Hello, and welcome to today's RHI Magnesita Q1 2023 trading update. My name is Bailey, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions-and- answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad, or you may submit a written question via the webcast. I would now like to pass the conference over to our host, Stefan Borgas, CEO. Please go ahead. Thank you very much. Good morning, everyone. Thanks for joining us. I'm joined on this call by our CFO, Ian Botha, and our IR team, Chris and Annabel. We're happy to report what happened in the first quarter of this year and then answer all of your questions, of course. Before we go into the detail, let me try to give you the summary. Four takeaways. First, we have been able to extend the strong pricing and margins that we had established in the fourth quarter of last year into the first quarter of this year. Therefore, we are on track to achieve at least our guidance for 2023. This is the positive news. Second message, volumes have been lower, markedly lower. We expected this because of the slowdown in many, many of our customer industries in most geographies. We're starting to see some recovery in our order books, but it's really happening very, very slowly, slower also than we had originally expected. Third message, the outlook, therefore for the rest of the year remains uncertain. We're in this cyclical bottom of the especially the construction industry. The recovery will be bumpy. It will not be the same everywhere. It will be not quite as forecasted. There's upsides, but also quite many downsides. We are also seeing pricing pressure on the horizons as costs are coming down in certain categories, and we have some competitors who still operate on a cost-plus model. Fourth message, we continue to make good progress on our acquisition strategy. We have completed acquisitions and announced some others. I'll get into this, into the detail just in a moment. Let's start now looking a little bit deeper into these topics. The volumes are 8% lower, mainly due to soft demand in steel and in cement, driven by a very low construction activity everywhere around the world, maybe with the exception of India. Even in China, the recovery in the construction industry is very muted and therefore doesn't support us very well. This was foreseen, but the turn up doesn't happen very much yet at the moment. In our industrial projects business, with a later business cycle, everything remains quite resilient. That's the volume side. Let's talk about the pricing side. The pricing side still has been quite strong in the 1st quarter. This is the opposite effect than from what we saw about a year ago when costs moved up everywhere and we had to pass on higher costs to customers, but with a certain time delay, and now this is going the other way. This is a short-term benefit. It doesn't sustain, of course, in the long term unless competitors change their behavior. We're in this part of the cycle where the volumes are weaker. There's a cost deflation happening everywhere, especially in shipping and in energy costs and some raw material categories as well, and that will induce pricing pressure in a few weeks or months from now. As a result, we had good margins in the first quarter, ahead of our guidance of 10%. We do expect this to come under pressure, so we have to watch for the remainder of the year where this is going. We have a business that is diversified all over the world, as you know, so we have to look in the individual pockets of what happens in end markets and with customer markets. We are benefiting from the cost-saving initiatives that we've started a couple of years ago. These are step-by-step coming into the P&L. Some of the margins we hopefully can defend over time, but we will start to see this year also some significant and meaningful benefits from acquisitions. So far to the business this year. Let's talk about M&A. Acquisitions have been a central part of our strategy execution over the past two years. We are seeing good momentum, as you have noted from the deals that we have announced step by step over the course of this year. Just to summarize what we have done on the acquisition side in the first quarter, we closed the two acquisitions in India, Dalmia OCL and Hi-Tech, in January of this year. The integration is fully underway. The teams have been completely merged already, and now, we're more focusing on the operational aspects here. This leaves us with a 30% market share, roughly 30% market share in the fastest-growing refractory market. In the world, India, we're quite excited about the prospects here in this market. I think this will become a very good platform. We have now nine manufacturing locations spread over India so that we can serve the different customer segments, relatively well with the regional setup. We also now have a very well-balanced product portfolio across the steel and the industrial markets and of course, also the flow control markets, mostly in steel, also in a few other segments. We have room in this production network now to increase production as the market continues to grow, so we can serve the growth of our customers. This will reduce imports into India from other markets, notably from China, but also from Europe. It will