27 February 2025

RHI Magnesita N.V.

("RHI Magnesita" or the "Company" or "Group")

2024 Full Year Results

Resilient margin and cash flow performance in very weak market conditions

RHI Magnesita, the leading global supplier of high-grade refractory products, systems and solutions, today announces its final results for the year ended 31 December 2024 ("2024" or the "Year").

1.  Adjusted figures are alternative performance measures "APMs" excluding impairments, amortisation of intangibles and exceptional items to enable an understanding of the underlying performance of the business. Full details are shown in the APM section.

2.  2024 Net debt includes leases of €77 million (2023: €70 million), as required by IFRS 16. For further details see Note 37 of the consolidated financial statements.

3.  Pro Forma Adjusted EBITDA is used to assess financial gearing and includes a full year of Adjusted EBITDA contribution from any businesses acquired during the year.

4.  Recommended final dividend of €1.20 per share, subject to AGM approval on 7 May 2025. Full year dividend of €1.80 per share includes the interim dividend of €0.60 per share paid to shareholders on 26 September 2024.

Operational and strategic highlights

·    Operational efficiency and cost discipline delivered robust margin performance despite historically weak end markets

·    Acquisition of Resco for enterprise value of €391 million completed on 28 January 2025 brings total deal value of M&A completed since December 2021 to €1.2 billion

·    M&A closed in 2023 contributed €77 million to 2024 Adjusted EBITDA, in line with guidance of c.€80 million

·    Customer service KPIs including net promoter score and PIFOT ("Process In Full and On Time") reached record highs

·    Sustainability commitment demonstrated by record recycling rate of 14.2% (2023: 12.6 %), driving annual CO₂ emission savings of 1.8 Mt compared to 2018 levels

·    Outsourcing agreement with Capgemini from December 2024 to deliver shared service centre efficiency gains

Financial highlights

·    Sales volumes 1% lower in the base business, excluding contribution from M&A, with continuing softness in end market demand especially in industrial markets

·    6% lower pricing matched a 6% reduction in cost of goods sold per tonne as pricing was reduced to protect market share

·    Adjusted EBITA of €407 million (2023: €409 million) within guided range of €400-€410 million, supported by strong trading in Q4 and margin of 11.7% (2023: 11.4%), comprising record high refractory margin of 10.9% and continued weak raw material contribution of 0.8%

·    Total net adjustments to EBITA of €125 million (2023: €31 million) driven by costs of Group wide programmes aimed at improving operating efficiency and future profitability through (i) €52 million expenses relating to digital transformation and business process improvements, and (ii) plant network optimisation, including €29 million impairment of Brazil assets in connection with Resco and €25 million closure costs at Mainzlar

·    103% cash conversion supported by €115 million release of working capital, due to efficient management of inventory and receivables as well as deflationary cost development

·    Net debt reduced by €53 million to €1,251 million (2023: €1,304 million) after €58 million of M&A, including prepayments of €44 million for Resco acquisition and €5 million acquisition of Refrattari Trezzi

Outlook and guidance

Refractory demand remains weak, with no recovery in end market demand visible. Falling domestic demand of customer industries in China results in exports of steel and other materials from China, reducing customer output in most world markets and therewith reducing refractory usage. 2024 was a relatively strong year for higher margin non-ferrous metals and glass projects due to the timing of customer investment projects. However, markedly lower capex investments by these industrial customers will reduce demand in 2025, offsetting forecasted growth in steel refractory demand in India, West Asia & Africa. Revenue performance in 2025 year to date and the outlook for H1 is weak, driven by low volumes in steel and pricing pressure in particular in cement and non-ferrous metals.

The Adjusted EBITA performance in 2025 is therefore expected to be modestly above 2024 levels including the acquisition of Resco. Adjusted EBITA is expected to be weighted approximately 45% in the first half and 55% in the second half of the year.

Stefan Borgas, CEO said: "RHI Magnesita has delivered another resilient financial performance despite very weak market demand in most markets around the world. At €407 million, Adjusted EBITA was within our guidance range of €400-€410 million, reflecting the expected strong performance in the fourth quarter for which I offer my congratulations to the team. We continue to prioritise safety above all - this is a core value for us.

We have now completed the Resco transaction, the largest single acquisition we have undertaken since the combination of RHI and Magnesita in 2017. In our US business we can finally fulfil our customers' requests for significantly higher local production. Investments into the enlarged production network are being prepared in detail by our merged team in the USA.

We expect to incur network optimisation expenses in Europe and Brazil as a result of plant footprint adjustments following the Resco acquisition and other M&A transactions completed in 2022 and 2023. Total restructuring costs of €60 million and capital expenditure of €40 million are planned over the period 2025-27. This will deliver €10 million of EBITA benefit in 2025, €20 million in 2026 and €30 million per annum thereafter. Our strategy to grow through acquisition in the fragmented refractory industry, building on our strengths as a technology and sustainability leader, is proving to be a solid approach to generating value for shareholders. We will continue to manage the business conservatively throughout the ongoing downturn in demand whilst delivering on our strategic objectives to generate long term value."

For further enquiries, please contact:

Investors: Chris Bucknall, Head of Investor Relations, +43 699 1870 6490, [email protected]

Media:  Hudson Sandler, +44 020 7796 4133, [email protected]  

Conference call

A presentation for investors and analysts will be held on 27 February 2025 starting at 8:15am UK time (9:15am CET). The presentation will be webcast live and details can be found on: https://ir.rhimagnesita.com/. Alternatively the webcast can be accessed using the following link:

https://www.investis-live.com/rhimagnesita/67adc364242e93000e3ae4ae/hapetf

A replay will be available on the same link shortly after event.

About RHI Magnesita

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 and contractors in 65 main production sites (including raw material sites), 12 recycling facilities and more than 70 sales offices. RHI Magnesita intends to leverage its leadership in terms of revenue, scale, product portfolio and diversified geographic presence to target strategically those countries and regions benefiting from more dynamic economic growth prospects.

The Group is listed within the Equity Shares (Commercial Companies) category ("ESCC") of the Official List of the London Stock Exchange (symbol: RHIM) and is a constituent of the FTSE 250 index, with a secondary listing on the Vienna Stock Exchange (Wiener Börse). For more information please visit: www.rhimagnesita.com

FORWARD LOOKING STATEMENTS

This announcement contains (or may contain) certain forward-looking statements with respect to certain of the Company's current expectations and projections about future events. These statements, which sometimes use words such as "aim", "anticipate", "believe", "intend", "plan", "estimate", "expect" and words of similar meaning, reflect the directors' beliefs and expectations and involve a number of risks, uncertainties and assumptions which could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement. Statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The information contained in this announcement is subject to change without notice and, except as required by applicable law, the Company does not assume any responsibility or obligation to update publicly or review any of the forward-looking statements contained in it and nor does it intend to. You should not place undue reliance on forward looking statements, which apply only as of the date of this announcement. No statement in this announcement is or is intended to be a profit forecast or profit estimate or to imply that the earnings of the Company for the current or future financial years will necessarily match or exceed the historical or published earnings of the Company. As a result of these risks, uncertainties and assumptions, the recipient should not place undue reliance on these forward-looking statements as a prediction of actual results or otherwise. The Company has no obligation or undertaking to update or revise the forward-looking statements contained in this announcement to reflect any change in its expectations or any change in events, conditions, or circumstances on which such statements are based unless required to do so by applicable regulations. The numbers presented throughout this announcement may not sum precisely to the totals provided and percentages may not precisely reflect the absolute figures, due to rounding.

