Report

Leading the refractory
industry in sustainability
and technology

Annual Report 2021

We are RHI Magnesita

Contents

Strategic report

01 Investment case

02 Highlights

03 OurCulture

04 Refractorycustomersandend

markets

05 Globalfootprint with local for

local strategy

08 Investingincleanertechnologies

10 BusinessModel

12 Chairman’sstatement

13 CEOreview

14 Ourstrategic framework

16 Strategy inaction

24 KeyPerformance Indicators

26 OperationalReview

32 FinancialReview

38 Eﬀective risk management

40 Ourinternalcontrolsystem

42 ViabilityStatement

44 PrincipalRisks

50 Stakeholderengagement

56 Sustainability governance

59 Progressagainst sustainability

targets

60 Climate andenvironment

64 OurPeople andCommunities

66 EU Taxonomy Regulation

Governance

68 Chairman’sintroductionto

corporate governance

70 Corporate governance statement

88 BoardofDirectors

86 Executive Management Team

88 NominationCommittee report

91 Corporate Sustainability

Committee report

92 Audit & Compliance Committee

report

96 RemunerationCommitteereport

100 Directors’RemunerationPolicy

111 AnnualReport on Remuneration

We oﬀer refractory products,

customised services and innovative

solutions that help shape tomorrow’s

world. Our advanced products are

essential for our customers in the steel,

cement, metals and glass industries.

Our purpose

Our purpose is to master heat, enabling

global industries to build sustainable

modern life.

Our values

At RHI Magnesita, we believe in an ethical

workplace which means performing our

roles with integrity, honesty, reliability

and in respectful collaboration with each

other. Extending these ethical behaviours

to interactions with all business partners

is vital for the long term sustainable

success of RHI Magnesita.

Financial statements

122 ConsolidatedStatement of
FinancialPosition

123 ConsolidatedStatement ofProﬁt
orLoss

124 ConsolidatedStatement of
Comprehensive Income

125 ConsolidatedStatement of
Cash Flows

126 ConsolidatedStatement of
ChangesinEquity

128 Notesto the Consolidated
FinancialStatements2021

189 CompanyFinancialStatements
ofRHI Magnesita N.V.

190 Notesto the Company Financial
Statements2021

Other information

200 Independent Auditor’sreport
209 Alternative performance
measures(“APMs”)

210 Glossary

211 Shareholderinformation

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

Investment case

Global market

c.15%

Leadership in the

refractory industry

Magnesite raw material

from own sources

c.70%

Strong competitive position

with vertical integration

• Marketleaderinrefractoryproductsandheat

managementsolutionsforindustrial

applications involvingtemperaturesabove

1,200°C.Signiﬁcantscalebeneﬁtsfrom

havingthelargestglobalfootprint,

closeproximitytocustomersand“local for

local” strategy

• Marketshareofc.15%globally(30%excluding

China and East Asia) in a c.€20 billion industry.

ClearmarketleaderinNorthandSouth

America,EuropeandtheMiddleEast

• c.70%ofrevenuederivedfromtheSteel

Divisionandc.30%fromIndustrial.RHI

Magnesita’scustomersserveendmarketsinthe

constructionandinfrastructure,automotive,

machineryandheavyequipmentindustries

• Verticalintegrationwithlow-costmagnesite

anddolomiterawmaterialassetsproviding

securityofsupplyandcontributing3.2

percentage points of EBITA margin in 2021

• Leadershipininnovationanddigitalisationof

refractoryproductsandservices. Annual

R&DandTechnicalMarketingspend of €63

million,newproductsrepresented 16% of

revenuesin2021

• Innovatingto supportsustainable

development,leadingthe industry inlow-CO₂

refractorytechnologies

Adjusted EBITA

margin

11.0%

Margin resilience and

signiﬁcant growth

opportunity

Capital

expenditure

€252m

Investment driven

value creation

• Low-costoperationsandessentialnatureof

productsunderpindoubledigitEBITAmargin

performancethroughthecycle

• Maintainedsignificantorganicinvestment

throughout2020and2021, withcapital

expenditureof€252millionin2021

• Costsavinginitiativestodeliver€110million

EBITAcontributionby2023,furtherimproving

marginsthroughplantconsolidation,

specialisation, modernisation andlower

relativeSG&A

• Disciplinedfocusonreturnsoncapital

• High-returningprojectsaredueto complete

andrampupfrom2022,deliveringmaterial

cashﬂow beneﬁts

• GrowthopportunityinFlowControl,new

geographicmarketsofChina,IndiaandTurkey,

andthroughexpansionofthebusinessmodel

intoservices,digitalproductsandfullheat

management solutions

• Balancedanddynamiccapital allocation

throughinvestmentinorganic growth,

acquisitions,sustainabilityandshareholder

returns

Use of secondary raw

material, 2021

6.8%

Sustainability leadership

• Proprietarytechnologyforincreasinguseof

secondaryrawmaterialwithequallygood

refractoryperformance.Reduceswasteand

eliminates CO₂emissions from use of new raw

materialinshortterm

• Longerterminvestmentindevelopingnew
technologysolutionstocapture and store or
utiliseCO₂emittedintherefractory
production process

• Strongmarketshareinessentialrefractory
productsthatareenablersforthe

decarbonisationofsteelproductionthrough
increaseduseofelectricarcfurnaces

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 0 1

Highlights

Financial highlights

RHI Magnesita has successfully

navigated another challenging

year in 2021 whilst continuing

to make further structural

improvements to our business

to strengthen our leadership

position in the global refractory

industry.

Herbert Cordt

Chairman

Revenue Availableliquidity

€2.6bn €1.2bn

2020: €2.3bn 31 December2020: €1.2bn

Adjusted EBITA Adjusted earnings per share

€280m €4.52

2020: €260m 2020: €3.28

AdjustedEBITAmargin Dividendpershare

11.0% €1.50

2020: 11.5% 2020: €1.50

Strategic highlights

Capital expenditure Strategic initiatives EBITA(cumulative)

€252m €84m 2020: €157m 2020: €35m

ROIC Shareholder returns

9.6% €167m 2020: 11.5% 2020: €52m

Sustainability highlights

Recycling rate Reduced CO2emissions intensity

6.8% 1.82 t CO

₂/t 2020: 5.0% 2020: 1.96 t CO2 /t

LTIFR (per 200,000 hours) CDPrating

0.1 8 B 2020: 0.13 2020: B

Dalian, China

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STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

Our culture

Our corporate culture guides our strategy
and day-to-day decision making.

innovative

We live innovation to create

value for our customers, by

being bold and providing

the best digital and

sustainable solutions.

customer

focus

performing

Our high performance

is rooted in accountability

and responsibility. We are

a reliable partner that

decides and delivers

based on our

customers' needs.

open pragmatic

Our open mindset and
We act pragmatically to

transparent way of working is
enable fast and simple

ﬂanked by a diverse, respectful
collaboration across functions
and friendly business

and regions to serve

environment, where we care
our customers best.

about our customers

and colleagues.

The swi

the supply chain challenges we encountered in 2021
demonstrated our customer focus, pragmatism and
reliability as a business partner. Throughout the year, we
prioritised keeping our customers supplied with refractories to avoid interruption to their operations during
a period of high demand, using alternative sources of
supply and new logistics solutions where necessary.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 0 3

Refractory customers and end markets

We create the refractory products, customised services
and innovative solutions that help shape tomorrow’s world.
By mastering heat, we enable global industries to build
sustainable modern life.

Through our solutions business model, we provide a broad range of tailored services at
customer sites such as refractory installation, recycling, digital and supply chain services.
These drive process eﬃciencies, reduce costs and generate sustainable beneﬁts,
thereby creating value for our customers, as well as for the Group.

Customer

industries Steel Cement

Glass

& EEC

Non-ferrous

metals

Refractories are

specialist materials

used in industrial

processes

which can withstand

temperatures of up to

2,000 degrees. They are

consumed during use at

varying rates, for example

up to 15 kg of refractories

are required per tonne of

steel production.

~10 to 15 kg

1,7600C

Refractory demand for 1 tonne

~1 kg ~4 kg

1,5000C 1,6500C

Copper

~3 kg

Aluminium

~6 kg

1,3500C 1,2500C

Refractories

are classiﬁed

as operating

expenses for

the steel industry

where replacement

cycles are between 20

minutes and two months.

Other industries have

longer replacement

cycles, for example

refractories in cement

kilns are replaced

annually, whereas in the

glass industry refractory

linings within furnaces

are replaced up to every

10 years.

Lifetime

20 minutes to

2 months

Annually Glass

Up to 10 years

EEC

5 to 10 years

EEC

c. 1.5%

% of customers’ costs

c. 3% c. 0.5% cG. l1a%ss

1-10 years

(non-ferrous)

c. 0.2%

Market shares

RHI Magnesita serves

thousands of industrial

sites worldwide.

% Market share by customer market

c.15% c.35% c.5% c.25%

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STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

How our customer industries relate to end-user markets.

Demand for refractories is driven in the ﬁrst instance by demand from industries requiring
advanced heat-resistant materials for their production processes, being predominantly the
steel, cement/lime, non-ferrous metals, glass, energy and chemicals industries. Over the
long term, demand for refractories is linked to production volumes in these industries, which
in turn are determined by the end markets for those materials. The most important end
markets for the refractory industry are construction, automotive and transport, machinery and
equipment, electronics and consumer goods and energy, oil and gas and petrochemicals.

Customer

industries

Cement Steel Glass & EEC Metals

% of 2021 revenue. 13% 71% 10% 6%

End markets

outlook

45% 17% 10% 15% Other 5%

Whilst previously

high growth rates

in construction

and automotives

during the initial

recovery from the

COVID-19 pandemic

are not forecast to

continue in 2022-

23, strong growth in

electriﬁcation and

decarbonisation are

expected to drive

volumes in non-

ferrous metals.

Construction Automotive

and transport

6.0% 12.1%

4.8% 4.5%

8.6%

5.1%

Machinery

and equipment

7.4%

3.9% 3.7%

Electronics and

consumer goods

5.7%

4.1%

3.4%

Energy and

petrochemicals

3.7%

2.3%

1.7%

2021 2022^F2023^F2021 2022^F2023^F2021 2022^F2023^F2021 2022^F2023^F2021

2022^F2023^F

Trends

We are agile and

proactive in pursuing

opportunities and

managing risks

posed by the rapidly

changing global

environment.

Continued

growth in Asia

ex-China

Green steel

transition Connectivity Regionalisation Commoditisation

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 0 5

Global footprint with local for local strategy

Our global network of raw material sites,

refractory plants, sales oﬃces and R&D

centres enables us to be a trusted partner

for our customers. RHI Magnesita can supply

a full range of refractory products anywhere

in the world.

Our global networkhas been optimisedby the Production

Optimisation Plan,progressing our ‘local for local’ strategy.

We aim to reduce movements ofrawmaterials andﬁnished

goods,lowering costs andimproving reliability andsecurity

ofsupply for our customers.

Key raw material transport routes Steel Division Revenue split by geography

North America 28%
South America 15%
Europe/CIS/Turkey 26%
China and East Asia 11%
India, West Asia and Africa 20%

Industrial Division Revenue split by segment

Cement/Lime 44%

Industrial business 56%

Headquarters

Technology hubs

Raw materials production

Finished refractory products production

Raw materials and ﬁnished refractory
products production

Key raw material export route

0 6 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

1 Brumado, Brazil, our Americas

magnesite hub

The Group’s largest magnesite raw
material asset with over 100 years of
remaining mine life and ﬁrst quartile cost
position, serving production facilities
across the Americas.

2 York, United States, our Americas

dolomite hub

Provides low cost, high-quality dolomite
into North and South America.

3 Eskisehir, Turkey, supplies low

cost Magnesite raw material to European production plants
Our local for local strategy is enhanced
through the acquisition of SÖRMAŞ,
agreed in 2021 (completion expected in
H1 2022).

4 Externally sourced raw material

partnerships

Externally sourced raw material from
China provides Europe with low-cost
magnesite and alumina based raw
materials, including electro-fused
material.

Note:Shippingroutesshownareillustrative.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 0 7

Investing in cleaner technologies

The future of steelmaking

Traditional steelmaking process

Globally,c.70%ofsteelproductioniscarriedoutusingablastfurnace

(“BF”)to reduceironore,combinedwithaBasicOxygenFurnace(“BOF”)

forconversionofpigironintosteel.Thesteelindustryaccountsforaround

8% of global CO₂emissionsandisclassiﬁedasa “hard-to-abate”industry

becauseofthehighcapitalcostandtechnologicalchallengesinvolved.

Reduction of iron ore in a blast furnace requires the burning of large

quantitiesofcoke(700kg)per tonne of steel produced). BOF emit a

further0.17 tonnes of CO per tonne of steel produced, as oxygen is

injectedtoremovecarbondissolvedinthesteel.

Existing process

Iron ore

Coke

Natural gas

Limestone

Oxygen

CO₂

H₂O

Oxygen CO₂

Electric arc furnaces

The ﬁrst step to reduce CO₂emissionsinsteelmakingistheadoptionof

electric arcfurnaces(“EAF”),whichcanbepoweredusingelectricity

sourcedpartiallyorwhollyfrom renewableenergy generation.

(Blast furnace)

BOF

2,1000C 1,6000C

(Basic Oxygen Furnace)

EAFusegloballyex-Chinahasgrownsigniﬁcantlyoverthelast20years,

from 37 % of steel production in 2001 to 47% in 2021. EAF steelmaking

requires a source of scrap steel and has therefore grown fastest in

developedmarketswherescrapavailabilityishigh.EAFuseisnow

growingfastinChina,withcurrentusagerepresentingaround10%of

output,forecasttogrowto23%by2030(Source:InternalCompany

estimates).

Future technology

Iron ore

Hydrogen

H₂O

Electricity

Scrap or

sponge

iron

Zero

emissions

RHIMagnesitahasaleadingmarketpositioninEAF-speciﬁcrefractories,
servicesandheatmanagementsolutionsandisideallypositionedto
beneﬁtfromthisongoingtransition.In2021,16%oftheGroup’srevenues
werederivedfromEAFrefractories.

Direct reduction of iron ore

DRI

(Direct Reduction)

EAF

1,4000C 1,8000C

(Electric Arc Furnace)

Directreductionofironore(“DRI”)usinghydrogenisa newtechnology

thatseekstoeliminateCO₂emissionsfromthereductionofironore

inblastfurnacesusingcoke.Ifsuﬃcientquantitiesofhydrogen

manufacturedfromrenewable sources can be accessed and if a DRI

furnace can be paired with an EAF for the second stage of the process

that is also powered by renewable energy, CO₂emissionsfromsteel

productioncanbelargelyeliminated.

Tonnes CO₂per tonne of steel

1.77

-63%

AnalternativepathwaytoreduceCO₂emissionsistheuseofelectrolysis.

RHIMagnesitahaspartneredwithBostonMetaltoproviderefractories

forprototypemoltensaltfacilitieswhichoperateattemperaturesof

around1,850°.

0.66

-92% -92%

0.15 0.14

BF + BOF DRI-EAF

(Nat gas)

Scrap EAF DRI-EAF

(Green H₂)

EAF steelmaking by region

World ex-China (Mt) China (Mt) China long term forecast
% of steel production from EAF

+18% +63% 50%

40%

502 160

427

23% 98

10%

2021 2026 2021 2026 2021 2030 2040 2050

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STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

The future of refractories

Recycling

RHIMagnesitaisleadingtherefractoryindustryintheuseof

secondaryrawmaterials.Foreverytonneofwasterefractory

material that we re-use, we can save two tonnes of CO₂

emissionswhichwouldotherwisehavebeenemittedinthe

extractionandprocessingofnewrawmaterial.

Recycling rate

2021 6.8%

2020

5.0%

4.6%

2019

Historically,theuseofsecondaryrawmaterialintheindustry

hasbeenlimitedbecauseofthereducedeﬀectivenessof

refractoriesmadewithrecycledmaterial.RHIMagnesitahas

developednewtechnologyforusingsecondaryrawmaterial

withoutimpactingperformance.

2018 3.8%

TheGroup’srecyclingtargetistoincreaseuseofsecondary

raw material to 10% of raw material by 2025 and in 2021 this

increased to 6.8% (2020: 5.0%). Due to the geogenic CO₂

emissionsand energyconsumption involved in theprocessing

ofnewrawmaterial,increasingtherecyclingrateisaneﬀective

route for the Group to reduce its CO₂emissionsintheshort

term.

Industry leading recycling technology

Carbon capture and utilisation

RHI Magnesita is investing €50 million over the next four years
to developnewtechnologiesforcaptureandthenstorageor
utilisationofCO₂emittedduringtherefractoryproduction
process.Themajorityofemissionsarereleasedintheraw
materialprocessingphaseandarereportedasScope1
emissionsformaterialsourcedfromourownminesandScope
2emissionsinrespectofexternallypurchasedrawmaterial.

In 2021 the Group signed a memorandumofunderstanding

withAustraliabasedtechnologycompany,CalixLimited,to

develop a Calix Flash Calciner at an RHI Magnesita site for the

captureandstorageofCO₂. This technology is one of a

number of diﬀerent routes that the Group is evaluating to

capturegeogenicCO₂emissions.

Relative CO₂emissions: (t CO₂/t)

2021 1.82

2020

1.96

1.85

2019

RHIMagnesitaisleadingtherefractoryindustryonthisvital

sustainabilityissue,whichwillbeanincreasinglyimportant

considerationforourcustomersinthefutureastheyalsoseek

to reducetheenvironmentalimpactoftheiractivities.

2018 1.89

Carbon capture andstorage R&Dprojects

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 0 9

Business model

What we do

Weoﬀerourcustomershigh-qualityrefractory

products,supportedbyindustry-leadingR&D

andunderpinnedbyourvertically integrated

structurewhichprovidessecurityofsupplyoflow

cost,high grademagnesitebasedrawmaterial.

Raw material production

Ourend-to-endvaluechainincludesthemining

andprocessingofrawmaterials,themixing,

pressingandﬁringofrefractories,logistics,design,

installation,monitoring,recyclingand disposal.

Oursuiteofdigitalproductsprovidesour

customerswithunrivalledintelligenceand

insightsintotherefractorylifecycleattheirplants,

improvingproductivityanddrivingeﬃciencies.

Ourcomprehensiveproductrangeand expertise

enables us to oﬀer full heatmanagement

solutionstocustomerswhoare seeking

toimprove productioneﬃciency and lower

theircostsandenvironmental impacts.

Mining

Firing in rotary kiln

Refractory production

Crushing

Unshaped

refractories

Logistics

Refractoryproductsareusedinallhigh-

temperatureindustrialprocesses.Without

refractories,keyindustriessuchassteel,cement,

metals,glass,energyandchemicals could not

function.Refractorieswithstandhostile

conditions includingheatandchemical

corrosion,maintainingtheirformandfunction

attemperaturesover1,200°C.Theyprotect

equipmentsuchasfurnacesand kilns against

thermal,mechanicalandchemicalstress.

Press

Firing and/or heat treatment

Shaped

refractories

Our value chain

Innovation, research

and development

High-quality raw

materials sourcing,

production, recycling

Production

of refractories

Oneofthefundamentaldriversofourbusiness

modelisinnovationandR&D,supportedby

stronginternalexpertiseinmaterials

technologyanddigitalisation.TheGroup

continuestodriveinnovation,withsigniﬁcant

opportunitiesidentiﬁedintheﬁeldsof

automation,roboticsandsustainability,and

aims to devote 2.2% of revenues per year to

R&DandTechnicalMarketing.Investmentin

R&D and Technical Marketing in 2021 was c.

€63million,representing2.5%ofrevenues.

Withthehighestlevelofverticalintegration

intheindustry,includingsigniﬁcantself-

suﬃciencyinkeyrawmaterials,wehavea

uniqueabilitytocoverandserviceeverystepof

thevaluechain,andoﬀerdistinctivecustomer

solutionsbasedonourtechnological

leadership,expertiseandcostcompetitiveness.

Ourlow-costrawmaterialassetsmakea

signiﬁcantcontributiontoGroupmargins

comparedtothecostofacquiringequivalent

rawmaterialsfromexternalsuppliers.

Oneofthemostimportantrawmaterialsfor

refractoryproductionismagnesite,amineral

thatwemineinbothundergroundandsurface

mines.Magnesiteoreiscrushedandﬁredat

1,800°Cinspecialkilns.Duringthisprocess,

CO₂isreleasedanddensityisincreased.

Rawmaterialsare mixedandcombinedwith

technicaladditivestobe sold as mixes or are

furtherprocessedintoshapedrefractory

products.Shapedrefractorybricksarepressed

intodiﬀerentsizesandshapesdepending on

the speciﬁc application,employingpressures

of up to 3,200 tonnes.

undergoheattreatmentattemperaturesof

up to 350°C and may be furthersubjected

to ﬁring at 1,800°C in tunnel kilns for a number

ofdays.

Unﬁredproductsareprimarilyusedinthesteel

industry,whilstthe mainapplicationsfor ﬁred

productsare in the cement,non-ferrous

metals,processandmineralindustries.

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OTHER

INFORMATION

Heat management solutions

How we generate revenue

Wegeneraterevenue fromourglobalfootprintspanningNorth and South

America,Europe,China,India,the rest of Asia and the Middle East.

Installation

Around70%ofourrevenueisgeneratedfromsellingrefractory products

andsolutionstoourSteelcustomers,withthe remaining30% fromthe

Industrial Division.

120,000SKUs.Ourmainproductgroupsincluderefractory bricksand

mixesandﬂowcontrolproductssuchasslide gates,nozzlesand plugs.

Wesellafullsuiteofproductstailoredtocustomerrequirements,with over

Monitoring, repair and

process eﬃciencies

Ouruniqueservice oﬀeringisone of the keydiﬀerentiatorsof RHI Magnesita.

We are able tooﬀerheatmanagementsolutionscontractswhich madeup

29%ofrevenue in 2021 (2020:27%).Inoursolutionsbusinessmodel,

we partnerwithourcustomerstoprovide consultancy,engineering and

technicalcapabilities,aswellasotherservicessuchasinstallation

andrecycling,todrive eﬃciencygainsforthe customer.

Disposal

Removal

Recycling

Product marketing,

sale and delivery

Installation, monitoring,

and complex issue solving

Stakeholder

value creation in 2021

The Group has more than 70 sales oﬃces

worldwideandservicescustomersinmore

than100countries.Ithas28mainproduction

hubsand12rawmaterialsites,strategically

located in order to serve its customers as

eﬃcientlyaspossible.

The closer we work with our customers, the

greater the diﬀerence we can make for them.

Havingaglobalnetworkofoﬃces,research

centresandproductionsitesisimportanttous,

and to them.

Wehavediﬀerentiatedscale, with a global

customerbaseservingaround 1,070out of

1,3001steelplants.

1Approximate numberofplantsworldwide excludingChina,

basedoncompanyestimates

AkeycomponentofRHIMagnesita’sabilityto

addvalue liesinoursolutionsoﬀering,which

includesthe installation,monitoring,repair

andremovalofrefractoryproductsat

customersitesbyexperiencedemployees.

Digitalmonitoringproductsallowusto

monitorrefractoryperformance,safely

extendingthe usable lifeoftherefractory,

whilstremote gunningsolutionscancarry

out intermediate repairsduringuse.

process,residualrefractoryliningsare

removedandreusedifpossible assecondary

rawmaterialsinthe productionofnew

refractories.RHIMagnesitatherefore operates

acrosstheentirecycle fromrawmaterial

productiontorecyclingofspentmaterial

into newﬁnishedproducts.

Shareholders

€1.50 per share paid as a dividend

–

Employees

€548millionintotalgrossemployeepay

–

Customers

€745millionrevenue generated in our

solutionsbusinessmodel

–

Suppliers

€1.8billionpaidtosuppliers

–

Communities

26%ofcommittedcommunityspenddirected

toemergencyCOVID-19 relief

–

Governments

€39milliondirectcashtaxes

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 1 1

Chairman’s

statement

The Board remains committed to the Group’s

three-pillared strategy to invest in improving

its competitive position, expanding the

business model and growing in new markets.

Leading the refractory industry Board review

Herbert Cordt

Chairman

I am pleased to report that RHI Magnesita has

successfully navigatedanotherchallengingyear

in 2021 whilstcontinuingtomake thestructural

improvementswhichare necessarytogrowour

leadershippositionintheglobalrefractory

industry.

Sustainability is a key priority for the Board and the

Groupis making considerable progresstowards

its2025sustainabilitygoals,whilstinvestingin

newrecyclingandcarboncapture technologies

whichwillmakeitpossibletomateriallyreduce

CO₂emissions in the longerterm.The

RemunerationCommitteehaslinked

management incentivestoimprovingour

sustainabilityperformance and the Board is

satisﬁedwiththeprogressthathasalreadybeen

achieved.Transitioningtosustainable business

practiceswillbethenext“industrialrevolution”

andRHIMagnesitaiscommittedtoextendingits

leadershipinthisvital area.

Each year we carry out a review of Board

eﬀectivenesstoassessourperformance and

make appropriate improvements,tomaintain

highstandardsofcorporategovernance.

This exercise is a high priority for me personally

and I am pleased to include the ﬁndingsand

recommendationsfromthe reviewin

the Corporate Governancesectionofthis

Annual Report.

Dividend

The Boardhasrecommendedaﬁnaldividend of

1.00 Euro per share in respect of the ﬁnancial year

to 31 December2021.Thislevelofdividend is

alignedwithourpolicytomaintaindividend cover

ofbelowthree timesadjustedearningswhilst

takingintoaccountthe otherfunding

requirementsofthe businessaswe manage

capital expenditures,M&Aspendandgearing

levelsthroughthisimportantperiodinour

strategicdevelopment.

Board changes

Strategy and outlook

I am pleased to welcome ﬁvenewDirectorsto

The Boardremainscommittedtothe Group’s

theBoardthisyear,comprisingthreeindependent

three-pillaredstrategytoinvestinimprovingits

Non-ExecutiveDirectorsandtwoemployee

competitiveposition,expandingthebusiness

representatives:JannBrown,Marie-Hélène

model and growing in new markets where we are

Ametsreiter,SigaliaHeifetz,KarinGarciaand

currentlyunder-represented,inparticular

Dr. Martin Kowatsch. Ms. Garcia and Dr. Kowatsch

throughM&AwhichhastheBoard’sfullsupport.

wereappointedbythe workscouncils

The challengesposedbythe COVID-19

representingouremployeesinSpainandAustria,

pandemicin2020andthesubsequentvery

respectively.Wehave therefore takenpositive

signiﬁcantandunexpectedsupplychain

steps forward in improvinggenderdiversityin

disruptionin2021 have not diverted us from these

2021,with38%female representationatBoard

goals and we werepleasedthattheGroup

level at the year end and 22% in the Executive

reachedagreementonthe acquisitionof

Management Teamanddirectreports.

SÖRMAŞ in Turkey in October. The Board looks

Theskillsandexpertiseofthese newDirectors forwardtodemonstratingthebeneﬁtsofthe

willbeavaluableandcomplementaryaddition Group’sinvestmentprogrammefrom2022

to theBoard,bringingexperience inﬁnance, onwards, as the projects which make up the

governanceandsustainabilitycombinedwith ProductionOptimisationPlanarecompleted and

technology, innovation,digitalisationandrelevant begintodeliversigniﬁcantvaluetoshareholders.

internationalexperience inourtargetmarkets.

Readmore aboutourStrategy

Following these changes in the year, the Board Page 14

nowhasanoptimumbalance,representingthe

interestsofourkeystakeholderswithemployee

representativedirectors,directorsrepresenting

majorshareholders,executivedirectorsand

independent non-executives.Youcanreadmore

about the composition of the Board in the

CorporateGovernance StatementintheAnnual

Report.

1 2 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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FINANCIAL

STATEMENTS

OTHER

INFORMATION

CEO review

Stefan Borgas

CEO

Demandforrefractoryproductsandserviceswas

strongin2021 asourcustomerindustriesbegan

theirrecoveryfromthe2020downturncaused

bytheCOVID-19pandemicmuchfasterthanwas

anticipated.Thiscreatedanunprecedentedstrain

on global supply chains, which led to a signiﬁcant

increaseincostsandlogisticsleadtimes.

Ourreactiontothesechallengeshasbeen

comprehensiveandincluded theallocation of

additionalresourcestoplanningandlogistics,a

signiﬁcantincreaseininventorylevels,useofair

freightwherenecessaryandmultipleprice

increasesduringtheyeartorestoremarginsby

passingonadditionalproductionandshipping

coststoourcustomers.

People and culture

Our people and culture are the cornerstone of our

achievementsandwithoutastrongteamethos

andindividualaccountabilitywewouldnothave

beenabletorespondtothesigniﬁcantchallenges

we faced together in 2021. Our colleagues in

logistics,planning,procurement, operations and

salesfunctionsdeserve specialpraisefortheir

eﬀortsthisyearinrespondingtowidespread

disruptiontoglobalsupplychainsandprioritising

theneedsofourcustomers.

Delivering our strategic initiatives

Althoughsomeinvestmentprojectshavebeen

impactedbycostinﬂationandminordelays,

logisticaldiﬃcultieshavenotmateriallyimpacted

onthedeliveryofourlong-termstrategy.Wehave

improvedourcompetitivepositionthroughSG&A

savingsandtheProductionOptimisationPlan,

whichisadvancingour“localforlocal”production

strategywhilstpreservingscalebeneﬁtsfromour

globalfootprint.Wehavedeliveredfurthergrowth

inoursolutionsbusiness,inFlowControlsalesand

intargetmarketswhereweareseekingtoincrease

ourmarketshare.Progresshasbeenaccelerated

throughM&A,akeypillarofourgrowthambitions,

withtheagreementtoacquireSÖRMAŞinTurkey

andtheestablishmentofanewjointventurein

Chongqing,Chinatowidenourproductrange

forcementcustomersintheregion.

Innovation and sustainability leadership

We have an excellent track record in health and

safety, with a Lost Time InjuryFrequencyRate of

0.18(2020:0.13),despite manyofouremployees

workinginenvironmentswithsigniﬁcant

occupationalhazardsandaswe have delivered

closetorecordhighproductionvolumes.The

safety of our people in the workplace will always

be a core value for us.

RHIMagnesitaisalreadythe leadingglobal

supplierofhigh-performance refractory

products,systemsandsolutions.We are

increasinglyaddingdigital productsalongside

ourcoreoﬀeringwhichdiﬀerentiateusfrom

competitorsandenable us to oﬀer full heat

managementsolutions. Solutionscontractsgrew

to represent 29% of Group revenues in 2021

(2020:27%).

Wealsoleadtherefractoryindustryinallareas

ofsustainability.Nootherrefractoryproduceris

taking the same steps as we are to increase the use

ofsecondaryrawmaterialsandtoreduceand

captureCO2 emissions.Oureﬀortstoincrease

recyclingofrefractoriesoﬀermajorbeneﬁts

throughimprovedwastemanagementandthe

avoidanceofCO2 emissionsthatwouldotherwise

bereleasedintheprocessingofnewrawmaterial.

Tomakethispossible,wehavedeveloped

proprietarytechnologyforachievinghighlevels

ofperformancefromrecycledrefractorymaterial.

Wearealsoinvesting€50millionoverthenext

fouryearsintheresearchanddevelopmentofnew

technologiestoreduceandcaptureCO2 emissions

releasedduringthematerialsmanufacturing

processchain.

Ourproductportfolioisuniquelypositioned

to beneﬁtfromthe shi 2 emitting

processesinourcustomerindustries.Insteel,

we are global leaders in the supply of specialised

refractoriesforelectricarcfurnacesandstand

to beneﬁtfromthe ongoingtransitiontowards

this technology, which will be a key enabler of

thedecarbonisationofglobalsteelproduction.

Ourcommitmenttoimprovingoursustainability

performancewasdemonstratedthisyearbythe

linkingofthe margin on over €1 billionofnew

or existingdebtfacilitiestoourEcoVadisrating,

whichimprovedto“gold”from“silver”thisyear.

We are leading the industry on these issues

because of the widerbeneﬁtsforallstakeholders

but we are alsoincreasingthevalueofRHI

Magnesita’sproductsandservicestoour

customers.We believethe value attachedto

sustainablebusinesspracticeswilltranslateinto

market share opportunitiesorpricingadvantages

in the future, as we extendourleadershipposition

relativetoourcompetitors.

Financial and operational performance

TheGroupdeliveredadjustedEBITAof

€280millionin2021,inlinewiththeadjusted

guidancerangeissuedinOctober.Proﬁtability

improvedmateriallyduringthefourthquarteras

theGroupbeneﬁtedfrommultiplepriceincreases

oﬀsettingover€150millionofadditionalcosts,

mainlyfromhigherfreightrates,logistics,

purchasedrawmaterialandenergycosts.

Salesvolumesin2021 were ahead of our initial

expectations,reﬂectingstrongdemand fromour

customersandthe strengthofunderlying end

marketsinconstructionandmachinery. To meet

this high demand we had to deliver additional

volumesfromourproductionfacilitieswhile

deployingthelargestinvestmentprogrammein

the Company’shistoryatmostofour key sites

acrossthenetwork.

UnplanneddowntimeatRadentheininthethird

quarterimpactedEBITAbyaround €8 millionas

customershipmentsofhighmarginrefractories

foruseinnon-ferrousmetalsandsteel

applicationswere delayed.Inthesediﬃcult

circumstances,withlocalsupplychain

bottlenecksaddingtoplanningcomplexity,itis

a huge credit to our people that we nevertheless

managed to deliver a 15% increase in shipped

volumes versus 2020 and 1% above the volume

achievedin2019.

Key strengths and outlook

RHIMagnesitaisuniquelypositioned withinthe

refractoryindustryasaleaderintechnology,

includingdigitalisationandsustainability. A key

diﬀerentiatorofourbusinessmodelisour vertical

integrationinthesupplyofmagnesitebased raw

materials, with assets in the ﬁrst quartile of the

costcurve givingussecurityofsupply over c.70%

ofthemagnesiteanddolomitethatweconsume

andhighermarginscomparedtonon-integrated

peers,especiallyduringperiodsofelevated raw

material prices.

Inthefourthquarter,energyshortagesinChina

signiﬁcantlyincreasedthecostofexternally

purchasedrefractoryrawmaterials.Whilstthis

costpressurehaseasedintheﬁrstmonthsof

2022,magnesite,dolomite,aluminaandfusedraw

materialpricesremainabove2021 averagesand

thishasincreasedpricingforﬁnishedrefractory

productsacrossthemarket.Thehigherraw

materialpriceenvironmentsupportedrefractory

priceincreasesof€127millionduring2021 and

combinedwithinitialsavingsfromourcost

optimisationinitiativestorestoretheGroup’s

EBITA margin to 12.5% in Q4.

2021 was the peakyearofcapitalexpenditureon

ourProductionOptimisationPlanand we have

alreadycompletedworksatourHochﬁlzen,

Urmitz and Vizag plants. As we move through

2022 we willcompleteplantupgrades,

expansionsandmodernisationworkatVeitsch,

Radenthein,ContagemandBrumado which have

beendelayedslightlydue toglobalsupply chain

problemsandlabourshortages.Asthenew

facilitiesrampupwe willseematerialcash ﬂow

beneﬁtsfromthese fast-paybackprojectsand

establish a higher EBITA margin that we believe

is sustainable in the long term.

Whilstuncertaintyandvolatilitywillremain

ongoingfeaturesofglobalmarkets,wearewell

positionedtonavigateanynewchallengesthat

2022 will bring. This is mainly thanks to the

commitmentanddedicationofour employees,as

wellasthemajorinvestmentsandrestructurings

wehaveundertakentoimprove thecostposition

andeﬃciencyofourbusinessover thelastthree

years.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 1 3

Our strategic framework

RHI Magnesita’s strategy is

based on three pillars,

supported by our people and

culture. Our strategic goals are

to improve competitiveness

through cost reductions and

network optimisation, to grow

revenues and margins by

expanding the business model

and to increase market share in

new geographies or product

areas where the Group is

currently under-represented.

Each strategic pillar represents

an opportunity to deliver

signiﬁcant long-term value for

shareholders, building on the

Group’s existing global footprint.

Our strategic priorities

Competitiveness

Reduce operating costs

The Group’s cost saving initiatives are targeted to deliver

€110 million of annualised EBITA contribution by 2023,

which will largely comprise €30 million in SG&A savings

and €65 million of annual benefit expected from the

Production Optimisation Plan.

Business model

Expand the business model

RHI Magnesita aspires to lead the refractory industry

through its extensive product offering, pioneering

technology and leadership capabilities in research

and development.

Markets

Grow market share in geographies and products

where we are under-represented

The Group has c.15% market share (c.30% ex-China and

is actively seeking out strategic new organic growth and

consolidation opportunities in target geographies

and product groups such as flow control.

East Asia) within a c.€20 billion global market. The Group

People and culture

Enablers of our strategy

Hire, retain and motivate talent and nurture an innovative,
open, pragmatic and performance-driven culture.

Sustainability

Sustainability leadership

Sustainability is integral to the accomplishment
of the Company’s strategic priorities.

1 4 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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OTHER

INFORMATION

Progress Outlook

The Production Optimisation Plan progressed well in 2021, with projects

largely on-time and on-budget. In Brazil, the Contagem and Brumado

project capex estimates have increased, largely due to capex inflation, and

there has been a slight delay to the forecast completion date of Brumado,

nevertheless the project economics remain attractive. A cumulative

EBITA contribution of €22 million from projects already completed was

recognised in 2021

–

The Group achieved its SG&A reduction target in 2021, realising an EBITA

run rate saving of €29 million per annum

Complete the Production

Optimisation Plan by the end

of 2023 to deliver €65 million

of annual savings, and €45 million

in 2022

–

Maintain low-cost position of raw

material assets to capture additional

value from vertical integration in a

higher raw material price environment

See [Linkto

Competitiveness

pillar page]

Page 16

Expanded the business model through increased solutions contract

revenues

–

Increased sales of digital products and services

–

Increased recycling of waste refractories

Continue to grow our service

offering and new products

–

Deliver €40 - 60 million of EBITA

contribution from sales strategies

in 2023 with c.€30 million in 2022

See [Linkto

businessmodel

pillar page]

Page 18

Maintained strong market share in core markets North America, South

America and Europe

–

Organic growth in new markets China, India and Flow Control

–

“Local for local” strategy progressed, through decentralising global

functions and creating regional production hubs

–

Strengthened market position in under-represented business segments

–

Acquisitions in Turkey and China

Continue to grow the Group’s position

as the global leader in refractories

through maintaining core market

share and through actively pursuing

value accretive M&A opportunities,

supported by organic growth in

target markets

See [Linkto

Marketspillar

page]

Page 20

Strong cross-functional collaboration efforts to overcome supply chain

challenges

–

Supported an innovative, open, pragmatic and performance-driven culture

within the organisation

Continue to develop a workforce

of tomorrow at RHI Magnesita,

equipping our people with the

necessary skills required to face

digital disruption, decarbonisation

and external market volatility

See [Linkto

Peopleand

Culturepillar

page]

Page 22

CO₂capture R&D ongoing

–

Recycling rate now at 6.8%

–

Market leader in EAF refractories, essential for steel emissions reduction

Further increase in Group recycling

rates towards 10% goal, with

associated CO₂emissions savings

–

Work with our customers to reduce their

CO₂emissions by applying our leading

digital solutions and advanced refractory

products

–

Improve gender diversity in senior roles

Read more in

Anindustry leader

inaddressing

carbonemissions

Page 9

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 1 5

Competitiveness Execute cost

Strategic progress in action

reductions

Cost-competitive global producer of
technologically advanced refractory materials
with safe production network and a focus on
sustainable value generation

EBITA run rate cost savings by 2023 €110m

EBITAmargin

11.0% 2020:11.5%

Refractory production and

raw material optimisation

In2019,theGroupannounceditsProduction

OptimisationPlantoaddressthechallengessuch

astransferringcapacityfromhigh-costlocations

tolowercostlocations,ensureproductioncloseto

rawmaterialsandcustomersandtoupgradeand

specialisetheplantsthroughcreatingcentresof

excellence.TheGroupachievesthisthrough

threefocalareas:consolidationofexisting

capacity,plantspecialisationbyinvestingin

automation anddigitalisationandraw material

optimisation.

Investmentstoupgradethe productionnetwork

areprogressingwithslightdelays,withfull

beneﬁtsbeingrealisedin2023ratherthan2022.

Oncecomplete,itwillimprovethe Group’scost

positionanddeliverycapabilitiessigniﬁcantly,as

new facilities start ramping up in 2022. The

Group’scapitalallocationpolicyunderpinsits

investmentprogrammes,andeachofthese

individualprojectswithinthe programmeofwork

deliversverydemandinginternalratesofreturn.

TheseinvestmentswillimproveGroupoperating

marginandcontribute €45 million of run rate

EBITA savings by 2022, and €65 million by 2023.

EBITA run rate beneﬁt will now be fullyrealisedin

2023 given the project delays at Brumado and

thedecisiontoextendtheoperationofMainzlar

through2022.Whencomplete,itwillprovide

astrongplatformfor2023andbeyondthrough its

unrivalledproductionnetwork.Theproduction

facilityinvestmentswillcontribute torefractory

marginaccretion,gearedtowardsthe Group

target of a mid-teen EBITA margin over the

mediumterm.Itsrawmaterialoptimisation

shoulddrive eﬃcienciesinitsrawmaterialassets,

increasingthe verticalintegrationmarginto

3-4 ppts by 2023.

In2021,wecompletedtheinvestmentprojectat

Hochﬁlzensite,Austria.Theinvestmentat

Hochﬁlzenwill consolidate Europeandolomite

productionintoasingle low-costsitewhich will

supplyanewportfolioofinternallysourced

dolomiticrawmaterial,followingthedecision

toexitourpartnershipwithJointVenture, Lhoist,

Belgium.The Group’sverticalintegrationin

Hochﬁlzenwilldeliveranalternativesupply of

highquality,lowcostdolomitewhilstincreasing

the outputofrawmaterialandextendingassetlife.

The Groupcommenceddolomiticrawmaterial

productioninQ42021,andconstructionofthe

new rotary kiln at the site completed in Q4 2021

andwillcontinue to ramp up output in 2022.

AttheplantinValenciennes,France,theGroup

made progresstowardsexpandingandupgrading

the Company’sonlyEuropeanplanttoproduce

ﬁreddolomite bricks.Thisplantinvestment

includesthe installationofanadditionalpress

andatechnicalupgradeofthepowerful tunnel

kiln,inauguratedinSeptember2021.

1 6 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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OTHER

INFORMATION

We endeavour to achieve cost leadership in
every regional market by optimising our global
portfolio of low-cost raw material assets.

Rajah Jayendran

Chief Operations Oﬃcer

During2021 theGroupcontinuedtoadvance

itsfullyautomatedproductionfacilityatits

Radentheinsite,Austria,a ﬂagshipdigitaland

automatedplant.InJune2021,thenewtunnel

kilnatRadentheinwasﬁredandinauguratedby

PeterKaiser,GovernorofCarinthia.Additional

automatedpressesandunmannedvehicleswere

installedwhichwilldriveeﬃciency savings and

lowerproductioncosts,andtogetherwiththe

high performance of the new kiln, the plant

productionisexpected to increase by 30%.

In2022,theGroupwillcompleteitscapacity

expansionofmagnesia-based ﬁnished

products,aswellasitsprogrammeofreduced

conversioncosts.

AtBrumado,Brazil,theGroup’slargestmagnesite

raw materialasset,wehavecommissioneda

projecttoreplaceeightverticalkilnswithone

rotarykiln,whichwillfacilitatethedevelopment

of new raw material sinters as well as considerably

extending mine life, by more than double and

enabletheproductionofvariousdead-burned

magnesiagradesannually.TheBrumadositeis

thelowestcost,highestqualityproducerof

magnesite,andthisprojectwillfurtherincreaseits

competitivenessofmagnesia-basedproductsin

theAmericasandotherregions.TheGrouphas

developedanewinnovativemethodduringthe

extractionprocesstomaximisethemagnesite

outputthroughusingthetailings,whichwould

have previouslybeendiscardedaswaste.Thesite

iswell-positionedforrampinguprawmaterial

production in H2 2022, following a delay to the

projectduetoCOVID-19restrictions.

InUrmitz,Germany,the Groupismodernising

and expandingtheplanttocreate a new hub for

non-basicrefractoryproducts,aswellascreating

a ﬂagship site forimprovedenergyeﬃciency

and recycling.In2021,the Groupadvancedthe

installation of its tunnel kiln and is on track to ramp

upproductionin2022.

In 2021, the Group took the decisiontodelay

theclosure of its Mainzlar site in Germany, given

an unprecedentedstrengthofunderlying

demand in 2021, to ensure that the Groupcan

continuetoserve itsEuropeancustomerbaseas

eﬃcientlyaspossible.Thedecisionwastakenin

ordertomaintainproductioncapacityinEurope,

whilst Radentheinunderwentitsplannedplant

maintenanceaspartoftheProduction

OptimisationPlan,aswellasunplannedschedule

maintenanceinQ32021.The Groupconsulted

theappropriate unionsduringitsdecisionmaking

processesandhasagreedtodelaytheclosure

until the end of 2022.

Mainly due to the highinﬂationaryenvironment

for projectconstructionmaterials,some of the

individualprojectsareexpectedtorequire higher

capitalexpenditure during2022and2023,

however otherparametersoftheprojecthave

movedfavourably,andthe additionalreturns

oﬀset the higher capex such that the economics

oftheprojectsremainattractive.Therefore,in

2023 we expect to achieve €65 million of EBITA

run rate beneﬁt from the ProductionOptimisation

Plan, an increase of €10 million from the original

2022 EBITA run rate target of €55 million.

Vertical integration advantage

The Groupcontinuestobeneﬁtfromitsvertical

integrationinbasicrawmaterial,and in 2021

the totalEBITAcontributionfromitsrawmaterial

assetswas3.2%.The Group’sverticalintegration

isvitaltoitscompetitiveness,withc.70% of the

Group’stotalmagnesiteconsumptionfrom

itsowninternallysourcedrawmaterial,and

c.50% of its total raw material by value. The

Groupstrategicallybeneﬁtsfromitscertainty

ofsupplyandhigh-qualityrawmaterialatlow

cost.Itbeneﬁtsfromitsstrategically positioned

productionsites,closetoitsrawmaterialassets,

whichunderpinthe Group’s“localfor local”

strategy.Itsrawmaterialassetsinsomecases

provide unique productsforspeciﬁc applications

in the market, with a bespoke blend ofrecipes

unrivalledbyitscompetitorsgivenitsportfolio

ofbasicrawmaterialsinters.

The rawmaterialrequiredforanelectric arc

furnaceusesmagnesite-basedoreand RHI

Magnesitaisverticallyintegratedinthisraw

material.TheAnkerHearthproductseriesisused

for the hearth of the electric-arcfurnace, and uses

the Group’sunique alpinesinter,which ismined

atHochﬁlzen,itsrawmaterialassetinAustria. The

product has proven to be the clear marketleader

giventheexcellentspeciﬁcationsofthesinter,

positioningRHIMagnesitaasaleadingrefractory

partner of choice in the green transition of the

steelindustry.

AtContagem,Brazil,weareautomatingthe

productionofmagnesitebasedﬁnishedproducts,

aswellasincreasingcapacitybyc.45%.

Contagemwillbewellpositionedtoserveits

customerbaseintheentireAmericasregionby

the end of 2022. Across 2021, two new hydraulic

presseswerecommissionedwhichwillincrease

productioneﬃciencyand capacity, servingthe

steel,cementandglassmarkets.Civilworkswere

concludedtowardsthecompletionofthenew

comminutionline,withtheinstallationdueto

completein2022.TheGroupiscommissioning

newgrindinglines,whereContagemwillbeable

to grindelectric-fusedmagnesia,aswellasthe

magnesiarawmaterialitcurrentlyprocessesfrom

itsrawmaterialasset,Brumado.Thiswillincrease

productivity,productquality and stability, whilst

loweringoperating costs.

SG&A savings

Inadditiontothecostsavingsidentiﬁedthrough

theProductionOptimisationPlan,theGroup

identiﬁedafurther€30millionofSG&Asavings

during 2020, of which €29 million have been

realisedin2021.Weareenhancingregionalisation

anddecentralisationofmanagerialdecision

making,andrestructured540headoﬃceroles

intotheregionalareas,increasingaccountability

andacceleratingdecisionmakingaswellas

reducingthecostbasebyrelocatingmanagerial

roles to lower cost locations. This will enable us to

directSG&Aexpensestowardsgrowthand

innovationareasofthebusinessaswecontinueto

executeourstrategy.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 1 7

Business model Enhance

Strategic progress in action

business model

The leading service and solutions provider in the
refractory industry, with an extensive portfolio
based on innovative technologies and
digitalisation – the building blocks for a strong
and sustainable future.

Sales strategiesEBITA run rate savings by
2023

€40-60m

Revenue fromsolutionscontracts

29% 27% in 2020

Solutions business model

TheGroup’ssolutionsbusinessmodelisakey

componentofthe Group’ssalesinitiatives,which

willdeliverc.€30millionofadditionalEBITA

by 2022, and €40-60m by 2023 given delays

relatedtoCOVID-19restrictions.Inthesolutions

businessmodel,wepartnerwithourcustomers,

providingconsultancy,engineeringandtechnical

capabilities,aswellasotherservicessuchas

installation and recycling,todrive eﬃciencygains

for the customer. The Groupthenbeneﬁtsfrom

highermarginsolutionspackagesoverthe

mediumtermaswellascapturingmarketshare.

We are committed to derive 40% of all revenue

fromthesolutionsbusinessmodelby2025,and

in 2021, the Group made goodprogresstowards

this target with 29% of all revenue derivedfrom

solutions contracts(2020: 27%).

Digitalisation at our customer sites

Thesolutionsbusinessmodelisaugmented

by RHIMagnesita’srange ofdigitalproducts,

whichincreasesoursaleseﬀectivenessthrough

allowinganincreasingleveloftransparency

for the sales team as well as providing greater

insightsforthecustomerintotheiroperations.

Thisinnovativeapproachenablesadatadriven

andholisticsalesmethod,disruptingthe way

theindustryhastraditionallydonebusiness.

Increaseduseofdigitaltoolsatourcustomersites

also improves ourcustomers’processeﬃciency

andquality.These digitalproductsare provingto

drivegreatermarketpenetrationinnewmarkets,

as well as defend market share in core markets

withexistingcustomers.

Followingthe successfulrolloutofthe

AutomatedProcessOptimisation(“APO”) tool

(used in the steelandnon-ferrousmetals(“NFM”)

industries),usedtoimprove predictability oflining

wearrates,we developedasimilartoolfor the

cement industry in 2021. In 2021, we successfully

rolled out the APO tool to 20 customers, which is

double that of 2020. We alsosuccessfully trialed

the APO tool for cement at one major customer

site. The APO tool is used by the customer to

measurethe wear rates of the refractorylining

usinglasersandinfra-redthermocameras. This

creates a digital twin which can in turn predict

maintenance cyclesandliningdurability,which

enhancessafetyandreducesdowntime. In2021,

wealsocelebratedthe ﬁrstinstallationof the

QuickCheck(“QCK”)inUSA,innovative image

processingtechnologywhichcanbeused to

monitorthe liningwearmeasurements.In 2021

the Groupalsointroducedtoitsdigitalproduct

portfoliothe MechanicalKilnAudit,anovelway to

evaluatethe mechanicalconditionofarotary kiln.

Thisenablesthecustomertoimprove

maintenance measuresandtooptimise the

refractorylayoutaswellasinstallation

procedures.Theauditsupportsearlydetectionof

upcomingissuessothatcost-eﬀective

preventative maintenance can be carriedout.

Weintroducedtheladle slagmodelin2021,

where RHI Magnesita,workingwithitscustomers,

discoveredanovel solutionwherebycustomers

canperformadjustmentsoftheslagwithinthe

ladle furnace.Theladle slagmodelprovidesmore

accurate calculationsthatallowforfasterdecision

making.

1 8 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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INFORMATION

We are constantly innovating to ﬁnd new ways
of supporting our customers and being the
partner of choice in the refractory industry.

Luis Bittencourt

Chief Technology Oﬃcer

Toensureaseamlesscustomerexperiencewe

haverecentlyintroducedconnectedmachinery.

Throughconnectedmachinery,ourcustomers

haveend-to-endoversightoftherefractory

lifecycleintheirplantthroughbothdatadriven

predictivemaintenanceandmachine-driven

warehousemanagement,basedonmeasured

refractoryconsumptionandpredictionoffuture

consumption.Connectedmachinerycan

independentlytriggermaterialordersand

maintenancecycles,andsubsequently,Radio

frequencyidentiﬁcation(RFID)technologycanbe

appliedtorecordandtrackallmaterialmovements.

Virtualrealityhassupportedourabilitytowork

eﬀectivelythroughoutthepandemic,andRHI

Magnesita was able to conduct a virtualplant

tour and audit using “Smart Glasses” from its ISO

plantatBonnybridge,Scotland,attherequest

of a customer in April 2021. The customer’s

representativeswereaﬀordedtheopportunityto

observeandaskquestionsaboutBonnybridge

remotelyfromtheirsitesinFinlandandSweden.

The outcome of the audit was positive, withthe

customerorderingatrialproductfromtheplant.

Our sales teams are able to access their customer

dataholisticallythroughthenewCRM tool,which

providesvaluableinformationtothesalesteam

throughproﬁlingthecustomer,basedonhistoric

data points, and they can then use this data to

predictfuturecustomerrequirements.Data

obtainedthroughourdigital applications installed

withinthecustomerplantsarethenaccessible

throughtheportal,providingthesalesteamwith

a myriad of data points to support their decision

makingtodriveproﬁtabilityaswellasgenerate

eﬃciencysavings forthecustomer.

Digital transformation in operations

InpartnershipwithRockwellAutomation,the

ManufacturingExecutionSystem(“MES”)was

developed,whichcomprisescomputerised

systemsthatareinstalledtotrackanddocument

manufacturingprocessesfromtherawmaterialto

theﬁnishedproduct. By fosteringcomprehensive

real-timevisibility,wewillgraduallyoptimiseour

productionnetworkandprocessesacrossthe

organisation.Radenthein,AustriaandDalian,

China,ourﬂagshipdigitalisationandautomation

plantsarepilotplantstobetransformedinto

“SmartFactories”.Bothoftheseplantsstartedthe

implementationphaseoftheprocessinQ32021.

Theunderlyingtechnologyconnectsmultiple

locations,integratingmachinery,equipment,

quality managementsystemsandotheressential

componentsofthemanufacturingprocess.The

MESwillautomate productionplanning,collect

real-time data,increase overallmanufacturing

performanceandspeedupdigitaltransformation

andexecution.The MES is scheduled to be

complete in the twopilotplantsbyintegrating

withotherautomationandplanningsolutions

in Q42022,anduponsuccessfulcompletion,

will be rolled out more widely across the

productionnetwork.

Recycling

Recycling andourcirculareconomyapproach

arekeytoachievingourambitiousemissions

reductiontargets.The Groupistargetingto

increase its recycling rate to 10% by 2025 from

2018, which will be asigniﬁcantdriverofthe

Group’swiderCO₂emissionreductiontargetof

15% by 2025. In 2021, we continuedtofocuson

circularcontractswithcustomers,andbuild

technologyleadershipthroughourownR&D

developments.InSouthAmericawe made

substantialprogress,registeringarecord

collectionofspentrefractories,thankstothe

combinedeﬀortsofourdedicatedcircular

economyteam,partneringwiththesalesteamsto

providewastedisposalsolutionsforour

customers.We signedacircularcontractwith

Ternium CSA to dispose of 100% of the plant’s

spentrefractory;we’ve collectedmorethan80%

ofthespentrefractoryproducedbyallcement

companiesinBrazil;andrecentlywepurchased

refractorywastefortheﬁrsttime in the glass

industry, tobetterunderstandrecycling

technologyfromthisproductsegment.The

regionachievedan8%recyclingratein2021.

Thespentrefractorymaterialcanthenbe used

in newproductsassecondaryrawmaterials,

such asinthelow-carbonproductANKRALLC

series.Byincludingsecondaryrawmaterial,

theseproductsthenhave asigniﬁcantlylower

CO₂footprintwhilstmaintainingthe technical

speciﬁcationandhighperformanceofaproduct

madeusingvirginrawmaterial.

Innovation and R&D

Underpinningthebusinessmodelisthe Group’s

abilitytoinnovateandadaptitsproductsand

servicestobestserve itscustomers'evolving

needs andrequirements.Ourindustry-leading

R&D teamisfundamentaltothestrategyand

long-termaspirationsoftheGroup,witha563

workforce whichincludesacombined total of 148

PhDsandmasters,acrossﬁvetechnologycentres.

TheGroupcommitted2.5%revenuetoR&Dand

TechnicalMarketingin2021 andachieved16%of

totalrevenuefromnewproductsinthelastthree

years(2020:16%).Wearecommittedto

protectingtheintegrityofourexpanding

intellectualproperty,andcurrentlyhave1572

activepatentsand1,707activetrademarksglobally.

The TechnicalAdvisoryCommittee(TAC) was

establishedin2018andincludesrepresentation

fromseniorexternalprofessionals,R&D and

technicalmarketingteams.Board directorshave

alsoattendedTACmeetingsonoccasionto learn

more about areas of innovation. In 2021, the TAC

consideredthe topicofhightemperaturesensors

forharshenvironmentsandexternalexperts

were invited to evaluate how we could utilise

technologiesfromextreme environment

applicationsforsupportingthe development

of our future sensortechnologies.

We are constantlyinnovatingand pioneering the

productionofbothrawmaterialsand refractories.

An example of this is the Spinospheretechnology

used in our ANKRAL-X series, with itsunique

characteristicsintermsofclinker-meltresistance

andﬂexibilityforrotarykilnbricks.InMarch

2021, we celebrated the opening of the new

Spinosphere Tower at our Veitsch site in Austria,

which is fully integrated into the already existing

fullyautomatedmixingplantinVeitsch to

maximise capacity,increasingthecompetitive

advantageoftheplant.

Werecognisetheimportanceofadaptingtoa

changingworld,whichinvolvesmoredigitalisation,

increasedconnectivity,disruptivetechnologies

andarequirementformoresustainableproducts

andprocesses.Forthisreason,wehavedeveloped

a15-yearinnovationroadmap,ensuringthatwe

continuetoleadtheindustrythroughpioneering

technology.Wehaveidentiﬁedeightinnovation

ﬁeldsandareaswhichwillbeoffocus,including

recycling,pioneeringproductionroutes,hydrogen

compatibility,newrefractorysolutions,newﬂow

controlsolutions,newminingandcarboncapture

andutilisation.Thecarboncaptureandutilisation

project was launched in 2021, and we aim to have

thetechnologysolutionby2025whichwillcreate

thepathforafulldecarbonisationoftheCompany.

Read more on our Climate strategy

Page 61

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 1 9

Markets Drive market

Strategic progress in action

leadership

The Group has c.15% global market share
(c.30% ex-China and East Asia) within a
c.€20 billion industry, worldwide presence
with strong local organisations and solid
positions in all major markets.

Revenue fromIndia and China in 2021

18% 2020:16%

Enhancing regionalisation

RHIMagnesita’srefractoriesbusinessisdrivenby

ourcorecustomermarkets;Steel,Cement&Lime

and a varietyofotherindustrieslikenon-ferrous

metals, glass, foundry,energy,environmentand

chemicals and aluminum.Theirdemandisdriven

byconstruction (45%),automotive (17%),

electronicsandconsumergoods(15%),

machinery and equipment(10%),energy,oil and

gas (5%), and others (8%). Currently, RHI

Magnesitahasac.15%marketshareglobally

(c.30% ex-China and East Asia) within a €20

billionindustry;itcommandsworldwidepresence

withinstronglocalorganisationsandsolid

positionsinallmajormarkets.

Underpinningourstrategywithinthese markets

arekeymegatrends,whichwillinﬂuencethe

strategyandultimatelyshape theCompanyin

thefuture.Thetrendsshapingourindustrytoday

includecontinuedgrowthinAsia(ex-China),

thedecarbonisationofindustryandtransport,

connectivity anddigitalisation,automationand

artiﬁcialintelligence,volatilityandregionalisation.

beneﬁtconstructionprojectsglobally,main

driversforourSteelandCementbusinesses,

andconsumerdemandfordurable goods,a key

consumingsectorforSteel,StainlessSteeland

NFM.However,thesharpreboundofdemand has

ledtosupplychaindisruptioninlogisticalcosts

includingfreight,rawmaterialavailability and

labourshortages,leadingtounpredictability

inourvaluechainandlongerproductionlead

times.The supplychainissuesmaterially

impactedbothRHIMagnesitaandalsoits end

markets,particularlyautomotive.Automotive

experiencedasurge incustomerdemand

during2021;however,giventhetightsupply

ofsemiconductormicrochips,steelandother

keyinputs,productionofAutomotive materially

TheSteelDivisioncontributesc.70%ofGroup
revenue, anddemandforrefractoryproducts
correlateswithsteelvolumes.In2021,global
steelproductionincreasedby4-5%drivenby
thestrongeconomicreboundfollowingthe
impact of the pandemic during 2020, with the
V-shapedrecoveryinsteeldemandexceeding
expectations, especiallyinemergingeconomies.
Strongdemandwasdrivenbyglobalﬁscalstimuli
of over $20 trillion as part of worldwide COVID-19
response.Fiscal stimulipackageswill particularly

2 0 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

By decentralising decision making to the
regions, we aim to become more ﬂexible,
adaptable and responsive to evolving
customer needs.

Gustavo Franco Chief Sales Oﬃcer

Growth markets

RHIMagnesita’sendmarketgrowthrates

excludingChinaarebetween1-2%.TheGroup

hasthereforeidentiﬁedpocketsofgrowthwhich

representastrategicopportunityinmarket

regions such as India, China and Turkey, as well as

intheproductsegment,FlowControland

non-basic.TheGroup’sapproachtoM&Ais to

capturevalue-addingconsolidationopportunities

inunder-representedmarkets.TheGrouphas a

disciplinedapproachto M&A and identiﬁes

targetswithcompellingsynergiesanda hurdle

rate of 15% return on invested capital.

In China, the Group continued to make good

progressinexpandingitspresenceinbothSteel

andIndustrial,with20%revenueincrease

compared to 2020. With China being the

unrivalledlargeststeel producerintheworld,

this marketrepresentsa signiﬁcantgrowth

opportunityfortheGroup.DespitetotalChinese

steeloutputbeingcappedbygovernment

policies to 2020 levels, many new Electric Arc

Furnacesarecurrentlyinthepipelinetostart

transitioningtheChinesesteelindustrytoa

modernCO₂eﬃcientstate.Theseprojects

representamajorgrowthopportunity.The

Groupleveragesitsuniquecapabilitiesthrough

itssolutionoﬀeringand digitalapplications

comparedtoitsregionalcompetitorswhich

generallyhaveamorecommoditisedapproach.

In 2021 theGroupsuccessfullyagreedtwonew

solutionscontracts.On30December2021 the

Groupacquireda51%ownershipstakein

‘ChongqingBoliangRefractoryMaterialsCo.Ltd.’

for a cash consideration of €5 million and an

investmentofc.€12millioninnewproduction

capacity, to be deployed in 2022 and 2023 with

an IRR of over 25%. The acquisition and joint

ventureinvestmentwillestablishoutputof

non-basicrefractoriesalongsidearecently

constructedandfullyautomatedplantin

Chongqing,China,thatwillcomplementthe

Group’sexistingmagnesite-based operations in

Daliananddeliverafullrangeofrefractory

productsforcementcustomersinChinaand

SoutheastAsia.

The Group has agreed to acquire a 85% stake

inSöğütRefrakterMalzemeleriAnonimŞirketi

(“SÖRMAŞ”),aproducerofrefractoriesforthe

cement,steel,glassandotherindustriesinTurkey,

for a consideration of €39 million in cash. The

asset recorded €6m EBITDA in 2020 and we

expect to beneﬁt from at least 30% EBITDA

synergies.Theacquisitionwillsigniﬁcantly

expandtheGroup’slocallymanufacturedproduct

portfolioandserveasaproductionhuband

platform for business growth in Turkey and the

widerregion.Withanenlargedproductportfolio,

furtherpotentialstemsfromtheopportunityto

deliverfull-line servicesolutionstocustomersin

Turkey.

Indiacontinuestobeaveryattractive growth

opportunityforthe Group,maintainingsecond

positionasthe world’slargeststeelproducerin

2021,drivenbydomesticavailabilityofraw

materialsuchasironoreandcompetitive labour

costs.TheWorldSteelAssociationshortrange

outlook forecasts that steel in India is going to

grow signiﬁcantly by 6.8% in 2022 given India’s

comparativelylowpercapitasteelconsumption

which is expected to rise. This will be driven by

increasedinfrastructure constructionandthe

thrivingautomotiveandtransportationsectors.

The creation of the single RHIMagnesitaentity

in India,followingthemergerofthreeseparate

entities,hascreatedastrongplatforminthe India

market,primedtobeneﬁtfromthestronggrowth

opportunity.Ofproduction,35%issuppliedto

customersininternationalmarkets,whilst65%is

consumedinIndia’sdomesticmarket.InOctober

2021 a new tunnel kiln was commissioned at

the Vizag plant, India. The new tunnel kiln will

increasethecapacityofnon-basichighalumina

contentrefractorybricksbyalmost20%.The

Groupalsoinvestedincapacityexpansionof

magnesia-basedrefractoryproductsatits

Cuttackplant,increasingproductionsigniﬁcantly,

and freeing up local capacity in China. The Group

will fully start to realise thebeneﬁtsfromits

investmentsinitsVizagandCuttackplantsin

2022,inalignmentwiththemarket’sconsiderable

growthtrajectory.

Core markets

RHIMagnesitaisfocusedondefendingand

subsequentlyexpandingitsmarketshareincore

markets,Europeandthe Americas,andis

committedtofurtherstrengtheningitsposition

in thesemarketsthoughitsunrivalledsolutions

product oﬀering,augmentedbyitsadvanced

digitalproductportfolio.We remainthe clear

marketleadersintheAmericas,withapproximate

marketshare of c.65% in South America and

marketshare of c.40% in North and Central

America,thankstothe successofthe solutions

businessmodel,andthroughitsleadingposition

insupplyingelectricarcfurnaces.Marketsharein

Europeisaround20%where we focus on our

valueoptimisationstrategy,deliveringoursuite of

productsascosteﬀectivelyaspossible.

Flow control

Flow control systems play a crucial role on

the continuouscastingﬂoor,asthey ensurean

uninterruptedandhighlyprecise ﬂowregulation

fromtheladle to the tundish and from the tundish

tothemould.Ourholisticapproach in Flow

Controlreachesfromladle tomould,comprising

allrelevantaspectsofthe FlowControlprocess

fromsystems,torefractories,tometallurgy. Our

innovative solutionsensure the highestpossible

safetystandards, whilstdelivering better

metallurgicalresultsforourcustomers.

In 2021, we launched our ﬁrst global, multi-

channel Flow Controlmarketingcampaign

“BeyondRefractories”.StartinginSouth America

andMexico,the campaigninforms existingand

potentialcustomersaboutourFlowControl

solutionspackagesforcleansteel,safety,

productivity,andgreensteel.Itaddresseskey

challengesinFlowControlandshowcaseshowto

masterthembyusingRHIMagnesita’scustomised

solutions.Thus, the campaignbuildscustomer

awarenessanddemonstrateswaysto achieve

steelofthehighestpossiblequality,maximise

safetyinchallengingworkingenvironments,drive

processeﬃcienciesandreducetheir carbon

footprint.

To ﬁnd more information on the individual

solutions,visitthe campaign website

www.beyond-refractories.com

FlowControlcontributed€430millionof

revenue in 2021 from (€380 million in 2020),

and was broadly in line with2019 revenue. Flow

Controlcontributed16.9%ofGroup revenuesin

2021,broadlystablecomparedto 2020(16.9%).

However,2021 revenuecontributionfromFlow

Controlwasamarkedimprovementon2019

(15.3%).We are delayed by one year in the Flow

Controlsegment,givenlackofaccessto

customersitesduringthe COVID-19restrictions.

Itisthereforewellpositionedtoreach itstarget

contributiontowardsthe salesinitiativesin2023,

ratherthan,aspreviouslyguided,in2022. The

salesinitiativeswillcontribute acombined total

EBITA run rate of €30 million by 2022, and €40

– 60 million in 2023.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 2 1

People and Culture The driving force

Strategic progress in action

of our strategy

Our skilled, motivated people, our customer-centric
culture and our strong stakeholder partnerships are
critical to the long-term success of the Group.

Tenure

Up to 3 years 33%
From 4 to 6 years 17%
From 7 to 9 years 11%
Over 10 years 39%

Workforce

Our purpose and culture

support our strategy

Ourpurposeistomasterheat,enablingglobal

industriestobuildsustainable modernlife.

the workforce,suchasremunerationand any

issues arising as part of the plantchangesand

closuresfromtheProductionOptimisationPlan.

Readmore on how we engage with our

employees

Pages 52 and 53

South America 37%

Western Europe 28%

Asia Paciﬁc 21%

North America 10%

Near and Middle East 2%

Eastern Europe 1%

Africa 0%

Our culturehas underpinnedourfoundations

insupportingourbusinessthroughanother

challengingyearin2021,where ourworkforce

hascontinuedtodemonstrate thepowerful

elementsofourculture,suchascustomer-

focusedpragmatismandperformance,a

philosophyattheheartofeverythingwe do.

The culture is based on four segments. We boldly

innovatetocreate value forourcustomers,by

providingthebestdigitalandsustainable

solutions.Ouropenmindsetandtransparent

way of working is centred around a diverse

andinclusivebusinessenvironment.We act

pragmaticallytoenable fastandsimple

collaborationacrossfunctionsandregionsto

serveourcustomersbest.Ourhighperformance

isrootedinaccountabilityandresponsibility.We

areareliableandresilientpartnerthatdecides

anddeliversbasedonourcustomers’needs.

To reinforce our culture, we regularlyhost

regionaland functional townhalls,encouraging

collaborationandanopendialoguebetween

employeesand seniorleadership.Ourthree

employeerepresentativesdirectorsprovide an

eﬀective, direct voice in the boardroom on a range

ofissues,inparticularthosewhichdirectlyimpact

Creating the leaders of tomorrow

Wefosteremployeedevelopmentandrecognise

theunparalleledimportanceofcreatingtheleaders

oftomorrowinordertoexecutethestrategy.We

haveimprovedourreadinessintheworkforcefor

morevolatility,unexpectedmarketchangesand

long-termdisruption.Throughvariousinitiatives,

weareequippingourselveswiththenecessary

skillsrequiredtoprosperinanet-zeroindustry,grow

ourdigitalcapabilitiestocreateanincreasingly

data-drivenplatformandlastly,thriveingrowth

marketssuchasIndiaandChina.

In 2021, we rolled out the digital sales

transformationprogramme,designedtoenhance

the digitalanalyticsculture of the sales

organisationacrosstheglobethroughtheCRM

tool. This will equip the sales team with new ways

to sell our solutions to customers. To be

successful,digitalmindsetneedstobe

embeddedintoeveryaspectofbusiness.

OurdigitalhubinVienna,Austria,isdedicatedto

leadingtherefractoryindustry,frombigdatato

blockchaininrefractoryapplications,providingour

customerswithamarket-leadingdigitaloﬀeringto

supportoursuiteofproductsandservices.

2 2 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

In order to progress our goal of digitalisation,
we need the skills and pioneering culture to
support technology.

Simone Oremovic Executive VP People, Project
and Value Chain

Radenthein,Austria,isthemosttechnologically

advancedplantintheglobalrefractoryindustry

and now serves as the new apprentice hub in

Austria.Theplantenjoyeditsﬁrstfullyearof

apprenticetraininginprocesstechnologyin2021,

tosupplementitscoretrainingprogrammeand

alsolauncheditsnewtrainingfacility.

AtthetrainingcentreinLeoben,Austria,we

launchedanacademyto provideour employees

andourcustomerswithtrainingintheinstallation

ofrefractorybrickswithinthelimekiln.The

trainingsarebasedontheprovenfundamentals

fromthehighlysuccessfulcementcoursesatthe

centrebutadaptedtoLimespeciﬁcelements.The

trainingcentreforcementatLeoben,celebrated

its10-yearanniversaryin2021,oﬀering

state-of-the-arttraining,andoverthattimehas

sharedspecialistknowledgeandexperiencewith

morethan550customersfromthecement

sector,specialistsfromrelatedindustriesand

in-houseprofessionals fromvariouscountries

withover50courseshavingbeenheld.

Supporting our workforce through

achallenging year

During2021,theGroup’sﬁrstpriorityinits

COVID-19responsewastoprotectthesafetyand

wellbeingofouremployeesandothersthatwork

alongsideus.Ourregionaltaskforcesestablished

in2020continuedtoworktirelesslyduring2021,

respondingtochallengesthroughouttheyear

on a regional basis and taking guidance from the

WorldHealthOrganization(WHO),Centresfor

DiseaseControlandPrevention(CDC),local

governmentsandothersources.We

implementedaremote workingstrategy where

possibleinthecorporateoﬃces.Wecontinued

to implementsafetyprotocolsatourproduction

facilitiesandoﬃcesworldwide,includingthe

provisionofpersonalprotectiveequipment(PPE),

infra-red cameratemperaturechecks,increased

cleaning,testingstrategiesandaglobal

vaccinationdrive.Inresponse tothedevastating

secondwave inIndiathroughoutspring2021,

wedeployedafocusedvaccinationdrive in the

region.Thevaccinationdrive hasmeantthat

every employee of any age, their families and

residentsofcommunitiesnearbyhave been

oﬀered at least one dose of the vaccine,andin

October2021,100%ofemployeesinthe Indian

plantsincludingcontractualworkforce,had

received at least one dose. By December 2021,

more than half had received two doses. The plant

managementandsafetyteamsconducted

vaccinationinitiativesatthe plantsincluding

vaccinationregistrationandsupport,helping

to achieveitsvaccinationsuccessrate.

We ensure that our employees are as protected

as possible during the pandemic and we made a

concertedeﬀortinourvaccinationdrive incertain

regionsthatwere mostaﬀectedandhadless

accesstohealthcare,likeSouthAmerica.By

31 December 2021, a total of 99% of the entire

workforceinSouthAmericahadreceivedtheir

ﬁrst dose of a COVID-19 vaccine, and 81% of

employeeshadreceivedtwodoses.

Throughoutthispastchallengingyear,ithasbeen

more important than ever to make sure thatour

employeesareoﬀeredsupportformentalhealth

and wellbeing.Tohelpsupportemployeesduring

thisextraordinarytime,we launchedthe Head

Oﬃce(Vienna)basedemployee assistance

programme,“Consentiv”,whichoﬀers

anonymousface-to-face servicesincluding

counselling,coaching,mediationandconﬂict

interventionforallViennabasedemployeesand

theirfamilies.OutsideofVienna,wehave

partneredwithlocal external providersaround

the world in order to oﬀer support to our

employeesinternationally.Webelieve increating

anorganisationwhereeveryonehassomeoneto

turntoforsupportwithbothprofessionaland

personalissues.

Building a diverse, equitable and inclusive

workforce

The Grouplauncheditsﬁrsteverglobalgraduate

traineeprogrammein2020,the“Refractory

Factory”,withourﬁrstintakenowapproachingthe

endoftheir18-24monthleadership journey.

Graduatetraineeshaveworkedonrotational

assignmentsacrossFinance,Salesor R&D,

participatedinstrategicgrowthprojectsand

workedinatleasttwolocations.Thetrainee

programmeisdesignedtobringyoungtalentinto

our business, helping us to build a multi-

generationalworkforce.Ourlatestgraduate

intakerecruitedduring2021 for2022included 21

traineesacross11 nationalitiesandwith 57%

female representation.

The Groupiscommittedtoincreasingitsgender

diversityatleadershiplevel,andin2021

welcomedﬁvenewDirectorstotheBoard,

includingthree independentNon-Executive

Directorsandtwoemployee representatives.

Followingthesenewappointments,Board female

representationisnow38%.Currently,22% of

all seniorleadershippositionsare held by females

whichincludesthe EMTandtheirdirectreports.

RHI Magnesita’s goal is to increase the share of

female leaders to 33% by 2025.

To help us succeed in the future werequirethe

broadestrange oftalentandperspectivesfrom

avariedworkforce,especiallyintermsofgender

diversity,international representationand

generationmanagement.AtRHI Magnesita, we

arecommittedtooﬀeringinclusion to everyone,

anddiscriminationhasnoplace at our Company.

Toincreaseoureﬀortstoexpanddiversity within

ourworkforce,adedicatedGlobalDiversity

SteeringCommitteewasestablished in June

2021,followedbyRegionalDiversity Steering

Committeesintheregions.Thepurposeofthe

committeesistopromoteglobaland regional

measurestoincreasediversity,keep trackof

progressandcoordinate rolloutwith line

functions.InDecember2021,theExecutive

ManagementTeamcommittedtoexecuting

anewandimpactfuldiversitystrategy with a

greaterfocusongenderdiversityin2022.

Readmoreondiversityand inclusion

Page 65

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 2 3

Key performance
indicators

The Board and management

have identiﬁed the following

indicators which it believes

reﬂect the ﬁnancial and

non-ﬁnancial performance

of the business.

Safety: LTIF Relative CO₂emissions

(t CO₂/t)

2021 0.18 2021 1.82

2020 0.13 2020 1.96

2019 0.28 2019 1.85

2018 0.43 2018 1.89

The non-ﬁnancial

information, as presented

within the Director’s Report,

which in this document

comprises the Strategic report

and Governance section of

this Annual Report, complies

with the Dutch Disclosure of

Non-Financial Information.

KPI relevance

Safetyis paramount to thesuccessful running of our

business.LostTimeInjury Frequency (LTIF) isthemain

indicatorused tomeasuresafety performance.

TheGroup’s goal iszero accidents.

How it is measured

Thenumber ofaccidentsresulting inlost timeof more

than eighthours,per200,000 working hours,

determined onamonthly basis.

KPI relevance

Climatechangeposesstrategic andoperational risks

to ourbusiness, aswell asopportunities. TheGroup’s

target is to reduceScope1, 2, 3(raw materials) by15%

pertonneof product by 2025(vs2018).

How it is measured

TonnesoftotalScope1,2,3(rawmaterials)carbon

emissionspertonneofproduct.Scope1 emissions

consistofon-siteemissions,Scope2comprise

purchasedelectricity,andScope3aremeasuredfrom

rawmaterialsproduction.

Link to strategy 2021 performance 2021 performance

Business model

Competitiveness

Markets

LTIF was 0.18 in 2021 (2020: 0.13) and TRIF (Total

Recordable Injury Frequency) increased slightly to 0.60

(2020: 0.45), broadly in line with industry averages. The

rate of occupational injuries increased slightly compared to

the prior year as staﬀ returned to workplaces following the

COVID-19 pandemic, production volumes increased and

as the Group progressed construction projects at several of

its sites as part of its network optimisation.

