RHI AG: significant improvement in third quarter results

Following the global recession, which had characterized business development in the first half of 2009, the economy started to bottom out in most of RHI“s customer markets at mid-year. This initially…

Following the global recession, which had characterized business development in the first half of 2009, the economy started to bottom out in most of RHI“s customer markets at mid-year. This initially had positive effects on RHI“s customer industries, especially in the Steel Division, while in the Industrial Division no significant recovery was tangible by the end of September 2009. Capacity utilization of the Raw Materials Division was in line with the demand for basic materials in the RHI Group. The restructuring measures introduced in the first half of the year were consistently implemented, so that the resulting cost improvements had an effect on the result for the first time in the third quarter. Consequently, the RHI group generated an operating result of EUR 32.8 million in the first three quarters despite the ongoing difficult economic climate. Profit in first nine months of 2009 was down 26.3% on the comparative period of 2008 and amounted to EUR 900.2 million. Performance in the third quarter was better than in the second quarter: revenues amounted to EUR 295.7 million (compared to EUR 288.7 million), and EBIT to EUR 11.4 million (compared to EUR 7.3 million). Since the beginning of the year, equity of the RHI Group rose from EUR 181.8 million to EUR 189.9 million. The liquidity situation improved further and net debt was reduced by 28.4% from EUR 375.0 million at 31 December 2008 to EUR 268.5 million. RHI“s Steel Division benefited from the recovery in world steel output and generated revenues of EUR 179.0 million in the third quarter of 2009, up 18% on the previous quarter. Due to the weak market performance in the first half of the year, revenues declined by 33.6% to EUR 497.4 million in the first nine months of 2009. In RHI“s Industrial Division, the situation continued to be very subdued overall in the third quarter of 2009. Revenues of the Industrial Division, at EUR 387.7 million in the first nine months of 2009, fell short of the prior-year figure of EUR 446.8 million. Revenues of the Raw Materials Division in the first three quarters of 2009 dropped by 30.8% on the comparative period of 2008 because of lower volumes and a decline in price levels. Following the corresponding preparation work, RHI established a corporate strategy until 2015. The objectives are to make RHI the most profitable group in the industry and to expand the number one position further. The new location concept is one of the main prerequisites for this strategy. It provides for increased flexibility and an optimization of production capacity to match future market and demand developments. This goes hand in hand with a transfer of production capacities from the stagnating customer markets of Europe and North America to the emerging markets of Asia. Through a consistent reduction of fixed costs, all existing plants in the western industrialized countries are to be maintained. Individual plants or part of plants, however, will be shut down until the economy picks up again. The new concept will require investments of roughly EUR 15 million in the coming years. In addition, non-recurring costs of roughly EUR 5 million will be incurred in the context of staff cuts with a focus on Europe and North America. Depending on the further development of the world economy, demand in the Steel Division is expected to stabilize further and the order level in the Industrial Division is expected to improve in the coming months until the end of the year 2009. As there will be no more non-recurring restructuring costs and the cost effects resulting from capacity adjustments are now taking full effect, the RHI Group“s results should improve in the fourth quarter of 2009. Therefore, in the light of the deep crisis, an adequate annual result is to be expected for the whole year 2009.