CEO REVIEW

Safety, resilience and progress

Weak end markets continued to impact the business in 2024. The contribution from M&A, operational excellence and network efficiencies supported relatively stable revenues, margins and profitability. We continue to execute on our three strategic pillars of reducing costs, expanding our business model and growing in markets where we are underrepresented.

Health & Safety

Health and safety is our absolute priority and I am saddened to report that two fatal incidents occurred at our production sites in H1 2024. Health and safety improvements have been prioritised at all levels of management; together we are undertaking a complete review of our safety standards, culture, leadership and key serious injury and fatality risks.

During the year we established the RHI Magnesita HELP fund, a registered association in Austria focused on providing immediate financial assistance to individuals and families affected by workplace safety incidents across our global network. I am proud to say that the HELP fund has been funded primarily through voluntary contributions from RHI Magnesita staff, with a matching contribution from the Company. From these sources the HELP fund raised over €800,000 in its first year and payments to qualifying recipients have already commenced.

Operational excellence

Operational excellence underpins our customer offering, our industrial operations and financial performance. The work to drive improvements is translating into tangible benefits in both of these areas. Our main KPIs in 2024 were PIFOT ("Process In Full On Time") and net promoter scores in customer surveys. Both of these achieved record highs in 2024. Other operational indicators and inventory management metrics also showed improvements, contributing to a reduction in working capital and strong cash flow conversion this year.

Our digital transformation is well underway, consisting of a group-wide replacement of the core operating systems (including ERP) alongside a redesign of our core business processes, all focused on improving customer experience. In Q4 we entered into a business process outsourcing agreement with Capgemini which will result in broader career opportunities for our shared service centre colleagues, deliver cost savings and, most importantly, lead to sharper execution of the critical processes which are the foundation of our ability to deliver for our customers more reliably. We will be investing over €100 million into this platform to deliver greater value to customers and more effective integration of acquisitions.

4PRO

R&D and the new '4PRO' service offering are critical to deliver improvements to our customers. Constantly improving world-leading refractory performance is reliant upon continuous adaptation of existing solutions according to customer needs and the development of new technologies that will deliver the next iteration of product performance improvements, and efficiency gains in our own manufacturing processes. I am pleased to report strong growth in sales of robotics solutions for automated lining repairs in 2024 and exciting new developments in production techniques with high potential for sustainability, cost and performance improvements. Our offering in this area has been consolidated under a central function offering Advanced Technologies to ensure that we can move our customers up the margin curve to higher value added products and services.

During 2024 we expanded our solutions contract offering under the 4PRO brand. 4PRO represents a holistic approach to high-performance refractory applications, based on closer collaboration with customers seeking continuous improvement in production techniques as well as the pursuit of sustainability objectives and circular economy initiatives.

Strategy update

Our M&A-led growth strategy delivered strong results despite headwinds from weak market conditions. The six acquisitions completed in 2023 contributed Adjusted EBITDA of €77 million, in line with guidance of c.€80 million. During 2024 we completed the acquisition of Refrattari Trezzi, expanding our recycling activities in Europe.

In the US, we reached agreement on the acquisition of Resco Group in April 2024 and successfully completed the transaction on 28 January 2025, for a final deal value of €391 million. This acquisition is a major step forward for our North American business. Resco's strengths in the petrochemical, cement and aluminium industries are complementary to our existing business and will provide opportunities in these market segment worldwide by leveraging RHI Magnesita's global footprint. The much larger US plant footprint will allow us to accelerate our 'local for local' production strategy, onshoring significant manufacturing activity into the US and shortening supply chains. Resco is the largest acquisition we have undertaken since the combination of RHI and Magnesita in 2017 and I am excited about the prospects for our future growth in this dynamic and valuable refractory market. The new team is fired-up!

We remain committed to our strategy to allocate capital to growth via M&A. We note that there have been other transactions in the sector in 2024, with Shinagawa's acquisition of Gouda Refractories Group and Vesuvius PLC's purchase of Piromet in Türkiye. During 2025 our focus will be primarily on network optimisation, the integration of recent acquisitions and reducing net debt, with any additional M&A likely to be limited in scope.

We expect to incur network optimisation expenses in Europe and Brazil as a result of plant footprint adjustments following the Resco acquisition and other M&A transactions completed in 2022 and 2023. Total restructuring costs in the base business of €60 million and associated capital expenditure of €40 million are planned over the period 2025-27, to deliver €10 million of EBITA benefit in 2025, €20 million in 2026 and €30 million per annum thereafter.

Our people

Our greatest strength lies in our people. Every contribution matters and strengthens our collective success, increasingly also from colleagues joining RHI Magnesita as a result of M&A. We continue to learn more about our industry, identifying new opportunities and benefitting from the expertise of talented teams and individuals as we integrate acquired businesses.

Sustainability

Sustainability means the protection and preservation of resources for future generations. Our Company traces its origins back to 1834. Today, as the leading global supplier of refractories, which are essential for the creation of basic building materials for modern life, we can be certain that our industry will remain essential for many years to come. Refractory production is CO₂ intensive and RHI Magnesita has pioneered new technologies for reducing CO₂ emissions. Our journey to recycle secondary raw materials increasingly requires the development of cutting edge technologies, which are now in industrial testing. In 2025 we will be piloting a CO₂ re-mineralisation technology together with MCi Carbon. Further progress requires engagement with suppliers to adopt low-carbon energy sources.

Our customers are amongst the highest emitters of CO₂ globally and are undergoing their own transformation to decarbonise. When developing new production technologies they are increasingly turning to RHI Magnesita as their preferred partner for refractory solutions. We have now won five major contract awards for green steel projects; this will be an important source of high value-add business going forwards.

RHI Magnesita has produced sustainability statements according to ESRS for the 2024 financial year. Having completed a lengthy double materiality assessment and complied in full with the disclosure requirements, the Group is of the view that the outcome of the ESRS process is not beneficial to stakeholders. ESRS places an unreasonable burden in terms of financial cost and other corporate resources which cannot be deployed to actual sustainability improvements. RHI Magnesita urges relevant regulators and legislators to look again at the way that ESRS has been implemented in practice to allow companies to redirect resources from reporting to action. We note that the European Commission has proposed a revision to ESRS through its Omnibus Directive and we hope for improvement.

Financial performance

Our financial performance was resilient considering the challenging end market conditions, which saw a decrease in sales volumes of 1% in the base business and 6% lower pricing. The contribution from M&A and operational efficiency delivered stable revenues and Adjusted EBITA of €407 million (2023: €409 million) with margin increasing to 11.7% (2023: 11.4%). It is a sign of our strong operational performance that we were able to maintain margin in a falling price environment, despite lower vertical integration contribution and the additional burden from high fixed cost under-absorption due to shrinking volumes.

