Industrial furnace equipment manufacturer RHI Magnesita (RHIM) is facing an increasingly challenging trading environment as reduced global industrial production puts equipment orders on hold.
Customer production in the steel division has fallen in response to the economic slowdown caused by the pandemic, and the company believes worse is to come.
RHI Magnesita produces heat resistance materials for heavy industry, including refractory products for steel manufacturing furnaces.
‘The trading environment has become increasingly challenging in the second quarter as a result of COVID-19, with a significant slowdown in customer activity and fall in order book levels,’ the company said in a first quarter update today.
The company’s industrial division, whose products are used in glass, plastics and cement manufacturing, remained more resilient, particularly in areas where maintenance work had been accelerated during shutdowns, although there had been some project postponements.
‘The overall impact of Covid-19 and, in particular, the extent and the duration of its effects on the global economy and our business, and the speed of economic recovery remain very uncertain,’ RHI Magnesita said.
BALANCE SHEET SALVES TRADING SLUMP
‘Whilst the impact will be material in the short term, the business is taking appropriate actions and has sufficient liquidity to withstand an extended period of uncertainty.’
Those actions include conserving cash, which saw the its 2019 final dividend scrapped in early April, plus at least €45m of capital expenditure being deferred.
This, and robust finances, have provided investors with the reassurance they were looking for, sending the RHI Magnesita share price rallying more than 3% in Tuesday trade to £24.16.
The stock has fallen from £33 levels since early February.
The company said it had a strong liquidity position, which increased to €1.2bn in the first quarter, comprising cash and cash equivalents of €500m and fully committed undrawn facilities of €700m.
‘Longer term, the group is well positioned to take advantage of growth opportunities when markets improve and is focused on ensuring that it can exit this period of disruption with positive strategic momentum’.