create an opportunity in due time to export, especially into the West Asia and Africa regions. Further on the acquisition side, we signed and closed the acquisition of Jinan New Emei in China with a very efficient and professional process with the local authorities who approved this deal very quickly. This was a good experience. This is an addition in our flow control business with a super modern facility located in the Shandong province. We also signed and closed another smaller acquisition in Germany, a company called Dalmia GSB. This is a specialty producer of lances for the steel industry. It's a functional product in which we were not active until now in the region Europe, so this is an addition to the portfolio. We're very happy about this team. That acquisition has also closed already. Total cash that we invested in acquisitions in the first quarter was EUR 155 million, including the India payments, and also including the acquisition in MCi Carbon in Australia, which is a technology company that could help us solve a large portion of our CO2 emissions. In April, after the quarter, we reached an agreement with a company called Seven Refractories for a cash consideration of EUR 93 million. Seven is a non-basic refractory business, operating mostly in Europe, and somewhat also in U.S. and in India. We have been very small in this market segment, so also this is a portfolio addition. This transaction requires European approvals, so we need time for this to close, and this will happen sometimes later this year, probably more towards the end of the year rather than the beginning of the year. Our M&A pipeline, the rest of the M&A pipeline remains robust. We are continuing to advance discussions with other potential sellers, to see whether we can continue to complement our portfolio. We continue to see opportunities to make these value added, very accretive deals in really all geographies, and to build our business this way. With this, let me hand over to Ian, who can give you a little bit more details on the numbers. Ian? Thanks, Stefan. We've made good progress in funding alongside the headway that we're making in M&A. Our financial liquidity remains strong at around EUR 1.2 billion with a long-dated debt maturity profile at very competitive rates of interest. This was supported in the first quarter by EUR 320 million of new debt finance through a Schuldschein bond issuance, together with a renewed and increased bilateral facility with UniCredit. Both of these are ESG linked. In the first week of April, we secured EUR 101 million of new equity funding through a placement of shares in our listed Indian subsidiary. There was strong interest from institutional investors in India and internationally. This has confirmed the market value of RHI Magnesita India. The group generated strong operating cash flow in the first quarter, very much as it did through the second half of last year. This helps to reduce our gearing from 2.4 x at the beginning of the year to 2.2 x, including the India equity raise and the EUR 155 million of M&A that we completed in the first quarter. If you also include a trailing twelve-month EBITDA contribution from the M&A completed in the first quarter, so Dalmia and Hi-Tech, our pro forma gearing was 2.1 times. Moving to working capital. Absolute levels of working capital were broadly unchanged in the first quarter, pre the M&A that we completed. We continue to maintain higher levels of working capital than we've done historically. We are doing this very deliberately as our customers value the security of supply. This has delivered important market share gains and price support in 2022. With that, I'll hand you back to Stefan. Perfect. Thanks, Ian. Let me finish with an outlook for the rest of the year. As I said earlier, the outlook for 2023 remains quite uncertain. The assumptions we take every month get reworked. On the positive signs, we see some volume recovery, although they're coming later and with lower oomph than we had maybe hoped for at the beginning of the year. There are some volume recoveries. We see this especially in the steel order book, as I said, little bit more, little bit later than originally estimated. This is offset, however, by pricing pressure. We have these discussions everywhere. We expect to experience this as costs are falling and too many competitors still operate on a strict cost-plus business model. Having made a good start to the year, and based on the assumptions that the volumes continue to recover and that the pricing pressure remains reasonable, so that maybe we can hold on to some of these cost reductions, we are confident to achieve our current guidance for 2023, and to be able to integrate the M&As so that in the next years you will see really a good improvement of the company. We're happy to take your questions now. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, please press star followed by one. If you have joined us by the webcast today, please do submit a written question. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question, and please do ensure to unmute locally. Our first question today comes from the line of Mark Davies-Jones from Stifel. Please go ahead. Your line is now open. Thank you. Morning, Stefan. Morning, Ian. Can we talk a little bit more about M&A? There's been a lot going on. Your position in India is now very strong. Are there geographic areas which are much in focus, or are these more focused on sort of product add-ins like some of the deals you've just highlighted? Well, both really. I think in India, we're pretty much done now. We don't plan to have any further acquisitions here. I think in China there are still some round-up opportunities similar to the New Emei transaction. Turkey also, I think we're pretty much done. We now have to look at other geographies where we're weak, where we have some weakness in North America in some market segments, and we have some weakness also in East Asia in certain of the fast-growing markets. We look at this, and then, of course, this product portfolio, round up also is another focus. Actually, also on the recycling side, we have some opportunities. Can you talk a little bit more about your thinking around the Indian subsidiary? The placing there was obviously an interesting and successful step forward. How do you balance benefiting from the valuation arbitrage there with maintaining sort of control over that asset? How do you see that going forward? We for sure don't plan to reduce our shareholding any further in India. Ian, you wanna talk a little bit about the valuation aspect? Mark, RHI in India is a core long-term part of our portfolio. We have no intention to reduce our shareholding further. Clearly, this was an attractive opportunity for us to essentially fund that portion of the Hi-Tech Chemicals and Dalmia acquisition, plus associated working capital investments in India using the higher values, equity. We do not intend to dilute further from the 56% that we have now. Okay. Thank you. That's very clear. Thank you. The next question today comes from the line of Patrick Steiner from Kepler. Please go ahead. Your line is now open. Good morning, ladies and gentlemen. Congrats on the good Q1 results. I just have one question. I mean, we've seen very strong Q1 margin wise, and you didn't really change your full year guidance. Has your expectation in the next three quarters changed negatively somehow or the last couple of months, or do we just have even more caution in the current guidance? No, actually we have seen some disappointment on our expectations. We have clearly expected at the beginning of the year that the volume recovery would start in March, later than April. That didn't happen yet. It also didn't come at the same level that we had thought. Based on our past experience, we're also very careful on having big expectations on the pricing side. Because as volumes don't come, smaller competitors get under pressure and we expect still lack of discipline here. We're careful on the pricing side, and on the volume side, we actually have seen some disappointments. Okay, perfect. Thank you very much. Very clearly. Thank you. The next question today comes from the line of Jonathan Hurn from Barclays. Please go ahead. Your line is now open. Good morning, guys. Just a couple of questions for me please. Just coming back to this sort of volume improvement or the tick up that you've seen in the order book. Can you just sort of talk us through a little bit more on that please? Maybe just in terms of the regions where you've seen the improvement. You obviously just commented about April. Can you just sort of talk about how April has trended relative to March as well, please? That was the first one. Yeah. On the... let me go through the different regions volume and then volume wise, and then Ian maybe can make a bit of a April assessment. Europe volume increase, coming from a very, very low level, so there is some improvement here in the steel business. The cement was a bit weaker than usually is, and the cement is now pretty much finished, middle of May. Steel recovery however, has been slower than we had thought. There wasn't a big inventory effect, therefore inventory built up last year in at least not refractory inventory and not very much steel inventory either. We didn't therefore, we expected this to come a little bit faster and a little bit bigger, but it didn't. North America, maybe is the biggest disappointment. You've also seen compared to what we were expecting. You've maybe also seen the GDP forecast there. This is lower than what everybody expected, we see it also. Still not a significant take up of steel demand and refractory demand because of low construction activity. South America is pretty much as bad as we thought, no positive surprise here. India is as strong as we thought, no negative surprise here either. China maybe is a little bit weaker also than we had thought because the recovery there is not happening on the construction industry side, but more in segments that don't require very much steel or cement or glass. This is a little the overall picture, if that helps. Ian, you wanna try to compare April to March? Yes. It's very much a continuation of the trends that we've been seeing. We've seen a continuation in the reduction in key costs, a continuation in the resilience of our sales prices. Our volumes have been weaker in April, slightly weaker than what we had in March. We've just moved through what's probably been the weakest steel