Adjusted EPS increased to €5.32 (2023: €4.98) and cash generation was strong at 103%, contributing to a reduction in net debt of €53 million to €1,251 million and gearing of 2.3x (2023: 2.3x), in line with our target range.

Outlook

The short-term outlook for our industry remains weak and we must be ready to respond with fast decision making. China's necessary and clearly communicated economic transition is the most significant factor affecting industrial markets worldwide including refractory markets. The long term outlook for future-oriented commodities and materials such as copper, aluminium and glass remains strong. However, project demand in the industrial segment is expected to decline in the near term.

Should any recovery in refractory demand occur, RHI Magnesita is well positioned to benefit due to its high levels of operational gearing and vertical integration capability. During this extended downturn, we have greatly increased our customer base through the acquisition of 12 businesses with a total deal value of €1.2 billion and we are seeing real benefits from synergies as these acquisitions are integrated into our network. Against this backdrop, we continue to believe that adaptability, discipline and innovation will deliver long-term success.

FINANCIAL REVIEW

Reporting approach

The Company uses a number of alternative performance measures ("APMs") in addition to measures reported in accordance with IFRS Accounting Standards as adopted by the European Union ("IFRS"), which reflect the way in which the Board and the Executive Management Team assesses the underlying performance of the business. The Group's results are presented on an "adjusted" basis, using APMs that are not defined or specified under the requirements of IFRS, but are derived from the IFRS financial statements. The APMs are used to improve the comparability of information between reporting periods and to address investors' requirements for clarity and transparency of the Group's underlying financial performance. The APMs are used internally in the management of our business performance, budgeting and forecasting. A reconciliation of key metrics to the reported financials is presented in the section titled APMs.

All references to comparative 2023 numbers in this review are on a reported basis, unless stated otherwise. Figures presented at constant currency represent 2023 translated numbers against average 2024 exchange rates as disclosed in Note 3 to the Consolidated Financial Statements. All reported volume changes year-on-year are excluding mineral sales.

Revenue

The Group recorded revenues of €3,487 million, a 1% decrease from 2023 revenues of €3,529 million on a constant currency basis. This was primarily driven by 6% lower average pricing and a 1% decline in base business sales volumes, offset by 6% growth in revenues from acquisitions completed in 2023.

On a reported basis, the decrease in revenue was 2% (2023: €3,572 million), reflecting the depreciation of certain currencies against the euro (Chinese yuan, Indian rupee, Brazilian real, Turkish lira, Canadian dollar) which reduced revenue generated from those geographies in euro terms. The foreign exchange impact on revenues was €43 million.

Against a backdrop of weakness in the key end markets of construction and automotive, steel revenues decreased to €2,373 million, representing a 4% decline on a reported basis (2023: €2,461 million) and a 3% decline in constant currency terms (2023: €2,434 million), accounting for 68% of Group revenue in 2024. The primary driver behind the decrease in steel revenues for the financial year 2024 was pricing. Soft end market demand also impacted sales volumes in North and South America. Exports of surplus steel from China negatively affected pricing and refractory demand from domestic steel producers in most geographies, in particular in India.

Industrial revenues were stable at €1,114 million (2023: €1,111 million) and increased by 2% in constant currency terms (2023: €1,094 million), outperforming steel revenue growth, supported by M&A. Cement & Lime revenues decreased by 12% to €376 million (2023: €424 million), while Non-ferrous metal revenues declined by 12% to €247 million (2023: €281 million). The primary factors contributing to the decline in cement, lime, and non-ferrous metals were weaker end markets in China and South America. Revenues in the glass business increased by 19% to €217 million (2023: €182 million), mainly driven by a strong contribution from 2023 M&A. Revenues from industrial applications increased by 46% to €210 million (2023: €143 million), also due to M&A.

During 2024 the Group re-assessed its criteria for the timing of revenue recognition for shipments delivered by sea freight with third-party carriers. From 2024, control of refractory products is determined to transfer when the carrier issues shipping documents that allows the customer to redirect or otherwise control the shipped refractory products. Group revenue in 2024 increased by €42 million (and gross profit by €10 million) as a result of this revised accounting policy. For further details refer to Note 3 of the Financial Statements, 'Significant Accounting Policies, Judgements and Estimates'.

Cost of goods sold

Cost of goods sold decreased by 3% to €2,639 million from €2,715 million in 2023, primarily due to a reduction in raw material costs. The cost of purchased raw materials fell by 7% to €1,058 million (2023: €1,139 million). Plant-related labour costs increased by 16% in 2024, rising from €452 million to €523 million, mainly due to acquisitions and salary increases to offset inflation. After a period of disruption and high inflation in 2023, freight and energy costs decreased by 11% and 10%, respectively, in 2024 as both markets stabilised. Spending on general supplies, including pallets, packaging, and spare parts were broadly flat at €169 million (2023: €170 million).

During 2024 the Group re-assessed its criteria for inventory provisioning in light of sustained improvements in its inventory management. Re-valuation of stock previously written off, which is now deemed to be saleable at market price, resulted in an €11 million reduction in cost of goods sold. For further details refer to Note 3 of the Financial Statements, 'Significant Accounting Policies, Judgements and Estimates'.

Raw material prices

Refractory raw material prices decreased in 2024 compared to 2023, with the price of high-grade dead burned magnesia ("DBM") from China decreasing by 6% and by 1% on average for medium-grade DBM from China. Lower raw material prices usually result in lower finished goods pricing for refractories worldwide, as production costs for non-vertically integrated competitors are reduced. The main driver for the decrease in DBM pricing was oversupply, combined with lower customer demand for refractories globally. Fused alumina, a raw material that the Group does not produce and which constitutes only a small portion of the Group's overall raw material requirements, experienced a significant price increase towards the end of 2024, in line with the increase in alumina prices in the fourth quarter.

Gross profit

The Group recorded gross profit of €848 million (2023: €857 million), a decrease of 1% on a reported basis and 4% in constant currency terms. Gross margins increased by 30bps to 24.3% (2023: 24.0%). Although refractory pricing in the base business reduced by 8%, input costs reduced further, primarily due to lower prices for externally purchased raw materials as well as lower energy and freight costs.

Selling, general and administrative expenses ("SG&A"), were €435 million, a 3% decrease compared to the previous reporting period (2023: €449 million), attributable to stringent cost management, lower personnel expenses and reduced hiring levels.

Depreciation increased by 2% to €136 million (2023: €134 million) and in 2025 is expected to be around €150 million including Resco.

Amortisation of intangible assets amounted to €39 million in 2024 (2023: €44 million) and is expected to be approximately €35 million in 2025, subject to the purchase price allocation exercise relating to the acquisition of Resco Group.

Adjusted EBITDA

The Group recorded Adjusted EBITDA of €543 million, flat compared to the prior year (2023: €543 million). Adjusted EBITDA margin increased to 15.6% (2023: 15.2%) an increase of 40bps, reflecting higher gross margins and a decrease in SG&A expenses. Adjusted EBITDA margin decreased by 60bps on a constant currency basis.