CO₂emissions intensity reduced to 1.82 tCO₂per tonne of

product, compared to 1.96 in 2020. Higher Scope 3

emissions from externally purchased raw materials were

oﬀset by eﬃciencies from high plant utilisation, increased

purchases of electricity from renewable sources,

improved energy eﬃciency, higher use of secondary

raw material and an increase in production of fused

magnesia at the Group’s Contagem site in Brazil using

renewable electricity.

Use of secondary

raw materials₁

Voluntary employee

turnover

Gender diversity in

leadership

2021 6.8% 2021 6.8% 2021 22%

2020 5.0% 2020 5.1% 2020 25%

2019 4.6%²2019 6.2%¹2019 17%

2018 3.8% 2018 6.6% 2018 12%

KPI relevance KPI relevance KPI relevance

Recyclingplaysa criticalrole inachieving our 2025

emissions reductiontarget while alsodeveloping the

circularityofourbusiness. Ourtargetis toreach10%

secondaryrawmaterial(SRM) contentin refractories

by 2025³

Voluntaryturnoverisoneway of measuring theGroup’s

success in retaining itsemployees.

Diversity isimportant intermsof maintaining our

competitivenessandeconomic success,andgender

diversity isourﬁrst priority. Ourtarget is to increase

femalerepresentation insenior leadershipto 33% by

2025.

How it is measured How it is measured How it is measured

Share of SRMcontent asa percentageoftotal raw

materials.

Thepercentageof employeeswho voluntarily le

Companyduring theyearandwerereplacedby new

employees.

Numberof womenasapercentageof all those in

leadershippositions(CEO, EMT andEMT direct reports).

2021 performance 2021 performance 2021 performance

SRM accounted for 6.8% in 2021, compared with 5.0%

in 2021. The strong progress made during the year was due

to new initiatives to increase collection and processing of

material from customer sites combined with an internal

incentive scheme designed to reward sales of refractories

with higher recycling content.

Voluntary employee turnover was 6.8% for 2021, in line

with historic averages but an increase on the rate of 5.1%

recorded in 2020, when staﬀ turnover was temporarily

lower due to the COVID-19 pandemic and associated

uncertainty in the global economic environment.

Female representation at leadership level decreased to

22% from 25%. The Group is pursuing a number of

initiatives to increase female represenation toward target

level.

1 Achangeinproductionvolumereportingsystem hasledto an

adjustment tothe2018baseline andKPI.

2 Thevalueforthe recyclingratefor2019hasbeenrevisedsince

thepublicationofthe 2019AnnualReport.

3 UseofSRM hasbeenaddedasaremunerationperformance

measurefrom2021 –seepage121.

1 The 2019 ﬁgure has beenrestatedduetoa retrospective

change to the basis ofanalysis.

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Revenue Adjusted EBITA margin Adjusted EPS

2021 €2,551m 2021 11.0% 2021 €4.52

2020 €2,259m 2020 11.5% 2020 €3.28

2019 €2,922m 2019 14.0% 2019 €5.57

2018 €3,081m 2018¹13.9% 2018 €5.31

KPI relevance KPI relevance KPI relevance

Thisdemonstratesthe growthofthebusiness.

Byincreasingourglobalrefractorymarketshare,

continually enhancingourproductand serviceoﬀering,

the Company isfocusedon achieving revenuegrowth

andaimsto outperform therefractories marketon an

annualbasis.

EBITAmarginprovidesameasureof proﬁtability

and demonstratesthesuccessful executionof the

Company’sstrategy.

Reﬂecting theincomestatement inaclear wayand

taking theequity structureinto account, the Board

believesAdjustedEPS to beoneof the indicators which

demonstratesshareholdervalue.

How it is measured How it is measured How it is measured

Total Group revenue, asreported in theﬁnancial

statements.

Adjusted EBITA dividedby revenue, asreportedinthe

ﬁnancial statements.

Earningspershare, excluding otherﬁnancial income

andexpenses.

2021 performance 2021 performance 2021 performance

Revenue for 2021 amounted to €2,551 million, 13% higher

than 2020 given increased customer demand driven by

the rebound of end market activity, following the adverse

impact of the COVID-19 pandemic in 2020.

The Group delivered a double-digit adjusted EBITA margin

of 11.0%, 50bps lower than 2020 due to increases in

freight, externally purchased raw material and energy costs

that were not fully passed on to customers during 2021.

Adjusted EPS of €4.52 (2020: €3.28) reﬂected higher

operating proﬁts and a reduced share count due to the €98

million share buyback programme (thereof €96 million

share buyback in 2021 and €2 million share buyback in

2020).

Leverage ROIC R&D and Technical
Marketing spend

2021 2.6x 2021 9.6% 2021 €63m

2020 1.5x 2020 11.5% 2020 €62m

2019 1.2x 2019 15.3% 2019 €64m

2018¹1.3x 2018 16.5% 2018 €63m

KPI relevance KPI relevance KPI relevance

Appropriate leverage provides thebusiness with

headroom forcompellinginvestmentopportunities

butalso enablesshareholderdistribution.TheBoard has

deﬁneda long-term leveragetargetrangeof0.5 to1.5x

acrossthe cycle.

Return on investedcapital (ROIC) isusedto assessthe

Group’s eﬃciency inexecuting itscapital allocation

strategy,which isaimedat enabling organic growth,

disciplinedM&A andshareholderreturns.

ExcellenceinR&D andstrong Technical Marketing

capabilitiesarekey contributorsto our competitiveness.

Thisdemonstratesourcommitment todriving innovation

andto being theleading providerof services and

solutionswithintherefractoriesindustries. The

Company aimsto invest 2.2% perannum of revenue

inR&D andTechnical Marketing.

How it is measured How it is measured How it is measured

Netdebt to adjustedEBITDA.

Calculated asnet operating proﬁt a

total investedcapital1fortheyear.

Annual spendon research anddevelopment,

beforesubsidiesandincluding opexand capex.

2021 performance 2021 performance 2021 performance

Net debt to adjusted EBITDA was 2.6x at the year end,

above Group’s target range of 0.5-1.5x due to a material

increase in inventory levels during 2021 to mitigate

supply chain disruptions and high capital expenditure

on strategic initiatives.

ROIC decreased from 11.5% in 2020 to 9.6%, due to

lower underlying proﬁtability against comparative

invested capital.

€63 million was committed to R&D and Technical

Marketing in 2021, equating to 2.5% of revenues,

exceeding the Group’s annual commitment of 2.2%.

1 2018wasadjustedtoincludethe impact of IFRS16. 1 Investedcapitalis:totalassets less cashandcashequivalents,
othercurrentandnon-currentﬁnancialassetsand

non-interest-bearingcurrentliabilities.

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Operational
review

Strategic initiatives are progressing in building
a strong and sustainable platform, despite a
challenging supply chain environment.

Revenueincreased year on

year by 13% to €2,551 million

(2020: €2,259 million) and by

16% in constantcurrency

terms, with shipped volumes

now above 2019 levels

Steel Division

€127 million priceincrease
programme realised largely in
Q4, to mitigate unprecedented
supply chain disruption
includinghigher freight,energy
and purchased raw material
costs

Cost saving initiativesnow

expected to deliver c.€90

million of EBITA beneﬁt from

cost optimisations in 2022 and

€110 million in 2023

Sales strategies now targeting

€40-€60 million in 2023 as

Flow Control trials and

solutions contracts delayed by

lack of access to customer sites

during pandemic

Maintained strong market share

in Electric Arc Furnace

refractories,whichgenerated

16.2% of Group revenues

Digital products support

growth in solutionscontracts,

now representing 29% of

revenue

Steel revenue

€1,823m

2020: €1,570m

Steel gross margin

21.6%

2020: 23.4%

The Steel Division accounts for roughly 70%

of Group revenues, and demand is driven by

global steel production volumes.

Refractoryproductsare used to line steel

applicationsinthe plant,toprotectagainstthe

extremetemperaturesofliquidsteelofup

to 1,800degreesC.RHIMagnesitaoﬀersa

completeproductandserviceportfolioforall

steelapplications,includingprimarysteelmaking

suchasbasicoxygenfurnace(BOF),electricarc

furnace (EAF) and ladles as well as ingot and

Revenue breakdown by

geography in Steel Division

North America 28%

South America 15%

Europe/CIS/Turkey 26%

China and East Asia 11%

India, West Asia and Africa 20%

continuouscasting.Refractorieshave a ﬁnite

lifetimeofbetween20minutesandtwomonths

insteel applications.Theyare consumableitems

andtherefore treatedasanoperatingexpense

bysteelproducers,accountingforbetween

2-3% of the costofsteelproduction,onaverage.

The Divisionservesover1,000customer sites

worldwide,withaglobalmarketshare ofc.15%,

or c.30% excluding China and East Asia.

SteelDivisionrevenuesincreasedby16%in2021,

to€1,823million(2020:€1,570million)

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reﬂectingthestrongeconomicrebound globally

followingtheimpactofCOVID-19ondemand

in2020.WorldSteelAssociationrecordedan

increaseinglobalsteel production of 4% in 2021

compared to 2020, and by 4% in 2021 compared

to 2019.Comparatively,SteelDivisionrevenues

were down by 10% on 2019 (2019: €2,018

million).Grossproﬁtfor theDivisionwas€394

million,7%higherthan2020(2020:€368

million).However,grossmargindeclinedoverthe

sameperiodby180bps,predominantlyduetothe

adverseimpactofsupplychaindisruptionswhich

increased the cost of sales, and the timing of

passingthroughcostincreasestohigherproduct

pricesintoH1 2022.

The Group is making good progress in Europe in

itsstrategytoconsolidateitsproductionfootprint

anddriveeﬃcienciesthroughautomationand

modernisationofplants.The Groupinvested

€27 millionatHochﬁlzen,Austriain2021 to

transformitintoaEuropeanhubfordolomite-

basedmaterials.In2021,the newmine and

automatedconveyorsystemsweresuccessfully

commissioned,andthenewrotarykilnbecame

operationalinQ42021.Productionfromthe

newlyinstalledfacilitiesisexpectedtoramp

up over the ﬁrst half of 2022.

ReadmoreaboutourProductionOptimisationPlan

progress in the strategy section on pages 16 and 17.

Alignedtothe Group’sstrategyofgrowth in

currentlyunder-representedregions,theGroup

agreedtoacquireinOctober2021 an85.2%

ownershipstake inSöğütRefrakter Malzemeleri

AnonimŞirketi(“SÖRMAŞ”),aproducer of

refractoriesforthe cement,steel,glassand

otherindustriesinTurkey,foraconsideration

of €38.8 million in cash. The acquisition will

signiﬁcantlyexpandtheGroup’slocally

manufacturedproductportfolioand serveas

aproductionhubandplatformfor business

growth in Turkey and the widerregion. With

anenlargedproductportfolio,further potential

existsfromtheopportunitytodeliver full-line

service solutionstocustomersinTurkey.

Refractoryproductionincreasedin2021,in

responsetoincreasedendmarketdemandas

economiesstartedtore-open.However,plant

productioncapacitywashamperedbythe

construction work at some of our key plants, as

partoftheProductionOptimisationPlan,which

wasfurtherexacerbatedbythesupplychain

disruption. Freightavailability remained poor for

themajorityoftheyear,containerisedshipping

remaineddisruptedandtightnessinthismarket

isexpectedtocontinue into2022.Thisheavily

impactedthesupplychainforbothshippingraw

materialtoproductionplantsandﬁnishedgoods

to customersites.Regionswhichrelyheavilyon

raw materialimportsforrefractoryproductionand

ﬁnishedgoodswereimpactedmoreseverelyby

the supply chain issues, such as the India and

WestAsiasteelregion.

Aspartofitsdigitalisationinitiative,theGroupsigned

itsfirstAutomatedProcessOptimisation(“APO”)

digitalservicecontract,acloudbasedreal-time

monitoringandmaintenancesystem,withacentral

Europeancustomerontheoperationalperformance

oftheRHdegasserapplication,withsecurity

standardsbasedonblockchaintechnology.

TheGroupmadegoodprogressingrowingits

solutionbusinessmodelintheregionduring

2021.TheGrouprenewedasolutionscontract

withalongstandingcustomerinPolandforan

additionalﬁveyears,followinganexisting10-year

relationship.TheGroupalsosecuredalarge

solution contract for a CIS customer, in joint

collaboration with an OEM partner, for a BOF

application,enhancingtheGroup’sgrowth

trajectoryinthisstrategicmarket.

In2021,theGroupalsosignedandimplemented

itsﬁrston-siterecyclingcontractwithArcelor

Mittal,France.Thecontractincludesthesorting

andre-useofspentrefractoriesatthecustomer

site.Theon-siterecyclingfacilitywillhave

theabilitytosortmorethan20,000tonnes

ofmaterialperyear,withapproximatelyathird

of that expected to be eligible for reuse as

secondaryrawmaterial,allowingtheGroupto

bothexpanditssolutionsportfolioaswellasdriving

itssustainabilityeﬀorts.RHIMagnesitacommits

tohelpitspartnerstoreducelandﬁllcostsby

increasingtheshareofsecondaryrawmaterialinto

itsownproduction,underpinnedbyappliedR&D.

More detailsareavailable on the Group’s website.

FromQ22021,theGroupimplementedprice
increasesacrossallbusinessareastotalling
€130milliontomitigatetheincreasingly inﬂationaryenvironmentandwassuccessful
inachieving98%oftheseplannedpriceincreases
in2021,withfurtherbeneﬁtexpectedin2022.
Thepriceincreasenegotiationsweresupportedby
agenerallyhigherproductpricingenvironment
duringQ4,includingrawmaterialpriceincreases.

Europe, CIS, Turkey

Total revenue for the year in Europe, CIS and
Turkey amounted to €474 million, up 9% on
2020 (2020: €437 million). On a constant
currencybasis,revenuesincreasedby9%from
€434millionin2020.TheGroup’soverall
performanceinthecombinedregionwas
positivelyimpactedbytherecoveryofthe
Europeansteelmarket, as well as increases in
marketshareandhigherﬁnishedgoodspricing
given higher raw material prices in Q4. World
SteelAssociationdatarecordeda 11%increasein
steelproductionintheregioncomparedto2020.

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Operational review continued

Americas

Totalrevenuesfortheyearof€784millionin NorthandSouthAmericarepresenteda15% increaseon2020(2020:€681 million),asdomestic
steelproductionenjoyedastrongreboundand
steelproductionreturnedto,andinsomecases
exceeded,pre-pandemiclevels.Strongdemand
forsteelintheAmericasisexpectedtocontinueinto
2022andbeyond,followingtheannouncementof
a$1 trillioninfrastructurebillintheUnitedStatesthat
isexpectedtobedirectedtowardsnewroadand
bridgeconstruction.WorldSteelAssociationdata
recordeda17%increaseinproductionover2020in
NorthAmericaand18%increaseinSouthAmerica.

Onaconstantcurrencybasis,revenuesincreased
by 21%, from €645 million in 2020. The Group
experiencedaFXrevenuesheadwind,given BRL
and USD weakened in 2021.

During2021,theGroupadvanceditsinvestment

projects in Brazil, which are part of the Group’s

ProductionOptimisationProgramme.Atthe

Brumado mine in Brazil, the installation of a rotary

kilnformagnesiteproductionisduetocomplete

in H2 2022. The investment will increase the life

of the mine from 47 years to 120 years, and further

improvethecostcompetitivenessofthemine

which is already in the ﬁrst quartile of the global

cost curve for DBM raw material. The Group also

continueditsinvestmentinthemodernisation

andautomationoftheContagemplant,which

willincreaseproductivityandreducecosts,

creatingamagnesitehubfortheAmericas.

This project is expected to complete in H2 2022.

A new primarycrusherinYork,Pennsylvania,

UnitedStates,(Americasdolomitehub), was

installedandcommissionedin2021 a

multi-year€7millioninvestment.Thenew

crusherwillincreaseeﬃciency, reducewaste

and extend the life of the dolomitic mine.

RHIMagnesitacontinuestoexpanditssolutions

contractsintheAmericas,whichaccountsfor

approximately41%oftotalrevenues.In2021,the

Groupsecuredanewfulllinesolutioncontract

withamajorsteelcustomerinTexas,UnitedStates,

over a time period of two years, with 14 people

on-sitededicatedtorefractoryinstallation.

In 2021 theGroupexpandeditsmarketposition

in FlowControl,withﬁve projectscommissioned

over the year for slide gates and a further four

conﬁrmedfor2022.ProductioncapacityinFlow

ControlwasincreasedwithaninvestmentatYork,

UnitedStates,inatundishworkinglinings,aswell

asa newalumina-basedproductionlineand

pre-cast nozzleline atTlalnepantla,Mexico.

TheAmericasregiondemonstratedexcellent

tractioninexpandingitsdigitaloﬀering,akey

part oftheGroup’soverallsalesstrategy.Seven

projects for laser measurementtechnologywere

successfullyimplemented,withafurtherthree

in thepipeline.

Initiativestoincrease thepercentage ofrecycled

rawmaterialsin ourproductionchainhavegained

momentum in the Americas. In the month of

March2021,for the ﬁrst time, we achieveda

record10.3%recyclingrate atRamosArizpe,

Mexico.R&Dsuccessenabledachange in the

compositiontoinclude highersecondaryraw

material in the products of the basicand

aluminous lines,withoutaﬀectingperformance.

TheGrouphascommitted€1 millionover2022

withatwo-yearpaybackperiodtowards

developingRamosArizpe,Mexico,intothe

Group’sﬁrstrecyclingplantinNorthAmerica.

Thistransformationwillincludeadedicated

refractorywastepurchasingteamandnew

refractorywastecrushingline.

China and East Asia

TheChinaandEastAsiaregionrecorded

revenuesof€206millionin2021,anincrease

of 23% on 2020 (2020: €167 million). On a

constantcurrencybasis,theGrouprecorded

revenues of €164 million in 2020. World Steel

Associationdatarecordeda1%decrease in

productionover2020inthecombinedregion,

where productioninChinadecreasedby 3%.

TheGroupperformedespeciallywellintheEast

Asiaregion,where revenuesincreasedby 33%

to€132millionfrom2020(2020:€99million)

reﬂectingthe strengthofthe economicrebound

in the region,especiallywithinSouthKorea,

TaiwanandVietnam.Chinarevenuesincreased

to €74 million (2020: €67 million), as the Group

continuedtoexecuteitsstrategyindeveloping

newbusinessandincreasingmarketshare.

However,steelproductioninChinawasadversely

impactedbythe Chinese government’ssteel

reductionpolicyimplementedinH22021,

environmental restrictionsimposedahead

of the BeijingWinterOlympicsandpower

shortagesinQ4,whichimpededproduction

andreducedlocalrefractorydemand.China

revenues increased by 10% to €74 million,

from €67 million in 2020.

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We are immensely proud of our newly
established R&D centre in Bhiwadi,
India, which will become our ﬂagship
R&D centre for ﬂow control.

Parmod Sagar

President of India, Africa & West Asia

Over the next four years a key focus area for the

Group will be to grow its market share in EAF

plants,withanadditional75Mtofcapacityin

China expected by 2023. In 2021, the Group

completedthestartupofitsﬁrstQuantum-EAF

projectinChinawithPinggang.Italsoachieved

a new record number of heats for the EAF plant

atSJZsteel,drivingeﬃcienciesforthecustomer

andcontributingtothe establishmentofa new

solutionscontract.

AspartoftheGroup’songoingProduction

OptimisationPlan,anewtemperfurnacewas

installedatDalian,China,whichwill

approximatelydoublecapacityatthatsite.

Additionally,theproductionplantinstalleda

newFlowControlproductionlineforpurgeplugs.

Dalian, China, is home to one of the Group’s

ﬁrst ManufacturingExecutionSystems(“MES”),

aﬂagshipsitefortheGroup’sdigitalisation

initiatives.TheMESprojectwasinitiatedinAugust

2021 and is due to complete during H2 2022,

whichwilloptimiseoperationofmachinery,

improvesafetyandreducecosts.TheGroupalso

implementedanewRFID-enabled warehouse

inChongqing,China.RFID technologyallows

customerstoachievereal-time,virtualinventory

managementofconsignment stock.

TheGroupinitiatedanon-siterecyclingsolutions

contractwithamajorChinesesteelcustomerin

2020,andfollowingstrongperformanceduring

2021, will now commission the project as a global

pilotgivenitseﬃcientandcost-eﬀectivesorting,

treatmentandrecyclingprocesses.

India, Africa and West Asia

Total revenues recorded for the year in India,

Africa and West Asia was €359 million, an

increase of 26% compared to 2020 (2020: €285

million).Thecombinedregionrecorded

signiﬁcantvolumegrowthin2021,withsales

volumes higher than in 2019. On a constant

currencybasis,revenuesincreasedby30%

(2020:€275million).Bycomparison,India,

AfricaandWestAsiasteelproductionincreased

by 15% in the period according to the World

SteelAssociationdata.Thestrongrevenues

performance was due to a robusteconomic

reboundinthecombinedregion,despitethestrict

COVID-19 lockdown in India in H1 2021.Thiswas

supportedbytheﬁnancialstimulusprogramme

inIndiaforinfrastructuredevelopment.Demand

forsteelexportsfromIndiahavealsoincreased,

increasingrefractorydemandintheregion,as

productioninChinaslowed.Thistrendis

expectedtocontinueinto2022.

OutsideofIndia,the Groupcontinuedto

partner withitssolutionscustomersinBahrain

andOman,helpingtodriveproduction

eﬃciencies.The Group won market share in Iraq

andAlgeriaandexpandeditsbusinessinEgypt.

InIndia,theregionhasexpandedcapacityin

non-basicshapedproductsatthe Vizagplantas

partoftheProductionOptimisationPlan.Anew

tunnelkilnwascommissionedinOctober2021

whichwillincreasecapacityofaluminabrick

productionandanewshuttle kiln at the plant

was installedduring2021,readyforproduction

in Q1 2022. In line withthe Indiangovernment’s

“Madein India”policy, whichencourages

companiestoon-shore manufacturinginIndia

for domesticcustomers,theGroupisgaining

competitive advantage frommanufacturing

products for the Indian market locally. 65% of the

plant’sproductionissuppliedtocustomersinthe

domesticmarket.TheGroupalsoannounceda

€42millioninvestmenttoexpanditsproduction

capacityinIndiaandincreaseautomationof

existingplantsinBhiwadi,VizagandCuttack,

to becompletedby2025.

Thecombinedregioncelebratedtheﬁrst

installationofthe APO tool in 2021 at a BOF

operated by a major steel customer. The India

region also won its ﬁrst contract in the country

for electro-magneticlevelindicators(“EMLI”)for

a tundishapplicationofamajorsteelcustomer.

Othernew productsandservicesinstalledduring

the year to improve steel quality at customer sites

includePurgebeamand Magﬁlter,whichhave

beendesignedbyRHIMagnesita’sR&Dand

innovationdepartmentsusingﬂowsimulation

to imitate the ﬂow of molten steel in moulds

and in the tundish.

As part of the Group’s eﬀorts to drive itssolutions

business,the Groupwonasolutionscontract

in October2021 to partner with a major steel

customerwhichhasrecentlycommissionedthe

largestbrownﬁeldexpansioninIndia,creatingthe

largestplantcapacityinIndia.RHIMagnesitawill

providerefractoryproductsforapplicationssuch

as the BOF, Ladle and RH degasser as well as ﬂow

controlapplications.

InNovember2021,theGroupopened a new

regional R&D centre in India to facilitate a greater

understandingof local marketsand enablemore

uniﬁedtechnologytransferinthe region,driving

costeﬃciencies.Focusareaswillbelocalraw

material development,providingsolutions

supportforcustomerperformanceimprovement

projectsandsupportinglocal contentand

manufacturingineachofthe Group’sthree

plantsinIndia.

Over the year the Groupprogressed its ﬂow

controlstrategyinthisregion,increasingmarket

share in both slide gates and ladle purging and

remains the market leaders in the region for the

longsegmentoftundishandISOproducts.

Indiahashistoricallyrecordedhigh ratesof

secondaryrawmaterialusage,giventhelackof

virginrawmaterialavailabilityintheregion,and in

2021 it recorded a high recycling rate of 16%. In

West Asia and Africa, the Groupconsistently

increasedthe amountofsecondary rawmaterial

content in products sold to EAF and ladle

applicationsandincreasedeﬀorts to collectspent

refractorymaterialfromcustomer sites.

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Industrial Division

Readmore inOurmarkets

Page 20

IndustrialDivisionrevenuesincreasedby6%
in 2021 to€729million(2020:€689million),
led by a strong recovery in the Cementand Lime
businesswhichincreasedby18%followinga
recordyearofvolumes.Onaconstantcurrency
basis,revenuesincreasedby7%,from
€679 millionin2020.

Gross proﬁt for the Divisionwas€190million,
up from €182 million in 2020 and gross margin
declinedoverthe same periodby30bps to 26.1%
as the impactfromsupplychain disruptionincreasedcosts,especiallyfor
the projectbusiness.

Cement and Lime

Industrialrevenue

€729m

2020:€689m

Industrialgross margin

26.1%

2020:26.4%

The Industrial Division accounts for c.30%

of Group revenues and provides refractory

solutions to customers across cement and lime

and industrial projects (non-ferrous metals

(‘NFM’), glass, environment, energy and

chemicals (‘EEC‘), foundry and mineral sales).

TheIndustrialDivisionsegmentsaresubject

tolongerreplacementcyclesasthelifetimeof

arefractoryproductintheseindustriesranges

from one year to 20 years. Refractories used

intheIndustrialDivisionaretreatedascapital

Revenue breakdown by segment

in Industrial Division

Cement/Lime 44%

Industrial business 56%

expenditureatourcustomersites,giventhe long

replacement cycles of over a year. They account

for between 0.2% to 1.5% of the customercost

baseandconsume lessrefractorymaterialper

tonneofproductionthansteel,onaverage.The

IndustrialDivisionservesapproximately2,800

customersworldwide,withasigniﬁcantglobal

market share of c.35% in Cement and Lime

and c.25% in NFM and c.5% in Glass, EEC and

Foundry.

Revenue for the year was €322 million, up by 18%

on 2020 (2020: €273 million), and on a constant

currencybasisby20%(2020:€267million).

Cement and Lime accounted for 44% of total

IndustrialDivisionrevenuesin2021 and 13% of

Grouprevenues.The CementandLimesegment

recordedarecordyearforvolumesattributed to

both new orders and from a carry-over of delayed

ordersduring2020.End-userdemandremained

strongthroughout2021 andthistrendisexpected

to continue into 2022 with full order books for

repairactivityinQ1 2022.Stimuluspackages,

initiatingnewinfrastructure projects,were

implementedgloballyto helpstimulate slowed

economiesover2020,boostingcementdemand

internationally.

Therawmaterialsrequiredforthe portfolio of

refractoryproductsfortheCementandLime

segmentwere in tight supply at the start of the

year,whichwasexacerbatedbyglobalfreight

disruptionfromQ2onwards.Rawmaterial

inventorylevelshavesincebeenrestored ahead

of the highseasonaldemandexpectedduringthe

2021-2022northernhemisphere winter months,

whentheannualindustryrepaircycletakesplace.

Pricingwasso

resulting in a lower average price per tonne

comparedto2020.Pricingwasestablished at the

start of Q3 2020 for H1 2021,whenrefractory raw

materialpriceswereattheirlowestlevels for ﬁve

years.Price increasesimplementedduring2021

inresponsetoinﬂationarypressuresstarted to

comethroughduringQ42021 and will be fully

realisedin2022.Thehigherrawmaterial price

environmenttowardsthe end of 2021 supported

customerpricingnegotiationsfor2022.

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A state-of-the-art ﬁred alumina brick
plant will be built in 2022 which
underlines our alumina strategy and
opens lots of new opportunities in all
industrial sectors.

Marco Olszewsky

President of China & East Asia

On30December2021 theGroupacquired

a51%ownershipstakein‘ChongqingBoliang

RefractoryMaterialsCo.Ltd.’foracash

considerationof€5million.Thejointventure

investmentwillestablishproductionofnon-basic

refractoriesalongsideanexistingfullyautomated

plantthatwillcomplementtheGroup’s

magnesite-basedproductioninDalianand

deliverafullrangeofrefractoryproductsfor

cementcustomersinChinaandSoutheastAsia.

In 2021 theGroupcontinuedtomake

considerabletractioninitsANKRALLowCarbon

(LC) product in Europe based on the circular

economyapproachand sustainabletechnology.

TheGroupapproximately doubled revenues

contributionfromtheseproductscomparedto

2020andincreasedthenumberofcustomers

served from 13 to 22. In 2021 theproductionof

the ANKRAL LC serieswasalsoextendedfrom

Europe to China, at the Dalian site, which will

furtherincreaseourmarketshareinsustainable

productsinAsia.

TheGroupalsoexpandeditsdigitalisation

solutionsin2021,launchingthe“LaserScan”

previewforcementcustomers.LaserScanuses

highspeed3Dlaserstomeasuretheremaining

thicknessofrotarykilnliningsaheadofanyrepair

work,optimisingrefractoryperformanceandkiln

availability.

Industrial Projects

IndustrialProjects,comprisingNFM,process

industries(glass,EEC andfoundry)andmineral

salesreportedrevenuesof€407millionin2021,

2%belowrevenuesrecordedin2020(€416

million) and below expectations for the year. On a

constantcurrencybasis,2021 revenuewas1%

lowerthan2020(2020:€410million).The

IndustrialProjectsbusiness experienced

signiﬁcantdemandthroughouttheyearforboth

NFM andprocessindustries,fromnewordersas

wellascarry-overfrom projectpostponementsin

2020.Demandinthenon-ferrousmetalssector

strengthenedinH1 2021,ascommodityprices

rallied in the ﬁrst ﬁve months of 2021.

NFM recordedrevenuesof€145million,2%

higherthantheprioryear(2020:€142million).

Processindustriesrevenuesdeclinedby4%

to €262 million (2020: €274 million)asthe

productioncapabilityinthebusinessand

deliveriestocustomers wereimpactedby

insuﬃcientproductioncapacity, given the

ProductionOptimisationPlanworkatRadenthein,

Austria,whichwasthenaggravatedbytheglobal

supplychaindisruption.

DisruptionacrosstheIndustrialProjectsbusiness

wasexacerbatedbyunplannedmaintenanceat

Radenthein,the Group’smainproductionfacility

fortheprojectsbusiness.Anunscheduled

shutdownduringQ32021 adverselyimpacted

Group EBITA by €8 million. The plant was

repairedandfullyoperationalinQ42021.

Inresponse tohigherinﬂationarycosts,the Group

implementedprice increasesinitsIndustrial

Projects business for new orders, as well as for

previouslynegotiatedcontracts.The response

fromourcustomershasbeenlargelysuccessful,

however the longlead-time characteristicof

projectswithreplacementcyclesofoverone year

meansthatasigniﬁcantportionoftheseprice

increaseswillonlybe realisedin2022.

Radenthein,Austria,isthe Group’smain

productionplantforIndustrialProjects.The

Groupismodernisingandautomatingtheplant,

aswellasinvestinginnewinfrastructure,centred

aroundanewtunnelkiln,whichwasinaugurated

inMay2021.Afurtherinvestmenttowardsnew

pressesatthe sitewillincreasethe plant’s

productioncapacityby30%,withtheinvestment

project due to complete in H2 2022.

TheGroupstrengtheneditssustainable market

share in 2021 andbroadeneditssolutionoﬀering,

signingaconsortiumagreementwithRussia’s

ZiO-Podolsktosupplyrefractoryengineering,

materialsandinstallationservices.The initiative

willconstructfournew waste-to-energyplants

in the Moscow area, which is due tocommence

in 2023.The plantswillprocessaround

2.8 milliontonnesofwasteannually,supplying

up to 1.5 million people witharenewablesource

ofelectricity.

TheGroup’sAGELLIS®systemsincrease yield,

improvequality,reduce maintenance,greatly

enhancesafetyandare usedinourcustomer

operationsforNFM,aswellassteel.Sensor

technologymonitorsprocesscritical parameters

withinourcustomers’furnacesusing

electromagneticandopticalsensors.AGELLIS®

systemsare gainingsigniﬁcantmarketshare

withinthenon-ferrousmetalssegment.

Outlook

In the SteelDivisionthere is a strong order book
and visibility for the ﬁrst half of 2022, although the
highcustomerdemandrecoveryexperienced in
2021 isexpectedtonormalise in the second half.
The industrialdivisionorderbookcoversmostof
2022 and lead times, in some cases, exceed 12
months.IndustrialsDivisionmarginswillcontinue
to beneﬁt, in the ﬁrst quarter of 2022, from the
strongerpricingenvironmentforcement customerscomparedtotheprioryear.

Costpressuresfromfreight,energy and raw
materialsare continuingin2022with signiﬁcant
labourinﬂationnowalsoexpected in both local
currency and Euro terms, as high inﬂation leads to
wagedemands.Furtherpriceincreaseshave
become eﬀective inJanuaryandmoreprice
increasesare undernegotiationtopreserve
marginsinresponse toongoingcostinﬂation.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 3 1

Financial

review

Ian Botha

CFO

We delivered a robust

ﬁnancial performance in

spite of the challenging

macro environment, and

continued to make good

progress on the 2022

investment programme.

Revenue

TheGrouprecordedrevenueof€2,551 millionin

2021,anincrease againstthe prior year of 13%

(2020:€2,259million).TheGroupbeneﬁted

fromincreasedcustomerdemanddrivenbythe

rebound of end-marketactivity,followingthe

adverseimpactoftheCOVID-19pandemicin

2020. The higher raw material price environment

in 2021 comparedto2020supportedhigher

refractorypricingacrossallbusinesses.

In 2021 theGroupnegotiatedprice increases

totalling€130millioninresponsetosigniﬁcant

costinﬂationdrivenbyhigherfreightandenergy

costs.TheGroupwassuccessfulinrealising98%

ofplannedpriceincreasesin2021,withfurther

beneﬁtexpectedin2022fromtherestorationof

marginstohigherlevels.Price increasesrestored

gross margin to 26% in December 2021,

establishingarunrateinto2022.

Rawmaterial prices

Rawmaterialpricesincreasedandthenheld

broadly stable levels for eight months of the year

beforeincreasinginthe fourthquarterasChinese

suppliersreducedproductiondue topower

shortages, energyrationingandhighenergy

costs.

Readmore on raw material pricing in the

Markets sectionon

Page 20

Steel Division

TheGroup’sSteelDivisiondeliveredrevenue of

€1,823 million in 2021, 16% higher than 2020

(2020:€1,570million).Onaconstantcurrency

basis,SteelDivisionrevenueincreasedby20%

(2020:€1,522million).Global economiesstarted

to recover in 2021 withthemostnotable impactin

India,WestAsiaandAfricawhererevenueswere

26% higher than in 2020. The China & East Asia

regionalsoperformedwellin2021,recordingan

23%increaseinyear-on-yearrevenues

attributedmostlytoEastAsia.TheAmericasand

Europe, CISandTurkeyregionscontributed15%

and9%year-on-yeargrowth,respectively.The

Americasenjoyedastrongreboundinsteel

demand,with steel demandoutweighing

productionthroughoutthe year as steel

producers constrainedproductionfocusingon

priceratherthanvolumes.Onaconstant

currencybasis,the Americasregionrecorded

revenueincrease of21%,impactedbycurrency

devaluationsparticularlyfromBrazilianReaisand

USDollaragainstthe Euro.The Europe,CISand

Turkeyregionwaspositivelyimpactedbythe

recoveryoftheEuropeansteelmarket,as well as

anincreaseinmarketshare.

IndustrialDivision

IndustrialDivisionrevenueincreasedby6% to

€729million(2020:€689million)largely due to

the strongrecoveryinvolumesinthe Cementand

Limebusinesswhichincreasedby18%year-on-

yearto€322million(2020:€273million),

recordingaverystrongQ1 andQ4,characteristic

ofstrongseasonaldemandduringthe northern

hemisphere wintermonths.However,pricesfor

the CementrepairseasoninQ1 2021 were set in

the summer of 2020 when prices were low,

aheadofrawmaterialprice increases,

contributingtolowerproductpricing.The

Industrialprojectsbusinesswasbroadlyﬂat

against2020,recordingrevenue of €407 million

(2020:€416million),asproductioncapability in

the businesswasimpactedbyglobalsupply chain

disruptionandunscheduledtunnel kiln

maintenance atRadenthein,Austria.Revenue

recoveryacrosstheprojectbusinesswasfurther

impactedbythedelayinimplementing

Group-widepriceincreasesacrossthesegment,

given longer lead times on orders with

replacementcyclesofgreaterthanoneyear.

Readmore ondivisionalperformancein

theOperationalreview

Pages 26 to 29

Cost of goods sold

The Group cost of goods sold over the period

amountedto€1,967million,anincreaseof15%

compared to the same period last year. Higher

freightcostswerepartiallyoﬀsetbyfavourable

currencymovements,andonaconstantcurrency

basis cost of goods sold was 19% higher than in

2020.

Inboundandoutboundfreightcostsaccounted

for 12% of COGS in 2021, compared to 8% in

2020andamountedto€236million(2020:

€137million).The ShanghaiContainerized

FreightIndexincreasedby81%sincethe

beginningoftheyear.Supplychaindelays

causedbylowfreightreliabilityimpacted

productionschedulesand deliveriesandthere

wascontinueduse ofairfreightwhennecessary

toensure customersupply.

Read more on APMs on

Page 215

Reporting approach

TheCompanyusesanumberofalternative

performancemeasures(APMs),inadditionto

thosereportedinaccordance withIFRS,which

reﬂect the way in which the Board and the

ExecutiveManagementTeamassessesthe

underlyingperformance of the business.The

Group’sresultsarepresentedonan“adjusted”

basis,usingAPMswhichare notdeﬁnedor

speciﬁedunderthe requirementsofIFRS,but

arederivedfromtheIFRSﬁnancialstatements.

The APMs are used to improve the

comparability ofinformationbetweenreporting

periodsandtoaddressinvestors’requirements

forclarityandtransparencyoftheGroup’s

underlyingﬁnancial performance.The

APMs are used internally in the management of

ourbusinessperformance,budgetingand

forecasting.Areconciliationofkeymetricsto the

reportedﬁnancialsispresentedinthe section

titledAPMs.

InJanuary2021,the FoundryDivisionwas

reclassiﬁedintotheIndustrialDivisionfromthe

SteelDivision.In2021,the FoundryDivision

contributed€13milliontoGrouprevenue.

2020divisionalrevenueshave beenrestated

accordingly.

Allreferencestocomparative2020numbersin

thisrevieware onareportedbasis,unlessstated

otherwise.Figurespresentedatconstant

currencyrepresent2020translatedtoaverage

2021 exchangeratesasdisclosedinNote 6to

the Financial Statements.

3 2 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

In June 2021, the Group implemented a

dedicatedtaskforcetomitigatetheimpactof

supplychaindisruption, includingreal-time

logisticsmonitoringto helpplan around shipment

delays.InDecember2021,theGrouplaunched

theﬁrstphaseofitsTransportManagement

System (TMS) in China, ahead of its planned

global roll out. The TMS willprovideend-to-end

transportmanagementcontrolcovering

planning,execution,monitoringand auditing,

allowingenhancedvisibilityoffreightstatusand

location.

TheGrouppurchased€906millionofraw

materialsfromexternalsourcesin2021,

compared to spending of €807 million in 2020.

The cost impact in the 2021 proﬁtandloss

statementwas€(69)million.Elevatedraw

material prices in Q4 2021 were mainly due to

highercostsofproductionandtransportation

costsforrawmaterialsuppliers,asenergycosts

increasedsigniﬁcantly. TheGrouprestockedits

raw materialinventoryoverthecourseoftheyear

priortoexpectedtightersupplyfromChinaduring

Q4 2021 aheadoftheBeijingWinterOlympics.

EnergycostssigniﬁcantlyincreasedinQ42021,

aspost-pandemic demand returned whilst

supplyremainedconstrained.Naturalgas and

power in Europe and Asia were most impacted.

TheGrouppurchasedEuropeannaturalgasand

powercontractsinadvanceforQ42021 and Q1

2021,signiﬁcantlybelowwherespotprices

subsequentlymovedto.TheGroupwasalso

impactedbyhighercostsofCO₂creditsinEurope,

mainlyduetohigherproductionvolumesinour

raw materialplants.Duringtheyear,theGroup

implementedarollingﬁve-year hedging

programmetoreduceitsexposuretospotCO₂

contractprices.

Gross proﬁt

The Group recorded a 6% increase in gross proﬁt

to €584 million in 2021 (2020:€550million)due

to highersalesvolumes,pricingandrevenues,

oﬀsetbyincreasedfreightandenergycostsand

higherpricesforexternallysourcedrawmaterial.

Grossmarginsdeclinedto22.9%(2020:24.4%)

aspriceincreasesrealisedduringtheyeardidnot

fullyoﬀsetthesigniﬁcantincreaseincostsfrom

supplychaindisruption and higherenergy costs.

Ona divisionalbasis,grossproﬁtinthe Steel

Divisionof€394millionrepresentedanincrease

of 7% against the previousyear(2020:€368

million),whilegrossmarginreducedby180bpsto

21.6%, (2020: 23.4%). Gross proﬁt in the

IndustrialDivisionamountedto€190million

(2020: €182 million), up 4% against the prior

year, with gross margin declining by 30bps to

26.1%(2020:26.4%).

Steel 2021 2020 Change

Revenue (€m) 1,823 1,570 16%

Gross proﬁt (€m) 394 368 7%

Gross margin 21.6% 23.4% (180)bps

Industrial 2021 2020 Change

Revenue (€m) 729 689 6%

Gross proﬁt (€m) 190 182 4%

Gross margin 26.1% 26.4% (30)bps

SG&A

TheGroupcompleteditspermanentSG&Acost

savingprogrammein2021,achieving€29million

inannualEBITAsavings,throughthe

decentralisationof540managerialpositionsinto

lowercostlocationsanddrivingincreased

regionalisationinordertolocalise decision

making, closertocustomersandplants.

At the height of the COVID-19pandemicin2020,

€50millionoftemporarycostsavingmeasures

wereimplemented,includingshorttime work

arrangementsandplantsuspensions.In2021,

€43 million of these temporarysavingsreturned

to the cost base as expected, with €7 million to be

capturedasapermanentcostreductioninthe

formoflowerdepreciation.

Totalselling,generalandadministrative

expenses,before R&Drelatedexpenses,were

€297million,representinga7% increase against

theprioryeargiveninﬂationandadditional

expenditure onstrategicinitiatives,notably

digitalisation(2020: €279 million).

Depreciation and amortisation

Depreciationfor2021 amountedto €109million

(2020: €120 million), 9% lower than 2020 given

the short-termcostmeasurestakenin2020

whichlowereddepreciationby€7 millionand the

reduction of assets due to the closureofplants

fromtheProductionOptimisationPlan.

Depreciationin2022isexpectedto bearound

€125million.

Amortisationofintangible assetsamounted to

€22 million in 2021 (2020:€19million).

Adjusted EBITDA

AdjustedEBITDAamountedto€389million,up

by 2% compared to 2020 (2020: €380million).

The adjustedEBITDAmarginfor2021 was15.2%,

compared to 16.8% over the same period last year,

adecrease of160bps.

Adjusted EBITA margin %

7.7%

2.6%

5.1%

RHI standalone RHI Magnesita

13.9% 14.0%

9.7%

3.8%

5.9%

5.5%

8.4%

5.0%

9.0%

11.5%

2.4%

9.1%

11.0%

3.2%

7.8%

2016 2017 2018 2019 2020 2021

Backward integration margin
Refractory margin

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 3 3

Financial review

continued

Adjusted EBITA

TheGroupdeliveredadjustedEBITAin2021 of €280 million, an increase of 8% compared to 2020

(2020:€260million),asthe €292 million increase in revenues was oﬀset by c.€150 million of supply

chain,rawmaterialandenergyrelatedcostheadwinds.The Grouprealisedanincremental€49

millionin2021 fromitsstrategicinitiativeprogrammes,withcostsavinginitiativescontributing €36

millionandsalesstrategies€13million.€43millionoftemporarycostsavingsmadein2020to

preserveliquiditywere reintroducedtothe costbase in2021.

(€m) 2021

2020

reported

2020 at

constant

currency

% change

reported

% change at

constant

currency

Revenue 2,551 2,259 2,201 12.9% 15.9%
Cost of sales (1,967) (1,709) (1,658) 15.1% 18.6%
Gross proﬁt 584 550 543 6.2% 7.6%
SG&A (297) (279) (275) 6.8% 8.4%
R&D expenses (28) (30) (30) (6.7)% (6.7)%
OIE (44) (120) (120) 63.3% 63.3%
EBIT 214 121 118 76.9% 81.4%
Amortisation (22) (19) (19) 15.8% 15.8%

EBITA 236 140 137 68.6% 72.3%

Adjusted items 44 120 120 (63.3)% (63.3)%

Adjusted EBITA 280 260 257 7.7% 8.9%

Refractory EBITA 199 205 (2.4)%
Vertical integration EBITA 81 55 49.1%

AdjustedEBITA

€280m

2020:€260m

AdjustedEBITA margin

11.0%

2020:11.5%

Impacted by signiﬁcantsupplychainheadwinds

in 2021, the Group’s price increase programme

andothercostreductioninitiativesdeliveredan

adjustedEBITAmarginof11.0%(2020:11.5%).

TheGroup’srefractorymarginwasdirectly

impacted by highersupplychain,energyandraw

material costs and declined to 7.8% (2020: 9.1%).

However,theGroup’sverticalintegrationmargin

ontheproductionofrawmaterialsforinternal

consumptionincreasedto3.2%(2020:2.4%),

reﬂectingthehigherraw material price

environmentandthelow-costpositionofthe

Group’srawmaterialassets.The EBITA

contributionofthe Group’srawmaterialassets

increasedto€81 million(2020:€55million),

basedonexternalmarketpricebenchmarksfor

therawmaterialsproduced.

Net ﬁnance costs

Netﬁnancecostsin2021,includinggainsand

lossesrelatingtoforeignexchange,amountedto

€(25)million(2020:€(87)million).

• €(44)millionrecordedin“restructurings,other

income andexpenses”,relatingmainly to the

costreductioninitiatives,including€16million

relatingtotheplantclosure atTrieben,Austria,

and €31 millionforimpairmentofDashiqiao,

China.Theseincludedseverance costs of €1

millionandnon-cashimpairmentsof €41

million;

• €22millionamortisationofintangible assets

created at the time of the merger between RHI

andMagnesita;

• €6millionnon-cashothernetﬁnancial

expenses,theseinclude €6millionnon-cash

presentvalue adjustmentoftheprovisionfor

the unfavourablecontractrequiredto satisfy

EU remedies at the time of the combination of

RHIandMagnesitatoformRHIMagnesita;and

• One-time chargesexcludedfromtheeﬀective

taxrate(“ETR”),largelythe restructuring,

impairmentexpensesandataxdepreciation.

Netinterestexpenseamountedto€(7)millionin

2021 (2020:€(14)million),withinterestexpenses

onborrowingsof€(21)million(2020:€(20)

million)andinterestincomeof€14million(2020:

€6million).Foreignexchangegainsof€3million

were incurred, compared to a €(43) million in

2020, mainly due to the signiﬁcantdepreciation

of the Brazilian Real and US Dollar against the

Euro,resultinginanincreasedeﬀectofforeign

currency translation on the P&L in 2020.

Items excluded from adjusted

performance

Taxation

Total tax for 2021 in the incomestatement

amountedto€39million(2020:€14million),

representinga14%eﬀective taxrate (2020:33%).

The eﬀective tax rate in 2021 decreasedasaresult

ofrestructuringexpenses.

Reportedproﬁtbefore tax amounted to €289

million(2020:€42million).Adjustedproﬁtbefore

taxamountedto€270million(2020:€197

million),withanadjustedeﬀective taxrate of

18.0%(2020:16.7%).The adjustedETRguidance

isbetween20%-22% for2022.

Inordertoaccuratelyassessthe performanceof

thebusiness,the Groupexcludescertain

non-recurringitemsfromitsadjustedﬁgures.In

2021,theseadjustmentscomprise:

• €91 millionrecordedinshareofjointventures

andassociatesfollowingtheproceedsfrom

the sale of the Group’s 50% stake in the

MagniﬁnJointVenture;

Proﬁt a

On a reported basis, the Grouprecordeda proﬁt

earnings per share of €5.10 in 2021 (2020:

€0.51).Adjustedearningspersharefor2021 were

€4.52(2020:€3.28).

3 4 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

Itemsexcluded

from adjusted

performance

2021

(€m)

2 EBITAreconciledtorevenue onpage 34.

reported

adjusted

EBITA 236 44 280

Amortisation (22) 22 –

Net ﬁnancial expenses (25) 6 (19)

Result of proﬁt in joint ventures 100 (91) 9

Proﬁt before tax 289 (19) 270

Income tax (39) (10) (49)

Proﬁt a 250 (28) 222

Non-controlling interest 7 - 7

Proﬁt attributable to shareholders 243 (28) 215

Shares outstanding¹47.6 - 47.6

Earnings per share (€ per share) 5.10 (0.58) 4.52

1 Totalissuedandoutstanding share capital asat 31 December2021 was46,999,019.TheCompanyheld2,478,686ordinaryshares in

treasury.Weightedaverage numberof sharesusedforbasic earningspershare47,629,647.

Capital expenditure

Capitalexpenditure in 2021 was€252million

(2020: €157million),comprising€75 millionof

maintenancecapex(2020:€71 million) and €177

millionofprojectcapex(2020:€86 million). In

2021,theGroupincreaseditscapitalexpenditure

oncapitalprojects,asguided.

Theprojectcapitalspentin2021 wasslightly

belowtheguidanceof€180million,largely due

tocapitalprojectdelaysatContagemand

BrumadoinBrazil.Mainlygiventhehigh

inﬂationaryenvironment,the individualprojects

areexpectedtorequirehighercapitalexpenditure

during2022and2023,howeverother

parametersofthe projecthave moved favourably,

and the additionalreturnsoﬀsetthehigher capex

such that the economicsoftheprojectsremain

attractive.

Other assets and liabilities

€(90)millionofotherassetsandliabilities

includes€19millioninpensioncontributionsand

€20 million from a change in bonus provision

relative to 2020. €53 million of indirect and other

tax,temporarytimingdiﬀerences includes €43

millionrefundableVATpaidonincreasedraw

materialpurchases,recognitionofa refundof

revenue-basedtaxespreviouslyoverpaidinBrazil,

energytaxesandresearch incentives.TheGroup

hasrecognised€14millionofotherrevenueand

€11 millionofinterestincomefollowingaBrazilian

SupremeCourtrulingresultingina refundof

revenue-basedtaxespreviouslyoverpaidinthe

period2005-2020.

Working capital

Workingcapitalincreasedto€677million

(31 December2020:€369million)assupply

chaindelaysincreased the value of material in

transitandasinventoriesofrawmaterialsand

ﬁnishedgoodswereintentionallyincreasedto

ensuresuﬃcientlevelsofproductavailabilityfor

customers.Cashoutﬂowfromincreasedworking

capitalwas€283millioncomparedwithaninﬂow

of €97 million in 2020. Favourableforeign

exchangeeﬀectsreducedworkingcapitalcash

outﬂowby€25million.Workingcapitalintensity,

measuredaspercentageofthelastthreemonths’

annualisedrevenue(€2,911 million),increasedto

23.3% in 2021 (2020:15.9%),outsideofthe

targetedrangeof15-18%.Workingcapital

intensitylevelswerehigherthanguidedgiventhe

higherrawmaterialprices, and intentional

build-upofrawmaterialgivenconcernsonlower

availability.AnimprovementintheGroup’s

workingcapitalintensity is dependent on

improvedsupplychainreliability.Ifsupplychain

disruptioncontinuesin2022andreturningto

withinthetargetedrangemaynotoccuruntil

2023.

Workingandrawmaterialavailabilityimproves

followingenergyshortagesinChinainthefourth

quarterandtheimpact oftheBeijingWinter

OlympicsinQ1 2022.Improvementinworking

capitalintensityisalsoexpectedtobesupported

by the implementation of a newIntegrated

BusinessPlanningsystemin2021,which

supportsGroup-widedecision makingand

ﬁnancialplanning.

Inventoriesincreasedto€977million

(31 December2020:€477million),accounts

receivable increasedto€349million

(31 December2020:€210million)andaccounts

payableincreasedto€649 million(31 December

2020:€319 million).

Thedecisiontoincreaseinventorylevelsacross

bothrawmaterialsandﬁnishedproductswastaken

inresponsetoglobalsupplychainissueswithraw

materialavailabilitysigniﬁcantlydisruptedbypoor

freightavailabilityandinanticipationofshortages

aheadoftheBeijingWinterOlympicsinQ1 2022.

The Group spent a total of €906 million on

externallysourcedrawmaterialin2021,compared

to€807millionin2020.Rawmaterialcoverage

ratiosin2021 increasedfrom1.3monthsin2020to

2.3monthsin2021,andﬁnishedgoodsfrom1.9

monthsto2.4months,giventhehighercostsofraw

materialsandlongerdeliverytimes.

Accountsreceivable increasedby€139million,

to €349 million, given the higher level of business

activity.The accountsreceivableintensitylevel

increased by 300 bps to 12.0% (31 December

2020:9.0%),astheprioryearcomparative

beneﬁtedfromhighrevenueinthefourthquarter

in2020.Accountsreceivableiscalculatedas

tradereceivablespluscontractassetsless

contractliabilities,asperthe ﬁnancialstatements.

Accountspayable increasedby€330million,to

€649million,largelydue topayablesrelatingto

thematerialincreaseinexternallypurchasedraw

materialoverthe year.Accountspayable intensity

increasedto22.3%,by860bps(31 December

2020:13.7%).Accountspayable referstotrade

payables,aspertheﬁnancialstatements.

Workingcapital ﬁnancing,used toprovide

low-costliquidityandsupportthe Group’s

commercialoﬀeringtocustomers,stoodat€320

million at the end of the year(31 December2020:

€221 million).Thiscomprised€178millionof

accountsreceivable ﬁnancing(factoring) and

€142millionofaccountspayableﬁnancing

(forfeiting).Workingcapitalﬁnancinglevelsvary

accordingtobusinessactivity,andtheGroup

targetsa medium-termlevelbelow€320million.

Asbusinessactivitylevelsincreasedover2021

from2020,workingcapitalﬁnancinghashelped

tomoderatethecashoutﬂowfromworkingcapital

increases.

In2022guidanceforcapitalexpenditureis

approximately€190million,comprising€85

millionofmaintenancecapexand €105 millionof

projectcapex,increasingby€20milliondueto

€12 million to be invested at Chongqing, €5

millionincreaseatContagemandBrumado and

€3millionunderspendin2021 carried forward.

In2023,capitalexpenditure isexpected to

increase toapproximately€150million,ofwhich

€85millionwillbedirectedtowardsmaintenance

expenditureand€65milliontowardsprojects. In

2024,theGroupanticipatesapproximately €130

millionofcapitalexpenditure,ofwhich €85

millionwillbeonmaintenanceexpenditureand

€45milliononprojects.

In 2021, the Groupinvested€61 million(2020:

€35million)initsrawmaterialassets,including

maintenancecapexof€13million (2020:€14

million¹) and project capex of €48 million(2020:

€21 million).

1 Restatedfrom€6milliongivenaninternalchangein

methodology.

Adjustedearnings per share

€4.52

2020: €3.28

Capital expenditure

€252m

2020: €157m

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 3 5

Financial review

continued

Cash ﬂow

TheGroupgeneratedoperatingcashﬂowof€(236)millionin2021 (2020:€290million),

representingcashﬂowconversionof(84)%(2020:112%).Freecashﬂowwasadverselyimpacted by

highcapitalexpenditure in 2021 on the Group’sstrategicinitiativesaspreviouslyguided,combined

withhigherthanusualworkingcapitalrequirementsdue tosupplychaindisruptions.Free cashﬂow

decreasedto€(427)million(2020:€101 million).

Returnon invested capital

9.6%

2020:11.5%

Cash ﬂow €m 2021 2020¹

Adjusted EBITA 280 260

Working capital (283) 97

Changes in other assets/liabilities (90) (31)

Capital expenditure (including pre-payments) (252) (157)

Depreciation 109 120

Operating cash ﬂow²(236) 290

ESGlinked ﬁnancing

€1.2bn

Cash tax (39) (48)

Net ﬁnancial expenses (25) (26)

Restructuring/transaction costs (56) (52)

Magniﬁn disposal proceeds 100 –

Dividend payments (71) (50)

Share buyback (96) (3)

Dividends from associates – 11

MORCO acquisition – (9)

Sale of PPE³8 11

Right-of-use assets acquisition (13) (25)

Derivative gains 1 2

Free cash ﬂow (427) 101

1 Reportedbasis.

2 Operatingfree cashﬂowis presentedtoreﬂectthenetcashﬂowfromoperating activities beforecertainitems suchas restructuring
costs. Full detailsareshownintheAPMsectiononpage215.

3 Includingthe sale oftheBurlingtonsite(Canada) in2020,cashinﬂowof€8 million.

Costsavinginitiatives

€110m

AnnualisedEBITArunrateby2023

Sales strategies

€40-60m

AnnualisedEBITArunrateby2023

Net debt

Net debt at the end of 2021 was€1,014million,

comprisingtotaldebtof€1,595millionincluding

IFRS 16 leases of €56 million, cash and cash

equivalentsof€581 million,thiscomparestonet

debt at the end of 2020 of €583 million including

IFRS 16 leases of €57 million. Net debt to EBITDA

at the year-end was 2.6x, 1.1x higher than 2020

(2020:1.5x)andabove theGroup’stargetrange of

0.5x-1.5x,mainlyduetoinventorybuild.

Supportedbylowercapitalexpenditure and

earningsgrowthfromorganicandinorganic

sources,theGroupexpectstoreduce itsgearing

leveltowardsitstargetedrange during2022,

beforeconsideringM&A.

Additionalreﬁnancingwasconductedin2021 to

maintainliquiditylevels,extenddebtmaturities

andestablishlinkstotheGroup’ssustainability

performance.On30November2021,the

Companyenteredintoa€150millionESGlinked

BilateralfacilitywithING,andsuccessfullyplaced

a€250millionESG-linkedSchuldscheinbond

withinvestors,withmaturitiesrangingfrom5.5

years to 10 years and a weighted average interest

rate on issuance of 0.80%.

TotalliquidityfortheGroupatyearendwas€1,181

million,includingundrawncommittedfacilitiesof

€600million.

Return on invested capital

Returnoninvestedcapital(ROIC)isusedtoassess

theGroup’seﬃciencyinexecutingitscapital

allocationstrategy,whichisaimedatenabling

organicgrowth,disciplinedM&Aandshareholder

returns. The Group ROIC in 2021 was 9.6%

(2020: 11.5%), from a total of €2,296 million of

investedcapital(2020:€1,754million)and€219

millionnetoperatingproﬁta

(2020:€201 million).RawmaterialROICwas

16.2% (2020: 13.5%), from a total of €377 million

ofinvestedcapital(2020:€385million)and€61

millionNOPAT(2020:€52million).

Amortisation schedule

(€m as at 31 December 2021)

1,181

581

793

513

600

218

107 151

248

193 109 56

Cash Revolving credit facility Debt

Strategic initiatives

The Groupisprogressingtwosigniﬁcantstrategic

programmestosustainablyincrease earnings:

• Costsavingsinitiativesrepresenting €110

millionofincrementalEBITAby2023. In2021,

the costreductioninitiativesdeliveredEBITA

beneﬁtof€66million,representingan

increase of €36 million on 2020. The

programmetargetstoachieve anadditional

€44 million in EBITA run rate savingsin2023,

achieving its total EBITA beneﬁt of €110

million,(€90millionin2022).TheProduction

OptimisationPlanbeneﬁtswillincreaseits

totaltargetto€110million,althoughwith one

yeardelaythanpreviousguidancegiventhe

projectdelaysatBrumadoandthedecisionto

extendtheoperationofMainzlarthrough

2022.

3 6 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

• Salesstrategiesrepresentingc.€40-60million

ofincrementalEBITAbenefitby2023.Thesales

strategiesdelivered€18millionofcumulative

EBITAin2021.TheGroupistargetingtoachieve

c.€40 – 60 million in 2023, and €30 million in

2022.Therestrictionsfromthepandemicand

globalsupplychainissuesresultedindelaysin

accessingcustomersites,impactingtherevenue

benefitfromFlowControlandtheSolutions

business.Newmarketscontinuetodeliver

attractiverevenuegrowth,withstrongorganic

andinorganicrevenuecontributionexpectedin

2022fromtheJVwithChongqingand

acquisitionofSÖRMAŞ.

Cost savings initiatives

In2021 theGroupstartedtogainmaterialbeneﬁts

fromitsstrategicinitiatives,withanincremental

EBITAimprovementin2021 of €36 million from its

ongoingcostinitiatives,including€17millionfrom

theProductionOptimisationPlananda€19million

beneﬁtfromtheSG&AReductionprogramme.

TheProductionOptimisationPlanseeksto

rationalisetheGroup’sglobalproductionfootprint

through the closure of up to 10 sites (with a focus

onEuropeandSouthAmerica)andinvestmentsin

remainingfacilitiestoincreaseplantscaleand

specialisation,reducerawmaterialcostsand

implementnewtechnologies.

During2021,theGroupinvestedinitsHochﬁlzen

site,Austria,toconsolidateEuropeandolomite

productionintoasingle low-costsite.TheGroup

iscreatingitsﬂagshipdigitalandautomatedplant

atRadenthein,Austria,includingtheinstallation

and commissioning of a new tunnel kiln. At

Contagem,Brazil,theGroup’slargestproduction

facilityintheAmericas,theGroupisautomating

theproductionofMagnesiteﬁnishedproducts.

KeyprojectmilestonesatContagemincludedthe

commissioningoftwonewautomatedpresses

whichwillincreaseproduction eﬃciency and

capacityandtheinstallationofnewgrindinglines.

AtUrmitz,Germany,theGroupismodernising

and expanding the plant to create a new hub for

non-basicrefractoryproductsandtheinstallation

of a new tunnel kiln which was commissioned in

November2021.

TheclosureofMainzlar,Germany,wasdelayed

until the end of 2022 in response to high demand

fromEuropeancustomers,supplychainrelated

delaysaﬀectingtherestoftheGroup’snetwork,

theinvestmentprojectworktakingplaceat

Radentheinreducingcapacityandthetemporary

closureofRadentheininQ3forunscheduled

maintenance.

Sales strategies

TheGroup’ssalesstrategiesseektogrowRHI

Magnesita’spresence in new marketsincluding

IndiaandChina,increase market share in the ﬂow

controlproductrangeandexpandthe solutions

business targeting40%by2025,supportedby

investmentindigitalisation.

TheGroupincreasedpercentage ofGroup

revenueto29%fromsolutionscontracts(2020:

27%). It agreed to acquire two assets in new

markets.FlowControlasapercentage ofrevenue

remainedstable,at16.9%(2020:16.9%).

M&A

InOctober2021 the Groupagreedtoacquire an

85%ownershipstakeinSöğütRefrakter

MalzemeleriAnonimŞirketi(“SÖRMAŞ”),a

producerofrefractoriesforthe cement,steel,

glass and other industries in Turkey, for a

considerationof€39millionincash.Theasset

recorded €6.4m EBITDA in 2020 and we expect

tobeneﬁtfromatleast30%EBITDAsynergies.

The Group completed its disposal of its stake in

theMagniﬁnjointventureinDecember2021,a

non-coreassetproducinghighgrademagnesium

hydroxide for use in ﬂame retardancy,foracash

considerationof€100million.The asset is held as

aﬁnancialinvestmentandisnotconsolidatedinto

the Group’s reported EBITDA. In the year to

31 December2021,theGroup’sshare ofproﬁt

before tax from the Magniﬁnjointventure was €9

millionandtheMagniﬁnjointventure recorded

EBITDAof€19million.

InDecember2021,the Groupacquireda51%

ownershipstake in“ChongquingBoliang

RefractoryMaterials”inreturnforinitial

considerationof€5millionandaninvestmentof

€15 million in new production capacity, to be

deployed in 2022 and 2023.

InDecember2020the Groupenteredintoan

agreementtosellitstwohigh-costrawmaterial

plants,Porsgrunn,Norway,andDrogheda,

Ireland.The sale ofbothplantscompletedon

1 February2021,realisingalossof€6million.

Furtherprovisionsforrestructuringcosts

amountingto€4millionhavebeenrecognised

during2021 for the exposuretoenvironmental

risks, unfavourable contractsanddismantling

costs.

Readmoreinthestrategicreview

Pages 16 to 21

Returns to shareholders

€177millionwasexpansionarycapital

expenditure relatedtoprojectinvestments.

Giventheresilientperformance ofthebusiness

andpositiveoutlookinto2022,the Board has

recommendedaﬁnaldividendof€1.00per share

for the full ﬁnancial year, and €47 millionin

aggregate.Thisrepresentsadividend cover of

3.0xadjustedearningspershare.Subjectto

approvalatthe AGM on 25 May 2022, the ﬁnal

dividendwillbe payable on 14 June 2022 to

shareholdersontheregisteratthe closeoftrading

on 27 May 2022. The ex-dividend date is 26 May

2022.Thisrepresentsafullyeardividend of

€1.50pershare.

The Board’sdividendpolicyremainsto targeta

dividendcoverofbelow3.0xadjusted earnings

overthemediumterm.Dividends will be paid ona

semi-annualbasiswithonethirdoftheprior year’s

fullyeardividendbeingpaidattheinterim.

InDecember2020,theGroupcommenceda

sharebuybackprogramme,toreturnvalueto

shareholders,ofupto€50million,which

completedinApril2021,with€45millionof

expenditurefallingin2021 and €3 million in 2020.

ThebuybackprogrammewasextendedinMay

2021,andtheCompanypurchasedafurther€50

million.Intotalacross2020and2021,thebuyback

programmerepurchasedatotalof2,078,686

sharesforatotalconsiderationof€98million¹.As

at 31 December2021,theCompanyheldatotalof

2,478,686ordinarysharesinTreasurywhich

represent5.01%oftheissuedsharecapitalatthe

dateofacquisitionoftheshares.

TheGroupcompleteditsSG&Acostsaving

programmein2021,achieving€29millionin

annualEBITAsavings,throughthe

decentralisationof540managerialpositionsinto

lowercostlocationsand drivingincreased

regionalisationinordertolocalisedecision

making,closertocustomers and plants.

The extension of the closure of the Mainzlar site in

2022,combinedwiththecontinuedinvestment

intheproductionoptimisationplan,willenable

additional run rate savings of €10 million in 2023,

achievingatotalcumulativerunratebeneﬁtfrom

the cost savings of €110 million in 2023 (€90

millionin2022).

TheBoard’scapitalallocationpolicyremainsto

support the long-termGroupstrategy,providing

ﬂexibilityforbothorganicandinorganic

investmentopportunitiesanddeliveringattractive

shareholderreturnsoverthe midterm. These

opportunitieswillbe consideredagainsta

frameworkofstrategicﬁt,riskproﬁle,ratesof

return, synergypotential andbalance sheet

strength.

2021 was the peakcapitalexpenditure yearfor

spendingonstrategicinitiatives,includingthe

substantialcompletionofthe Production

OptimisationPlan.In2021 the Groupincurred

capitalexpenditure of €252 million, of which €75

millionwasmaintenance capitalexpenditure and

1 Thepricepaidandvalueofshares purchased bytheCompany
on8 April2021 overstatedthevalueofsharesboughtbackby
€1.5million.Thetotalvalueofshares purchased duringtheﬁrst
buyback,completedon13April2021,was€48,450,082atan
averagepriceof3,946pencepershareandnotthepreviously
disclosedvalueof€49,998,930atanaveragepriceof4,071
pencepershare.Thenumberofshares repurchased intheﬁrst
buybackandtheshares inissueandheldintreasuryare
unchangedas aresultofthis correction.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 3 7

Eﬀective risk

management

The Group has an established risk management

approach with the objective of identifying,

assessing and controlling uncertainties and risks

which could impact the delivery of RHI

Magnesita’s strategy.

Our approach to risk management

Ourriskmanagementeﬃciencyandeﬀectiveness

werefurtherimprovedin2021byenhancingthe

Group-wideintegratedriskmanagement

approachestablishedin2020.Duringthis

secondyear,the Groupfocusedonmaturingthe

riskmanagementframeworkbyfurther

embeddingtherisktools,culture andawareness

into key areas of the Company. A regionalised risk

managementapproachwasdevelopedwiththe

purposeofprovidingthe RegionalLeadership

Teamswithinsightsintocurrentandemerging

risks and acomprehensive regional riskproﬁle,

whichisfullyintegratedwithinthe Group-wide

risk managementapproach.

AuditCommitteemeetingsandthe annual

Board-ledstrategicreview.The bottom-up risk

assessmentisbasedoneachoftheoperational

siteswhichmaintainongoingriskmanagement

activitylinkedtothe ISOriskmanagement

practices.

Deep-dive riskassessmentsareperformed for

areasofemergingorprevailingrisks,which,in

2021,includedinformationsecurity,tax

management,plantoperations,fraud

managementandsustainability.Inaddition,the

Groupundertookaclimate-relatedriskand

opportunitiesdeep-dive as part of the preparation

ofthe2021TCFDDisclosuresummarised on

page 60.

Herbert Cordt

Chairman of the

Board of Directors

During the year, the

continuing COVID-19 crisis

and the consequential

disruptions to global logistics

challenged the Group's risk

management capabilities.

However, management’s

proactive approach to risk

management enabled RHI

Magnesita to gain insights

into risks across our end-to-

end value chain. Risk based

mitigating actions supported

RHI Magnesita in continuing

to deliver products and

services to our customers,

returns to our investors and a

healthy working environment

for our employees.

SeePrincipalriskson

Pages 44 to 49

Therisk managementapproachcombines

top-down,bottom-upanddeep-dive risk

assessments.The top-downriskassessmentis

performedbythe ExecutiveManagementTeam

(EMT) and reviewed by the AuditCommittee and

theBoardofDirectors.Reportingagainstthese

risksisincludedwithinquarterlyEMTmeetings,

Risk management cycle

Reporting

Riskswhich require immediate

action are reported

immediately to line

management for action.Risks

which do not require

immediate action are reported

periodically to theoperational

management and on a

quarterly basis to theEMT.

Reporting

Identiﬁcation

Assessment

Mitigation

Monitoring

Risksand associated

mitigating measures are

reassessedquarterly during

the year,with increased

frequency for thoseareas

experiencing signiﬁcant

changes in the risk landscape.

The remaining risk levelis

evaluatedto ensure that it is

alignedwith the Group’s risk

appetite and reviewed on a

quarterly basis by theEMT.

Mitigation

Allrisks considered tobeoutsideof theGroup risk

appetite, due to their nature or their potential

ﬁnancialor qualitative impacts, are mitigated by

appropriate risk management strategies. The

implementation and eﬀectiveness of thedeﬁned

mitigation measures are reviewed, and additional

actions are deﬁned if necessary. For this purpose,

risks are assessed based on their likelihood and

impact befor

mitigation measures.

The informationfromthe bottom-upandthe

deep-diveriskassessmentsisintegratedinto the

top-downriskassessmentstoensure thatthe

Groupriskproﬁleiscompleteandaccurate. The

Group risk proﬁle is reviewed by the EMT on a

quarterlybasis,andbythe AuditCommittee

duringthe meetingswhichtakeplaceon aregular

basisduringtheyear.

Identiﬁcation

Starting from allthepossible

categories of risks potentially

impacting the Group, speciﬁc

risks relevant toRHI Magnesita

are identiﬁed through several

analytical tools, including

comparative analysis and risk

benchmarking.

Assessment

The risks identiﬁed are linked

topotential root causes and

assessed for their inherent

likelihood, inherent impact,

and velocity. Risk analysis to

develop an understandingof

thepossibleinterdependencies

between risks is performed.

3 8 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

Risks and strategy

OurriskmanagementapproachhelpstheBoard

andEMTtounderstandtherisksassociatedwith

theadoptedstrategy,periodicallyassessifthe

strategyisalignedwithourriskappetiteand

understandhowthechosenstrategycouldaﬀect

theGroup'sriskproﬁle,speciﬁcallythetypesand

amount of risk to which the Group is potentially

exposed.Aspartofthisprocess,riskscenariosare

evaluatedtoassesspotentialoutcomes.

Group risk chart

Impact

low moderate high critical

very likely

likely

1 5 10 11

Velocity

Slow –

> 12 months

Rapid –

within3months

Moderate–

within12 months

Theassessment,monitoringandmitigationofkey

risks to the strategy are prominent features of the

enhancedapproachto risk management adopted

in 2020 and further enhanced in 2021. Risk

workshopshavebeenconductedwiththeEMT

and Board to review the Group risk proﬁle in the

context of the 2025 strategy and the risk appetite

of the top risks to the Group.

possible

unlikely

Risk appetite

We deﬁneriskappetiteas"thenatureandextent

of risk RHI Magnesita is willing to accept in relation

to the pursuit of its objectives". We look at risk

appetitefromdiﬀerentangles,suchastheseverity

oftheconsequencesshouldtheriskmaterialise,

any relevantinternalor externalfactors

inﬂuencing the risk, and the status of

managementactionstomitigateorcontrolthe

risk. A scale is used to help determine the risk

appetitethresholdforeachrisk,recognisingthat

riskappetitewillchangeovertime.

Ifaparticularriskexceedsitsriskappetite

threshold,itwillthreatenourobjectivesand

thereforerequiresigniﬁcantriskmitigationand

potentiallyachangetothestrategy.Risksthat

approach the limit of the Group's risk appetite may

requireaccelerationorenhancement of

managementactionstoensurethatrisksremain

withinappetitelevels.

Theriskmanagementapproachisbasedonan

assessmentoftheriskappetiteformedbythe

Board,coveringthekeyriskcategories("averse",

"limited","moderate"and"high").Theriskappetite

statements are approved by the Board and are a

foundationalelementofourriskframeworkasit

providesguidancetomanagementonthe

amount and type of risk we seek to take in

pursuingourobjectives.

Our principal risks

TheprincipalrisksarethosetheBoardconsiders

may have a signiﬁcant impact on the results of the

Group and on its ability toachieveitsstrategic

objectives.Thisdoesnotrepresentanexhaustive

list of risks faced by the Group but encompasses

thoseconsideredtobemostmaterialtobusiness

performance.

Theriskscanoccurindependentlyfromeach

otherorincombination.Extraordinaryevents,

suchastheCOVID-19pandemicorgloballogistic

challenges,havethepotentialtocrystallise

multipleprincipalriskssimultaneously,

signiﬁcantlymagnifyingtheadverseimpact.In

2021,theCOVID-19crisiscombinedwithfreight,

energyandrawmaterialcostinﬂationincreased

theriskmanagementchallengesinkeyareasof

the business. As a response to the current

circumstances,continuousmonitoringofthe

Group'sriskproﬁle,withspeciﬁcreferencetothe

potentialcumulativeimpactarisingfromthe

crystallisationofrisks,wasundertakenbytheEMT

duringtheyearandmitigatingactionsweretaken.

1 Macroeconomic environment and

condition of customer industries leading

to signiﬁcant sales volume reductions

2 Supplier dependency risk

4 Signiﬁcant changes in the competitive

environment or speed of disruptive

innovation

5 Reliability of the end-to-end value chain

Macroeconomic environment

12 Fluctuations in exchange rate and energy

prices

2 Lack of competitiveness of internally

sourced raw materials

3 Inability to execute key strategic initiatives 3 Inability to execute key strategic initiatives

4 Signiﬁcant changes in the competitive

environment or speed of disruptive

innovation

5 Business interruption and supply chain

disruption

6 Sustainability – environmental and

climate risks

7 7 Sustainability – health and safety risks Sustainability – health and safety risks

8 8 Regulatory and compliance risks Regulatory and compliance risks

9 9 Cyber and information security risks Cyber and information security risks

10 10 Product quality failure Ability to predict and pass cost increases

to customers

11 Inconsistent demonstration of RHIM

culture, values and related behaviours

Unchanged Replaced by a new risk Scopebroadened

Nine out of 12 principal risks included in the 2020

AnnualReporthave beenconﬁrmedtobe

equallyrelevantin2021.The riskshavebeen

reviewedthroughoutthe year, and it has been

determinedthatthereare twonewprincipalrisks

to theGroup: "Supplier dependencyrisk"and

"Abilitytopredictandpasscostincreasesto

customers".

It has also been determined that two risks

previouslyreported asprincipal risksshouldno

longer be reported as such: "Lack of

competitivenessofinternallysourcedraw

materials"and"Productqualityfailure".These

weredeprioritisedinfavourofrisksrequiringmore

attentionandinalignmentwithmanagement

focus areas.

Furthermore,theprincipalrisk"Fluctuationsin

exchange ratesandenergyprices"isnow covered

bytheprincipalrisk"Macroeconomic

environment"withinabroaderscope.The scope

oftheprincipalrisk"Businessinterruptionand

supplychaindisruption"wasbroadenedtocover

theentireend-to-endvalue chainandtherefore

re-named"Reliabilityoftheend-to-endvalue

chain".Inaddition,the principalrisk"Inconsistent

6 Sustainability – environmental and

climate risks

11 Organisational capacity to execute

strategy, including demonstrating

Company cultural values

demonstrationofRHIMculture,valuesand

relatedbehaviours"wasrefocused on the

organisationalcapacitytodelivertheGroup's

strategyandconsequentiallyreworded as

"Organisationalcapacitytoexecutestrategy,

includingdemonstratingCompany cultural

values".

Thesekeychangesinprincipalrisksare

highlightedinthetableabove.

Emerging risks

Identifying emerging risks is a key part of our risk

managementprocess.Emergingrisksidentiﬁed

duringthe yearareassessed,monitored and

evaluated with the EMT and the Board withinthe

riskworkshops.The extensive considerationof

emergingandchangingriskswas a key driver to

the changesinprincipalrisksdescribed above.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 3 9

Our internal control system

The Board reviews

the eﬀectiveness of

the system of internal

ﬁnancial, operational

and compliance controls

and the risk management

framework.

RHIMagnesitafollowsthecorporategovernance

requirementsoftheregulationsofboththe

Netherlands,giventhelocationofits

incorporation,andtheUK,giventhelocationofits

listing.Wherepossible thedisclosuresare

combinedinthisreport,howeverthere are

primary areas where the respective governance

requirements necessitate similarbutseparate

assessments.

Such an area is the required disclosure and

descriptionofRHIMagnesita’scontrol

environment andsystems.Therefore,the

CompanyprovidesbothaManagement

“In-ControlStatement”asrequiredbythe Dutch

CorporateGovernance CodeandanInternal

ControlSystemreportasrequiredunderthe UK

CorporateGovernance Code.Bothoutline the

measuresthatRHIMagnesitatakestoensure a

strongcontrolenvironment.

Internal control system

TheBoardisultimatelyresponsible for

maintainingeﬀective corporate governance,

whichincludestheGroup’sriskmanagement

approach,theGroup’ssystemofinternalcontrols

andtheGroup’sinternalauditapproach.

TheBoardreviewsthe eﬀectivenessofthesystem

of internalﬁnancial,operational andcompliance

controlsandtheriskmanagementframework.

TheBoardexamineswhetherthe systemof

internalcontrolsoperatedeﬀectivelythroughout

theyear and willmake recommendationswhen

appropriate.

