RHI Magnesita LON: RHIM said demand for refractories remained soft in the first quarter of 2026 across both its key end markets, steel and industrial, but reported a meaningful year-over-year improvement in profitability driven by cost and efficiency initiatives. Management also reaffirmed its full-year adjusted EBITDA guidance and expectations for deleveraging.
Weak demand backdrop, mixed end-market trends
CEO Stefan Borgas told investors that demand was “slightly weaker” in Q1 2026 than the comparable period in 2025. The company’s volumes into steel were “more or less in line” with the prior year, supported by “some pricing benefits,” while industrial project-related volumes “remained subdued even compared to last year.”
Borgas said global steel production declined 2.3% year-over-year in the quarter, citing World Steel Association data, and noted that RHI Magnesita’s steel revenue benefited from price improvements despite that decline. In industrial markets, Borgas described the cement season as “broadly normal,” non-ferrous metals volumes as “broadly flat” versus last year, and said glass volumes in the first quarter were lower than in 2025.
He added that, based on current visibility, the company is seeing “early signs of a possible gradual improvement in steel demand through the remainder of 2026,” though he cautioned that early reporting from some Western steel customers was “not super encouraging on the volume side.”
Profitability rose on “self-help” measures and pricing actions
While volumes were pressured, management emphasized improved profitability. Borgas said adjusted EBITDA increased “meaningfully year on year,” attributing the improvement to execution of “self-help initiatives,” pricing actions to catch up with cost increases, cost discipline, network optimization, and targeted supply chain measures.
CFO Ian said adjusted EBITDA in Q1 increased by approximately 15% year-on-year, or 46% on a constant currency basis. He attributed the improvement to “sustained cost discipline and the ongoing benefits of self-help measures implemented in 2025 and in 2026.”
Management highlighted four “structural levers” supporting earnings:
- Network optimization, which Ian said is “on track.”
- SG&A reduction, driven by digitalization, process standardization, and shared services expansion.
- Pricing discipline, supported by expansion of the company’s “4PRO” offering.
- Early signs of industrial improvement, particularly in non-ferrous metals.
In response to analyst questions, Borgas said the profit improvement “comes solely from the self-help measures” and that the “backward integration margin is not improving,” noting raw material prices had not increased significantly.
Ian added that the company’s full-year EBITA margin guidance remains 11.5%, which “includes 1% for backward integration.” He said utilization at magnesite-based raw material plants “remains subdued,” and described the margin progression as seasonally weighted to later in the year: “the second quarter normally being better than the first quarter, and the second half to be better than the first half.”
Guidance reaffirmed; cash conversion and leverage targets reiterated
Management reaffirmed full-year adjusted EBITDA guidance of EUR 435 million on a constant currency basis, or approximately EUR 400 million incorporating the company’s current view on foreign exchange rates. Borgas said the outlook was unchanged from the prior update and reiterated expectations for leverage reduction to about 2.6x net debt to EBITDA.
Ian said net debt increased in Q1 versus year-end 2025 due to higher working capital, reflecting a “planned buildup in inventories” ahead of anticipated stronger second-quarter sales, particularly in industrial projects. He said the build is consistent with normal seasonality and is expected to unwind over the remainder of the year.
On cash flow, Ian said full-year cash conversion is expected to exceed 90%, with year-end working capital intensity expected to be around 22%, though higher at the half-year as normal. He said the company expects net debt to decline over the year to around EUR 1.4 billion, alongside the targeted leverage reduction.
When asked about the expected split of performance across the year, management said results should be more typical than in the prior year. Borgas said a “normal” split is about 45% in the first half and 55% in the second half. Ian added that, based on the company’s FX-influenced guidance, the first half would be “probably around EUR 170 million of our EUR 400 million,” with the second half “around EUR 230 million.”
Regional performance and footprint actions in Europe
Borgas said North America and Latin America delivered strong earnings in Q1. In North America, he said the steel business performed well alongside 2.3% year-over-year quarterly steel production growth, despite winter storm-related supply chain disruptions. In Latin America, he said performance was driven more by industrial strength than steel, noting steel volumes were down in the region.
India, China, East Asia, and the Middle East and Africa were described as broadly in line with expectations, with “a little bit stronger steel performance” offsetting weaker industrial demand. Europe and CIS underperformed across both steel and industrial volumes, which Borgas attributed partly to a volume shift from Q1 into Q2, “especially on the industrial side.”
In Europe, Borgas said the company announced a review of its production footprint in France, including “the potential to close one plant” and convert another into a recycling hub. He said the company is engaged with local works councils and committed to managing any transition responsibly, framing the move as part of a broader network optimization program aimed at improving competitiveness, customer service levels, and costs.
Geopolitics, supply chain response, and FX headwinds
Borgas said geopolitical tensions made the operating environment more challenging, but indicated the Middle East conflict had not materially impacted group performance. He noted local customers in the Middle East were affected, resulting in lower volumes, but said the company’s overall exposure to the region is “relatively small.”
He highlighted the company’s response to logistics disruptions tied to incidents near the Strait of Hormuz, saying shipments were redirected through alternative routes and that the company’s “digital supply chain capabilities” enabled a rapid response.
On pricing, Borgas said Q1 reflected both annualization of prior pricing actions and new surcharges linked to higher energy and freight costs. However, he also pointed to competitive pressure in more commoditized industrial projects, where some competitors were pursuing volume at the expense of margin; Borgas said the company tries to avoid participating in “dump” pricing.
Foreign exchange was a notable headwind. Ian said the year-on-year depreciation of the U.S. dollar and Indian rupee drove the impact, and later added that moves in the Mexican peso, Turkish lira, and Chinese renminbi also weighed. He quantified sensitivity to the dollar, saying “every cent movement is over EUR 4 million on our earnings,” and cited the shift in average EUR/USD levels compared with the prior year.
In a Q&A response on revenue trends, Ian said that in constant currency terms steel revenue was up around 6% and industrial was down around 6%, with the group up around 2% in constant currency. On a reported basis, he said the group was down around 5% year-on-year due to currency.
On the industrial order book, Borgas said improvements were most notable in non-ferrous metals, supported by high commodity pricing and high customer utilization rates, as well as a maintenance-driven uptick in some segments after “two years of very subdued low deliveries.”
Finally, asked about M&A, Borgas said the pipeline “looks very good” and that discussions have started again, but added there were “no updates compared to what we said before” and “no cash outs this year.”
About RHI Magnesita LON: RHIM
RHI Magnesita is the leading global supplier of high-grade refractory products, systems and solutions which are critical for high-temperature processes exceeding 1,200°C in a wide range of industries, including steel, cement, non-ferrous metals and glass. With a vertically integrated value chain, from raw materials to refractory products and full performance-based solutions, RHI Magnesita serves customers around the world, with over 20,000 employees in 65 main production sites (including raw material sites), 12 recycling facilities and more than 70 sales offices.
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