Adjusted EBITA

Adjusted EBITA remained broadly flat at €407 million, compared to €409 million in 2023 on a reported basis, as the contribution from M&A and lower input costs offset weaker pricing and mix effects. Adjusted EBITA from businesses acquired in 2023 was €65 million (or €77 million of Adjusted EBITDA), broadly in line with guidance.

Adjusted EBITA margin increased to 11.7% (2023: 11.4%) as M&A contributions, supported by lower input costs and SG&A reduction.

Vertical integration contributed a record low 0.8ppts of the Group's overall Adjusted EBITA margin of 11.7%. Whilst this contribution is lower than the 1.7ppts contribution in 2023, primarily due to the decline in the market prices for refractory raw materials, the contribution was still positive meaning that the Group is able to source its own raw materials more cheaply than buying in the market. Lower raw material prices negatively impact the calculation of the contribution from the Group's raw material assets, which is based on the theoretical cost of acquiring those raw materials in the open market.

The Group's refractory business contributed a historic high of 10.9 ppts towards the total Adjusted EBITA margin of 11.7%, an increase of 120 bps compared to the 9.7 ppts contribution in 2023. Refractory margin was supported by lower input costs, the benefits of M&A synergies and structural cost reductions resulting from the Group's strategic cost-saving initiatives.

Adjusted EBITA and Adjusted EBITDA both exclude €125 million of net expenses from adjusted performance (2023: €31 million), including Software as a Service costs (largely on new SAP ERP), Mainzlar Plant closure costs and impairment of Hexa Contagem Project, consequent on Resco acquisition as set out in 'Items excluded from adjusted performance' below.

The Adjusted EBITA performance in 2025 is expected to be modestly above 2024 levels including the acquisition of Resco.

Items excluded from adjusted performance

In order to accurately assess the underlying performance of the business, the Group excludes certain items from Adjusted EBITA. Sizeable charges in the year have been driven by Group wide programmes aimed at improving operating efficiency and future profitability through business process improvements and plant network optimisation.

In 2024 the total net adjustments to EBITA amount to €125 million, including:

•    €14 million of amortisation of onerous contracts imposed by EU as part of the merger with Magnesita.

•    €9 million related to the disposal of the Dashiquiao plant in China.

•    €6 million related to receivables previously written down to zero.

•    €3 million of other miscellaneous income.

•    €(52) million of expenditure on digital architecture, previously guided as capital expenditure. Spending on Software as a Service is classified as an expense in IFRS and cannot be capitalised as would normally be the case with capital expenditure.  The Group incurred charges of €39 million on the ERP upgrade in 2024 and €7 million reclassified from 2023 and €6 million on logistics and supply chain planning software upgrades. Investments in digital architecture are expected to deliver value through cost savings and margin improvement, planning and operating efficiencies and improved working capital management.

•    €(39) million amortisation in intangible assets arising at the time of the merger with Magnesita.

•      €(29) million non-cash impairment of fixed assets in Brazil, where the second stage of the Hexa Contagem expansion project will not be advanced following the acquisition of Resco and intended transfer of production capacity to the US. The impact of this impairment was considered as part of the business case for the acquisition of Resco.

•    €(25) million provision for restructuring expenses at the Mainzlar, Germany plant, to be paid in 2025 following the announced closure of the plant in line with the Group's original Production Optimisation Plan and after an assessment of surplus production capacity in Europe.

•    €(12) million of expenses related to investments in and losses from the disposal of special Argentinian government bonds.

Net finance expenses

Net finance expenses, which includes interest payable on borrowings net of interest income on cash balances, gains and losses relating to foreign exchange, pension expenses, present value adjustments, factoring costs and non-controlling interest expenses, decreased to €42 million (2023: €100 million).

Net interest expenses remained stable at €39 million (2023: €38 million) comprising interest expenses on borrowings of €61 million (2023: €58 million) and €22 million of interest income on cash balances on deposit (2023: €20 million).

Foreign exchange gains of €11 million were recorded in 2024 compared to foreign exchange related losses of €30 million in 2023, mainly driven by US dollar strength in Q4, weakness in the Brazilian Real and Mexican Peso and a €(1) million hyperinflation adjustment related to Argentina (2023: €3 million).

Other net financial expenses amounted to €14 million (2023: €32 million) including factoring costs of €10 million (2023: €12 million), pension charges of €12 million (2023: €12 million) and present value adjustments of €7 million (2023: €8 million). Net financial expenses in 2024 also benefitted from a non-cash gain of €22 million due to the revaluation of the Group's obligation to purchase the remaining stakes it does not already own in Jinan New Emei and Chongqing.

Guidance for net interest expenses including Resco in 2025 is €60 million. Guidance for other adjusted net financial expenses is €30 million, resulting in €90 million of adjusted net finance expenses guided for 2025.

Taxation

Total tax for 2024 in the income statement amounted to €46 million (2023: €62 million), representing a 23% reported effective tax rate (2023: 27%).

Reported profit before tax amounted to €200 million (2023: €233 million). Adjusted profit before tax amounted to €347 million (2023: €317 million), with an adjusted effective tax rate of 24% (2023: 24%). Adjusted items include non-taxable IFRS revenues related to put option valuation and sale of fixed assets in China, as well as non-deductible legal restructuring costs.

The adjusted effective tax rate guidance is between 23-25% for 2025.

Profit after tax

On a reported basis the Group recorded profit after tax of €154 million (2023: €171 million), profit attributable to shareholders of €142 million (2023: €165 million) and earnings per share of €3.01 (2023: €3.50).

Adjusted profit after tax increased to €263 million (2023: €241 million) and Adjusted earnings per share was €5.32 (2023: €4.98). A full reconciliation of EBITA to EPS and Adjusted EBITA to Adjusted EPS can be found in the table below. Items excluded from Adjusted Profit after tax included €17 million of net financial expenses mainly arising from the revaluation of the Group's obligation to purchase the remaining stakes it does not already own in Jinan New Emei and Chongqing.

Profit attributable to shareholders is stated after deducting non-controlling interests of €12 million (2023: €6 million) mainly arising from RHI Magnesita India Ltd., in which the Group holds a stake of 56%.

Guidance for non-controlling interest expense in 2025 is approximately €15 million.

Financial guidance and outlook

Refractory demand remains weak, with no recovery in end market demand visible. Falling domestic demand of customer industries in China results in exports of steel and other materials from China, reducing customer output in most world markets and therewith reducing refractory usage. 2024 was a relatively strong year for higher margin non-ferrous metals and glass projects due to the timing of customer investment projects. However, markedly lower capex investments by these industrial customers will reduce demand in 2025, offsetting forecasted growth in steel refractory demand in India, West Asia & Africa. Revenue performance in 2025 year to date and the outlook for H1 is weak, driven by low volumes in steel and pricing pressure in particular in cement and non-ferrous metals.

The Adjusted EBITA performance in 2025 is therefore expected to be modestly above 2024 levels including the acquisition of Resco. Adjusted EBITA is expected to be weighted approximately 45% in the first half and 55% in the second half of the year.

An increasing trade tariff environment may protect customers in certain jurisdictions and benefit refractory producers with local for local production in the short term but risks a medium-term negative impact on global trade.

Sales volumes in the base business are expected to remain flat. Adjusted EBITA margin is guided to be stable at approximately 11.5%.