These systems are based on the three linesof

defencemodel,supportedbyanend-to-end

processmodelanddelegationofauthorities

structurereﬂectingtheresponsibilityforrisk

managementandinternalcontrolsatall

managementlevels.

TheGroup’sinternalcontrolframeworkis

designedtoenablethe applicationofthe Group’s

riskappetite.Thistypicallyseekstoavoidor

mitigaterisksratherthantocompletelyeliminate

therisksassociatedwiththeaccomplishmentof

theGroup’sstrategicobjectives.Itprovides

reasonableassurance butnotabsoluteassurance

against material misstatementorloss.

The Group has in place aspeciﬁcrisk

managementapproachandaninternalcontrol

frameworkinrelationtoitsﬁnancialreporting

processandthe processofpreparingthe ﬁnancial

statements.These systemsinclude policiesand

procedurestoensure thatadequateaccounting

recordsare maintainedandtransactionsare

recordedaccuratelyandfairlytopermitthe

preparationofﬁnancial statementsinaccordance

withthe applicable accountingstandards. For the

accountingprocess,anaccountinghandbook

(andrelatedknowledge portalandtraining) is

usedtostructure theinternalcontrolsover the

accountingprocess.

In 2020 the Group introduced a framework of

sevenGlobalProcessestoimprovethe

standardisation,eﬃciencyanddigitalisationof

processes.During2021itbecameapparentthat

the challengespromptedbytheCOVID-19

pandemic requiredthe immediate enhancement

ofspeciﬁcinternalcontrolprocesses.The Group

implementedadedicatedtaskforce tomitigate

the supplychaindisruptionandenhance the

relevantinternalcontrolsincludingthe

introductionofreal-time logisticsmonitoringto

helpplanaroundshipmentdelays.Thereforethe

internalprocessdevelopmentactivitywas

reprioritisedtoconcentrate initiallyonaddressing

theseimmediatespeciﬁcuse casesimpactingour

service levelstoourcustomersratherthanthe

widerapproach.The broaderdevelopmentofthe

GlobalProcesseswillberesumedin2022,albeit

with a stronger emphasis on the processes

directlydeliveringthe value toourcustomers.

The GrouphasanInternalAuditfunction,with a

reportingline totheChairman,AuditCommittee

andasecondaryreportingline,forday-to-day

operationalmatters,tothe CFO.The Internal

Auditfunctionprovidesassurancetothe Audit

Committee and the Board on the designand

eﬀectivenessoftheinternalcontrolframework.

InternalAuditoperateswithinasingledepartment

alsocomprisingRiskManagementand

Compliance.The AuditCommittee and

managementensuredthatappropriate

safeguardsare in place to maintain the

independence ofInternal Audit.The Internal

Audit,RiskandCompliance functionisstructured

intoregionalteamsprovidingalocally-focused

governance presence tosupportregional

managementinlinewiththeestablished

Group-wideobjectives.Thedeliveryofthe2021

InternalAuditplanwasimpactedbythepractical

limitationsimposedbyCOVID-19,however the

overallcoveragelevelwasmaintainedutilising

the approaches,suchasremoteauditing,

successfullydevelopedin2020.AnExternal

QualityAssessmentoftheeﬀectivenessand

capabilityoftheInternalAuditfunctionwas

performedin2021.Thisreportconcluded thatthe

InternalAuditfunctionhasthe requiredlevelof

4 0 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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independenceandisoperatingwithahighlevel

ofperformance.Certain recommendations were

madetofurtherimprovethefunctionandthese

willbeimplementedin2022.

During2021,InternalAuditconducted23

plannedinternalauditsandﬁvespecial

investigations,reportingthemostrelevant

observationsandrecommendationstotheAudit

Committee.

ThereportsbymanagementandInternalAudit,

RiskandCompliancealsofacilitated

considerationbytheAuditCommitteeof

managementactionsinrespectofthefollowing

keycontrolframeworkchallenges:

• Developingthematurityoftheregionally

basedmanagementmodel;

• Improvingtheeﬀectivenessofthedeliveryof

majorcapitalexpenditureandITprojects;

• ContinuingtheenhancementofITsecurity

controlstoaddressincreasedcybersecurity

risks;and

• UtilisingtheGlobalProcessframeworktoadd

valueandimproveoperationalperformance.

TheBoardconsidersthe Company’srisk

managementandinternalcontrolsystemare

appropriateandeﬀectivetogivereasonable, but

notabsoluteassuranceagainst material

misstatementorloss.Nonetheless,giventhe

continuedevolutionandtheregionalisednature

of the Group and the 2021 focus on addressing

supplychaindisruption,thereisneedforfurther

strengtheningoftheinternalcontrolsystemin

2022,mostnotablythroughtheresumedGlobal

Processdevelopmentactivity.

Management “In-Control Statement”

The Board and EMT are responsibleforensuring

theCompanyhasadequateriskmanagement

andinternalcontrolssystemsinplace.

implementedin2021.Itistherefore plannedto

reassessandfurtherupdatethe design of the

broaderinternalcontrolsystemsin2022.

Thekeyinternalcontrolmeasuresinclude reviews

ofﬁnancialperformance andkeycontrol

weaknessesateachBoardmeeting,monthlyand

quarterlyEMTreviewandchallenge of

operational ﬁnancial performance,zero-based

business planningprocess,improvingthe

ﬁnancialreportingprocesses,continued

deploymentofthe corporate culture andvalues

especially to the more remote areas of the

Company,reinforcementoftheCode ofConduct

throughincreasedtrainingsandcommunication,

deploymentoftoolstoincrease leadership

capabilities,enhancingtheresponsetoissues

raised via the whistleblowingprocessand

strengtheningthe capability of the Legal and the

InternalAudit,RiskandCompliance functions.All

keychangesintheinternalcontrolframework

were reviewed by the EMT. Each leader is

accountable for the eﬀectivenessoftheinternal

controlswithintheirareasofresponsibilityandis

requiredtocompleteaself-certiﬁcationreporting

theirassessment.Measuresare appliedineach

functionalareatoassessthe eﬀectivenessof

internalcontrolsandanyidentiﬁedissuesare

escalated.Controlweaknessesidentiﬁedby

managementandthose identiﬁedthroughthe

qualitymanagementsystemreviews,risk

managementactivityandinternal auditreports

areescalatedtothe EMTforreviewandresolution,

all of which is overseen by the Audit Committee.

Thekeycontrolweaknessesidentiﬁedfromthese

processeswere addressedwithin2021.During

2021, driven by the needforfasteranalysisand

decisionmakingonkeycommerciallevers,

Managementhave identiﬁedimprovement

potentialintheclarityandinsightprovidedbythe

coreinternalperformance managementdata.An

improvedﬁnancialmanagementdatasetand

enhancedmonthlyManagementreviewstructure

willbeimplementedfromJanuary2022.

the reportingofthe relatedstrategic objective

signiﬁcantlyincreasedvisibilityand insightofrisk

management.

The improvementsinthe riskmanagement

approach,themilestonesachieved,theresultsof

the internalqualityassessmentand planned next

stepswere reviewedbytheAuditCommittee. In

addition,the riskappetitewasdiscussed and

approvedbythe AuditCommittee and theBoard

followingaseriesofdiscussionworkshops.

During 2022 the focus will be oncompletingthe

integrationofriskmanagementwithinproject

managementactivitiesandcontinuing to

enhance theleadershipcapabilitiesto deliver risk

management,especiallywithintheregionally

basedmanagementteams.

The core design of the internal control systems is

based on extensive work conducted as part of the

merger activity in 2017 and reassessed in 2020 to

createamoreregionallyfocusedandagile

structure.Thetransactionallevelcontrols

operatedinlinewiththeestablishedcoredesign

throughout2021.Theplanneddevelopmentof

end-to-endglobalprocesses was largely

postponed into 2022 to enable resource to be

focusedin2021onemergingoperational

process-basedchallengessuchassupplychain

disruption.Arangeofimprovementstospeciﬁc

processes(e.g.logisticsmanagement)were

In2021,riskmanagementactivitycontinuedto

focus on increasing the depth of the assessment

of the top 20 Group risks and the set-up of

consistentreviewstomonitortheevolutionof

such risks by the EMT, to review the Group risk

proﬁle on a quarterly basis and to take any

additionalmitigatingaction.Improvementstothe

plantrisk managementandthefraudrisk

managementapproacheswere deliveredin2021.

Thepotentialtoembedriskmanagement

conceptsmore fullyintoleadershipbehaviours

was a keytheme of the 2021Leadership

Conference.Linkingthe reporting of key risks to

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 4 1

Viability statement

The Directors have a

reasonable expectation

that the Group and

Company will be able to

continue in operation and

meet its liabilities as they

fall due over the period to

December 2024.

Context

AnunderstandingoftheGroup’sbusinessmodel

and strategy is key to the assessment of its

prospects.TheCompany’sstrategicpriorities

are to:

• Improvecompetitivenessthroughcost

reductions andnetworkoptimisation

• Growrevenuesandmarginsbyexpandingthe

business model

• Increasemarketshareinnewgeographiesor

product segmentswhere the Groupis

under-represented

Formoreinformationonourstrategyandbusiness

model,pleaserefertopage pages 14 to 23 and

pages 10-11.

The principalrisksarethose theBoardconsiders

mayhave a signiﬁcant impact on the results of the

Group and on its ability to achieve its strategic

objectives.Theseare set out on page 10.

Theseriskscanoccurindependentlyfrom each

otherorincombination.Extraordinaryevents,

such as the COVID-19pandemicorglobal

logisticschallenges,havethe potentialto

crystallise multiple principal riskssimultaneously,

withthe eﬀectthatthe impactcouldbe

signiﬁcantlymagniﬁed.TheGroupcontinuously

monitorsitsriskproﬁle withspeciﬁcreferenceto

the potentialcumulative impactarisingfromthe

crystallisationoftheprincipalrisksanddeﬁnes

appropriate mitigatingactions.

Assessment of viability

Whilst uncertaintyandvolatilityremainongoing

featuresofglobalmarkets,in2021theGroup

continuedtoimplementitsstrategyand

demonstratedprogressinallstrategicpriorities.

The assessment process and key

assumptions

TheassessmentoftheGroup’sprospectsisbased

upontheGroup’sstrategy,itsﬁnancialplanand

principalrisks.

Aﬁnancialforecastcoveringthenextthree years

is prepared based on the contextofthestrategic

plan and is reviewed on a regular basis to reﬂect

changes in circumstances. The ﬁnancial forecast

is based on a numberofkeyassumptions,the

mostimportantofwhichinclude productprices,

exchangerates,rawmaterial,energy,freightand

labourcosts,estimatesofproductionvolumes,

futurecapitalexpenditureanddeliveryofour

strategiccostreductionandsalesinitiatives.

Allscenariosconsiderthecompletionofthe

acquisitionsofthe ChongqingplantinChinaand

SÖRMAŞ in Turkey in 2022. No additional M&A is

considered.Inaddition,the forecastdoesnot

assumetherenewalofexistingdebtfacilitiesor

raising of new debt. A key component of the

ﬁnancialforecastandstrategicplanisthe

expectedgrowthofsteelproductionandthe

outputofnon-steelclientsinallregions,

combinedwiththedevelopmentofthe speciﬁc

refractoryconsumptiontakingaccountof

technologicalimprovements.

The assessmentofviabilityhasbeenmadewith

reference totheGroup’scurrentposition and

expectedperformanceoverathree-yearperiod,

usingforecastproductprices,salesvolumesand

expectedforeignexchangerates.The ﬁnancial

performanceandcashﬂowshave thenbeen

subjectedtostresstestingandsensitivity analysis

overthethree-yearperiod.These datawere

aggregated to model a range of severe, but

plausible,downsidescenariosfortheGroup.

The scenariosforstresstestingarebasedupon

materialisationofthe Group’sprincipalrisks. The

scenariostestedconsider:

• Macroeconomic environment

• Supplierdependencyrisk

• Inabilitytoexecutekeystrategicinitiatives

• Reliabilityoftheend-to-endvaluechain

• Organisationalcapacitytoexecutestrategy,

includingdemonstratingCompanycultural

values

• Reliabilityoftheend-to-endvaluechain

• Abilitytopredictandpasscostincreasesto

customers

4 2 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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Theprincipalrisksdescribedabovecouldeither
betriggeredbyCOVID-19,ongoingglobal
logisticschallengesorothercircumstances.

Themostseverescenarioconsidersa COVID-
typemacroeconomicshocklimitingrevenuesand
earningsto2021 levelfortheentireplanning
period.

TheGroup’sliquidityamountsto€1,181million
comprisingofcashandcashequivalentsof€581
millionandundrawncommittedcreditfacilitiesof
€600 million as of 31 December 2021. This is
suﬃcienttoabsorbtheﬁnancialimpactoftherisks
modelledinthestressandsensitivityanalysis.
However,iftheserisksweretomaterialise, the
Groupalsohasarangeofadditionalmitigating
actionsthatenableittomaintainitsﬁnancial
strength,includingreductioninﬁxedcostsand
capitalexpenditure,raisingdebtorreducingthe
dividend.

Viability statement

The Directors believe that the Group is well-
placedtomanageitsprincipalriskssuccessfully.
InmakingthisstatementtheDirectorshave
consideredtheresilienceoftheGroup, taking
accountofitscurrentposition,theriskappetite,
theprincipalrisksfacingthebusinessinsevere
butreasonablescenarios,andtheeﬀectivenessof
any mitigatingactions.

TheDirectorshaveareasonableexpectationthat
the Group and Company will be able to continue
in operation and meet its liabilities as they fall due
overtheperiodtoDecember2024.TheDirectors
have determinedthatthethree-yearperiodto
December2024 isanappropriateperiod having
regardtotheGroup’sbusinessmodel,strategy,
principalrisksanduncertainties.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 4 3

Principal risks

Link to strategy

Business model

Competitiveness Markets

Appetite

High Moderate Limited Averse

1. Macroeconomic environment	Risk description Changes in the global economic environment, ﬁnancial markets conditions and adverse political developments may have an impact on the Group's revenue and proﬁtability.
Link to strategy	The macroeconomic environment changes leading to sales volume reductions can arise from industrial factors or from wider global issues, such as a pandemic or global logistic challenges. The demand for refractory products is directly inﬂuenced by steel, cement and non-ferrous metal production, the investment climate, metal and energy prices and the production methods used by customers.
Target risk appetite KPIs	Due to the Group's cost structure, ﬂuctuations in sales volumes have an impact on the utilisation of production capacities and consequently on the Group's proﬁtability. Examples of speciﬁc risks: • Decreasing investment in customers' infrastructure projects (therefore reducing steel and cement demand) leading to lower refractory consumption and depressed sales volumes. • Customers focusing on lower-cost and more commoditised refractories. • Lower sales volumes leading to lower ﬁxed cost absorption.
Revenue,AdjustedEBITAMargin, AdjustedEPS,ROIC Internally monitored metrics Keymacroeconomicandﬁnancial marketindicators,steeland cementforecastedproduction.	Risk mitigation • Initiatives to increase the Group's resilience, through establishing leaner processes and lower ﬁxed cost structures (such as the production network optimisation), whilst increasing the Group's market share and the value for our customers. • Diversiﬁcation of geographies and industries. • Dedicated taskforce to mitigate the impact of supply chain disruption. • Price increase initiative to pass inﬂationary costs to customers. • Early leading indicators to ensure identiﬁcation of emerging macroeconomic trends. • Treasury Policy and usage of ﬁnancial instruments to mitigate risk exposure to ﬁnancial markets.	Risk movement The demand for refractory products and RHIM customers' products increased sharply in 2021 and is expected to remain strong. The improvement of the global macroeconomic environment and condition of ﬁnancial markets had a positive mitigating eﬀect on this risk. The Group faced global logistic challenges, which impacted the cost and reliability of shipments. This risk was mitigated by management focusing on targeted actions such as price increases to customers, increase in the raw materials inventory levels and additional people and system resources dedicated to managing logistics. The risk appetite for the risk was reassessed by the Board as high due to the Group's limited ability to inﬂuence global macroeconomic events. This risk is within the risk appetite, and macroeconomic and industry developments are closely monitored by management and the Board.
2. Supplier dependency risk	Risk description The Group relies on a small number of external suppliers for certain materials. In certain cases, the Group relies on one supplier for the sourcing of these raw materials.
Link to strategy	The Group might depend on a few suppliers operating in the same market or based in the same geography which are subjected to the same industry, country dynamics and logistic challenges.
Target risk appetite	The Group works with selected specialist third-party providers to operate some of the mining activities across our production sites. Potential temporary or permanent inability to carry out these activities by the third-party providers might lead to risk exposure for the Group and ultimately result in a temporary production interruption.
KPIs AdjustedEBITAMargin, AdjustedEPS,ROIC Internally monitored metrics Tonnesofpurchasedmaterials from solesourcesuppliers,tonnes ofpurchasedmaterialsfrom supplierslocatedinthesame geography,stocklevelofcritical materials.	Examples of speciﬁc risks: • Production disruptions due to single source supplier not being able to deliver raw material on time. • Production interruption due to third-party providers’ inability to operate mining production. • All the Group's suppliers of a speciﬁc raw material and located in a country might be aﬀected by country-wide disruptions. Risk mitigation Risk movement Prompted by the strains of the COVID-19 crisis and the global logistic challenges on companies that operate globally through their international supply chains, this risk became more signiﬁcant during 2021. For this reason, it is reported as a new principal risk. • Proactive engagement with additional vendors to qualify additional supply to achieve risk diversiﬁcation. • Potential risks linked to suppliers' geographical location are assessed and considered in the risk mitigation strategies. • Strategically increasing stock levels to mitigate the risk of production interruption. The risk is within the risk appetite, however the Group is enhancing its eﬀorts to further mitigating the risk. • Increasing internal production of magnesite based raw material, and evaluating value adding options to produce other magnesite based raw materials

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3. Inability to execute key

strategic initiatives

Risk description

The Group's strategic initiatives include sales expansion, new product and service models, production network optimisation,

digitalisation and M&A projects.

Link to strategy

Eﬀective prioritisation and execution are key to delivering the Group strategy. The ambition level of these initiatives requires a

high level of management capacity to eﬀectively deliver change management and strategic initiatives execution.

ﬁnancial performance, including loss of revenue and margin.

The failure to eﬀectively execute these initiatives because of external or internal circumstances may lead to lower than planned

Target risk appetite	Examples of speciﬁc risks: • Failure to develop the strategy into speciﬁc actions. • Failure to react in a timely manner to a changing environment. • Failure to eﬀectively deliver projects. • M&A underperformance.
KPIs VoluntaryEmployee Turnover, Revenue,AdjustedEBITAMargin, AdjustedEPS,Leverage,ROIC Internally monitored metrics AdjustedEBITAfromstrategic initiatives,ROIC fromstrategic initiatives,completionofstrategic initiativeson-timeand on- budget.	Risk mitigation • Group-wide strategy with a high focus on key priorities. • Postponement or cessation of strategically non-important projects. • Strengthening of project management culture and approach. • Leadership capability enhancement programme. • Deep dive learning-based review on each strategic initiative.	Risk movement During 2021, the residual risk level remained overall consistent. The COVID-19 crisis increased the pressure on the delivery of these core strategic initiatives. In addition, the complexity of executing major projects in the challenging COVID-19 impacted environment remains high. Management continues to proactively focus on successfully executing strategic initiatives which are complex in nature. The risk appetite for the risk was reassessed by the Board as limited due to the importance of the Group’s ability to successfully execute its strategic initiatives in a challenging commercial environment. Overall, this risk is within the risk appetite of the Group and undergoes close monitoring to ensure that any further mitigating action will be promptly implemented if required.
4. Signiﬁcant changes in the competitive environment or speed of disruptive innovation	Risk description The Group has a digital strategy that focuses on using digital products to grow its revenue and margin, digitalisation of operations, and other internal processes. In 2021 this was an area of signiﬁcant management focus, which enabled the Group to progress in its digital transformation journey.
Link to strategy	Depending on the ability of the Group to develop adequate products and services, the changes in customers' preferences towards innovative products may present either an opportunity or a threat by increasing pressure on demand and margins. The speed of evolution of customer demand for environmentally-beneﬁcial features, digitalisation and services may be faster than the pace of implementation of the Group's digital strategy.
Target risk appetite	Examples of speciﬁc risks: • Disruptive product technology introduced by a competitor. • Failure to identify digitalisation trends and technologies. • Competitors being faster and more agile in responding to changing customer requirements.
KPIs Revenue,AdjustedEBITAMargin, AdjustedEPS,ROIC,R&D & TechnicalMarketing Spend Internally monitored metrics R&D&TechnicalMarketing Spend, ROIC on such spend and time-to-market,Salesofdigital products,Costsavinggenerated byusageofdigitaltechnologies.	Risk mitigation • Create a climate that fosters innovation and "out of the box" thinking. • Signiﬁcant focus on and investment in digitalisation to bring more digital products to market and to enhance internal processes through digitalisation. • Continued investment in R&D, including, importantly, on sustainability in line with the Group's strategy. • Focus development activity on projects aimed at an agile and fast impact on the market. • Monitoring of key R&D and innovation metrics. • Partnering with third-party innovation leaders.	Risk movement In 2021 the digitalisation focus was directed at internal process enhancement, foundational work on customer relationship management and digital products for customers. The Group made good progress in the implementation of the digital infrastructure in operations, and digital/automation projects to reduce costs are on track. Management continues to focus on monetising digital-based innovation. Investments in R&D is continued, and the Group opened a new R&D centre in India in November 2021. These initiatives contributed to strengthening the risk mitigation initiatives already in place and consequently reducing the residual risk level of this risk. The risk appetite was also reassessed by the Board as moderate, and the risk remains within the risk appetite and is consistently monitored.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 4 5

Principal risks

continued

Link to strategy

Business model

Competitiveness Markets

Appetite

High Moderate Limited Averse

5. Reliability of the

end-to-end value chain

Risk description

The journey from raw material to ﬁnished goods can span several months and might require shipments across the globe. The

ability to react quickly to changes prompted by internal and external factors is therefore key to ensuring value delivery to our

customers.

Link to strategy

In addition, the ability to forecast the demand for the Group’s product is key to enabling eﬃcient and eﬀective planning of

production-related activities, including procurement and inventory planning.

Target risk appetite

Our global operations can be disrupted by issues in a speciﬁc geography or by industry-wide challenges. However, the ability

to transfer some of the production between geographies to mitigate the risk of business interruption can be deployed as a risk

mitigation strategy.

KPIs

Revenue,AdjustedEBITAMargin,

AdjustedEPS,ROIC

Internally monitored metrics

Refractoryleadtimes,Plants’

capacityutilisation,SupplyinFull

OnTime, Inventorylevels,

Customersurveys.

Examples of speciﬁc risks:

• Global logistic challenges impacting the stability, speed and cost of our end-to-end value chain.

• Production interruption at a single-source manufacturing site.

• Inability to accurately predict customer demand leading to missed sales opportunities, ineﬃcient production planning and

additional costs.

• A natural disaster or major political crisis in one or more countries or regions.

Risk mitigation

• Dedicated taskforce to mitigate the impact of supply chain

disruption through short-term targeted improvement to

address speciﬁc operational challenges.

• Regular reviews of sales, production and ﬁnancial plans,

as well as longer-term portfolio decisions, are based on

extensive research.

• Additional people and system resources leading to

improvements in delivery reliability and reduction of

production backlog.

• Operational risk management and maintenance policies.

• Geographical diversiﬁcation of the production network.

• Implementation of an optimised production footprint to

meet planned requirements.

• Risk-based investment policy.

• Global insurance coverage.

• Focus on the minimisation of sole-source materials and

strategically increasing stock levels.

Risk movement

In the context of the COVID-19 crisis and the global logistic

challenges, the visibility over the future characteristics and

dynamics of the logistics industry remains limited.

The Group faced diﬃculties in the supply chain and production

management. This, combined with the closure of certain

plants, and meaningful investment in others (as part of the

Production Optimisation Plan) increased the level of this risk

duringtheﬁnancialyearandpusheditoutsideoftheriskappetite.

Capacity constraints for ﬁnished goods production, combined

with the low inventory levels at the beginning of the year and

the high-capacity utilisation, led to higher exposure to peaks of

demand during 2021 and the reduced ability to fully take

advantage of those peaks. Risk mitigation options are

constrained by the limited network ﬂexibility in 2021 and the

long lead times of the end-to-end supply chain. The current

global transportation challenges contribute to increasing

delivery times.

The Group recognises the rapidly evolving challenges

associated with managing the global supply chain and remains

focused on optimising the end-to-end value chain to reduce

the level of risk back to within the risk appetite.

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6. Sustainability –

environmental and

climate risks

Link to strategy

Risk description

Controlled emissions and use of potentially hazardous materials are inherent to the production of refractory products.

The risk of failing to meet environmental regulatory targets or uncontrolled emissions at our production sites exists and may

result in high ﬁnancial losses and liabilities.

The evolving regulatory environment, the increased stakeholders’ focus, and the Group’s commitment to sustainability led to

increasing investment and eﬀort being dedicated to achieving environmental and climate goals.

Target risk appetite

There are future environmental and climate targets that can only be met by new technological solutions to change the Group’s

production processes and by the delivery of environmental improvements by the Group’s suppliers and customers.

Examples of speciﬁc risks:

• Uncontrolled emissions.

• Inability to meet sustainability targets.

• Failure in meeting stakeholders’ expectations.

KPIs

RelativeCO₂emissions, Use of

secondaryrawmaterial,Revenue,

AdjustedEBITAMargin,Adjusted

EPS,ROIC

Internally monitored metrics

RelativeCO₂emissions, Use of

secondaryrawmaterial,Progress

towardstheachievementof

environmentalandclimate

targets.

Risk mitigation

• Regular environmental audits and risk monitoring at all

sites.

• Well-established Board-level Corporate Sustainability

Committee to oversee and challenge management’s

environmental and climate strategy.

• We manage, measure and report our environmental risks

and opportunities through the TCFD model (as described

on page 60)

• A climate strategy focused on recycling, carbon capture

and usage, fuel switch, energy eﬃciency, and innovative

customer solutions. Read more in Climate and environment

on pages 60 to 63.

• Increased focus on the use of secondary raw material as a

core element of the Group’s strategy.

• €50 million investment in a major four-year R&D

programme to pilot new sustainable production

technologies.

• The geographical diversity of the Group’s operations and

the ability to shi

events impacting speciﬁc geographies.

• Increased focus on sustainable procurement .

• Executive LTIP and Employee Bonus linked to achievement

of the Group’s CO₂reduction targets and increased

recycling.

Risk movement

The inherent likelihood of this risk has slightly risen due to the

increasing regulatory complexity and rising stakeholders’

expectations. Therefore the potential impacts, including

reputational and ﬁnancial, of this risk crystalising have

increased.

To match the increasing level of risk, a major four-year R&D

programme designed to expand the Group’s leading

sustainability position within the refractories industry was

launched in the ﬁrst half of 2021. Over the course of four years,

RHI Magnesita will invest €50 million towards technology

research and pilot plant constructions, including new

technology for the capture of CO₂.

In addition, a range of additional risk-mitigating measures was

implemented during the year. These include the achievements

of the Group’s CO₂targets in the employees’ bonus criteria, the

achievement of the “Gold” ESG EcoVadis rating, and the

increased focus on sustainable procurement.

The risk is within the Group’s risk appetite and is continuously

monitored by management.

7. Sustainability – health

and safety risks

Risk description

Employeesandcontractorsmaybeexposedtohealthandsafety(H&S)hazardsinourplantsthatcannotbecompletelyeliminated.

Our activities and products may potentially cause accidents at our customers’ sites.

Link to strategy

Beyond the harm to individuals, H&S incidents can lead to high ﬁnancial penalties, site closure and a loss in reputation for the

Group.

Especially in the current context of a pandemic, the health of our employees and contractors is a signiﬁcant area of risk to the

Group.

Target risk appetite

Examples of speciﬁc risks:

• Fatal or serious accident at manufacturing or customer site.

• Site closure due to H&S incidents.

• Loss in reputation for the Group due to H&S incidents.

KPIs

LTIF,Revenue,AdjustedEBITA

Margin,AdjustedEPS,ROIC

Internally monitored metrics

TotalRecordableInjury,LTIF,

SevereLostTimeInjuries,Near

Misses,PreventiveRatio,Unsafe

Situations.

Risk mitigation

• H&S objectives are deﬁned as a core Company objective,

and the performance is constantly monitored.

• H&S approach is based on leading global standards and

practices, including regular risk monitoring, emphasis on

“near miss” reporting and root cause analysis.

• Focus on collaboratively enhancing the H&S approach at

customer and supplier sites.

• Continued investment in H&S improvements in our plants.

• Regional COVID taskforces were established to prevent

and manage pandemic-related risks at our sites and

facilitate access to vaccinations.

• Speciﬁc action plans in the event of employee or contractor

health issues.

Risk movement

The risk level slightly increased due to the continuous threat of

the pandemic to the health of our employees and contractors.

Several measures to protect the health of our staﬀ have been

implemented to address local risks posed by COVID-19.

Protecting the health of our staﬀ continues to be a priority.

Safety remains a top priority for the Group with continued

focus, investment and management eﬀorts.

The overall H&S risk is evaluated to be within the risk appetite

and is constantly monitored to ensure that any necessary

action is taken promptly.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 4 7

Principal risks

continued

Link to strategy

Business model

Competitiveness Markets

Appetite

High Moderate Limited Averse

8. Regulatory and

compliance risks

Risk description

The Group faces increasing regulatory complexity and operates in some geographies with inherently high corruption risks.

We strive to establish a culture of compliance throughout the organisation.

Link to strategy

We are exposed to regulatory and compliance risks which may result in ﬁnancial losses or operational restrictions.

Regulatory changes could impact the proﬁtability of our operations and require investment to achieve compliance.

Target risk appetite

Examples of speciﬁc risks:

• Failure to act in accordance with our Code of Conduct.

• Violation of anti-corruption laws by employees or third-party representatives.

• Violation of data privacy regulations.

KPIs

Revenue,AdjustedEBITAMargin,

AdjustedEPS,ROIC

Internally monitored metrics

Percentagecompletionof

internalCodeofConductand

Compliancetrainingand

certiﬁcation,Whistleblowing

reports,Dataprivacybreaches

Risk mitigation

• Ethical values supported by strong corporate culture.

• Code of Conduct and compliance policies and procedures.

• Enhancement of global training, documentation of

compliance matters and communication.

• Anonymous whistleblowing hotline is available to

employees and external parties to report compliance

concerns. All reports are followed up by qualiﬁed

professionals.

Risk movement

In 2021 the focus on key compliance risks has continued,

enhanced by ad-hoc training, and targeted compliance

communications. Signiﬁcant milestones to strengthen

preventative measures were achieved with the delivery of core

compliance policies, guidelines, and training.

The overall risk level was reduced due to the achievement of a

signiﬁcant level of risk mitigation. The risk is within risk appetite

and continuously monitored by management.

9. Cyber and information

security risks

Risk description

The Group’s reliance on IT systems and the greater focus on digitalisation result in a growing exposure to cyber and information

security risks.

Link to strategy

The possible impact of cyber and information security risks could range from operational disruptions, loss of intellectual

property, legal compliance issues, frauds, to signiﬁcant reputation losses.

Target risk appetite

Examples of speciﬁc risks:

• Intellectual property or conﬁdential data the

• Personal data breach.

• So

• Cyber attacks leading to ﬁnancial losses.

KPIs

Revenue,AdjustedEBITAMargin,

AdjustedEPS,ROIC

Internally monitored metrics

Securityincidentsclassiﬁedby

severity,Phishingtestfailrates,

Triageescalationtime.

Risk mitigation

• Global information and cyber security policies in line

with information security best practices, standards

and frameworks.

• Continuous awareness campaign and training.

• Regular risk assessment and penetration testing.

• Cyber security detection and response team.

• Network, device and application protection.

• Audit Committee oversight and speciﬁc focus on cyber

security related controls.

Risk movement

The fast-evolving cyber and information security global

landscape experienced a continued increase in the level of

cyber-threat. This led to an increase in the potential risk impact

in 2021.

The Group continued the implement additional risk-mitigating

measures to respond to this rising threat, including awareness

campaigns and data encryption. These risk mitigation initiatives

contribute to lower the residual likelihood of this risk.

The overall residual risk was evaluated to be within the risk

appetite and closely monitored to enable fast reaction.

4 8 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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OTHER

INFORMATION

10. Ability to predict and

pass cost increases to

customers

Risk description

The Group is exposed to increases in its variable costs such as raw materials, energy, logistics and labour costs. In 2021, some of

these costs increased materially due to global factors.

Link to strategy

To achieve the Group’s margin targets, it is crucial that rising costs are identiﬁed early through the monitoring of leading

indicators and that these are eﬀectively passed on to the Group’s customers.

The Group can suﬀer signiﬁcant ﬁnancial loss should these costs not be fully passed on in a timely manner whilst preserving

customers’ relationships and our market share.

Target risk appetite

Examples of speciﬁc risks:

• Inability to identify early signs of increases in the variable costs.

• Inability to eﬀectively negotiate price increases with customers.

KPIs

Revenue,AdjustedEBITAMargin,

AdjustedEPS,ROIC

Internally monitored metrics

Priceincreaserealised,Price

fulﬁlment,Leadingcost

indicators.

Risk mitigation

• Consistent monitoring of leading indicators to identify early

signs of externally driven cost inﬂation.

• Management focuses on eﬀectively negotiating price

increases with customers without compromising

relationships and market share. These eﬀorts targeted the

delivery of price increases of €130 million in 2021.

• Close management monitoring of progress towards price

increase implementation.

Risk movement

Raw material and freight costs showed an upward trend since

early 2021, whilst energy, CO₂and labour costs started to rise in

the second half of the year. Following these externally driven

changes in key variable cost components for the Group, this risk

is now deemed to be high and a key area of management focus.

A range of risk-mitigating measures were implemented and

mainly relied on the successful delivery of 98% of the €130

million planned price increases within 2021 and enhancing the

monitoring of leading indicators to increase future visibility and

enable eﬀective decision making.

Theriskiswithinriskappetiteduetothesigniﬁcantprogressinrisk

mitigationexecution.Thisiscloselymonitoredbymanagementto

enableafastreactiontoadditionalchangesinexternalcosts.

Focusremainsonstructuralprocessimprovementstoenhance

visibilityoverinternalandexternalcostschanges.

11. Organisational capacity

to execute strategy,

including demonstrating

Company cultural values

Risk description

The Group places a high emphasis on pragmatism, openness, performance, customer centricity and innovation as core

behaviours within its corporate culture. The embedding of the Company culture is a continuous journey and leadership is

pivotal to enhancing the Group values across geographies and departments. Our values of accountability and responsibility

are key to promptly communicating and addressing issues to enable a fast and reliable execution.

Link to strategy

The Group’s corporate culture, combined with an optimal internal structure, adequate skills and resources, are key to ensuring

the delivery of the Group strategy. To ensure access to adequate skills, the Group is focused on being able to retain talent as

well as attract talent from the market.

enhance performance.

A key focus of the Group’s corporate culture is gender, ethnic and generational diversity, which is seen as an important driver to

Target risk appetite

Examples of speciﬁc risks:

• Inconsistent behaviour across the Group.

• Lack of accountability and responsibility.

• Inability to attract and retain top talent.

KPIs

Genderdiversityinleadership,

VoluntaryEmployee Turnover,

AdjustedEBITA,AdjustedEPS,

ROIC

Internally monitored metrics

Genderdiversityinleadership,

VoluntaryEmployee Turnover,

AdjustedEBITAfromstrategic

initiatives,ROIC onstrategic

initiatives.

Risk mitigation

• Continuous emphasis on the Company culture as a key

enabler of performance and driver of strategy execution.

• Dedicated leadership capability enhancement

programme.

• “Tone from the Top” leadership culture.

• Developing talent, enhancing diversity and promoting

Company culture as signiﬁcant components in the People

Cycle.

• Trainee programme to develop graduates into future

leaders.

Risk movement

Theincreasingpaceofchangesdrivenbythefast-evolvingglobal

landscape,whichmanifestedprominentlyin2021,requiresthe

Grouptocontinuouslyensurethatitsinternalstructureand

employees’skillsetenableagilitytosuccessfullydeliverthe

Group’sstrategy.Inaddition,aconsistentandwell-established

cultureisapivotalenablerofmanagement’seﬀectivenessin

deliveringthestrategy,especiallyinafast-evolvingcontext.

Duringtheyear,leadershipandprojectmanagementskillswithin

theGrouphavebeensubjectedtomultiplepressurepointsdueto

theincreasingcomplexitytomanagetheGroup’soperations,

projectsandstrategicinitiativesinacontextofglobalchallenges.

The global job market, which has been signiﬁcantly impacted by

COVID-19 and the strong macroeconomic recovery in 2021 in

several of the geographies in which the Group operates, started

to indicate an increasing retention risk for talents in the second

half of 2021. However, this risk has not crystalised, and the

retention rate amongst senior leaders remains high.

For these reasons, the level of risk has been deemed to have

risen in 2021 and requires management focus to enhance risk

mitigation actions to reduce it and bring it within the risk appetite.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 4 9

Stakeholder

engagement

Consistent, eﬀective and transparent

engagement with our stakeholders helps us

better understand their needs and opinions,

thereby informing our strategy.

Stakeholder group How the Company engages How the Board engages

Shareholders

Whytheyareimportant

Asprovidersofcapitalandowners ofthe

business,ourshareholdersplayacentral

role inthe Company’sgrowth and

development. By fosteringand

maintainingtheirsupport, we areableto

implement ourstrategy andobjectives.

TheInvestor Relations department maintainsan

ongoing,transparentdialogue with shareholdersand

analysts and reports regularlyto theBoard.

Regular engagementwithour shareholdersis

facilitated viaone-on-one meetings,investor

presentations and webcasts,theAGM,industry

conferences and events,capital marketsdaysandsite

visits.

In 2021,theInvestor Relationsdepartment initiateda

perception studyon behalfoftheBoard, inviting our

capital markets stakeholders to providetheir

perspectiveon theCompanystrategy andprogress,

allowing managementtotakeproactiveandinformed

decisions.

DavidSchlaﬀ andStanislausPrinz zuSayn-Wittgeinstein

represent major shareholdersintheCompany through their

positionontheBoardandcanprovideanessential investor

perspectiveto theBoardandEMT.

TheExecutiveDirectors(EDs) meet regularly with investors and

analysts(both inpersonandviadigital channels).

When Boardmembersinteract with shareholdersanupdate is

usually givento thefull Board. Directorsalso receivedregular

presentationsfromInvestorRelationswith analyst coverage of

market andshareholderreactionsto Company events.

TheBoardcontributedtowardstheformationof theperception

study anda detailedBoardpresentationontheresultsof the

perceptionstudy wasconsideredinaBoardmeeting.

TheInvestor Relationsdepartment regularly engagewith its
shareholderson mattersregarding sustainability andinNovember
2021 helditsannual sustainability andgovernanceroadshow with
Janet Ashdown, Chairmanof theCorporateSustainability
Committee(“CSC”) andRemuneration CommitteeandJohn
Ramsay,Senior Independent Director andChairmanof the Audit &
ComplianceCommittee(“Audit Committee”). Additionally, the
CSCreceivedareport fromtheHeadof InvestorRelationson the
particularviewsrelating to ESG.

Debt holders

and lenders

Whytheyareimportant

Ourlendersanddebt holdersarean

importantsource ofthe ﬁnancial

liquiditythe Group requiresto operate

andare integralto the long-term

sustainable successandgrowth

initiativesofthe business.

TheTreasurydepartmentmaintainsanongoing,

transparentdialoguewithits debt holdersandlenders

and reports regularlytotheBoard.

Regular engagementwiththesestakeholdersis

facilitated viaone-on-one andGroupmeetingsand

presentations.

In 2021,theTreasurydepartment engagedwith its

debtholders to,among other initiatives, convert its

€600million Syndicated RCF and$200 millionTerm

Loan intoESG linked facilities aswell as to issue€400

million ofnewESG linked long-termdebt, including a

€250million Schuldschein.

TheBoardhasaclearly deﬁnedapproval anddelegationof

authoritiesmatrixforthecontracting of debt instruments, and

actively contributesandengagesindiscussionswith theCFO and

GroupTreasurer.

TheCFOandGroupTreasurerexecutetheBoard-approved

strategiesby consistently engaging with debt holdersand lenders

to securefavourableterms, mitigaterisksandensuresustainable

andsolidrelationships.

Customers and

innovation partners

Whytheyareimportant

Ourcustomersare positionedat the

heartofourbusinessmodeland

everything we do. They are fundamental

tothe sustainable future ofthe Group.

Ourcustomershelp us to achieveour

Company purpose, through delivering

thevital materialssuch assteel, cement

andglasswhich are essentialto our end

markets.

Wecollaborate with externalpartners

suchas accelerators, start-ups, open

innovationplatforms, companies and

institutions to fosterinnovationand drive

developmentsinR&D.

Weworkcloselywithour customersto ensureweare

awareoftheir needs –this is facilitatedviaday-to-day

contactwithCompanyrepresentativesaswell as

fact-ﬁnding,technical consulting, installationand

operations supervisionand resident expert sitevisits.

TheCompany’s NetPromoter Score(NPS) ismeasured

regularlyand is used as akeymetric forcustomer-

facing teams,toensurefocus onthegoal of providing a

positivecustomer experienceinevery interaction. It

has been especiallyimportant to maintainclose

communication withour customersduring 2021 as we

havefaced unprecedented challengesfromthe

supplychain volatility.In Q4 2021 weachievedan

“outstanding” score,ranking in thetopquartileof

companies.

In aCustomer Satisfaction Survey conductedinQ4

2021 83%ofrespondents scoredRHIMagnesitaasa

“good” or “excellent”.85%ofrespondentsstatedthat

RHIMagnesita’s productquality iseither“excellent” or

“good” whereas only72%ofrespondentsscored

deliveryperformanceas “excellent” or“good”.

Our R&D,Technical ExcellenceMarketing andDigital

Solutions teams collaborateandengagewith

innovationpartners onan ongoing basis.

TheEDscommunicatewith customersinregularmeetings to

discussjoint strategies, at industry congresses, seminarsand

webinars, andat high-technology eventsandfairs.

NPS isconsideredat Boardmeetingsandisregardedasagood

proxy forengagement with customersonthebasisof itsrole in

bringing customerprioritiesto theboardroom. Management

continuesto developthissurvey to reach andengagewith as many

customersas possible.

TheCSCreceivedareport fromtheCSOontheparticular

customerviewsrelating to ESG.

TheBoardreceivedanupdatefromtheTechnical Advisory

Committee, which worksclosely with innovationpartners,and

consideredtheintellectual property strategy throughout the year.

TheCorporateSustainability Committeereceivestechnical

updatesonmeasuresto developtheCompany’ssustainability

strategy which aredevelopedinconjunctionwith innovation

partners. Thisisthenfedinto theBoardviadiscussionsand

Committeereports.

InpreviousyearstheBoardhavevisitedcustomersitesbutin 2020

and2021 thevariousrestrictionshavemeant thishasnot been

possible.

5 0 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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INFORMATION

Topics raised Outcomes

(whatmatterstothestakeholders) (i.e.howhasengagementandstakeholderopinionimpactedontheCompany’sstrategy)

• Companystrategyand implementation

• Operationalandﬁnancial performance

• Capitalstructure andliquidity

• Capitalallocation

• The role andimpact of our EmployeeRepresentative Directors

• ShareholderperspectiveswereconsideredinBoarddiscussionssurrounding capital allocation

decisions, notably theextensionby €50 millionof the€100 millionsharebuybackundertaken

inMay 2021.

• TheBoardcontinuedto incorporateshareholderfeedback aboutremuneration into its decision

making aroundsustainability measuresinincentiveschemesandensuring theoutcomes

against existing measureswill besuﬃciently assessed.

• Overboarding

• Sustainability agenda –meeting thechallenges ofclimate

change anddiversity

• Linkingremunerationand ESG

• The sustainability andgovernanceroadshowcentred upon

approach to diversity, environmental activity,supplychain

governance, corporategovernancepractices and remuneration

• Response to COVID-19:employeeprotectionmeasures,

participationingovernmentschemes

• TheDirectorsusedfeedback fromshareholdersto challengemanagement about progress of

sustainability measuresandthestrategy with regardto pricing andﬁrst moveradvantage.

• TheBoardconsideredshareholderexpectationswhen considering theoutlook and potential

announcementsthroughouttheyear, ensuring theCompany remainedcompliant with MAR.

• Ongoing conversationsabout diversity -particularly gender- ensuredthat theNomination

Committeerecommendedto theBoarda refresheddiversity policy (foundhereon our website)

andproposedthreefemaleDirectorsforappointment at theAGMinJune2021.

• Feedback about acquisitionstrategy fromshareholdersinformsthebusinessstrategyand

planning forthefutureintermsof liquidity andbusinesscapacity.

• TheNomination Committeeconsidered shareholderexpectationsaroundthenumber of

appointmentsheldby new DirectorsandtheIRteamengagedwith particularshareholders as

requiredto giveassurancethat new Directorshadsuﬃcient timeto dedicateto the Company.

• Companystrategyand implementation

• Operationalandﬁnancial performanceand outlook

• Capitalstructure andliquidity

• Additional reﬁnancing with competitiverateswasconductedin2021 to furtherenhance the

Company’scapital structure, debt amortisationscheduleandliquidity proﬁleincluding a €150

millionESG-linkedbilateral facility with ING anda€250 millionSchuldscheinissuance with

maturitiesranging from5.5yearsto 10 years.

• Sustainability initiatives

• Risk management

• Climate action

• Ourcustomers’partner ofchoicein thegreen transition ofSteel

andCement

• COVID-19

• Customerservice levels,lead times and supplychain issues

• Innovationpartners - the artofthepossibleand wherenew

developmentsare being madewhichmightapplytotheindustry

andprogresssustainablegoals

• Price increasesinresponsetoinﬂationarycosts,higher transport

costsandhigherraw material prices

• Customersremainat theheart of theCompany’svaluesandcultureandassuch form a central

part of every Boarddecision.

• TheBoardreferredto thecustomer experiencewhen considering anddiscussing the outlook for

thebusiness, incorporating thisperspectiveinto theirview of theCompany’sfuture

performance.

• TheBoardcarefully consideredglobal customerviewpoint inpricing discussions when

considering costsandvalueproposition. Retentionof long-termcustomerswith strong working

relationshipswasconsideredandprioritised.

• Strategic directioninrespect of sustainableproducts(price, secondary raw material level and

theirlevel of focusonScope1, 2 and3 emissions).

• Strategic directioninrespect of tailoredproductsforcustomersagainst thecomplexityof

businessoperation.

• Theopening of acustomercomplaintscentreinIndiawasdrivenby thedesireto provide better
customerservice, reducing responsetimes.

• Emergency airfreight usedinexceptional circumstancesto meet customerneeds in supply
chaindisruption.

• Any changesto productionfootprint which involveproduct transfersincludemitigating actions
if thiswouldimpact oncustomersto ensuretheirserviceisnot disrupted.

• Consideredcustomerrelationshipswhen considering potential M&A.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 5 1

Stakeholder
engagement
continued

Stakeholder group How the Company engages How the Board engages

Employees

Whytheyareimportant

Attracting, retaining anddeveloping

talentis centralto the successofthe

Company. We aim to cultivate an

engaged,innovative andcollaborative

workforce, with astrongfocuson

diversity.

Weemphasisetheimportanceof frequent,

constructiveand open communicationwith our

employees and havemanychannelsthrough which

this is facilitated.

Communication channels includetownhall meetings,

social mediachannels,email andanemployeeapp

(“MyRHIMagnesita”).Tohelpfacilitateeﬀective

communication throughoutevery level of the

Company,employees weregivena mobilephoneif

theydidn’talreadyown onesothat they couldaccess

MyRHIMagnesita.

Wehave“culturechampions”throughout the

Companywhoengagewiththeworkforceonan

ongoing basis toembed our cultureandvalues, and

arecurrentlyfocusing on “accountability”.

Wehaveexpanded our localisedstrategy, with

increased accountabilityin theregional leadership

teams.Our regional presidents andsitemanagershold

their own townhalls toaddress regional speciﬁc issues

e.g.local supplychain issues,local COVID-19updates

and restrictions,vaccinations andproductionsiteor

oﬃcechanges.

Weheld our annual Leaders conferenceinOctober

2021,focusing on processes,culture, collaboration

and speciﬁcKPIs.Ahead ofthe conference, asurvey to

collectfeedbackfrom theparticipantswasconducted

abouttheir assessmentoftheCompany performance.

ThreeEmployeeRepresentativeDirectorssit ontheBoard,

providing adirect voiceintheboardroomonarangeof issues, in

particularthosewhich directly impact theworkforce, such as

workforceremuneration,agreementsto accommodateworking

conditionsunderCOVID-19,andplant closures.

Asaresult of ongoing COVID-19restrictions, otherformsof Board

engagement with employeeswerelimitedduring theyear,

howevertheDirectorswerepleasedto makesomesitevisits in

2021 to theR&D centreinLeoben, Austria, ourplantsinIndia, and

ourRadentheinandBonnybridgeplants. Not all tripswere possible

asawholeBoard, but diﬀerent Directorstook opportunities as they

aroseandreportedback to theBoardon theirexperience.

EDsandEMT went to India, Brazil andNetherlandsaswell as site

visitsinGermany, FranceandAustria.

OnthesesitevisitsDirectorstook opportunitiesto discusstopics

withemployeestheymetsuchassafety,strategyforbusinessunits,

local conditions, innovationandproduction, amongst manymore.

TheBoardengagedwith employeesbelow EMT level, with

relevant specialist managerspresenting ontheirareasof expertise

to theBoardandCommitteesthroughout theyear, particularlyas

part of theStrategy session inSeptemberwherethey received

detailedbrieﬁngsondigital initiatives, Steel businessinNorth and

South Americaandsteel technology.

TheBoardreceivedpresentationson cultureandemployee

engagement, particularly with focusonexecuting thestrategy,

recognising thiscouldonly beachievedthrough eﬀective

collaborationamongst employees. Presentationsto theBoard also

detailedKPIsrelating to employees, particularly inrespectof

tenure, overall attrition, reasonsforexit, anddiversity statistics.

TheCSCconsidersemployeesafety KPIsat each meetingwhich
includedroot causeanalysisof any seriousorfatal accidents
amongst theemployeeandcontractor population.

Outsideof Boardmeetings, individual Directorsmet with
employeesfordirect discussionsonareasof interest astheyarose
inBoardmeetingssuch asdiversity, hedging approach, EUTrading
SchemeforCO₂Certiﬁcates,risk management, demandplanning
andoutlook amongst many moretopics.

TheEDsusedtheresultsof theLeadershipsurvey to structure the
conferenceandgeneratediscussion aboutstrategic
improvementsto theCompany andto theCompany’sculture,
particularly with referenceto accountability. TheBoardwas
subsequently updated onthis.

5 2 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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INFORMATION

Topics raised Outcomes

(whatmatterstothestakeholders) (i.e.howhasengagementandstakeholderopinionimpactedontheCompany’sstrategy)

• Operationalandﬁnancial performance • Social plansforplant closures havebeenimplemented.

• Businessrestructuring

• Productionhaltsandplantclosures

• Encouragedtalent development inkey teamsandconsideredhow thiswouldinform succession

planning forlevelsbelow EMT.

• Talent development and retention

• Workforce remuneration

• Culturalassessmentcontributedtotheconversationonexecutionofstrategicinitiativesthrough

considerationof staﬀ moraleandtheneedto react speedily. Seniormanagement are

encouragedto recognisehardwork andencourageaccountability to deliverthe strategy.

• COVID-19 • Consideredretentionandattractioninthechanging labourmarket/inﬂation.

• Vaccination

• Health andsafety

• Remuneration Committeeconsideredworkforce remuneration when considering a revised

RemunerationPolicy, thedecisionto pay abonusinrespect of theﬁnancial year 2020 and

whenagreeing theChairmanandED’sfees. Theworkforceoverall averageremuneration

increases, taking into considerationinﬂation, collectiveandunionagreements, formed the basis

fortheincreaseinfeesat Boardlevel.

• EmployeeKPIreportsenabledDirectorsto useexampleswith management about diversity,
operational complexity,theproduction network andsupport debateaboutprogress within
thesetopics.

• Ensuring safety of theworkplaceforemployees, supporting with vaccinationprogrammes and
extensivetesting globally.

• Through oversight of safety campaigns, theCSChasencouragedandchallenged
management onH&S performanceto drivefutureprogressinkeeping ouremployees safe at
work.

• Focusonupskilling, competenceto deliverandexecuting thestrategy.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 5 3

Stakeholder
engagement
continued

Stakeholder group How the Company engages How the Board engages

Communities

Whytheyareimportant

Wherever we operate, ourbusiness

dependsonmaintainingthe acceptance

andapprovaloflocalcommunities.In

returnforthissociallicence to operate,

we mustconduct ourbusinessethically

andresponsibly. We must also strive

towards sustainability, not only inour

ownoperationsbut also to support

socio-economicdevelopment and

environmentalprotectionwhereverwe

operate.

As amember oftheUNGlobal Compact, wesupport

theUNSustainableDevelopment Goalsand

implementtheGlobal Compact principles

(anti-corruption,human rights, labourrightsand

environment).Thesecommitmentsdriveour

engagementwithpolicymakers,NGOsandothersat

national and international level.

Ata local level,eachoperationengageswith local

communities and otherstakeholders to identify their

concerns and howwecan support them.

In 2021 wespeciﬁcallyfocused oneducationand

youthdevelopment,environmental protection and

emergencyrelief.Thelatter two havebecomemore

relevantgiven COVID-19 and theclimatecrisis.

TheBoardreceivesupdatesonourcommunity engagement and

investment programmes.

TheBoardreceivedregularupdatesonCOVID-19infection rates

andconsideredoperationsinthecontext of local community

situations,receiving reportsfrommanagement on how Company

resourceshadbeendeployedto helpcommunitiesacross our

global operationwith theirCOVID-19response.

Aswell asfocusing ontheCOVID-19response, theCorporate

Sustainability Committeeconsideredkey aspectsof community

engagement,including charitablefundraising for local

communitiesandreceivedupdatesfrommanagement on projects

incommunitiesinBrazil andAustria. Youcanreadmoreabout

theseinitiativesonpage65.

In 2021,wecommissioned a new rail container

terminal atHochﬁlzen,Austria. Around3,000 trucks

per year willbereplaced byrail, considerably reducing

CO₂emissions in thesurrounding community.

ReadmoreinCommunitieson

Page 65

ReadmoreinCommunitieson Page 65

Suppliers

Whytheyareimportant

Strongrelationshipswith oursuppliers

are vital for the eﬀective running ofour

operations. We rely onoursuppliers to

deliverservicesandmaterials, and the

availabilityofthese goodsimpacthow

we operate asa company.

In2021,weexperiencedunprecedented

supplychainvolatility, a

unexpectedlysharp reboundindemand

forgoods asthe pandemic eased,which

ledto ashortage ofcontainersin East

Asiacausinga sharp increase infreight

prices.Thisalso ledto poorreliabilityof

containers andsevere delaysaﬀecting

theshipment ofboth raw materials and

ﬁnishedgoodsto ourcustomersites.

In 2021,theGrouphad tochangetheway it managed

its supplychains in order toadapt to amuch more

volatileenvironment.

Weimplemented ataskforceby recruiting someof our

toptalenton atemporarybasis. Thismultidisciplinary

groupwas tasked toﬁnd solutionsto reduceleadtimes,

lower costs,restoresales and helpreplenish ourraw

material inventories.

TheCorporateSustainability Committeereceivedreportsfrom

management on supplierauditsand engagement andconsidered

new sustainableprocurement initiatives.

TheBoardreceivedregularupdatesonthebusiness’swork to

future-proof oursupply chainandthework undertakento adapt

ourprocessesto anincreasingly volatileenvironment.

Janet Ashdownlent her particularexperienceinvaluechain

management to thesenior management teamandprovided a

sounding boardandcoaching to seniorindividualsinthe

Company to challengethem to considerdiﬀerent approaches to

supply chainmanagement.

5 4 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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OTHER

INFORMATION

Topics raised Outcomes

(whatmatterstothestakeholders) (i.e.howhasengagementandstakeholderopinionimpactedontheCompany’sstrategy)

• COVID-19

• Climate change

• Werolledout anextensivevaccinationprogrammeglobally andinIndiaweoﬀered vaccines to

ouremployees, theirfamiliesandthelocal communities.

• Skillsandemploymentprogrammes

• Protectingexistingprogrammes and partners

• Wedonatedto theGermanRedCrossto support thelocal community during the extreme

ﬂooding that took placeinJuly 2021.

• Heavy rainsfell during December2021 neartheBrumado site, Bahia, Brazil. We responded

through donating 14 tonnesof foodto thecommunitiessurrounding thesite.

• Employeesareencouragedto volunteerinourcommunity programmes.

• The impact ofsupply chain volatilityon proﬁtability

• Inventorylevels

• Shipment delays

• COVID-19

• Climate action

• Safety

• Rawmaterials

• Asaresult of thereportsreceivedanddiscussiononsupply chaintopicsat Board meetings, the

Boardencouragedmanagement to seek outsideinput to aimtowardsaBest InClass value chain

andto improveday-to-day supply chainissues. Management commissionedaudits of the

supply chainfromconsultantswith preciseandparticularexpertiseinthesubject and created a

task forceto manageimmediateissuesinthefaceof global supply chaindisruption and a

longer-termsteering committeeto fundamentally set thevaluechainupforthe future.

• Thetaskforceimplementedchangessuch asmoreeﬃcient transportationreporting, regular

updatesof freight costs, thecreationof aleadtimedashboard, implementedanautomated

critical raw material check andregional support forbacklog prioritisation

• Sustainable procurement

• TheCorporateSustainability Committeeconsideredprogressmadeby Procurement in pursuit

of sustainablesuppliers. RHIMagnesitaintendsto evaluateitssuppliersthrough:

– A sustainability risk matrixthat assessessuppliersaccording to country andcategoryrisk
(completed)

– A goal basedframework to evaluatethemajority of RHIMagnesitapurchase spend by
supplierundersustainability criteriauntil 2025

– Implement sustainableprocurement process andorganisation in2022 and2023 in all
regions.

• TheBoardconsideredandapprovedtheModernSlavery Act statement for publication,
following recommendationfromtheCorporateSustainability Committee, andthis can be found
onour website.

• TheCompany succeededinimproving payment termswith supplierssigniﬁcantly over the
periodof thelast two years

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 5 5

Sustainability

governance

From COVID-19 to climate change, the urgent

challenges facing the world today cannot be

solved by governments alone. Business also has

a vital role to play and can be a force for good.

RHIMagnesita’spurposeistomasterheat,

enablingglobalindustriestobuildsustainable

modern life. Our solutions play a vital role in the

manufactureofthesteel,cement,copperand

glassthatcreatethehousing,hospitals,schools

and roads which are needed by the world’s

growingpopulation.Tomakeourbusiness

sustainable,wearepreparingourbusinessforthe

zero-carbonandresource-constrained economy.

As our customers chart their pathway to net zero

emissions, we aim to support them as their

preferredpartneronthejourney.

We are not only the global leader in refractories,

but the sustainability leader in our sector, too. To

retainthisleadership,wearesettingbold

ambitions, drivinginnovation,understandingrisks

andcapturingopportunities.

Materiality

OurriskmanagementapproachhelpstheBoard

andEMTtounderstandtherisksassociatedwith

theadoptedstrategy,periodicallyassessifthe

strategyisinalignmentwithourriskappetiteand

understandhowthechosenstrategycouldaﬀect

theGroup’sriskproﬁle,speciﬁcallythetypesand

amount of risk to which the Group is potentially

exposed.

Weprioritisethesustainabilitychallengesthatare

materialtoourbusinessandourstakeholders.In

2021,these were:

• COVID-19

• Climatechange

• NOxandSOxemissions

• Recycling

• Healthandsafety

Engaging with stakeholders

SustainabilityandESGcontinuedtogrowin

importancetoourstakeholdersduring2021.

Below is a summaryofdiscussiononthesetopics

duringtheyear.

Investors

InvestorinterestinourESGstrategyand

performancerose increasedfurtherin2021.Our

sustainabilityexpertsengagewithinvestorson

variousfronts,frombilateralmeetingsandwritten

exchangesonspeciﬁctopicstoperiodicESG

updatesatbroaderinvestormeetings.

Ourclimatestrategy,recyclingandinvestmentin

emergingtechnologiesremainthetopicsof

greatest interest, with a new focus on how we are

supportingcustomertransitions,suchasDRI

(directreducediron)andEAF(electricarcfurnace)

in steelmaking.

Investors are also keen to understand how we are

developingourgenderdiversityandhavestarted

to show more interest in biodiversity. In 2021, CDP

awardedRHIMagnesitaaB for climate. We also

obtaineda GoldratingfromEcoVadis,AArating

fromMSCI,MediumfromSustainalyticsand

Prime (C+) by ISS ESG rankings.

Customers

Asourcustomerscharttheirpathwaytonet-zero,

theyincreasinglyfocusonScope3emissionsin

their value chain. In 2021, we met with a series of

majorcustomerstolearnabouttheirnetzero

plans and how we can support them.

Inresponse, we already market our ﬁrst low-

carbonbrick,the ANKRAL LC series, and will soon

launch our ﬁrst net-zerobrick.

Asafull-servicesolutionsbusiness,we also help

customerstoreduce their Scope 1 and 2

emissionswithourdigitaltechnologies.Giventhe

scale ofcustomeremissions,thiscouldyield

greaterreductionsthantacklingourown Scope1

and2emissions.Lastly,takingbackspent

refractoriesforrecyclingreducescustomer

emissions and waste, as well as cost.

We aim to be atrustedpartnertoourcustomers

supportingtheirtransitiontoanet-zeroeconomy.

Insteelmaking,forexample,weare already the

market leader in EAF refractories and we plan to

position the company as a leader in DRI

refractories.

Onsocialsustainability,we continuetoworkwith

customersonsafetytodevelopshared

commitmentsandprocesses.We respond to our

customers’needswithinformationabout our

practices.Ournewsustainablesupplychain

processwithEcoVadiswillalsoprovidegreater

transparency.

Employees

Ouremployee engagementspanstownhall

meetingsforouremployeestomeetwith the

leadersofourbusiness(physicalandvirtual

meetings),adedicatedmobile app and other local

channels.During2021,wecontinuedto

communicate onCOVID-19,forexample

explainingthe beneﬁtsofvaccination.Our most

recentglobalsurveyconductedin2020 showed

a 79% score foremployee engagement,

exceedingboththeglobalbenchmarkand that

forthemanufacturingindustry.

• Diversity

Theseissueswerereconﬁrmedbasedoninformal

engagementwithinternaland external

stakeholdersandclosemonitoringoftheissues.

Wedidnotconductaformalstakeholder

consultationin2021.

Our performance in ESG rankings

Gold

Wereportourprogressagainst2025targetsfor

each oftheseissues.Inaddition,wereport

progressonothersocial andenvironmental

issues,suchasanti-briberyandcorruption,

sustainablesupplychainandwaterusage.

Prime C+

DISCLOSURE INSIGHT ACTION

5 6 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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STATEMENTS

OTHER

INFORMATION

Suppliers and contractors

In 2021, we began a new level of engagement

withoursuppliers,workingwiththemand

EcoVadisinordertoimprovesustainability

throughoutoursupplychain.Buildingonour

existingSupplierCodeof Conduct, our new

approachintegrates environment, labour rights,

humanrightsandanti-corruptionconsiderations

intotheprocurementprocess.

We alsocontinuedtointegrateoursafety

programmesforallrelevantcontractorsonour

sites.Inadditiontoclausesinourstandard

contracts,werequestallcontractorstoprovide

key safety data such as LTIF on a regularbasis.

Communities

With many of our sites located in relatively remote

locations,weengagedirectlywithcommunitiesin

theimmediatevicinityofourplants.Althoughwe

have clearoverarchingareasthatwesupport

aroundtheworld,wealsorespondtoimmediate

localneeds.In2021 ourcommunitysupport

rangedfromdonatingCOVID-19vaccinesto

residents near our Bhiwadi plant in India to

providingdisasterreliefto ﬂood-hitcommunities

near our Urmitz plant in Germany.

Working in partnership

Inadditiontobilateralengagement,wetake part

inbroadermultilateralplatformsonthe most

complexsustainabilitychallenges.Forexample,

weworktogetherinindustrypartnershipsonthe

developmentofcarboncapture andusage.These

includetheK1-METconsortiumintheAustrian

steelindustryandthe IndustrialAdvisoryBoardof

theEU-fundedMOF4AIRproject,adevelopment

ofthenewMetalOrganicFrameworkforcapturing

CO₂.

Governance structure

At Board level, the Corporate Sustainability

Committeeisresponsible foroverseeingall

aspectsofsustainabilityandESG.Theyare

responsible forreviewingrisksandopportunities,

approving strategiesandreviewingprogress.

TheSustainabilitySteeringCommitteeisthe

senior managementbodyresponsible fordriving

progress againstkeyobjectives,integrating

sustainabilitythroughoutthe business.TheChair

reportsregularlytothe CEO,Executive

ManagementTeam(EMT)andtheBoard.

Standards, frameworks and reporting

Wefollowleadingsustainabilitystandardsand

frameworks.AsasupporteroftheTaskforce for

Climate-RelatedFinancial Disclosures(TCFD),

we have assessed and quantied the risks and

opportunitiesposedbyclimatechange.The

BoardofDirectorsreceivedtrainingonthistopic.

We make annual climate submissions to CDP and

in 2021 were awarded a B rating.

(occupationalhealthandsafety)and ISO 9001

(quality).

We reportourprogressongender diversity

annuallytothe Hampton-Alexander Review. In

2021 we completedourﬁrstsubmissiononethnic

diversitytotheParkerReview.

We endeavourto reportourprogressopenly and

transparently.RHIMagnesitahasreported in

accordance withthe GRIStandards(Coreoption)

for the period 1 January2021 to 31 December

2021. Together with our GRI Content Index, this

reportservesasourGRIReport.

As a participant in the UNGlobalCompact,we

have committedtosupportthe UNSustainable

DevelopmentGoals.Wefocuson thegoalsmost

alignedtoourcorecompetencies. Thisreport

representsourCommunicationon Progress

(self-assessedasActive)andwe detail how we

support each UN SDG in our GRI Index.

Ourreportingmeetsthe legislativerequirements

intheUKandtheNetherlandsinimplementing

the EUNon-FinancialReportingDirective. In

accordance withthe newEUtaxonomy

requirements,we reportbelowthe proportionof

ourrevenue,operatingexpenditureand capital

expenditure for the 2021 ﬁnancialyear thatare

taxonomy-eligible.

Ourintegratedmanagementsystemmeetsthe
requirementsofISO14001 (environment),ISO
50001 (energymanagement),ISO 45001

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 5 7

Sustainability
governance
continued

We support the UN Sustainable
Development Goals (SDGs)
and have identiﬁed these as
the goals our business is best
placed to actively support.

Ethics and compliance

In 2021, we continued to review and enhance our

approachtothefollowingkeyethicsand

complianceareas:businessethics,anti-bribery

andcorruption(includinggi

conﬂictsofinterests),anti-trustandfair

competition,dataprivacy,tradecomplianceand

businesspartnerduediligence.Weenhanced

andfurtherembeddedarangeofcompliance

policiesandproceduresandconducted

compliancetrainingandcommunications.Aswe

enhanceourframeworkandinternalcontrols,our

complianceculturecontinuestomaturetoo.

Anti-corruptionisamongtheUNGlobal

Compact’s10principlesthatwehavecommitted

tointegratingintoourbusinessstrategyand

operations.Othersincludeenvironment, human

rightsandlabourrights.

Wetakeazero-toleranceapproachtoany

incidentsoffraud,briberyorcorruption,inboth

ouroperationsandourvaluechain.Thisapproach

is made explicit in our Code of Conduct and our

Supplier CodeofConduct.

Comprehensiveonlinetrainingontopicssuchas

businessethics,anti-corruptionortrade

complianceandmonthlymonitoringofthe

trainingcompletedensurethatalloﬃce-based

employees,includingnewhires,aretrained.

Additionalsessionsareprovidedasnecessary,

such as for salesstaﬀ.Inaddition,anti-corruption

andotherkeytopicsareregularlyincludedin

globalinternalcommunications.

Weconductbriberyandfraudriskassessments

acrossourbusiness,withresultspresentedtothe

AuditCommitteeeachyear.Alloursalesagents

arecertiﬁedbyTRACEInternational,aleading

anti-bribery standard-settingorganisation.

Businesspartnersandtransactionssuchas

mergersoracquisitionsarescreenedinthedue

diligenceprocess.We have implementeddigital

workﬂowstoaddressanddocumentconﬂictsof

interest declarations,gi

communityinvestmentapprovals.Guidelineson

eachtopicprovide furthersupportforemployees.

Wearecommittedtoupholdinghumanrights

andlabourrights.Morethanthreequarters(82%)

of our employees belong to unions or are covered

byworkscouncilsorcollective bargaining.

This focus on human rights and labour rights is

nowbeingexpandedtoinclude oursuppliers.Our

SupplierCodeofConductincludesprovisions

thataddressbothhumanrightsandlabourrights.

With the help of a digital tool, we askallsuppliers

to commit to our Supplier Code of Conduct. Our

Boardreviewsandapprovesannualstatements

forpublicationinaccordance withthe UKModern

SlaveryAct2015andCaliforniaTransparencyin

Supply Chains Act.

We urge anyone with concerns about our

business to reportthemtoourindependently

operatedhotline,whichisconﬁdentialandallows

anonymity.Weareﬁrmlycommittedtoprotecting

thewhistleblowerfromanyformofretaliation.

Contactdetailsofthe hotline arepublicised

onlineandthroughoutthe business.Reported

incidents areindependentlyinvestigatedand,if

necessary,appropriate follow-upactionsare

taken;the Audit&Compliance Committee

receive regularreports.In2021,thehotlineand

additional reportingchannelsgenerated63

reports (vs 62 in 2020); The majority of reports

wereHR-relatedcaseswithapproximately 70%

ofallreportsoriginatingfromBrazil.The tendency

regardingthe high number of cases from Brazil is

rooted in the whistleblowinghotlinebeingthe

preferredescalationrouteforHR-related queries

or concerns in Brazil, which in other regions are

typicallyraisedviaothercommunication

channels.

5 8 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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OTHER

INFORMATION

Progress against sustainability targets

Material issue

Targets by

2025 vs 2018

baseline year

Progress

in 2021 2018 2019 2020 2021

1. CO₂emissions Reduce by 15%

per tonne of

product

– Scope 1, 2, 3

(rawmaterials)

CO₂intensitydecreasedby

3.7% comparedtothe base

year

Absolute

(t CO₂)

Relative

(t CO₂/t)1

5,453,000 4,681,000 4,277,000 4,878,000

1.89 1.85 1.96 1.82

2. Energy Reduce by 5%

per tonne of

product

Energyeﬃciencyimproved

by 4.7% comparedto2020

and2.7% comparedtothe

base year (2018)

Absolute

energy

consumption

(GWh)

5,718 5,227 4,577 5,184

Relative

(MWh / t)1

1.98 1.93 2.03 1,93

3. Recycling Increaseuse

ofsecondary

rawmaterials to

10%

Use of SRM increasedto

6.8%

Use of

secondary

raw materials

3.8% 4.6% 5.0% 6.8%

4. Diversity Increase

womenon

ourBoardandin

senior

leadership

to 33%

Womennow accountfor

38% of our Board.Share of

womeninleadership

decreasedto22%

Board 7% 23% 25% 38%

EMT and

directreports

12% 17% 25% 22%

5. Safety MaintainLT IF at

<0.5(goal: zero

accidents)

Lost time injuryfrequency

(LTIF)increased 38%over

2020

per

200,000

hours worked

0.43 0.28 0.13 0.18

6. NOx and SOx

emissions

Reduceby30%

by 2027 (vs

2018), starting

with China by

2021

30% reductioninNOxand

SOx, achievedinChina

already; worknow focuses on

USoperations

China

– target

achieved

2021

Europe–

target

2027

South

America

– target

2027

North

America

– target

2025

1 Adaptationsinline withthe Greenhouse Gasprotocol andreﬁnement inreporting resultinupdatedCO₂andenergyeﬃciencyﬁguresfor2018-2021.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 5 9

Climate and

environment

The eﬀects of climate change became ever more

visible in 2021, from extreme weather events to

record temperatures. At the UN COP26 conference,

world leaders committed to keep the goal of 1.5^oC

alive while business leaders aligned emissions

reduction pledges to this critical goal.

Drivingemissionsdownisakeycorporatepriority

for RHI Magnesita. In addition to charting our own

transition, we want to be a trusted partner to our

customersontheirjourneytonetzero.

Our ﬁrst target is to reduce Scope 1, 2 & 3 (raw

materials)emissionsintensityby15%by2025.In

parallel, we are working to develop a Paris-

aligned target. To do so, we have been working

withtheAustrianGovernmentandWWFandaim

to submit a Science-BasedTargetin2022.

To decarboniseourbusinesswillrequire

unprecedentedinnovationandinvestment.

Between2021 and 2025, we have committed to

invest €50 million in the research and

developmentof newandemergingtechnologies.

In 2021 we spent €63 million on R&D and

TechnicalMarketing.

Climate governance

TheCorporateSustainabilityCommitteeofthe

Boardoverseesourclimatestrategy,reviewing

risks,opportunitiesandperformanceateach

quarterlymeeting.Atanoperationallevel,the

ClimateWorkingGroupofthe Sustainability

SteeringCommitteeassesses climaterisksand

opportunitiesanddevelopsand implements

strategy.

In 2021 wefurtherintegratedcarbon

considerations into keyprocesses:

• Anewinternalpricingmechanismwas

introducedtoincentivise salesteamsto

prioritiseproductswithhigherrecycled

content

• ReducingCO₂emissionsnow accountsfor

10% of the annual bonus for all eligible

employees

• EnhancedmonthlymonitoringofCO₂was

integratedintoourSAPenterprise resource

planningtool

Oursupplierevaluationtoolwillalsoincludean

increasingfocusonCO₂emissions.Thiswillhelp

enhanceouremissionsdataforrawmaterials,our

mostsigniﬁcant sourceofScope 3emissions.

Climate risk

Climatechangerepresentsbothstrategicand

operationalriskstoourbusiness.Thesecanbe

groupedasphysicalrisksandtransitionalrisks.

Physicalrisksinclude greaterseverityofﬂooding,

droughtsorotherextremeweathereventswhich

could disrupt ouroperationsandsupplychain.

Transitionalrisksrange fromregulatory

frameworksandtherisingpriceofcarbon to the

viabilityandcustomeracceptance ofemerging

technologies.Anothertransitionalriskisour

abilitytosetandmeetParis-alignedtargets.

In2021,theGroupcompletedmodellingand

analysisbasedon alow-emissionsscenario of

RCP2.6andaworst-case scenarioofRCP85.

Throughinterviews,modellingandanalysis,we

identiﬁedthelargestexpectedimpactsof

physicalandtransitionalrisks.

The results of the assessmentindicatedthatthe

overallriskproﬁle for physical risks is low. Two sites

have ahighercomparative riskproﬁle thanothers

within the portfolio and these will be prioritised for

futureadaptationandresiliencebuilding.

These risks are discussed in more detail in our

TCFDreport whichisconsistentwiththeTCFD

RecommendationsandRecommended

Disclosuresandispublishedseparatelyto the

AnnualReportdue to its length, on the Group’s

website: www.rhimagnesita.com/energy-and-

climate/.

Climate risks also form part of our third CDP

climatesubmission,forwhichwe wereawarded a

B rating by CDP.

Governance • Management role: The Climate Working Group of the Sustainability Steering Committee works with the Executive Management Team to assess climate risks and

opportunities and develop and implement climate strategy.

• Board oversight: The Corporate Sustainability Committee has been delegated responsibility from the Board for climate-related risk management and reviews

climate risks, strategy and performance in every quarterly meeting.

Risk

management

• This year we expanded our climate-related risk and opportunity assessment to include modelling to quantify the ﬁnancial impact on our business. We completed a

comprehensive review of previously identiﬁed climate-related risks and opportunities, adding further risks and opportunities identiﬁed through interviews with key

stakeholders across the business. We assessed the likelihood and impact of these risks and opportunities in line with the RHI Magnesita Risk Taking/Management

Policy.

• Where relevant, existing controls for the risks were identiﬁed and included in our ﬁnancial modelling. In 2022, our focus will be on identifying and implementing

mitigation actions to manage risks and embrace opportunities.

Strategy We have conducted scenario analysis of all identiﬁed climate-related risks and opportunities, using 2°C and 4°C warming scenarios across short (2023), medium

(2030) and long term (2050) time horizons. Under these scenarios, our key climate risks and opportunities are:

• Physical risks: ﬂooding and resulting disruption to our operations, including damage to property, plant and equipment
• Transitional risks: increased liability for our carbon emissions under carbon pricing schemes worldwide; and potential reputational impact and legal liability
associated with increased investor scrutiny over emissions-intensive industries.

• Opportunities: increased revenue and market share for products that support RHI Magnesita customers’ low-carbon products and/or services; and increased
revenue from RHI Magnesita products with a lower carbon footprint.

Metrics and

targets

• We measure our carbon emissions using the GHG Protocol and have set an interim target to reduce Scope 1, 2 and 3 emissions (raw materials) per tonne of product

by 15% by 2025.

• We have committed €50 million between 2021 and 2025 towards R&D of new and emerging carbon-related technologies and piloting in our plants.

• We have set a target of 10% secondary raw material in our products by 2025, reﬂecting our commitment to reduce our carbon footprint through reducing the

geogenic emissions associated with processing virgin materials. Achieving this target accounts for 10% of the bonus for all bonus-eligible white collar employees.

6 0 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

Climate strategy

Our ﬁrst target is a 15% reduction in emissions

intensity by 2025 in Scope 1, 2 and 3 emissions

(forrawmaterials).Weintendtoachievethistarget

byincreasingrecycling, improvingenergy

eﬃciency,switchingfuels and adopting

low-carbonelectricity.

Total CO₂emissions (Scope 1, 2 and 3 – raw

materials)in2021 were4.9milliontonnesand

emissionsintensityhasreducedby3.7%

compared to the baseline year of 2018. We are

continuingtoworkonthenecessaryinitiativesto

deliverourtargetofa15%reductionby2025.

Around 50% of our CO₂emissions aregeogenic,

whichmeanstheyarereleasedbyminerals

duringprocessing.Addressingtheseemissions

will require not only recycling but also new and

emergingtechnologies.

In addition to reducing climate risk, we aim to

captureopportunities.Weseesigniﬁcant

opportunityinbeingour customers’ preferred

partner as they transition to a net-zeropathway.In

additiontoreducingcustomerScope3emissions

fromrefractorysuppliers,wearedeveloping

solutionsthathelpourcustomersachieve

signiﬁcantreductionsintheirownprocess

emissions.

Recycling

Our target is to reach 10% secondary raw material

(SRM)contentinrefractoriesby2025.Working

towardsthisnotonlydevelopsthecircularityof

our business but is also thesinglemostimportant

contributortoachievingour2025emissions

reductiontarget.