pool in Europe and North America for our customer group, since pre-COVID. Yeah, 15 years actually, yeah. Oh, okay. That's very clear. Thank you. Just a second question is just coming back to pricing. I think when we heard from you last, you said in terms of the bridge in 2023 on 2022, there's probably a 50 basis points headwind to that coming through from price. Is that still the expectation that it kind of comes through at that level? Yes. I think that we've been clear that our results this year are really gonna be impacted very heavily by three things. One is what happens with raw material prices. Raw material prices have remained soft, and we expect that to continue during the course of the year. Our backward integration margin to remain weak. Secondly, around sales volumes, you've heard the guidance there. From a pricing perspective, we are expecting softness as the year progresses, we continue with the earlier guidance. Okay. That's clear. Thank you. maybe I can just squeeze one last one in. Just in terms of obviously the M&A, obviously the pipelines are fast, you've been very active. I mean, just in terms of looking forward, how long do you think this sort of, I suppose, heightened level of M&A will continue? Do you think you can probably complete it within the next sort of two years, or do you think it's something that RHI does maybe over sort of three to five years? Just any views there, please. Yeah. I think over the next couple of years is probably a good assumption. Great. Thank you, guys. Thank you. The next question today comes from the line of Vanessa Jeffries from Jefferies. Please go ahead. Your line is now open. Hi, just wondering if you could please run us through the contribution from recent M&A for this year and next, and if that's on top of that underlying guidance? Yeah, we've, as we've said, we've guided about a EUR 40 million impact of M&A last year. Maybe this is 45 now because we've been adding. We've been closing a little bit faster than we had thought, but this is around the level. Anything to add, Ian? Yes. As you picked up, we've guided EBITDA this year incremental EUR 25 million-EUR 30 million. That remains a good number. Since that guidance was provided, we've now announced the acquisitions of Seven Refractories and the Dalmia Germany business, those transactions will complete towards the end of the year after we've secured EU approval. That probably increases the guidance by around EUR 5 million. Okay, thanks. If you could just talk a little bit on working capital. It looks like there hasn't been much unwind despite the volume decline. Are you expecting any unwind in this half? Yes. Again, consistent with what we've guided in the past, we expect our working capital levels to track the underlying levels of activity costs and selling prices. As those reduce, we would expect to see some modest cash release from working capital. It's just a question of exactly how that phases out. We finished last year at just over 25% working capital intensity. We continue to believe that 25% is the right number for the end of the year. If you look at what actually happened in our first quarter, actually, we finished with a very similar absolute level of working capital pre the M&A. As inventory moved down towards the optimal levels on forecast demand, accounts receivable came down slightly, but that was offset by lower levels of accounts payable as we reduce our raw material procurement. Thank you. Thank you. The next question today comes from the line of Dominic O'Kane from Numis. Please go ahead. Your line is now open. Morning, gents. I guess the upshot is there's quite a lot of moving parts for this year, and I think you've given us a bit of clarity on a number of those. I just wonder when we throw them all into the mix, how we should think about the shape of the year with regards specifically to the current EBITA guidance. It feels obviously you'd hope to see a little bit of improvement through volumes to get the drop through there, but equally, mindful that there should be some further pricing pressure coming through for this year. Just first half, second half split would be helpful. I guess as well, just in terms of the guidance, has there been any change at all in terms of expectations for the net benefits from the self-help initiatives that you've referred to earlier on the call? Dominic, thanks for the question. Firstly, no change in our guidance and strategic initiatives, the incremental EUR 25 million of EBITA. We're tracking very nicely. We're comfortable with that guidance for this year. On the full year EBITA guidance, it was at EUR 340. We're just ticking it up slightly by EUR 5 million for the acquisitions of Seven Refractories and the Dalmia Germany business later this year. It's very difficult at this early stage in the year to provide real guidance on how the earnings and the margins are gonna come through, because there is this important interplay between two key issues. One is sales volumes, sales volumes are base expectations that they will just tick up slowly during the course of the year and that should support margin. At the same time, we expect our pricing to soften as the year progresses, reducing our margin. How quickly these two happen and the interplay is