Gearing will rise in the short term due to the completion of the Resco transaction but is expected to reduce back within the targeted range of c. 2.0-2.5x Pro Forma Adjusted EBITDA by the end of 2025. Capital expenditure on fixed assets will be reduced to €145 million (below depreciation of approximately €150 million), in favour of continuing to invest in our digital transformation, which will incur costs of approximately €35 million per year over the three-year period 2024-26. Capex associated with the integration of Resco is expected to be €30 million, spread over the next two financial years.

The Group expects to incur network optimisation expenses in Europe and Brazil as a result of plant footprint adjustments following the Resco acquisition and other M&A transactions completed in 2022 and 2023. Total restructuring costs in the base business of €60 million and associated capital expenditure of €40 million are planned over the period 2025-27, to deliver €10 million of EBITA benefit in 2025, €20 million in 2026 and €30 million per annum thereafter.

Working capital

Working capital decreased to €865 million (31 December 2023: €980 million) driven by inventory reduction, lower accounts receivable and higher payables.

Working capital intensity, measured as a percentage of the last three months' annualised revenue, decreased to 23.4% (31 December 2023: 24.4%). Accounts receivable intensity was 12.9% (31 December 2023: 11.9%), accounts payable intensity was 15.5% (31 December 2023: 12.4%) and inventory intensity increased to 26.1% (31 December 2023: 24.9%).

Inventories decreased to €962 million (31 December 2023: €1001 million), due to lower input costs, reduced inventory volumes and inventory improvement measure implemented at plants acquired in 2023.

Accounts receivable decreased slightly to €474 million (31 December 2023: €477 million), reflecting lower pricing. Accounts receivable is calculated as trade receivables excluding factoring plus contract assets less contract liabilities and downpayments received, and a full reconciliation can be found in the APMs section. 

Accounts payable increased to €572 million (31 December 2023: €498 million) due to extended payment terms and higher value raw material purchases in the second half.

Working capital financing, used to provide low-cost liquidity and support the Group's commercial offering to customers, was €289 million on 31 December 2024 (31 December 2023: €298 million), comprising €237 million of accounts receivable financing (factoring) and €53 million of accounts payable financing (forfaiting). Working capital financing levels vary according to business activity, and the Board has set an internal limit of €320 million on its use.

Working capital intensity is targeted to be approximately 24% in 2025.

Other assets and liabilities

Cash flows from other assets and liabilities amounted to €(93) million (2023: €(12) million) comprising, indirect and other tax rebates of €4 million (2023: € 14 million), employee pension pay outs and pension provision movements of €(22) million (2023: €(19) million), employee variable remuneration and employee-related provisions of €(24) million (2023: €29 million) and other cash flows of €(51) million (2023: € (36) million). The €53 million difference in variable remuneration and employee related provisions is due to a relatively high staff bonus payout in 2024 relating to 2023 performance, compared to a lower bonus payout in 2023.

Capital expenditure

The Group incurred €145 million of capital expenditure (2023: €180 million), of which €65 million was maintenance related (2023: €86million), €68 million was expansionary capital expenditure (2023: €74 million) and €12 million of maintenance and integration capital expenditure was incurred at newly acquired businesses (2023: €19 million).

Capital expenditure in 2025 is expected to be around €145 million. Maintenance capital expenditure in the base business is expected to be approximately €75 million, with expansionary capital expenditure of €55 million and maintenance and integration capital expenditure in newly acquired businesses of €15 million. Spending of approximately €35 million on digital infrastructure projects will be expensed in accordance with IFRS and will not be capitalised.

Acquisitions

In April 2024 the Group announced its intention to acquire Resco Group, a US based producer of alumina monolithics and wide range of basic and non-basic refractories, for an enterprise value of up to $430 million. The transaction completed on 28 January 2025 for an enterprise value of $410 million, or c.€391 million.  

In June 2024 the Group announced the €5 million acquisition of Refrattari Trezzi, a recycling specialist in Italy, expanding its recycling footprint in Europe. Refrattari Trezzi has been combined into the Group's existing MIRECO joint venture, increasing the Group's share in MIRECO to 55% (2023: 51%).

The Group incurred €58 million of cash outflow relating to acquisitions in 2024, including €44 million of prepayments for the intended acquisition of Resco, €5 million for the acquisition of Refrattari Trezzi, €3 million for the purchase of the remaining 49% stake in Seven Refractories Cyprus not already owned by the Group, a €3 million deferred payment for Jinan New Emei and €3 million purchase of additional stake in P-D Refractories.

Cash flow

Adjusted operating cash flow increased to €419 million (2023: €418 million) representing cash flow conversion from Adjusted EBITA 103% (2023: 102%), supported by the €115 million release of working capital.

Free cash flow decreased to €225 million (2023: €258 million), mainly due to higher interest and restructuring expenses.

Cash income tax payments increased to €69 million (2023: €60 million) and net interest paid also increased to €71 million (2023: €56 million), as a result of higher average interest rates and borrowings.

Cash dividends paid in 2024 amounted to €87million (2023: €77 million) and the cash change in Net debt was an increase of €80 million compared to a decrease of €41 million in 2023.

Financial position

Net debt decreased to €1,251 million, comprising total debt of €1,750 million, leases of €77 million and cash and cash equivalents of €576 million.

Total leases of €77 million (2023: €70 million) are included in the Group's Net debt position as required by IFRS 16.

The Group's gearing at the year-end was 2.3x Net debt to Pro Forma Adjusted EBITDA (31 December 2023: 2.3x).

Available liquidity at 31 December 2024 was €1,376 million, comprising undrawn committed facilities of €800 million and cash and cash equivalents of €576 million.

Out of the total gross debt of €1,750 million, 98% is denominated in euro. The floating to fixed ratio of the gross debt is 27% floating to 73% fixed and the weighted average cost of debt as of 31 December 2024 was 2.96%, including swaps.

The Group will seek to maintain the ratio of Net debt to Pro Forma Adjusted EBITDA within the guided range of 2.0-2.5x or above for periods of compelling M&A.

Return on invested capital

ROIC is used to assess the Group's efficiency in executing its capital allocation strategy, which is aimed at enabling organic growth, disciplined M&A and shareholder returns. ROIC is an APM, see the APM section for full details of how ROIC reconciles to IFRS metrics.

Under the APM definition, ROIC was 9.8% in 2024 (2023: 10.7%) based on Average Invested Capital of €3,043 million (2023: €2,854 million) and NOPAT of €298 million (2023: €305 million). ROIC generated by the Group's raw material assets was 3.5% (2023: 8.9%) and ROIC from the refractory business was 11.0% (2023: 11.0%). The main drivers of the decrease in ROIC were the increase in Average Invested Capital to €3,043 million (2023: €2,854 million) as a result of M&A transactions completed in 2023 and the reduction in contribution from the Raw material assets, due to low market prices for refractory raw materials. The Group intends to carry out a network optimisation over the period 2025-27 following M&A completed in the previous three years, reducing invested capital.

Returns to shareholders

The Board's capital allocation policy remains to support the long-term Group strategy, providing flexibility for both organic and inorganic investment opportunities and delivering attractive shareholder returns over the medium term. These opportunities are assessed against a framework of strategic fit, risk profile, rates of return, synergy potential and balance sheet strength.