Around half (53%) of our Scope 1 CO₂emissions

aregeogenic;theyarereleasedbyminerals

duringprocessing.Replacingthesevirgin raw

materialswithrecycledorsecondaryrawmaterial

(SRM)avoidstheseemissions.Reachingour

targetof10%recycledcontentwilltherefore

avoid up to 300,000 tonnes of CO₂and150,000

tonnes of landﬁll waste per year.

Progresstowardsourtargetiswellunderwayand

weachieved6.8%recycledcontentin2021

(2020:5.0%).Theseimprovementsareduetonew

initiativestocollect,processandincludemore

secondaryrawmaterial.Aswebuildonthis

progress,therearefourkeypillarstoourapproach:

• Improvingtheﬂowofspentrefractoriesback

toourplantsfromcustomersandtraders

• Developingtherecyclingsitesandnew

technologiestoprocessspentrefractories

• Increasingconsumptionofrecycledcontentin

ourbusiness

• Growingsalesofproductswithrecycledcontent

To increasetheﬂowofspentrefractoriesbackto

ourplants,wearedevelopingcircularcontracts

withcustomersthatincludebothdeliveryand

returnofrefractories.Inaddition,wearebuilding

strategicrelationshipswithsmallbusinesseswho

dealwithspentrefractories.

Wenowhaverecyclingfacilitiesineveryregion

andweareplanninginvestmentsinGermany,

MexicoandBrazil.Forexample,Mitterdorfisthe

newstate-of-the-artrecyclingfacilitynearour

Veitschplant.Thisplantwillhostourﬁrstsensor

sortingmachine,aninnovativetechnologyto

processspentrefractoriesintohighquality

secondaryrawmaterials.Anothernewtechnology

willremovecontaminationfromrefractoriesusedin

cementrotarykilnssothattheycanbereused

whilstmaintaininghighperformancestandards.

Thegreaterpurityofoursecondaryrawmaterials,

theclosertheyaretoprimaryrawmaterialsandthis

willallowustofurtherincreasetherecycled

contentofourproducts.

Developingmore recipesthatinclude recycled

content is another key focus. Our ANKRAL LC

series of bricks includes up to 20% recycled

content andhave anindependentlyveriﬁed13%

lowercarbonfootprint.Nowthatthe seriesiswell

establishedandusedby22customersinEurope,

we are rolling the series out to other regions while

also developing a new brick with up to 50%

recycledcontent.Anet-zerobrickforthe steel

industrywillbe launchedshortly.Theserecipes

aregainingapositive receptionfromcustomers.

Amongourtopsellers,approximately50%more

brandsnowcontainrecycledcontentcompared

to 2020.

Thechallengestofurtherincreasingrecycling

contentarenotmerelytechnical;wemustalso

changemindsets.Toencourage this,we have

implementedanew internal pricingmechanism

thatincentivisesoursalesforcetosellproducts

withhigherrecycledcontent,makingthese the

preferredchoice.Thisisalreadyshowing

promisingresultsinseveralregions,especially

Europe.

OurRasaplantinArgentinahassuccessfully

addressedboththetechnicalandcultural

challengesofincreasingrecyclingcontentandis

breakingnewgroundwithacircularapproachto

its operations.The average recycledcontent

acrosstheplant’smagnesia-carbonproduction

exceeds20%,one of the highestforany

productionline acrossourbusiness.

Ourrawmaterialsplantsare also ﬁnding ways to

reuseprimarymaterialpreviouslydiscardedas

waste.Byusingwastemagnesiteore,forexample,

our new rotary kiln in Brumado will almost halve

the virgin ore we extractfromthelocalmine,

extendingthe mine’s life by over 70 years. At

Hochﬁlzen,we recently developed a way to use

1.6milliontonnesofﬂotationtailingsthatremain

onsitefrompreviousproductionmethods.By

usingtailingsinrawmaterialproduction,we

reducewastewhile alsoreducingourneedfor

minedrawore.

In 2021, we generated108,000tonnesof

productionwaste,or0.04tonnespertonne of

production, compared to 107,000 t or 0.05 t/t in

2020. The bulk of this waste isnon-hazardous

ceramicandmineralwaste fromproductionand

mines.

Carbon capture and utilisation

Recycling,fuelswitchesandenergyefficiencycan

onlytakeuspartofthewaytonetzeroemissions

sincearound50%ofourScope1 emissionsare

releasedbymineralsduringprocessing.Carbon

dioxide(CO₂)isemittedwhenrawmagnesite

(MgCO₃)isprocessedintomagnesiumoxide(MgO),

thebasisformanyofourproducts.

Wearethereforeworkingtodevelopnew

technologiesthatareintendedtocaptureprocess

emissionsthensequesterthemordevelopavalue

chaintousethem.RHIMagnesitahascommittedto

invest€50millionby2025totrialsuch

technologiesatpilotplantlevel.OurR&Dfunction

andTechnicalAdvisoryCommittee(TAC)have

workedwithleadingresearchinstitutes,universities

andindustrypartnerstoidentifythemostpromising

technologiesandanumberofprojectsarenow

underway.

At our Austrian raw materials site at Breitenau, we

aretestingOxyfueltechnology.Theprocess

modellingandﬁrstpre-trialsare promisingbut

industrial trials in the kiln are now needed to

conﬁrmtheoretical calculations.Engineering

work to adapt the kiln is underway, with thenext

trialsplannedfor2022.

AtHochﬁlzeninAustriaandBrumado inBrazil,

two of our other key raw material sites, we

conductedtestsinAustraliatoseparatecarbon

frommagnesiteore.Initialresultsshowed the

processtobe energyeﬃcient.CalixLimited is our

technologypartnerforthistrialand we have

signedaMemorandumofUnderstanding to work

togetheronthisprocess.Dependentonﬁnal

results, we plan to install a pilot plant at one of our

mines. At our York site in the US, we are running a

feasibilitystudyforcryogeniccarboncapturein

ourrotarykilns.

Hydrogen is a carbon free energysourcewhich

oﬀersapromisingalternative to fossil fuels for high

temperature processes.Inaddition to lab trialsfor

calcinationandsintering,weare testinguseof

hydrogeninproductionprocesses. Theﬁrstpilot

willbeconductedatourMarktredwitz plantand

we are alsoexploringwhetherwe canalso

generatethe gas on site.

Theseprojectsarecost-intensivebutarea vital

longterminvestmentindrivingdownemissionsin

hard-to-abate,energy-intensive industries.

Companiesinvestinginsuchtechnologieswill

thereforerequire anenablingpoliticalframework

that allows us to compete fairly.Inaddition,these

newtechnologieswillrequireinfrastructure

providedbythirdpartiesorgovernmentsto

provide suﬃcientquantitiesofrenewableor

low-carbonenergyatcompetitiveprices,more

responsive smartgridsandnetworksfor

transporting andsequesteringCO₂.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 6 1

Climate and
environment
continued

Supporting customer net-zero journeys

Ourcustomersoperateinhigh-emittingand

hard-to-abatesectors.Forexample,thesteeland

cementindustries,whichrepresentmorethan

three-quartersofourcustomers,together

account for up to 15% of global CO₂emissions.

Bothsectorshavenowsetouttheirrespective

pathways to net-zero by 2050. Our aim is to be

thepreferredpartnerforourcustomersduringthis

transition.

Wearealreadytheleadingsupplierofrefractories

andsolutionstothegrowingproportionofsteel

madeusingelectricarcfurnace(EAF)based

production.Weintendtotakealeadership

positioninrefractoriesforsteelmakingusing

directreducediron(DRI),asthismethodbecomes

morewidespread.

Inaddition,wearetherefractorypartnerfor

breakthroughtechnologiesinsteelmaking,suchas

inourpartnershipwithBostonMetals,whichis

commercialisingitsgroundbreakinguseof

electrolysistotransformmetalsproduction.Weare

alsotherefractorypartnertoK1-MET,anAustria-

basedconsortiumbreakingnewgroundwithits

researchintoenergy-eﬃcient,circularand

climate-neutralmetalproduction.

Wearecontinuingtodevelopthenextgeneration

ofsolutionstosupportlow-carbonsteel

production.Forexample,ourITECplatformhas

beenupgradedtosupportthetransitiontogreen

steelmaking,optimisingforCO₂eﬃciency as well

asreducingrefractoryconsumption.

Althoughwearedevelopinginnovativelow-

carbonproducts,themarketforthemisnotyetfully

developed,particularlyinrelationtopricing

premium.Atthisstageofcustomers’net-zero

journeys,wethereforeusuallysupportemissions

reductionsusingexistingtechnology.Thisincludes

removingandrecyclingspentrefractoriesfrom

customersites,whichreducesbothwasteand

associatedemissions.Inaddition,weare

integratingCO₂emissionsreductionintoexisting

solutions,suchastundishandpurging,and

communicatingtheseavoidedemissionsto

customers.Forexample,ourEAFdirectpurging

plugs(DPP)systemincreasesproductivitywhile

reducingCO₂emissions by up to 12.7kg CO₂/tonne

ofsteel.

Cementcustomerscanreduceemissionsintheir

productionprocessesusingourAutomated

RefractoryOptimisation(ARO)technology.This

digitaltoolmonitorsconditionsinsidekilnsto

optimiserefractoryconsumptionandminimiseCO₂

emissions.AROissimilartoourmarket-leading

technologyforsteelcustomers,AutomatedProcess

Optimisation(APO).Digitalsupervisionofkilns

allowscustomerstoavoidenergy-intensive

stoppagesfortraditionalmaintenancechecks.

Inadditiontosteel,cementandothertraditional

customers,weare movingintonewindustriesin

thelow-carbon economy.Forexample,we will

supply refractoryengineering,materialsand

installation for fournew waste-to-energyplants

thatwillsupply1.5millionMoscowresidentswith

renewableenergyby2023.

Reducing the carbon intensity of energy

Weareswitchingtolower-carbonandrenewable

sources of energywhere feasible in order to

reducethecarbonintensityofthe energyweuse.

By the end of 2021, 48% of purchased electricity

wasfromlow-carbonorrenewablesources.This

is due to new contracts for renewable energy in

Germany and China and has led to a 22% drop in

ourScope2emissions.Similarinitiativesatother

locationsarebeingexplored.

Renewablesarenotyetaviableprimaryenergy

sourceforusduetothehightemperaturesand

quantitiesofenergyrequiredfortheproductionof

refractories.Wherepossible,weareswitchingfrom

pet coke to natural gas, the fossil fuel with the

lowestcarbonfootprint.In2021,gasrepresented

52% of our fuel use.

Nevertheless,the requiredgasinfrastructure does

not yet exist in all locations. In Hochﬁlzen, we plan

to switch to gas as soon as the naturalgassupply

isupgraded.InYork,thepre-engineeringis

underway for both rotary kilns to have new

multi-fuelburnersthatwouldallownaturalgas.

Weanticipateinstallationofthe ﬁrstburnerin

2022 and the second in the following year.

Our energy use

2018 2019 2020 2021

Total

consumption

(GWh) 5,718 5,227 4,577 5,184

MWh/t 1.98 1.93 2.03 1.93

1 Reﬁnementofreportingresultsinupdatedenergyeﬃciency

KPI2018-2021.

Increasing energy eﬃciency

By2025,wehavecommittedthatenergy

eﬃciencywillbe5%highercomparedto2018.

Withplantsnowoperatingatfullcapacity,the

resultsofrecentenergyeﬃciencyprojectsarenow

visible.Wehaveimprovedenergyeﬃciency6%

sincethepreviousyear.

To build on this progress, we have nowadopted

energymanagementstandardISO 50001. In

2021,weimplementedthisinourMexico,Austria

andTurkeyoperationsandwillcomplete arollout

to all global operations in 2022. By reducing the

durationandtemperaturerequiredforproduction

processes,innovative technologiesare also

helpingtoimprove energyeﬃciency.

In 2021, we used 5.2 TWh of energy. Energy

eﬃciencyprojectsareexpectedtosavemorethan

100 GWh a year.

Responsible use of air, land and water

Climate change is not the onlypressing

environmental challenge.Decliningbiodiversity,

watershortagesandairpollutionareinterlinked

andwillasorequireintervention.

RHIMagnesitaaimstoreduce itsimpacts on air,

land and water and to be a responsible user of

these precioussharedresources.

Reducing NOx and SOx emissions

Ourprogrammetoreduceouremissionsof

nitrogenoxides(NOx)andsulphuroxides(SOx) by

30%isunderway.Followingaphasedapproach,

we focused ﬁrst on China and met our 2021 target

a year early. We are now on track to achieve

targetsinthe US by 2025 and we arecurrently

implementingthe necessaryprocess

optimisation.InEurope andSouthAmerica,we

expect to reach the 30%reductiontargetby

2027.

Wealsopartnerwiththecementindustryontheir
net-zerojourney.OurANKRALlowcarbon(LC)
brick for the cement industry has up to 20%
recycledcontent.

6 2 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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STATEMENTS

OTHER

INFORMATION

Protecting biodiversity

Biodiversitylossandecosystemcollapseare

described as one of the top ﬁve threats to face

humanityinthenextdecade.Thelinksbetween

nature and the global economy are now better

understood,withanestimated$44 trillionof

economicvaluegeneration moderately or highly

dependentonnature.

Water stewardship

Lessthan1%^6,7of the world’swaterisfreshwater

thatisavailablefordomesticuse,agriculture,

industryandfreshwaterecosystems.Demands

onthisﬁniteresource are rising. As the climate

changes,the availabilityofthiswaterisbecoming

lesspredictable,withﬂoodsanddroughts

becomingmore common.

We plan to expand the scheme to our Cuttack

andBhiwadiplants.

In2021,ourwaterconsumptionwas13.0million

m³, 5% higher than 2020. Of our total water

consumption,1.3m³water (or 10%) was

consumedinwater-scarce areas.

A sustainable supply chain

RHIMagnesitarecognisesthethreatposedby

nature loss. We aim to assess how our operations

impactnature,aswellasthepotentialﬁnancial

risks to our business that could arise in the longer

term. We have begun the process of developing a

biodiversitystrategy.Asaﬁrststep, we are

assessingourminingsitesforproximitytoand

impact on areas that are protected, or of high

biodiversityvalue.

Wearecontinuingourprogrammestoplantnative

speciesoftreesatkeylocationsacrossour

business.OurtreenurseryinBrumadohasgrown

over16,000trees.RHIMagnesitaplantedmore

than 4,000 of these in Brumado in 2021 and

donatedafurther12,000tocommunitygroups.

Similarly,ourEski

landborderingourmineandplant,bringingthe

totalplantedto197,300since2005.

Althoughtherefractoryindustryisnotwater-

intensive,wemuststillminimisewaterwithdrawals

andusewateraseﬃcientlyaspossible.Thisis

particularlytrueforthe10siteswehaveidentiﬁed

asbeingsituatedinregionswherewaterscarcityis

ormightsoonbecomearisk.PlantsinMexico,

Brazil,India,ChinaandFrancewereallidentiﬁed

throughwaterscarcityassessmentswehave

conductedateveryproductionsite.

InIndia,mitigationplansinclude ourﬁrstrainwater

harvestingsystem.NowoperationalatourClasil

plant, the system has so far replenished the

aquiferwithmore waterthantheplantwithdraws,

makingourlocaloperationwaterpositive.The six

rainwaterharvestingpitsprotectedthe plantfrom

ﬂoodingduringthe monsoonwhile helpingto

recharge theaquiferwithanestimated

30,000m³ofrainwater.

We are workingtointegrateenvironmental

sustainabilityinto ourprocurementprocesses.

Followingacomprehensive riskassessment,we

arenowrollingoutanassessmentprocess

togetherwithEcoVadiswhichwillassesssuppliers

forenvironmental issuesrangingfromenergy and

CO₂emissions to waste and end of life. Based on

risk mapping, we carried out the ﬁrst phase of

assessmentsin2021.Ourtargetis to cover

two-thirdsofoursupplierbaseby2025 and all

suppliersdeliveringrawmaterialswith a high CO₂

intensity.

Our carbon emissions Case study

Absolute emissions (thousand tonnes of CO₂)

2018 2019 2020 2021

New circular approach to our

business in Rasa

Scope 1 2,396 2,008 1,973 2,493
of which geogenic emissions 1,305 1,066 1,075 1,330
of which fuel-based emissions 1,045 918 873 1,129
of which other emissions 46 24 25 34
Scope 2 206 188 143 112
Scope 3 (raw materials) 2,851 2,486 2,161 2,273

Total 5,453 4,681 4,277 4,878

1 Adaptationsinline withthe Greenhouse Gasprotocol andreﬁnement inreporting resultinupdatedCO₂ﬁgures andKPI2018-2021.

Our energy use by source Our water use

Natural gas 52%

Electricity 11%

Fuel oil 15%

Diesel 1%

LPG 0%

Coal and coke 20%

Water consumption

in non-scarce areas 90%

Water consumption

in water scarce areas 10%

OurArgentinianplantatRasahasseta

boldnewbenchmarkforourbusinesswithits

circularapproach.Theplantimproved

stabilisationforrecycledmaterialsand

launchedacircularplanthatcoverseverything

fromsourcingandrecipestocustomer

relationships.Theplantnowonlyproduces

productswithrecycledcontentandhasbeen

abletoexceed20%recycledcontentinits

magnesiacarbonrefractories.

Recycledcontentin magnesia

carbon refractories

20%+

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 6 3

Our people

and

communities

The world of work is changing rapidly both for

employers and employees. From the challenges of

COVID-19 and its eﬀects on global supply chains to

the demands of decarbonisation and digitalisation,

companies face new and complex challenges.

Wewillonlynavigatethesechallenges

successfully if we bring our people along on the

journey,too.Thismeansequippingemployees

with new knowledge and skills. It also requires a

cultureandastructurethatareopen,pragmatic,

thatpromotesinnovationandrewards

performance.

Health and safety

Ouremployeesandcontractorsareentitledtoa

safeandhealthyworkplace.SincetheCOVID-19

pandemic,thisfundamentalemployerobligation

has taken on even greater signiﬁcance and we

haveworkedhardtoprotectemployeehealth,

safetyandwellbeing.

During2021,wecontinuedwithstrictadherence

toourCOVID-19safetyprotocols.Routinetesting

helpedtoprotectthesafetyofourworkforce,as

wellasthecontinuityofourbusiness.Othersafety

measurescontinueddependingonlocal

circumstancesandregulations.Wemaintaineda

heightenedfocusoninternalcommunications,

includingthepromotionofvaccinations.Asa

result,wehaveavoidedoutbreaksinour

operations.Nevertheless,weweresaddenedby

theCOVID-19relateddeathsof11 people,

includingemployeesandcontractorsinsomeof

thehardesthitcountriesinwhichweoperate.

Our safety performance

1.2

1.0

Inparallel,wecontinuedtoprogressour

occupationalsafetyprogrammes.A

consistentpositive trendsince2011 forallsafety

KPIs,weexperiencedaslightincreaseininjury

ratesduring2021.Ourlosttimeinjuryfrequency

(LTIF) rose to 0.19 and our total recordable injury

frequency(TRIF)was0.61.Mostregrettably,two

contractorsdiedasaresultofworkplace

accidents,oneinBrazilandone inChina.

Immediateinvestigationsandremedialaction

were taken in both cases.

The deterioration in our safety KPIs in 2021 broke a

continuousrecordofimprovementsince2011 and

thiswasimmediatelyinvestigated.Interviewsand

analysisrevealedthese developmentswere

probablyaresultofunexpectedlyhighplantloads

combinedwithreducedstaﬃngduetoCOVID.

Deterioratingsafetyperformance is not

acceptableand the Grouphasazeroaccidents

target. We achieved this goal for a ﬁve month

periodin2020. We are takingswi

action,includingaglobalSafetyRelaunch

programme.GiventhetwofatalitiesinChinaand

Brazil,weareengagingcloselywiththese client

sitesandothers toensure theirsafetystandards

are as high as the rest of our operating locations.

0.5

0.4

As part of our safety integration project, we also

workwithcustomerstodevelopsharedtraining

andreportingpractices.Employeescontracted to

workatcustomersitesare alreadyincluded in our

data,asarecontractorsonoursites.

We are extendingimplementationofISO45001

forourrefractoryinstallationsbusiness.This

occupationalhealthandsafetymanagement

system,whichwe have implementedacross

20plantsandproductionsites,ensuresthat

we focuson:

• Riskassessmentstoidentifyhazardsand

preventaccidentandinjury

• Mitigatingunsafe situationstoprevent

accidentsandlearnfromnear-misses

• Measuringthe timelinessandeﬀectivenessof

mitigationmeasures

• Investigationsandrootcause analyses,

sharingresultsacrosstheorganisation

Since unsafe behavioursare responsiblefor most

accidents at work, we also use thePOSTsafety

observationprogrammetofocusonbehaviour-

basedsafety.

Our culture

Wecontinue toembedourorganisationalculture

intooureverydaybusiness.Customerfocusisat

the heart of this culture which has four key

dimensions: innovation,openness,pragmatism

andperformance-driven.These qualities have

allowed us to navigate the pandemic,while

protectingthe healthofouremployees,serving

ourcustomersandensuringtheswi

ourbusiness.

0.8

0.6

0.4

0.2

0.0

2018 2019 2020 2021

0.3

0.2

0.1

0.0

Duringthe pandemic,ouremployee engagement

largelycomprisedvirtualtownhallmeetings

betweenourleadersandemployees,aswellas

onlinecommunicationschannels.Wehavenow

beguntoreintroduce face-to-facetownhall

meetings.Ourmostrecentglobalsurvey

(conductedin2020)showedouremployee

engagementat79%.Thisexceededglobal

benchmarksforbusinessandformanufacturing

industries.

Total recordable injury frequency Lost time injury frequency

6 4 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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OTHER

INFORMATION

Asweacceleratethedigitalisationofourbusiness,

we are also focusing on the people side of the

transformation.Followingthesuccessofour

culturechampions,we haveappointedmorethan

100digitalchampionsacrossourglobalbusiness.

Theseambassadorsengagewith employees,

showcasing the beneﬁts of new tools, as well as

identifyingchallengesand solutions.

Promoting diversity

We believethatadiverseandinclusiveworkplace

isbetterforouremployeesandourbusiness.

Whenemployeesfeelmoreaccepted and valued

for who they are, they are more likely to feel

engaged, sharediﬀerent perspectives and be

able to innovate.

Our goal is therefore to build a highlydiverse

organisationwhereeveryonefeels welcomeand

valued,regardlessofgender,age, nationality,

ethnicity,religion,disability,sexualityoranyother

diﬀerence.Wehaveembeddeddiversityintoour

culturalthemes.

Diversityofgender,nationality and generation are

our ﬁrst three priorities. To drive progress, we have

setupglobalandregionalgovernancestructures

thatreporttotheCorporateSustainability

CommitteeoftheBoard.

Our target is that by 2025 women should

represent 33% of our Board, our Executive

ManagementTeam(EMT)andtheirdirectreports.

OurBoardalreadyexceedsthistarget,with38%

ofDirectorsnowwomen.Femalerepresentation

among our senior leaders was 22% at the 2021

year end so there is further progress to be made in

thisarea.

We arebuildingapipelineoffuturefemale

leaders. As we work to make our leadership reﬂect

thegeographicdiversityofourbusiness,we

intend to appoint female leaders to roles in each

keyregion.

We aimtoincreaserepresentationfromboth

youngerandolderagegroups helps us beneﬁt

fromamulti-generationalworkforce.Ournew

traineeprogramme,RefractoryFactoryseeksto

attractandretainyoungtalent.Ourﬁrstintakeof

traineesincluded10nationalities,with30%

femalerepresentation.

We madeourﬁrstsubmissionin2021 to the

Parker Review on the topic of ethnicity and race.

Developing leaders

Peopledevelopmentiscriticalaswetransform

our business and rise to the challenges. From

digitalisationtodecarbonisation, wearebuilding

newskillstosuccessfullyaddressthese

challenges.

TheRefractoryFactoryisourrecentlylaunched

globaltraineeprogrammedesignedtobuildour

leadershippipeline. The two-year courseoﬀers

thechancetoparticipateinstrategicgrowth

projectsaswellascross-functionaland

internationalassignments.

New skills are also required of leaders in

increasinglycomplexandvolatile global markets.

Ournewgloballeadershipdevelopment

programmefocusesonleadershipintimesof

change.

Ourtalentmanagementsystem,the People

Cycleprovidesassessmentsofperformance and

potential,supportspersonal developmentplans

and successionplanning.

OurRadentheinplantisthemosttechnologically

advancedintheglobalrefractoryindustry.Ithas

thereforebeenchosentobe thecentraltraining

hubanddigitalﬂagshipplant,withmore than

€1 millioninvestedinexpandingitstraining

facility.

Supporting our communities

Withour operationstypicallyinremote areas,RHI

Magnesita’scommunityinvestmentprojectsare

mostlyfocusedonneighbourhoodsinthe

immediate vicinity.

Ourmainfocusareasare:educationandyouth

development,environmentalprotectionand

emergencyrelief.Byworkinginpartnershipwith

localresidentsandexperts,wedevelop

programmesthatrespondtolocalneeds,improve

livesandstrengthencommunities.

Examplesfrom2021 include:

• WeprovidedCOVID-19vaccinationsto

residentslivingnearourIndianplants.

• In Germany,we supportedemergencyﬂood

reliefeﬀortsforcommunitiesaroundour

Urmitzplant.We supportedthe GermanRed

Cross and matched funds raised by our

GermanWorkers’Council.Inaddition,we

organisedvolunteeringopportunitiesfor

employees.

• InBrazil,Buildingthe Future is a 24-month

trainingprogrammethatrecruitsyoung

people fromdisadvantagedneighbourhoods

near our Contagem plant and leads to a

professionalqualiﬁcationandpractical

experience inouroperations.Similarly,our

BrumadositerunsProjectHexa,atechnical

trainingprogrammeforresidentswhole

schoolwithlimitedopportunitiesorlosttheir

livelihoods.

• InAustria,we have expandedourpartnership

withthe educationalorganisation,

Wissensfabrik.OurSTEM (science,

technology,engineeringandmaths) project

continuestogrow.

EnvironmentalprojectssupportedbytheGroup

includetree-planting,biodiversityprojects,river

clean-ups,communityfruitandvegetable

gardensandenvironmental education.We have a

longstandingtree-plantingprogramme inBrazil

which raisesawarenessamongstouremployees

ofenvironmentalissuessuchasdeforestationand

biodiversitydecline.

Women in leadership in 2021

Board

2020: 3 | 2019: 3

EMT

2020: 2 | 2019: 2

EMT Direct

Reports

2020: 12 | 2019: 12

EMT + EMT

Direct Reports

2020: 14 | 2019: 14

Board

2020: 9 | 2019: 10

EMT

2020: 5 | 2019: 7

EMT + EMT

Direct Reports

2020: 41 | 2019: 67

2025

target

EMT Direct

Reports

2020: 36 | 2019: 60

2019 2020 2021

Board1 23% 25% 38% 33%

EMT 22% 29% 29% 33%

EMT + direct

reports 16% 25% 21% 33%

EMT + EMT Direct

Reports 17% 26% 22% 33%

1 Percentageofwomen,excludingEmployeeRepresentative

Directors

Case study

Providing local ﬂood relief

in Germany

Our Urmitz plant is located near the site of

catastrophicﬂoodinginGermany during

2021.Althoughourplantwasundamaged,

thelocalareawasseverelyaﬀected. We

immediatelyprovidedacashdonationto the

GermanRedCrossandencouraged

employeestoparticipate indisaster reliefand

rebuilding.The localWorksCouncilraised

fundstosupportanemployeewhosehouse

had been lost and we matched those

generousdonations.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 6 5

EU Taxonomy

Regulation

DirectReductionofIronore(“DRI”)using

hydrogenisanewtechnologyunder

developmentthatseekstoeliminate CO₂

emissionsfromthe reductionofironore inblast

furnacesusingcoke.Ifsuﬃcientquantitiesof

hydrogenmanufacturedfromrenewablesources

can be accessed and if a DRI furnace can be

paired with an EAF for the secondstage of the

steelmakingprocessthatisalsopoweredby

renewable energy,CO₂emissionsfromsteel

productioncanbe largelyeliminated.

TheEUTaxonomyRegulation(“EUTaxonomy”)

appliesinrespectoftheﬁnancialyearto

31 December2021 andrequirestheGroupto

reportannuallyontheproportionofitsturnover,

operatingexpenditureandcapitalexpenditure

attachingtoeconomicactivitiesthatare

consideredtobeenvironmentallysustainable.

TheEUTaxonomyidentifiesthesixenvironmental

objectives:climatechangemitigation;climate

changeadaptation;thesustainableuseand

protectionofwaterandmarineresources;the

transitiontoacirculareconomy;pollutionprevention

andcontrol;andtheprotectionandrestorationof

biodiversityandecosystems.Inrespectofthe2021

financialyeartheGroupisonlyrequiredtoreportin

relationtothefirsttwoobjectives.

The EU Taxonomy diﬀerentiates between

taxonomyeligibilityandtaxonomyalignment.

IfaneconomicactivityisdescribedintheAnnex

it can be considered eligible. In order to be

considered‘aligned’furthertechnicalcriteria

must be met. In respect of the 2021 ﬁnancialyear

theGroupisonlyrequiredtoreporteconomic

activitiesthatareeligible.

No sector-speciﬁcguidancefortherefractory

industryhasbeenpublishedandthereforethe

Group is required to use its own judgement

againsttheeligibilitycriteria.In2022theGroup

intendsto reportalignedactivities.

TheNACEcodesmostcloselydescribingthe

activitiesofthecompanyare“23.20Manufacture

ofrefractoryproducts”and“08.99Othermining

andquarrying”.TheseNACEcodesarenotlisted

in Annex I or Annex II of the Taxonomy regulation,

butcertainactivitiescarriedoutbytheGroupdo

meetthedeﬁnitionsofeconomicactivitieslisted

in Annex I oftheRegulation.Aselaboratedfurther

by the Commisison on Taxonomy, if the NACE

code of an economic activity is not mentioned in

theClimateDelegatedAct,buttheeconomic

activitycorrespondstothedescriptionofthe

activity, it can qualify as Taxonomy eligible. This is

furtherelaboratedintheTaxonomyeligible

activitiessection.

1 Otherthan manufactureofrenewable energy technologies,

manufactureofequipmentforthe productionanduse of

hydrogen, manufactureoflowcarbontechnologiesfor

transport, manufacture ofbatteries,manufacture of energy

eﬃciency equipmentforbuildings

Accounting policy

RHIMagnesitaN.V.preparesconsolidatedﬁnancial

informationinaccordancewithgenerallyaccepted

accountingprinciplesunderIFRS,asadoptedby

theEUandtheﬁnancialinformationforturnover,

operatingexpenditureandcapitalexpenditure

presentedundertheEUTaxonomyhasbeen

preparedunderthesameaccountingprinciples.

Taxonomy eligible activities of RHI

Magnesita referring to the activities of

Annex I and II

EconomicactivitiesofRHIMagnesitathatare

described in Annex I and II of the Delegated

Regulation(EU)2021/2139,are considered

eligible.Inthecase ofRHIMagnesita,the

followingactivitiesareconsideredrelevant:

• Manufactureofotherlowcarbontechnologies

• Materialrecoveryfromnon-hazardouswaste

• Closetomarketresearch,development

andinnovation

Manufacture of other low carbon

technologies

Theeconomicactivity“Manufacture of other low

carbontechnologiescoversthe“Manufactureof

technologiesaimedatsubstantialGHGemission

reductionsinothersectorsofthe economy”.1 RHI

Magnesita oﬀersproducts andserviceswhich

help to make CO2-intensive processesinthe steel

industrymoreeﬃcientandthereforeachieve

emissionsreductionsinthe globalsteelindustry.

Electric Arc Furnacerefractories

RHIMagnesitaprovidesrefractoryproducts

speciﬁcallydesignedforElectricArcFurnaces.

Additionally, RHI Magnesita providesheat

management solutionsandservicestoits

customerstoreducetheirGHGemissions,

includingdigitalsolutionsaswellasadvanced

refractory products.

ElectricArcFurnaces(“EAF”)areavitalenabling

technologyforthe reductionofCO2 emissionsin

thesteelindustry.EAFscanbepoweredusing

electricitysourcedpartiallyorwhollyfrom

renewableenergygenerationandreplace the

BasicOxygenFurnace (“BOF”)phase of the

traditionalintegratedsteelmanufacturing

process,whichpairsablastfurnace with a BOF

and is highly CO2 intensive.EAF steelmaking

requiresa source of scrap steel or sponge iron

producedfromthe reductionofironore.

RHIMagnesitahasaleadingmarketpositionin

EAF-speciﬁcrefractories,servicesandheat

managementsolutions,inpartdue to the unique

chemicalcompositionoftheGroup’svertically

integratedrawmaterialsupply.EAFrefractories

producedbyRHIMagnesitadirectlyenable

substantialreductionsinCO₂emissionsatsteel

plants,ifthe EAFoutputisdisplacingsteelthat

wouldotherwise have beenproducedusinga

blast furnace and BOF.

Digitalsolutions and other products which

increaseenergyeﬃciency

RHI Magnesitaoﬀersdigital solutionsand

associatedphysicalequipmentwhichachieve

CO₂emissionsreductionsthroughprocess

eﬃciencies,suchaswearmonitoringandgunning

repairstoextendthe safe workinglifeofrefractory

linings.Safelyextendingthe workinglifeof

refractoryliningscanachievesigniﬁcantenergy

savingsforsteelproducersbyreducingthe

numberofheatingandcoolingcyclesrequired

per unit of steel output.

The Groupalsooﬀersadvancedrefractory

productswhichenableitscustomersto

substantiallyreduce GHGemissionsbyreducing

electricityconsumption,improvingyield and

reducingoxygenconsumption,savingup to 13kg

CO2 pertonneofsteelproduced.

Othersolutionsandproductswhichdirectly

contribute to CO2 emissionsreductionsat

customersitesinclude coldsettingmixes,EAF

directpurgingplugsandconverterinertgas

purging.

Material recovery from non-hazardous

waste

Materialrecoveryfromnon-hazardouswaste

coversthe“constructionandoperationoffacilities

forthesortingandprocessingofseparately

collectednon-hazardouswaste streamsinto

secondaryrawmaterialsinvolvingmechanical

reprocessing,exceptforbackﬁllingpurposes.”

RHIMagnesitaaimstoincrease itssecondary raw

material(“SRM”)inputto10%ofrawmaterialused

inproductionofrefractories.Aspartofthiseﬀort,

RHIMagnesitaoperatesfacilitiesforthe sorting

andprocessingofspentrefractoriesfrom

customers’industries.Secondaryrawmaterials

whichare mechanicallyprocessedbyRHI

Magnesitaandtransformedfromwaste to raw

materialare eligible forconsiderationunder the

EUTaxonomy,whilstsecondaryrawmaterial

processedbyathirdpartyandpurchased

externallybytheGrouparenon-eligible.

Close to market research, development

and innovation

Close tomarketresearch,developmentand

innovationcovers“research,appliedresearch and

experimental developmentofsolutions,

6 6 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

processes,technologies, business models and

otherproductsdedicatedtothereduction,

avoidanceorremovalofGHGemissions(RD&I)for

whichtheabilitytoreduce, remove or avoid GHG

emissionsinthetargeteconomicactivitieshasat

leastbeendemonstratedina relevant

environment,correspondingto at least

TechnologyReadiness Level (TRL) 6”.

RHI Magnesitaconducts closeto market research,

developmentandinnovationamongothersto

directlyavoidGHGemissions(e.g.researchon

chemicallybondedbricks which do not need

ﬁringinkilns)orwhichsupportothereligible

economicactivities(e.g.materialrecoveryfrom

non-hazardouswaste).TheseR&Dactivitiesmay

beincludedintheOperatingExpenditureofthe

othereligibleeconomicactivityandaretherefore

excludedtopreventdoublecounting.

KPIs

ShareofTaxonomyeligiblerevenue, Operating

ExpenditureandCapitalExpenditure–Climate

changemitigation:

Turnover

TheturnoverKPI is calculated as the ratio of

turnoverassociatedwithtaxonomy-eligible

economicactivitiesinthereportingperiodtototal

turnover in that period. The total turnover of the

ﬁnancialyear2021 of€2,551 millionformsthe

denominator of the turnover key ﬁgure and can be

takenfromtheconsolidatedincomestatementon

page 123 of this Annual Report.

Thefollowingeligibleactivitieshavebeen

identiﬁedasrelevantinviewofturnover:

• Manufactureofotherlowcarbontechnologies

• Materialrecoveryfromnon-hazardouswaste

Thetotalturnoverreportedintheconsolidated

incomestatementisanalysedacrossallgroup

companiestoassesswhetheritisassociatedwith

taxonomy-eligibleactivities.Adetailedanalysisof

the items included in the total turnover is used to

allocatetherespectiveturnovertothetaxonomy-

eligibleactivities.

re-measurements,includingthoseresultingfrom

revaluationsandimpairments,aswellasexcluding

changesinfairvalue.Itincludesacquisitionsof

tangibleﬁxedassets(IAS16),intangibleﬁxedassets

(IAS38),right-of-useassets(IFRS16)and

investmentproperties(IAS40).Additionsresulting

frombusinesscombinationsarealsoincluded.

Goodwill is not included in Capex, as it is not

deﬁnedasanintangibleassetinaccordancewith

IAS38.

Thesumoftheseidentiﬁedadditionsofassetsin

thereportingyearequalsthenumeratorof

taxonomy-eligibleCapitalExpenditure.Thetotal

capitalexpendituresinlinewithpoint1.1.2.1.Annex

1 oftheDisclosureDelegatedActequalthe

denominator.

Operating Expenditure

ThedenominatoroftheOperatingExpenditureKPI

shallcoverdirectnon-capitalisedcoststhatrelate

toresearchanddevelopment,buildingrenovation

measures,short-termlease,maintenanceand

repair,andanyotherdirectexpendituresrelating

totheday-to-dayservicingofassetsofproperty,

plantandequipmentbytheundertakingorthird

partytowhomactivitiesareoutsourcedthatare

necessarytoensurethecontinuedandeﬀective

functioningofsuchassets.

The numerator equals to the part of the operating

expenditure includedinthedenominatorrelated

withtaxonomy-eligible economicactivities,part

ofa plausible plan to expand or achieve

environmentallysustainable economic activity,or

relatedtothepurchaseofoutputsandproducts

fromtaxonomy-eligible economicactivities.

Taxonomy disclosure table

Thefollowingeligible activitieshavebeen

identiﬁedasrelevantregardingtheOperating

ExpenditureKPI:

• Manufacture ofotherlowcarbontechnologies

• Materialrecoveryfromnon-hazardouswaste

• Closetomarketresearch,developmentand

innovation

For the identiﬁcationofrelevantOperating

Expenditure,costsincludingdirectnon-

capitalisedcoststhatrelatetoresearch and

developmentaswellmaintenance and repair

have beenconsidered.

Avoidance of double counting

To avoid double counting,datasourcesfor the

variousreporteditemsare individually cross-

checkedtoidentifyoverlappingclassiﬁcations.

Where double countingisidentiﬁed,datais

removedfromoneoftheoverlappingcategories.

Materialareasidentiﬁedforremovalofdouble

countingare asfollows:

• Revenue fromElectricArcFurnace

(Manufactureofotherlowcarbon

technologies)andrevenuefrom Recycling

(Materialrecoveryfromnon-hazardouswaste)

EU Taxonomy reporting in the year to

31 December 2022

In 2022 the Groupintendstoobtainthird party

conﬁrmationofitsclassiﬁcationofTaxonomy-

eligible activitiesrelevanttoclimatechange

mitigation,todemonstrate alignmentofthose

activities.The Groupalsointendsto extend its

analysisofTaxonomy-alignedorTaxonomy-

eligible activitiestocoverwateruse,thecircular

economy,pollutionandbiodiversity as set out in

theEUTaxonomyRegulation.

Capital Expenditure

TheCapitalExpenditureKPIindicatesthe

proportionofcapitalexpenditurethatiseither

relatedwithtaxonomy-eligibleeconomic

activities, part of a plausible plan to expand or

achieveenvironmentally sustainableeconomic

activity, or related to the purchase of outputs and

productsfromtaxonomy-eligibleeconomic

activities.

Thefollowingeligibleactivitieshavebeen

identiﬁedasrelevantregardingtheCapital

ExpenditureKPI:

Operating

Capital

Year to 31 Dec 2021 Revenue

Expenditure

Manufacture of other low carbon technologies € million 431 14 6

% 16.9% 16.9% 2.3%

Thereof enabling or transitional activities2 € million 431 14 6

% 16.9% 16.9% 2.3%

Material recovery from non-hazardous waste € million 82 3 5

% 3.2% 3.2% 2.1%

Thereof enabling or transitional activities € million – – –

% – – –

Close to market research, development and innovation € million – 2 1

% – 2.6% 0.4%

• Manufactureofotherlowcarbontechnologies

• Materialrecoveryfromnon-hazardouswaste

• Closetomarketresearch,developmentand

innovation

Theprojectdescriptionsoftheadditionsofassetsin

thereportingyearservedasabasisforthe

necessaryidentiﬁcation.

Thereof enabling or transitional activities € million – 1 1

% – 0.8% 0.4%

Total Taxonomy eligible € million 514 18 12

% 20.1% 22.7% 4.8%

Thereof enabling or transitional activities € million 431 14 7

% 16.9% 17.7% 2.7%

Denominator € million 2,551 80 261³

TotalCapexconsistsofadditionstotangibleand

intangibleﬁxedassetsduringtheﬁnancialyear,

beforedepreciation,amortisationandany

2. Dra

TaxonomyRegulationonthereporting ofeligibleeconomicactivities andassets (2February2022) appliedwithoutexaminationof

TechnicalScreeningCriteria.

3. See note 12,Propertyplantandequipment”

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 6 7

Chairman’s

introduction

to corporate

governance

In 2021, the Board has supported the

management in navigating the business

amidst a challenging market backdrop, with

stakeholders always at the forefront of decision

making

Herbert Cordt

Chairman

Boardgenderdiversity 1

Male 62%

Female 38%

Boardindependence 1

Independent 58%

Not independant 42%

1 As calculated by reference to the UK Corporate

Governance Code and excluding the ERDs

Dear Shareholder,

On behalf of the Board, I am pleased to present

thecorporategovernancereportfortheyear

ended31 December2021,summarisingthe role

oftheBoardinprovidingeﬀectiveleadershipin

promotingthelong-termsustainablesuccessof

RHIMagnesita.

2021 hasbeenanotherchallengingyear,andwe

have been pleased to make goodprogressagainst

our strategy as we approach 2025. We have

learnta lot about ourselves as a company and as a

board as we operate in these volatile times.Our

governanceprocessesandpracticeshave

undoubtedlyaidedusinfocusingoureﬀortsand

attention,soastocontinue todelivervalue for our

shareholders andbeneﬁtsforourstakeholders.

Thiscorporategovernance statementwillreport

onourgovernance approach in full and in this

introduction I outline a few key matters for your

particular attention.

Board composition

As we reported to shareholders in our 2021 report,

weundertooka searchfornewNon-Executive

Directors.Weweredelightedtowelcome three

newIndependentNon-Executive Directors,Jann

Brown, Marie-Hélène AmetsreiterandSigalia

Heifetz in the course of 2021, with their

appointments beingapprovedbyshareholdersat

the AGM in June. All were appointed with a

signiﬁcantmajorityandhaveeachbroughta

diversity of skillsandexperience which

complementedthe existingskillsproﬁle of the

Boardandhavestrengthenedthe performanceof

theBoardwiththeircontributions.Their

appointmentsensuredthatwe aremoregender

diverse, somethingwe have noted as being a key

deliverablefromBoardreviewsinrecentyears.

Theirtailoredinductionshave beencompletedin

2021 and you can read more about the structure

oftheprogramme on pages 77 and 78.

InDecember2021,theworkscouncilsofAustria

andSpainappointedtwonewEmployee

RepresentativeDirectorsforatermoffouryears

each,pursuanttoourArticlesofAssociation,who

becamemembersofthe Boardwithimmediate

eﬀect.MartinKowatschwasappointedbythe

AustrianWorksCouncil,replacingFranzReiter,

who stepped down from the Boardandwillretire

from the Company in due course. Karin Garcia

wasappointedbythe SpanishWorksCounciland

together,MartinandKarinjoinMichaelSchwarz,

whoseappointmenttotheBoardwasrenewedby

theGermanWorksCouncilwitheﬀectfrom

9December2021.

We wish Franz all the best for his forthcoming

retirementandthankhimforhisenergetic and

constructiveinputoverhisyearsasaBoard

member for RHI AG and subsequently RHI

Magnesita N.V. We welcome Karin and Martin and

lookforwardtoaco-operative andhealthy

engagement on a wide range of topics, as well as

seekingtheopportunitytohearmoredirectly

fromdiﬀerentsectionsofouremployees. They are

beingsupportedwithatailoredinduction

programmewhichyoucanreadmore abouton

pages 77 to 78 .

FulldetailsofourBoardandExecutive succession

planningandrecruitmentofnewmemberscan

be found on pages 89 and 90. Their biographies

can be found on pages 83 to 85 .

Diversity

We are pleasedtohave exceededthe Hampton

Alexander target of a 33% female Board with a

genderdiversityof38% female Boardmembers.

Wehavealwayscalculatedthispercentage

excludingthe ERDs as we cannotinﬂuencetheir

appointment.However,we arepleasedthatthe

workscouncilinSpainchose to appoint a female

Directorandtherefore,includingourERDs,weare

also at 38%.

In order to ensure thatwecontinue topursue

diversityofthoughtandexperienceonour Board

the NominationCommitteehasrecommended a

refreshedBoarddiversitypolicyin2021,which,in

line withDutchlawchanges,containsambitious

targetsforgenderdiversityandcommitsusto

reporting to the Parker Review. Whilst we are

pleasedthatwe satisfythe ethnicdiversity criteria

of the Parker Review, with one of our Board

identifyingasamemberoftheethnicminority

categoriesasdeﬁnedbythe UKOﬃceofNational

Statistics,wewillcontinue toconsiderour

diversity as a Board and as the Companybased on

our global footprint and operations in a way which

isbestalignedwithourgrowthagenda.

Independence

The independence of the Boardcontinuesto be

attheforefrontofourgovernance agenda. With

the growth of the ERD group on our Board, we

werepromptedtoreviewhowthese Directors

operate and how we shouldcalculatethe Board’s

independence,giventheirdiﬀeringprocessof

appointmentasenshrinedinEuropeancorporate

law.

The UKhasembracedworkerrepresentativesin

recentyears.However,workforce representatives

6 8 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

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STATEMENTS

OTHER

INFORMATION

on a supervisory board, has been a cornerstoneof

theDACH(beingtheregioncomprisingGermany,

AustriaandSwitzerland)corporatelegal

environmentformanyyears.Ourcorporate

historyandBoardcompositionstemsfromthis

DACHcorporatelegalenvironment.Thetwo

systems (UK and DACH) aim for the same

outcomeofbroaderstakeholderconsideration

butmaydiﬀerintheirpracticalapplication.

We ﬁnd, looking at other companies in a similar

position,thatadiﬀerentiationwhencalculating

independence,andindeed otherBoard statistics,

ismadebetweendirectorsappointedby

shareholdersattheAGM,andthoseappointedby

theworkforce.TheBoard,managementand

indeed our shareholders, can play no role in the

appointment or removal of the ERDs. As such, we

are not including our ERDs as part of the

denominatorinourindependencecalculations.

We have always set them out as a separate

categorywithinthatcalculationandthisis

consistentwiththat.

You can read more about

the role of the ERDs on

Page 74

Followingfromthe ﬁndingsofthe Boardreviewin

2020, weimplementedbettertechnologyand

processestosupportthehybridmeetings,

althoughtheyare stillnosubstituteforin-person

interaction which we hope to return to as quickly

as possible.

Board review

Whenwebecame RHI Magnesita in 2017, we

engagedinathree-yearprogrammeofexternal

BoardreviewsdeliveredbyLintstock.Asanascent

Board with a number of new participants and a

rangeofconsiderationstobe aware of, this level of

detailedevaluationwasfelttobe useful,andwe

haveseensigniﬁcantprogressthroughthese

evaluationsintermsofBoarddynamics,inputsto

theBoardandBoardcomposition.

As we have settled into the naturalrhythmsof

Boardoperation,followingtheimmediateyears

post-merger,itwasfeltthataninternalevaluation

for2021, as permitted by the UKCGC, would be

suitable.OurCompanySecretaryadministered

theBoardevaluationfor2021,workingtogether

with the SID and the Chairman to develop the

areas for focus and the action plan based on the

ﬁndings.

At RHI Magnesita, we recognise the role we play

inthelivesofouremployees,customers,

suppliers,shareholders,andthe communitiesin

whichwe operate. You can read more about our

stakeholderengagementonpages50 to 55.

Throughoutthe yearwehaveappreciated

hearingfromourshareholdersonmany diﬀerent

topics,notleastoncorporategovernance. You

can read more about these meetings on page 51.

Amoredetailedoverviewofthemattersdiscussed

and debated by the Boardatitsmeetingsduring

the year is presented on pages 79 to 80.

The reportofourcomplianceinrespectofeach of

the UKCGCandtheDutchCorporate

GovernanceCode 2016(the“DCGC”and

together“theCodes”)canbe found on page 70.

Wehavereportedcompliancetotheextent

possible andexplainedwhereverthishasnot

beenachievable.

As in recent years, we will again be holding our

AGMvirtually,totheextentpossibleunder Dutch

law, as we have found it to be an eﬃcient and cost-

eﬀective way of engaging with as many

shareholdersaspossible andunderstanding their

viewsthroughthebusinessofthe meeting.

Furthermore,thisyearWolfgangRuttenstorfer,

who served on the supervisory board of RHI AG

from2012,reachednineyearsofservice.He

meetsnoothercriteriafor non-independence

suggestedundertheUKCorporateGovernance

Code2018(“UKCGC”).TheCompanyhas

changedimmeasurablyoverthatperiod,and

Wolfgangcontinuesto demonstratestrong

independentjudgement and assessments in

Boardmeetings.TheBoardiscomfortablethat

Wolfgangcontinuesto act independently,

however, under the criteria of the UKCGC, he will

bereportedasaNon-Independent Non-

ExecutiveDirectorgoingforward.

Finally,in2021 we took steps to change our

Articles of Association to give the casting vote to

theDeputyChairmanand Senior Independent

Director¹toensureindependencebepreserved in

ourdiscussionsanddecisionsandtogive

assurancetostakeholders that an independent

non-executivedirectorwouldhavethepowerto

steer the Company, should it ever be required. It is

importanttousthat,whilstweindividuallyas

Directorshaveadutytoexerciseindependent

judgement, that the Board as a whole can be

assuredtobeindependent to our stakeholders.

We were pleased to see that our members

consider the Boardtobeeﬀective,showinggood

progressfrom2020,despite continuinglogistical

diﬃcultiesforthe BoardarisingfromCOVID-19

restrictions.Weidentiﬁedareasforfocusin2022

and you can read more abouttheﬁndingson

page 89.

Sustainability, stakeholders and strategy

Throughoutthe2021 Boardprogrammewe again

devotedconsiderabletimetothe deliberationof

theCompany’sstrategy,particularlytoassessing

progress against our 2025 strategy so far and the

executioncapabilityrequiredtodeliverit.These

discussionswere focused on the risks to the

strategyexecutionandhowmanagementcould

mitigatethese risks,focusingonourcorporate

purpose and culture as a key mechanism for

delivery.

Sustainabilityhasbeenaconstantseam

throughoutmanyofourconversationsasaBoard

andalsowithstakeholders.Itwasacornerstone of

thestrategydiscussionandwasdiscussedateach

Boardmeetinginthe year,withDirectors

recognising it as both a risk and opportunity for

thebusiness,andourwidercommunities.

Finally,allDirectorswillseekre-electionatour

AGM on 25 May 2022 and we lookforward to

engagingwithourshareholdersatthatevent.

Herbert Cordt

Chairmanofthe BoardofDirectors

1 Adualroleheldbyoneindividual,currentlyJohnRamsay.

Youcanreadtheroledescriptiononour website.

You can read more about the

independence of theBoard on

Page 75

COVID-19 restrictions on the Board

Onceagain,asaBoardwithinternational

composition,wewereseriouslyhamperedby

travelrestrictionsacrossmultiplejurisdictions,

makingitverydiﬃculttofacilitatephysical

meetingsandsitevisits.Nonetheless,more

interactionandengagement with thebusiness

was possible compared to 2020, with one Board

site visit undertaken to our R&D centre in Leoben,

and other visits taken by smaller groups to

Radenthein(Austria),Bonnybridge(Scotland)and

Biwadi(India).TheEMTandExecutiveDirectors

were able to visit many more locations in 2021

than in 2020, and reported details back to the

Boardaccordingly.

TheCorporateSustainabilityCommittee (CSC)

has reported back to the Board on the

proceedingsofeachofitsmeetingsandthe CSC

alsowelcomedvariousBoardmembersandkey

seniormanagementasattendeestothose

meetingsthroughoutthe year,ensuringthat

conversationhasbeentakingplace at the highest

levelsoftheorganisation.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 6 9

Corporate governance statement

Compliance with the Dutch Corporate

Governance Code (“DCGC”) and the UK

Corporate Governance Code (“UKCGC”)

TheBoardhasappliedtheprinciplesof,complies

with and intends to continue to comply with the

requirements of both the DCGC and the UKCGC

to the fullest extent possible. A limited number of

deviations from these Codes are set out with

explanationsbelow.

Deviations from the UK Corporate

Governance Code in 2021

The Company does not comply with Provision 9

of UKCGC which states that the Chairman of the

Boardshouldbeindependenton appointment.

The Chairman is not considered to be

independentforthepurposesoftheUKCGC,

having served on the Board of RHI AG for more

than nine years, prior to the merger. This also

meanstheCompanyisnotcompliantwith

Provision 19. The Board, led by the Senior

IndependentDirector,believesthatHerbertCordt

continuestodemonstrateintegrity,objective

judgementandindependenceof character, and

that his experience as Chairman of RHI AG’s

supervisoryboardisvaluabletotheCompany,

providingcontinuityandcorporatememory.

TheBoardbelievesthatitscurrentPolicyfor

post-employmentshareholdingrequirementsis

appropriateand,withotherelementsofthe

Policy,achievesthe rightbalance between

providingaremunerationstructurethatisboth

incentivisingandretentive.The Policyensures

alignment to shareholderinterestsandlong-term

sustainableperformanceofthebusiness,both

whilsttheexecutivesare employedbythe

businessandfollowingtheirtermination.In

reachingthisconclusion,theBoardhastakeninto

accountthediﬀerentelementsofthe Policythat

togetherachievethese aimsincludingpost-

employmentholdingperiodsforannualbonus

shares and vested LTIPs, for both good and bad

leavers,in-ﬂightunvestedLTIPsforgoodleavers,

as well as shares beneﬁcially owned by the

executives.

Provisions 40 and 41

TheCompany beneﬁtsfromemployee

representationonthe BoardandtheBoard,

annually, approvesexecutive remuneration.This

providesa mechanismforourERDstounderstand

andengageonbehalfoftheworkforceregarding

thealignmentofexecutiveremunerationwith

widerCompanypaypolicyandtoprovide

feedback.

Corporate governance declaration

Incomplyingwiththe requirementsoftheDCGC,

the Companypublishesthiscorporate

governance statementincludingitscompliance

withthe DCGC.The informationrequiredto be

includedinthiscorporate governancestatement

can be found in the followingchapters,sections

and pages of this Annual Report (the “Annual

Report”) and are deemed to be included and

repeatedinthisstatement:

• the informationconcerningcompliancewith

the DCGC can be found on page 70;

• theinformationconcerningtheCompany’smain

featuresoftheinternalriskmanagementand

controlsystemsrelatingtothefinancialreporting

processcanbefoundonpages38to41;

• the informationregardingthefunctioningof

the GeneralMeetinganditsmainauthorities

andtherightsoftheCompany’sshareholders

andholdersofdepositaryinterestsinrespect

of shares in the Company and how they can be

exercisedcanbe found on pages 68 to 121;

• theinformationregardingthecompositionand

functioningoftheBoardanditsCommittees

can be found on pages 88 to 121;

Asdetailedabove,WolfgangRuttenstorferisno

longerdeemedtobeindependentunderthe

criteria outlined in the UKCGC, as a result of his role

ontheRHIAGsupervisoryboardfrom2012.The

BoardgreatlybeneﬁtsfromWolfgang’sﬁnancial

experience,challengetomanagementandhis

contributionstotheAudit&Compliance

Committee,andassuch,Wolfgangwillcontinueto

beamemberoftheCommittee.Wehavetherefore

decidedtoexplainourpositioninrespectof

Provision24oftheUKCGC

SincetheintroductionofthecurrentUKCGCin

2018, the Company took steps in order to be able to

reportcompliancewiththeprinciplesand

provisionsrelatingtoremuneration.Followingthe

publicationofFRCguidanceonCorporate

GovernanceReportingin2021,wewillnowreport

partialcompliancewithProvisions36,40and41.

Provision36

The Company consulted circa 70% of its

shareholderbaseaboutthecurrent

RemunerationPolicy(thePolicy)priortoits

approvalatthe2021 AGM,explicitlyreferringto

theproposedpolicyforpost-employment

shareholdingrequirementswhich comprises the

continuationofholdingperiodsforannualbonus

sharesandtheLTIPpost-cessationof

employment.OurPolicyreceived95.95%

supportatthe2021 AGM.HowevertheCompany

notestheclariﬁcationbytheFinancialReporting

Council in 2021, speciﬁcally that it is not enough

to achieve compliance with the UKCGC by

includingapolicythatonlyprovidesforholding

periodstocontinuepost-employment.

Our remunerationpoliciesandpractices,

includingour approachtosalaryincreasesand

annualbonusstructure arealignedthroughout

thebusiness.Giventhisalignment,andthe extant

mechanismforengagementwiththeERDs,the

Boardiscomfortablewiththeexistingapproach

anddoesnotconsideritnecessarytoprovide any

additionalformsofengagementwiththe

workforcetoexplainhowexecutive remuneration

alignswithwiderCompanypaypolicy.The

RemunerationCommitteewillcontinue to keep

thisunderreview.

Deviations from the Dutch Corporate

Governance Code in 2021

TheCompanydoesnotcomplywithbestpractice

provision2.2.2ofthe DCGCwhichrecommends

that, in case of a one-tierboard,aNon-Executive

Directorshouldbe appointed for a period of four

years.TheappointmentoftheNon-Executive

Directors(otherthanEmployee Representative

Directors)hasbeenmade on the basisof

nominationsfor three-yearterms,subjectto

performanceandannualre-electionattheAGM.

TheBoardconsidersthatthe three-yeartermis

moreconsistentwithUKlistedcompanypractice

anddoesnotcompromise the spirit of the DCGC

provisionanddoesnotpropose to make changes

totheexistingNon-Executiveappointments.

Asexplainedonpage 69, going forward we do not

include our ERDs as part of the denominator in our

Board independence calculations.

• thediversitypolicywithregardtothe

compositionoftheBoardandtheirCommittees,

canbefoundonpage89and

• the informationconcerningthedisclosureof

the followingitems,where theyexist,may be

found on pages 71 to 81:

– participationsinthe Companyforwhich a

disclosure obligationexists;

– specialcontrolrightsattachedtoshares

and the name of the person entitled to

suchrights;

– anylimitationofvotingrights,deadlinesfor

exercisingvotingrightsandtheissueof

depositoryinterestsforshareswith the

co-operationoftheCompany;

– the regulationsinrespectofthe

appointmentanddismissalofExecutive

DirectorsandNon-Executive Directorsand

amendmentstotheArticlesofAssociation;

– the powers of the Board,inparticular to

issue shares and to acquire own shares by

the Company;and

– thenumberofshareswithoutvotingrights

and the number of shares which do not give

any, or only a limited, right to share in the

proﬁtsorreservesoftheCompany,withan

indicationofthepowerswhichtheyconfer.

70 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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INFORMATION

Corporate governance structure

RHI Magnesita Board

Chief

Executive

Ocer

Remuneration

Committee

Nomination

Committee

Audit

Committee

Corporate

Sustainability

Committee

Executive

Management

Team

Listing Rules information

Certaininformationisrequiredtobepublishedby

the Listing Rules (LR 9.8.4C R and LR 9.8.4 R) and

this information can be found in the Annual

Report as set out in the table below:

1. Interest capitalised n/a

2. Publication of unaudited

ﬁnancial information

n/a

Pages 97-121

n/a

3. Details of long-term

incentive schemes

4. Waiver of emoluments

by a Director

Major shareholdings

At 25 February 2022, the Companyisaware of

thefollowingpersonsholdingdirectlyor

indirectly at least 3% of the issuedand

outstandingsharesinthecapitaloftheCompany:

Number

of shares

Shareholder⁵

based on

MSP Sti 1 13,333,340 28.37%

Fidelity Management &

Research Company LLC 4,259,559 9.06%

E. Prinzessin zu Sayn-

Wittgenstein Berleburg²2,088,461 4.44%

K.A. Winterstein³2,088,461 4.44%

the sharesinsteadoflegaltitle.Nederlands

CentraalInstituutvoorGiraalEﬀectenverkeer B.V.

(alsoknownasEuroclearNederland) holdsthe

legaltitle totheunderlyingshares.

Sharesmaybeissuedpursuantto aresolutionof

the General Meeting or of the Board, if and insofar

as,the Boardhasbeendesignatedfor that

purpose by a resolution of the GeneralMeeting.

Suchdesignationshallbe as set out in the

Company’sArticlesofAssociation.TheCompany

shallnotifyeachissuance of shares in the relevant

calendarquartertotheDutchTradeRegister,

statingthenumberofsharesissued.

Transactions with majority shareholders

5. Waiver of future emoluments

by a Director

6. Non pre-emptive issues

of equity for cash

7. Item (6) in relation to major

subsidiary undertakings

8. Parent participation in a placing

by a listed subsidiary

n/a

Erste Group 1,810,282 3.85%

Fidelity Worldwide

Investment (FIL) 1,783,045 3.79%

Man Group PLC 1,701,815 3.62%

W. Winterstein⁴1,590,000 3.38%

1 HelddirectlybyMSPSti

underLiechtensteinlaw,whosefounderis Mag.MartinSchlaﬀ.

There have beennotransactionsbetweenthe

Company and MSP Sti

of best practice provision 2.7.5 of the DCGC. Since

there are no other legal or natural persons who

hold at least 10% of the shares in the capital of the

Company,nodeclarationinaccordancewith best

practice provision 2.7.5 of the DCGC has to be

published.

9. Contracts of signiﬁcance n/a

10. Provision of services by a

controlling shareholder

Refer to Note 61

11. Shareholder waiver of dividends n/a

12. Shareholder waiver

of future dividends

n/a

13. Agreements with

controlling shareholders

Refer to Note 61

2 The interestis heldthroughChestnutBeteiligungsgesellscha

mbH (“Chestnut”).Ms.Sayn-Wittgensteinmadeanagreement

with Mr. Wintersteinwhichallows Chestnuttoexercisethe

votingrights ofSilverBeteiligungsgesellscha

the Issuer.Ms.Sayn-WittgensteinandMr.Wintersteinsharea

family relationship.

3 The interestis heldthroughSilver.Ms.Sayn-Wittgenstein

made anagreementwithMr.Wintersteinwhichallows

Chestnut toexercisethevoting rights ofSilverintheIssuer.

Ms. Sayn-WittgensteinandMr.Wintersteinshareafamily

relationship.

4 HeldinpartdirectlyandinpartindirectlythroughFEWI

Beteiligungsgesellscha

5 The Companyholds 5.01%ofits ownshares intreasuryas a

result of thebuybacks undertaken2019-2021.

Outline of anti-takeover measures and

impacts of Brexit

Noanti-takeovermeasureshavebeen

implemented.Aspreviouslyreported,the

Companyacquiredasecondarylistingin2019on

the ViennaStockExchange (Wiener Börse) to

extendregulatoryprotectionstoitsshareholders,

which could have been lost as a result of the UK’s

exit from the EuropeanUnion(EU). Austriahas

become the sole host member state and the

NetherlandscontinuestobeRHIMagnesita’s

home memberstate.

Therearenorestrictionsonvotingandproﬁtrights

andnoholdersofanysecuritieswithspecial

controlrights.Depositaryinterestsinrespectof

theCompany’sshareshave been issued by the

CompanywiththeCompany’sco-operation,

whichcanbesettledelectronicallythrough,and

held in the system of CREST. The depositary

nterest holdersholdthe beneﬁcial ownershipin

ThemaineﬀectofthisisthattheCompanynotiﬁes

disclosures,suchassharedealing,toeachofthe

threeauthoritiesinUK,Netherlands,andAustria.

TheCompanycomplieswiththerelevant

corporateandlistingregulationsacrossallthree

jurisdictions.TheCompany’sgovernancestructure

continuestobeprimarilyderivedfromitsprimary

listingstatusintheUK,althoughthereareminor

areasinwhichregulationsinotherjurisdictionstake

precedence.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 7 1

Corporate governance statement continued

The UK’s exit from the European Union (EU)

requiredthattheCompanyrestructureits

depositary interests to be held by an EU entity in

order that they could settle in CREST and be

tradedinthenormalcourseofbusiness.

Accordingly, on 2 June 2021, a transferofthe

depositaryinterestswasundertaken. No

disruptionoccurredtothesettlementofshares

andcompliancewithpost-Brexitregulationswas

assured.

Share buyback

Undertheauthoritygivenbyshareholdersatthe

AnnualGeneralMeeting(AGM)in2020to

purchase a maximum of 10% of the issued share

capital of the Company at the date of acquisition

(the“2020authority”),theCompany

commencedasharebuyback programmeon

16 December 2020 to return value to

shareholders.Thisprogrammeconcluded on

13 April 2021 andafurtherprogramme

commenced on 5 May 2021, ending on 4 August

2021. The 2020 authority expired at the AGM in

2021 whenafurtherauthoritywasobtainedfor

purchase of up to 10% of the issued share capital

was obtained at the AGM 2021. The remainder of

thebuybackprogrammewascompletedunder

thisauthority.

Thesebuybacks,totalling€98million,were

conductedonanon-discretionarybasiswith

BarclaysBankIrelandPLC,whichmadetheshare

purchasesontheCompany’sbehalf,

independentlyof,anduninﬂuenced by, the

Company.Thepurchasesweremadeonmarket

terms and the average price per share was

disclosedineachdailyreport. Theoverallaverage

price of the ﬁrst tranche, ending on 13 April 2021,

was 3946 pence per share whilst the second

tranche, ending on 4 August 2021, was at an

overallaveragepriceof4254pencepershare.

Theremainingamountauthorisedunderthe

resolution passed at the AGM 2021, as at

25 February 2022, is 8.61%. This will expire at the

end of the 2022 AGM or the date which falls 15

months from the 2022 AGM.

You can read more about

thesesharebuybackson

Page 39

As at 31 December2021,theCompanyhelda

totalof2,478,686ordinarysharesinTreasury

whichrepresent5.01%oftheissuedsharecapital

at the date of acquisition of the shares. The

Companycontinuestoassess thetreatmentof

these treasury shares and they may be used to

satisfy awards made under the terms of the

Company’sLong-TermIncentivePlanor

cancelledinduecourse.

Beforeengagingontheprogrammeofshare

buybacks,theBoarddiscussedtherisksand

beneﬁtsofsuchaprogrammeandclosely

consideredthemedium-termliquidity,leverage

proﬁle, outlookandgoingconcernofthe

Companywithdetailedpresentationsfrom

management andconsultationswithour

corporatebrokers.Thematterwasconsideredin

thecontextofshareholderreturns,withinthe

Group’sbroadercapitalallocationstrategy,and

deemed to be in the best interests of a sustainable

company,itsshareholdersanditsother

stakeholders.The Boardwillcontinue toevaluate

thepotentialfor additionalsharebuyback

programmes to furtherenhance shareholder

returns,a

conditionsandthe Group’swidercapital

allocation priorities.

Board powers, responsibilities and

representation

TheBoardiscollectivelyresponsibleforthe

leadershipandmanagementofthe Company

anditsbusiness.Itsrole is to establish the strategy,

purposeandvaluestoensure theGroup’s

long-termandsustainable success.TheBoard

assesses the strategic risks it is willing to take in

pursuitofthisstrategy,ensuressuﬃcient

resources,andmeasurestheperformance of

management againstagreedobjectives,aligned

withthestrategy.TheBoardensuresthat

appropriatecontrolsandsystemsareinplace to

manageriskandconsidersthe Companyculture

andpractices,reviewingalignmentwiththe

purpose, valuesandstrategy.

The Board Rules and Matters Reserved to the

Board,whichare availableonthewebsite,setout

thosematterswhicharereservedforthe Boardto

consider, includingamong otheritems,overall

responsibilityforstrategyandmanagement,

majoracquisitionsandinvestments,structureand

capital,ﬁnancialreportingandcontrols,and

corporategovernance.Youcanreadmore about

themattersconsideredbythe Board in 2021 on

pages 79 and 80.

TheBoardhasdelegatedresponsibilityfor

day-to-daymanagementofthe Companytothe

CEOandhisExecutiveManagementTeam(the

EMT).Thereisaclearseparationofresponsibilities

betweentheBoardandthe EMT, and the main

responsibilitiesoftheEMTaretoassisttheBoard

withitsoversightofstrategy,whichinvolves

makingstrategicrecommendationstothe Board,

beingaccountable forimplementingthe Board’s

decisions, and beingresponsible fordirectingand

overseeingtheCompany’soperations.

The Boardhasdelegatedsomeresponsibilitiesto

CommitteesoftheBoard,whichareoutlined in

the CommitteeTermsofReference,availableon

the Companywebsite,andsummarisedintheir

individualreportsonpages [•]to[•].TheChairman

of each Committee provides a report to each

Board on the mattersdiscussedandresolved

upon in the respectiveCommittee meetings.

EachBoardCommitteehasconsideredthe

requiredmattersfromthe respectiveTermsof

Referenceand,throughtheBoardreview process,

hasassesseditsperformance.Thecompositionof

the Committees,the numberofmeetings,

attendance atthose meetingsandkeyitems

discussedcanbefoundineachCommittee

Report on pages 88 to 121.

Pursuanttothe ArticlesofAssociation,theBoard

may, if it elects to do so, assign duties and powers

toindividualDirectorsand/orcommitteesthatare

composed of two or more Directors,withthe

day-to-daymanagementofthe Company

entrustedtothe ExecutiveDirectors.Both

Executive DirectorsandNon-Executive Directors

mustperformsuchdutiesasare assignedto them

pursuanttothe ArticlesofAssociationand the

Board Rules or a resolution of the Board. Each

DirectorhasadutytowardstheCompany to

properlyperformthedutiesassignedtothem.

Furthermore, each Director has a duty to act in the

corporate interestsoftheCompanyandits

business.UnderDutchlaw,corporate interest

extendstothe interestsofallstakeholdersofthe

Company,suchasshareholders,creditors,

employeesand otherstakeholders.Youcanread

more aboutstakeholderengagementon pages

50 to 55.

The Board as a whole isentitledtorepresentthe

Company.Additionally,(i)theCEOandthe

Chairman,(ii) the SeniorIndependentDirector

andDeputyChairman¹and the Chairmanand (iii)

twoExecutiveDirectors,actingjointly,arealso

authorisedtorepresenttheCompany.Pursuantto

the ArticlesofAssociation,theBoardmayappoint

oﬃcerswhoareauthorisedtorepresentthe

Company within the limits of the speciﬁc powers

delegated to them. You can ﬁnd our Articles of

Associationandtherole proﬁlesofthe aboveroles

onourwebsite.

1 Adualroleheldbyoneindividual,currentlyJohnRamsay.
Youcanreadtheroledescriptiononour website

72 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

Board appointment

PursuanttotheArticlesofAssociation,the

Directors,otherthantheEmployee

RepresentativeDirectors,areappointedbythe

GeneralMeetingbyamajorityofvotescast,

irrespectiveoftherepresentedcapital.TheBoard

makesnominationstotheGeneralMeetingfor

suchappointments.Aresolutiontoappointthe

Directorotherthaninaccordancewitha

nomination by the Board may be adopted by the

GeneralMeetingbyanabsolutemajorityofvotes

castrepresentingmorethanone-thirdofthe

Company’sissuedcapital.

Non-ExecutiveDirectors(otherthanEmployee

RepresentativeDirectors)willbenominatedfora

termofthreeyears,subjecttosatisfactory

performanceandannualreappointmentbythe

GeneralMeeting.EmployeeRepresentative

Directors are appointed for a term of not more

than four years. The term of oﬃce for each

Director(otherthanEmployeeRepresentative

Directors) will end on the day of the AGM in the

yearfollowingappointment.Pursuanttothe

ArticlesofAssociation,Directorsmaybe

reappointedforanunlimitednumberofterms,but

theBoard’sconsiderationofNon-Executive

Directors(otherthanEmployeeRepresentative

Directors)forreappointmentforathirdtermwould

alwaystakeintoaccountoverallBoard

independenceandstakeholderviews, as well as

relevantCorporateGovernanceCodes.

The General Meeting has the power to suspend or

remove a Director at any time, by means of a

resolutionforsuspensionorremovalasoutlinedin

theArticlesofAssociation.TheGeneralMeeting

is authorised to resolve to amend the Articles of

Association,ontheproposaloftheBoard.

Conﬂictof interest

Dutch law provides that a Director may not

participateinthediscussionsanddecision-

making by the Board if such Director has a direct

orindirectpersonalinterestconﬂictingwiththe

interestsoftheCompanyorthebusiness

connectedwithit.

PursuanttotheArticlesofAssociationandthe

rulesadoptedbytheBoard(the“BoardRules”),

theBoardhasadoptedproceduresunderwhich

eachDirectorisrequiredtodeclarethenatureand

extent of any personal conﬂict of interest to the

otherDirectors.

Board site visits

The agreed Board pattern is that one Board

session per annum, typically over a week in April,

is held at a location other than the Vienna

headquarters.InApril2021 travelwasstillvery

diﬃcult, and with the intention to bring in three

new Directors, it was agreed that the visit be

postponed to later in the year.

In September 2021, the majority of the Board met

in person for the ﬁrsttimesinceJanuary2020,

givingDirectorsthe opportunitytomeet

colleagues in person, some for the ﬁrst time, and

tobuildimportantpersonalrelationships.This

meetingtookplaceinLeoben,(le

centre, and the Boardvisitedthetechnology

centre, receivingpresentationsfromspecialists

withinthebusinessontopicspertinenttoour

strategysuchasournet-zerobrickrange,Flow

Control,useofsecondaryrawmaterials,quality

assessment,toolssuchascomputedtomography

watermodelling.Theywere able to meet and

engage with a broad section of the Company,

hearingemployees’experiences,abouttheir

areasoffocus,abouttheirperspectiveonthe

strategicinitiativesandviewpointsfromother

stakeholderssuchascustomers,innovation

partners andsuppliers,withwhomthe employees

engagewithregularly.Thisprovidedinvaluable

viewpointsforthe Directorsoncultureand

stakeholderexperience.

Theexperience was felt to be overwhelmingly

positive, especiallyforournewDirectors,who

received acomprehensive overview of the

underlyingaspectsof production,were able to

meetspecialistsinvariousﬁeldsandformdeeper

relationshipswiththeircolleaguesontheBoard,

as well as with the EMT.TheexistingDirectors

similarlysawarefreshmentintheirrelationships

withtheircolleaguesandthe value of meeting in

person wassubstantiallyreinforced.

Othersite visitstookplaceinsmallergroups

throughout2021 whenandwhere travel was

possible:

• TheUK-basedDirectorsvisitedthe

Bonnybridgeplant,hearingfromthe

managementthereonsafetystandards,

operationalprocesses,andtheplant’s

contributionto,androlein,FlowControl.

• The CSC held a meeting of the Committee in

Radenthein,seeingthedigitalinnovationand

supplychaininaction,meetingnotonlylocal

management,butalsoattendeesofthe

CommitteefromtheRotterdamoﬃce,Brazil,

and Germany, as well as colleagues based in

Austria.

Where not all the Board were able to attend the

site visits,updateswere givenatthefollowing

meetingtosharethe learningsandperspectives

fromtheexperience.

• TheExecutiveDirectorsandDavidSchlaﬀ
visitedthe Biwadi plant in India and were
presentatthe openingofthe newR&Dcentre.
They saw the plansforimprovements,the
automationofproductiontoexpandcapacity
andcapabilitytodevelopinIndia,the Middle
East and Africa, and met the workforce

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 7 3

Corporate governance statement continued

Culture and purpose

remunerationandattritionlevelsthroughoutthe

annualcycle.Directorsengagedirectlywith

management, throughoutthe meetingcycle and

alsobeyond,whichenablestheirassessmentof

managementculture.

Culture continues to be a central part of

performanceevaluationsforemployeesandthe

Company’s internal communicationsare

underpinned byourcultural values.The Board

consideredtheextenttowhichculturalvalues

were promoted and embodied as part of all

succession planningdecisions.Giventhe

multiplegloballocationsofoperations,local

culture is also discussed by the Boardwhen

consideringtheimpactandlikelysuccessof

initiatives.ThecompliancereportstoDirectors

refertoculture, hand in hand with training and

CodeofConductcompliance levels.The Internal

AuditreportstotheAuditCommittee

demonstratethatorganisationalculture is a key

factorinachievinggoodauditresultsand,where

thereareimprovements,culture is a focus to

enablesuccessful implementation.Culture is

consideredindiscussionstoidentifytrendsand

challengesfacingthebusiness.The Corporate

SustainabilityCommittee speciﬁcallyconsiders

behaviourandcultureaskeysuccessfactorsof

healthandsafetycampaigns,youcanﬁndmore

details on page 64.

Theconsiderationofculture at Board level has led

theunderstandingofperformanceinteamssuch

assupplychainmanagement,ﬁnanceandsales,

as well as on the ground in our plants and

operations.The Boardhasconsideredtheculture

ofdiﬀerentteams,anddiscussedwith

managementhowthatculturehascontributedto

decisionmakingandperformancelevelsofthe

business.TheBoardcontinuestoconsiderhow

besttoeﬀectivelymeasure andassessculture at

Boardlevel.The followingkeyculturalthemes

determinetheactionsoftheCompanyand

speciﬁcallyfeedintoperformancereviewsacross

theGroup, successionplanningandrisk

management:

customer

performing

focus

Our high performance

is rooted in accountability

and responsibility. We are

a reliable partner that

decides and delivers

based on our

customers' needs.

open pragmatic

Our open mindset and

We act pragmatically to

transparent way of working is

enable fast and simple

ﬂanked by a diverse, respectful

collaboration across functions

and friendly business

and regions to serve

environment, where we care

our customers best.

about our customers

and colleagues.

Culture continues to play a large role in Board

discussionsandtheBoardtookalltheavailable

opportunitiestoengagewithcolleaguesinthe

businessinordertoobserveandunderstandthe

culturewithintheCompany.

CulturalvaluessupporttheCompanyPurpose,

andthePurposeunderpinsthe Company’s

stakeholderengagement,demonstratingthe

Company’splacewithinourwiderenvironment

and society. You can read more about how the

Boardincorporatesstakeholderviewpointsintoits

decision making process on pages 50 to 55.