really gonna drive the margin and the earnings out turn. We would hope to be in a better position a little bit later in the year to provide more definitive guidance on that, so. Can I just jump in with a follow-up? Is it easier maybe to ask the question as to where you think margins might be in the second quarter, given that we're now some way through that, relative to your first half level? Not really because it does depend on how our volumes perform and how quickly pricing comes down. We've had a outperformance on our margin against the 10% full year guidance in the first quarter. I think we're cautious about guiding on margin for Q2. Understood. Thank you. Thank you. Dominic, let me give you an operational example of what that illustrates why this is so difficult. Because of this volume uptake expectations, we have carefully built up our resources in the plants in order to be able to produce these additional volumes. That leads to higher costs, you know, higher let me say short-term fixed costs, people and so on, in the different plants, contracted electricity and those things. If the volumes now not come, we will have a dilution of the margins even without any pricing. Yeah. Really we're in this phase of the market where this moves, almost week by week. That's why we're so opaque because it is opaque. Yeah. Okay. Thank you. Thank you. The next question today comes from the line of Harry Philips from Peel Hunt. Please go ahead. Good morning, everyone. Good. Just a simple question I hope on the vertical integration margin, which obviously you made clear in the statement is running broadly at 1.7 in the second half of last year. I'm just thinking more out into the future, what are the dynamics we need to see to see that vertical integration margin get back to more trend level around the sort of 3%, 300 basis points level? What sort of factors do we need to keep an eye on in that context, please? The, the first most important one is volume uptake, because that will stabilize all the raw material volumes and take the price pressure off the raw materials, especially from China. This is the, certainly the biggest factor here. That was weighing on, this was weighing on the vertical integration margin because of raw material, low, very low raw material prices from China. The second aspect is the energy cost development in Europe. This is the cost pressure that we have as a structural disadvantage. It looks a little bit better now than it did nine months ago, but we need to continue to have some improvements here. If Europe decides with more regulatory actions to keep the energy cost high structurally compared to others, then this will become a very difficult environment for high energy industries. This will affect our vertical integration margin directly, it also will affect our customers who will start to not produce here anymore. That will reduce the volumes on these raw materials that we make in Europe. Those are the two main factors. Thank you. Then just a second question just coming to mind as you highlight energy. I mean, if we go back 9 months, 1 year across all companies, not just yourselves, the whole debate around energy costs, hedging and strategies around that, and here we are now sort of much further on in quite a different environment. What's your approach to energy costs and hedging? Is it still just hedging that sort of quarter or so forward, or is there more sort of philosophical change being undertaken within the business? Harry, our approach to energy hasn't really changed. We continue to focus on security of supply and therefore the investments and action that we took last year around diversifying, for example, in Europe, our energy sources, securing storage, these remain areas that we focus on. Secondly, clearly from a cost perspective, hedging is one of the tools that we use. We have a five-year hedging program, which gives us a high level of coverage for this year and for next year, and then comes down. The key objective here is to provide us with visibility and certainty on our energy costs and on our energy supply. It's performed well for us in the past, and we continue to believe in it. Perfect. Thank you very much indeed. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you have joined us by the webcast, please do submit a written question. There are no additional questions waiting at this time. I'd like to pass the conference over to Stefan Borgas for any closing remarks. Wonderful. Well, thank you very much. Let me just repeat what happened. Good margins in the first quarter, but significantly lower volumes. Still a satisfying first quarter. Very fuzzy outlook with more skepticism on the volume recovery than previously assumed, and some price pressure on the horizon. Giving us a quite uncertain rest of the year from today's perspective. Third message, good progress on the M&A side with a number of transactions closed and some new ones also signed. Thank you very much for dialing in this morning, for listening to us, and for discussing with us. We look forward to seeing you personally over the course of the next month, and then see you all again together for the half-year update. Bye-bye. Thank you. Bye. Thank you. This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.