In 2024, the Group invested €68 million in expansionary capital expenditure in the base business and €12 million in the integration of newly acquired businesses. Maintenance capital expenditure was €65 million. A further €391 million was agreed to be allocated to the acquisition of Resco.

Following the strong profitability, cash generation and strategic progress delivered in 2024, the Board has recommended a final dividend of €1.20 per share for the full financial year, and €85 million in aggregate. This represents a dividend cover of 3.0x Adjusted earnings per share. Subject to approval at the AGM scheduled for 7 May 2025, the final dividend will be payable on 12 June 2025 to shareholders on the register at the close of trading on 23 May 2025. The ex-dividend date will be 22 May 2025. Together with the interim dividend of €0.60 per share paid on 26 September 2024, the recommended final dividend represents a full year dividend of €1.80 per share in respect of the 2024 financial year.

The Board's dividend policy remains to target a dividend cover of below 3.0x adjusted earnings over the medium term. Dividends will be paid on a semi-annual basis with one third of the prior year's full year dividend being paid at the interim.

OPERATIONAL REVIEW

Steel overview

Supplying refractory products and services to the steel industry accounted for 68% of RHI Magnesita's revenues in 2024 and the Group retained its leading position globally with a c.13% market share, or c.20% excluding China and East Asia. Refractory products are required to protect steel making equipment from extremely high temperatures of up to 1,800°C, chemical corrosion and abrasion. Refractory product applications include iron making (blast furnace or direct reduction), primary steel-making (basic oxygen furnace or electric arc furnace) as well as ingot and continuous casting. New applications are under development for production of green steel and the Group was awarded five contracts for such projects in 2024. RHI Magnesita offers a complete range of products and solutions for the steel making process. The lifespan of refractory products in the steel making process can range from hours to months depending on the application, for example a slide gate is a consumable item that may need to be replaced every four hours whilst the lining of a primary steel making furnace could require re-lining at six month intervals. Refractory consumption in steel making is therefore classified as an operating expense by steel producers and usually accounts for around 2-3% of operating costs, on average.

Steel segment revenues decreased by 4% to €2,373 million (2023: €2,461 million) and by 3% in constant currency terms (2023: €2,434 million) as a 3% increase in sales volumes supported by M&A was offset by 6% lower pricing. Excluding M&A, the base business increased shipped volumes by 1%, a strong performance compared to World Steel Association data which indicates a decrease of 0.9% in global steel output in 2024.

Global steel demand decreased in the key markets of China and North America in 2024 but grew in India, West Asia & Africa, Europe and South America. Domestic production in some markets was displaced by exports from China where domestic consumption of steel reduced by approximately 6% and production by approximately 3%. The approximate 3% gap represents the increase in exports, which increased from approximately 90 million tons in 2023 to approximately 120 million tons in 2024.

Industrial overview

RHI Magnesita is a leading supplier of refractory products and services to customers in the cement and lime, non-ferrous metals, glass, energy, environmental and chemicals industries. These Industrial customers accounted for 32% of Group revenues in 2024 and have longer replacement cycles compared to Steel customers, ranging from one to 20 years. Refractories are classified as capital expenditure by Industrial customers and represent between 0.2% and 1.5% of total costs over the life cycle of a facility. RHI Magnesita has a c.25% market share globally in cement refractories, c.20% market share in non-ferrous metals applications, c.19% in the glass industry and c.5% in other industrial applications such as energy, environment, chemicals and foundry.

Industrial revenues were stable at €1,114 million (2023: €1,111 million) and increased by 2% in constant currency terms, with shipped volumes increasing by 11%, supported by M&A, whilst average pricing reduced by 9%.

Cement & Lime revenues reduced by 12% to €376 million (2023: €424 million), representing 11% of Group revenues in 2024 as pricing reduced by 7% and sales volumes reduced by 4%. Strong growth in sales volumes in Process Industries of 101% and Glass of 19%, mainly resulting from M&A, were offset by the 4% decline in the larger Cement & Lime segment and 9% lower Non-ferrous metals sales. The Non-ferrous metal business remained the highest margin segment for the Group, with a gross margin of 44% in 2024 (2023: 42%).

Minerals

The Group sourced 42% of its raw material needs by value, in line with its vertical integration strategy. Raw materials not utilised internally are sold in the open market and reported under Minerals within the Industrial segment, generating revenues of €65 million in 2024 (2023: €80 million). Mineral sales volumes declined by 11%, coupled with lower market prices for raw materials, leading to a reduction in revenue.

Regional business units

In 2023 RHI Magnesita established an operational governance structure consisting of five regional business units, which continued in 2024. Managing the business through a regional structure enables the Group to serve its customers better through faster local decision making and improved accountability, supporting our local for local production strategy.

Europe, CIS & Türkiye

Europe, CIS & Türkiye revenues increased by 3% to €926 million (2023: €894 million), or by 5% in constant currency terms. Average price per tonne declined by 11% due to end market weakness in construction and automotive and a changing product mix, but this was more than offset by a 17% increase in shipped volumes due to the full year contribution from M&A completed in 2023. Excluding M&A, base business sales volumes reduced by 2% and price per tonne was 14% lower, with revenues reducing by 15%.

Gross profit increased by 10% to €195 million (2023: €177 million), as higher gross margins of 21.1% (2023: 19.8%) were supported by the contribution from higher margin businesses acquired in 2023 and a reduction in the key input costs of energy and purchased raw materials. In the second half of the year, a significant increase in alumina prices drove up costs for acquiring alumina based refractory raw materials and disruption in the global graphite supply chain also resulted in cost increases.

Steel revenues decreased by 1% in constant currency terms on 7% higher shipped volumes, as M&A delivered volume growth despite subdued customer demand. Steel production in the European Union increased by 2.6% and in Türkiye by 9.4% according to WSA data, reflecting recovery from a low base in Europe and strong growth and relative stability in Türkiye compared to the surrounding region. Whilst steel output in the European Union increased year on year, producers continue to face a combination of deteriorating prices, rising costs and low demand relative to historic levels. These factors led some customers to reduce capital expenditure in favour of running repairs and to increase sourcing of cheaper imported refractories. The challenging market conditions for steel customers also resulted in the delay of some green steel projects, but these were temporary postponements and not cancellations.

Industrial segment sales volumes increased by 40% and revenues by 15% in constant currency terms, supported by a full year contribution from process industries focused P-D Refractories. Whilst volumes in Cement & Lime and Non-ferrous metals reduced by 15% and 23% respectively, this was more than offset by a 49% increase in Glass sales volumes and 216% increase in Industrial applications, mainly due to M&A. Waste to energy is a strategic growth focus within Industrial applications where the Group was able to increase market share in both maintenance and greenfield project support. Sales of digital products increased, including laser technologies for refractory evaluation at customer sites. Such products are already widely in use in the Cement & Lime segment and are now gaining traction with Non-ferrous metals and Industrial applications customers.