Readmoreaboutour

cultureon

Page 64

AstheBoardconsideredthevariousoperational

diﬃculties in the year, culture was a continuous

themewhendiscussingrootcausesandsolutions.

Managementdevotedsigniﬁcanttimeand

attentiontoculture,discussingcultural

informationindetailwiththeBoardthroughout

theyear.

Withlimitedin-personexposuretocolleaguesat

levelsacrossthebusinessbecauseoftravel

restrictions,theBoardsoughtinputfrom

management,receivedBoard presentations in

meetings,andrequestedinsightintohowateam

operatedoraregionapproached problems.

Culturehasremainedanintegralelementof

BoarddiscussionsandtheBoardandits

Committeesusemanysourcestoassessculture.

Giventhatculturecanarguablybestbedescribed

as “the way we do things around here”, it is diﬃcult

tousequantitativemetricsthataccurately

communicatetheculturetotheBoard.

Nonetheless,datausedbytheDirectorsto

measurecultureincludewhistleblowingreports,

CodeofConductcompliancereports, employee

engagementsurveyresults,health and safety

reports,responsestoInternalAuditreportsand

thecorrespondingoutstandingactions,workforce

innovative

We live innovation to create

value for our customers, by

being bold and providing

the best digital and

sustainable solutions.

Whistleblowing

Potentialconcernsaboutbusinessethicsor any

matterscanbereportedbyallstakeholdersto an

independentlyoperated,conﬁdential and

anonymouswhistleblowinghotline,available

acrossallourkeyoperatinglocationsand in the

mainlanguagesusedwithinthe Company.

Contactdetailsare publicisedthroughoutthe

businessandare availableexternallyonthe

website.Allreportsare assessedbythe Head of

InternalAudit,Risk&Compliance andthen

addressedonacase bycasebasis,typically

engagingseniorleadersfromLegal andHR. The

Boardroutinelyreviewsthisprocessandthe

reportsarisingfromitsoperation,ensuringthere

are arrangementsinplace for the appropriateand

independentinvestigationofthese cases and that

follow-upactionstoaddresstherootcausesare

completed.

TheAuditCommitteereport

containsmore detailson

Page 92

Boardworkforceengagement

RHIMagnesita’scorporatestructurehas,from

thebeginning,includedEmployee

Representative Directors.Thiswasa

requirementfromthemergerin2017and

reﬂectsthe approachincontinentalEurope,

particularlytheDACHregion.The Employee

Representative Directors,currentlyMichael

Schwarz,KarinGarciaandMartinKowatsch,

havebeenappointedbytheirrespectiveworks

councilsinlinewiththeCompany’sArticlesof

Association,and,withexperienceofthe

frontline ofoperations,seektodirectly

representthe views of the workforce at the

highestleveloftheCompany.

TheBoardwelcomesthe diﬀerentviewpoints

theyprovide,bringingincreasedopportunity

forchallenge of the executivemanagement,

and holding them to account from a diﬀerent

perspective,beingthatoftheworkforcewho

are on the ground,amongstcolleagues. The

ERDs can attest to the impact of the

executives’actionswithinthebusinessand

contribute to the Board accordingly. Not only

do the ERDs have the abilitytochallenge

management,buttheycanalsocontributeto

theNEDs’viewofmanagementand

understandingofthe Companyculture,

strengtheningthe independence the NEDs

have throughproviding abroaderknowledge

of the Company.

TheinformationanddiscussionsatBoard

meetingshelpsthe ERDs’supportofthe

workforce andprovide amutuallybeneﬁcial

linkbetweencolleaguesandtheBoard.

Speciﬁcdetailsare includedintheBoard

stakeholderengagementreportonpages52

to 53.

74 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

Board composition

TheBoardiscomposedof16Directorswhich

includestwoExecutiveDirectors,threeEmployee

RepresentativeDirectorsand11 Non-Executive

Directors.

The size of the Board at 16Directorscontinuesto

be a challenge, as seen in ﬁndings of the Board

reviews.Howeverthisismitigatedbythecareful

behaviourofDirectorsinmeetings,thededicated

work of the Committees who then feed their

pre-workonmattersintotheBoardmeetingsand

the familiarity of the Board with the nuances of

beingadual-listedCompanywithobligationsin

threejurisdictions.

Independence

InpreviousyearsWolfgang Ruttenstorferhas

beenconsideredindependent undertheUKCGC

andnon-independentundertheDCGC.This is

because he was interim CEO for RHI AG for six

months when there was an urgent requirement,

followingthehealth-relatedabsenceoftheCEO.

Bestpracticeprovision2.1.8i.oftheDCGC

contains a window of ﬁve years which Wolfgang is

no longerwithin.Therefore, under the DCGC he

isnowclassedasindependent.

Under the UKCGC, the practice has been to

includetheserviceofthoseDirectorswhowere

on the RHI AG board when calculating the time

served.Onthisbasis,Wolfgangnolongermeets

theindependencecriteria of theUKCGC, having

joinedRHIAG’ssupervisoryboardin2012and

thereforeexceedingnineyearsofservicein2021.

He meets no other criteria in Provision 10 of the

UKCGC and the Board continues to be

comfortablethatheprovides strongindependent

challengetomanagement.

Additionally,perthe Chairman’sintroductionto

corporategovernance,asEuropeancorporate law

requiresthe Companytoallowforasigniﬁcant

portionofthe Board to be ERDs, the Board feels it

isappropriate tofollowtheprocessofcalculating

independence as it is undertaken in the relevant

jurisdiction.WhichistosaythatonlyDirectors

who can be appointedbyshareholdersare

countedinthecalculationandERDsareexcluded

fromthedenominator.

Accordingly,the BoardhassevenDirectorsoutof

12eligibleDirectors,whoare deemed

independent (as set out in the table on page 76),

therebyconstitutingaBoardwhichiscomposed

ofatleasthalfNon-Executive Directors(excluding

the Chairman) considered by the Board to be

independent.

TheBoardhasconsideredthe independence of

theNon-Executive Directors,includingpotential

conﬂicts of interest. Each of these Directorshas

also conﬁrmed that there is no reason why they

shouldnotcontinuetobeconsidered

independent.

Skills andexperience

TheNominationCommitteeseekstoensurethe

right balance ofskills,knowledge andexperience

ontheBoard,takingaccountofthebusiness

model,long-termstrategyandthesectorsand

geographiclocationsinwhichtheGroup

operates. The Board is structured so that the

following experience andcapabilitiesare present

in one or more ofitsDirectors:

• knowledge andunderstandingofthe business

andproductsofthe Companyandits

subsidiariesandthe marketsandgeographies

in which the Companyanditssubsidiaries

operate,inparticularthe trendsandfuture

developmentsofthesemarketsand

geographies;

• aninternationalbackgroundand geopolitical

exposure;

• broadboardexperience,including knowledge

ofcorporategovernance issuesatmainboard

levelasappropriatefortheCompany with

referencetoitssizeandinternationalspread of

activities;

• understandingof corporate social

responsibilityandsustainability matters;

• practical experience in,andrelating to,

ﬁnancingandaccountingand/or experience

inrelationtoInternationalFinancialReporting

Standards (IFRS), as well as in the areas of risk

managementandinternalcontrols;

• understandingof the marketswherethe

Companyisactive,inparticular emerging

markets;

• science,technologyandinnovationexpertise;

• experience andunderstanding ofhuman

resourcesandremunerationrelated matters;

and

• personalqualitiessuchasimpartiality,

integrity,tolerance of other points of view,

abilitytochallenge constructively and act

criticallyandindependently.

The NominationCommitteeconsidersthatallof

theseaspectsare present in a number of the

DirectorsandwellrepresentedacrosstheBoard.

The Boardiscommittedtoencouragingdiversity

todeliverlong-termsustainable successfor the

Companyandwillcontinue to pursue its

programmeinthisregard.

ReadaboutBoarddiversityintheNomination

Committee report on page 88 and 89.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 7 5

Corporate governance statement continued

At the date ofthisAnnualReport,theBoardiscomposedasfollows:

Name Position Year of birth

Date of

appointment

Expiry/

reappointment date

Herbert Cordt Chairman¹1947 20 June 2017 2022 AGM

John Ramsay Deputy Chairman and Senior Independent Director^{2, 3}1957 6 October 2017 2022 AGM

Stefan Borgas Executive Director (CEO)^{4, 5}1964 20 June 2017 2022 AGM

Ian Botha Executive Director (CFO)^{4, 5}1971 6 June 2019 2022 AGM

Janet Ashdown Independent Non-Executive Director^{2, 3}1959 6 June 2019 2022 AGM

David Schlaﬀ Non-Independent Non-Executive Director^{4, 5}1978 6 October 2017 2022 AGM

Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg Non-Independent Non-Executive Director^{4, 5}1965 6 October 2017 2022 AGM

Fiona Paulus Independent Non-Executive Director^{2, 3}1959 6 June 2019 2022 AGM

Jann Brown Independent Non-Executive Director^{2, 3}1955 10 June 2021 2022 AGM

Karl Sevelda Independent Non-Executive Director^{2, 3}1950 6 October 2017 2022 AGM

Marie-Hélène Ametsreiter Independent Non-Executive Director^{2, 3}1970 10 June 2021 2022 AGM

Sigalia Heifetz Independent Non-Executive Director^{2, 3}1961 10 June 2021 2022 AGM

Wolfgang Ruttenstorfer Non-Independent Non-Executive Director⁶1950 20 June 2017 2022 AGM

Karin Garcia Employee Representative Director^{4, 5}1970 9 December 2021 9 December 2025

Martin Kowatsch Employee Representative Director^{4, 5}1972 14 December 2021 14 December 2025

Michael Schwarz Employee Representative Director^{4, 5}1966 8 December 2017 9 December 2025

1 HerbertCordtwasamemberofthe supervisory boardof RHI AGandthusnot deemedtobeindependentonappointmentwithinthemeaning oftheUKCGC butindependentonappointmentwithinthe
meaningofthe DCGC,dueto adiﬀerence inindependence requirementsunder the respectivecodes.

2 Independentwithinthe meaningofthe UKCGC.

3 Independentwithinthe meaningofthe DCGC.

4 Non-Independentwithinthe meaning of the UKCGC.

5 Non-Independentwithinthe meaning of the DCGC.

6 WolfgangRuttenstorferisconsidered independent under the DCGC andnon-independentundertheUKCGC

Individualroles

Roles of Chairman, SID & Deputy Chairman and

CEO

The roles of Chairman, the CEO, SID & Deputy

Chairmanhavebeenformally recordedbythe

Board. All of these documents can be found on

theCompanywebsite.Thecompositionofthe

Board has been structured such that no one

individualcandominatethedecision-making

processesoftheBoard.

Non-Executive roles

TheEmployeeRepresentative, Non-Independent

andIndependentNon-ExecutiveDirectors

engage with the business of the Board from

diﬀerentperspectives,enablingmultifaceted

scrutinytobeappliedtotheBoard’sdecision-

makingensuringthattheviewpointsofthe

Company’skeystakeholdersarerepresented.All

Directorsarerequiredtoexercisetheir

independentjudgementandact in thebest

interestsoftheCompany,takingintoaccountthe

interestsofitsstakeholders,intheirdecision-

making.

Non-Independent Non-Executive Director roles

HerbertCordt,StanislausPrinzzuSayn-

Wittgenstein-Berleburg,DavidSchlaﬀand

WolfgangRuttenstorferare notconsidered

independent underthe UKCGC,havingbeen

members of the supervisory board of RHI AG for a

number of years prior to the merger in 2017 with

Magnesita.However,becauseofthatexperience,

theycontributestronglytotheBoard’sculture and

personality, adding valuable insightgained

throughexperience of the marketsinwhichthe

Groupoperatesandcorporatememory.Theycan

constructivelychallenge theExecutive Directors

andscrutinisetheperformance ofmanagement

inmeetingtheir objectiveswiththe beneﬁtof

historicalexperience of the operationsand

industryofthebusiness.StanislausPrinzzu

Sayn-Wittgenstein-BerleburgandDavidSchlaﬀ

canprovideaninvestorperspective to the

management teamandchallenge them

accordingly.ThedetailofalltheDirectors’

independenceandthe detail ofcompliance with

the criteria of each Code can be found above and

onpage70respectively.

The Chairman’sothersigniﬁcantcommitments

are set out in the table below:

Name of company Function

CORDT & PARTNER

Management- und

Finanzierungsconsulting

GesmbH.

Managing Partner

Watermill Group Boston Advisory Board member

Georgetown University’s School

of Foreign Service for its MSFS

Program

Advisory Board member

Quality Metalcra

Metal, Inc.

Advisory Board member

Cooper & Turner Group Advisory Board member

7 6 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

Time commitment

Onappointment,andeachsubsequentyear,

Non-ExecutiveDirectorsconﬁrmthattheyhave

suﬃcienttimetodevotetotheCompany’saﬀairs.

In addition, they are required to seek prior

approvalfromtheChairmanbeforetakingonany

additionalexternalcommitments,andtheBoard

is advised of any changes. The Board is satisﬁed

that,havingconsideredthedemandsofthe

externalappointments ofeachNon-Executive

Directorandthetimerequirementsfromthe

Company,allNon-ExecutiveDirectors are

contributingeﬀectivelytotheoperationofthe

Board.WhilsttheNon-ExecutiveDirectorsare

re-elected each year at the AGM, their letters of

appointmentstateatermofthreeyears.

Executive Directors

InaccordancewithDutchlaw,anExecutive

Director may not be allocated the tasks of: (i)

servingasChairman;(ii)participatinginthe

adoptionofresolutions (includingany

deliberationsinrespectofsuchresolutions)

relatedtotheremunerationofExecutiveDirectors

orinstructinganauditortoaudittheCompany’s

annualaccountsiftheGeneralMeetingfailstodo

so; or(iii)nominatingDirectorsforappointment.

TheroleofanExecutiveDirectoris,amongstother

things,tobringcommercialandinternal

perspectivestotheboardroom.TheExecutive

Directors, being the CEO and CFO, are

responsiblefortheleadershipand management

oftheCompanyaccordingtothestrategic

directionsetbytheBoard.

Company Secretary

Sally Caswell was appointed by the Board as

CompanySecretaryinJanuary2020.All

Directorshaveaccesstotheadviceandservices

oftheCompanySecretary,whoseresponsibilities

includeensuringthatBoardproceduresare

followed,assistingtheChairmaninrelationto

corporategovernancematters and,in

conjunctionwiththeGeneralCounsel, ensuring

the compliance of the Company with legal and

regulatoryrequirements.In2021,sheassistedthe

Chairman and the SID & Deputy Chairman in

administeringtheBoardReview.

Delegation of Authority

TheBoardhasdocumentedthemattersreserved

foritsapprovalincludingapprovalsofmajor

expenditure,investmentsandkeypolicies.This

wasrevisitedandrevisedin2021 to ensure it

reﬂectedthecurrentorganisationalstructure, and

provided as much clarity as possible to the Board

and the organisation as a wholetoenable

eﬀectivedelegationofauthority.

Tasksthathavenotbeenspeciﬁcallyallocatedto

a speciﬁc Director fall within the power of the

Board as a whole. The Directors share

responsibilityforalldecisionsandactsofthe

Boardandfortheactsofeachindividualmembers

oftheBoard,regardlessoftheallocationoftasks.

Board and Committee structure

TheCompanyhasaone-tierboardstructure,with

aBoardconsistingofbothExecutive Directorsand

Non-Executive Directors(collectivelythe

“Directors” or the “Board”). As at the date of this

AnnualReport,theprovisionsofDutchlawthat

arecommonlyreferredtoasthe“largecompany

regime”(structuurregime)donotapplytothe

Company.

The Board has four Board Committees to ensure a

stronggovernanceframeworkfordecisionmaking

and assessmentofperformance againstthe

Company’sstrategy:the AuditCommittee,the

RemunerationCommittee,theCorporate

SustainabilityCommittee andtheNomination

Committee.EachCommittee receivessupport

fromtheCompanySecretary.The Terms of

Referenceofthese Committeescanbe foundon

ourwebsite andthereportsofeachCommittee,

includingmembershipandattendance at

meetings in 2021, can be found on pages 88 to

121.

Information and support for Directors

InordertobuildandincreasetheNon-Executive

Directors’appreciationandunderstandingofthe

Group’speople,businesses,andmarkets,

particularlygrowthmarkets,seniormanagersare

regularlyinvitedtomakepresentationsatBoard

meetings.Thestrategymeetinginvolvedmultiple

break-outsessionstoprovidedetailoncertain

areasofbusinessfocussuchasCO₂emissionsand

digitalisation.ThetouroftheR&DcentreinLeoben

alsoprovidedopportunityfortheDirectorstohear

fromR&Dspecialistsasoutlinedabove.

TrainingsessionswereprovidedtoDirectorson

topicssuchasSustainability&TCFD,cyber

security,developmentsinDutchlaw,andacase

study on the role ofAuditCommitteesinrecent

corporate failures.The corporate trainingportal,

usedbyemployeesacrosstheorganisation,was

alsomadeavailable toDirectors,coveringtopics

suchasmarketabuseandanti-bribery&

corruption.

Trainingandadditional informationsessionson

areas such as EU CO₂certiﬁcationscheme,have

been providedbymanagementonaone-to-one

basisforDirectorsthroughoutthe year.Directors

alsomaintaintheirownindividualnon-executive

trainingschedule based on their areas of need

andinterestandattendedavarietyofvirtual

trainingeventshostedbyexternalproviders.

Thereisanestablishedprocedure forDirectorsto

seekindependentprofessional advice in the

furtheranceoftheirdutiesiftheyconsiderthis

necessary.

TheCompanymaintainsDirectors’andOﬃcers’

liability insurance whichprovidesappropriate

coverforlegalactionbroughtagainstitsDirectors.

InlinewithDutchbestpracticeandcorporatelaw,

at each AGM there is a resolution to release the

Directorsfromliabilityfortheexerciseoftheir

respectivedutiesduringthe ﬁnancialyear.

Induction

UponjoiningtheBoard,anynewDirector is

oﬀeredacomprehensive andtailored induction

programmecoveringallaspectsofthevalue

chain, with visits to key sites and meetings with

seniormanagersandothercolleaguesor advisers

asrequired.AnynewmemberstoCommitteesare

providedwiththeopportunityfora fulland

detailedinduction,eveniftheyareexisting

membersoftheBoard.

In2021,ﬁveDirectorsjoinedtheBoard. Those

joininginJune 2021 havebeenprovided with an

inductionprogrammetailoredtotheir experience

and their role within the Boardandthe

Committeestheywere joining.ThenewERDs’

inductionprogramme isongoingand iscovering

similaraspects,whilstbeingtailored to their

existingknowledgeoftheCompany.

Directorsspenttimewithseniormanagement,

andcoveredthe followingtopics:

• strategy;

• value chain;

• endmarketsservedbyRHIMagnesita;

• drivingmarketforces;

• refractoriesindustry;

• recentcorporatehistoryandkey corporate

subsidiaries;

• competitorsandpeers,and

• stakeholderssuchasemployees,customers,

shareholders,regulators,andlocal

government.

They also met with the Chairmen of each Board

Committee to discuss the role ofeach Committee

and,where they were to serve on the Committee,

theytookadditionaltimewiththeChairmento

delve into the detailoftheCommittee, their role

on the Committee,recenttopicsand ongoing

discussionswithmanagementand key areasof

focus.WherenewDirectorsjoined aCommittee,

theyalsometkeymanagementassociated with

thatCommitteetodiscussthe operationaldetail,

historytotopics,andstructurebeneath the

Committee.Forexample,onjoiningtheAudit&

ComplianceCommittee,JannBrownmetwith

the Finance leadershipteamcoveringtopicssuch

astheCompany’staxstructure,foreignexchange

hedgingstrategy,pensions,insurance,funding

structure,includingtrade ﬁnance, and an

overviewoftheCompany’scontrolenvironment

The newDirectorsreceivedaccessto theBoard

portal,containingkeyconstitutionaldocuments,

corporate policies,historic meeting papers,

minutes,andreports.

TheyalsometwiththeCompanySecretary to

discusstheirdutiesasDirectors,theCompany’s

corporate make-up,listingrequirementsin

LondonandVienna,disclosure requirementsand

corporate governance matterspertinentto the

Company.ShealsocoveredBoard processesand

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 7 7

Corporate governance statement continued

procedures,withreferencetoBoardpolicies,the

MattersReservedandBoardRules.

Alloftheseinductionsessionstookplacevia

video call and the feedback from the new

Directorswasverypositive.

Inaddition,theRemunerationandNomination

Committeeswelcomednewmemberswhowere

alreadyontheBoard.Thesenewmemberswere

oﬀeredinductionsspeciﬁctotheCommittee;

each receivedaccesstoallthehistoric

Committeedocumentsandmetwithkey

membersofmanagementtounderstand the

detailsofongoingmattersattheCommittees.

Additionalexternaltrainingonremunerationwas

providedtogiveanoverviewofstakeholder

expectations,regulationsandmarketpractice.

TheCommitteeChairmenmadetimeavailableto

discussthe keyrelationships,stakeholderviews

andrecentdecisionstaken.Finally,eachnew

joinerattendedmeetingsfromJanuary2021

onwardsasobservers,priortotheirmembership

commencingfromtheJune2021 AGM.This

allowed them to be fully briefed and cognisant of

theCommitteemattersanditsmodeofoperation.

Board attendance

SevenBoardmeetingswereplannedfortheyear

(2020: seven),withcertainmattersapprovedby

circularresolutionoutsideofBoardmeetings

wherethreemeetingsheldatshortnoticeon

speciﬁcitems.Giventheincreasedtravel

restrictions,theBoardmeetingswereheldlargely

viavideoconferencing facilities in 2021 and the

Boardmadeuseofvariousdigitaltoolstofacilitate

themeetings,buildingonfeedbackfromthe

2020Boardreviewtoimprovetheexperiencefor

Directors.

Thetablebelowshowsthenumberofscheduled

meetingsattendedandthemaximumnumberof

scheduledmeetingswhichthe Directorswere

eligibletoattend. JannBrown, Marie-Hélène

AmetsreiterandSigaliaHeifetzwereinvitedto

attendmeetingsfromAprilonwardsasobservers

until they were appointed by the AGM as

Directors.Themeetingswhere they were

observersareincludedinthefollowingtable.

Onlyinexceptionalcircumstanceswould

DirectorsnotattendBoardandCommittee

meetings.NoneofourNon-ExecutiveDirectors

haveraisedconcernsoverthe timecommitment

required of them to fulﬁl their duties and the

NominationCommitteeconsideredthetime

requiredofNon-ExecutiveDirectorsaspartofits

regularprogramme.

Total

Total meetings

Board attendance 2021

Board operation

attended

eligible to attend

Herbert Cordt 7 7

John Ramsay 7 7

Stefan Borgas 7 7

Ian Botha 7 7

Janet Ashdown 7 7

David Schlaﬀ 7 7

Stanislaus Prinz zu

Sayn-Wittgenstein-

Berleberg 7 7

Fiona Paulus 7 7

Jann Brown²5 5

Karl Sevelda 7 7

Marie-Hélène Ametsreiter²5 5

Sigalia Heifetz^{2, 3}3 5

Wolfgang Ruttenstorfer 7 7

Karin Garcia²0 0

Martin Kowatsch²0 0

Michael Schwarz 7 7

Celia Baxter²4 4

Andrew Hosty²4 4

1 Inthe year, three Boardsub-committees wereheldtoapprove

mattersspeciﬁcallydelegatedbytheBoardinaccordancewith

article 17.5of the Company’s Articles ofAssociation.Theseare

not includedinthetableabove.

2 These personswereonlyDirectors forpartoftheyear.Forthose

appointed, it includesmeetingswheretheywereobservers.

3 SigaliaHeifetz had toundergomedicaltreatmentandis now

fully recuperated.

TheBoardmeetsregularlythroughoutthe year

withsevenBoardandCommitteesessions,which

are usually spread over two days, in person in

Vienna.Boardmeetingscanalsobeconvenedas

deemednecessarybythe Chairmanorthe Senior

Independent DirectorandDeputyChairman.

There was one meeting in 2021, where the

majorityoftheBoardwere togetherinperson.The

remainderwereheldthroughacombinationof

in-person attendance andvideoconferencing.

Technologyandequipmentweredeveloped

whereverpossibletoachievethe bestoutcomes

forattendeesinthe circumstancesandoptimise

theinputfromindividuals.Thestructureofthe

meetingswasadjustedtoaddresstheneedsof

thoseattendingonvideoconference and

wherever in-personmeetingwaspermitted

underlocalguidelines,relevanthealthandsafety

measureswereabidedby,suchasmasks,

temperaturechecks,social distancing,ventilation

oftherooms,vaccinationpassesandCOVID-19

testing.

In the meetings,the Chairmantakescare to

ensure thateachDirectorhasopportunity to

commentandbe heard,whilstenablingan

orderlyﬂow.

At the end of each Board meeting, the Non-

ExecutiveDirectorsmeetwithouttheExecutive

Directorsandmanagementpresenttoenablean

open and frank exchange of views and

assessmentofperformance.Additionally,theSID

holds a meeting with the otherNon-Executive

Directorstodiscussthe Chairman’sperformance

in the course of the year, with input also provided

from the Board review. The Chairmanand other

Non-Executive Directorsholdregularinformal,

individual,meetingswiththeExecutive Directors

andotherseniormanagersinthebusiness,

providingthe opportunitytoraisequestionsand

coverpointsofinterest,whichcontributesto the

developmentofboththeNon-Executive Director

and the managementmembers.

Boardpapersarecirculatedinadvance of

meetings,usingasecure web-basedportal,to

allowDirectorssuﬃcienttime toconsidertheir

contentpriortothemeeting.The Chairmanis

assistedinthisresponsibilitybytheCompany

SecretaryandCEOthroughthecareful

preparationofagendasandthe timelyprovisionof

paperstotheBoard.Themanagementteam

continuestotakefeedbackfromtheBoard via the

reviewprocessonhowpapersandpresentations

can be improved to assist the ﬂow of the meeting.

Aninformationroomwithinthewebportal

providesaccesstousefulinformation,including

corporate governance reference materials,

analystreports,andCompanyﬁnance,treasury

andstrategyinformation.

The Boardtakesthe viewsofitskeystakeholder

groupsintoaccountwhenchallenging

management,andinitsdiscussionsand

decisionmaking.Inputstothisprocessincludethe

Company’sNetPromoterScore,employee

engagementsurveys,the Employee

RepresentativeDirectors’views,regularInvestor

Relationsreports,analystcoverage and views of

the twoNon-IndependentNon-Executive

Directorswhorepresentshareholdersonthe

Board.

7 8 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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FINANCIAL

STATEMENTS

OTHER

INFORMATION

TheBoardrecognisestheimportanceof

balancingstakeholderviews, whilst actingin the

best interests of the Company. In the event of a

decisionwhichhasapotentiallynegativeimpact

onaspeciﬁcstakeholdergroup, eﬀortsaremade

to mitigatethese.Asanexample, in the event of

anorganisationalrestructure, whichdoesnot

beneﬁtcertainemployees, atransparent

communicationsstrategyisimplementedto

explain the decision and employee are treated in a

respectfulandgenerous manner.This aligns with

the Company values to be open in decision-

makingandaccountablefor actions taken.See

thestakeholderengagement report on pages 50

to 55 for more examples of this.

TheBoardreviewin2021,whichcomprised

reviewsoftheBoard,itsCommittees,the

ChairmanandindividualDirectors’self-

evaluation,conﬁrmedthattheBoardwas

functioningeﬀectivelyandmoredetailonthe

Boardreviewprocessandoutcomescanbefound

on page 88.

Key areas of Board focus and activity in

2021

Amongstothermatters,theBoardfocusedonthe

followingareasintheyear:

People,successionand leadership

• Boardcomposition,appointingthreenew

NEDsandreceivingtwoERDs.

• ReviewedBoardCommitteemembershipand

receivedupdatesfromtheNomination

Committee,includingthe recommendation

forarefreshedBoarddiversitypolicy.

• Consideredthe executive managementand

CEOsuccessionplansandrelatedactions.

• Consideredthe2021 internalBoardreview

and the actionsrelatingtothereview,

includingprogressagainstthe actions

identiﬁedinthe year. See pages 88 to 89for

furtherdetails.

• Reviewedandapprovedthe bonusfor2020

performance and the remunerationofthe

Chairman,ExecutiveDirectorsandEMT.

• Discussedretention,performance and

resourcingandrecommendationsmade to

managementinrespectoftraining,

incentivisationandexternal support.

• Discussedemployee engagement,morale

andwellbeing,particularlyinrespectofthe

impactofCOVID-19 pandemic.

Markets and sales

• Receivedupdatesateachmeetingonsales

performance,marketshare and progress

againstsalesinitiatives,particularly with

referencetocustomersandtheimpactsfrom

COVID-19.

• Consideredproductpricingand costsof

production.

• Receivedreportsonrecyclingand digital

initiativesdesignedtomeetcustomer

expectationsanddevelopthe Company’s

oﬀering.

Group strategy

• Annualtwo-daystrategymeetingsessionwith

membersoftheEMTandseniormanagement

teamstoexaminethecurrentstrategyand

ensure it was ﬁt for purpose. As part of these

discussions,theBoardconsideredtheglobal

outlookofeconomicrecoveryand

macroeconomictrends,developmentsinkey

marketsineachregion,structuraltrends,

technicalinnovation,reviewofthebusiness

model,andthecompetitiveenvironmentfor

eachregionandproductarea.

• Aspartofthestrategysession,undertookrisk

managementworkshopalignedwiththe

strategicopportunitiesandfocusedbreak-out

sessionsonfutureopportunitiesandcurrent

positionoftopicssuchastheEuropeansteel

marketsanddigitalisation.

• Receivedreportsthroughouttheyear

outliningpotentialbusiness development

opportunitiesastheyarose, includingstrategic

M&A.

• Approveddisposalsand acquisitions

• Consideredgeopoliticalandmacro-

economictrendsandfactors.

• Progressagainstthe2025strategy,through

considerationofastrategicinitiatives

dashboard,anddiscussedtheexecutionofthe

strategyandanyassociatedbarriers.

Financialperformance

• Approvedthe annualbudgetfor2021.

• Reviewedandapprovedthe Group’sfull-year

2020andhalf-year2021 resultstogetherwith

the2020Annual Report,includingensuring

thatitisfair,balancedandunderstandable

and conﬁrming that the Group was a going

concern. As part of this, the Boardconsidered

theexternalauditor’sreportsandthekey

mattersraised.

• Receivedregularﬁnancialupdatescovering

revenue,costs,performance year-to-date,

and outlook on a monthly basis.

• ReviewedtheGroup’sdebt,capitalandfunding

arrangements,particularlyinrespectof

ensuringtheabilitytotakeadvantageofany

opportunitiesastheyarise.Approvedentryinto

anESGratings-linkedﬁnancialinstruments.

• Reviewedliquidity,cashﬂowandscenario

planning,particularlywithreference to the

impactfromCOVID-19andmacrofactors

suchasinﬂation,supplychainissues,and

politicalchangesinChinarequiringcareful

managementofinventory.

• Consideredcapitalallocationandpaymentof

dividends,includingthe approval of the

interimdividendandthe share buyback.

• Considereddisclosurestothe marketand

noted the work of the Disclosure Committeeto

continuallymonitormattersathand.

• Appraisedthe principal risks,mitigating
actionsandcontrols.

• Receivedupdatesonthe Company’stax
strategyandmattersathandwithlocal
authoritiesinvariouslocations.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 7 9

Corporate governance statement continued

Operational performance

• Receivedupdatesateachmeetingon

operationalperformance,includingany

impactstocustomersandcurrenthealthand

safetycompliancelevels.

• Receivedbrieﬁngsonoperationalprojects,

includingprojectmanagement, business

casesforpayback,timescales, and any barriers

tocompletion.

• Consideredindividualplant performanceand,

with referencetotheCompany’sstrategyand

impactsfromCOVID-19,notedmanagement’s

decisionstopauseproductionatplantsas

required.

• Receivedfrequentreports onsupplychain

disruption, the task force set up to address the

issuesandconsideredmanagement’s

proposalstoimproveperformanceacrossthe

valuechain.

Technical innovationand sustainability

• ConsideredthebudgetdedicatedtoR&Dand

particularlythecostsoffeasibilitystudies.

• Receivedupdatesonthedevelopmentof

low-carbonproductsandmarket

developmentsincarboncaptureandstorage.

• Consideredfuturestrategy,partnershipswith

externalparties,andprocesses to encourage

innovation.

Legal and compliancematters

• Receivedregularupdateson whistleblowing,

includinganannualreviewoftheprocess.

Stakeholderengagementandgovernance

• ApprovedtheNotice and business of the

AGM.

• Receivedinputfromthe Employee

Representative Directorsonthe Board.

• Consideredthe Companyculture andreports

ontheCompanyvalues.

• Received reportsoninvestorengagementat

eachBoardmeeting,includingverbatim

feedback,thediscussionsheldaspartofthe

annualroadshow,andthedetailedperception

study.

• Received presentationsondiversity,and

sustainablesupplierprocesses.

• Approvedthestatementforthe Modern

Slavery Act andCaliforniaTransparencyin

Supply ChainsAct.

• Receivedreportoncustomersatisfaction

levels,includingNetPromoterScore.

• Reviewed remunerationofsenior

management,the ExecutiveDirectorsandthe

Group-widebonusschemeon

recommendationfromthe Remuneration

Committee.

• Receivedregularupdatesoncorporate

governanceandothermattersfromthe

CompanySecretary,includingreviewsofany

potentialconﬂictsofinterest.

Board review

In2021,theBoardconsideredthe externally

facilitated2020Boardreviewandtheprogress

againstactions.WhilstCOVID-19continued to

hamperBoardactivity,progresswasmadewith

newappointmentstothe Board,increasing

diversityanddigitalexpertise,andwiththeinputs

totheBoard,includingupdatestoDirectorson

keytopicsinbetweenmeetingsandmore

informationtothe Boardonsustainability and

stakeholdergroupsmade available.Time

managementinmeetingsandqualityofpapers

was also felt to have improved, as well as the

eﬀectivenessofremote meetingsthrough

introductionofbetterequipmenttofacilitatethe

hybridmeetings.

As outlined in the Chairman’sintroduction,in

2021 theBoarddecidedtoconductaninternal

Boardreview,facilitatedbythe Company

Secretary.The Boardmemberscompleted a

comprehensive review on the overall Board

performance,the Chairmanandtheirown

individualperformancein2021.The review

coveredcore areasoftheBoardandCommittee

performance,withparticularfocuson:

• Boardcompositionanddiversity;

• stakeholderoversight;

• cultureandexecutionofstrategicgoals;

• Boarddynamics,communicationand

cohesion;

• Boardsupport,eﬀectivenessofremote

meetings,meetingmanagementandfocus;

• ReceivedtheCodeofConductcompliance

report.

• ReceivedupdatesontheGroup’scompliance

andcybersecurityprogrammes.

• BoardCommitteeeﬀectiveness;

• support and challenge of the EMT, quality of

discussion,andrelationshipsbetween

Directorsandmanagement;

• Consideredcompliancereports, and also

receivedabenchmarkingreportonthe

numberofcompliancecasescomparedwith

peers.

• Receivedupdatesonanylegaldevelopments

as they related to the Company.

• Consideredandapprovedrevised share

dealingandinsideinformationpolicies,

MattersReservedtotheBoard,theassociated

DelegationofAuthoritymatrix,andBoard

Rules.

• strategicoversightanddiscussion;

• riskmanagementandinternalcontrols;and

• successionplanning,talentmanagementand

humanresource management.

The reviewalsoincludedquestionsonthe

ongoingresponse to COVID-19 pandemic and

the impactonriskmanagement.

The Boardconsideredthethemesandoutput

from2021 review(withoutcomesdiscussed in the

NominationCommittee report on page 88) and

was pleased to note that, even with the impacts

feltfromCOVID-19restrictions,theBoard was

assessedashavingmaintainedorimproved its

performancefrom2020.Anactionplan, aligned

to the outcomes of the 2021 review,todrive

furtherprogressthrough2022hasbeen drawn

up and progress will be reportedinthe 2022

AnnualReport.

8 0 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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OTHER

INFORMATION

Statement of Directors’ responsibilities

TheDirectorsareresponsibleforpreparingthe

Company’sAnnualReport. TheCompany’s

AnnualReportcomprises,amongothers,the

StrategicReport,theGovernanceReport,the

ConsolidatedFinancialStatements.TheDirectors

areresponsibleforpreparingtheAnnualReport

foreachﬁnancialyearinaccordancewith

applicablelawandregulations, includingin

accordancewithIFRSasadoptedbythe

EuropeanUnionandthe relevantprovisionsofthe

DutchCivilCode.TheDirectorsmustnotapprove

theAnnualReportunlesstheyaresatisﬁedthatit

gives a true and fair view of the state of aﬀairs of

theCompanyanditsconsolidatedGroup

companies and of the proﬁt or loss of the Group

forthatperiod.InpreparingtheAnnualReport,

theDirectorsarerequiredto:

a) selectsuitableaccountingpoliciesandthen

applythem consistently;

b) makejudgementsandaccountingestimates

thatarereasonableandprudent;

c) statewhetherapplicableIFRSasadoptedby

theEuropeanUnionandtherelevant

provisions of the Dutch Civil Code have been

followed,subjecttoanymaterialdepartures

disclosedandexplainedintheAnnualReport;

and

d) preparetheAnnualReportonthegoing

concernbasis,unlessitisinappropriateto

presumethattheCompanywillcontinuein

business.

TheDirectorsareresponsibleforkeeping

adequateaccountingrecordsthataresuﬃcientto

showandexplaintheCompany’stransactions

anddisclose,withreasonableaccuracyatany

time,theﬁnancialpositionoftheCompanyand

the Group and enable them to ensure that the

AnnualReportcomplieswithapplicablelawand,

asregardstheConsolidatedFinancial

Statements,theIASRegulation.Theyarealso

responsibleforsafeguardingtheassetsofthe

CompanyandtheGroupand hencefor taking

reasonablestepsforthepreventionanddetection

offraudandotherirregularities.

EachoftheDirectors,whose namesandfunctions

are listed on pages 82 to 85, conﬁrm that, to the

bestoftheirknowledge:

• theCompany’sﬁnancialstatementsandthe

ConsolidatedFinancial Statements,which

havebeenpreparedinaccordance withIFRS

as adopted by the European Union and the

relevantprovisionsoftheDutchCivilCode,

give a true and fair view of the assets, liabilities,

ﬁnancial position and proﬁt or loss of the

Group;

• the Annual Report gives a true and fair view on

thesituationonthebalance sheetdate,the

developmentandperformanceofthe

businessandthepositionoftheCompanyand

itsconsolidatedGroupcompaniesand

includesadescriptionofthe principalrisksand

uncertaintiesthatthe Companyfaces;and

• havingtakenallmattersconsideredbythe

Board and brought to the attentionofthe

Boardduringthe ﬁnancialyearintoaccount,

theDirectorsconsiderthatthe AnnualReport,

taken as a whole is fair, balanced and

understandable.TheDirectorsbelieve that

the disclosures set out in the AnnualReport

provide theinformationnecessaryfor

shareholderstoassessthe Company’s

position,performance,businessmodeland

strategy.

analysis,theDirectorshavereasonable

expectationthatthe Grouphasadequate

resourcestocontinueinoperationalexistence for

theforeseeable future.Forthisreason,the

Directorsconsideritappropriate to adopt the

goingconcernbasisinpreparingthe Annual

Report.Directorsarealsorequiredtoprovide a

broaderassessmentofviabilityoveralonger

periodwhichcanbe found on pages 43 and 44

(the“ViabilityStatement”)oftheintegratedreport

and accounts.The consolidatedﬁnancial

statements on pages 126 to 203 were approved

and signed by the Boardon27February2022.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 8 1

Board of Directors

1 2 3 4 5

6 7 8 9 10

11 12 13

Employee Representative Directors

14 15 16

82 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

Chairman Senior Independent Director

and Deputy Chairman

Chief Executive Oﬃcer Chief Financial Oﬃcer

1. Herbert Cordt N

Chairman

2. John Ramsay A N

Independent Non-Executive Director

3. Stefan Borgas

Chief Executive Oﬃcer

4. Ian Botha

Chief Financial Oﬃcer

Appointment date: June 2017

Nationality: Austrian

Appointment date: October 2017

Nationality: British

Appointment date: June 2017

Nationality: German

Appointment date: June 2019

Nationality: South African/British

Herbert wasChairmanoftheSupervisory

BoardofRHI AGfrom 2010 until 2017, as

well asVice-Chairmanfrom2007to

2010. He isManagingPartner atCordt&

PartnerGmbH, hisinternational boutique

corporate ﬁnance consultancy,which

advisesclientsoncorporateﬁnance

matters. Inthe course ofhis career hehas

held avariety ofseniorexecutiveand

managingdirectorpositions in

telecommunicationsandﬁnancial

institutionsinEuropeanﬁrms,providing a

wide range ofbusinessacumen and

internationalexperience.

Herbert obtaineda Doctoratein Lawfrom

the University ofVienna, graduated from

the Diplomatic Academy ofViennaand

receiveda Master’sofSciencedegreein

ForeignService from Georgetown

University WashingtonD.C.

Current external appointments:

WatermillGroup Boston(Advisor),

Cooper& TurnerGroup (AdvisoryBoard

Member), QualityMetalcra

Metal, Inc.(AdvisoryBoard Member),

CORDT & PARTNER Managementund

Finanzierungsconsulting GesmbH

(ManagingPartner), Georgetown

University’sSchoolofForeign Servicefor

itsMSFS Program (AdvisoryBoard

Member).

John has held senior ﬁnancial executive

roles across theworld,including serving

as ChiefFinancial Oﬃcerof Syngenta

AG,as wellas being their InterimCEOfor

aperiod.John started with SyngentaAG

as GroupFinancial Controllerin2000

and prior tothatwas FinanceHeadof Asia

Paciﬁcfor ZenecaAgrochemicals. Earlier

in his career hewas aFinancial Controller

ofICI Malaysiaand regional controller

for Latin America.Hestartedhiscareer

working in auditand taxat KPMG andhis

knowledgein accounting andﬁnance

provides valuablepractical experience.

John is aChartered Accountant andalso

holds an Honours DegreeinAccounting.

Current external appointments:

KoninklijkeDSMN.V.(Supervisory

Board Member),CrodaInternational plc

(Non-ExecutiveDirector,Chairof Audit

Committee)and Babcock International

plc(Non-ExecutiveDirector).

Stefan‘scareerhasfocusedonbusiness

transformations. He was CEO at RHI

AG fromDecember2016 until October

2017. Priorto that, hewaspresident

andCEOat Israel ChemicalsLtdand

between2004 and2012, hewasCEO

at LonzaGroup. Inhisearly career,

heworkedat BASF Group, wherehe

heldvariousmanagement positions.

Stefanhasabusinessadministration

degreefromtheUniversity

SaarbrückenandanMBA fromthe

University of St. Gallen-HSG.

Current external appointments:

AfyrenSAS (Chairman) and

Borgasadvisory GmbH (owner).

Ianenjoyedahighly successful career

with FTSElistedAnglo American plcin

therelatedmining andmetals industry

forover20 years. Whilst there, he held

avariety of international executive roles

including asGroupFinancial Controller

anddivisional Chief Financial Oﬃcer,

andmost recently asFinance Director

of listedAnglo American Platinum. Ian

hassigniﬁcant experience in ﬁnance

andaccounting, investor relations,

strategy, M&A andgovernance, as

well asexcellent business acumen

anda track recordinﬁnancial and

performanceimprovements.

IanholdsaBachelor’sdegree in

CommercefromtheUniversityof Cape

TownandisaChartered Accountant.

Current external appointments: none.

Board Committee member

N NominationCommittee

A Audit & Compliance Committee

S CorporateSustainability Committee

R Remuneration Committee

Chairmanof Committee

Directors

by length oftenure

Directors

by ethnicity

Directors

by age

Directors

by nationality

0-3 6

3-5 2

5-9 1

9+ 4

White 69%

Prefer not to say 23%

Other ethnic groups 8%

40–49 8%

50–59 31%

60–69 38%

70–80 23%

Austrian 38%

British 31%

German 15%

Israeli 8%

South African / British 8%

AsdescribedintheCorporateGovernanceStatement,thesestatisticsdonotinclude theEmployee Representative Directors.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 8 3

Board of Directors continued

Non-Independent

Non-Executive Directors

Independent Non-Executive Directors

5. Stanislaus Prinz zu

Sayn-Wittgenstein-Berleburg

Non-IndependentNon-ExecutiveDirector

Appointment date: October 2017

Nationality: German

Stanislauswasamemberofthe

SupervisoryBoardofRHIAGfrom2001.He

hasbeenaSupervisoryBoardmemberon

several“Stadtwerke”(municipalityowned

utilities)aswellasundertakingsenior

executiveroles,includingCEOandCFO,in

theenergyindustry.Hehasdeployed

industrialknowledgecombinedwith

financialdetailthroughouthiscareer,and

wasanInvestmentBankingDirectorat

DeutscheBankAG.Overthepastfiveyears

hehasfocusedonprivateequityworkina

Germanmid-capenvironmentandalso

engagesinabroadrangeofasset

managementactivitiesinafamilyoffice

environment.

StanislausholdsaSloanFellowsMaster’s

inBusinessAdministrationfromMITSloan

SchoolofManagementandstudied

BusinessAdministrationandEconomicsat

UniversitédeFribourg.HeisaChartered

FinancialAnalyst(CFA).

Currentexternalappointments: STUV

Steinbach&VollmannHoldingGmbH

(CEO).

7. Wolfgang Ruttenstorfer A

Non-IndependentNon-ExecutiveDirector

Appointment date: June 2017

Nationality: Austrian

Wolfgang was amemberofthe

SupervisoryBoard ofRHI AG from2012 to

2017,whereheacted as theInterimCEO

for sixmonths,following thesickness-

related absenceoftheCEO.Hestarted

his professional career in oil and gasat

OMV,wherehebecameCEO andthen

Chairman oftheManagementBoard. He

has held numerous supervisoryboard

roles,including as Chairman,inindustries

suchas telecommunications,real estate,

healthcareand insurance.Wolfgang also

served as SecretaryofStatein the

Austrian Federal MinistryofFinance. His

varied career brings awiderangeof

strategicand business management

experience.

Wolfgang graduated fromtheVienna

UniversityofEconomics and Business.

Current external appointments:

Flughafen Wien Aktiengesellscha

(SupervisoryBoard member)andErne

Fittings GmbH (SupervisoryBoard

member).

8. Janet Ashdown S R

Independent Non-Executive Director

Appointment date: June 2019

Nationality: British

Janet hashada distinguishedcareer

working forBPplc forover30 years,

holding anumberof international

executivepositionsthroughout the

valuechain. Until theendof 2012,

Janet wasCEOof Harvest Energy

Ltdandthroughout hercareerhas

providedleadershipthrough change.

Janet also hasawiderangeof board

andcommitteeexperienceasaNon-

ExecutiveDirector, including theUK

NuclearDecommissioning Authority,

apublic body whereshechairsthe

Safety andSustainability Committee.

Herexperienceintheenergy sector

hasprovidedherwith signiﬁcant skills

ingeneral management,particularly in

environmental andsustainability matters.

Janet holdsaBSc inEnergy Engineering

fromSwanseaUniversity.

Current external appointments:

NuclearDecommissioning Authority

UK (Non-ExecutiveDirectorandChair

of Safety & Sustainability), Victrex

plc (Non-ExecutiveDirector, Chair

of Remuneration) andStolt-Nielsen

Limited (Non-ExecutiveDirector).

9. Fiona Paulus S R

Independent Non-Executive Director

Appointment date: June 2019

Nationality: British

Fionahasover37 years’ global

investment banking experience, having

heldsenior management roleswith

anumberof leading international

investment banks, such asCredit Suisse,

Royal Bank of Scotland, Deutsche

Bank andCitigroup. During her career,

Fionahasledandmanagedavariety

of global banking businesses, from

start-upsto businesseswith US$4

billionintotal revenues. Additionally,

Fionahasadvisedcompaniesin over

70 countriesintheglobal energyand

resourcessectorsonvariousstrategic

initiatives, including M&A, equityand

debt ﬁnancings,andrisk management.

FionahasaBA inEconomicsfrom

theUniversity of Durham.

Currentexternalappointments:Interpipe

Group(Non-ExecutiveDirector),

RedcliﬀeAdvice(Managing Director)and

Gleacher Shacklock LLP(Senior Advisor).

6. David Schlaﬀ

Non-IndependentNon-ExecutiveDirector

Appointment date: October 2017
Nationality: Austrian

DavidwasamemberoftheSupervisory

BoardatRHIAGfrom2010until2017.

CurrentlyChiefInvestmentOfficerand

jointManagingDirectoratM-Tel,hehaskey

managementandsupervisoryexperience

ininternationalfinancialandmanufacturing

institutions.HehasundertakenrolesatLH

FinancialServicesCorporationand

Forstmann-LeffAssociatesInc,andhehas

heldadvisoryandsupervisoryboard

positionsatLatrobeSpecialtySteel

CompanyandA/SVentspilsNafta.

Davidholds aBachelor’sdegree in

Business Administrationfrom the

InterdisciplinaryCenterHerzliyainIsrael.

Current external appointments: M-Tel

HoldingGmbH(ChiefInvestmentOﬃcer

andJointManagingDirector).

Employee Representative Directors

14. Karin Garcia

Employee Representative Director

15. Martin Kowatsch

Employee Representative Director

Appointment date: December 2021

Nationality: Spanish

Appointment date: December 2021

Nationality: German

Karin studied attheUniversityofOviedo

and ﬁnished herdegreein computer

sciencein 1994,specialising in systems

support.Shestarted withtheGroupat

RHI in 1997,ﬁrstworking in the

commercial executionteamand then she

transferred totheITon-sitesupport in

Oviedoas aRegional SiteService

Coordinatorwhereshecontinuesto work

as asenior sitecoordinator.

Karin hasbeen appointedasan Employee

RepresentativeDirectorbytheSpanish

Works Council.

Current external appointments: none.

Martinhasbeenwith theGroupsince

1987 andistheChairmanof theworks

council at theFlagshipDigital Plant

FlagshipinRadenthein. Heisatrained

Company electrician,completedan

one-yearChamberof Labour/tradeunion

training, thenstudiededucation/group

dynamicsandorganisational

development.

MartingraduatedfromtheAlpenAdria

University.

Martinhasbeenappointedasan

EmployeeRepresentativeDirector by the

AustrianWorksCouncil.

16. Michael Schwarz

Employee Representative Director

Appointment date: December 2017

Nationality: German

Michael hasbeenwith theGroup since

1983 andisamemberof theworks

council at RHIMagnesitaDeutschland

AG.

Michael has beenappointed as an

EmployeeRepresentativeDirector by the

GermanWorksCouncil.

Current external appointments: none.

8 4 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

10. Janice “Jann” Brown A

IndependentNon-ExecutiveDirector

11. Karl Sevelda R N

Independent Non-Executive Director

12. Marie-Hélène Ametsreiter S

Independent Non-Executive Director

13. Sigalia Heifetz

IndependentNon-ExecutiveDirector

Appointment date: June 2021

Nationality: British

Appointment date: October 2017

Nationality: Austrian

Appointment date: June 2021

Nationality: Austrian

Appointment date: June 2021

Nationality: Israeli

Jann startedhercareerwithKPMG,

where she qualiﬁedasa Chartered

Accountant anda Chartered TaxAdviser,

movinginto industry in1998and since

thenhasworkedina number ofroles,

both executive andnon-executive,

primarily inthe energy sector butalsoin

engineeringservices, manufacturing and

investment management.As aresultof

theseroles, Jannhasextensive

internationalbusinessexperience,

particularly inIndia andtheMiddleEast.

Herlistedcompanyboardexperience,

bothasanexecutive anda non-

executive, bringsanawareness ofthe

importance ofgovernance,cultureand

strongethics.She isanexperienced

ﬁnancialprofessionalandis aPast

President ofthe Institute of Chartered

AccountantsofScotland.

Jann isa CharteredAccountant,and also

holdsanHonoursDegree in Historyfrom

Edinburgh University.

Current external appointments: Pharos

Energyplc(ManagingDirector),and ICAS

Foundation(Trustee andboard member).

Karl progressed toCEO of Raiﬀeisen

BankInternational AG a

CEOand undertaking management

roles in theRaiﬀeisen Bank group

wherehe was responsiblefor corporate

customers and corporate tradeand

exportﬁnanceworldwide. Priorto this

heheld several seniormanagement

positions in Creditanstalt-Bankverein

wherehe focused oncorporateand

exportﬁnance.Additionally, hehasheld

theposition ofSecretaryto theFederal

Minister for Tradeand Industry of Austria.

Karl holds aMaster’s and Doctorate

Degreefrom ViennaUniversity

ofEconomics and Business.

Current external appointments:

SIGNAPrimeSelection AG (Supervisory

Board member),Liechtensteinische

LandesbankAG(Non-Executive

Director),and Custos Privatsti

(ManagementBoard member).

Marie-HélènehasbeenaGeneral

Partnerwith Speedinvest, aleading

EuropeanVentureCapital ﬁrm, since

2014. Astheleadpartnerof theIndustrial

Tech team, shedrivesseedstage

investmentsinstartupssupporting the

digitisationof Europe’sindustrial sector,

including manufacturing,logistics,

construction andclimatetechnology.

BeforeSpeedinvest, Marie-Hélènewas

responsiblefor theCorporate

Sustainability Programat OMV, aleading

Austrianoil andgasproducer, andpriorto

that wasCEOof theCroatianmobile

telecomoperator Vipnet. Shehas

extensiveskillsandexperiencein

sustainability,digitisationand

automation.

Marie-HélènegraduatedinBusiness

AdministrationfromtheViennaUniversity

of Economicsandstudiedat the

University of California.

Current external appointments:

Greyparrot.aiLtd(Non-Executive

Director),ConundrumIndustrial Ltd

(Non-ExecutiveDirector), AMODO, Inc.

(Non-ExecutiveDirector) and

Speedinvest DeutschlandGmbH

(Managing Director).

SigaliaservedintheIsraeli Air Force as

OperationRoomController and Training

Commanderandlaterjoined BDO. She

wasamemberof professional

committeesat theIsraeli Institute of CPAs

until 1997, whenshebecame a Partner at

BDOuntil 2003. Since 2008 Sigalia has

providedconsulting services to

international investors. She holds

non-executivedirectorships at a number

of leading public corporations across a

rangeof sectorsandindustries. She

bringsawealth of international

experienceandgeopolitical exposure,

alongsidesolidbusiness and ﬁnancial

acumen.

SigaliaholdsaBA inAccounting &

EconomicsfromtheUniversityof Tel Aviv

(Israel) andisaCertiﬁed Public

Accountant. Shehascompleted two

ExecutiveMBAswith INSEAD (France)

andTsinghua(China).

Current external appointments:

Plus500 Ltd(Non-Executive Director),

MamanCargo Terminals and Handling

Ltd(Non-ExecutiveDirector), Tamar

PetroleumLtd(Non-Executive Director),

Clal Biotechnology Industries Ltd

(Non-ExecutiveDirector, including Clal

Industriesandsubsidiaries within the

group) andVestaInvestment and

Management Ltd(Owner).

Directors serving part of the year

Board Committee member

N NominationCommittee

Franz Reiter

Employee Representative Director

Appointment date: December 2017

Nationality: Austrian

Celia Baxter

IndependentNon-ExecutiveDirector

Appointment date: October 2017

Nationality: British

Andrew Hosty

IndependentNon-ExecutiveDirector

Appointment date: October 2017

Nationality: British

A Audit & Compliance Committee

CorporateSustainability Committee

Remuneration Committee

Chairmanof Committee

Franz steppeddownfrom theBoard on

14December2021, andwas replaced by

MartinKowatsch.

As reported in the2020Annual Report,

Celiadid notstand for re-electionat the

June2021 AGM

Asreportedinthe2020 Annual Report,

Andrew didnot standforre-electionat

theJune2021 AGM.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 8 5

Executive Management Team

The EMT combines broad experience and
complementary skill sets to deliver the
Group’s strategic priorities.

1 2 3 4

5 6 7

Executive serving for
part of the year

8 6 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

1. Stefan Borgas

Chief Executive Oﬃcer

2. Ian Botha

Chief Financial Oﬃcer

Forfullbiographies,see

Page 83

3. Gustavo Franco

Chief Sales Oﬃcer

Gustavowas appointed Chief Sales

Oﬃcer in January2020,priorto which he

was Senior VP ofProcess Industriesand

Minerals.Hejoined Magnesitain2001 as

aTechnical Marketing Engineer, a

ﬁnishing his Bachelor’s degreein

Mechanical Engineering at theFederal

Center for Technological Educationof

Minas Gerais and sincethen has

developed his career in therefractory

industry.

Over thecourseofsixyears, he

progressed throughvarioussales

managerial roles in SouthandNorth

Americaand was partoftheExecutive

CommitteeofMagnesita Refratáriosfrom

2015 to 2017. In 2018hecompletedthe

Senior ExecutiveProgrammewith the

LondonBusiness School.

4. Luis Rodolfo Bittencourt

Chief Technology Oﬃcer

Luis started working for Magnesitain1986

and has held several positionsinhis

career in therefractoryandmining

industryincluding Mining/Geology

Manager,Technical Purchasing Manager,

PlantManager,and R&D VP.

Heis currentlyPresidentof theBrazilian

RefractoryProducers Associationandthe

Latin AmericaRefractoryProducers

Association.Heholds aBachelor’sdegree

in mining engineering fromtheFederal

UniversityofMinas Gerais, aMaster’s

degreein Metallurgical Engineering from

theUniversityofUtah,andaPhD degree

onCeramicEngineering fromthe

UniversityofMissouri.

5. Rajah Jayendran

Chief Operations Oﬃcer

Rajah hasheldvarioussenioroperational

andstrategic development rolesat

multinational companiessuch as

Thyssen-Krupp UhdeGmbH,Bayer

MaterialScienceAG,LonzaAG,and

ChemChina-BluestarGroupCo,working

inChina, SingaporeandSwitzerland. He

hasvaluableexperienceintheindustry in

Asia.Healsohasexperienceinrenewable

solutionsandoperational performance

management. In2018, Rajah becamea

key teammemberat RHIMagnesita,

holding thepositionof SeniorVice

President OperationsEurope/CIS/Turkey

until, inOctober2021, hejoinedtheEMT

asChief OperationsOﬃcer(COO). Rajah

bringsadetailedknowledgeof the

Company’sglobal operationsand

expertiseinproductioneﬃciencies.

Rajah graduatedinengineering fromTU

– Ruhr-Universität Bochum.

6. Simone Oremovic

Executive Vice President People, Project

& Value Chain

SimonejoinedRHIMagnesitainan

executivecapacity inNovember2017,

andher rolecoversPeople,Culture,

CorporateCommunicationsaswell asall

global projectsfortheGroup. Simonehas

20 yearsof experienceinHuman

Resources.

Shestartedher careerat General Electric

wherehermainfocuswasonleadership

andtalent management, aswell as

HumanResourcesprocess. She is a

certiﬁedSixSigmaMasterBlack Belt. She

hasheldleading HumanResourcesroles

inTelekomAustriaGroup, IBMAustria,

andBaxterAG. HerrolesinceOctober

2021 coversPeople, Culture, Global

ProjectsfortheGroupaswell asbuilding

thenew end-to-endValue Chainand

running theoperational supply chain.

7. Ticiana Kobel

Executive Vice President Legal,

Corporate Communications

& Purchasing

Ticianahasextensivelegal experience in

awiderangeof global businesses, such

asSRTechnicsGroupand Bühler Group,

leading legal departments in

manufacturing,aviation, technology, the

servicesectorandengineeringindustries.

Intheseroles. Shewasin charge of

crucial projectspertaining to varied

matters, such ascomplex strategic

procurement,spin-oﬀs, sales and

acquisitions,andcorporate governance

issues, andassistedwith the design and

implementation of compliance functions,

mergersandacquisitions, and

partnerships.

Ticianahasalaw degree with an

emphasisincorporatelaw from the

Federal University of Minas Gerais and an

LLMinInternational EconomicLaw and

EuropeanLaw at theUniversityof

Geneva.

Executive serving for

part of the year

8. Gerd Schubert

GerdservedasChief Operations Oﬃcer

until 1 October2021 when he stepped

downfromtheExecutive Management

Team to leadprojectsin the Company

focusing onsustainabilityand innovation

inmanufacturing processes, prior to his

intendedretirement.

SimonehasadegreefromtheEuropean
BusinessSchool (Paris) andfromthe
Economic University of Vienna.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 8 7

Nomination Committee report

Herbert Cordt

Chairman of the Committee

Committeemembersand

meeting attendance

Attendance

in 2021

Member

since

Herbert Cordt

(Chairman)

4/4 October 2017

Celia Baxter 3/3 October 2017,

resigned

June 2021

John Ramsay 4/4 October 2020

Karl Sevelda1 1/1 June 2021

1 KarlSeveldawasappointedtotheCommittee

from10June 2021.Hewaspresentatmeetings

fromthebeginningof2021 asanattendee.

The Committee has

delivered greater Board

diversity in 2021 and

continues to consider

how the considerable

skills and experience

now available on the

Board are best used

to guide and help

management to achieve

their strategic ambitions.

Committee purpose, roles and

responsibilities

TheCommittee’spurposeistoensure thatthe

Companyhasthecompetenciesanddepthof

skillswithintheBoardandseniorexecutivesto

meet the demands of a global business and to

supportthedevelopmentoftheGroup’sstrategy,

whilstpayingparticularattentionto

independenceanddiversity.

Roles and responsibilities:

• reviewthestructure,sizeandcomposition

(includingthe skills,knowledge,experience

anddiversity)ofthe BoardanditsCommittees

and to recommend any changes to the Board;

• successionplanningforDirectorsandother

senior executives;

• leadtheprocessforrecruitmentofany

new Directors,includingthe Chairman,

andtheir recommendationtoshareholders;

• assessannuallythe time commitment

requiredfromNon-Executive Directors

(NEDs);and

• review the results of the Boardperformance

reviewrelatingtocompositionoftheBoardor

theeﬀectivenessofanyindividualDirector.

More detail on the duties of the Committee can be

found in its Terms of Reference on the corporate

governancesectionofourwebsite.

Activities in 2021

The Committeemetfourtimesin2021,covering

the rolesandresponsibilitiessetoutaboveand in

particular,theCommittee consideredthe

followingmatters:

Time commitmentfrom NEDs

The Committeeconsidered,asitdoesannually,

the reviewoftime required from the NEDs to fulﬁl

theirdutiessatisfactorily.Thiscoveredmeetings,

the preparationtime,additionaltimeDirectors

spentoutsideofmeetingsindiscussionwith

management,andrecognisedthe additional

complexityofCompanyoperations,giventhe

impactsofCOVID-19andoperationaldisruption.

No NED has raised any concerns about the time

requestedofthem.

PriortorecommendingthenewNEDswho

joinedthe BoardinJune 2021,the Nomination

Committee carefullyconsideredtheirroles

heldelsewhere,withreferencetothe

recommendationsbyproxyvotingagencies

andtheUKCorporate GovernanceCode,and

weresatisﬁedtheyhadsuﬃcienttimeavailable

to dedicate to the Company.

The Boardreceivedareportoutliningexternal

appointmentsheldbyDirectorsandwere

comfortablethatnoneoftheDirectorsare

compromisedbytheirothercommitmentsin

the time they can dedicate to the Company.

Board review

The Committeetakesresponsibilityforthe

preparationoftheannualBoardreviews. In2021,

followingthreeyearsofexternalreviews

facilitatedbyLintstock,the Boardreviewwas

undertakeninternally,andthe Company

Secretaryworkedcloselywiththe SID & Deputy

Chairmantoprepare thequestionnaires,covering

Boardperformance,individual performance,and

the Chairman’sperformance.

8 8 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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FINANCIAL

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OTHER

INFORMATION

TheBoardconsideredtheoverallthemesarising

from the 2021 reviewandeachcommitteethen

reviewedthespeciﬁcsoftheevaluationrelating

totherespectivecommitteesandtheirscope

ofwork.Actionswereagreedasrequired.

The ﬁndings of the 2021 reviewstillshowed

signiﬁcantimpactsarisingfromCOVID-19

restrictions; as no doubt was the case for

otherinternationalBoards.Boardmembers

regrettedtheabsenceofmeetingcolleagues

withintheorganisationandgettingasensefor

theoperationalcultureona regularbasis.In

September2021 a Board site visit was achieved

and the feedback showed how valuable a visit

this had been. The intention is to continue

physicalmeetingsasmuchaspossiblein

2022.Nonetheless,despitethelimitationson

personalinteraction,theresponsesshowed

afeelingofgreatercohesioncomparedto

2020andtheChairman’sroleingenerating

this wasappreciated.

Duringtheyearasigniﬁcantadvancewasmade

inBoarddiversity,withtheappointmentofthree

new female NEDs in June 2021. Progress was also

seenintheintegrationofsustainabilitywithinthe

operationsandstrategyoftheCompany,albeit

with more to be achieved in future, given the

importanceofsustainableproductionforthe

Company’sstakeholders.

TheBoardagreedactionsfortheyearahead,

withaviewtofurtherimprovingitseﬀectiveness.

Keypointsconsideredincluded:

Area of

assessment Agreed action

Stakeholder

oversight

Continue to explore ways of

understanding stakeholder views more

comprehensively and incorporate them

into decision making.

Delivery of the

2025 strategy

Sustained focus in Board discussions on

execution of strategy, particularly

around ensuring lessons learned and

engaging with constructive criticism.

Board papers Further focus on style and structure of

papers; consideration of improvements

in the Board paper portal.

Board skills More structured ongoing training

sessions for NEDs, to further both

professional development and industry

knowledge.

Culture Maintaining Board oversight of

Company culture and continuing to

take opportunities to experience the

culture.

The Board was satisﬁed to see sustained

improvementinBoardeﬀectivenesssince listing

in2017,withitsmembersunanimouslyagreeing

thatdiscussionsanddebateswereopen,honest

andconstructive,whilstcontinuingtohearideas

forimprovementandmore variedperspectives

fromitsnewmembers.

TheCommittee alsoconsidereditsown

eﬀectivenessarisingfromtheBoardreview

output.Thisconcludedthattheperformance of

theCommitteecontinuedtobe eﬀective but

neededtoengage the full Board earlier on

emerging issues.

Boarddiversity

TheCommittee and the Board have dedicated

time in the annualscheduletodiscussing

diversity, both at Board level and within the

organisation.Boardgenderdiversityhas

increasedto38%,exceedingourtargetof33%

by 2021,andthe Boardadoptedaformal Board

diversitypolicy,whichwasrecommendedbythe

Committee whichwasrecommendedbythe

Committee.Furthermore,halfofthe Board

Committeesare chaired, or the seats ﬁlled, by

women.

TheCompanyreportedtothe Hampton

AlexanderReviewandParkerReviewin

respect of2021,meetingeachofthesereviews’

recommendationsforFTSE250boards.As

discussedintheCorporateGovernance Report

theEmployee Representative Directors,being

appointedbythe workforce with no input by

theBoardorshareholders,arenotable to be

inﬂuencedintermsofappointment.Therefore,

the Board’s view is that it is inappropriate to

includetheminanycalculationofBoarddiversity.

Nonetheless,theBoardwerepleasedthatthe

nominationfromtheSpanishworkscouncilwasof

afemaleDirectorandwelcomedKarinGarciato

theBoardinDecember2021.

TheCommittee andtheBoardwillcontinue to

supporttheCompany’sapproachinfacilitating

peopledevelopment,ensuringthattalent,

regardlessof age,genderandbackground,enjoys

careerprogressionwithinthe Group.Diversityof

nationality,culture andethnicityare allimportant

factorstoengenderdiversityofthought.

TheCommittee believesthatthe diversityof

nationalitiesandculture representedamongst

the Board and EMT provides a diverse andglobal

perspective; 43% of the EMT are of Brazilian

heritage,representingourlegacyasaCompany

andthespreadofouroperations.More details

on the Group’sdiversityandinclusionworkcanbe

found on page 23.

Succession planning

EMTsuccessionplanning

The Committeemonitorsthedevelopmentofthe

executiveteam(“EMT”)belowtheBoard to ensure

that there is a diverse supply of senior executives

andpotentialfutureExecutive Directorswith

appropriate skillsandexperience.

The Committeeconsidersthe skillsand

experience of individualsatdiﬀerentlevels

in the organisationwithanindicationoftheir

expectedtime to develop to the nextlevel,and

requirementsinordertoachievethatprogression,

suchasexperience ofadiﬀerentbusiness

functionoradditionaltraining.Furthermore, it

consideredhowsuccessionplanningwould be

treatedindiﬀerentscenarios(e.g.inanimmediate

scenario or in an orderly fashion). A summary

of this was provided to the Board for its

consideration.Diversityisconsidered as part of

successionplanning,andmanagementare

encouragedtoincorporate toolsand measures

tofurthergenerate andencourage diversity in

the pipeline of the organisation.Thedecreasein

genderdiversityofthe direct reports of the EMT

andtheassociatedcauseshasbeennoted and

inBoarddiscussions,managementhavebeen

encouragedtorefocustheireﬀortsinorder to

drive progressin2022.Informationonthegender

diversity of the EMT and its direct reports is on

page 65.

During2021 GerdSchubertstepped downfrom

hisroleasCOOandRajahJayendransucceeded

him. This was part of an orderly succession plan,

with Gerd retiring in due course.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 8 9

Nomination Committee report continued

As a result of the supply chain focus required

in the year, the EMT, supported by the Board,

tookstepstoreorganisetheallocationof

responsibilitiestoensureduetimeandattention

couldbededicatedtothesepriorities.Ticiana

Kobeltookonadditionalresponsibilitiesof

Corporate CommunicationsandPurchasing,

whichalignedwithherskillset and experience

andstreamlinedtheOperationsDepartment

scope.SimoneOremovicusedherproject

managementskillstobuildafocusedtaskforce

toaddressimmediateissueswithinthesupply

chain.Thisprovidedgreatopportunity for

wideningtheirexperiencewithintheCompany

andtheorganisationhasbeneﬁtedfromtheir

freshperspectiveonmatters.

Boardsuccessionplanning and composition

SincetheCommitteelastreportedto

shareholders,AndrewHostyandCeliaBaxter

stood down from the Board at the end of their

three-yeartermattheJune2021 AGM,and

threenewNon-ExecutiveDirectorswere

recommendedbytheCommitteetotheBoard

tobeappointedbyshareholders,threeNon-

ExecutiveDirectorsJannBrown,Marie-Hélène

AmetsreiterandSigaliaHeifetz.Theappointment

processstartedwithaclearscopeofdesired

attributes,skillsandexperience.Arangeof

candidateswereconsidered,andinordertomake

aselection,ashortlistproceededthrougha

thorough interviewprocess,withanumberof

diﬀerentDirectors,anddetailed references.The

Committeewereaidedinthecomprehensive

search by Egon Zehnder, signatory to the

VoluntaryCodeofConductfor ExecutiveSearch

Firms.EgonZehnderhasnootherconnectionto

theCompanyorindividualDirectors.

In2021,theCommittee alsoconsidered,with

referencetoBoardcomposition,the impact of the

change in ERDs, nominated to the Board by the

workforce, and how the Companycouldsupport

theirinductionandcontributionstothe Board.

Additionally,theCommitteeconsideredthe

independenceofthe Boarddirectors,asoutlined

in detail on page 75.

On an ongoing basis, the Committeeconsiders

thetenureofDirectorswithreference to the

retirementandresignationproﬁle,whichcanbe

found on the website (link to website). In thinking

aboutfuturerecruitmenttotheBoard,the

CommitteecontinuestomonitorDirectors’skills

and experiences,aswell asdiversityto engender

constructivedebateandavariedmixofideas.

TheBoardproﬁle is published on the website:

https://ir.rhimagnesita.com/wp-content/

uploads/2022/01/bod-diversity-policy-for-

upload.pdf]

As of June 2021 there werethe followingchanges

in Board Committee composition:

• JanetAshdownbecame Chairmanofthe

RemunerationCommittee

• Fiona Paulus became a member of the

RemunerationCommittee,steppingdown

fromtheAudit&ComplianceCommittee

• JannBrownjoinedthe Audit&Compliance

Committee

• Marie-Hélène Ametsreiterbecame amember

oftheCorporate SustainabilityCommittee

• KarlSeveldajoinedtheNomination

Committee

TheNominationCommittee ensuredthatthe

refreshmentofBoardCommitteecomposition

madeuse of our Directors’ skill sets and

experience. The inductionplansprovided gave

opportunityforgreater understandingof these

areasandthe Committeesare beneﬁtingfrom

freshperspectives.

ThemembershipofBoardCommitteescanbe

seen on pages 83 to 85.

Herbert Cordt

ChairmanoftheCommittee

TheCommitteeconsidersthesuccession
planning for the CEO and CFO on an ongoing
basis, both on the basis of immediate and orderly
succession.Thedevelopmentofinternal
candidatesfortheserolesisconsideredbythe
CommitteeandtheBoard.

9 0 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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STATEMENTS

OTHER

INFORMATION

Corporate Sustainability
Committee report

Janet Ashdown

Chairman

Committeemembers and

meetingattendance

Committee purpose, roles and

responsibilities

TheroleoftheCorporateSustainability

Committeeistosupportthe Board and act as

an advisorybodytoensurethe long-term

sustainabilityofthe business.

• ThroughtheoversightofrelevantKPIsandthe

Group’sperformance againstthem,the

CommitteeensuresthattheGroup’sactivities

generate sustainablevalue,notonlyfor

customersandshareholders,butalsofor

employees,suppliersandcommunities

wherever the Groupoperates.

• On behalf of the Board,the Committee

overseestheeﬀectivemanagementofrisks

associatedwithclimatechange,healthand

safety,alongwithotherESGrisks.

More detail can be found in the Terms of

Referenceinthecorporategovernance section

of ourwebsite.

Health & Safety

• Receivedreportsonthecompany’sCOVID-19

relatedsafetyprotocols

• Consideredsafetyperformanceatoperational

sitesforbothemployeesandcontractors.

A adecade ofconsistentimprovement,

oursafetyperformance deteriorated slightly

in2021.Rootcausesforthiswereconsidered

andmanagementwere challenged to

deliverimprovements

Diversity

• ReceivedreportsontheGroup’sstrategy

toimprovediversityinitsleadership

and workforce

• Monitoredprogressagainstdiversity targets

SustainableSupplyChain

• Reviewedanew sustainable procurement

initiativetoassesssuppliersusing

environmental,socialandethicalcriteria

Attendance

in 2021

Member

since

Activities in 2021

External ESG ratings

Janet

4/4 June 2019

2/2 June 2021

Ashdown

Fiona Paulus 4/4 June 2019

Marie-Hélène

Ametsreiter1

Andrew Hosty2 2/2 June 2019 to

April 2021

1 Marie-HélèneAmetsreiterwasappointedto

the Committeefollowingthe 2021 AGM.

2 AndrewHostyresignedasaDirectorand

ceasedtobe aCommitteememberat the

2021 AGM.

TheCorporateSustainabilityCommittee (CSC)

met four times in 2021. In addition to performing

thedutieslistedabove,theCommittee addressed

thefollowingissues:

ClimateChange

• ReviewedprogressagainstRHI Magnesita’s

CO₂emissionsintensityreductiontargetsand

theGroup’s€50millioninvestmentincarbon

capture technologies; reviewedopportunities

toreducecustomerCO₂emissions

The Committeewaspleasedtonotethat

RHI Magnesitareceivedanotherindustry-

leadingscore from CDP and a Gold ratingfrom

EcoVadis,amongstotherpositive ratingsfrom

independentanalysts.

• CDP–B

• Eco Vadis – Gold

• MSCI – AA

• Sustainalytics–medium

RHI Magnesita improved

its CO₂emissions

intensity in 2021

through the increased

use of secondary raw

materials and renewable

electricity. This year we

have published our ﬁrst

comprehensive TCFD

disclosure, setting out

the climate related risks

and opportunities for our

business.

• Notedthattheincreaseduse ofrenewable

electricityandprogressofenergyeﬃciency

projects,whichremainontrack

• Monitoredthe increaseduseofsecondaryraw

materials,includinganew internal pricing

mechanismtoincentivesalesofproductswith

higherrecycledcontent

• Took part in a joint CSC and Audit Committee

TCFDworkshopandapprovedtheGroup’s

ﬁrst comprehensive TCFDdisclosure

More informationonourperformanceand

approachtosustainabilityissuescanbefound

on pages 56 to 59.

Janet Ashdown

Chairmanofthe Committee

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 9 1

Audit & Compliance
Committee report

John Ramsay

Chairman of the Committee

Committeemembersand

meeting attendance

Attendance

in 2021

Member

since

John Ramsay

(Chairman)

6/6 October 2017

Jann Brown 3/3 June 2021

Wolfgang

Ruttenstorfer

6/6 October 2017

Fiona Paulus 3/3 September

2019 to June

2021

The Committee

eﬀectively delivered

review, insight and

challenge to respond

to the demands of

2021 and ensure the

continued improvement

of corporate

governance standards

within the Group

Committee purpose, roles and

responsibilities

ThepurposeoftheCommittee is to ensure the

integrity and transparencyofcorporate reporting,

the quality of work and independence of the

externalauditor and to evaluate the robustnessof

internalcontrolsandriskmanagementprocesses.

TheCommittee’smainrolesandresponsibilities

are:

• advising the Board on the Group’soverallrisk

appetite, tolerance,currentriskexposuresand

futureriskmitigationstrategy;

• supervisingthe recording,managementand

submissionofﬁnancialinformationbythe

Groupand advisingthe Boardonwhether,

taken as a whole,thereportedﬁnancial

informationisfair,balancedand

understandable;

• supervisingthe functioningofthe Internal

Auditdepartment,andinparticular,review

andapprovethe annualInternalAuditwork

plan and takingnote of the ﬁndingsand

considerationsofthe InternalAudit

department;

• supervisingtherelationshipwiththe external

auditor,includinginparticular,assessingits

independence,eﬀectiveness,remuneration

andnon-auditrelatedworkfortheGroup;

• supervisingthe compliance with

recommendationsandobservationsofthe

internalauditorandtheexternalauditor;

• supervisingthe ﬁnancingofthe Groupand

the policy of theGroupontaxplanning;

• reviewingtheadequacyandeﬀectiveness

of theGroup’sCompliancefunction;and

• recommendingtheappointmentofan

externalauditorbythe AnnualGeneral

Meeting(AGM).

More detail on the duties of the Committee can be

found in the Terms of Reference on the corporate

governancesectionofourwebsite.

Activities in 2021

The Committee met six times in 2021. Due to

COVID-19 limitationsvideo conferencing was

usedforsomemembersandattendeesduring

thesemeetings.

Discussionsatthemeetingscoveredthe

responsibilitiesoutlinedabove,withaparticular

focus on the continued impact of COVID-19 on

the riskproﬁle of the Group,the emergingissues

relatingtosupplychain,theeﬀectivenessof

end-to-endbusinessprocessesandother issues

arisingin2021.

