listed on the London Stock Exchange.

As pat of the agreement, GP Investments (GP) will become a relevant shareholder of RHI Magnesita. The combined company’s corporate governance will consist of on a one-tier board structure while GP will be represented on the board of directors.

The deal is dependent on approvals by the relevant competition authorities, the migration of RHI to the Netherlands, the listing of RHI Magnesita’s shares in the premium segment of the Official List on the Main Market of the London Stock Exchange and RHI’s shareholders not having exceeded statutory withdrawal rights in an amount of more than Euro70m in connection with organisational changes preceding RHI’s migration from Austria. The migration and the preceding organisational changes in Austria require qualified approval by RHI’s shareholders’ meeting. If the deal is terminated for reasons not under the control of Magnesita’s controlling shareholders, an aggregate break fee of up to Euro20m is payable by RHI to Magnesita’s controlling shareholders.

The merger transaction is expected to complete in 2017. Until then, the two companies will remain completely separate and independent. Therefore customers, suppliers, employees and other stakeholders should expect no change in management teams, commercial relationships, supply chains and product offerings during this period.

RHI and Magnesita say that the new refractory company will bring together complementary businesses, both in terms of products and geographical footprint. Magnesita have a presence in South America and the US compared to RHI’s presence in Europe and Asia. The merger is also expected to aid the company’s position against the growing Chinese refractory industry. In addition, Magnesita’s position in dolomite-based products is complementary to RHI’s asset portfolio, which traditionally has a strong focus and an excellent market reputation for high-quality magnesite products.

Synergies from the merger are expected to deliver at least Euro36m in earnings before tax (EBIT) by 2020. However, if RHI Magnesita’s stake in Magnesita significantly exceed 46%, RHI expects substantially higher synergies of approximately Euro72m, especially in the areas of enhanced production efficiency and cost benefits in research and development, marketing and administrative functions. In addition, capital expenditure synergies are expected to amount to be Euro2 – 7m/yr and aggregate working capital savings of Euro40m are expected in the coming years.