The Europe and Türkiye region has benefited from significant inorganic growth in recent years with the addition of MIRECO, Sörmas, Dalmia GSB, Seven Refractories and PD Refractories in 2022 and 2023. Regional leadership have been focused on the integration of each of these businesses and the achievement of synergy targets. MIRECO delivered strong growth in recycling rates, Sörmas prepared for the initial adoption of the Group's new ERP system and the Bochum plant previously owned by Dalmia GSB completed necessary legal, financial and operational integration processes during the year. Certain Seven Refractories businesses now form RHI Magnesita's new Alumina Monolithics business unit and synergy realisation is on track, despite low demand conditions. Network optimisation in Europe is expected to be required to fully realise the synergy benefits of M&A completed in the last three years.

The Mainzlar plant in Germany will be closed in 2025 and the Group may consider further plant footprint optimisation in Europe following recent M&A.

North America

Revenues in North America decreased by 5% to €852 million (2023: €894 million) or by 4% in constant currency terms, due to a 1% reduction in sales volumes and 3% lower average pricing.

Despite lower revenues, the region grew Gross profit by 5% to €263million (2023: €250 million) as margins were successfully increased to 30.9% (2023: 27.9%) due to effective cost management and resilient pricing in Cement & Lime and Non-ferrous metals.

Steel volumes reduced 2% and pricing by 3% resulting in 4% lower revenues, whilst gross margin expanded to 30.7% (2023: 28.3%). Utilisation rates in US steel mills remained low, at approximately 76% in 2024 and reducing below this level at the end of the year following the US election in November. North America steel output according to WSA data declined by 4.2% in 2024 whilst RHI Magnesita estimates that output from its customers in the region reduced by 6%, compared to the 2% decline in sales volumes. The Group continues to build out its product offering and secured agreements with three additional tap hole clay customers during the year. In the electric arc furnace segment, a contract for refractory supply including an automated robotic solution for gunning repair was awarded in Canada, by a large customer converting to EAF from BOF steel production. Other robotics contracts were awarded in the US, including multiple new tundish cage solutions.

Industrial sales volumes saw greater variation across segments with a weak Cement & Lime result more than offset by strong trading in Glass and Industrial applications, resulting in an overall increase in sales volumes of 1%. Higher pricing in Non-ferrous metals and reduced input costs were the key drivers of the increase in Industrial Gross margin to 31.7% (2023: 27.0%). Cement and concrete production in the US reduced by 8% and was the main driver of a 13% reduction in Cement & Lime refractory sales volumes. The Group continued to expand its offering to a broader range of customers and was awarded a contract for aluminium furnace design and refractory supply, the first of its kind in the region.

Inventory management was a key focus to minimise working capital and finished goods inventories were successfully reduced despite falling customer demand over the year. PIFOT and net promoter scores in customer surveys remained close to all-time highs.

The integration of Seven Refractories' US sites is largely complete, with a new tap hole clay line now commissioned at Plant Huron. RHI Magnesita agreed to acquire US based Resco in April 2024 and the acquisition completed in January 2025. The integration of Resco into the Group's North American business and the realisation of planned synergies will now be the primary focus for regional leadership.

The US increased its recycling rate to a new high of 14.2% (2023: 8.3%). New health and safety reporting structures and a 'stop work' system were implemented at the Pevely and York plants.

India, West Asia & Africa

Revenues in the India, West Asia & Africa region decreased by 2% to €744 million (2023: €762 million) or by 2% in constant currency, as a 4% increase in sales volumes was offset by a 6% decline in average pricing due to increased competition and product mix changes. Base business sales volumes, excluding the full year contribution from 2023 M&A, increased by 2% with similar pricing pressure and mix impacts.

Gross profit reduced by 17% to €155 million (2023: €187 million) as gross margins reduced to 20.8% (2023: 24.5%), caused by the 6% reduction in average pricing on relatively stable unit costs.

Steel revenues decreased by 7% to €541 million (2023: €582 million) with a 1% increase in sales volumes offset by an 8% decrease in prices, as the full effect of pricing pressure fell on the Steel segment whilst Industrial pricing was stable. The main cause of pricing pressure in Steel was the impact of surplus low-priced imports from China entering the Indian market due to weakening demand in China. Steel gross margins compressed to 19.2% from 22.8% in 2023, mostly as a result of competitive pricing pressure, which outweighed the benefit of a 4% improvement in unit costs.

Domestic steel production in India grew by 6% in 2024 according to WSA data, however imports from China and Vietnam increased to partially satisfy growth in local demand. In India the Group remains well positioned to benefit from new DRI, blast furnace and coke oven projects under construction and customers have reacted positively to the growth strategy in iron making, DRI furnace refractories and pellet production. In the Middle East some new steel projects were postponed due to current unfavourable market conditions but this was offset by new business growth in induction and reheating furnaces in Iraq, Saudi Arabia, Libya and Africa. The Group secured three new solutions contracts in India and three in the Middle East, alongside two contract renewals outside India.

Industrial revenues increased by 13% to €203 million (2023: €180 million) reflecting a 13% increase in sales volumes on stable pricing. The main driver of the increase in revenues was the Cement & Lime segment, where sales volumes increased by 15% and revenue by 17%, with new demand coming from greenfield and brownfield cement projects in India and North Africa. Non-ferrous metals, the second largest segment in the region by revenue and gross profits, saw a 22% decrease in sales volumes offset by 18% higher pricing, translating to an overall 9% decrease in revenues.

Industrial gross margin decreased to 24.9% (2023: 30.3%) as costs increased by 7%, mainly due to high prices for alumina-based raw materials and a change in product mix towards alumina-based refractory sales. Margins improved in Non-ferrous metals and Glass but declined in Cement & Lime and Industrial Applications.

Capacity utilisation remained at a low level, with space to grow in line with forecast customer demand increases. One plant at Bhilai was closed and production transferred to Rajgangpur, in line with the M&A integration strategy. Supply chain reliability and efficiency was good throughout the year.

South America

Revenues in South America decreased by 9% to €473 million (2023: €522 million) or by 6% in constant currency terms, as shipped volumes reduced by 3% and pricing declined by 7%. Gross profit reduced by 3% to €142 million (2023: €146 million) supported by an increase in Gross margin to 30.0% (2023: 28.0%), driven by lower input costs.

Steel revenues decreased by 8% to €362 million (2023: €393 million) driven by a 1% decline in shipped volumes and 7% lower average pricing. The decline in sales volumes was slightly below the movement in steel production for the region, which increased by 0.6% in 2024 according to WSA data. Steel gross margin increased to 28.5% (2023: 24.5%) as the impact from lower pricing was more than offset by an 11% improvement in unit costs. New long-term contracts were signed with key customers and revenue derived from long-term contracts increased to 70% of the total for the region in 2024.

Industrial revenues decreased by 13% to €112 million, with a 6% decline in sales volumes and 7% lower average price per tonne. Volume decline was most pronounced in the Non-ferrous metals segment, with no new greenfield projects occurring during 2024 against a strong comparative in 2023. Pricing weakness was most evident in Cement & Lime.

Industrial segment Gross margins reduced to 35.2% (2023: 38.7%) as the 7% decline in average pricing was only partially offset by 2% lower costs.

During the year the Brumado rotary kiln project was completed and ramped up production. The project will reduce costs and increase operational flexibility considerably at this strategically important and globally significant raw material site.