The Chairman,theChiefFinancialOﬃcer,the

HeadofFinancialReporting,the Headof Internal

Audit,RiskandCompliance,theGeneral Counsel

andtheExternalAuditorattendtheCommittee

meetingsandthe CompanySecretaryactsas

SecretarytotheCommittee.Boardmemberscan

attendattheirdiscretion;theChiefExecutive

Oﬃcertypicallyattendseachmeetingand other

Companyexecutivesare invitedtoattend for

speciﬁcagendaitems.The Chairmanofthe

Committee hashadregularprivatediscussions

withthe ExternalAuditor,theHeadofInternal

Audit,RiskandCompliance and the Chief

FinancialOﬃcerduringtheyear.

Speciﬁc areas of scrutiny for the

Committee in 2021 included:

Review of Going Concern Statement

andScenarioModelling

The ability of the Group to continue as a going

concerndependsuponcontinuedaccessto

suﬃcientﬁnancingfacilities.Judgementis

requiredinthe estimationoffuturecashﬂowsand

compliance withthe debtcovenantinfuture

years.TheCommittee assessedtheforecast

levelsofnetdebt,headroomonexisting

borrowingfacilities,compliancewiththedebt

covenantandthe debtmaturityproﬁle.This

analysiscoveredtheperiodto31 December 2023

andconsidereda range ofdownside sensitivities,

includingtheimpactoflowerproductionvolumes

andhighercosts.Inthese discussionsthe

Committee soughtthe opinionoftheExternal

Auditorandensuredthatthe ExternalAuditor

challengedmanagementsuﬃcientlyonthe

breadth,depth,andvarietyofscenarios,aswellas

soughtconﬁrmationthatsuﬃcientsubstantiation

to the key assumptions in the scenarioswas

validated.TheCommittee concludeditwas

appropriate to adopt the goingconcernbasis.

92 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

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OTHER

INFORMATION

TheCommitteereceiveda series of risk and

ﬁnanciallybasedupdatesonthesupplychain

andrelatedchallengesin2021.TheCommittee

posed a series of questions to examine the

impact on the results in 2021, the internal control

frameworkimprovementspromptedbythese

events and the extent to which these events

wereincludedinfuturemodellingscenarios.

Alternativeperformance measures:

Adjusted EBITA and AdjustedEPS

RHI Magnesita continues to use a number of

alternativeperformancemeasures(“APMs”),

whichreﬂectthewayinwhichmanagement

assessestheunderlying performanceof the

business.

Read more about APMs on

Page 215

TheGroup’sAPMpolicydeﬁnescriteriafor

calculationofAdjustedEBITAandAdjustedEPS.

TheCommitteeconsideredboththeoverall

policy and the use of each APM, as well as the

impact that they may have on the clarity and

understandabilityoftheﬁnancialstatements

togetherwithregulatorypositioningonsuch

reporting.TheCommitteeenquiredastoany

investorfeedbackreceivedbyManagementon

the use of APMs. A robust discussion led by the

Committeereviewedeachoftheadjustments

made in Adjusted EBITA and Adjusted EPS and

concludedthattheiruseisappropriate.

Benchmarking and Stakeholderfeedback

on theﬁnancially-basedend-to-end

Company processes

TheCommitteereceived acomprehensive

reportencompassingexternalperspectives

andfeedbackfrominternalstakeholderson

theperformanceofﬁnanciallybasedprocesses

withintheCompany.TheCommitteeengaged

inadiscussionwithManagementontheissues

raisedandtheoptionsconsideredfordelivering

thecross-functionalimprovements identiﬁed.

TheCommitteeendorsed theManagement plans

and will monitor the delivery of the actions

through2022andbeyond.

Impact of the increased level of regional

basedgovernance

TheCommittee heldadetaileddiscussion

withManagementoverthe governance

approachbeingdeliveredineachofthe regions

within theCompany.The Committeereceived

observationsfromInternalAudit,Risk&

Compliance comparingthe governance

performanceacrosstheregionalfootprint.The

Committeesoughttounderstandthe history,

capabilitylevelsandplanstodevelopthe regional

governance structure.Theresultantdiscussions

ledbytheCommittee highlightedthatthe

regionalisationactivityhadstartedfromdiﬀerent

base points in each region and been subject to

diﬀerent COVID-19 impacts.The Committee

challengedManagementonthe rootcauses

presentedtoexplainthe variationingovernance

performanceacrosstheregions.

Tax strategy

TheCommittee dedicatedsigniﬁcantfocusin

2021 to the review and challenge of the tax

strategy.TheCommittee receivedupdates

through2021 asthetaxstrategyevolved,actions

wereexecutedandManagementoutlinedthe

responsestothe continuingengagementwith

theAustrianandNetherlandstaxauthorities.

TheCommittee consideredthe risks of the tax

strategy,theeﬀectivenessofactionsbeing

executedandencouragedinsightfromthe

ExternalAuditor.The Committeeendorsedthe

tax strategy as presented at each meeting and will

continuetomonitortheprogressofthe projects

impactingthetaxposition.

Informationsecurityrisks

TheCommittee continuedtogive high focus to

informationsecurityrisks,particularlyasspeciﬁed

intheDutchCorporate GovernanceCode.Cyber

andinformationsecurityriskisincludedamongst

the Group’s principal risks on pages 44 to 49.

Multiplepresentationswere receivedbythe

Committeetobothinformthe Committeeofthe

emergingrisksandoutline theinternalcontrols.

TheCommittee gave speciﬁcattentiontothe

resultsof “phishing”testsandthe measurestaken

byManagementtoimproveawarenesslevels

amongst staﬀofthisrisk.TheCommittee

requestedagreaterinsightintothe Company

Crisis Managementplansandtheirapplicationto

anyinformationsecurityriskbasedincident.

Complianceprogramme

The Committeereviewedandchallenged the

annualCompliance programmeaspresented by

Management.TheCommittee soughtto ensure

thattheComplianceprogrammeremainsfresh

andthatthevolumeofmaterialiscomprehensive

whilstalsobeingsuccincttohaveimpactand

make an eﬃcient use ofManagementtime.

The Committeeenquiredhowthe Compliance

activityisbenchmarkedandthe basisonwhich

the successofCompliance activitiesismeasured.

Compliance with Market Abuse

Regulations(MAR)

The Committeereviewedthecompletion

ofinternaltrainingsonMARandsought

explanationsfromManagementfor the

regional variationintrainingcompletionlevels.

Managementoutlinedbroaderactionstopromote

Compliance (includingtrainingcompletion).

Treasury and foreignexchangerisk

management

The Committeereviewedthetreasury policy and

made enquiriesofManagementinrelationto the

fundingoptionstosupportthe Company strategy

delivery.

Insurancestrategy

The CommitteereviewedtheInsurancestrategy

andcontinuedtomonitorthe plansfor acaptive

insurance scheme.

Pensionschemeliabilities

The Committeereceivedanupdateonthestatus

ofthevariouspensionschemesin geographies

acrosstheGroupandspeciﬁcupdatesonthe

fundingandliabilitiesofthe schemes. Following

discussion,theCommitteegavepositivefeedback

on the qualityofthe informationproduced,the

managementofthe pensionschemes and the

future actionsproposedbyManagement.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 93

Audit & Compliance
Committee report
continued

Responseto Consultationon “Restoring

trustincorporategovernance andaudit”

TheCommitteeandManagement jointly

preparedtheCompanyresponsetotheUK

DepartmentofBusiness,EnergyandIndustrial

Strategy(BEIS)consultationexerciseonthe

whitepaper“Restoringtrustincorporate

governanceandaudit“.Whilesupportiveof

thegeneralprinciplescontained within the

paper,thediscussionswiththeCommittee

and Managementandthesubsequent

responsesubmittedhighlightedsome

practical implementationconcerns and

somecostburdensforcompanies.

Core Committee activity performed in

2021 included:

Whistleblowing programme

Thewhistleblowingprogramme, which is

monitoredbytheCommitteeandoverseenby

theBoardofDirectors,isdesignedtoenable

employees,customers,suppliers, managers,

orotherstakeholderstoraiseconcernsona

conﬁdentialbasiswhereconductisdeemedto

be in violation of our Code of Conduct or contrary

toourvalues.

TheCommitteediscussedwithmanagementthe

broadlystaticlevelofwhistleblowerreports

receivedin2021 comparedto 2020. The wide

range of topics raised in these reports and the

largegeographicalspreadofthereportswere

observedbytheCommittee.Management

describedthatthemajorityofthereportsarise

from Brazil(asinpreviousyears)whereemployees

typicallyprefertouse thewhistleblowing

programmetoraiseHumanResourcesrelated

concerns.

TheCommitteemadeenquiriesofmanagement

in relation to the reports received on the

whistleblowingprogrammeinorderto conclude

itseﬀectivenessduring2021.TheCommittee

acceptedManagement’sexplanationthatthe

cases in 2021 eachrelatedtoindividual

circumstancesandhadbeenappropriately

investigatedandrootcauses addressed.

Riskmanagement

Riskmanagementistheresponsibilityofthe

Board and is integral to the achievement of the

Group’sobjectives.TheBoardestablishesthe

systemofriskmanagement,settingriskappetite

andmaintainingthesystemofinternalcontrol

to manage risk within the Group. The Group’s

systemofriskmanagementandinternalcontrolis

monitoredbythe Committeeunderdelegation

from the Board. Details of the Group’s risk

management approach,riskappetite and

principalrisksareoutlinedintheRisk,viability,and

internalcontrolsectionoftheAnnualReporton

pages 38 to 49.

TheCommitteereceivesquarterlyreportson

risk managementandmadeenquiriesto

managementtoassessandmonitorthe

eﬀectivenessoftheapproach.TheCommittee

speciﬁcallyconsideredFraudRisksbasedona

managementassessment.TheCommittee also

includesrisk-basedchallenge in all its subject

matterdeepdivesperformedin2021.

TheCommittee speciﬁcallychallenged

Managementonthe eﬀectivenesswithwhich

“BlackSwan”riskeventswere beingcaptured

or consideredwithinthe riskmanagement

framework.TheCommittee encouraged

Managementtousethe learningsfromthe supply

chainchallengesin2021 as a prompt to develop

an enhanced approachforidentifyingand

evaluatingpotentialfuture“BlackSwan”events.

Reviewing theresults of InternalAuditwork

and the 2021 plan

TheCommitteereviewedtheeﬀectivenessand

resourcesoftheInternalAuditdepartmentand

concludedthatthe InternalAuditfunction

is eﬀectiveandhasadequateresources.

TheCommitteecontinuedtoassessthe

independenceofInternalAuditwithinthe

combineddepartmentalmodelofInternal

Audit, Risk&Compliance.The Committeepaid

particularattentiontothe results of the External

QualityAssessmentofInternalAuditperformed

in2021.TheCommittee ensuresthatthistiming

meetstherequirementofsuchanassessment

beingperformedatleasteveryﬁve years.The

Committeeconsideredthe positiveresults

showingtherequiredlevelofInternalAudit

independenceandthehighqualityofthe work

performed.TheCommittee willmonitorthe

delivery in 2022 of the improvementpointsraised

intheassessmentwhichlargelyfocusedon

detailed processenhancements.

Based on the reports received on the results of

InternalAuditwork,theCommittee satisﬁeditself

that the 2021 internal audit plan was on track and

discussed areaswhere control improvement

opportunitieswere identiﬁed.TheCommittee

alsoreviewedprogressincompletionofagreed

management actions.

TheCommittee reviewedthe proposed2022

InternalAuditplan.ThecurrentChiefAudit

Executive will be released from this role inearly

2022toleadaprocessimprovementprojectwith

aspeciﬁcemphasisoninternalﬁnancialcontrols.

TheCommittee discussedthe approachto

appointasuccessororengageatemporary Chief

AuditExecutive.TheCommittee raised a series of

challenges to the plan focusing on any impact to

Internal Auditqualityandindependenceand

followingreceivingappropriate assurancesand

supplementaryinformation,the Committee

approvedthe proposedapproach.The

Committeeapprovedthe 2022InternalAudit

plan,havingdiscussedthe scope of work and its

relationshiptothe Group’srisks.

Externalaudit

The Group’sExternal IndependentAuditor,

PricewaterhouseCoopersAccountantsN.V.

(PwC),wasﬁrstappointedasthe Groupauditor

followingtheCompany’sﬁrstappointment

processatthe AGM held on 4 October 2017,

shortlybeforethe listingofthe newlyformed RHI

Magnesita.PwChasperformedthisroleineach

subsequentyear.PwCwillbeproposedfor

reappointmentatthe 2022 AGM. In line with the

External Auditorengagementpartner rotation

rules,the Committeehasundertakenmeetings

to support the nomination by PwC of a new

engagementpartnerfor2022.

Inassessingtheperformance of PwC, the

CommitteediscussedandagreedwithPwC

three keyareasofcontinuedfocus:

• Improvingthe auditapproach especially

aligningthe scopingtoCompanyprocesses;

• Adjustingthe externalauditprocessto match

the acceleratedreportingtimetable; and

• More eﬃcientandconsistentcommunication

andcoordinationespeciallywiththe

respective componentauditteams.

TheCommittee receivedadescriptionof the

mannerinwhichtheExternalAuditorplanwas

alignedwithbusinesspriorities,theplans to

addressthe areas of focus , major change projects

and the riskassessments.Havingdiscussed the

proposalsfromPwCtoaddressthese issues,the

Committeeapprovedthe auditplantogether

withtheauditfee.Thisprocessinvolvedactive

discussionofthe auditapproach,(the assessment

ofworkconductedon)keyauditmatters,

materialitylevelandauditrisks.

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TheCommitteeconsidered and challenged the

documentpresenteddescribingtherationale

and work performed by PwC in reaching their

assessmentofkeyauditmattersandkeyrisks.

The Committeediscussedthereportpresented

by the External Auditor on the year end audit.

TheCommitteerequestedmoreinsightfrom

Managementontherootcausesofthematters

raised by the External Auditor and sought to form

anexpectationofthetypicallevelofsuchissues.

The Committeealsodiscussedobservationsfrom

the External Auditor on the IT elements of their

yearendauditwork.

TheCommitteealsoreceived updates during

theyearontheexternalauditprocess,including

howtheAuditorhadchallengedtheGroup’s

assumptionsontheissuesnotedinthisreport.

The ExternalAuditorhadunrestrictedaccess

to,andattendedall,Committeemeetingsin

2021.Theyalsohadprivatemeetingswiththe

Committeeintheabsenceofmanagement.

They were asked for their input and opinion on

a range of topics throughout the year.

External Auditor’sindependence

The ExternalAuditorreportstotheCommitteeon

theactionstakentocomplywithprofessionaland

regulatoryrequirements,aswellasbestpractice

designedtoensureitsindependence. Following

duereviewandscrutiny,theCommittee

recommendedthatPwCandEsthervander

VleutenshouldcontinueastheExternal

IndependentAuditoranddesignatedauditorfor

theﬁnancialyear2021.

In2021,theGroupmaintainedthenon-audit

servicespolicyfortheExternalAuditoras

reviewedin2020.This policyisconsistent

withtheapplicableEUDirective, Dutchand

UKlegislationandguidance, including

recommendationssetout in theFinancial

ReportingCouncil’s(FRC’s)GuidanceonAudit

Committees(2016)andtherequirementsofthe

FRC’sRevisedEthicalStandard(2019).

Thedeﬁnitionofpermitted non-audit services

correspondswiththeEuropeanCommission’s

recommendationsontheauditor’s independence

and with the Ethical Standards issued by the Audit

PracticesBoardintheUK.Non-auditwork,

non-pervasivetotheGroup, by a local (non-

Dutch)PwCﬁrm,isonlyundertakenwherethere

iscommercialsense,wherepre-approvalis

obtainedfromtheCommitteeandwhenthe

ultimateResponsibleIndependencePartnerat

PwCNetherlandshasapprovedtheallowanceof

suchnon-auditworkabroad.During2021,very

limitednon-auditworktolocalRHIMagnesita

entities for a total of €0,0 million (2020:

€0.1 million)wasperformedbylocalPwCoﬃces.

Non-auditfeesrepresentedare disclosedinNote

59 of the ﬁnancialstatements.

TheGroupconﬁrmscompliance duringthe

year withthe provisionsoftheCompetitionand

MarketsAuthorityOrderonmandatorytendering

for the appointment of the ExternalAuditorand

Audit Committee responsibilities.

It is proposed that the nextexternalaudittender

is undertakenin2025,Thecommittee hasformed

this proposal to match the nextscheduledpartner

rotationforPwC.The committeeconsideredan

earliertenderprocessandbalancedthe beneﬁts

ofa tenderprocessagainsttheworkloadof

undertakingatenderandbelievesthatthe

approachproposedisinthe bestinterestsof

theCompany.

Fair,balancedandunderstandableﬁnancial

statements

TheGroup’sﬁnancialstatementsshouldbe fair,

balanced,understandable andprovide the

informationnecessaryforstakeholderstoassess

theGroup’sposition,performance,business

modelandstrategy.The Committeeandthe

Boardaresatisﬁedthatthe2021 AnnualReport

meetsthisrequirement,withappropriateweight

havingbeenappliedtobothpositiveandnegative

developmentsthroughoutthe year.

Injustifyingthisstatement,the Committeehas

takeninto considerationthe preparationprocess

fortheAnnualReportandAccounts,including:

• detailedtimetable andinstructionsare

providedtoallcontributors;

• updatesand/orrevisionstoregulatory

reportingrequirementsare continuously

monitoredandprovidedtocontributors;

• early-warningmeetingsare conducted

betweentheﬁnance functionandthe External

Auditorinadvance of the year-endreporting

process;

• external advisersprovide advice to

managementandthe Committeeonbest

practice regardingthepreparationofthe

AnnualReport;

• a Committee meeting was held in Q1 2022 to

reviewandapprove the dra

Report and Accounts in advance of the ﬁnal

sign-oﬀbythe Board;

• reviewofsigniﬁcantaccountingmattersas

explainedinthe notes to the Consolidated

Financial Statements; and

• conclusionsdrawnbythe ExternalAuditor

concerningkeyauditmatterscontributingto

theirauditopinion,speciﬁcally impairments

taxation,fraudrisk,climatechangeand other

Environmental,Social andGovernance

componentswereconsidered by theAudit

Committee.

Committee Governance

The Committeeheldtrainingsessionsintheyear,

covering topics such as TCFD and a case study on

the roleofAuditCommitteesinrecentcorporate

failures.These sessionswereontopicssuggested

bytheCommittee membersbutweremade

availabletoallDirectors.Individualmembers

tookactionstocontinue theirown professional

development.Youcanreadmoreaboutinduction

plans for new members on page 90.

The Committeeconsidereditsperformancein

2021,aidedbyfeedbackfromtheBoard Review

process.Thisreviewconcludedthatthe

Committee hasbeenoperatinghighly eﬀectively.

Focus in 2022 will be giventosupportingand

guidingmanagementastheyseek to deliver

greatertransparencyinﬁnancial informationand

systems.Planstoimplementadditionaltraining

forCommitteememberswillbe enacted once

the practicalrestrictionsofCOVID-19allow.

The Boardconsideredthe independencestatus

ofWolfgangRuttenstorfer,amember of the

Committee, and under the criteria of the UK

CorporateGovernance Code, Wolfgang is no

longerdeemedindependent.He ishowever

independentunderthe DutchCorporate

GovernanceCode.TheCommittee’sTermsof

Referenceare clear that a member should be

independentundereitherCode and theDirectors

remaincomfortable thatWolfgangremains

independentinhisapproachandactionsasa

DirectorandmemberoftheCommittee. Further

explanationofthe positionunderProvision24 of

the UKCorporateGovernance Code can be

found on page 70.

John Ramsay

Chairman,AuditCommittee

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 9 5

Remuneration Committee report

Current Committee membership and

operation

• Reviewingandamendingthe Terms of

ReferenceoftheCommittee.

Janet Ashdown

Chairman of the Committee

Committeemembersand

meeting attendance

Attendance

in 2021

Member

since

Janet

Ashdown

(Chairman)

5/5 October 2020

Karl Sevelda 5/5 October 2017

Fiona Paulus²5/5 June 2021

Celia Baxter¹2/2 October 2017,

resigned June

2021

1 CeliaBaxterresignedasaDirectorandso

ceasedtobe CommitteeChairman at the

2021 AGMwhenshe steppeddown from

theBoard

2 FionaPauluswasappointedtothe

Committee followingthe 2021 AGM. She

was presentatthe JanuaryandFebruary

meetings asanattendee

JanetAshdownistheChairmanoftheCommittee

and at the time of appointment as Chairman, had

extensiveexperience onotherlistedcompanies’

remuneration committeesandsocomfortably

met the requirement for at least one years’

experiencepriorto chairingaRemuneration

Committee.FionaPaulusandKarlSeveldaare

currentmembersoftheCommittee.All

Committeemembersare IndependentNon-

ExecutiveDirectors(NEDs)withinthemeaningof

theUKandDutchCorporateGovernance Codes.

TheCompanySecretaryisthesecretarytothe

Committee.Otherindividuals,suchasthe

ChairmanoftheBoard,theChiefExecutive

Oﬃcer,theExecutiveVicePresidentPeople,

Projects & Value Chain (who is responsible for

Human Resources),andexternal professional

advisers may be invited to attend for all or part of

any meetingas andwhenappropriate and

necessary.No individual ispresentwhentheir

ownremunerationisdiscussed.TheCommittee

meets at least three times a year and at such other

times as the Chairman of the Committee shall

require or as the Board may direct.

Committee purpose, roles and

responsibilities

TheRemunerationCommittee’spurposeisto

developarewardpackageforExecutiveDirectors

andseniormanagersthatsupportsourvisionand

strategyasa Group,andtoensure therewards

are performancebased,encourage longterm

shareholdervaluecreation,andtake account

of theremunerationofthe wholeworkforce.

Terms of Reference

• Discussingthe outputfromthe Committee

evaluationandagreeingactionsinresponse

• Consideringthe retentionmechanisms

availableforExecutiveDirectors(EDs),

Executive ManagementTeam(“EMT”),and

senior management in light of LTIPs

continuingnottovest

• Consideringtheoutturnofthe2020and2021

bonus,the performanceofin-ﬂightLTIPs,

reviewingthe 2022 bonus and LTIP

performance conditionsandtargets.

• Reviewingtheremunerationofthe EDs, EMT,

andseniormanagementwithinthe contextof

widerglobal workforce remuneration and

where there were changedresponsibilities.

• ReviewingthefeefortheChairmanofthe

Board.

• In November, Janet Ashdown took part in an

investorroadshow,wheretopicsdiscussed

includedExecutive Directorremuneration,

viewsonevolvingincentivestructuresinthe

market,the performanceconditionsused,how

incentivescoulddrive progressagainstthe

Company’ssustainabilitystrategyandhowthe

performance againstnewerESGKPIs would

be assured.

• Approvalofarefreshedexpensespolicy for

the Board

• Reviewoftheperformance ofremuneration

advisersandtheirscopeofservices.

Dear Shareholders

The Remuneration

Committee is

committed to its role

in promoting the

delivery of long-term

value. Remuneration is

closely aligned to RHI

Magnesita’s strategy,

culture and operations.

Changes of the Committee

Celia Baxter stepped down from the Board at the

2021 AGM andJanetAshdownassumedthe role

of Chairman of the Committee.FionaPaulus

joinedtheCommitteeasamemberfollowing

the2021 AGM.

Activities in 2021

Thekeyactivitiesanddecisionstakenthroughout

theyearwere:

• BringingthenewRemunerationpolicytothe

AGMforapproval.Itwasapprovedbyamajority

of95.95%ofvotesrepresentedattheAGM.

• Consideringmarketandcorporate

governancetrendsandhowtheymightapply

totheCompany

ThisismyﬁrstreportsincetakingoverasChairman

of the Committee in June 2021. I would like to take

theopportunitytothankCeliaforherdedicated

servicetoboththeCommitteeandthewiderBoard.

On behalf of the Board, I present our 2021

Directors’RemunerationReport.Thisreport

includes my letter to the shareholders,our

Directors’RemunerationPolicy,approvedby

shareholdersatthe2021 AnnualGeneral

MeetingandourAnnual ReportonRemuneration

for the yearending31 December2021,which sets

outhowourDirectors’RemunerationPolicy was

implementedduringthe year and will be

operatedin2022.

9 6 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

RHIMagnesitaisincorporatedandregisteredin

theNetherlands,makingitsubjecttoDutch

corporate law. It has its primary listing on the

LondonStockExchangeanda secondarylisting

on the Vienna Stock Exchange. As a result, we are

required to comply with both UK and Dutch

reportingrequirementsand their respective

CorporateGovernanceCodes.Our

RemunerationReport is thereforepresented on

thisbasisand,recognisingtransparencyof

reporting,includescertainvoluntarydisclosures.

This letter on pages 96 to 98, the summary on

page99andtheAnnualReportonRemuneration

on pages 112 to 112 will also be presented for

approval by an advisory vote at the AGM on

25 May 2022.

Remuneration is aligned with our strategy,

culture and operations

OurRemunerationPolicycontinuestosupport

ourstrategy,cultureandoperations.Ourbonus

targetsformanagementthroughoutthe

Company are aligned to those of the executive

andseniormanagement.Thisprovidesa clear

line ofsightofCompanyobjectives,supportsour

organisationalculture,fostersteamworking,and

incentivises appropriatebehaviours across the

workforce.TheDirectorsledtheCompany’s

strategyreviewprocessinSeptember2021,

whichsupportedthesubsequent agreement

ofbonusKPIsbeingaredirectlyalignedwith

thethreepillarsofourstrategy.

Ourlong-termincentiveplan(LTIP)rewardsthe

creationofshareholdervalueandproﬁtability.

Total hareholder return (TSR) and EPS are used as

LTIPKPIstoincentivisethecreationoflong-term

value.Inordertosupportachievementofour

2025strategytoreducecarbonemissions,

putting us on the path towards net zero carbon

emissionsandassistinginthereductionofour

customer’scarbonfootprint,wehaveincluded

CO emissionintensity targets in our incentives

since2021.Wehaverecognisedthatthe

reductionofCO emissions intensity is atarget

betterachievedoveralongertime-frameand

have thereforemovedthereductionofCO

emissions for 2022 from our bonus to our LTIP and

focused on the use of secondary raw material as a

bonus target for 2022 where results can be more

easilyrecognisedovertheshorterterm.Youcan

read more about this on page 121. LTIP awards vest

extenttargetsaremet,withafurthertwo-year

holdingperiodfortheExecutiveManagementTeam.

RHI Magnesita’s performance during 2021

2021 was a diﬃcult year for RHI Magnesita with

business volatilitycontinuingasCOVID-19

restrictionscontinuedtoimpactproduction,

and globalsupplychainpressuresimpacted

operations.Costsincreased,mainlydue to high

sea freight, which could not be fullypassedon

to our customers,negativelyimpactingmargins.

Nevertheless,we arefacingstrongdemandand

goodshippingvolumes.Ourworkingcapitalhas

alsoincreaseddue toincreasesinrawmaterial

inventoriesaheadofanticipatedshortages

as detailedonpage 35. As laid out in the

Chairman’sStatementandtheChiefExecutive

Oﬃcer’sReview,despite allthese diﬃculties,

theGrouprecordedin2021 arobustrevenue of

€2,551 million,whichmeansanincrease of 12.9%

against the prior year; adjusted EBITA of €280

million, an increase of 8% compared to 2020;

and a decreaseinoperatingfree cashﬂowof

-€236millioncomparedto€290millionin

2020. It has been within this context that the

CommitteehasconsideredtheAnnualBonus

scheme, the 2021 outturnandthe2022targets,

as well as reviewing 2019 LTIP performance and

agreeing2022performance conditions.

Incentive outcomes for the year

As set out in the Annual Report on Remuneration,

ourremunerationoutcomesfortheyearwere

as follows:

Annual BonusPlan

The2021 annual bonus outcome results in a 24%

annual bonus for the CEO and CFO. This is as a

resultofgoodperformanceagainstthestrategic

initiatives.AlthoughneitheroftheAdjustedEBITA

orOperatingCashFlowmetricswereachieved,

the Committee noted that a robust level of proﬁt

had beendeliveredagainstachallengingtarget

range, particularlywhentakeninthecontextof

themarketchallengesalreadynotedabove.The

Committeealsoconsideredthatmanagement

hadmanagedthe businesseﬀectivelyoverthe

year,managingstrongvolumedemandwithrising

costpressures,whileensuringstronglevelsof

liquiditywithgoodprogressagainsttheimportant

strategicelementsofthebonus.Inthe

circumstances,theCommittee agreedthatthe

levelofformulaicbonuswhichalignedtobonuses

payabletoeligible membersoftheworkforcewas

appropriate andtheexerciseofdiscretionwas

not required.Furtherdetailsofourperformance

against2021 bonus targets can be seen on page

113.Noadjustmentshave been made to the

targetsdue to COVID-19. ]

The Companyhascontinueditspracticeofnot

takinganystateissuedCOVID-19related support.

LTIP

An LTIP award was made in 2019, based onthree

performance conditions. The performanceperiod

of this award was the threeﬁnancialyears2019,

2020 and 2021. More detailsareavailableon

page 113.Noneoftheperformance targetshave

beenmetandtheawardswillthereforelapse.

The CommitteeiscomfortablethatthePolicy

operatedasintendedduringthe year.

LTIP awards granted in the year

LTIP awards were made to the CEO and CFO on

15March2021 at normal grant levels of 200%

of salary for the CEO and 150% of salary for the

CFO.TheCommittee carefullyconsidered

appropriate performance measures,taking into

accounttheeconomicandbusinessoutlook.

The measuresforthe2021 awards were of 50%

adjustedEPS,25%absoluteTSRand 25% Use of

secondaryrawmaterialtosupportmanagement’s

focusondeliveringmaterialincreasesintheshare

price (plusdividends) and sustained aggregate

EPSovertheperformance period as well as our

environmentalcommitments.Detailsofthe

awardsandperformance conditionscanbe

found on page 114.

Implementation of the Remuneration

Policy for 2022

The base salaries of the CEO and CFO were

increasedby4.45%and4.44%respectively,

with eﬀect from 1 January2022.Both ofthese

executivesare employedinAustria,and this

compareswithanaverage of 4.45% for the

majorityofAustrianbasedemployees.

Annual bonusmaximumopportunity for 2022

isunchangedfrom2021 at150% ofsalary. The

bonusmetricsandweightingswerereviewed for

2022.The bonuswillcontinue to be based on

EBITAandoperatingcashﬂowrecognisingthat

boththesemetricscontinuetoreﬂectour key

ﬁnancialpriorities.Inaddition,anelementofthe

bonuswillonceagainbefocusedonachievement

ofourstrategicpriorities,includinganESG

measure,asdriversoffuture proﬁtability and

growth.Thetargetsandperformanceagainst

them will be disclosedretrospectively in the 2022

RemunerationReport,providedthey are not

consideredtobecommerciallysensitiveat

thattime.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 9 7

Remuneration Committee report continued

The quantum of the CEO and CFO’s LTIP awards

for 2022remain unchanged with a face value of

200%and150%ofsalary,respectively.The

awards will be made in March 2022 based on the

shareprice atthattime.Executiveswillreceivethe

award shares in 2027 (subject to a three-year

vestingperiodandtwo-yearholdingperiod)if

performancetargetsaremet.Theperformance

targetsthatwilldeterminevestingoftheshare

awards, will continue to be based on absolute TSR

andAdjustedEPStargetsreﬂectingtheongoing

focusofmanagementtodelivermaterial

increasesintheshareprice(plusdividends)and

sustainedEPSgrowth.For2022theCommittee

hasincludedasitsthirdESGrelatedperformance

measurethereductionofCO₂emissions intensity

tosupportthelonger-termfocusofmanagement

onachievingthe2025strategytoreducecarbon

emissions.Theperformancetargetsaresetouton

page121.TheCommitteeiscomfortable, taking

into accounttheongoingeconomicandmarket

uncertaintyaswellasthebusinessoutlookthat

the targets are as challenging as those set for prior

LTIP awards, whilst also acting as a retentiontool.

The Committee has the ability to scale back the

level of vesting if it considers the outcome to be

reasonablyunacceptable,ortoavoidany

“windfall gain” or if it is not reﬂective of the

underlyingperformanceofthe Company.

How our remuneration practices support

our strategy

Strategic Pillar

Element

ofreward Metrics

Market

Leadership

Enhance

Business

Model

Execute

Cost

Reductions

Bonus Proﬁt

Free Cash

Flow

Strategic

initiatives

LTIPs

Earnings Per

Total

Shareholder

Return

Economic

Proﬁt

Use of

Secondary

Raw Materials

Reduction of

CO₂

emissions

ESG metrics

The Committee was pleased to be a leader in the

refractoryindustryinintroducingESGrelated

measures as part of the rewardstructure for the

Group in 2021 and in 2022 will continue to

include ESG metrics in the structure ofincentives.

Representativesofthe Committeeconsultedwith

investorsduring2021 andshareholderswere

supportiveofthelinkingofmanagement

incentives to sustainabilitytargets.

Thechosenmetricsarealignedwiththe

Company’sstrategyandsustainabilitytargets,

which aim to reduce CO₂emissionsintensityby

15% by 2025 and increase the useofsecondary

rawmaterialto10%.Toachievefurtheremissions

reductioninthe longerterm,the Groupis

investing€50millionintothedevelopment

of newtechnologiestocapture,store andutilise

its CO₂emissions.

TheCommitteeiscomfortable that the ESG

targets in the LTIP and the annual bonus are

bothmaterialandstretchingforthe business.

In decidingonthetargets,ithasreceiveddata

on the progress in these areas to date and the

expecteddevelopmentinthecomingyearsto

reachtheoverallstrategy.The Chairmanofthe

Committeeisalsothe ChairmanoftheCorporate

SustainabilityCommitteeandFionaPaulusis

a memberofbothcommittees.The Committee

is thereforewellpositionedtoassessprogress

againstthesustainabilitystrategyanddevise

appropriatelinkstomanagementincentives.

Thetargetssetarequantiﬁable,basedon

regularly reportedoperational andmanagement

information andCO₂emissionsintensityinthe

targetscopeareassuredbyanindependentthird

party.Theuseofsecondaryrawmaterialsis

includedasanannualbonustargetthisyear

(havingbeenincludedinthe2021 LTIP) to focus

performance since it is a key lever to deliver

progressinreducingScope 1 CO₂emissions

in theshortterm.

Our conversation with our shareholders

At the 2021 AGMtheCommittee proposed

thenewRemunerationPolicywhichwas

approved by a majority of 95.95% of votes

from and as a result we are comfortablethat

thePolicymeetsshareholderexpectations.

TheCommitteebelievesthatthe remuneration

policyhasoperatedasintendedduring2021.

Theremunerationoutcomesfor2021 arealigned

totheCompany’sstrategy,the complexstructure

ofthebusinessandthelong-termshareholder

interests.

TheCommittee continuestoreﬂecton

remunerationapproachforthe workforce and

the executiveteam,particularlyasthe world

transitionstoapost-COVID-19world.With all the

macro-socialeconomicchangesaround us,the

Directors feel it is appropriate to take the time, as

we go into 2022, to consider the Company’s

practicesandRemunerationPolicyafresh to

ensure it remains ﬁt for purpose. We willalso

closelymonitorthe marketforbestpracticeand

emergingtrends.Anychangeswouldofcourse

be made withshareholdersandstakeholder

experience inmind,andconsultationas

appropriate.The Committee valuesshareholder

feedback and ﬁnds it most useful to hear their

opinions,guidance andtheirconcerns.We

carefullyconsiderallinputwhenreviewingthe

rewarddesignanddeterminingoutcomes. You

canreadmore about this in the stakeholder

engagementreportonpages107and108.

AsoutlinedintheCorporateGovernance

Statementonpage 70, we are reportingpartial

compliancewithProvisions36,40and41

of the UKCorporateGovernance Codeon

Remuneration.We explainourpartial compliance

in the Corporate GovernanceStatement and will

continue to keep our practices under review in

respectoftheseprovisions.

At the 2022AGM,shareholderswillbe asked

to vote on the Directors’RemunerationReport.

I hope that the Committeewillhaveyoursupport.

AsCommittee Chairman,Icontinue to be

available toengage withshareholderswishing

todiscussremunerationmatters.

Janet Ashdown

ChairmanoftheRemunerationCommittee

9 8 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

At a glance: Operation ofRemuneration Policy for the ﬁnancial year ending 31 December2021

Policy element S Borgas (CEO) I Botha (CFO)

Base salary from 1 January 2021 €1,052,000 €615,000

% Increase from prior year 2.5% 2.5%

Retirement allowance Allowance of 15% of base salary Allowance of 15% of base salary

Annual bonus Up to 150% of base salary Up to 150% of base salary

Annual bonus metrics Adjusted EBITA (35%) and Operating Cash Flow (35%) measured on a constant currency basis and Strategic deliverables (30%) . The

strategic element was equally weighted on; Increase global value market share, reduce conversion cost and reduce CO₂emission
intensity.

Amount paid for threshold performance 0% 0%

Amount paid for target performance 75% of salary (50% of maximum annual bonus)

Actual bonus result for 2021 performance Bonus paid €374,775 (24% of maximum) Bonus paid €219,094 (24% of maximum)

Payment of bonus in shares 50% of annual bonus in excess of target a

LTIP Award 200% of base salary 150% of base salary

LTIP metrics 50% of the award: Adjusted EPS (cumulative for the three-year performance period)

25%of the award: Absolute TSR

25% of the award: Use of Secondary raw material

Payment for threshold performance 25%

Performance and post vesting holding

periods

Three years and two years respectively

Malus and clawback Malus applies to the period prior to vesting for LTIP awards and payment of the annual bonus
Clawback applies to cash bonus and LTIP awards for a period of three years following the date of vesting and three years following any
cash payment

Dividends on vested awards Participants are eligible for dividend equivalents on performance shares awarded under the LTIP

Shareholding requirement 200% of base salary to be met within ﬁve years

Shareholding as % of salary at 2021

year-end

80% 53%¹

1 Calculatedassumingatax rate of 50%.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 9 9

Directors’ Remuneration Policy

ThisDirectors’RemunerationPolicywasapproved

by over 95% of voting shareholders at the June

2021 AGM andbecameeﬀectivefrom1 January

2021.ThefullRemunerationPolicy as approved

byshareholdersisavailableinthe2020Annual

Reportonourwebsite.

Policyoverview

The aim of theCompany’sremunerationstrategy

is to provide a level of ﬁxed pay that, together with

incentives,willattract,retainandmotivate

high-calibre,high-performingexecutives,

aligningthemtothelong-termperformanceof

theCompanyanditslong-termshare

performancewhilerewardingthemfor creating

anddeliveringshareholdervalue.

Thepolicy isalignedtoandsupportsourcultural

values which are set out below:

• Innovative

• Open

• Pragmatic

• Performing

ThemissionoftheCompanyis“Takinginnovation

to1200°Candbeyond”.Achievingourmission

requireshigh-performingsenior management

and the Policy is designed to motivate them to

perform to a high standard and reach the

stretchinggoalsset.Inaddition,theremuneration

arrangementsfortheExecutiveDirectors

contributetolong-termvaluecreationby:

• providingafairandappropriatelevelofﬁxed

remunerationthatdoesnotresultin

overrelianceonvariablepayandundue

risk-taking,therebyencouragingthe

executivestofocusonsustainedlong-term

valuecreation.

• providingabalanceofshort- and long-term

incentives to ensure there is focus on

short-termobjectivesthatwillovertimebuild

to createlong-termvaluecreationaswellas

long-termgoals.

• requiringperformance measuresinour

long-termincentive to be measuredoverthe

longer term and for shares to be held

post-vestingforafurthertwo-yearperiod;and

• incorporatingmetricsfocusedonlong-term

shareholder value,suchastotalshareholder

return and reduction of both our and our

customers’carbonemissionsthroughthe

increaseduseofsecondaryrawmaterial.

Whenimplementingthe RemunerationPolicy,

theRemunerationCommittee consideredthe six

factors listed under Provision 40 of the UK

CorporateGovernance Code:

• Clarity: The Policy and the way it is

implementedisclearlydisclosedinthispolicy

sectionoftheRemunerationReportandthe

AnnualStatementandsupportingreports,

withfulltransparencyofallelementsof

Directors’ remuneration.

• Simplicity:The Policyissimple and

straightforward,basedonamixofﬁxedand

variablepay. The annual bonus and LTIP

includeperformance conditionswhichare

alignedwithkeystrategicobjectivesand

driversofthe RHIMagnesitabusiness.

• Risk:TheCommittee believesthatthe

performancetargetsinplacefortheincentive

schemes provide appropriate rewardsfor

stretchinglevelsofperformance without

drivingbehaviourwhichisinconsistentwith

theCompany’sriskproﬁle.Potentialrewardis

alignedwithmarketlevelsofpeercompanies

andthereputationalriskfromaperceptionof

“excessive”pay-outsislimitedbythe

maximum award levels set out in the Policy

andtheCommittee’sdiscretiontoadjust

formulaicremunerationoutcomes.Toavoid

conﬂictsofinterest,Committee membersare

requiredtodisclose anyconﬂictsorpotential

conﬂictsaheadofCommitteemeetings.

No ExecutiveDirectororothermember

of managementispresentwhentheirown

remunerationisunderdiscussion.

• Proportionality:The linkbetweenthedelivery

ofstrategy,long-termperformance,

shareholderreturnandthe remuneration

oftheExecutive Directors is set out in the

RemunerationReport.

Alignmenttoculture:Asexplainedaboveand in

therestofthisreport,theapproachtoDirectors’

remunerationisconsistentwiththeGroup’s

culture andvalues.

Whendeterminingthe implementationofthe

remunerationpolicy,theCommittee alsoreviews

andconsidersthosemattersreferredtoaspectsin

section3.1.2ofthe DutchCorporateGovernance

Codewhichcomprise:long-termvaluecreation,

scenarioanalyses,ratioofﬁxedtovariable

remunerationcomponents,marketpriceof

shares,termsandconditionsgoverningshareand

share optionawards.

Whenreviewingthe RemunerationPolicy,the

Committeewillfollowthe processsetoutbelow:

• The Committeewillconsidermarketand

governance developments(including the UK

CorporateGovernance CodeandDutch

CorporateGovernance Code) as well aswider

pay context, such as pay ratios and Group

rewardarrangements

• The Committeewillconsiderthe guidelinesof

shareholderrepresentative bodies,proxy

agenciesandinvestorexpectations.

• The Committeewillconsultwithshareholders

andemployeesaheadofanyfuture

AGMswhere theremunerationpolicy is put to

a vote.

• Allchanges,adoptionorrevisionstothe

existingpolicywillbebroughttoshareholders

forapproval.

• requiringexecutivestoacquireand retain

sharesintheCompany.

• oﬀeringlong-termincentives wherethe

rewardisdeliveredinshareswhichaligns

executivestoshareholderinterestsandvalue

as well as the performance of the Company

overthelongerterm.

• Predictability:ThePolicyincludesfulldetails

oftheindividuallimitsinplace for the

incentiveschemesaswellas“scenariocharts”

whichsetoutpotentialpay-outsinthe event

ofdiﬀerentlevelsofperformance,basedona

number of reasonable assumptions.Any

discretionexercisedbytheCommittee in

implementingthe Policy will be fully

disclosed.

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Policy table for Executive Directors

Element and purpose How it operates Maximum opportunity Performance-related framework and recovery

Base salary

To assist in the recruitment and

retention of appropriate talent.

To provide a fair ﬁxed level of

pay commensurate for the role

ensuring no overreliance

on variable pay.

Salaries are paid monthly and reviewed annually.

The Company’s policy is to set salaries at market

competitive levels taking into account salaries at

companies of a similar size by market capitalisation,

revenue and any other factors considered relevant

by the Committee such as international business mix

and complexity.

There is no prescribed

maximum annual base salary

or salary increase.

Salaries will be reviewed by the Committee annually

taking into account the various factors noted in the

“How it operates” section of the policy.

Decisions on salary are inﬂuenced by:

• The performance and experience of the individual
• The performance of the Group

• The individual’s role and responsibilities and any
change in those responsibilities

• Pay and employment conditions of the workforce
across the Group including salary increases
• Rates of inﬂation and market-wide increases
across international locations

• The geographic location of the Executive Director

Retirement allowance

To provide competitive

retirement beneﬁts for

recruitment and retention

purposes.

Executive Directors may participate in a deﬁned

contribution plan, and/or receive cash in lieu of all

or some of such beneﬁt.

Only base salary is pensionable. The pension will be

set at a rate aligned to the majority of the workforce

in the country of the Executive Director’s appointment,

structured as required by the local regulation

in the country of appointment, and in line with

industry norms.

Pension is capped at the rate

applicable to the majority of

employees in the country of

appointment for the Executive

Director (currently Austria where

it is 15% of salary).

None

Other beneﬁts

To provide a competitive beneﬁt

package for recruitment and

retention purposes as well as

to support the personal health

and wellbeing of the

Executive Director.

Beneﬁts currently provided include: private health

insurance, life insurance, car/car allowance and

fuel allowance.

Additional beneﬁts and tax payable as a result of

reimbursement of reasonable business expenses may

be provided from time to time if the Committee decides

payment of such beneﬁts and tax is appropriate and

in line with market practice.

There is no maximum level

of beneﬁts provided to

an Executive Director.

None

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 1 0 1

Directors’ Remuneration Policy continued

Policy table for Executive Directors continued

Element and purpose How it operates Maximum opportunity Performance-related framework and recovery

Annual bonus

To provide focus on the

short-term performance of

the Company and to provide a

reward for achieving short-term

personal, strategic and ﬁnancial

Company performance.

To provide a mechanism for

alignment with longer-term

performance and shareholder

objectives.

The requirement for Executive

Directors to acquire shares with

their bonus aligns them to the

“development of the market price

of the shares” in the Company as

provided in the Dutch Corporate

Governance Code.

The annual bonus is based on the Group’s

performance as set and assessed by the Committee

on an annual basis.

The annual bonus is paid in cash and the Executive

Directors are required to acquire shares in the

Company with 50% of the amount paid in excess

of target (a

period of three years.

Up to 150% of base salary.

Target potential opportunity is

50% of maximum opportunity.

Details of the performance targets set for the year under

review and performance against them will normally be

provided each year in the Annual Report on Remuneration.

If for reasons of commercial sensitivity, the targets cannot

bedisclosedthentheywillbedisclosedinthefollowingyear.

Performance will normally be measured over a one-year

period.

Targets will be based on the Group’s annual ﬁnancial

and non-ﬁnancial performance for the particular

performance year. At least 70% of the bonus will

be subject to ﬁnancial performance metrics.

The Committee may scale back the bonus that is payable

if it considers the outcome to be reasonably unacceptable

or if it is not representative of the underlying performance

of the Company and/or there have been regulatory,

environmental or health and safety issues that the

Committee considers are of such severity that a scale

back of the bonus is appropriate.

For the ﬁnancial targets, not more than 25% of the
maximum potential bonus opportunity will be payable for
achieving threshold performance rising on a graduated
scale to 100% for maximum performance. Threshold
performance being the level of performance required
for the bonus to start paying.

In relation to strategic targets, the structure of the target
will vary based on the nature of the target set and it will
not always be practicable to set targets using a graduated
scale. Vesting may therefore take place in full if speciﬁc
criteria are met in full.

Payments under the annual bonus plan may be subject
to clawback/malus for a period of three years from
payment in the event of a material misstatement of the
Company’s ﬁnancial results, an error in calculating the
level of grant or level of vesting or payment, a failure of risk
management including the liquidation of the Group, if the
participant has been guilty of fraud or gross misconduct
or the Company has been brought into disrepute. The
clawback/malus provisions as set out above do not limit
Article 2:135 of the Dutch Civil Code.

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Policy table for Executive Directors continued

Element and purpose How it operates Maximum opportunity Performance-related framework and recovery

Awards granted under the

RHI Magnesita Long-Term

Incentive Plan (LTIP awards)

To incentivise and reward

execution of the longer-term

business strategy.

To provide alignment to

shareholders and the

longer-term performance

of the Company and to

recognise and reward value

creation over the longer term.

The “development of the

market price of the shares”

in the Company is, as required

by the Dutch Corporate

Governance Code, taken

into account by providing

a long-term incentive using

shares as the delivery

mechanism. In addition,

part of the award is determined

by Total Shareholder Return

which is a measure of share

price performance.

LTIP awards may take the form of nil-cost options

or conditional awards. Awards are normally

made annually.

Awards normally vest a

performance and continued service. Where Executive

Directors cease employment or are under notice prior to

the three-year vesting date, diﬀerent rules may apply.

Shares resulting from the exercise of an option or

vesting of a conditional award cannot be sold until ﬁve

years have elapsed from the date of award, other than

to pay tax.

To the extent an award vests, the Committee may

permit dividend equivalents to be paid either in the

form of cash or shares representing the dividends that

would have been paid on those shares during the

vesting period (and where the award is a nil-cost option

to the ﬁ

are payments in cash or shares equal to the value of the

dividends that would have been paid during the period

referred to above, on the number of shares that vest.

200% of salary (face value of

award) annually (normal limit),

where the face value is the

market value of the shares

subject to an award at the time

it is awarded.

In exceptional circumstances

on recruitment 250% of salary

(face value of award).

Awards vest based on three-year (or longer) performance

measured against a range of challenging targets set

and assessed by the Remuneration Committee. The

Committee will determine the speciﬁc metrics and

targets that will apply to each award prior to the date of

award subject to the vesting of at least 25% of an award

being determined by Total Shareholder Return.

The targets for each award will be set out in the Annual

Report on Remuneration.

In relation to ﬁnancial targets not more than 25% of the

total award will vest for threshold performance rising on

a graduated scale to 100% for maximum performance.

Threshold performance being the level of performance

required for the LTIP award to start to vest. In relation to

strategic targets the structure of the target will vary based

on the nature of the target set and it will not always be

practicable to set targets using a graduated scale and

so vesting may take place in full if speciﬁc criteria are

met in full.

The Committee may scale back the level of vesting if

it considers the outcome to be reasonably unacceptable

or if it is not reﬂective of the underlying performance

of the Company and/or there have been regulatory,

environmental or health and safety issues that the

Committee considers are of such severity that a scale

back of the LTIP award is appropriate.

LTIP may be subject to clawback/malus for three
years from the date of vesting in the event of a material
misstatement of the Company’s ﬁnancial results, an error
in calculating the level of grant or level of vesting or
payment, a failure of risk management including the
liquidation of the Group, if the participant has been guilty
of fraud or gross misconduct or the Company has been
brought into disrepute. The clawback/malus provisions
as set out above do not limit Article 2:135 of the Dutch
Civil Code.

Share ownership

To increase alignment

between management

and shareholders and

to promote the longer-term

performance of the Company.

Requirement for the Executive Directors is to normally

retain all of the shares acquired from annual bonus

payments following expiry of the three-year holding

period and normally 50% of vested Performance

Shares (net of tax) following the two-year holding

period until the shareholding requirement is achieved.

200% of salary None.

Executive Directors are expected to hold 200% of
salary in shares. The Committee normally expects this
requirement to be met within ﬁve years of appointment
and for the CEO 7 June 2018 being the date of approval
of the Company´s ﬁrst Directors’ Remuneration Policy.

Holding periods for annual bonus shares and
long-term incentive awards continue post cessation
of employment in respect of bonus shares acquired
with 2021 bonus and LTIP awards granted in 2021 and
future years, thereby providing a post-employment
shareholding requirement.

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Directors’ Remuneration Policy continued

ThetablebelowsetsouttheRemunerationPolicyfortheNon-Executive Directors(includingthe Chairman).

Policy table for Non-Executive Directors

Element and purpose How it operates Maximum opportunity Performance-related framework and recovery

To provide fees reﬂecting

the time commitments and

responsibilities of each role to

enable recruitment of the right

calibre of Non-Executive

Directors who can further the

interests of the Group through

their experience, stewardship

and contribution to the strategic

development of the Group.

The Non-Executive Directors are paid a basic fee.

Supplemental fees may be paid for additional

responsibilities and activities, including for a

Committee Chairman and member of the main Board

Committees and the Senior Independent Director.

The cash fee is normally paid quarterly in arrears. The

Chairman’s fee is inclusive of all of his responsibilities.

Reasonable expenses incurred by the Non-Executive

Directors in carrying out their duties may be reimbursed

by the Company including any personal tax payable

by the Non-Executive Directors as a result of

reimbursement of those expenses. The Company

may also pay an allowance in lieu of expenses if it

deems this is appropriate.

There is no prescribed maximum

annual fee or fee increase.

The Board is guided by the

general increase in the

non-Executive market and the

Group’s global workforce, but

may decide to award a lower or

higher fee increase to recognise,

for example, an increase in the

scale, scope or responsibility of

the role and/or take account of

relevant market movements.

None.

Fees are reviewed periodically.

Performance criteria

TheCommitteeassessesannually,atthebeginningoftherelevantperformanceperiod,whichperformancemeasures,orcombinationandweightingof
performancemeasures,aremostappropriateforbothannualbonusandanyLTIPawardedtoreﬂectthe Company’sstrategicinitiativesforthe performance
period.TheCommitteehasthediscretiontochangetheperformancemeasuresforawardsgrantedinfutureyearsbaseduponthe strategicplansofthe
Company, as it will do for 2022’s award. The Committee sets what it considers are demanding targets for variable pay in the context of the Company’s
tradingenvironmentandstrategicobjectivesandconsideringtheCompany’sinternalﬁnancialplanning,andmarketforecasts.Anynon-ﬁnancialgoals
willbewelldeﬁned,andtheperformanceagainstthegoalswillbeindependentlyassured.

The short term ﬁnancial and non-ﬁnancial criteria of our variable remuneration may, as noted above, vary from year to year to ensure alignmentwith the
strategic plans of the Company. Set out below is a summary of the measures for 2022 and other measures that have been used since 2018 and may be
incorporatedagain(inadditiontoothermeasures)forfutureincentives:

Annual bonus

Financialcriteria

• AdjustedEBITandEBITAareareﬂectionoftheCompany’soperatingproﬁts,operatingperformanceandbusinesseﬃciencysupportingthe value of RHI
Magnesitafortheshareholders.Theyreﬂectthewayinwhichmanagementassessesthe underlyingperformanceofthebusiness,excludingcertain
non-recurringitemsfromtheadjustedﬁgures.

• OperatingcashﬂowsupportstheCompany’scapacitytoexpanditsoperationsorinvestmentinadditionalassets/acquisitions,aswellasdividendspaid
to shareholders.ItiscalculatedbytakingadjustedEBITDApluschangesinworkingcapitalandinotherassets/liabilitiesminuscapexspend.

Non-ﬁnancial criteria

• StrategicdeliverablessupportingﬁnancialtargetssuchasadjustedEBITorEBITAandoperatingcashﬂowwithinitiativesandstrategicprojects,
suchasenhancingthecurrentbusinessmodelorCompany’sfootprintandglobalvaluemarketshareandESGmeasuressuchasCO₂emissionsintensity
reduction,useofsecondaryrawmaterialsandreducingconversioncosts.

LTIP

Financialcriteria

• TSR–combinationofmovementsinsharepriceanddividendsearnedonsharesreﬂectingthetotalreturnearnedbyholdingtheCompany’sshares.

• AdjustedEPS– reﬂectstheincomestatementina clear way and takes the equitystructureintoaccountandtheBoardbelievesAdjustedEPSto be one
oftheindicatorswhichdemonstratesthevaluecreatedforitsshareholders.

• EconomicProﬁtGrowth–measuresvaluecreation,consideringalleconomicresourcesemployedwithinthe business,takingintoaccountthecosts
of makingandsellingaproduct/service.

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Bonus & LTIP

Non-ﬁnancial criteria

• Useofsecondaryrawmaterials–measurestherateatwhichsecondaryrawmaterialisusedinourproductionnetworkcomparedtovirginrawmaterials.
Despitethisnotbeingawhollyﬁnancialtarget,thiswillnonethelessbe independentlyveriﬁedbyanexternalprovider.

• Reduction of CO₂emissions intensity– to reduce the tonnes of CO₂emittedpertonne of production by 15% by 2025 compared to 2018 baseline,

includingScope1 emissions,Scope2emissionsandScope3emissionsfromrawmaterials.

ThecriterialistedabovedirectlylinktotheCompany’sstrategy,long-terminterestsandsustainability.Performancetargetsaresetatalevelto maintain
goodﬁnancialhealth.ThisenablestheCompanytoperformwell,delivershareholderreturnsandinvestsustainablytoachievestrategicdeliverables.
The assessment of the fulﬁlment of performance criteria for the annual bonus and for LTIP awards is set out on pages 113 and 114..

Discretions retained by the Committee

TheCommitteeoperatestheGroup’svariablepayplansaccordingtotheirrespective rules.Inadministeringthese plans,the Committeemay apply certain
operationaldiscretions.

Theseincludethefollowing:

• determiningtheextentofvestingbasedontheassessmentofperformance;.

• determiningthestatusofleaversand,whererelevant,theextentofvesting.

• determining the extent of vesting of LTIP awards under share based plans in the event of a change of control.

• makingappropriateadjustmentsrequiredincertaincircumstances(e.g.rightsissues,corporaterestructuringevents,variationofcapitaland special
dividends);and

• adjustingexistingtargetsifeventsoccurthatcausetheCommittee todetermine that the targets set are nolongerappropriateandthatamendment
isrequiredsotherelevantawardcanachieveitsoriginalintendedpurpose,providedthatthenewtargetsarenotmateriallylessdiﬃcultto satisfy.

TheCommitteealsoretainsdiscretiontomakenon-signiﬁcantchangestothePolicywithoutrevertingtoshareholders(forexample,forregulatory,
tax,legislativeoradministrativepurposes).

Malus and clawback

The Committee may, at any time within three years from the date of LTIP awards vesting or payments under the annualbonusplan,determinethatmalus
orclawbackprovisionsmayapply.MalusenablestheCommittee toreduce bonusorshareawards(includingtonil)beforetheyvest.Clawbackenablesthe
Committeetoreclaimsharesacquiredfromshareawardsand/orbonusespaidincludingthe cashvalue ofsharesanddividends.The Committeecanalso
operateclawbackthroughthereductionincludingtonilofotherawardsheldbythe individualbefore they vest or bonus before itispaid.Theprovisions
applyinthefollowingcircumstances:(i)materialmisstatementoftheCompany’sﬁnancialresults;(ii)anerrorincalculatingthe levelofgrant or levelof
vestingorpayment;(iii)a failureofriskmanagementincludingtheliquidationoftheGroup(iv)ifthe participanthasbeenguiltyoffraudorgrossmisconduct
ortheCompanyhasbeenbroughtintodisrepute.Theclawback/malusprovisionsassetoutabovedonotlimitArticle 2:135 of the DutchCivilCode.

Executive Directors’ service contracts and payments for loss of oﬃce

Servicecontractsandlettersofappointmentareavailableforinspectionatthe Company’sregisteredoﬃce.

Service contracts and loss of oﬃce

It is the Company’s policy that notice periods for Executive Directors will not exceed 12 months and the servicecontractsforthe ExecutiveDirectors
areterminablebyeithertheCompanyortheExecutiveDirectoron12months’notice.

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Directors’ Remuneration Policy continued

Service contracts and loss of oﬃce

Name Position Date of aqppointment Notice period

Stefan Borgas CEO 20 June 2017 12 months

Ian Botha CFO 1 April 2019 12 months

TheCommittee’spolicyinrelationtoterminationofservicecontracts is to deal with each case on its merits having regard to the circumstances of the
individual,theterminationofemployment,anylegaladvicereceived and what is in the best interests of the Companyanditsshareholders.AnExecutive
Director’sservicecontractmaybeterminatedearly(otherthanforcause)bypaymentinlieuofsalaryinequalmonthlyinstalmentsoverthe noticeperiod.
TheCompanymayincludepensioncontributionsandbeneﬁtswithinthe paymentinlieuofnoticeifthisisdeemedappropriateorisspeciﬁcallyprovided
for in the service contract. Unless a contractspeciﬁcallyprovidesotherwise,allpaymentswoulddiscontinueorreducetothe extentthatalternative
employmentisobtained.Therearenoenhancedprovisionsona change of control and there are nospeciﬁcseverance arrangements.Whilstnotpartof
the formal policy, in the event of a change of control, LTIP awards will vest based on performance to the change ofcontrol.Inaddition,awardswillnormally
be scaled back pro rata to the proportion of the performance or vesting period served, with the RemunerationCommitteehavingthe discretiontoreduce
thescalebackinexceptionalcircumstancesifitdeemsittobeappropriate.

AnExecutiveDirector’sservicecontractmaybeterminatedwithoutnotice forcertaineventssuchasgrossmisconductinwhichcasenopayments
orcompensationbeyondsumsaccruedtothedateofterminationwillbepaid.

TheCompanymayalsopayoutplacementcosts,legalcostsandotherreasonable relevantcostsassociatedwithterminationandmaysettle anyclaim
orpotentialclaimrelatingtothetermination.

Treatment of variable pay awards on termination

AnnualbonusesandLTIPawardsarenon-contractualandaredealtwithinaccordance withthe rules of the relevantplans.

AtthediscretionoftheCommittee, incertaincircumstances,forexample,toincentivise short-termretentionandcompletionofkeybusinessdeliverables,
and where poor performance is not relevant to the cessation, a pro-ratabonusmaybecome payableatthenormalpaymentdate for the periodof
employmentwithﬁnancialperformancetargetsbasedonfull-yearperformance.Where theCommittee decidestomakeapayment,therationale
willbefullydisclosedintheAnnualReportonRemuneration.

Thedefaulttreatmentforshare-basedawardsisthatanyunvestedawardwilllapseonterminationofemploymentor,incertaincircumstancesonthe
executivegivingnotice.However,undertherulesoftheLTIPunderwhichawardswillbemade,incertainprescribedcircumstances,suchasdeath,injury,
ill-health,retirementwiththeCompany’sagreement,redundancy,leavingtheGroupbecause theemployercompanyorbusinessleavesthe Group or
wheretheCommitteedeterminesotherwise,awardsareeligibletovestsubjecttothe performanceconditionsbeingmetoverthenormalperformance
period(orashorterperiodwheretheparticipanthasdied)andwiththeawardbeingreduced(unlesstheCommittee considers,inexceptional
circumstances,adiﬀerenttreatmentisappropriate)byanamounttoreﬂecttheproportionoftheperformance periodnotactuallyserved.

Approach to recruitment and promotions

The recruitment package for a new Director will be set in accordance with the terms of our Policy. On recruitment, the salarymaybe setbelowthenormal
marketrate, withphasedincreasesastheDirectordemonstratesperformance withintheCompany.Annualbonusopportunitywillreﬂecttheperiod of
service for the year.

The normal annual LTIP award limit is 200% of salary face value in a ﬁnancialyear(face value beingthe market value of the shares subject to an award at the
time it is awarded). A higher limit of 250% of salary (face value) is included for use inexceptionalcircumstancesfortheCompanytobe able toattractand
secure the right candidate if required. A LTIP award may be made shortly a

Withinternalappointments,anyvariablepayelementawardedinrespectofthe candidate’spriorrole willnormallybe allowedtocontinue according
to its terms.

ThePolicy enablestheCommitteetoincludethosebeneﬁtsitdeemsappropriateforanExecutiveDirector.Onrecruitment,thismayincludebeneﬁts
suchasrelocation,housingor schoolingexpenses.Inarrivingata beneﬁtspackage,theCommittee’sprevailingconsiderationwillbe to pay only what is
considerednecessaryandappropriate,takingintoaccounttheimportance of securing the right candidate for the job, acting in the best interests of the
Company’sstakeholdersandlimitingcertain beneﬁts to aspeciﬁed periodwhere possible.

Onrecruitment,theCompanymaycompensateforincentivepay(orbeneﬁtarrangements)foregonefromapreviousemployer.Replacementshareawards
would be made under the Company’s LTIP and any subsequently adopted share plansusingthe separatespeciﬁclimitforthesepurposesof250% ofsalary
(face value) or as necessary and as permitted under the Listing Rules. The new awards would take account of the structure ofawardsbeingforfeited(cash or
shares),quantumforegone,theextenttowhichperformanceconditionsapply,thelikelihoodofmeetinganyexistingperformance conditionsandthetime
le

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Policy for Executive Directors on external appointments

SubjecttoBoardapproval,ExecutiveDirectorsmayacceptexternalnon-executivepositionsandretainthe feespayableforsuchappointments.

Non-Executive Directors

Lettersof appointment and policy on recruitment

AllNon-ExecutiveDirectorshavelettersofappointmentforaﬁxedperiodofthreeyears,subjecttoreappointmenteachyearattheAGM.Noadditional
compensationispayableontermination,withfeesbeingpayable to the date oftermination.Theappointmentsare terminablebyeitherpartyonthree
months’writtennotice.

OnappointmentofanewNon-ExecutiveDirector,thefeearrangementwillbe setinaccordancewiththeapprovedRemunerationPolicyinforceatthat
time.

Name Position Date of initial appointment Expiry date of current term

Herbert Cordt Non-Independent Non-Executive Director, Chairman 20 June 2017 AGM 2024

David Schlaﬀ Non-Independent Non-Executive Director 6 October 2017 AGM 2024

Stanislaus Prinz zu Sayn-Wittgenstein-

Berleburg

Non-Independent Non-Executive Director 6 October 2017 AGM 2024

John Ramsay Independent Non-Executive Director 6 October 2017 AGM 2024

Janet Ashdown Independent Non-Executive Director 6 June 2019 AGM 2022

Sigalia Heifetz Independent Non-Executive Director 10 June 2021 AGM 2024

Marie-Hélène Ametsreiter Independent Non-Executive Director 10 June 2021 AGM 2024

Jann Brown Independent Non-Executive Director 10 June 2021 AGM 2024

Wolfgang Ruttenstorfer Independent Non-Executive Director 20 June 2017 AGM 2024

Karl Sevelda Independent Non-Executive Director 6 October 2017 AGM 2024

Fiona Paulus Independent Non-Executive Director 6 June 2019 AGM 2022

Michael Schwarz Employee Representative Director 8 December 2017 9 December 2025¹

Karin Garcia Employee Representative Director 9 December 2021 9 December 2025¹

Martin Kowatsch Employee Representative Director 14 December 2021 14 December 2025¹

1 MichaelSchwarz,KarinGarciaandMartinKowatsch are the Employee RepresentativeDirectors andhavebeenselectedinaccordancewiththeapplicablelocallawprovisions bytheemployee
representatives.Theyare appointedforaterm of not more thanfouryears.

How the views of shareholders and employees are taken into account

Owing to the Board members’ widerangeof experienceand backgrounds,andwithEmployee Representativesmembersandshareholdersrepresented in
person,thereisampleopportunityforstakeholderfeedbackonthePolicyanditsimplementationonanongoingbasis.

TheCommitteeformallyconsultsdirectlywithemployeesonexecutive pay via the Employee Representative Directorsappointedtothe Board. Other
engagementactivitiesincludeemployeesurveys,CEOcalls,regulartownhallmeetingsandanactiveCEOChannel,aspartofthe MyRHIMagnesitaapp,
whereemployeescanaskquestionsonanyissuesincludingexecutivepay.TheCommittee receivesperiodicupdatesfromtheCEOandtheExecutiveVP
People,ProjectsandValueChainwhichincludeemployeefeedbackreceivedonremunerationpracticesacrosstheGroup.Nosubstantive questionshave
beenraisedonexecutiveremuneration.TheCommitteetakesdue accountoftheoverallapproachtoremunerationandthe remunerationstructuresfor
employeesintheGroupwhensettingpayfortheExecutiveDirectors.

TherearerepresentativesoftwooftheCompany’smajorshareholdersontheBoardandthusregularconsultationonallelementsofremunerationisongoing.
TheCommitteeChairmanmeetsdirectlywithrepresentativesofvariousinstitutionalshareholdersonremunerationandappreciatestheopportunityto
understandtheirquestions,seektounderstandtheirexpectationsandthenprovidethoseviewstotheCommitteeandtothewiderBoardasrequired.In
November2021,theCommitteeChairmanparticipatedinaninvestorroadshowwiththeSeniorIndependentDirectorandtheDeputyChairmanwhere
remuneration,andparticularlythelinkswiththesustainabilityagenda,werediscussedwithﬁveinstitutionalshareholders.TheCommittee,andthewiderBoard,
foundthesessionsveryusefultoheardirectfeedbackfrominvestorsandunderstandtheirexpectationsforthefutureintermsofdrivingmanagement
performancethroughincentives.

TheCommitteeChairmanseeksfeedbackfromshareholdersonanysubstantiveremunerationmattersandanyconsultationexercise wouldtypically cover
over70%ofshareholders.Thisfeedback,bestpracticeinthemarket,andanyviewsalsoreceivedfromtime to time, as well as guidance fromshareholder

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Directors’ Remuneration Policy continued

representativebodiesmoregenerally,willbeconsideredaspartoftheCompany’sannualreviewofRemunerationPolicyandimplementationofthatpolicy.
TheCommitteehasengagedwithshareholdersregardingthechangedPolicyandinvestorsapprovedatinthe lastAGM.

How the views of shareholders and employees are taken into account continued

In addition to this, the website provides an important tool for investor engagement. It contains a wide range of information on our Company and has asection
dedicatedtoinvestors,whichincludescertainremunerationinformation,suchasourLTIPrules,ourinvestorcalendar,ﬁnancialresults,presentations,press
releases,withnewsrelatingtoRHIMagnesitaﬁnancialandoperationalperformanceandcontactdetails.

Remunerationmarketdataforcompaniesofa comparablesizeandcomplexitytothe Companywasconsideredaspartofthe Committee’sformulation
of the Policy. This remuneration data was only one of many factors considered by the Committee.

The Committee has taken note of the views of the Executive Directors with regard to the amountandstructure oftheirremunerationandthe provisions
of3.1.2oftheDutchCorporateGovernanceCode(mattersthatshouldbe takenintoconsiderationwhenformulatingthe RemunerationPolicy)havebeen
brought totheirattention.

You can read more on our stakeholder engagement on page 50.

How the Executive Directors’ Remuneration Policy relates to the wider Group

ThePolicy describedaboveappliesspeciﬁcallytotheCompany’sExecutive andNon-ExecutiveDirectors.The Committeeisaware ofandprovides
feedbackonthewiderGroupremunerationstructures.TheCompany’spolicyisforthePolicyandstructure to be cascadedasfaraspracticable to the senior
management team and for the overriding principles to be taken into account for the Group-wide policy.

BasesalariesforthewholeGroupareoperatedunderbroadlythesame policy as for the ExecutiveDirectorsandare reviewedannually.

The key diﬀerence between the Policy and the wider Group’s policy is that the ExecutiveDirectors’packages(andthe seniormanagementteamtoa lesser
extent)are weighted more to variable pay. From 2019 on, the bonus targets are the same forExecutive Directorsandforalleligible white-collaremployees.
Allouremployeestakepartinannualdiscretionarybonusschemes,whichisbasedonthe same metricsasthoseapplicabletothe ExecutiveDirectors
asshowninAnnualReportonRemuneration.Ourapproachistoincentivise ouremployeestofocusonandcontribute totheCompany’skeygoals.

LTIPawardsareawardedtothoseemployeesidentiﬁedashavingthegreatestpotentialtoinﬂuencestrategicoutcomes.Giventhe costofoperating
such a plan, the Committee considers this is the right approach and in the bestinterestsoftheCompanyanditsshareholders.

Acomparisonoftheremunerationstructurebetweenthewiderworkforce and the Board is illustrated in the table below.

Competitive pay and cascade of incentives

Organisational level

Number of

employees

Maximum bonus as

percentage of salary

Maximum

proportion of bonus

payable in cash

(% of maximum

award)

Maximum

proportion of bonus

deferred in shares

(% of maximum

award)

Maximum LTIP

award based on

annual salary

Executive Directors 2 150% 75%¹25%¹150-200%

Executive Management Team 5 80-140% 85%²15%²80-150%

Senior Leaders c30 40% 100% 0% 20-50%

Functional Directors c90 30% 100% 0% 0%

Senior Managers c150 25% 100% 0% 0%

Managers c450 20% 100% 0% 0%

Specialists c1,600 10% 100% 0% 0%

Professionals c1,900 5% 100% 0% 0%

Other bonused employees c8,100 Various³100% 0% 0%

1 Halfofannualbonusinexcessoftarget, a

2 EMTmembersarerequiredtoacquire sharesinthe Company with 30% of the amountabovetarget(a

3 Various localbonusprogrammesare inplace forthe operational, administrative andblue-collaremployees oftheCompany.

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Summary of remuneration structure for employees below the Board

Element Policy features for the wider workforce Comparison with Executive Director remuneration

Salary

Read more on

pages 102 and 103

Our white-collar global workforce participates in an annual cash bonus

plan. The plan is based on our Company KPIs. This structure places equal

emphasis on the importance of an employee’s personal contribution to

the success of RHI Magnesita. We operate diﬀerent bonus plans for those

employees of our business where remuneration models in the market are

markedly diﬀerent, such as sales and production areas.

Annual bonus for Executive Directors is directly related to the same

performance measures and outcomes as the wider workforce.

LTIP are provided to our senior executives and senior roles who

have inﬂuence on the overall performance of the Company.

Pay ratios

TheDutchCorporateGovernanceCoderecommendedfromtheﬁnancialyear2018,andthe UKDirectors’ReportingRegulationsrequiredfrom2019,
thattheCommitteereportpayratiosincludingchangesfromthe prioryearaspartofitsdeterminationofexecutive payandwiderexecutiveremuneration
decisions.ThetotalemployeeremunerationﬁgureusedfortheratiobelowisforallemployeesinallGroupcompaniesandincludescountrieswith
signiﬁcantly lower levels of pay than Europe and the United States. RHI Magnesita only has around 100 employees in the UK and falls below the required
thresholdforUKpayratioreportingrequirements.AsUKemployeesrepresentlessthan1%ofRHIMagnesita’semployees,the Committeeconsidersthat
theaboveapproachisappropriateinthecircumstances.

RHI Magnesita is positioned around the median CEO pay ratio of other basic materials and industrial companies of a similar size listed on the FTSE.

AsigniﬁcantproportionoftheExecutiveDirectors’remunerationisdeliveredthroughincentives,annualbonusandLTIP,whereawardsarelinked to
Companyperformanceandsharepricemovementoverthelongerterm.Thismeansthatthe pay ratio will depend on the incentive outcome. No LTIP vested
duringthelasttwoyears.

Thetablebelowshows the pay ratio in respect of each year from 2018 to 2021:

Pay ratio 2021 2020¹2019 2018

CEO 21.1 41:1 34:1 49:1

CFO 13.1 25:1 16:1²N/A

1 Payratioislowerdue tonot achievingtarget bonusKPIs.

2 The payratiorosedue tothe increase inbase salary forthe CEOandCFOin2020.

3 CFOpayratioislowerasIanBothajoinedthe Company on1 April 2019; with thefullsalaryandbonus,theratiowouldbe21:1.

The proportion of ﬁxed and variable remuneration

To supportthePolicy’sobjectivestodeliverlong-termsustainable successoftheCompany,the remunerationpackage ofourExecutive Directorsincludes
a mix of ﬁxed and variable remuneration. The proportion for 2022 is approximately 40% for ﬁxed pay and 60% variable remuneration on a target basis
(calculatedonthesamebasisasthetargetscenarioshownbelow).Variable pay is split between the annual bonus, with 50% of payment over targetbeing
heldinshares,andlong-term incentive.

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Directors’ Remuneration Policy continued

Remuneration scenarios for Executive Directors

ThePolicy providesthatasigniﬁcantproportionofremunerationisdeterminedbyGroupperformance.The graphbelowillustrateshowthetotalpay
opportunitiesvaryunderthreediﬀerentperformancescenarios:minimum,targetandmaximum.Wehavealsoshownanassumedsharepriceappreciation
of50%fortheLTIPawardduringtheperformanceperiodunderthemaximumpaymentscenario.

Assumptions

Minimum:Fixedpayonly(base salary,pensionandbeneﬁts,excludingrelocationbeneﬁts).

Target: Fixed pay plus 50% of 2022 maximum annual bonus opportunity for the CEO and CFO with 50% vesting of the 2022 LTIP award.

Maximum:Fixedpayplusmaximumannualbonusopportunityand100%vestingof2022LTIPawardwithanassumedsharepriceappreciationof50%
fortheLTIPawardduringtheperformanceperiod.

AsrequiredundertheDutchCorporateGovernanceCode, scenario analysis was carried out as part of the formulation of the Policy and to establish thatthe
policyresultsinappropriateandfairlevelsofremuneration,includingthatthe level and ratio of ﬁxed to variable paydoesnotencourage inappropriate
risk-takingoroverrelianceonvariablepaywhileensuringthereissuﬃcientalignmenttoinvestors,thelong-termperformanceoftheCompanyand
development of the market value of the shares of the Company.

CEO Values in €		CFO Values in€
Maximum 20% 27% 35% 18% 6,223,403	Maximum 24% 30% 30% 15%		3,159,763
Target 40% 26% 34% 3,201,703 Target 44% 28% 28% 1,714,363
Minimum 100% 1,278,803 Minimum 100% 750,763

Fixed pay Annual bonus LTIP 50% share price growth on LTIP

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Annual Report on Remuneration

Annual ReportonRemuneration ThefollowingsectionprovidesdetailsofhowtheCompany’sDirectorswerepaidduringtheﬁnancialyearto31 December2021.

AsaDutchincorporatedandregisteredandUKlistedcompanyRHIMagnesitaisrequiredtocomplywithbothUKandDutchreportingrequirements,
includingtheUK andDutchCorporateGovernanceCodes.

TheCommitteetogetherwiththeBoardhasdeterminedtoprovide certainvoluntarydisclosuresrecognisingthe importance oftransparency ofreporting
andinvestorexpectationasa UKlistedcompanytocomplywiththeUKDirectors’RemunerationReportingRegulations.ThisAnnualReportiscompiled
onthisbasis.

TheRemunerationCommitteemembers,activitiesandmeetingsduringtheyearare set out on page 96,alongwiththeCommittee’spurpose,
rolesandresponsibilitiesandistherebyincludedinthispartofthe reportbyreference.

Advisers

KornFerry(“KF”)signatoriestotheUKRemunerationConsultantsGroup’sCode ofConduct(“Code of Conduct”) and was appointed by the Committeein
2017havingsubmitteda proposalwhichdemonstratedtheirskillsandexperienceinexecutive remuneration.KFprovidesadvicetothe Committee
onmattersrelatingtoUKgovernanceincludingconsultingon theremunerationreportandanalysingmarkettrends.

TheCommitteewassatisﬁedthattheadviceprovidedbyKornFerrywasobjectiveandindependenthavingnotedtheircommitmenttothe Codeof
Conduct. Korn Ferry’s fees for advice to the Committee in 2021 were £52,215.KornFerry’sfeeswerechargedonthe basis of the time spentadvisingthe
Committee.KornFerryprovidedotherhumancapitalrelatedservicesduringthe year to a separate part of the business,buttheseserviceswerecarried
out by a team wholly separate to the remuneration advisory team. The Committeeiscomfortablethatthe controlsinplace at Korn Ferry do not result
in the potential for any conﬂicts of interest to arise.

