12 November 1998: Austria“s Erste Bank said it had cut its rating for Austrian refractories maker Radex-Heraklith (RHI) to “hold” from “buy” after the group reported weaker-than-expected nine month r…
12 November 1998: Austria“s Erste Bank said it had cut its rating for Austrian refractories maker Radex-Heraklith (RHI) to “hold” from “buy” after the group reported weaker-than-expected nine month results. Erste also said it had lowered its 1998 earnings per share (EPS) forecasts to Sch 50 from Sch 58. It forecast EPS would remain at Sch 50 in 1999. RHI reported an increase in nine-month earnings before interest and tax (EBIT) to Sch 741 million (US$ 59 million) from Sch 714 million. Analysts had been expecting EBIT of between Sch 841 and Sch 870 million. Weakness in the steel sector was hitting RHI“s main refractories division, Erste said. Erste said RHI“s forecast of a return-on-sales of 5% next year was “highly optimistic” given the difficulties the group had suffered in the third quarter of 1998. The bank said it expected a flat development in return-on-sales in 1999. RHI shares fell Sch 26.10 to reach Sch 349.20 at the close, the leading decliner on Austria“s blue-chip ATX share index. “The results are disappointing – estimates must be revised down,” said one analyst. “The share looks as if it“s cheap, but it can“t be recommended as a buy because of the risks in the results forecasts.” Group net profit rose to Sch 478 million from Sch 473 million on a 4% increase in sales. RHI said it expected to post a gain in 1998 earnings per share of around 10% from last year“s level of Sch 47, despite difficult market conditions. But the group warned that the outlook for its business environment remained bleak. “A worse environment must be expected for the fourth quarter of 1998,” it said in a statement. “The hard recession in some countries in the Asia/Pacific region as well as the financial crisis in Russia will weigh heavily on our most important growth industries in western Europe and the NAFTA zone.” The group attributed the unexpected results to a drop in demand in Asia and a fall in the dollar rate against the schilling, which hit sales in the North American Free Trade Agreement (NAFTA) zone. RHI holds a majority stake in German blast furnance linings maker Didier-Werke AG.