A write down of assets in Brazil of €29 million connected to the completion of the Resco transaction has been recognised in the 2024 financial results, reflecting the network optimisation which will result in transfer of production capacity into the US.

China & East Asia

Revenues in China & East Asia increased by 2% to €426 million (2023: €418 million) as strong sales volumes in Steel offset volume decline and lower pricing in the Industrial segment. Excluding the contribution from M&A, revenues in the base business declined by 8%, mainly due to lower pricing and 2% lower shipped volumes. Gross margins were stable at 21.0% (2023: 21.0%) as pricing pressure was matched by reduced input costs. Gross profit increased slightly to €89 million (2023: €88 million) reflecting the revenue increase and stable margins.

Steel refractory sales volumes excluding M&A increased by 5%, representing a strong relative performance compared to WSA data for China which indicates a 1.7% decline in steel output in 2024. Shipped volumes of refractories in East Asia excluding M&A increased by 6%, also outpacing overall steel output growth in the region although this was largely due to the restart of a key customer site that had been suspended in 2023.

Industrial sales volumes decreased by 5% driven by weaker demand in construction and reduced consumption of glass refractories, partially offset by robust Non-ferrous metal demand in China. Lower pricing resulted in Industrial revenue decline of 9%, as weak Cement & Lime results were offset by strong demand for Non-ferrous metals refractories in China. Industrial gross margin in the region reduced to 27.3% (2023: 28.0%) as price weakness outpaced the reduction in input costs.

The Group's priority in its China & East Asia business continues to be a sustainable increase in margins to levels that are closer to the average for the Group worldwide. The Group's strategy is to focus on higher value-added products and services to differentiate against lower quality competing suppliers.

ALTERNATIVE PERFORMANCE MEASURES (APMs)

Definitions of APMs used by the Group are set out below. The purpose and usefulness of each APM and a reconciliation to the nearest IFRS equivalent measure, or a reference to a reconciliation appearing elsewhere in this document. In general, APMs are presented externally to meet investor and analyst requirements for clarity and transparency of the Group's underlying financial performance. APMs are also used internally in the management of the Group's business performance, budgeting and forecasting. APMs are non-IFRS measures which enable investors and other readers to review alternative measurements of financial performance, but they should not be used in isolation from the main financial statements. Commentary within the Annual Report, including the Financial Review, the Consolidated Financial Statements and the accompanying notes, should be referred to in order to fully appreciate all the factors and context affecting the Group's financial performance. Readers are strongly encouraged not to rely on any single financial measure and to carefully review the Group's reporting in its entirety.

Performance APMs

Adjusted EBITDA

Adjusted EBITDA is a key non-IFRS measure that the Executive Management Team (EMT) and Directors use internally to assess the underlying financial performance of the Group and is viewed as relevant to capital intensive industries. The ratio of Net Debt to Adjusted EBITDA is used as a measure of financial gearing.

Adjusted EBITDA is defined as EBIT, as presented in the Condensed Consolidated Statement of Profit or Loss, before amortisation, depreciation, and Excluded Items (see definition below).

Pro Forma Adjusted EBITDA

Pro Forma Adjusted EBITDA is used to assess financial gearing and includes a full year of Adjusted EBITDA contribution from businesses acquired during the year.

Adjusted EBITA

Adjusted EBITA is a key non-IFRS measure that the EMT and Directors use internally to assess the underlying performance of the Group.

Adjusted EBITA is determined consistently with Adjusted EBITDA, but includes depreciation expense of property, plant and equipment to reflect the wear and tear cost and future replacement of productive assets.

Adjusted EPS

Adjusted EPS is a key non-IFRS measure and one of the Group's KPIs. Adjusted EPS is used to assess the Group's underlying operational performance, post tax and non-controlling interests on a per share basis.

This measure is based on Adjusted EBITA after finance income and expenses, taxes, share of profit or loss from associates and joint ventures and non-controlling interest. Share of profit or loss from associates and joint ventures is adjusted to exclude impairments and gains or losses recognised on disposals.

Adjusted EPS excludes finance income and expenses and certain foreign exchange effects, that are not directly related to operational performance. This includes the non-cash present value adjustments for the Oberhausen provision.

Taxes are calculated by applying the effective tax rate normalised for restructuring expenses and impairments.

Excluded items

Items that are excluded in arriving at the Group's Adjusted measures of Adjusted EBITA, EBITDA and EPS include:

Other income, other expenses and restructuring expenses as reflected on the Consolidated Statement of Profit or Loss as well as gains and losses within interest income, interest expenses and other net financial expenses that are non-recurring in nature and not reflective of the underlying operational performance of the business. Excluded items include restructuring related provisions, costs in relation to corporate transactions and other non-recurring costs. The tax impacts of the above Excluded Items are also adjusted for.

Cash flow performance measures

Adjusted operating cash flow and Free cash flow

Adjusted operating cash flow is a key non-IFRS measure used by the EMT and the Directors to reflect the operational cash generation capacity of the Group before the cash impacts of Excluded Items (see definition above).

Adjusted operating cash flow is defined as Adjusted EBITDA adjusted for working capital items, changes in other assets and liabilities and capital expenditure and other non-cash items, such as share based payments. This APM is reconciled to Net Cash flow from operating activities as follows:

1.         As reflected in the Consolidated Statement of Cash Flows

Free cash flow is determined from the IFRS measures of Net cash flow from operating activities, net cash used in investing activities and net cash (used in)/provided by financing activities and excludes the cash impacts of purchases and disposals of business and subsidiaries, dividends paid to equity shareholders of the Group, share capital transactions with shareholders, proceeds and repayment of borrowings and current borrowings and repayment of leases.

Free cash flow is reconciled to Cash changes in Net debt in the table in the 'Cash flow and working capital' section. Cash changes in Net debt is reconciled to Change in cash and cash equivalents in the Net Debt APM reconciliation.

Balance sheet

Liquidity

Liquidity comprises cash and cash equivalents, short term marketable securities and undrawn committed credit facilities.

1.         As reflected in the Consolidated Statement of Financial Position

Net Debt

Net Debt is the excess of current and non-current borrowings, associated debt derivatives for which hedge accounting is applied and lease liabilities over cash and cash equivalents and short-term marketable securities. The Board uses this measure for the purpose of capital management. A reconciliation of Net Debt is included in Note 33 to the Consolidated Financial Statements.

1.         As reflected in the Consolidated Statement of Cash Flows

Working capital

Working capital consists of inventories plus trade receivables and other receivables minus trade payables and other payables. Working capital intensity provides a measure of how efficient the Company is in managing operating cash conversion cycles. It is measured as Working capital divided by trailing three-month revenues (annualised) and is expressed as a percentage.

Return on invested capital ("ROIC")

ROIC reflects the annualised return on invested capital of the Group. ROIC is calculated as NOPAT (net operating profit after tax) divided by average invested capital of the year.

1.         As reflected in the Consolidated Statement of Profit and Loss

2.         As reflected in the Consolidated Statement of Cash Flows

3.         As reflected in the Consolidated Statement of Financial Position

4.         NOPAT divided by average invested capital of the year