Statement of voting at AGM

At last year’s AGM, held on 10 June 2021, votes on the business pertaining to remuneration, were cast as follows:

Resolutions Votes for

% of votes

cast

Votes

against

% of votes

cast

Total votes

validly cast

Total votes

cast as a % of

the relevant

shares in

issue

Number of

votes

withheld

Advisory vote on Annual Report on Remuneration 36,339,606 95.83 1,582,904 4.17 39,070,758 81.53% 1,148,248

Adopt the Directors’ Remuneration Policy which takes

eﬀect from 1 January 2021

37,487,854 95.95 1,582,904 4.05 39,070,758 81.53% 0

The total voting rights of the Company on the day on which shareholders had to be on the register in order to be eligible to vote was 47,924,771.
A “Vote withheld” is not a vote in law and is not counted in the calculation of the % of shares voted “For” or “Against” a resolution.

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Annual Report on Remuneration continued

Single total ﬁgure table (audited)

Thefollowingtableshowsasingletotalﬁgureofremunerationinrespectofqualifyingservicesforthe2021 ﬁnancialyearforeachExecutive and
Non-ExecutiveDirectoroftheCompany,togetherwithcomparativeﬁguresfor2020.

Salary Taxable beneﬁts²Pension³Bonus LTIP Total remuneration Total ﬁxed remuneration

Total variable

remuneration

Director¹2021 2020 2021 2020 2021 2020 2021 2020³2021 2020 2021 2020 2021 2020 2021 2020

Executive Directors

Stefan Borgas €1,052,000 €969,000 €183 €8,823 €157,800 €145,539 €374,775 €769,500 0 – €1,584,758 €1,892,862 €1,209,983 €1,123,362 €374,775 €769,500

Ian Botha €615,000 €566,667 €12,003 €21,277 €92,250 €85,110 €219,094 €450,000 0 – €938,347 €1,123,054 €719,253 €673,054 €219,094 €450,000

Non-Executive Directors

Herbert Cordt £241,000 £227,167 – – – – – – – £241,000 £227,167 £241,000 £227,167 – –

John Ramsay £122,900 £93,163 – – – – – – – £122,900 £93,163 £122,900 £93,163 – –

Janet Ashdown £104,522 £87,163 – – – – – – – £104,522 £87,163 £104,522 £87,163 – –

David Schlaﬀ £71,100 £67,087 – – – – – – – £71,100 £67,087 £71,100 £67,087 – –

Stanislaus Prinz zu Sayn Wittgenstein-

Berleburg £71,100 £67,087 – – – – – – £71,100 £67,087 £71,100 £67,087 – –

Fiona Paulus £84,728 £79,943 – – – – – – – £84,728 £79,943 £84,728 £79,943 – –

Jann Brown £52,566 – – – – – – – – – £52,566 – £52,566 – – –

Karl Sevelda £82,314 £74,820 – – – – – – £82,314 £74,820 £82,314 £74,820 – –

Marie-Héléne

Ametsreiter £48,017 £48,017 £48,017

Sigalia Heifetz £48,017 £48,017 £48,017

Wolfgang

Ruttenstorfer £79,300 £74,820 – – – – – – – £79,300 £74,820 £79,300 £74,820 – –

Celia Baxter⁴£42,234 £90,287 – – – – – – – £42,234 £90,287 £42,234 £90,287 – –

Andrew Hosty⁴£36,182 £77,333 – – – – – – £36,182 £77,333 £36,182 £77,333 – –

Michael Schwarz⁵– – – – – – – – – – – – – – –

Karin Garcia⁵– – – – – – – – – – – – – – –

Martin Kowatsch⁵– – – – – – – – – – – – – – –

1 Allamountsaredisclosedinthe currenciesinwhich the relevant elementsof pay are set.Actualpaymentmaybemadeinthecurrencywheretherecipientresides using theexchangerateatthetime
ofpayment.

2 Beneﬁtsin2021 forStefanBorgasof €183 (garage andinsurance) forthe year; Stefanexchangedhis cartoanelectriccarduring 2021.UnderAustriantaxlaw,electric cars arenottaxableemployee
beneﬁtswhichresultsinasigniﬁcant reductioninCEOtaxable beneﬁtsfor2021. The beneﬁts forIanBotha includeda carbeneﬁtof€11,694and€309garageandinsurancebeneﬁts.

3 Pensionﬁguresrepresentthe15%of salary cash allowance receivedby Executive Directors.

4 Andrew HostyandCeliaBaxtersteppeddownfrom theirBoardroleson10June 2021 thereforetheirfees wereproratedaccordingly.

5 Employee Representative Directorsdo not receive additional remunerationforthisroleas theyareremuneratedas employees oftheGroup.

Noloans,advancesorguaranteeshavebeenprovidedtoanyDirector.NoLong-termincentivesvestedduringthe year and so there was no impact of share
priceappreciation.

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2021 annual bonus performance against targets (audited)

Thetargetssetfortheannualbonusandperformanceagainst themare set out below. For 2021, the Committeereintroducedastrategicelementto the
bonusonceagaintoprovidedriversforproﬁtabilityalignedwiththe Company’srefreshedstrategyandCO₂emissionsintensityreductiontargets. The
ﬁnancialtargetsfocusedondrivingearningsandcashﬂow,therebypreservingthe Group’sbalance sheetstrengthandﬁnancialliquidity.TheCommittee
iscomfortablethatthisbonuspaymentrepresentsa fairlevelofrewardfortheperformance achievedbythe ExecutiveDirectorsandthe business.

There is a payment of 24% of maximum annual bonus for the CEO and CFO as a result of good performance against the strategic initiatives, including
growingmarketshare.AlthoughneitheroftheAdjustedEBITAorOperatingCashFlowmetricswere achieved,theCommittee noted that a robust level
ofproﬁthadbeendeliveredagainstachallengingtargetrange,particularlywhentakeninthe contextofthemarketchallengesalreadynoted above. The
Committeealsoconsideredthatmanagementhadmanagedthe businesseﬀectivelyoverthe year,managingstrongvolumedemandwithrisingcost
pressures,whileensuringstronglevelsofliquiditywithgoodprogressagainsttheimportantstrategicelementsofthebonus.Inthecircumstances,the
Committeeagreedthatthelevelofformulaicbonuswhichalignedtobonusespayabletoeligible membersoftheworkforcewasappropriate.

Pay-out (€)3

Measure Weighting

Threshold

(0% of

maximum)

Target

(50% of

maximum)

Max

(100% of Actual Pay-out Pay-out

maximum) performance (% of max) 2 (% of salary) CEO CFO

Adjusted EBITA (€m) 35% 291 322 354 280 0% 0% €0 €0

Operating Cash Flow (€m) ¹ 35% 157 189 212 -236 0% 0% €0 €0

Increase global value market share 10% 14,0% 14,4% 14,7% 14.3% 37% 6% €59,175 €34.594

Reduce conversion cost 10% -6,0% -7,0% -7,5% -11.9% 100% 15% €157,800 €92.250

Reduce CO₂emissions4 10% -0,8% -1,2% -1,4% -3.7% 100% 15% €157,800 €92.250

Total 100% – – – – 24% 36% €374,775 €219.094

1 Operatingcashﬂowatconstant currency. EBITA w/o restructuringexpenses+CapEx+ changeinworking capital+ cashtax.

2 The maximumCEOandCFOannual bonusin2021 was150% of salary.

3 ExecutiveDirectorsare requiredto acquire sharesinthe Company with 50% oftheamountpaidinexcess oftarget(a
asapercentageofsalarywasnot achieved(75%), the bonusispayable whollyincash.

4 Youcanreadmoreonthereductionof CO₂emissionsintensity onpage 91.

LTIP awards where vesting is based on performance periods ending during the ﬁnancial year ending 31 December 2021 (audited)

LTIP awards vesting

The details for the LTIPs due to vest in 2022 are shown below:

The LTIP awards¹ granted on 19 August 2019 and vesting in 2022 were based on performance to the year ended 31 December2021.The performance
targetsfortheseawardsandactualperformanceagainstthosetargetswere asfollows:

Metric Weighting

Threshold

target

(25% vests)

Stretch

target

(100% vests) Actual % Vesting

Relative TSR²33.33% 50th

percentile

(27.90%)

75th

percentile

and above³

(73.81%)

-3.75% 0%

Adjusted EPS (ﬁnal year of performance period) 33.33% €7.80 per

€9.00 per

€4.46 per

Cumulative economic proﬁt 33.33% €600 M €670 M €340 M 0%

Total 100% 0%

1 Awardsare structuredasnil cost options.

2 Measuredagainstthe FTSE350, excludingsectorswith limiteddirect relevancetoRHIMagnesita.

3 Awardsvestonastraight-line basisbetweenthresholdandmaximum.

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Annual Report on Remuneration continued

LTIP awards where vesting is based on performance periods ending during the ﬁnancial year ending 31 December 2021 (audited) continued

LTIP awardsvestingcontinued

The details of the LTIPs vesting in 2022 as a resultofperformancenotedaboveare shownbelow:

Executive Grant date Vest date

Number of

granted

Number of

shares to vest

Dividend

equivalent

Estimated

value

Stefan Borgas 19 August 2019 19 August 2022 38,397 0 0 0

Ian Botha

19 August 2019 19 August 2022 16,840 0 0 0

19 August 2019 19 August 2022 16,841 0 0 0

1 In2019,IanBothareceivedtwograntsof performance shares. The grant of 16,840shares represents theannualLTIPgrant.Thegrantof16,841 shares represents thebuy-outawardfortheperformance
shareawardsforfeitedwhenjoining RHIM. The buyout awardveststhree yearsa

LTIP awards awarded during the ﬁnancial year ending 31 December 2021 (audited)

Duringthe year, the CEO received an LTIP award of 200% of salary and the CFO received an LTIP award of 150% of salary.

Details of the LTIP award and the performance targets that will determine the extent to which the awardvestsare set out below.

Director Scheme Basis of award Date of award

Percentage of

salary award

Share price

used¹

Face value

€000

Percentage

vesting at

threshold

performance

Number of

End of

performance

period

Stefan Borgas LTIP Annual award³15 March 2021 200% €48.28 2,104 25% 43,579 15 March 2024

Ian Botha LTIP Annual award³15 March 2021 150% €48.28 922.5 25% 19,107 15 March 2024

1 Thefacevalueoftheawardswascalculatedusingthe average closingprice forthe ﬁvetrading days priortotheawardbeing grantedbeing £41.38 convertedto€(using averageFX rateover thesame
ﬁve-dayperiodof€0,857to£1 =€48.28).

2 Awards are structuredasnilcostoptions.

Performance targets for 2021 LTIP awards

Performance measure Weighting

Threshold

(25% vesting) ¹

Intermediate

(75% of vesting) ¹

Maximum

(100%

vesting) ¹

Performance

period²

Absolute TSR 25% 13% 20% 25% and

above

15 March 2021 to

15 March 2024

Adjusted EPS (cumulative for the three-year performance period) 50% €12.00 €14.50 €16.89 1 January 2021 to

31 December 2023⁴

Use of Secondary Raw Material³25% 6.5% 7.5% 8.0%

1 Awards vestonastraight-linebasis betweenthresholdintermediate andmaximum.

2 FortheTSRelement,measuredfrom date of grant to thirdanniversary on15March 2024witha two-monthaverageTSRbeforeeachdateandfortheEPS elementandSecondaryRawMaterialElement,
threeﬁnancialyearsuntil31 December2023.

3 Useofsecondaryrawmaterialasapercentage of total raw materialsused, evaluatedattheendof2023basedonthecurrentproductionnetwork(andexcluding anychanges inrawmaterialusage
duetoanyfuture M&Aactivity).

4 Inlinewiththe RemunerationPolicy, atwo-yearholdingperiodpost vestingholdingperiodapplies.

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Performance targets for 2020 LTIP awards

Performance measure Weighting

Threshold ¹

(25% vesting)

Intermediate ¹

(75% of vesting)

Maximum ¹

(100%

vesting)

Performance

period²

Absolute TSR 50% 30%

cumulative

TSR growth

over the 3

years

30%

cumulative TSR

growth over the

3 years

30%

cumulative

TSR growth

over the 3

years

8 April 2020 to

7 April 2023

Cumulative Underlying Earnings Per Share 50% €6.50/share €8.00/share €9.50/

1 January 2020 to

31 December 2022

1 Awardsvestonastraight-line basisbetweenthreshold, intermediate andmaximum.

2 Forthe TSRelement,measuredforaperiodof three yearsfrom the date of grantwitha two-monthaveragebeforeeachdate.TheEPS elementis threeﬁnancialyears until31 December 2022.

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Statement of Directors’ shareholding and share interests (audited)

UndertheshareownershiprequirementssetoutintheDirectors’RemunerationPolicy,the ExecutiveDirectorsare normallyrequiredtobuildandmaintain
over ﬁve years a shareholding equivalent to at least 200% of salary. At the 2021 year-end,the ExecutiveDirectorseachheldsharesinthe Company
as detailed below. Shares are valued using the Company’s closing market share price on 31 December2021 of£33.06.

ThetablebelowshowshoweachDirectorcomplieswiththeshareholdringguidelineson31 December2021

held at 31

December

2021

Shares held

connected

persons

held at 31

December

2020

Number

of shares

Number of

options

Unvested

and subject

to a service

requirement

only

Unvested and

subject to

performance

conditions

Vested but

unexercised

Exercise

during

the year

Shareholding

requirement

Current

shareholding

% salary¹

Requirement

met?

Executive Directors

Stefan Borgas 21,300¹ 1,150 18,600 21,300 172,372 – 172,372 – – 200% salary 80%²No

Ian Botha – – – – 109,027 16,592 92,435 – – 200% salary 53%³No

Non-Executive Directors

Herbert Cordt 350,000 – 350,000 – – – – –

John Ramsay 2,130 – 2,130 – – – – –

Janet Ashdown – – – – – – – –

David Schlaﬀ⁴– – – – – – – –

Stanislaus Prinz zu Sayn-Wittgenstein-

Berleburg ⁵– – – – – – – –

Fiona Paulus – – – – – – – –

Jann Brown

Karl Sevelda 2,000 – 1,000 – – – – –

Marie-Hélène

Ametsreiter – – – – – – – – – –

Sigalia Heifetz

Wolfgang

Ruttenstorfer – – – – – – – –

Celia Baxter⁶1,002 1,002 – – – – – – – –

Andrew Hosty⁶389 389 – – – – – –

Karin Garcia – – – – – – – –

Martin Kowatsch 1,223 – – – – – – –

Michael Schwarz – – – – – – – –

1 ShareholdingdeterminedusinganFXrate of 1.1943 forGBP to EUR on31 December2021.
2 Includes shareholdingsofconnected persons.

3 aIncludesunvestedshareswhichare subject to aservice requirement andassumesataxrateof50%.
4 Accordingtothelatestdisclosuresby the shareholder: 13,333,340helddirectly by MSPSti

5 Accordingtothelatestdisclosuresby the shareholder: 2,088,461 interestsare heldthroughChestnutBeteiligungsgesellscha
Mr.WintersteinwhichallowsChestnut to exercise the votingrightsof SilverBeteiligungsgesellscha

2,088,461 heldthroughSilver.Ms.Sayn-Wittgensteinmade anagreement with Mr. Wintersteinwhichallows Chestnuttoexercisethevoting rights ofSilverintheIssuer.Ms.Sayn-Wittgensteinand
Mr.Wintersteinsharea familyrelationship. 1,590,000heldinpart directly andinpart indirectlythroughFEWIBeteiligungsgesellscha

6 ShareholdingforCeliaBaxterandAndrew Hosty are only considereduntil 10June 2021,whentheysteppeddownfromtheBoard.

TherewerenochangesintheDirectors’shareholdingsandshareinterestsbetweenthe end of the year and 25 February 2022.

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Directors’ interests in RHI Magnesita’s LTIP

ThetablebelowdetailsoutstandingshareawardsincludingtheannualLTIPawardsgrantedtothe CEO and CFO during 2021.

Scheme Award date

Share price

used

€

Share awards

held at

1 January 2021

Awarded

during

the year

Vested

during

the year

Share awards

lapsed

during

the year

Share awards

held at

31 December

2021

Total share

value at award

(face value)

€

Vesting

date

Stefan Borgas Performance shares 7 June 2018 57.773 28,594 – – 28,594⁶– 1,652,000¹7 June 2021

Performance shares 19 August 2019 44.534 38,397 – – – 38,397 1,709,972²19 August 2022⁵

Performance shares 8 April 2020 22.7 90,396 90,396 2,052,000⁴8 April 2023

Performance shares 15 March 2021 48.28 43,579 43,579 2,104,000⁵15 March 2024

Ian Botha Performance shares 19 August 2019 44.534 16,840 – – 16,840 750,000²19 August 2022

Performance shares 19 August 2019 44.534 16,841 – – 16,841 750,000²19 August 2022

Performance shares 8 April 2020 22.7 39,647 39,647 900,000⁴8 April 2023

Performance shares 15 March 2021 48.28 19,107 19,107 922,500⁵15 March 2024

Conditional Award 26 November 2019 45.202 16,592 – – 16,592 750,000³26 November 2022

1 The face valueoftheawardswascalculatedusingthe average closingprice fortheﬁvetrading days priortotheLTIPawardbeing grantedbeing £50.62 convertedto€ (using averageFXrateover the
same ﬁvedaysperiodof€1.14 to £1 =€57.773).

2 The face valueoftheawardswascalculatedusingthe average closingprice fortheﬁvetrading days priortotheLTIPawardbeing grantedbeing £41.06convertedto€ (using averageFXrateover the
same ﬁvedaysperiodof€1.0846 to £1 =€44.534).

3 The face valueoftheawardswascalculatedusingthe average closingprice fortheﬁvetrading days priortotheLTIPawardbeing grantedbeing £38.73convertedto€(using averageFXrateover the
same ﬁvedaysperiodof€1.167 to £1 =€45.202).

4 The face valueoftheawardswascalculatedusingthe average closingprice fortheﬁvetrading days priortotheawardbeing grantedbeing £19.976convertedto€(using averageFXrateover thesame
ﬁve dayperiodof€0,881 to £1 =€22.7).

5 The face valueoftheawardswascalculatedusingthe average closingprice fortheﬁvetrading days priortotheawardbeing grantedbeing £41.38 convertedto€(using averageFX rateover thesame
ﬁve-dayperiodof€0.857 to £1 =€48.28).

6 Followingthetestingofthe performance conditions, thisawardhasnow lapsed.

Review of past performance and CEO remuneration table (unaudited)

Sharepriceperformance

SharesarevaluedusingtheCompany’sclosingmarketshareprice on 31 December2021 of £33.06 (2020: £35.06). During 2021, the shares traded in the
range of £29.46 – £47.04.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 1 1 7

Annual Report on Remuneration continued

RHIMagnesitatotal shareholderreturn

The graph below compares the Total Shareholder Return of the Company with the FTSE350IndexfromAdmissiondate of 27 October 2017 to 31 December

2021.ThisisconsideredanappropriatecomparatorforRHIMagnesitabecauseitisaconstituentofthe index.

180

160

140

120

100

27/10/18 31/12/18 31/12/19 31/12/20 31/12/21

RHI Magnesita FTSE 350

Source:Datastream(ThomsonReuters)

Remuneration of the CEO

2017 2018 2019 2020 2021

Single ﬁgure of total remuneration¹

Stefan Borgas €476,981 €2,073,350 €1,490,427 €1,892,862 €1,584,758

Annual bonus pay-out as % of maximum^{2, 3}

Stefan Borgas 83.16% 88.04% 38.9% 50% 24%

Long-term incentive vesting rates as % of maximum⁴

Stefan Borgas N/A N/A N/A 0% 0%

1 The2017 single ﬁgureoftotalremunerationrelatesto the period27 October2017 to 31 December2017.

2 The2017 annualbonuspay-outas a% of maximum relatesto bonustargetsset priortothemergerofthetwocompanies thatnowformRHIMagnesitaNV.
3 Thepercentageofmaximumshown forthe 2020annual bonusisthe amount paidto theCEO.Theformulaicbonus outcomeis 100%ofmaximum.

4 Along-termincentiveplanwasintroducedwhentheCompanywasformedinOctober2017.Theﬁrst2018LTIPawardwaseligibletovestinin2021 basedonaperformanceperiodending31 December
2020(andto31 January2021 forthe TSR element). The performance conditionswerenotmet.The2019awards vestin2022 basedona performanceperiodending 31 December2021.Asdetailed
elsewhere,no2019LTIPawardispayable asperformance conditionshave not beenmet.Seepage114.

Annual percentage change in remuneration of the CEO (unaudited)

Thetablebelowillustratesthepercentagechangeinannualsalary,beneﬁtsandbonusbetween2020and2021 for the CEO and the average for all
AustrianemployeesoftheCompany.TheCEOisanAustrian-basedemployee;therefore,the CommitteefeelsthatacomparatorbasedonallAustrian
employeesisappropriateforthepurposesofthisanalysis.

Salary change

(2020 to 2021)

Beneﬁts change

(2020 to 2021)

Annual bonus

change (2020

to 2021)

CEO 2.5% -2.3%¹-51.3%

Average of employees 2.9% -5.5%¹-49.0%

1 Eligibleemployeeshaveexchangedtheircarto anelectric carduring2021. Due to Austriantaxlawelectric cars arenotataxableemployeebeneﬁt(comparedtonon-electric cars).ThereforeCEO and
employeetaxable beneﬁtsfor2021 fell slightly.

1 1 8 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

Directors and employee remuneration over time (unaudited)

Thetablebelowshows theDirectors’totalremunerationyearonyearchange (onafull-timeequivalentbasis)

Year

Total

remuneration

in FY 2021

Change %

2020 to 2021

Change %

2019 to 2020

Change % from

2018 to 2019¹

Executive Directors²

Stefan Borgas €1,584,758 -16.28%³27% -28.1%

Ian Botha €938.347 -16.45%⁴N/A⁴N/A⁴

Non-Executive Directors –

Herbert Cordt £241,000 6.09% 3.2% –

John Ramsay £122,900 31.92% 12.9% 6.4%

Janet Ashdown £104,522 19.92% N/A⁴N/A⁴

David Schlaﬀ £71,100 5.98% 3.2% –

Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg £71,100 5.98% 3.2% –

Fiona Paulus £84,728 5.99% N/A⁴N/A

Jann Brown £52,566 N/A⁴– –

Karl Sevelda £82,314 10.02% 3.2% –

Marie-Héléne Ametsreiter £48,017 N/A⁴– –

Sigalia Heifetz £48,017 N/A⁴– –

Wolfgang Ruttenstorfer £79,300 5.99% 3.2% –

Karin Garcia⁵– – – –

Martin Kowatsch⁵– – – –

Michael Schwarz⁵– – – –

Celia Baxter⁶£42.234 N/A⁴3.1% 6.1%

Andrew Hosty⁶£36.182 N/A⁴-3.9% 3.8%

Company performance

Adjusted EPS 4.46 36.0% -41.1% 4.8%

Reported EBIT in € million 213,8 77.3% -55.8% -4.4%

Operating Cash Flow in € million -236 -181.4% 1.7% -23.0%

Average remuneration (on a full-time equivalent basis)

Employees of the Company⁷€73,962 -3.4% 7.7% 4.1%

1 Fornotesonthechangefrom 2018to 2019, please see the 2019 Annual Reportandforthechangefrom2019to2020the2020AnnualReport.

2 The Executive Directorswaived20% of basic salary andthe Non-Executive Directors tooka voluntaryfeereductionof10%fora four-monthperiodfrom1 April2020.Thepercentagechangefrom
2020to2021 reﬂectsthis reduction.

3 DuetonotreachingtargetonCompany KPIsthe bonusdecreasedandthereforetheoverallremunerationdroppedalso.

4 Where the incumbentdidnot serve forthe full year, the calculationhasnot beenmadeas itis unrepresentative.

5 Employee Representative Directorsdo not receive remunerationforthat role,theyareremuneratedas employees oftheGroup.

6 AndrewHostyandCeliaBaxterceasedto be Directorson10June 2021.

7 The groupofRHIMemployeescoversthe parent company, namely all employees withintheAustriansubsidiaries.

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 1 1 9

Annual Report on Remuneration continued

Relative importance of spend on pay (unaudited)

The following table sets out the changeindistributionstoshareholdersbywayofdividendandshare buyback and overall spend on pay in the ﬁnancial year
ended31 December2020comparedwiththeﬁnancialyearended31 December2021.

2021

€ million

2020

€ million

Percentage

change

Total gross employee pays 547.6 575.6 -4.86%

Dividends 71.2 73.5 -4.22%

Share buyback 95.5 2.6

You can ﬁnd ﬁnd more information on the share buyback on page 37.

Payments to past Directors (audited)

There were no payments to past Directors in the period 1 January to 31 December2021.AndrewHostyandCeliaBaxtersteppeddownfromtheBoard
on 10 June 2021 andreceivedfeestothatdate(£36,182and£42,234respectively).

Payments for loss of oﬃce (audited)

No payments were made to any Director in respect of loss of oﬃce in the period1 January to 31 December2021.

2022 remuneration (unaudited)

SetoutbelowishowtheDirectors’RemunerationPolicywillbeimplementedduring2022.There arenosigniﬁcantchangesinthe way that the
RemunerationPolicywillbeimplemented in 2022.

Salaries and fees for 2022

Directors’salariesand fees (on a full-time equivalent basis)

Subjecttoapprovalatthe2022AGM,theDirectors’salariesandfeeswillbeincreasedinalignmentwiththegeneralworkforce increases(4.44%)from
1 January2022.Owingtorounding,theexactpercentagesofincrease diﬀer but are never more than 4.45% which was the averageincreaseoftheAustrian
workforce.

2022²2021²

Percentage

change

Executives

Stefan Borgas €1,098,800 €1,052,000 4.45%

Ian Botha €642,300 €615,000 4.44%

Non-Executives

Chairman (inclusive of all Committee fees) £251,700 £241,000 4. 44%

Non-Executive Directors £74,200 £71,100 4.36%

Deputy Chairman & Senior Independent Director £28,500 £27,300 4.40%

Chairmen of Audit & Compliance Committee, Remuneration Committee, Nomination Committee

(unless held by the Chairman) and Corporate Sustainability Committee

£19,900 £19,100 4.19%

Membership of the Audit and Compliance and Remuneration Committees £8,500 £8,200 3.66%

Membership of the Nomination and Corporate Sustainability Committee £5,600 £5,400 3.70%

1 Feeandsalaryincreasesareroundedto the nearest 100.

TheCompanydoesnotcontributetodeﬁnedbeneﬁtpensionschemesonbehalfofExecutiveDirectorsorNon-Executive Directors.Nodirectorhas a
prospectiveentitlementunderadeﬁned beneﬁt scheme.

1 2 0 R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1

STRATEGIC REPORT GOVERNANCE

FINANCIAL

STATEMENTS

OTHER

INFORMATION

Annual bonus for 2022

The maximum potential annual bonus opportunity for FY22 remains at 150% of salary for both the CEO and CFO. The CommitteehassetbonusKPIsfor
2022 which focus on key 2022 ﬁnancial measures as well as our strategic priorities. Both CEO and the CFO are requiredtouse 50% of any bonus earned in
excess of target (net of tax) to acquire shares in the Company that will be held for a minimum of three years.

Weighting

Performance criteria 2021 2022

Adjusted EBITA 35% 35%

Operating Cash Flow 35% 35%

Strategic Initiatives ¹

Increase global value market share 10% 10%

Reduce conversion cost 10% 10%

Reduce CO₂emissions 10% N/A

Use of Secondary Raw Material N/A 10%

1 The speciﬁctargetsrelatingto the 2022 bonushave not beendisclosedat this stageas theyareconsideredbytheCommitteetobecommerciallysensitive,anditis notconsideredintheinterests
ofshareholderstodisclosefurtherdetailsonaprospective basis. Detailswill beprovidedona retrospectivebasis innextyear’s AnnualReportonRemuneration

2022 LTIP awards

The CEO will be granted a LTIP award over shares with a value at grant of 200% and the CFO will be granted a LTIP award over shares with a value at grant of
150%ofsalary.Takingintoaccounttheongoingmarketandeconomicoutlookanduncertainty,theCommittee decidedtoretainthefocusonabsolute
(ratherthanrelative)totalshareholderreturn,andtotalcumulative EPS.Asoutlinedearlierinthisreport,theCommittee recognisestheimportanceof
attainingourtargetsforthereductionofcarbonemissions.For 2022 we have moved our CO₂emissiontargetfromthe annual bonus to the LTIP aligning it to
ourlong-termreductionstrategy.Themeasuresandthetargetsaresetoutbelow.

Performance measure Weighting

Threshold

(25%

vesting)

Intermediate

(75% of

vesting)

Maximum

(100%

vesting)

Performance

period

TSR¹25% 15% 22% 27% 2022 to 2024
(+2 year

Adjusted EPS (cumulative for the three-year performance period)²50% 14.25/ps 16.50/ps 19.25/ps
holding

period post

Reduce CO₂emissions per tonne against 2018 ²25% -11.5% -12.5% -13.0%
vesting)

1 Measuredfromthe date of grant to thridanniversary with atwo-month averagebeforeeachdate.

2 Measuredoverthe threeﬁnancial yearsto 31 December2024.

3 Awardsvestonastraight-line basisbetweenthresholdintermediate andmaximum.

This report was reviewed and approved by the Board on 25 February 2022 and signed on its behalf by order of the Board.

Janet Ashdown ChairmanoftheRemunerationCommittee

R H I M A G N E S I TA A N N U A L R E P O R T 2 0 2 1 1 2 1

Consolidated Financial Statements 2021

Consolidated Statement of Financial Position

as of 31.12.2021

in € million	Note	31.12.2021	31.12.2020
ASSETS
Non-current assets
Goodwill	(10)	114.4	110.8
Other intangible assets	(11)	282.6	265.7
Property, plant and equipment	(12)	1,089.7	958.6
Investments in joint ventures and associates	(13)	5.7	16.3
Other non-current financial assets	(14)	14.6	14.5
Other non-current assets	(15)	41.2	26.6
Deferred tax assets	(16)	202.4	199.2
		1,750.6	1,591.7
Current assets
Inventories	(17)	976.5	477.4
Trade and other current receivables	(18)	568.2	351.8
Income tax receivables	(19)	35.1	27.7
Other current financial assets	(20)	2.9	0.3
Cash and cash equivalents	(21)	580.8	587.2
Assets disposal groups	(5)	0.0	16.6
		2,163.5	1,461.0
		3,914.1	3,052.7


EQUITY AND LIABILITIES
Equity
Share capital	(22)	49.5	49.5
Group reserves	(23)	736.4	596.6
Equity attributable to shareholders of RHI Magnesita N.V.		785.9	646.1
Non-controlling interests	(24)	36.3	20.0
		822.2	666.1
Non-current liabilities
Borrowings	(25)	1,321.0	983.0
Other non-current financial liabilities	(26)	106.0	88.8
Deferred tax liabilities	(16)	48.4	45.0
Provisions for pensions	(27)	269.0	303.6
Other personnel provisions	(28)	68.7	70.5
Other non-current provisions	(29)	63.6	62.6
Other non-current liabilities	(30)	5.9	4.8
		1,882.6	1,558.3
Current liabilities
Borrowings	(25)	218.1	131.5
Other current financial liabilities	(26)	19.2	44.0
Trade payables and other current liabilities	(31)	878.8	522.7
Income tax liabilities	(32)	38.2	25.8
Current provisions	(33)	55.0	86.4
Liabilities disposal groups	(5)	0.0	17.9
		1,209.3	828.3
		3,914.1	3,052.7

Consolidated Statement of Profit or Loss

from 01.01.2021 to 31.12.2021

in € million	Note	2021	2020
Revenue	(34)	2,551.4	2,259.0
Cost of sales	(35)	(1,967.9)	(1,708.9)
Gross profit		583.5	550.1
Selling and marketing expenses	(36)	(108.1)	(110.9)
General and administrative expenses	(37)	(217.4)	(198.3)
Restructuring	(38)	(58.8)	(113.8)
Other income	(39)	29.1	19.7
Other expenses	(40)	(14.5)	(26.2)
EBIT		213.8	120.6
Interest income	(41)	14.2	5.9
Interest expenses on borrowings		(20.7)	(20.1)
Net income/(expense) on foreign exchange effects and related derivatives	(42)	2.8	(42.8)
Other net financial expenses	(43)	(21.2)	(29.7)
Net finance costs		(24.9)	(86.7)
Result from joint ventures and associates	(13)	100.2	7.6
Profit before income tax		289.1	41.5
Income tax	(44)	(39.4)	(13.9)
Profit after income tax		249.7	27.6
attributable to shareholders of RHI Magnesita N.V.		243.1	24.8
attributable to non-controlling interests	(24)	6.6	2.8


in €
Earnings per share - basic	(51)	5.10	0.51
Earnings per share - diluted		5.05	0.50

Consolidated Statement of Comprehensive Income

from 01.01.2021 to 31.12.2021

in € million	Note	2021	2020
Profit after income tax		249.7	27.6

Currency translation differences
Unrealised results from currency translation	(6)	70.5	(227.8)
Deferred taxes thereon	(44)	0.6	39.9
Current taxes thereon		0.1	3.7
Unrealised results from net investment hedge	(55)	(14.1)	15.8
Deferred taxes thereon		3.5	(2.0)
Current taxes thereon		0.0	(2.0)
Reclassification to profit or loss	(40)	0.0	0.3
Reclassification to profit or loss - Disposal subsidiaries	(5)	(7.9)	0.0
Cash flow hedges
Unrealised fair value changes	(54)	8.7	(3.6)
Deferred taxes thereon	(44)	(2.1)	0.9
Items that will be reclassified subsequently to profit or loss, if necessary		59.3	(174.7)

Remeasurement of defined benefit plans
Remeasurement of defined benefit plans	(27)	25.3	(0.7)
Deferred taxes thereon	(44)	(5.2)	0.6
Share of other comprehensive income of joint ventures and associates	(13)	0.6	0.0
Reclassification to other reserves due to disposal of joint ventures and associates		(0.5)	0.0
Items that will not be reclassified to profit or loss		20.2	(0.1)

Other comprehensive income after income tax		79.5	(174.8)

Total comprehensive income		329.2	(147.2)
attributable to shareholders of RHI Magnesita N.V.		320.5	(147.5)
attributable to non-controlling interests	(24)	8.7	0.3

Consolidated Statement of Cash Flows

from 01.01.2021 to 31.12.2021

in € million	Note	2021	2020
Cash (used in) / generated from operations	(47)	(53.3)	366.6
Income tax paid less refunds		(38.5)	(47.6)
Net cashflow from operating activities		(91.8)	319.0
Investments in property, plant and equipment and intangible assets		(252.1)	(156.9)
Investments in subsidiaries net of cash acquired		3.2	(8.5)
Cash flows from sale of subsidiaries net of cash disposed of		(4.8)	0.0
Cash receipts from the sale of equity instruments of interests in joint ventures		100.0	0.0
Cash inflows from the sale of property, plant and equipment		12.2	10.5
Dividends received from joint ventures and associates		7.6	10.8
Investment subsidies received		2.4	0.0
Interest received	(49)	2.7	6.0
Cash outflows / inflows from non-current receivables		(0.1)	0.2
Net cashflow from investing activities		(128.9)	(137.9)
Acquisition of treasury shares		(95.5)	(2.7)
Dividend payments to shareholders of the Group		(71.2)	(49.1)
Dividend payments to non-controlling interests		(1.4)	(1.1)
Proceeds from borrowings and loans		516.1	97.6
Repayments of borrowings and loans		(112.7)	(23.7)
Changes in current borrowings		5.5	7.4
Interest payments	(49)	(26.6)	(30.5)
Repayment of lease obligations		(16.3)	(15.8)
Interest payments from lease obligations		(1.1)	(1.3)
Cash flows from derivatives		0.9	1.5
Net cashflow from financing activities	(48)	197.7	(17.7)
Total cash flow		(23.0)	163.4
Change in cash and cash equivalents		(23.0)	163.4
Cash and cash equivalents at beginning of year¹⁾		589.2	467.2
Foreign exchange impact		14.6	(41.4)
Cash and cash equivalents at year-end	(21)	580.8	589.2

1) thereof shown under assets held for sale €2.0 million as of 31.12.2020.

Consolidated Statement of Changes in Equity

from 01.01.2021 to 31.12.2021

					Group reserves
						Accumulated other comprehensive income
in € million	Share capital	Treasury shares	Additional paid-in capital	Mandatory reserve	Retained earnings	Cash flow hedges	Defined benefit plans	Currency translation	Accumulated other comprehensive income/expenses relating to disposal groups	Equity attributable to shareholders of RHI Magnesita N.V.	Non-controlling interests	Total equity
Note	(22)	(23)	(23)	(23)	(23)	(23)	(23)	(23)			(24)
31.12.2020	49.5	(21.5)	361.3	288.7	376.8	(13.7)	(145.7)	(257.1)	7.8	646.1	20.0	666.1
Profit after income tax	-	-	-	-	243.1	-	-	-	-	243.1	6.6	249.7
Currency translation differences	-	-	-	-	-	-	-	58.5	(7.9)	50.6	2.1	52.7
Market valuation of cash flow hedges	-	-	-	-	-	6.6	-	-	-	6.6	-	6.6
Remeasurement of defined benefit plans	-	-	-	-	-	-	20.0	-	0.1	20.1	-	20.1
Share of other comprehensive income of joint ventures and associates	-	-	-	-	(0.5)	-	0.6	-	-	0.1	-	0.1
Other comprehensive income after income tax	-	-	-	-	(0.5)	6.6	20.6	58.5	(7.8)	77.4	2.1	79.5
Total comprehensive income	-	-	-	-	242.6	6.6	20.6	58.5	(7.8)	320.5	8.7	329.2
Dividends	-	-	-	-	(71.2)	-	-	-	-	(71.2)	(1.4)	(72.6)
Shares repurchased ¹⁾	-	(95.5)	-	-	-	-	-	-	-	(95.5)	-	(95.5)
Reclassification of puttable non-controlling interests without change of control²⁾	-	-	-	-	(1.6)	-	-	1.4	-	(0.2)	9.0	8.8
Change in non-controlling interests due to addition to consolidated companies	-	-	-	-	-	-	-	-	-	-	3.4	3.4
Reclassification of puttable non-controlling interests without a change of control	-	-	-	-	(20.0)	-	-	-	-	(20.0)	(3.4)	(23.4)
Share-based payment expenses	-	-	-	-	6.2	-	-	-	-	6.2	-	6.2
Transactions with shareholders	-	(95.5)	-	-	(86.6)	-	-	1.4	-	(180.7)	7.6	(173.1)
31.12.2021	49.5	(117.0)	361.3	288.7	532.8	(7.1)	(125.1)	(197.2)	0.0	785.9	36.3	822.2

1)The share buyback programme initiated in December 2020 has been completed in April 2021. The share buyback program was subsequently extended in May 2021 and completed in August 2021.

2)Further information is provided under Note (5) and Note (53).

		Group reserves
						Accumulated other comprehensive income
in € million	Share capital	Treasury shares	Additional paid-in capital	Mandatory reserve	Retained earnings	Cash flow hedges	Defined benefit plans	Currency translation	Accumulated other comprehensive income/expenses relating to disposal groups	Equity attributable to shareholders of RHI Magnesita N.V.	Non-controlling interests	Total equity
Note	(22)	(23)	(23)	(23)	(23)	(23)	(23)	(23)			(24)
31.12.2019	49.5	(18.8)	361.3	288.7	379.6	(11.0)	(145.6)	(79.8)	-	823.9	20.8	844.7
Profit after income tax	-	-	-	-	24.8	-	-	-	-	24.8	2.8	27.6
Currency translation differences	-	-	-	-	-	-	-	(177.3)	7.9	(169.4)	(2.5)	(171.9)
Market valuation of cash flow hedges	-	-	-	-	-	(2.7)	-	-	-	(2.7)	-	(2.7)
Remeasurement of defined benefit plans	-	-	-	-	-	-	(0.1)	-	(0.1)	(0.2)	-	(0.2)
Other comprehensive income after income tax	-	-	-	-	-	(2.7)	(0.1)	(177.3)	7.8	(172.3)	(2.5)	(174.8)
Total comprehensive income	-	-	-	-	24.8	(2.7)	(0.1)	(177.3)	7.8	(147.5)	0.3	(147.2)
Dividends	-	-	-	-	(24.5)	-	-	-	-	(24.5)	(1.1)	(25.6)
Shares repurchased	-	(2.7)	-	-	-	-	-	-	-	(2.7)	-	(2.7)
Share-based payment expenses	-	-	-	-	(3.1)	-	-	-	-	(3.1)	-	(3.1)
Transactions with shareholders	-	(2.7)	-	-	(27.6)	-	-	-	-	(30.3)	(1.1)	(31.4)
31.12.2020	49.5	(21.5)	361.3	288.7	376.8	(13.7)	(145.7)	(257.1)	7.8	646.1	20.0	666.1

Notes

to the Consolidated Financial Statements 2021

Principles and Methods

1. General

RHI Magnesita N.V. (the “Company”), a public company with limited liability under Dutch law is registered with the Dutch Trade Register of the Chamber of Commerce under the number 68991665 and has its corporate seat in Arnhem, Netherlands. The administrative seat and registered office is located at Kranichberggasse 6, 1120 Vienna, Austria.

The Company and its subsidiaries, associates and joint ventures (the “Group”) are a global industrial group whose core activities comprise of the development and production, sale, installation and maintenance of high-grade refractory products and systems used in industrial high-temperature processes exceeding 1,200°C. The Group supplies customers in the steel, cement, lime, glass and non-ferrous metals industries. In addition, the Group’s products are used in the environment (waste incineration), energy (refractory construction) and chemicals (petrochemicals) sectors.

The shares of RHI Magnesita N.V. are listed on the Main Market of the London Stock Exchange and are included in the FTSE 250 Index, with a secondary listing on the Vienna Stock Exchange.

RHI Magnesita N.V. was incorporated on 20 June 2017 and became the ultimate parent of the RHI Magnesita Group as of 26 October 2017, after completing the corporate restructuring of RHI AG. Until then, RHI AG was the ultimate parent of the Group. This restructuring represented a common control transaction that had no impact on the Consolidated Financial Statements, except for the reclassification of individual equity components.

The financial year of RHI Magnesita N.V. and the Group corresponds to the calendar year. If the financial years of subsidiaries included in the Consolidated Financial Statements do not end on 31 December due to local legal requirements, a special set of financial statements are prepared for the purpose of consolidation. The reporting date of the Indian subsidiaries is 31 March.

For the following German entities the exemption clause pursuant to section 264 paragraph 3 HGB (German commercial Code) was applied: RHI Urmitz AG & Co. KG (Koblenz), Magnesita Refractories GmbH (Wiesbaden), RHI Dinaris GmbH (Wiesbaden), RHI GLAS GmbH (Wiesbaden), RHI Magnesita Services Europe GmbH (Cologne), RHI Refractories Site Services GmbH (Wiesbaden), RHI Sales Europe West GmbH (Coblenz), RHI Magnesita Deutschland AG (Wiesbaden).

The Consolidated Financial Statements for the period from 1 January 2021 to 31 December 2021 were drawn up in accordance with all International Financial Reporting Standards (IFRSs) mandatory at the time of preparation as adopted by the European Union (EU). The presentation in the Consolidated Statement of Financial Position distinguishes between current and non-current assets and liabilities. Assets and liabilities are classified as current if they are due within one year or within a longer normal business cycle or if the company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Inventories as well as trade receivables and trade payables are generally presented as current items. Deferred tax assets and liabilities as well as assets and provisions for pensions and termination benefits are generally presented as non-current items.

The Consolidated Statement of Profit or Loss is drawn up in accordance with the cost of sales method.

With the exception of specific items such as derivative financial instruments and plan assets for defined benefit obligations, the Consolidated Financial Statements are prepared on a historical cost basis unless otherwise stated.

Basis for preparation

The preparation of the Consolidated Financial Statements in accordance with generally accepted accounting principles under IFRS, as adopted by the EU, requires the use of estimates and assumptions that influence the amount and presentation of assets and liabilities recognised as well as the disclosure of contingent assets and liabilities as of the reporting date and the recognition of income and expenses during the reporting period. Although these estimates reflect the best knowledge of management based on experience from comparable transactions, the actual values recognised at a later date may differ from these estimates. The financial statements are prepared on a going concern basis.

All amounts in the Notes and tables are shown in € million, unless indicated otherwise. For computational reasons, rounding differences may occur.

The Annual Report was authorised for issue on 27 February 2022 and will be submitted for adoption to the Annual General Meeting of shareholders on 25 May 2022.

2. Initial application of new financial reporting standards

The following amendments of standards have become effective during the reporting period. None of these amendments will have an effect on the Group’s accounting and measurement principles.

Standard	Title	Publication (Effective date)¹⁾	Effects on RHI Magnesita Consolidated Financial Statements
Amendments of standards
IFRS 16	Amendment to IFRS 16 Leases Covid 19-Related Rent Concessions beyond 30 June 2021	31.03.2021 (01.04.2021)	No effect
IFRS 4	Amendments to IFRS 4 Insurance Contracts - deferral of IFRS 9	25.06.2020 (01.01.2021)	Not relevant
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16	Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Interest Rate Benchmark Reform - Phase 2	27.08.2020 (01.01.2021)	No effect

1)According to EU Endorsement Status Report of 01.02.2022.

IFRS 7, IFRS 9, IAS 39, IFRS 16, IFRS 4 “Interest Rate Benchmark Reform”

In 2019 RHI Magnesita elected to early adopt the Phase 1 amendments to IAS 39 and IFRS 7 Interest Rate Benchmark Reform (IBOR) issued in September 2019 and is still applying the Phase 1 amendments in the Consolidated Financial Statements of 2020. In accordance with the transition provisions, the amendments have been adopted retrospectively to hedging relationships that existed at the start of the reporting period and to the amount accumulated in the cash flow hedge reserve at that date. The Phase 1 amendments provided temporary relief from applying specific hedge accounting requirements to hedging relationships directly affected by the IBOR reform by assuming that the interest rate benchmark is not altered as a result of the IBOR reform. The reliefs stipulated in the IBOR reform should not cause hedge accounting to terminate in general. However, any hedge ineffectiveness was continued and continues to be recorded in the Consolidated Statement of Profit or Loss. Furthermore, the amendments set out triggers for when the reliefs will end, which include the uncertainty arising from interest rate benchmark reform no longer being present.

In August 2020 the Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 were issued, which focus on the treatment of accounting impacts arising from the actual transition from the currently used to an alternative benchmark interest. The Phase 2 amendments are effective for annual periods beginning on or after 1 January 2021 and are to be applied retrospectively. RHI Magnesita’s risk exposure that is directly affected by the IBOR reform concerns its USD 200 million floating-rate debt with a remaining term until mid-2023. RHI Magnesita has hedged this debt with an interest rate swap, and it has designated the swap in a cash flow hedge of the variability in cash flows of the debt, due to changes in USD LIBOR that is the current benchmark interest rate. Further information is provided under Note (55). The applicable 3-month USD LIBOR is continued to being published until 30 June 2023 - which is after the last interest fixing date of the USD 200 million debt and interest rate swap. Therefore, the potential risk of any hedge ineffectiveness can be considered immaterial. Even in the unlikely scenario of discontinuation of USD LIBOR before 2023, management considers that the hedged debt would move to the same alternative benchmark rate as the swap, without any material effect on the Group.

One of the main uncertainties regarding LIBOR, even if not directly impacting the Group’s structural debt, is the use of its replacement rates after 31 December 2021. As USD LIBOR cannot be applied to new contracts starting 1 January 2022, the Group is being exposed to LIBOR replacement rates for its working capital and short-term financings in USD. Currently, the market predominantly uses a combination of the Secured Overnight Financing Rate (SOFR), plus a fixed credit spread adjustment that is based on a lookback period comparing credit spreads between SOFR and USD LIBOR, ranging from two to five years. As for the SOFR rate, either the simple overnight rate or specific Term-SOFR is used depending on the bank and product. There are still uncertainties in the market whether a true benchmark rate will prevail, that is as easily comparable and widely used as the USD LIBOR, however management is in close contact with banking counterparts to understand how the pricing of each underlying transaction is formed.

The EURIBOR is expected to remain active as the benchmark rate in the Euro area and consequently the risk of discontinuation before 2023 is relatively small, thus the interest rate swap of€305.6 million and its corresponding underlying hedged item, a floating-rate debt, both maturing in 2023, would most likely be unaffected. Even in the unlikely scenario of precocious discontinuation of the EURIBOR, management considers that the hedged debt would move to the same alternative benchmark rate as the swap.

RHI Magnesita is continuing to closely monitor the developments of the IBOR reform and is in regular communication with the banks to minimise any mismatches going forward.

IFRS 16 “Amendment to IFRS 16 Leases Covid-19-Related Rent Concessions”

The amendment permits lessees, as a practical expedient, not to assess whether particular rent concessions occurring as a direct consequence of the COVID-19 pandemic are lease modifications and instead to account for those rent concessions as if they are not lease modifications.

The practical expedient only applies to rent concessions occurring as a direct consequence of the COVID-19 pandemic and only if the following conditions are met cumulatively:

• The change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;

• Any reduction in lease payments affects only payments due on or before 30 June 2022; and

•There is no substantive change to other terms and conditions of the lease.

RHI Magnesita has evaluated the effect of applying the amendment to IFRS 16 Leases “COVID-19-Related Rent Concessions” with the conclusion that the Company will not make use of the practical expedient and that there is no effect to be expected to the Group.

3. New financial reporting standards not yet applied

The IASB issued further standards, amendments to standards and interpretations, whose application is, however, not yet mandatory as at 31 December 2021. The following financial reporting standards have not yet been adopted by the EU and were not applied early on a voluntary basis. They are not expected to have a significant impact on RHI Magnesita.

Standard	Title	Publication¹⁾	Mandatory application for RHI Magnesita	Expected effects on RHI Magnesita Consolidated Financial Statements
New standards and interpretations
IFRS 14	Regulatory Deferral Accounts	30.01.2014	No EU endorsement	Not relevant
IFRS 17	Insurance Contracts; including amendments to IFRS 17	18.05.2017 (09.12.2021)	01.01.2023	Not relevant

Amendments of standards
IAS 1	Classification of Liabilities as Current or Non-current	23.01.2020	01.01.2023	No material effects expected
IAS 1	Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies	12.02.2021	01.01.2023	No material effects expected
IAS 8	Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates	12.02.2021	01.01.2023	No material effects expected
IAS 12	Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single transaction	07.05.2021	01.01.2023	No material effects expected

1)According to EU Endorsement Status Report of 01.02.2022.

The following financial reporting standards have been adopted by the EU and were not applied early on a voluntary basis. They are not expected to have a significant impact on RHI Magnesita.

Standard	Title	Publication (EU endorsement)¹⁾	Mandatory application for RHI Magnesita	Expected effects on RHI Magnesita Consolidated Financial Statements
New standards
Amendments of standards
IFRS 17	IFRS 17 Insurance Contracts (issued on 18 May 2017); including Amendments to IFRS 17	25.06.2020	01.01.2023	not relevant
IFRS 3, IAS 16, IAS 37	Amendments to IFRS 3 Business Combinations; IAS 16 Property Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets as well as Annual Improvements 2018-2020	14.05.2020	01.01.2022	No material effects expected

1)According to EU Endorsement Status Report of 01.02.2022.

4. Other changes in comparative information

Segment reporting

As foundry is a very fragmented small customer industry and Segment Industrial is used to serve many more customers than only Segment Steel, given the multitude of different customer industries RHI Magnesita delivers to, the responsibility of the foundry business has been moved from the Segment Steel to Segment Industrial in 2021. The information for the previous year was adjusted accordingly, impacting segment revenue by €12.9 million, segment gross profit by €3.6 million and segment assets by €11.3 million.

5. Methods of consolidation

Subsidiaries

Subsidiaries are companies over which RHI Magnesita N.V. exercises control. Control exists when the company has the power to decide on the relevant activities, is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

The main operating companies of the RHI Magnesita Group and their core business activities are as follows:

Name and registered office of the company	Country of core activity	Core business activity
RHI Magnesita Deutschland AG, Germany	Germany	Production
Magnesit Anonim Sirketi, Turkey	Turkey	Mining, production, sales
Magnesita Mineração S.A., Brazil	Brazil	Mining
Magnesita Refractories Company, USA	USA	Mining, production, sales
Magnesita Refractories GmbH, Germany	Germany	Production
Magnesita Refratários S.A., Brazil	International	Production, sales
RHI Magnesita Trading B.V., Netherlands	International	Procurement, sales, supply chain
RHI Magnesita India Limited, India	India	Production, sales
RHI Canada Inc., Canada	Canada	Production, sales, provision of services
RHI Magnesita GmbH, Austria	International	Sales, R&D, financing
RHI GLAS GmbH, Germany	International	Sales
RHI Refractories (Dalian) Co., Ltd., PR China	PR China	Production
RHI US Ltd., USA	USA	Production, sales, provision of services
RHI-Refmex, S.A. de C.V., Mexico	Latin America	Sales
Veitsch-Radex GmbH & Co OG, Austria	Austria	Mining, production

The acquisition method is used to account for all business combinations. The purchase price for shares is offset against the proportional share of net assets based on the fair value of the acquired assets and liabilities at the date of acquisition or when control is obtained. Intangible assets which were previously not recognised in the separate Financial Statements of the company acquired are also measured at fair value. Intangible assets identified when a company is acquired, including for example technology, mining rights and customer relations, are only measured separately at the time of acquisition if they are identifiable and are in the control of the company and a future economic benefit is expected.

For acquisitions where less than 100% of shares in companies are acquired, IFRS 3 allows an accounting policy choice whereby either goodwill proportionate to the share held or goodwill including the share accounted for by non-controlling interests can be recognised. This accounting policy choice can be exercised individually for each acquisition. For the acquisition of Magnesita, non-controlling interests have been measured at their proportionate share of Magnesita’s identifiable net assets.

If a business combination is achieved in stages, the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains and losses arising from such remeasurement are recognised in profit or loss.

After completing the purchase price allocation, the determined goodwill is allocated to the relevant cash-generating unit and tested for impairment. In accordance with the provisions of IFRS 3, negative goodwill is immediately recognised in profit or loss in other income after renewed measurement of the identifiable assets, liabilities and contingent liabilities.

Net assets of subsidiaries not attributable to RHI Magnesita N.V. are shown separately in equity as non-controlling interests. The basis for non-controlling interests is the equity after adjustment to the accounting and measurement principles of the RHI Magnesita Group and proportional consolidation entries.

Transaction costs which are directly related to business combinations are expensed as incurred. Contingent consideration included in the purchase price is recorded at fair value at initial consolidation.

When additional shares are acquired in entities already included in the Consolidated Financial Statements as subsidiaries, the difference between the purchase price and the proportional carrying amount in the subsidiary’s net assets is offset against shareholders’ equity. Gains and losses from the sale of shares are recorded in equity unless they result in a loss of control.

All intragroup results are fully eliminated.

In accordance with IAS 12, deferred taxes are calculated on temporary differences arising from the consolidation. Subsidiaries are deconsolidated on the day control ceases.

Foundation of RHI Magnesita (Chongqing) Co., Ltd., Chongqing, China

On 2 November 2021 RHI Magnesita Group has founded RHI Magnesita (Chongqing) Co., Ltd., Chongqing, China (RHIMNGG). The Group holds a stake of 51% in the share capital of the company.

RHI Magnesita Group exercises control over RHIMNGG, as through voting rights and management representation, it has the power to steer the relevant activities of the business and can use this power to affect the variable returns from the company that it is exposed to. Therefore, RHIMNGG is a fully consolidated entity.

The non-controlling interests have the option to put the remaining equity stake to RHI Magnesita in 2031. RHI Magnesita opts to account for the non-controlling interests in accordance with IFRS 10. Thus, the non-controlling interests are initially recognised in accordance with IFRS 3 within equity while the put option liability is initially recognised against the non-controlling interest, reducing it to zero. The put option liability is recognised as a financial liability in accordance with IFRS 9. Further information on the fair value of the put option is provided under Note (53).

Disposal of RHI NORMAG AS and Premier Periclase Limited

In line with the Group’s raw material strategy, the Group completed the disposal of RHI Normag AS, Porsgrunn, Norway and Premier Periclase Limited, Drogheda, Ireland on 1 February 2021, being classified as held for sale as at 31 December 2020. The fair value less cost of disposal of the disposal group was determined with reference to the compensation payable to the purchaser. The total gain on loss of control of €6.0 million recognised in the Consolidated Statement of Profit or Loss predominantly relates to the recycling of certain components of Other Comprehensive Income of the entities within the disposal group.

The gain on loss of control is presented as follows:

in € million	01.02.2021
Loss on derecognition of net assets	(1.2)
Recycling of OCI components to P&L	8.0
Result from deconsolidation	6.8
Cash consideration payable to the purchaser	(0.8)
Gain from loss of control	6.0

As of 31 December 2021, further provisions for restructuring costs amounting to €4.2 million have been recognised for the exposure to an environmental guarantee and unfavourable contracts, see Note (33).

The following assets and liabilities were disposed of as at 1 February 2021:

in € million	01.02.2021
Non-current assets	5.3
Inventories	7.2
Trade receivables and other current assets	2.0
Cash and cash equivalents	4.0
Assets	18.5

Non-current liabilities	1.4
Current liabilities	15.9
Liabilities	17.3

Merger of Indian entities

In June 2021 the two Indian subsidiaries RHI CLASIL Private Limited and RHI India Private Limited were merged into RHI Orient Refractories Limited (ORL), now renamed to RHI Magnesita India Limited, leaving RHI Magnesita with a share of 70.19% in ORL. As a result of this transaction, put options held by the minority shareholders were waived and consequently the current financial liability of €8.8 million was reclassified to non-controlling interest within equity. Further information is provided under Note (24) and (53).

Joint ventures and associates

Shares in joint ventures and associates are accounted for using the equity method. A joint venture is a joint arrangement between the RHI Magnesita Group and one or several other partners whereby the parties that have joint control over the arrangement have rights to the net assets of the arrangement.

An associate is an entity over which the RHI Magnesita Group has significant influence. Significant influence is the power to participate in the investee’s financial and operating policy decisions without control or joint control. There is the rebuttable presumption that if a company holds directly or indirectly 20% of the shares of the investee or has other possibilities (e.g. through seats in the supervisory board) to influence the company’s financial and operating policy decisions it has significant influence over the investee.

At the date of acquisition, a positive difference between the acquisition costs and the share in the fair values of identified assets and liabilities of the joint ventures and associates is determined and recognised as goodwill. Goodwill is shown as part of investments in joint ventures and associates in the Statement of Financial Position.

The carrying amount of investments accounted for using the equity method is adjusted each year to reflect the change in equity of the individual joint venture or associate that is attributable to the RHI Magnesita Group. Unrealised intragroup results from transactions are offset against the carrying amount of the investment on a pro-rata basis upon consolidation, if material.

RHI Magnesita examines at every reporting date whether there exist any objective indications of an impairment of the shares in joint ventures and associates. If such indications exist, an impairment loss is determined as the difference between the recoverable amount and the carrying amount of the joint ventures and associates and is recognised in profit and loss in the item share of profit of joint ventures and associates.

When the group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. If the equity-accounted investment subsequently reports profits, the entity resumes recognising its share of profits only after those profits equal or exceed its share of losses not recognised.

The Financial Statements of the companies accounted for using the equity method are prepared in accordance with uniform accounting and measurement methods throughout the Group.

Acquisition of Chongqing Boliang Refractory Materials Co., Ltd, Chongqing, China

On 30 December 2021 RHI Magnesita Group has acquired a 51% ownership stake over Chongqing Boliang Refractory Materials Co., Ltd, Chongqing, China (RHIMNU), for a cash consideration of €5.2 million.

RHI Magnesita Group has determined that it does not control Chongqing Boliang Refractory Materials Co., Ltd even though the Group owns 51% of the issued capital of this entity. The Group is not represented in the management board of the entity and does not have the power to direct the relevant activities of the entity, but participates in central financial policy-making choices, including decisions about dividends. RHI Magnesita Group has significant influence over RHIMNU. RHI Magnesita Group has the option to purchase the remaining equity stake from the JV partner in 2031 therefore.

Disposal of Magnifin

As MAGNIFIN Magnesiaprodukte GmbH & Co KG (“MAGNIFIN”), is not core to RHI Magnesita’s growth strategy, the 50% stake in Magnifin was sold as of 30 December 2021 for a cash consideration of €100.0 million to the joint venture partner J.M. Huber Corporation. The book value as of 31 December 2021 of the interest in the joint venture amounts to €0.0 million (31.12.2020: €15.8 million). Most of its profits are distributed and RHI Magnesita is entitled to receive the share of the dividend accordingly until closing. Further information is provided under Note (13).

6. Foreign currency translation

Functional currency and presentation currency

The Consolidated Financial Statements are presented in Euro, which represents the functional and presentation currency of RHI Magnesita N.V.

The items included in the Financial Statements of each Group company are based on the currency of the primary economic environment in which the company operates (functional currency).

Foreign currency transactions and balances

Foreign currency transactions in the individual Financial Statements of Group companies are translated into the functional currency based on the exchange rate in effect on the date of the transaction. Gains and losses arising from the settlement of such transactions and the measurement of monetary assets and liabilities in foreign currencies at the closing rate are recognised in profit or loss under net expense on foreign exchange effects and related derivatives. Unrealised currency translation differences from monetary items which form part of a net investment in a foreign operation are recognised in other comprehensive income in equity. When a non-derivative financial instrument is designated as the hedging instrument in a net investment hedge in a foreign operation, the effective portion of the foreign exchange gains and losses is recognised in the currency translation difference reserve within equity. Non-monetary items denominated in foreign currency are carried at historical rates.

If foreign companies are deconsolidated, the currency translation differences are recycled to the Statement of Profit or Loss as part of the gain or loss from the sale of shares in subsidiaries. In addition, when monetary items cease to form part of a net investment in a foreign operation or when in case of a net investment hedge the foreign operation is disposed, the currency translation differences previously recognised in other comprehensive income are reclassified to profit or loss.

Group companies

The Annual Financial Statements of foreign subsidiaries that have a functional currency differing from the Group presentation currency are translated into Euros as follows:

Assets and liabilities are translated at the closing rate on the reporting date of the Group, while monthly income and expenses and consequently the profit or loss for the year as presented in the Statement of Profit or Loss are translated at the respective closing rates of the previous month. Differences resulting from this translation process and differences resulting from the translation of amounts carried forward from the prior year are recorded under other comprehensive income without recognition to profit or loss. Monthly cash flows are translated at the respective closing rates of the previous month. Goodwill and adjustments to the fair value of assets and liabilities related to the purchase price allocations of a subsidiary outside the European currency area are recognised as assets and liabilities of the respective subsidiary and translated at the closing rate.

RHI Magnesita has evaluated the effect of applying IAS 29 “Financial Reporting in Hyperinflationary Economies” in Argentina with the conclusion that the effect on the Consolidated Financial Statements is considered immaterial to the Group.

The Euro exchange rates of currencies important for the RHI Magnesita Group are shown in the following table:

		Closing rate		Average rate¹⁾
Currencies	1 € =	31.12.2021	31.12.2020	2021	2020
Argentine Peso	ARS	116.25	103.47	111.99	79.35
Brazilian Real	BRL	6.30	6.38	6.38	5.83
Canadian Dollar	CAD	1.44	1.57	1.49	1.53
Chinese Renminbi Yuan	CNY	7.20	8.03	7.68	7.89
Indian Rupee	INR	83.89	89.83	87.76	84.13
Mexican Peso	MXN	23.12	24.45	24.20	24.48
Norwegian Krone	NOK	9.98	10.50	10.21	10.76
Pound Sterling	GBP	0.84	0.90	0.86	0.89
Swiss Franc	CHF	1.03	1.08	1.08	1.07
South African Rand	ZAR	17.97	17.97	17.60	18.72
Turkish Lira	TRY	15.01	9.07	10.29	7.96
US Dollar	USD	1.13	1.23	1.19	1.14

1) Arithmetic mean of the monthly closing rates.

7. Principles of accounting and measurement

Goodwill

Goodwill is recognised as an asset in accordance with IFRS 3. It is tested for impairment at least once each year, or when events or a change in circumstances indicate that the asset could be impaired.

Other intangible assets

Mining rights were recognised in the course of the purchase price allocation for Magnesita and are amortised based on the depletion of the related mines. Depletion is calculated based on the volume mined in the period in proportion to the total estimated volume. Given that globally there are currently few or no viable alternatives for the construction and automotive segments to use other than Steel and Industrial products such as Cement and Glass and given the production process for Steel and Industrial products is moving towards green production, which will still require very high temperatures, our refractory products, also in the green economy, will remain to be required. The raw materials to our refractory products, that are extracted from our mines, will therefore continue to be used in line with previously assessed economic useful life terms, based on our current assessment. However, there remains a level of uncertainty and our views may change over time. Therefore the number of years of depreciation and cash generation to offset the carrying value of these assets, have remained unchanged in our assessment.

Customer relations were recognised in the course of purchase price allocations of acquired subsidiaries and are amortised on a straight-line basis over their expected useful life.

Research costs are expensed in the year incurred and included in general and administrative expenses.

Development costs are only capitalised if the allocable costs of the intangible asset can be measured reliably during its development period. Moreover, capitalisation requires that the product or process development can be clearly defined, is feasible in technical, economic and capacity terms and is intended for own use or sale. In addition, future cash inflows which cover not only normal costs but also the related development costs must be expected. Capitalised development costs are amortised on a straight-line basis over the expected useful life, however, with a maximum useful life of ten years. Amortisation is recognised in cost of sales.

The development costs for internally generated software are expensed as incurred if their primary purpose is to maintain the functionality of existing software. Expenses that can be directly and conclusively allocated to individual programmes and represent a significant extension or improvement over the original condition of the software are capitalised as production costs and added to the original purchase price of the software. These direct costs include the personnel expenses for the development team as well as a proportional share of overhead costs. Software is predominantly amortised on a straight-line basis over a period of four years.

Purchased intangible assets are measured at acquisition cost, which also includes acquisition-related costs, less accumulated amortisation and impairments. Intangible assets with a finite useful life are amortised on a straight-line basis over the expected period of useful life. The following table shows useful lives of the Group’s main classes of intangible assets:


Customer relationships	6 to 15 years
Internally generated intangible assets	4 to 18 years
Other intangible assets	4 to 65 years

Property, plant and equipment

Property, plant and equipment is measured at acquisition or construction cost, less accumulated depreciation and accumulated impairment losses. These assets are depreciated on a straight-line basis over the expected useful life, calculated pro rata from the month the asset is available for use.

Construction costs of assets comprise of direct costs as well as a proportionate share of capitalisable overhead costs and borrowing costs. If borrowed funds are directly attributable to an investment, borrowing costs are capitalised as production costs. If no direct connection between an investment and borrowed funds can be demonstrated, the average rate on borrowed capital of the Group is used as the capitalisation rate due to the central funding of the Group.

Expected demolition and disposal costs at the end of an asset’s useful life are capitalised as part of acquisition cost and recorded as a provision. The recognition criteria are a legal or constructive obligation towards a third party and the ability to reliably estimate future cost.

Stripping costs incurred in the development phase to gain access to mines are recognised as a separate other non-current asset. These capitalised prepaid expenses are subsequently depreciated by reference to the actual depletion of the mineral resources of the mine during the production phase.

Land and plant under construction are not depreciated. Depreciation of other material property, plant and equipment is based on the following useful lives in the RHI Magnesita Group:


Real estate, land and buildings	8 to 50 years
Technical equipment, machinery	8 to 50 years
Other plant, furniture and fixtures	3 to 35 years

RHI Magnesita’s leases include mainly arrangements regarding land and buildings, technical equipment and machinery as well as other equipment, furniture and fixtures. The average lease term is nine years for land and buildings, five years for technical equipment and three years for other equipment, furniture and fixtures. Impacts resulting from extension and termination options, as well as residual value guarantees are immaterial.

RHI Magnesita makes use of the following practical expedients of IFRS 16:

Lease payments for leases whose contractual term is 12 months or less or whose remaining term at adoption is 12 months or less will continue to be recognised as an expense.
Lease payments for leases for which the underlying asset is of low value will continue to be recognised as an expense.
Applying a single discount rate to a portfolio of leases with reasonably similar characteristics.

Since 1 January 2019, leases are recognised as a Right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between principal payments on the liability and finance cost. The finance cost is charged to profit or loss over the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The Right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

Fixed payments (including in-substance fixed payments), less any lease incentives receivable
Variable lease payments that are based on an index or a rate
Amounts expected to be payable by the lessee under residual value guarantees
The exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. The incremental borrowing rate is based on the German federal bond and the US Government Treasury Yield Curve. Based on these two governmental curves, a spread is determined in relation to the bond rating of RHI Magnesita. This spread is then added with an inflation differential and a country risk premium for each country. The weighted average incremental borrowing rate applied to these lease liabilities was 3.62%.

Right-of-use assets are measured at cost comprising the following:

The amount of the initial measurement of lease liability
Any lease payments made at or before the commencement date less any lease incentives received
Any initial direct costs, and
Restoration and removal costs.

A lease modification is a change in the scope of a lease or the consideration for a lease, that was not part of the original terms and conditions of the lease. If the modification decreases the scope of the lease, the carrying amount of the Right-of-use asset and the lease liability has to be reduced accordingly. If the modification increases the scope of the lease (consideration is not at a stand-alone price), the carrying amount of the Right-of-use asset and the lease liability has to be increased accordingly.

Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment, office furniture and other small items. Expenses for short-term, low-value and variable lease payments in 2021 amount to €2.2 million (31.12.2020: €4.5 million). The total cash outflow for leases in 2021 amounts to €19.6 million (31.12.2020: €21.7 million).

The residual values and economic useful lives of property, plant and equipment, intangible assets and Right-of-use assets are reviewed regularly and adjusted if necessary.

When components of plant or equipment have to be replaced at regular intervals, the relevant replacement costs are capitalised as incurred if the criteria per IAS 16 have been met. The carrying amount of the replaced components is derecognised. Regular maintenance and repair costs are expensed as incurred.

Gains or losses from the disposal of property, plant and equipment, which result as the difference between the net realisable value and the carrying amount, are recognised as income or expense in the Consolidated Statement of Profit or Loss.

Impairment of property, plant and equipment, goodwill and other intangible assets

Property, plant and equipment, including Right-of-use assets, and intangible assets, are tested for impairment if there is any indication that the value of these items may be impaired. Intangible assets with an indefinite useful live and goodwill are tested for impairment at least annually.

An asset is considered to be impaired if its recoverable amount is less than its carrying amount. The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use (present value of future cash flows). If the carrying amount is higher than the recoverable amount, an impairment loss equivalent to the resulting difference is recognised in the Statement of Profit or Loss. If the reason for an impairment loss recognised in the past for property, plant and equipment and for other intangible assets ceases to exist, a reversal of impairment on the amortised acquisition and production costs is recognised in profit or loss.

In the case of impairment losses related to cash-generating units (CGUs) to which goodwill is allocated, the goodwill is reduced first. If the impairment loss exceeds the carrying amount of goodwill, the difference is apportioned proportionately to the remaining non-current tangible and intangible assets of the CGU on the basis of their carrying amounts. Reversals of impairment losses recognised on goodwill are not permitted and are therefore not considered.

If there is an indication for an impairment of a specific asset or a group of assets, only this specific asset will be tested for impairment. The recoverable amount is determined as the asset’s fair value. If the fair value is lower than the carrying amount, an impairment loss is recorded in EBIT. If impairment losses arise due to restructuring, they are recorded in restructuring costs.

Cash-generating units (CGU)

In the Group individual assets do not generate cash inflows independent of one another; therefore, no recoverable amount can be presented for individual assets. As a result, the assets are combined in CGUs, which largely generate independent cash inflows. These units are combined in strategic business units and reflect the market presence and market appearance and are as such responsible for cash inflows. CGUs are determined based on group of assets that can generate cash inflows independent of other assets.

The organisational structures of the Group reflect these units. In addition to the joint management and control of the business activities in each unit, the sales know-how, the knowledge of RHI Magnesita’s long-standing customer relationships or knowledge of the customer’s production facilities and processes further support these units. Product knowledge is manifested in the application-oriented knowledge of chemical, physical and thermal properties of RHI Magnesita products. The services offered extend over the life cycle of RHI Magnesita products at the customer’s plant, from the appropriate installation and support of optimal operations, to environmentally sound disposal with the customer or the sustainable reuse in the Group’s production process. These factors determine cash inflow to a significant extent and consequently form the basis for the CGU structures.

The CGUs of the strategic business unit Steel are Linings and Flow Control. These two units are determined according to the production stages in the process of steel production.

In the Industrial business unit, each industry line of business (Glass, Cement/Lime, Non-Ferrous Metals and Environment, Energy, Chemicals) forms a separate CGU. All raw material producing facilities are combined in one CGU.

Major assumptions

As in the previous year, the impairment test is based on the value in use; the recoverable amount is determined using the discounted cash flow method and incorporates the terminal value. The assumptions were updated considering the latest developments of the COVID-19 pandemic, energy and raw material prices. The detailed planning period was shortened by one year compared with the previous period and is now based on the Budget and Long-Term Plan for the next four years. This is a change in estimate compared to prior period.

The detailed planning of the first four years is congruent with the strategic business and financial planning. Based on the detailed planning period, it is geared to a steady-state business development, which balances out possible economic or other non-sustainable fluctuations in the detailed planning period and forms the basis for the calculation of the terminal value. As in the previous year, the terminal value is based on a growth rate derived from the difference of the current and the possible degree of utilisation of the assets.

RHI Magnesita is subject to environmental and other laws and regulations in various countries in which it operates and has established environmental policies and procedures aimed at compliance with these laws. RHI Magnesita has incorporated considerations for increased energy and raw material prices in its Budget and Long-Term Plan 2023-2025 and estimates the total increase in investments in research and development costs (related to both capitalisable assets and expenditure) until 2025 at approximately €50 million. Current technology used by the industries requiring advanced heat-resistant materials for their production depend on refractory materials and in our view will remain in use in the observable future. The impact of climate related risks on major assumption incorporated in forecasts and disclosures to relevant assets and obligations remains uncertain and therefore our estimations were not adjusted accordingly. This will remain an area of increased focus in the upcoming reporting period.

The net cash flows are discounted using a discount rate that is calculated taking into account the weighted average cost of capital of comparable companies (peer group); the corresponding parameters are derived from capital market information. In addition, country-specific risk premiums are considered in the weighted average cost of capital. The discount rate ranges between 7.7% and 9.8% in the year 2021. In the previous year, the discount rates ranged between 7.4% and 9.5%.

Composition of estimated future cash flows

The estimates of future cash flows include forecasts of the cash flows from continued use. If assets are disposed at the end of their useful life, the related cash flows are also included in the forecasts.

A simplified statement of cash flows serves to determine the cash flows on the basis of strategic business and financial planning. The forecasts include cash flows from future maintenance investments. Expansion investments are only taken into account in the estimated future cash flows for impairment testing when there has been a significant cash outflow or significant payment obligations have been entered into due to services received and it is sufficiently certain that the investment measure will be completed. Cash flows for other expansion investments are excluded from the DCF model; this applies in particular to expansion investments that have been decided on but that have not begun.

Working capital is included in the carrying amount of the CGU; therefore, the recoverable amount only takes into account changes in working capital.

Basis for Planning

Basis for the impairment test was the 2022 Budget and Long-Term Plan 2023 to 2025, which was approved by the Board, and developed with the growth rates used in the forward-looking business plan. To forecast the CGUs’ cash flows, management predicts the growth rate using external sources for the development of the customer’s industries and expert assumptions. This includes forecasts about the regional growth of the steel production and the output of the non-steel clients. In combination with the development of the specific refractory consumption, which considers technological improvements, the growth rates for the individual CGUs are determined.

	2021			2020
	Discount rate before Tax	Perpetual annuity growth rate	Goodwill in € million	Discount rate before Tax	Perpetual annuity growth rate	Goodwill in € million
Steel Division - Linings	8.4%	0.9%	83.5	8.2%	0.9%	84.2
Steel Division - Flow Control	8.7%	0.9%	29.6	8.1%	0.9%	25.0

The remaining immaterial portion of goodwill amounting to €1.3 million (31.12.2020: €1.6 million) is allocated to the remaining CGUs, all of them having sufficient headroom.

Given that globally there are currently few or no viable alternatives for the construction and automotive segments to use other than Steel and Industrial products such as Cement and Glass and given the production process for Steel and Industrial products is moving towards green production, which will still require very high temperatures, our refractory products, also in the green economy, will remain to be required. As a result, the goodwill that produces our refractory products will therefore continue to be used in line with previously assessed economic useful life terms, based on our current assessment. However, there remains a level of uncertainty and our views may change over time. Therefore the number of years of depreciation and cash generation to offset the carrying value of these assets, have remained unchanged in our assessment.

Result of impairment test

Based on the impairment test conducted at 31 December 2021, the recoverability of the assets was demonstrated for all CGUs.

As in the previous year, no reversals of impairments were made in the financial year 2021.

Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. In general, financial instruments can be classified to be measured subsequently as at amortised cost, at fair value through profit or loss or at fair value through other comprehensive income. Classification of financial assets depends on the contractual terms of the cash flows as well as on the entity’s business model for managing the financial assets. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

Further information on the Group’s financial assets and liabilities, as well as on the fair value measurement is provided under Note (53).

Other financial assets and liabilities

The item other financial assets in the Consolidated Statement of Financial Position of RHI Magnesita includes shares in non-consolidated subsidiaries and other investments, securities, financial receivables and positive fair values of derivative financial instruments.

The item other financial liabilities includes negative fair values of derivative financial instruments as well as liabilities to fixed-term or puttable non-controlling interests and in the previous reporting period a financial liability relating to the termination of an energy supply contract.

Financial assets are classified as at amortised cost, if the contractual cash flows of the financial asset include solely payments of principal and interest and they are held in order to collect the contractual cash flows. If the contractual cash flows of financial assets include solely payments of principal and interest, but they are held in order to both collect the contractual cash flows and sell the financial asset, then the financial assets are classified as at fair value through other comprehensive income. If the contractual cash flows of financial assets do not solely include payments of principal and interest, then these financial assets are classified as at fair value through profit or loss.

The Group initially recognises securities on the trading date when the entity becomes a party to the contractual provisions of the instruments. All other financial assets and financial liabilities are initially recognised on the date when they are originated. Financial instruments, except for trade receivables, are initially recognised at fair value. Financial assets are derecognised if the entity transfers substantially all the risks and rewards or if the entity neither transfers nor retains substantially all the risks and rewards and has not retained control. Financial liabilities are derecognised when the contractual obligations are settled, withdrawn or have expired.

The Group’s investment in debt securities is subsequently measured at fair value through profit and loss, as the contractual terms of cash flows do not solely include payments of principal and interest.

The Group’s investments in equity securities are of minor importance and are subsequently measured at fair value through profit or loss, since the irrevocable option for subsequent measurement at fair value through OCI was not exercised.

Shares in non-consolidated subsidiaries (RHI Magnesita exercises control but the subsidiary is not-fully consolidated due to materiality reasons), shares in other companies as well as securities are classified as at fair value through profit or loss in the RHI Magnesita Group. For materiality reasons if such financial assets are of minor significance cost serves as an approximation of fair value. Directly attributable transaction costs are recognised in profit or loss as incurred. Securities at fair value through profit or loss are measured at fair value and changes therein, including any interest income, are recognised in profit or loss.

Financial receivables are measured at amortised cost applying the effective interest method. Any doubt concerning the collectability of the receivables is reflected in the use of the lower present value of the expected future cash flows according to the impairment model described below. Foreign currency receivables are translated at the closing rate.

Derivative financial instruments, which are not designated in an effective hedging relationship in accordance with IFRS 9, must be carried at fair value through profit or loss. In the RHI Magnesita Group, this measurement category includes derivatives related to purchase obligations, forward exchange contracts, embedded derivatives in open orders that are denominated in currencies other than the functional currency of either contracting party as well as interest rate swaps.

The measurement of forward exchange contracts and embedded derivatives in open orders denominated in a currency other than the functional currency of either contracting party is made on a case-by-case basis at the respective forward rate on the reporting date. These forward rates are based on spot rates, including forward premiums and discounts. Unrealised valuation gains or losses and results from the realisation are recognised in the Statement of Profit or Loss in net expense of foreign exchange effects and related derivatives.

For derivative financial instruments, which are designated in an effective hedging relationship in accordance with IFRS 9, the provisions regarding hedge accounting are applied. RHI Magnesita has concluded interest rate swaps to hedge the cash flow risk of financial liabilities carrying variable interest. Hedging transactions are shown as part of cash flow hedge accounting. The interest rate swaps as hedging instruments are measured at fair value, which corresponds to the amount which RHI Magnesita would receive or has to pay on the reporting date when the financial instrument is terminated. The fair value is calculated using the interest rates and yield curves relevant on the reporting date. The effective part of the fair value changes is initially recorded in other comprehensive income as an unrealised gain or loss. Only at the time of the realisation of the underlying transaction, the contribution of the hedging instrument is recycled to the Statement of Profit or Loss. Ineffective parts of the cash flow hedges are recognised immediately in the Statement of Profit or Loss. If the hedged transaction is no longer expected to take place, the accumulated amount previously recorded in other comprehensive income is reclassified to the Statement of Profit or Loss.

Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge are recognised in Other Comprehensive Income and presented in the currency translation difference reserve within equity while any gains or losses relating to the ineffective portion are recognised in the Statement of Profit or Loss. On disposal of the foreign operation, the cumulative amount of any such gains or losses recorded in Other Comprehensive Income is reclassified to the Statement of Profit or Loss. The Group uses a loan to hedge its exposure to foreign exchange risk on its investments in foreign subsidiaries.

Capital shares of non-controlling interests in subsidiaries with a fixed term are recognised under other financial liabilities in the Consolidated Statement of Financial Position in accordance with IAS 32. The liabilities are measured at amortised cost. The share of profit attributable to non-controlling interests is recognised under other net financial expenses in the Statement of Profit or Loss. Dividend payments to non-controlling interests reduce liabilities.

Furthermore, the RHI Magnesita Group entered into purchase obligations with non-controlling shareholders of a subsidiary. Based on these agreements, the shareholders received the right to tender their shares at any time on previously defined conditions. In this case, IAS 32 provides for carrying a liability in the amount of the probable future exercise price. The difference between the estimated liability and the carrying amount of the non-controlling interest was recognised to equity at the time of initial recognition without affecting profit or loss. Subsequently, the liability for puttable non-controlling interests was measured at amortised cost and changes were recorded in net finance costs. In 2021 the puttable non-controlling interests within equity were reclassified to equity upon completion of the merger of the Indian entities. Further information is provided under Note (24) and (53).

Impairment of financial assets

Impairment of certain financial assets is based on expected credit losses (ECL). Expected credit losses are defined as the difference between all contractual cash flows the entity is entitled to according to the contract and the cash flows that the entity expects to receive. The measurement of expected credit losses is generally a function of the probability of default, loss given default and the exposure at default.

RHI Magnesita recognises a loss allowance for expected credit losses on debt instruments that are measured at amortised cost, trade receivables and contract assets. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.

The Group recognises lifetime ECL for trade receivables and contract assets by applying the simplified approach. The expected credit losses on these financial assets are generally estimated using a provision matrix based on the Group’s historical credit loss experience for customer groups located in different geographic regions. Forward-looking information is incorporated in the determination of the applicable loss rates for trade receivables. For the Group, the general economic development of the countries in which it sells its goods and services is the relevant for the determination if adjustment of the historical loss rates is necessary.

For all other financial instruments, the Group recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.

Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

RHI Magnesita makes use of the practical expedient that if a financial instrument has an ‘investment grade’ rating that it is assumed to be of low credit risk and no significant increase in the credit risk took place and the expected credit loss is calculated using the 12-month ECL. Among other factors the Group considers a significant increase in credit risk to have taken place when contractual payments are more than 30 days past due.

The Group considers the following as constituting an event of default, hence leading to a credit-impaired financial asset:

significant financial difficulty of the issuer or the borrower;
a breach of contract;
the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted

to the borrower concessions that the lender(s) would not otherwise consider;

it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
the disappearance of an active market for that financial asset because of financial difficulties.

In addition to these factors, RHI Magnesita applies the presumption in regard to trade receivables, that a default event has occurred when such receivables are 180 days past due unless the Group has reasonable and supportable information for anything different. 180 days past due are used as an objective evidence of default as this is presumed to reflect the Group’s customer industry.

For those financial instruments where objective evidence of default is present an individual assessment of expected credit losses takes place.

Generally, financial instruments are written off when there is no reasonable expectation of recovery. Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognised in profit or loss.

Deferred taxes

Deferred taxes are recognised on temporary differences between the tax base and the IFRS carrying amount of assets and liabilities, tax-loss carryforwards and consolidation entries.

Deferred tax assets are recognised on temporary differences to the extent it is probable that sufficient deferred tax liabilities exist or that sufficient taxable income before the reversal of temporary differences is available for the settlement of deductible temporary differences.

Deferred taxes are recognised on temporary differences relating to shares in subsidiaries and joint ventures, unless the parent company is in a position to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse. No temporary differences are recognised for financial instruments which were issued by subsidiaries to non-controlling interests and which are classified as a financial liability in accordance with IFRS.

The calculation of deferred taxes is based on the tax rate expected in the individual countries at the time the deferred tax asset is realised or the liability is settled and generally reflects the enacted or substantively enacted tax rate on the reporting date. As in the previous year, deferred taxes of the Austrian group companies are determined at the corporation tax rate of 25.0%. Deferred tax assets and liabilities of the Brazilian group companies are measured at 34.0%. Tax rates from 13.0% to 35.0% (31.12.2020: 12.5% to 34.0%) were applied to the other companies.

Deferred tax assets and liabilities are offset if there is an enforceable right to offset current tax receivables against current tax liabilities, and if the deferred taxes relate to income taxes due from/to the same tax authorities.

Inventories

Inventories are stated at the lower of cost or net realisable value as of the reporting date. The determination of acquisition cost of purchased inventories is based on the average cost. Finished goods and work in progress are valued at fixed and variable production cost. The net realisable value is the estimated selling price in the ordinary course of business minus any estimated cost to complete and to sell the goods. Impairments due to reduced usability are reflected in the calculation of the net realisable value.

Trade and other current receivables

Trade receivables are recognised initially at the amount of consideration that is unconditional, unless they contain significant financing components when they are recognised at fair value and subsequently carried at amortised cost minus any valuation allowances. Valuation allowances are calculated in accordance with the simplified approach of the impairment model for financial instruments (see impairment of financial assets above).

In case of factoring arrangements trade receivables are derecognised if RHI Magnesita transfers substantially all the risks and rewards associated with the financial assets.

Receivables denominated in foreign currencies are translated using the closing rate.

Cash and cash equivalents

Cash and cash equivalents includes cash on hand, cheques received and cash at banks with an original term of a maximum of three months. Moreover, shares in money market funds, which are only exposed to insignificant value fluctuations due to their high credit rating and investments in extremely short-term money market instruments and can be converted to defined cash amounts within a few days at any time, are also recorded under cash equivalents in accordance with IAS 7.

Cash and cash equivalents denominated in foreign currencies are translated at the closing rate.

Disposal groups held for sale

Non-current assets and disposal groups which can be sold in their present state and whose sale is highly probable are classified as held for sale. Assets and liabilities which are intended to be sold together in a single transaction represent a disposal group held for sale and are shown separately from other assets and liabilities in the Statement of Financial Position.

Non-current assets and disposal groups which are classified as held for sale are carried at the lower of fair value less costs to sell and carrying amount. Impairments are initially allocated to existing goodwill and then to the non-current assets on a pro-rata basis, based on the carrying amount of each individual asset of the disposal group. Non-current assets are not depreciated as long as they are classified as held for sale.

Borrowings and other financial liabilities

Financial liabilities include liabilities to financial institutions and other lenders and are measured at fair value less directly attributable transaction costs at initial recognition. In subsequent measurements these liabilities are measured at amortised cost applying the effective interest method. Financial liabilities in foreign currency are translated at the closing rate.

A financial liability is derecognised when the obligation under the liability is discharged (by payment or legal release), cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. The difference in the respective carrying amounts is subsequently recognised in the Statement of Profit or Loss, including any costs or fees.

Provisions

Provisions are recognised when the Group incurs a legal or constructive obligation as a result of past events, and it is probable that an outflow of resources will be required to meet this obligation, and the amount of the obligation can be reliably estimated.

Non-current provisions are measured at their discounted settlement value as of the reporting date if the discounting effect is material.

If maturities cannot be estimated, they are shown under current provisions.

Provisions for pensions

With respect to post-employment benefits, a differentiation is made between defined contribution and defined benefit plans.

Defined contribution plans limit the company’s obligation to the agreed amount of contributions to earmarked pension plans. The related expenses are shown in the functional areas and thus in EBIT.

Defined benefit plans require the company to provide the agreed amount of benefits to active and former employees and their dependents, with a differentiation made between pension systems financed through provisions and pension systems financed by external funds.

For pension plans financed by way of external funds, the pension obligation according to the projected unit credit method is netted against the fair value of the plan assets. If the plan assets are not sufficient to cover the obligation, the net obligation is recognised as a provision for pensions. However, if the plan assets exceed the obligations, the asset recognised is limited to reductions of future contribution payments to the plan and is presented as an other non-current asset on the face of the statement of financial positions.

The present value of defined benefit obligations for current pensions, future pension benefits and similar obligations and the related expenses are calculated separately for each plan annually by independent qualified actuaries in accordance with the provisions of IAS 19. The present value of future benefits is based on the length of service, expected wage/salary developments and pension adjustments.

The expense to be recognised in a period includes current and past service costs, settlement gains and losses, interest expenses from the interest accrued on obligations, interest income from plan assets and administration costs paid from plan assets. The net interest expense is shown separately in net finance costs. All other expenses related to defined benefit plans are allocated to the costs of the relevant functional areas.

Actuarial assumptions required to calculate these obligations, include the discount rate, increases in wages/salaries and pensions, retirement starting age and probability of employee turnover and actual claims. The calculation is based on local demographic parameters.

Interest rates used are the rates on high-quality corporate bonds issued with comparable maturities and currencies are applied to determine the present value of pension obligations. In countries where there is not a sufficiently liquid market for high-quality corporate bonds, the returns on government bonds are used as a basis.

The rates of increase for wages/salaries were based on an average of past years, which is also considered to be realistic for the future.

The fluctuation probabilities were estimated specific to age or seniority.

The retirement age used for the calculation is based on the respective statutory provisions of the country concerned. The calculation is based on the earliest possible retirement age according to the current statutory provisions of the respective country, among other things depending on gender and date of birth.

Remeasurement gains and losses are recorded net of deferred taxes under other comprehensive income in the period incurred.

Other personnel provisions

Other personnel provisions include provisions for termination benefits, service anniversary bonuses, payments to semi-retirees, share-based payments and lump-sum settlements.

Provisions for termination benefits are primarily related to obligations to employees whose employment is subject to Austrian law.

Employees who joined an Austrian company before 31 December 2002 receive a one-off lump-sum termination benefit as defined by Austrian labour legislation if the employer terminates the employment or when the employee retires. The termination payment depends on the relevant salary at the time of the termination as well as the number of years of service and ranges between two and 12 monthly salaries. These obligations are measured in accordance with IAS 19 using the projected unit credit method applying an accumulation period of 25 years. Remeasurement gains and losses are recorded directly to other comprehensive income after considering tax effects.

For employees who joined an Austrian company after 31 December 2002, employers are required to make regular contributions equal to 1.53% of the monthly wage/salary to a statutory termination benefit scheme. The company has no further obligations. Claims by employees to termination benefits are filed with the statutory termination benefit scheme, while the continuous contributions are treated as defined contribution pension plans and included in the personnel expenses of the functional areas.

Service anniversary bonuses are one-time special payments that are dependent on the employee’s wage/salary and length of service. The employer is required by collective bargaining agreements or company agreements to make these payments after an employee has reached a certain number of years of uninterrupted service with the same company. Obligations are mainly related to service anniversary bonuses in Austrian and German group companies. Under IAS 19 service anniversary bonuses are treated as other long-term employee benefits. Provisions for service anniversary bonuses are calculated based on the projected unit credit method. Remeasurement gains or losses are recorded in the personnel costs of the functional areas.

Local labour laws and other similar regulations require individual group companies to create provisions for semi-retirement obligations. The obligations are partially covered by qualified plan assets and are reported on a net basis in the Statement of Financial Position.

In 2018, the shareholders approved the Rules Of The RHI Magnesita Long-Term Incentive Plan (the Rules). Share-options are granted to members of senior management of the Group in accordance with these Rules. Each reporting date the provisional amount per due date is recognised in equity.

Obligations for lump-sum settlements are based on company agreements in individual companies.

Other provisions

Provisions for warranties are created for individual contracts at the time of the sale of goods or after the service has been provided. The amounts of the provisions are based on the expected or actual warranty claims.

Provisions for restructuring are created providing a detailed formal restructuring plan has been developed and announced prior to the reporting date or whose implementation was commenced prior to the reporting date.

The Group recognises provisions for demolition and disposal costs and environmental damages. RHI Magnesita’s facilities and its refractory, exploration and mining operations are subject to environmental and governmental laws and regulations in each of the jurisdictions in which it operates. These laws govern, among other things, reclamation or restoration of the environment in mined areas and the clean-up of contaminated properties. Provisions for demolition and disposal costs and environmental damages include the estimated demolition and disposal costs of plants and buildings as well as environmental restoration costs arising from mining activities, based on the present value of estimated cash flows of the expected costs. The estimated future costs of asset retirements are reviewed annually and adjusted, if appropriate.

A provision for an onerous or unfavourable contract is recognised when the expected benefits to be derived from a contract are lower than the unavoidable cost of meeting its obligations under the contract. Provisions are measured at the present value of the unavoidable costs of meeting the obligation under the contract which exceed the economic benefits expected to arise from that contract.

Provisions for labour and civil contingencies are recognised for all risks referring to legal proceedings that represent probable loss. Assessment of the likelihood of loss includes analysis of available evidence, including the opinion of internal and external legal advisors of the RHI Magnesita Group.

Trade payables and other current liabilities

These liabilities are initially recognised at fair value, and subsequently measured at amortised cost. Liabilities denominated in foreign currencies are translated at the closing rate.

Government grants

Government grants to promote investments are recognised as deferred income and released through profit or loss over the useful life of the relevant asset distributed on a straight-line basis.

Grants that were granted as compensation for expenses or losses are recognised to profit or loss in the periods in which the subsidised expenses are incurred. In the RHI Magnesita Group, they mainly include grants for research and employee development. Grants for research are recorded as income in general and administrative expenses.

Revenue, income and expenses

Revenue from contracts with customers

Revenue from the sale of goods and services is recognised at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The transaction price is the expected consideration to be received, to the extent that it is highly probable that there will not be a significant reversal of revenue in future periods. If the consideration in a contract includes a variable amount, the Group estimates the amount of consideration to which it will be entitled in exchange for transferring the goods or services to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved. The average credit term is 60 days upon transfer of goods or service. The Group applies the practical expedient in IFRS 15 and does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer and payment will be one year or less. At contract inception, the Group identifies the goods or services promised in the contract and assesses which of the promised goods or services shall be identified as separate performance obligations. Promised goods or services give rise to separate performance obligations if they are capable of being distinct. Revenue is recognised as control is transferred, either over time or at a point of time. Control is defined as the ability to direct the use of and obtain substantially all of the economic benefits from an asset.

Regarding delivery contracts of refractory products the goods promised are distinct and control of the goods is passed to the customer typically when physical possession has been transferred to the customer. The transport service does not give rise to a separate performance obligation to which a part of revenue would have to be allocated, as this service is performed before control of the products is transferred to the customer.

In consignment arrangements, RHI Magnesita Group ships products to a customer but retains control of the goods until a predetermined event occurs. Revenue is not recognised on delivery of the products to the customer if the delivered products are held on consignment, but generally when the withdrawal of the products from the consignment stock occurs. Most of the products within consignment arrangements have a high stock turnover rate.

The Group provides services (e.g. supervision, installation) that are either sold separately or bundled together with the sale of products to a customer. Contracts for bundled sales of products and installation services are comprised of two performance obligations as the promises to transfer products and to provide services are capable of being distinct and separately identifiable in the context of the contract. Accordingly, the allocation of the transaction price is based on the relative stand-alone selling prices of the product and services. Revenue from services is recognised over time, using an input method to measure progress towards complete satisfaction of the service, because the customer simultaneously receives and consumes the benefits provided by the Group.

Contracts for bundled sales of refractory products and non-refractory products (e.g. machines) provided to the customer free of charge comprise two performance obligations that are separately identifiable. Consequently, the Group allocates the transaction price based on the relative stand-alone selling prices of these performance obligations and allocates revenue to the non-refractory product which is delivered free of charge.

For contracts in the Steel segment with variable payment arrangements (transaction price depends on the customer’s production performance) management has determined that the promise to transfer each of the products and services to the customer is not separately identifiable from all the other promises in the context of such contracts. Therefore, only one single performance obligation exists - the performance of a management refractory service. Further information is provided under Note (9). With regards to these contracts, revenue is recognised over time on the basis using the output-oriented method (e.g. quantity of steel produced in the customer aggregate serviced).

Expected penalty fees from guaranteed durabilities when using refractory products are considered as a variable consideration in the form of a contract or a refund liability. Based on the expected value method, the amount of the variable consideration is estimated. The estimation of the variable consideration is not subject to a constraint as the Group has significant experience with promising durabilities. Once the uncertainty related to guaranteed durabilities ceases to exist, a significant reversal of revenue is highly unlikely. All other warranties guarantee that the transferred products correspond to the contractually agreed specifications and are classified as assurance type warranties. Consequently, no separate distinct performance obligation to the customer exists.

If transfer of goods or services to a customer is performed before the customer pays consideration or before payment is due, a contract asset, excluding any amounts presented as a receivable is recognised. A contract asset is an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer.

If a customer pays consideration before the entity transfers a good or service to the customer, the entity shall present the contract as a contract liability when the payment is made, or the payment is due (whichever comes first). A contract liability is an entity’s obligation to transfer goods or services to a customer for which the entity has received consideration (or an amount of consideration is due) from the customer.

Contract costs are the incremental costs of obtaining a contract and must be recognised as an asset if the company expects to recover those costs. As a practical expedient, RHI Magnesita expenses such costs when incurred, if the amortisation period would be 12 months or less.

In general, the term of customer contracts in accordance with IFRS 15 is no longer than one year. Therefore, the Group decided, as a practical expedient, not to disclose the remaining performance obligations for contracts with original expected duration of less than one year.

Further income and expenses

Expenses are recognised in the Statement of Profit or Loss when a service is consumed, or the costs are incurred.

Interest income and expenses are recognised in accordance with the effective interest method.

Dividends from investments that are not accounted for using the equity method are recognised to profit and loss at the time the legal claim arises.

Current income taxes are recognised according to the local regulations applicable to each company. Current and deferred income taxes are recognised in the Statement of Profit or Loss unless they are related to items which were recorded directly in equity or in other comprehensive income. In such a case, income taxes are also recorded in equity or other comprehensive income.

Since 2020 RHI Magnesita N.V., tax resident of Austria, acts as the head of a corporate tax group in Austria. Until 31 December 2019 RHI Magnesita GmbH, Vienna, Austria, acted as the head of a corporate tax group in Austria. According to the group and tax compensation agreement, the members of the group have to pay a positive tax compensation of 20% of the taxable profit to the head of the Group if the result is positive, as long as tax loss carry forwards exist with the head of the group; subsequently 25% of the taxable profit have to be paid. In case of a tax loss of the group member, the head of the group has to pay a negative tax compensation to the member of the group, with a rate of 12.5% being applied insofar as the loss can be utilised within the group. In case the losses of a group member were compensated (negative tax allocation payment) and this group member generates taxable income within the next three years (after compensation), the positive tax allocation amounts to 12.5%. In case of a loss in the tax group, an unused tax loss of a group member is retained and offset against future taxable profits of the group member. When the contract is terminated, a compensation payment is agreed for unused tax losses of a group member, which were allocated to the head of the group.

In Germany, RHI Magnesita Deutschland AG, Wiesbaden, acts as the head of a tax group for corporate and trade tax purposes. The five tax group members are obliged to transfer their profit or loss to RHI Magnesita Deutschland AG based on a profit or loss transfer agreement. Additionally, RHI Magnesita Deutschland AG, Wiesbaden, acts as the head of a tax group for VAT purposes with eight German tax group members. Furthermore, Rearden G Holdings Eins GmbH, Hagen, acts as the head of a two-level structure tax group with four group members for corporate, trade tax and VAT purposes.

8. Segment reporting

The RHI Magnesita Group comprises the operating segments Steel and Industrial. The segmentation of the business activities reflects the internal control and reporting structures and is regularly reported to the Chief Executive Officer.

The Steel segment specialises in supporting customers in the steel-producing and steel-processing industry. The Industrial segment serves customers in the glass, cement/lime, non-ferrous metals and environment, energy, chemicals industries. The main activities of the two segments consist of market development, global sales of high-grade refractory bricks, mixes and special products as well as providing services at the customers’ sites.

The globally located manufacturing sites, which extract and process raw materials, are combined in one strategic business unit. The allocation of manufacturing cost of the production plants to the Steel and Industrial Divisions is based on the supply flow.

Statements of Profit or Loss up to gross profit are available for each segment. The gross profit serves the management of the RHI Magnesita Group for internal performance management. Selling and marketing expenses, general and administrative expenses, restructuring and write-down expenses, other income and expenses, profit of joint ventures, net finance costs and income taxes are managed on a group basis and are not allocated.

Segment assets include trade receivables and inventories, which are available to the operating segments and are reported to the management for control and measurement, as well as property, plant and equipment, goodwill and other intangible assets, which are allocated to the segments based on the capacity of the assets provided to the segments. All other assets are not allocated. The recognition of segment assets is determined on the basis of the accounting and measurement methods applied to the IFRS Consolidated Financial Statements.

Data on revenue by country are disclosed by the sites of the customers. Data on non-current assets (goodwill, intangible assets and property, plant and equipment) are disclosed on the basis of the respective locations of the companies of the RHI Magnesita Group.

9. Critical accounting judgements and key sources of estimation uncertainty

The RHI Magnesita Group used forward-looking assumptions and estimates, especially with respect to business combinations, non-current assets, valuation adjustments to inventories and receivables, provisions and income taxes to a certain extent in the application of accounting and measurement methods.

The estimates are based on comparable values in the past, plan data and other findings regarding transactions to be accounted. The actual values may ultimately deviate from the assumptions and estimates made. The resulting changes in value of assets, liabilities, revenue and expenses are accounted for in the reporting period in which the change is made and in the affected future reporting periods.

Critical accounting judgements

Revenue recognition

For customer contracts in the Steel segment with variable payment arrangements where the transaction price depends on the customer’s production performance, (e.g. quantity of steel produced) management has determined that the commitment to transfer each of the products and services to the customer is not separately identifiable from the other commitments in the context of such contracts. The customer expects complete refractory management for the agreed product areas in the steel plant in order to enable steel production. Thus, only one performance obligation, performance of a management refractory service, exists.

Trade payables subject to supply chain finance arrangements

RHI Magnesita participates in supply chain finance arrangements whereby raw material suppliers may elect to receive a discounted early payment of their invoice from a bank rather than being paid in line with the agreed contractual payment terms. The Group settles the amount owed to the bank. The invoice due date as well as the value of the original liability remains unaltered. RHI Magnesita assesses that these arrangements do not modify the terms of the original trade payable, and therefore financial liabilities subject to supply chain finance arrangements continue to be classified as trade payables.

Own use exemption on physical delivery CO2-certificate forwards

Due to the reduction of free CO2 emission certificates and the expectation of increased CO2 market prices, the Group is hedging the price risk by use of physical delivery forward purchases (for “own use”). The “Own use exemption” is important to prevent fair value accounting and thus avoid P&L volatility. The “Own use exemption” requires that all purchases via forward contracts will be utilised. Any surpluses from forwards must be settled and kept for future use. If the own use exemption is not met, the forwards will be recognised on Balance Sheet at fair value, with fair value remeasurement through P&L for the entire CO2 forward portfolio. The Group settles the forwards through physical delivery and does not intend to sell any (unexpected) surplus of CO2 emission certificates for speculative purposes. Therefore, in accordance with IFRS 9, the forward contracts are assessed to be off-balance executory contracts.

There are no other critical accounting judgements made in the preparation of the Consolidated Financial Statements.

Key sources of estimation uncertainty

Business combinations (initial consolidation)

Estimates relating to the calculation of fair values of acquired assets, liabilities and contingent liabilities are required within the context of business combinations.

If intangible assets are identified, estimates are necessary for the determination of fair values by means of discounted cash flows, including the duration, amount of future cash flows, and discount rate. When determining the fair value of land, buildings and technical plant, above all the estimate of comparability of the reference objects with the objects subject to valuation is discretionary.

When making estimates in the context of purchase price allocations on major acquisitions, RHI Magnesita consults with independent experts who accompany the execution of the discretionary decisions and record it in appraisal documents.

Impairment of intangible assets with finite useful lives and property, plant and equipment

Intangible assets with a finite useful life and property, plant and equipment must be tested for impairment when events or a change in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amounts of these assets amounted to €1,370.5 million at 31 December 2021 (31.12.2020: €1,222.5 million). In accordance with IAS 36, such impairment losses are determined through comparisons with the discounted future cash flows expected from the related assets of the cash-generating units (CGUs).

As part of the annual planning process, the impairment test is conducted for the CGUs defined in the RHI Magnesita Group, thus considering all changes resulting from updates of strategic planning. Sensitivity analyses are also performed as part of the impairment test. In their calculation one of the main parameters is changed as follows: increase in the discount rate by 10%, reduction in the form of the contribution margin by 10% and reduction of the growth rate in terminal value by 50%. In all CGUs, these simulations do not result in impairments. Likewise, in all CGUs a reduction of the discount rate by 10%, an increase in profitability in the form of the contribution margin by 10% and an increase in the growth rate in terminal value by 50% do not result in reversals of impairments.

Impairment of goodwill and other intangible assets with indefinite useful life

The effect of an adverse change by plus 10% in the estimated interest rates as of 31 December 2021 or by minus 10% in the contribution margin would not result in an impairment of goodwill recognised (carrying amount 31.12.2021: €114.4 million, 31.12.2020: €110.8 million) nor in an impairment charge to intangible assets with indefinite useful lives (carrying amount at 31.12.2021: €1.8 million and 31.12.2020: €1.8 million).

Intangible assets and property, plant and equipment

Management uses its experience to estimate the remaining useful life of an asset. The actual useful life of an asset may be impacted by an unexpected event that may result in an adjustment to the carrying amount of the asset.

Provisions for pensions and termination benefits

The present value of pension and termination benefit obligations depends on several factors, which are based on actuarial assumptions such as interest rates, future salary and pension increases as well as life expectancy. Due to the long-term nature of these obligations, these assumptions are subject to significant uncertainties.

The following sensitivity analysis shows the change in present value of the pension and termination benefit obligations if one key parameter changes, while the other influences are maintained constant. In reality, it is rather unlikely that these influences do not correlate. The present value of the pension obligations for the sensitivities shown was calculated using the same method as for the actual present value of the pension obligations (projected unit credit method).

		31.12.2021		31.12.2020
in € million	Change of assumption in percentage points or years	Pension plans	Termination benefits	Pension plans	Termination benefits
Present value of the obligations		495.0	44.1	523.3	46.4
Interest rate	+0.25	(14.8)	(1.4)	(16.2)	(1.3)
	(0.25)	15.6	1.5	16.9	1.4
Salary increase	+0.25	0.7	1.4	1.6	1.3
	(0.25)	(0.7)	(1.4)	(1.5)	(1.3)
Pension increase	+0.25	11.3	-	12.5	-
	(0.25)	(10.9)	-	(11.0)	-
Life expectancy	+1 year	19.8	-	21.3	-
	(1) year	(20.6)	-	(20.7)	-

These changes would have no immediate effect on the result of the period as remeasurement gains and losses are recorded in other comprehensive income without impact on profit or loss. The assumptions regarding the interest rate are reviewed semi-annually; all other assumptions are reviewed at the end of the year. Further information on pensions is provided under Note (27).

Other provisions

The recognition and measurement of other provisions totalling €118.6 million (31.12.2020: €149.0 million) were based on the best possible estimates using the information available at the reporting date. The estimates take into account the underlying legal relationships and are performed by internal experts or, when appropriate, also by external experts. Despite the best possible assumptions and estimates, cash outflows expected at the reporting day may deviate from actual cash outflows. As soon as additional information is available, the estimates made are reviewed and provisions are also adjusted.

The majority of the provisions refers to an unfavourable contract which was recognised in the course of the acquisition of Magnesita and is mainly based on an estimate of forgone profit margins compared to market conditions.

Income taxes

The calculation of income taxes of RHI Magnesita N.V. and its subsidiaries is based on the tax laws applicable in the individual countries. Due to their complexity, the tax items presented in the Consolidated Financial Statements may be subject to different interpretations by local finance authorities. When determining the amount of the capitalisable deferred tax assets, an estimate is required of future taxable income. Should the future taxable profit deviate by 10% from the assumption made on the reporting date within the planning period defined for the accounting and measurement of deferred taxes, the net position of deferred tax assets amounting to €154.0 million (31.12.2020: €154.2 million) would have to be increased by €0.1 million (31.12.2020: €0.3 million) or reduced by €0.2 million (31.12.2020: €0.3 million).

Additional sources of estimation uncertainty with regard to climate change

Net realisable value of inventories

As stricter climate-related laws and regulations are expected to increase the demand for higher quality refractory products in customer industries, RHI Magnesita assesses that, overall, these events will not have an adverse effect on the net realisable value of the Group’s inventories.

Useful lives and residual values

Given that globally there are currently few or no viable alternatives for the construction and automotive segments to use other than Steel and Industrial products such as Cement and Glass and given the production process for Steel and Industrial products is moving towards green production, which will still require very high temperatures, our refractory products, also in the green economy, will remain to be required. As a result, the PPE that produces our refractory products will therefore continue to be used in line with previously assessed economic useful life terms, based on our current assessment. However, there remains a level of uncertainty and our views may change over time. Therefore the number of years of depreciation and cash generation to offset the carrying value of these assets, have remained unchanged in our assessment.

Due to the high degree of estimation uncertainty around the impact of climate change and consequential changes in legislature, this conclusion may change in the future.

NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION

10. Goodwill

Goodwill developed as follows:

in € million	2021	2020
Carrying amount at beginning of the year	110.8	117.5
Additions initial consolidation	0.0	3.8
Currency translation	3.6	(10.5)
Carrying amount at year-end	114.4	110.8

11. Other intangible assets

Other intangible assets changed as follows in the financial year 2021:

in € million	Mining rights	Customer relationship	Internally generated intangible assets	Other intangible assets	Total
Cost at 31.12.2020	133.1	95.1	62.0	121.3	411.5
Currency translation	6.2	4.2	0.2	4.9	15.5
Additions	0.0	0.0	8.8	9.9	18.7
Retirements and disposals	0.0	(0.1)	(0.1)	(4.1)	(4.3)
Reclassifications	0.0	0.0	0.0	13.4	13.4
Cost at 31.12.2021	139.3	99.2	70.9	145.4	454.8
Accumulated amortisation 31.12.2020	8.5	27.9	40.7	68.7	145.8
Currency translation	0.5	1.6	0.2	2.3	4.6
Amortisation charges	2.1	5.8	4.0	10.5	22.4
Impairment charges	0.0	0.0	0.0	3.7	3.7
Retirements and disposals	0.0	0.0	(0.1)	(3.8)	(3.9)
Reclassifications	0.0	0.0	0.0	(0.4)	(0.4)
Accumulated amortisation 31.12.2021	11.1	35.3	44.8	81.0	172.2
Carrying amounts at 31.12.2021	128.2	63.9	26.1	64.4	282.6

Other intangible assets changed as follows in the previous year:

in € million	Mining rights	Customer relationship	Internally generated intangible assets	Other intangible assets	Total
Cost at 31.12.2019	169.1	109.3	52.4	134.1	464.9
Currency translation	(36.0)	(14.2)	(0.3)	(8.9)	(59.4)
Additions	0.0	0.0	9.9	3.1	13.0
Retirements and disposals	0.0	0.0	0.0	(11.0)	(11.0)
Disposal group IFRS 5	0.0	0.0	0.0	(0.2)	(0.2)
Reclassifications	0.0	0.0	0.0	4.2	4.2
Cost at 31.12.2020	133.1	95.1	62.0	121.3	411.5
Accumulated amortisation 31.12.2019	8.0	25.2	37.1	75.6	145.9
Currency translation	(1.7)	(3.4)	(0.1)	(3.6)	(8.8)
Amortisation charges	2.2	6.1	3.7	7.4	19.4
Impairment charges	0.0	0.0	0.0	0.3	0.3
Retirements and disposals	0.0	0.0	0.0	(10.8)	(10.8)
Disposal group IFRS 5	0.0	0.0	0.0	(0.2)	(0.2)
Accumulated amortisation 31.12.2020	8.5	27.9	40.7	68.7	145.8
Carrying amounts at 31.12.2020	124.6	67.2	21.3	52.6	265.7

Internally generated intangible assets comprise capitalised software and product development costs.

The customer relations of Magnesita have a carrying amount of €63.6 million (31.12.2020: €66.9 million) and a remaining useful life of 7 to 11 years.

Other intangible assets include in particular acquired patents, trademark rights, software, and land use rights. The land use rights have a carrying amount of €20.0 million (31.12.2020: €21.1 million) and a remaining useful life of 16 to 56 years.

There are no restrictions on the sale of intangible assets.

12. Property, plant and equipment

Property, plant and equipment developed as follows in the year 2021 and in the previous year:

in € million	Real estate, land and buildings	Raw material deposits	Technical equipment, machinery	Other plant, furniture and fixtures	Prepayments made and plant under construction¹⁾	Right-of-use assets	Total
Cost at 31.12.2020	561.7	36.9	1,039.4	330.9	164.9	76.8	2,210.6
Currency translation	17.8	0.7	32.7	8.3	4.0	2.5	66.0
Additions	24.8	0.5	47.5	17.9	156.8	13.3	260.8
Reassessment / Modification of leases (IFRS 16)	0.0	0.0	0.0	0.0	0.0	0.1	0.1
Retirements and disposals	(4.1)	0.0	(18.5)	(5.4)	0.0	(5.6)	(33.6)
Reclassifications	31.6	0.4	42.5	27.7	(116.0)	0.0	(13.8)
Cost at 31.12.2021	631.8	38.5	1,143.6	379.4	209.7	87.1	2,490.1
Accumulated depreciation 31.12.2020	253.3	23.8	720.5	230.9	1.1	22.4	1,252.0
Currency translation	4.6	0.2	19.2	5.8	0.0	0.7	30.5
Depreciation charges	11.9	0.9	56.3	23.4	0.0	16.0	108.5
Impairment charges	18.3	0.0	14.6	4.3	0.4	0.0	37.6
Retirements and disposals	(1.2)	0.0	(16.7)	(4.9)	0.0	(5.4)	(28.2)
Reclassifications	(0.3)	0.0	(0.5)	0.8	0.0	0.0	0.0
Accumulated depreciation 31.12.2021	286.6	24.9	793.4	260.3	1.5	33.7	1,400.4
Carrying amounts at 31.12.2021	345.2	13.6	350.2	119.1	208.2	53.4	1,089.7

1) Prepayments made and plant under construction include €6.0 million relating to intangible assets.

in € million	Real estate, land and buildings	Raw material deposits	Technical equipment, machinery	Other plant, furniture and fixtures	Prepayments made and plant under construction	Right-of-use assets	Total
Cost at 31.12.2019	641.3	36.6	1,210.4	321.6	173.5	76.1	2,459.5
Currency translation	(50.8)	(2.1)	(92.3)	(9.2)	(17.1)	(7.6)	(179.1)
Additions	6.3	2.9	13.8	6.7	105.2	24.5	159.4
Additions initial consolidation	2.0	0.0	0.3	0.1	0.0	0.0	2.4
Reassessment / Modification of leases (IFRS 16)	0.0	0.0	0.0	0.0	0.0	2.5	2.5
Retirements and disposals	(5.4)	(0.3)	(61.2)	(10.1)	0.0	(8.6)	(85.6)
Disposal group IFRS 5	(47.8)	0.0	(57.6)	(25.0)	(1.9)	(10.1)	(142.4)
Reclassifications	16.1	(0.2)	26.0	46.8	(94.8)	0.0	(6.1)
Cost at 31.12.2020	561.7	36.9	1,039.4	330.9	164.9	76.8	2,210.6
Accumulated depreciation 31.12.2019	283.3	23.6	777.1	237.8	6.0	24.9	1,352.7
Currency translation	(6.6)	(0.6)	(37.8)	(4.9)	(0.3)	(2.8)	(53.0)
Depreciation charges	12.3	1.1	70.6	20.3	0.0	16.0	120.3
Impairment charges	11.2	0.0	26.0	5.1	2.7	1.5	46.5
Retirements and disposals	(2.8)	(0.3)	(57.2)	(7.5)	0.0	(7.1)	(74.9)
Disposal group IFRS 5	(46.3)	0.0	(54.0)	(24.9)	(1.5)	(10.1)	(136.8)
Reclassifications	2.2	0.0	(4.2)	5.0	(5.8)	0.0	(2.8)
Accumulated depreciation 31.12.2020	253.3	23.8	720.5	230.9	1.1	22.4	1,252.0
Carrying amounts at 31.12.2020	308.4	13.1	318.9	100.0	163.8	54.4	958.6

The item prepayments made and plant under construction includes plant under construction with a carrying amount of €179.2 million (31.12.2020: €147.6 million), with the expansion of a dolomite plant in Austria, representing the largest investment project under construction in 2020 and the expansion of a magnesite plant in Brazil representing the largest investment project under construction in 2021.

There are no restrictions on the sale of property, plant and equipment.

The Right-of-use assets per category developed as follows as of 31 December 2021:

in € million	Right-of-use assets land and buildings	Right-of-use assets technical equipment and machinery	Right-of-use assets other equipment, furniture and fixtures	Total
Cost at 31.12.2020	40.4	30.7	5.7	76.8
Currency translation	1.0	1.3	0.2	2.5
Additions	8.5	1.7	3.1	13.3
Reassessment / Modification of leases (IFRS 16)	0.2	(0.1)	0.0	0.1
Retirements and disposals	(2.3)	(1.7)	(1.6)	(5.6)
Cost at 31.12.2021	47.8	31.9	7.4	87.1
Accumulated depreciation 31.12.2020	9.3	9.8	3.3	22.4
Currency translation	0.2	0.4	0.1	0.7
Depreciation charges	8.2	5.8	2.0	16.0
Retirements and disposals	(2.3)	(1.6)	(1.5)	(5.4)
Accumulated depreciation 31.12.2021	15.4	14.4	3.9	33.7
Carrying amounts at 31.12.2021	32.4	17.5	3.5	53.4

The Right-of-use assets per category developed as follows as of 31 December 2020:

in € million	Right-of-use assets land and buildings	Right-of-use assets technical equipment and machinery	Right-of-use assets other equipment, furniture and fixtures	Total
Cost at 31.12.2019	39.5	30.0	6.6	76.1
Currency translation	(2.0)	(5.2)	(0.4)	(7.6)
Additions	13.3	10.2	1.0	24.5
Reassessment / Modification of leases (IFRS 16)	2.8	0.0	(0.3)	2.5
Retirements and disposals	(3.4)	(4.1)	(1.1)	(8.6)
Disposal group IFRS 5	(9.8)	(0.2)	(0.1)	(10.1)
Cost at 31.12.2020	40.4	30.7	5.7	76.8
Accumulated depreciation 31.12.2019	15.5	7.0	2.4	24.9
Currency translation	(1.1)	(1.4)	(0.3)	(2.8)
Depreciation charges	7.2	6.7	2.1	16.0
Impairment charges	0.0	1.3	0.2	1.5
Retirements and disposals	(2.5)	(3.6)	(1.0)	(7.1)
Disposal group IFRS 5	(9.8)	(0.2)	(0.1)	(10.1)
Accumulated depreciation 31.12.2020	9.3	9.8	3.3	22.4
Carrying amounts at 31.12.2020	31.1	20.9	2.4	54.4

Further detail on IFRS 16 related information is provided under Note (7) and (26).

13. Investments in joint ventures and associates

The following investments in joint ventures and associates are accounted for using the equity method in the RHI Magnesita Consolidated Financial Statements:

in € million	31.12.2021	31.12.2020
Investments in joint ventures and associates	5.7	16.3
Carrying amount at year-end	5.7	16.3

Joint ventures

The RHI Magnesita Group held a share of 50% (2020: 50%) in MAGNIFIN Magnesiaprodukte GmbH & Co KG (“MAGNIFIN”), a private company based in St. Jakob, Austria. until 30 December 2021. The company’s core business activity is the production and sale of halogen-free flame retardants for plastics. The investment in MAGNIFIN was treated as a financial investment. MAGNIFIN was set up as an independent vehicle. RHI Magnesita had a residual interest in the net assets of the company and accordingly classified its share as a joint venture. There are no listed market prices available. Further information on the sale of the equity stake in Magnifin is provided under Note (5).

The movement in the carrying amount of the share in MAGNIFIN in the RHI Magnesita’s Consolidated Financial Statements is shown below:

in € million	31.12.2021	31.12.2020
Proportional share of net assets at beginning of year	10.9	14.1
Share of profit	9.3	7.7
Share of other comprehensive income (remeasurement gains/(losses))	0.1	(0.1)
Dividends	(16.2)	(10.9)
Other changes in value	0.0	0.1
Proportional share of net assets	4.1	10.9
Goodwill	4.9	4.9
Disposal	(9.0)	0.0
Carrying amount of investment	0.0	15.8

In addition, the Group holds interests in an immaterial joint venture with a carrying amount of €0.5 million as of 31 December 2021 (31.12.2020: €0.5 million). The Group’s share of the profit after income tax, other comprehensive income and total comprehensive income in 2021 amounts to €0.0 million (2020: less than €0.1 million).

Associates

On 30 December 2021 RHI Magnesita Group has acquired a 51% ownership stake over Chongqing Boliang Refractory Materials Co., Ltd, Chongqing, China (RHIMNU), for a cash consideration of €5.2 million. Further information on this acquisition is provided under Note (5).

In 2019 the Group decided to restructure its Sinterdolime sourcing options in Europe and increase its vertical integration. As a result, operations will be suspended in the first quarter of 2022 and the equity accounted investment in Sinterco will be liquidated in 2023. In the course of the Magnesita purchase price allocation the fair value of the investment was determined as zero due to its economic performance. It is RHI Magnesita's best estimate that no additional cash contributions will be needed to cover the closing cost based on the current operations and determined exit plan.

14. Other non-current financial assets

Other non-current financial assets consist of the following items:

in € million	31.12.2021	31.12.2020
Interests in subsidiaries not consolidated	0.6	0.6
Marketable securities and shares	13.7	13.5
Other non-current financial receivables	0.3	0.4
Other non-current financial assets	14.6	14.5

Accumulated impairments on investments, securities and shares amount to €3.6 million (31.12.2020: €3.7 million).

15. Other non-current assets

Other non-current assets include the following items:

in € million	31.12.2021	31.12.2020
Tax receivables	27.1	14.5
Prepaid stripping costs	9.3	8.4
Judicial deposits	3.5	2.9
Plan assets from overfunded pension plans	0.9	0.2
Prepaid expenses	0.4	0.6
Other non-current assets	41.2	26.6

Prepaid expenses for stripping costs arising from mining raw materials in a surface mine are included in non-current assets due to the planned use of the mine.

Tax receivables relate to input tax credits, which are expected to be utilised in the medium term.

16. Deferred taxes

Deferred taxes are related to the following significant balance sheet items and tax loss carryforwards:

	31.12.2021		2021	31.12.2020		2020
in € million	Deferred tax assets	Deferred tax liabilities	(Expense)/Income	Deferred tax assets	Deferred tax liabilities	(Expense)/Income
Property, plant and equipment, intangible assets	41.3	109.6	17.0	36.5	117.4	11.2
Inventories	16.3	11.0	(12.5)	20.7	3.9	(5.5)
Trade receivables, other assets	25.0	5.2	(0.8)	25.1	4.1	20.8
Pensions and other personnel provisions	61.7	0.2	(3.2)	70.5	0.8	(5.3)
Other provisions	25.5	0.3	(1.4)	26.3	0.4	11.8
Trade payables, other liabilities	20.4	12.2	(11.3)	24.8	11.7	(36.6)
Tax loss carried forward	102.3	0.0	16.0	88.6	0.0	16.8
Offsetting	(90.1)	(90.1)	0.0	(93.3)	(93.3)	0.0
Deferred taxes	202.4	48.4	3.8	199.2	45.0	13.2

As of 31 December 2021, subsidiaries that generated tax losses in the past year or the previous year recognised net deferred tax assets on temporary differences and tax loss carryforwards of €160.8 million (31.12.2020: €116.3 million). Deferred tax assets have been recognised because the companies concerned are expected to generate taxable income in the future.

Regarding the recognition of tax expenses, deferred tax assets, and deferred tax liabilities, RHI Magnesita has evaluated the economic scenario’s impacts arising, mainly, out of COVID-19’s implications to a global downturn. In this context, the relevant uncertainties and potential negative effects of the downturn for the Group’s financial results were considered when evaluating the recoverability of the tax assets. Particular focus was given to working with the most reliable forecasts and assumptions to minimise the effects of economic uncertainty to reach an assessment that reflects the best analysis possible, considering the circumstances and information available. Based on this analysis it was concluded that there is no need for a material impairment of deferred tax assets.

Tax loss carryforwards totalled €477.0 million in the RHI Magnesita Group as of 31 December 2021 (31.12.2020: €413.8 million). A significant part of the tax loss carryforwards originated in Brazil and Austria where their deduction can be carried forward indefinitely. Furthermore, there are substantial tax loss carryforwards in China expiring within the next five years. The annual compensation of tax loss carryforwards in Austria is limited to 75% and to 30% in Brazil’s respective taxable profits. Deferred taxes were not recognised on tax losses of €118.7 million (31.12.2020: €115.3 million). Of these losses, €0.4 million will expire in 2022,€9.3 million in 2023, €7.6 million in 2024, €1.9 million in 2025, €2.4 million in 2026, €0.2million in 2027, €0.3 million in 2028 (31.12.2020: €0,4 million in 2022, €5.2 million in 2023, €6.9 million in 2024, €1.2 million in 2025, €0.2 million in 2027 and €0.3 million in 2028), while the remainder will be carried forward indefinitely.

Besides, no deferred tax assets were recognised for temporary differences totalling €216.0 million (31.12.2020: €89.7 million), which reverse until 2034.

Taxable temporary differences of €814.4 million (31.12.2020: €721.0 million) and temporary deductible differences of €116.8 million (31.12.2020: €456.0 million) were not recognised on shares in subsidiaries because the corresponding distributions of profit or the sale of the investments are controlled by the Group and are not expected in the foreseeable future.

The maturity structure of deferred taxes is shown in the table below:

	31.12.2021			31.12.2020
in € million	Current	Non-current	Total	Current	Non-current	Total
Deferred tax assets	53.2	149.2	202.4	69.1	130.1	199.2
Deferred tax liabilities	(10.4)	(38.0)	(48.4)	(3.1)	(41.9)	(45.0)

17. Inventories

Inventories as presented in the Consolidated Statement of Financial Position consist of the following items:

in € million	31.12.2021	31.12.2020
Raw materials and supplies	300.2	92.7
Work in progress	151.5	102.5
Finished products and goods	512.4	272.2
Prepayments made	12.4	10.0
Inventories	976.5	477.4

Inventories include €6.9million (31.12.2020: €1.4 million) carried at net realisable value. Net write-down expenses amount to €3.4 million (2020: € 1.4 million).

The Group has increased its stock of raw materials and finished goods to mitigate supply chain disruptions and to meet expected demand in 2022.

There are no restrictions on the disposal of inventories.

18. Trade and other current receivables

Trade and other current receivables as presented in the Statement of Financial Position are classified as follows:

in € million	31.12.2021	31.12.2020
Trade receivables	403.7	254.3
Contract assets	3.6	1.8
Other taxes receivable	113.7	58.4
Receivables from dividends	8.7	0.0
Receivables from employees	5.4	8.9
Prepaid expenses	3.9	4.2
Prepaid transaction costs related to financial liabilities	2.6	2.3
Receivables from joint ventures and associates	0.8	1.1
Receivables from property transactions	1.3	1.6
Receivables from non-consolidated subsidiaries	0.3	0.2
Emission rights	0.0	2.0
Other current receivables	24.2	17.0
Trade and other current receivables	568.2	351.8
thereof financial assets	414.4	255.6
thereof non-financial assets	153.8	96.2

RHI Magnesita entered into factoring agreements and sold trade receivables to financial institutions. The balance sold totalled €178.1 million as of 31 December 2021 (31.12.2020: €177.6 million). The trade receivables have been derecognised as substantially all risks and rewards as well as control have been transferred. Payments received from customers in the period between the last sale of receivables and the reporting date are recognised in current borrowings.

Other taxes receivable include VAT credits and receivables from energy tax refunds, research, education and apprentice subsidies. The increase compared to the prior year mainly results from the previous financial year’s low balance as well as import transactions and acquisitions of fixed assets at year-end. Further, this position contains a receivable of €12.1m (31.12.2020 €0.0m) that was recognised as a result of a successful judicial proceeding against tax authorities in Brazil relating to revenue based taxes.

Other current receivables mainly consist of advances to suppliers not related to inventories. The increase compared to prior financial year mainly results from advances for IT services as well as custom and import related services and costs.

19. Income tax receivables

Income tax receivables amounting to €35.1 million (31.12.2020: €27.7 million) are mainly related to income tax receivables relating to prior periods, tax prepayments and deductible withholding taxes.

20. Other current financial assets

This item of the Consolidated Statement of Financial Position consists of the following components:

in € million	31.12.2021	31.12.2020
Derivatives in open orders	2.4	0.0
Forward exchange contracts	0.1	0.3
Current portion of non-current loans	0.4	0.0
Other current financial assets	2.9	0.3

Accumulated impairments on other current financial receivables amount to €0.0 million (31.12.2020: €0.6 million).

21. Cash and cash equivalents

This item of the Consolidated Statement of Financial Position consists of the following components:

in € million	31.12.2021	31.12.2020
Cash at banks	564.0	571.2
Money market funds	15.4	14.8
Cheques	1.3	1.0
Cash on hand	0.1	0.2
Cash and cash equivalents	580.8	587.2

Cash and cash equivalents include restricted cash totalling €19.7 million at 31 December 2021 (31.12.2020: €21.6 million). Restricted cash is mainly related to cash and cash equivalents at subsidiaries (mainly in China, India and Colombia) to which the Company only has limited access due to foreign exchange and capital transfer controls. In addition, €2.0 million (31.12.2020: 0.0 million) are held in escrow in Austria and are therefore not available for use by the Group. €17.3 million cash and cash equivalents (31.12.2020: €12.2 million) are accounted for by subsidiaries with non-controlling interests.

22. Share capital

As at 31 December 2021 the authorised share capital of RHI Magnesita N.V. amounts to €100,000,000 divided into 100,000,000 ordinary shares, of which 46,999,019 (31.12.2020: 49,008,955) fully paid-in ordinary shares are issued and outstanding, taking into consideration the treasury shares amounting to 2,478,686 (31.12.2020: 468,750). All outstanding RHI Magnesita shares grant the same rights. The shareholders are entitled to dividends and have one voting right per share at the Annual General Meeting. There are no RHI Magnesita shares with special control rights.

23. Group reserves

Treasury shares

In the course of the share buyback program which was initiated on 16 December 2020, completed on 13 April 2021, extended on 5 May 2021 and completed on 4 August 2021 the Company acquired additional 2,078,686 shares in treasury, Thereof 2,009,936 shares in treasury equalling €95.5 million in 2021 and 68,750 shares in treasury equalling €2.7 million in 2020.

Additional paid-in capital

At 31 December 2021 as well as at 31 December 2020, additional paid-in capital comprised premiums on the issue of shares less issue costs by RHI Magnesita N.V.

Mandatory reserve

The articles of association stipulate a mandatory reserve of €288,699,230.59 which was created in connection with the merger. No distributions, allocations or additions may be made and no losses of the Company may be allocated to the mandatory reserve.

Retained earnings

Retained earnings includes the result of the financial year and results that were earned by consolidated companies during prior periods, but not distributed.

Accumulated other comprehensive income

Cash flow hedge reserves includes gains and losses from the effective part of cash flow hedges less tax effects. The accumulated gain or loss from the hedge allocated to reserves is only reclassified to the Statement of Profit or Loss if the hedged transaction also influences the result or is terminated.

Reserves for defined benefit plans include the gains and losses from the remeasurement of defined benefit pension and termination benefit plans taking into account tax effects. No reclassification of these amounts to the Statement of Profit or Loss will be made in future periods.

Currency translation includes the accumulated currency translation differences from translating the Financial Statements of foreign subsidiaries, unrealised currency translation differences from monetary items which are part of a net investment in a foreign operation, net of related income taxes, as well as the effective portion of foreign exchange gains or losses when a non-financial instrument is designated as the hedging instrument in net investment hedge in a foreign operation.

24. Non-controlling interests

Non-controlling interests in Orient Refractories Ltd.

In June 2021 the two Indian subsidiaries RHI CLASIL Private Limited and RHI India Private Limited were merged into RHI Orient Refractories Limited (ORL), now renamed to RHI Magnesita India Limited, leaving RHI Magnesita with a share of 70.19% in ORL. As a result, non-controlling interests hold a share of 29,81% (31.12.2020: 33.5%) in the listed company RHI Magnesita India Ltd. (in the following “ORL”), based in New Delhi, India. ORL is allocated to the Steel segment. The current reporting period and the previous reporting period need to be read in conjuction but are non- comparable as a consequence of the merger.

Based on the net assets of the company, the carrying amount of the non-controlling interests is determined as follows:

in € million	31.12.2021	31.12.2020
Non-current assets	51.1	29.1
Current assets	153.9	56.1
Non-current liabilities	(2.8)	(3.5)
Current liabilities	(80.9)	(23.0)
Net assets before intragroup eliminations	121.3	58.7
Intragroup eliminations	(0.5)	(0.1)
Net assets	120.8	58.6
Percentage of non-controlling interests	29.8%	33.5%
Carrying amount of non-controlling interests	36.0	19.6

The aggregate Statement of Profit or Loss and Statement of Comprehensive Income are shown below:

in € million	2021	2020
Revenue	167.4	77.0
Operating expenses, net finance costs and income tax	(146.9)	(68.6)
Profit after income tax before intragroup eliminations	20.5	8.4
Intragroup eliminations	1.2	0.1
Profit after income tax	21.7	8.5
thereof attributable to non-controlling interests of ORL	6.6	2.8

in € million	2021	2020
Profit after income tax	21.7	8.5
Other comprehensive income/(loss)	8.0	(7.5)
Total comprehensive income	29.7	1.0
thereof attributable to non-controlling interests of ORL	8.7	0.3

The following table shows the summarised Statement of Cash Flows of ORL:

in € million	2021	2020
Net cash flow from operating activities	(1.4)	8.1
Net cash flow from investing activities	(5.2)	(3.5)
Net cash flow from financing activities	(3.6)	(3.2)
Total cash flow	(10.2)	1.4

Net cash flow from financing activities includes dividend payments to non-controlling interests amounting to €1.4 million (2020: €1.1 million).

In addition, non-controlling interests hold a share of 29,81% (31.12.2020: 33,5%) in one immaterial subsidiary with a carrying amount of the non-controlling interests amounts to €0.3 million as of 31 December 2021 (31.12.2020: €0.4 million) and a share of 49.0% in RHIMNGG founded on 2 November 2021 with a carrying amount of the non-controlling interests of €0.0 million as of 31 December 2021. Further information is provided under Note (5).

Accumulated other comprehensive income attributable to non-controlling interests

The development of accumulated other comprehensive income attributable to non-controlling interests is shown in the following table:

in € million	Currency translation
Accumulated other comprehensive income 31.12.2020	(4.3)
Unrealised results from currency translation	2.1
Accumulated other comprehensive income 31.12.2021	(2.2)

25. Borrowings

Borrowings include all interest-bearing liabilities due to financial institutions and other lenders.

Borrowings have the following contractual remaining terms:

	Total	Remaining term
in € million	31.12.2021	up to 1 year	2 to 5 years	over 5 years
Syndicated & Term Loan	791.5	58.3	733.2	0.0
Bonded loans ("Schuldscheindarlehen")	650.0	65.0	282.5	302.5
Other credit lines and other loans	88.2	88.2	0.0	0.0
Accrued interest	4.4	4.4	0.0	0.0
Total liabilities to financial institutions	1,534.1	215.9	1,015.7	302.5
Other financial liabilities	7.4	3.2	4.2	0.0
Capitalised transaction costs	(2.4)	(1.0)	(1.3)	(0.1)
Borrowings	1,539.1	218.1	1,018.6	302.4

	Total	Remaining term
in € million	31.12.2020	up to 1 year	2 to 5 years	over 5 years
Syndicated & Term Loan	613.0	40.6	572.4	0.0
Bonded loans ("Schuldscheindarlehen")	400.0	0.0	100.0	300.0
Other credit lines and other loans	88.2	83.4	4.8	0.0
Accrued interest	4.4	4.4	0.0	0.0
Total liabilities to financial institutions	1,105.6	128.4	677.2	300.0
Other financial liabilities	11.9	4.3	7.6	0.0
Capitalised transaction costs	(3.0)	(1.2)	(1.7)	(0.1)
Borrowings	1,114.5	131.5	683.1	299.9

In March 2021 RHI Magnesita took out a €65.0 million credit facility, maturing in March 2022. In October 2021, this facility was increased by €50.0 million to a total amount of €115.0 million and maturity has been extended until April 2023. A part of the proceeds of the loan were used to repay a €60.0 million 2-year revolving credit facility guaranteed by the Austrian export credit agency (OeKB), which remains committed and can be utilised until its maturity in March 2022.

In August 2021 the CNY 100.0 million term loan in China, from which CNY 47.5m have been outstanding as of 31 December 2020 has been fully repaid.

In November 2021 the Group exercised its second extension option and thereby extended the maturity of the revolving credit facility (€600.0 million) by one year to 2027. The third and last extension option could be requested in November 2022 and would further extend the maturity of the revolving credit facility to 2028.

In December 2021 RHI Magnesita issued a Schuldscheindarlehen (“SSD”) bonded loan in the amount of €250.0 million with tenors ranging from 5.5 years to 10 years as well as a new term loan in the amount of €150.0 million and a maturity of 3.5 years. The proceeds of the new instruments will be used for general corporate purposes, including for example refinancing and potential acquisitions.

The introduction of ESG-related pricing mechanics into the Group's financing facilities highlights RHI Magnesita’s commitment to sustainability. The margin under the USD term loan (USD 200.0 million) and revolving credit facility (€600.0 million) as well as the newly issued SSD bonded loan (€250.0 million) and EUR term loan (€150.0 million) will be adjusted based on the Group's EcoVadis rating performance. RHI Magnesita is currently rated 'Gold' by EcoVadis and will seek to further improve its ESG performance and ratings through the execution of its sustainability strategy.

Net debt excluding lease liabilities/adjusted EBITDA is the main financial covenant of the loan agreements and is shown under Note (56). Compliance with the covenants is measured on a semi-annual basis. Covenant ratio is limited at 3.5x as at 31 December 2021. Breach of covenants leads to an anticipated maturity of loans. During 2021 and 2020, the Group met all covenant requirements.

Considering interest swaps, 70% (31.12.2020: 53%) of the liabilities to financial institutions carry fixed interest and 30% (31.12.2020: 47%) carry variable interest.

The following table shows fixed interest terms and conditions, taking into account interest rate swaps, without liabilities from deferred interest:

Interest terms fixed until	Effective annual interest rate	Cur- rency	31.12.2021 Carrying amount in € million	Interest terms fixed until	Effective annual interest rate	Cur- rency	31.12.2020 Carrying amount in € million
2022	EURIBOR + margin	EUR	403.3	2021	EURIBOR + margin	EUR	380.7
	1.87%	EUR	65.0		LIBOR + margin	USD	15.3
					Interbank Deposit Certificate (CDI) + Margin	CNY	19.9
	Variable rate + margin	EUR	34.0		Various - Variable rate	Var.	3.3
	Various - Variable rate	Var.	12.5		Variable rate + margin	EUR	94.0
2023	0.79%	EUR	374.7	2022	1.87%	EUR	65.0
	4.09%	USD	176.8	2023	0.83%	EUR	290.3
2024	3.10%	EUR	35.0		3.94%	USD	162.6
2025	1.00%	EUR	177.0	2024	3.10%	EUR	35.0
2027	1.00%	EUR	152.0	2026	1.10%	EUR	27.0
2028	0.92%	EUR	86.5	2029	1.52%	EUR	8.0
2029	1.52%	EUR	8.0
2031	1.28%	EUR	5.0
			1,529.8				1,101.1

The table above shows how long the interest rates are fixed, rather than the maturity of the underlying instruments. In some cases, the terms to maturity of the contracts are substantially longer than the period during which interest terms are fixed.

26. Other financial liabilities

Other financial liabilities include the negative fair value of derivative financial instruments as well as lease liabilities, fixed-term and puttable non-controlling interests in Group companies. The puttable non-controlling interests have been reclassified to non-controlling interests within equity upon completion of the merger of the Indian entities. Additional explanation on derivative financial instruments is provided under Note (54).

This item of the Consolidated Statement of Financial Position consists of the following items:

	31.12.2021			31.12.2020
in € million	Current	Non-current	Total	Current	Non-current	Total
Derivatives from supply contracts	0.0	0.0	0.0	1.6	0.0	1.6
Interest rate swaps	0.0	9.6	9.6	0.0	18.3	18.3
Derivatives in open orders	0.1	0.0	0.1	1.8	0.0	1.8
Derivative financial liabilities	0.1	9.6	9.7	3.4	18.3	21.7
Lease liabilities	16.1	39.4	55.5	12.2	44.6	56.8
Power supply contract Norway	0.0	0.0	0.0	15.5	0.0	15.5
Fixed-term or puttable non-controlling interests	3.0	57.0	60.0	12.9	25.9	38.8
Other financial liabilities	19.2	106.0	125.2	44.0	88.8	132.8

Further information on IFRS16 related information is provided under Note (7) and (43).

27. Provisions for pensions

The net liability from pension obligations in the Consolidated Statement of Financial Position is as follows:

in € million	31.12.2021	31.12.2020
Present value of pension obligations	495.0	523.3
Fair value of plan assets	(255.5)	(240.2)
Deficit of funded plans	239.5	283.1
Asset ceiling	28.6	20.5
Net liability from pension obligations	268.1	303.6
thereof assets from overfunded pension plans	0.9	0.0
thereof pensions	269.0	303.6

The present value of pension obligations by beneficiary groups is as follows:

in € million	31.12.2021	31.12.2020
Active beneficiaries	88.4	101.0
Vested terminated beneficiaries	68.4	72.9
Retirees	338.2	349.4
Present value of pension obligations	495.0	523.3

The calculation of pension obligations is based on the following actuarial assumptions:

in %	31.12.2021	31.12.2020
Interest rate	2.3%	1.7%
Future salary increase	2.5%	2.4%
Future pension increase	2.1%	1.7%

These are average values which were weighted with the present value of the respective pension obligation.

The calculation of the actuarial interest rate for the European currency area is based on a yield curve for returns of high-quality corporate bonds denominated in EUR with an average rating of AA, which is derived from pooled index values. The calculation of the actuarial interest rate for the USD and GBP currency area is based on a yield curve for returns of high-quality corporate bonds denominated in USD and GBP with an average rating of AA, which is derived from pooled index values. Where there are very long-term maturities, the yield curve follows the performance of bonds without credit default risk. The interest rate is calculated annually at 31 December, taking into account the expected future cash flows which were determined based on the current personal and commitment data.

The calculation in Austria was based on the AVÖ 2018-P demographic calculation principles for salaried employees from the Actuarial Association of Austria. In Germany, the Heubeck 2018 G actuarial tables were used as a basis. In the other countries, country-specific mortality tables were applied.

The main pension regulations are described below:

The Austrian group companies account for €100.5 million (31.12.2020: €111.8 million) of the present value of pension obligations and for €20.6 million (31.12.2020: €23.0 million) of the plan assets. The agreed benefits include pensions, invalidity benefits and benefits for surviving dependents. Commitments in the form of company or individual agreements depend on the length of service and the salary at the time of retirement. For the majority of commitments the amount of the company pension subsidy is limited to 75% of the final remuneration including a pension pursuant to the General Social Insurance Act (ASVG). RHI Magnesita has concluded pension reinsurance policies for part of the commitments. The pension claims of the beneficiaries are limited to the coverage capital required for these commitments. Pensions are predominantly paid in the form of annuities and are partially indexed. For employees joining the Company after 1 January 1984, no defined benefits were granted. Rather, a defined contribution pension model is in place. In addition, there are commitments based on the deferred compensation principle, which are fully covered by pension reinsurance policies, and commitments for preretirement benefits for employees in mining operations.

The pension plans of the German group companies account for €146.3 million (31.12.2020: €155.2 million) of the present value of pension obligations and for €0.7 million (31.12.2020: €0.7 million) of plan assets. The benefits included in company agreements comprise pensions, invalidity benefits and benefits for surviving dependents. The amount of the pension depends on the length of service for the majority of the commitments and is calculated as a percentage of the average monthly wage/salary of the last 12 months prior to retirement. In some cases, commitments to fixed benefits per year of service have been made. The pensions are predominantly paid in the form of annuities and are adjusted in accordance with the development of the consumer price index for Germany. The pension plans are closed for new entrants, except one contribution-based plan. There is no defined contribution model on a voluntary basis. Individual commitments have been made, with major part of them being retired beneficiaries.

The pension plan of the US group company Magnesita Refractories Company, York, USA, accounts for €86.8 million (31.12.2020: €86.0 million) of the present value of pension obligations and for €79.0 million (31.12.2020: €70.2 million) of the plan assets. The pension plan is a non-contributory defined benefit plan covering a portion of the employees of the company. The plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Effective 21 June 1999, the company offered the participants the opportunity to elect to participate in a single enhanced defined contribution plan. Participants who made this election are no longer eligible for future accruals under this plan. All benefits accrued as of the date of transfer will be retained. Employees hired after 21 June 1999 and employees that did not meet the plan's eligibility requirements as of 21 June 1999 are not eligible for this plan. The pensions are predominantly paid in the form of annuities and are adjusted annually based on the US consumer price index. The company's contributions for the year ended 31 December 2021 met, or exceeded, the minimum funding requirements of ERISA.

The pension plan of the UK group company Magnesita Refractories Ltd., Dinnington, United Kingdom, accounts for €67.1 million (31.12.2020: €63.7 million) of the present value of pension obligations and holds €95.7 million (31.12.2020: €84.2 million) of assets, although only €67.1 million (31.12.2020: €63.7 million) of the plan assets are reflected on the balance sheet due to the application of IFRIC 14 (asset ceiling). The company sponsors a funded defined benefit pension plan for qualifying UK employees. The plan is administered by a separate board of trustees which is legally separate from the company. The trustees are composed of representatives of both the employer and employees, plus an independent professional trustee. The trustees are required by law to act in the interest of all relevant beneficiaries and are responsible for the investment policy with regard to the assets plus the day to day administration of the benefits. Under the plan, employees are entitled to annual pensions on retirement at age 65.

The pension liabilities of the Brazilian group company Magnesita Refratários S.A. account for €44.1 million (31.12.2020: €52.3 million) of the present value of pension obligations and for €24.6 million (31.12.2020: €26.9 million) of the plan assets. The pension plan qualifies as an optional benefit plan. Employees are entitled to contribute to the plan, with the company contributing 1.5 times this value. The agreed benefits include pensions, invalidity benefits and benefits for surviving dependents. Commitments in the form of company or individual agreements depend on the length of service and salary at the time of retirement. For the majority of commitments, the amount of the company pension obligation is limited to 75% of the final remuneration. At retirement the employee may choose to receive up to 25% of his/her amount at once or receive it on a pro-rata base with different options of monthly quotes.

The following table shows the development of net liability from pension obligations:

in € million	2021	2020
Net liability from pension obligations at beginning of year	303.6	328.1
Currency translation	2.5	(13.2)
Pension cost	8.5	10.3
Remeasurement (gains)/losses	(26.0)	0.6
Benefits paid	(17.6)	(18.6)
Employers' contributions to external funds	(2.9)	(3.6)
Net liability from pension obligations at year-end	268.1	303.6

The present value of pension obligations developed as follows:

in € million	2021	2020
Present value of pension obligations at beginning of year	523.3	557.9
Currency translation	15.4	(34.7)
Current service cost	4.2	4.6
Interest cost	8.9	10.9
Remeasurement (gains)/losses
from changes in demographic assumptions	(3.7)	(1.0)
from changes in financial assumptions	(24.1)	24.3
due to experience adjustments	6.0	(8.6)
Benefits paid	(34.4)	(30.6)
Employee contributions to external funds	0.5	0.5
Disposal due to settlement	(1.1)	0.0
Present value of pension obligations at year-end	495.0	523.3

The movement in plan assets is shown in the table below:

in € million	2021	2020
Fair value of plan assets at beginning of year	240.2	248.0
Currency translation	14.5	(22.9)
Interest income	5.1	6.0
Administrative costs (paid from plan assets)	(0.2)	(0.4)
Income on plan assets less interest income	10.4	17.4
Benefits paid	(16.8)	(12.0)
Employers' contributions to external funds	2.9	3.6
Employee contributions to external funds	0.5	0.5
Disposal due to settlement	(1.1)	0.0
Fair value of plan assets at year-end	255.5	240.2

The changes in the asset ceiling are shown below:

in € million	2021	2020
Asset ceiling at beginning of year	20.4	18.0
Currency translation	1.6	(1.0)
Interest expense	0.4	0.4
Losses/(gains) from changes in asset ceiling less interest expense	6.2	3.0
Asset ceiling at year-end	28.6	20.4

At 31 December 2021 the weighted average duration of pension obligations amounts to 12 years (31.12.2020: 13 years).

The following amounts were recorded in the Consolidated Statement of Profit or Loss:

in € million	2021	2020
Current service cost	4.2	4.6
Interest cost	8.9	10.9
Interest income	(5.1)	(6.0)
Interest expense from asset ceiling	0.4	0.4
Administrative costs (paid from plan assets)	0.2	0.4
Pension expense recognised in profit or loss	8.6	10.3

The remeasurement results recognised in other comprehensive income are shown in the table below:

in € million	2021	2020
Accumulated remeasurement losses at beginning of year	170.0	169.7
Remeasurement losses on present value of pension obligations	(21.8)	14.7
Income on plan assets less interest income	(10.4)	(17.4)
Losses/(gains) from changes in asset ceiling less interest expense	6.2	3.0
Reclassification to other reserves	(0.4)	0.0
Accumulated remeasurement losses at year-end	143.6	170.0

The present value of plan assets is distributed to the following classes of investments:

	31.12.2021			31.12.2020
in € million	Active market	No active market	Total	Active market	No active market	Total
Insurances	0.0	43.8	43.8	0.0	41.0	41.0
Equity instruments	48.8	0.0	48.8	5.5	35.4	40.9
Debt instruments	97.0	3.3	100.3	60.5	38.0	98.5
Cash and cash equivalents	11.2	0.1	11.3	2.1	6.5	8.6
Other assets	49.9	1.4	51.3	48.7	2.5	51.2
Fair value of plan assets	206.9	48.6	255.5	116.8	123.4	240.2

The present value of the insurances to cover the Austrian pension plans corresponds to the coverage capital. Insurance companies predominantly invest in debt instruments and to a low extent in equity instruments and properties.

Plan assets do not include own financial instruments of the Group or assets utilised by the RHI Magnesita Group.

RHI Magnesita works with professional fund managers for the investment of plan assets. They act on the basis of specific investment guidelines adopted by the pension fund committee of the respective pension plans. The committees consist of management staff of the finance department and other qualified executives. They meet regularly in order to approve the target portfolio with the support of independent actuarial experts and to review the risks and the performance of the investments. In addition, they approve the selection or the extension of contracts of external fund managers.

The largest part of the other assets is invested in pension reinsurance, which creates a low counterparty risk towards insurance companies. In addition, the Group is exposed to interest risks and longevity risks resulting from defined benefit commitments.

The Group generally endows the pension funds with the amount necessary to meet the legal minimum allocation requirements of the country in which the fund is based. Moreover, the Group makes additional allocations at its discretion from time to time. In the financial year 2022, RHI Magnesita expects employer contributions to external plan assets to amount to €3.0 million and direct payments to entitled beneficiaries to €19.2 million. In the previous year, employer contributions of €3.1 million and direct pension payments of €22.5 million had been expected for the financial year 2021.

28. Other personnel provisions

Other personnel provisions consist of the following items:

in € million	31.12.2021	31.12.2020
Termination benefits	44.1	46.4
Service anniversary bonuses	21.4	19.4
Legacy share-based payment program	0.0	0.1
Semi-retirements	3.2	4.6
Other personnel provisions	68.7	70.5

Provisions for termination benefits

Provisions for termination benefits were based on the following weighted average measurement assumptions:

in %	31.12.2021	31.12.2020
Interest rate	1.3%	0.9%
Future salary increase	3.5%	3.5%

The interest rate for the measurement of termination benefit obligations in the Euro area was determined taking into account the Company specific duration of the portfolio.

Provisions for termination benefits developed as follows in the financial year and the previous year:

in € million	2021	2020
Provisions for termination benefits at beginning of year	46.4	52.0
Currency translation	0.0	(0.1)
Current service cost	1.2	1.3
Interest cost	0.4	0.6
Remeasurement losses/(gains)
from changes in financial assumptions	(1.8)	2.1
from changes in demographic assumptions	1.9	0.0
due to experience adjustments	0.5	(1.9)
Benefits paid	(4.8)	(7.5)
Loss / (Gain) on settlement	0.3	(0.1)
Provisions for termination benefits at year-end	44.1	46.4

Payments for termination benefits are expected to amount to €2.3 million in the year 2022. In the previous year, the payments for termination benefits expected for the year 2021 amounted to €2.9 million.

The following remeasurement gains and losses were recognised in other comprehensive income:

in € million	2021	2020
Accumulated remeasurement losses at beginning of year	27.6	27.5
Remeasurement losses/(gains)	0.6	0.1
Reclassification to other reserves	(0.5)	0.0
Accumulated remeasurement losses at year-end	27.7	27.6

At 31 December 2021 the weighted average duration of termination benefit obligations amounts to 14 years (31.12.2020: 12 years).

Provisions for service anniversary bonuses

The measurement of provisions for service anniversary bonuses is based on an average weighted interest rate of 0.8% (31.12.2020: 0.5%) and considers salary increases of 4.1% (31.12.2020: 3.5%).

Provisions for semi-retirement

The funded status of provisions for obligations to employees with semi-retirement contracts is shown in the table below:

in € million	31.12.2021	31.12.2020
Present value of semi-retirement obligations	7.6	7.8
Fair value of plan assets	(4.4)	(3.2)
Provisions for semi-retirement obligations	3.2	4.6

External plan assets are ring-fenced from all creditors and exclusively serve to meet semi-retirement obligations.

29. Other non-current provisions

The development of non-current provisions is shown in the table below:

in € million	Onerous/unfavourable contracts	Labour and civil contingencies	Demolition/disposal costs, environmental damages	Total
31.12.2020	45.2	6.7	10.7	62.6
Currency translation	0.5	0.0	0.9	1.4
Reversals	0.0	(1.5)	0.0	(1.5)
Additions	0.0	1.9	0.4	2.3
Additions interest	5.2	0.0	0.3	5.5
Reclassifications	(7.8)	0.0	1.1	(6.7)
31.12.2021	43.1	7.1	13.4	63.6

In November 2017, RHI Magnesita sold a plant located in Oberhausen, Germany, in order to satisfy the conditions imposed by the European Commission in connection with their approval of the Acquisition of Control of Magnesita. As RHI Magnesita is obligated to provide raw materials at cost, the Group has recognised a provision for unfavourable contracts as part of the purchase price allocation to reflect the foregone profit margin. The non-current portion of this contract obligation amounts to €43.1 million as of 31.12.2021 (31.12.2020: €45.2 million).

The provision for labour and civil contingencies primarily comprises labour litigation provisions against RHI Magnesita totalling 258 cases amounting to €4.9 million (31.12.2020: €5.2 million).

The provision for demolition and disposal costs and environmental damages primarily includes provisions for the estimated costs of mining site restoration of several mines in Brazil amounting to €2.9 million (31.12.2020: €2.3 million) and various sites in the United States amounting to €6.0 million (31.12.2020: €5.3 million).

30. Other non-current liabilities

Other non-current liabilities consist of the following items:

in € million	31.12.2021	31.12.2020
Deferred income for subsidies received	4.7	3.1
Liabilities to employees	0.5	0.8
Miscellaneous non-current liabilities	0.7	0.9
Other non-current liabilities	5.9	4.8
thereof financial liabilities	0.0	0.0
thereof non-financial liabilities	5.9	4.8

31. Trade payables and other current liabilities

Trade payables and other current liabilities included in the Consolidated Statement of Financial Position consist of the following items:

in € million	31.12.2021	31.12.2020
Trade payables	649.2	318.6
Contract liabilities	57.9	46.2
Liabilities to employees	80.9	88.8
Taxes other than income tax	29.3	27.0
Payables from property transactions	24.3	9.9
Payables from commissions	7.3	5.6
Liabilities to joint ventures and associates	1.3	1.2
Liabilities to non-consolidated subsidiaries	0.7	0.7
Dividend liabilities	0.4	0.4
Other current liabilities	27.5	24.3
Trade payables and other current liabilities	878.8	522.7
thereof financial liabilities	688.5	337.6
thereof non-financial liabilities	190.3	185.1

Trade payables increased in line with the Group’s replenishment of raw material and finished goods stock, see Note (17).

Trade payables include an amount of €142.0 million (31.12.2020: €43.5 million) for raw material purchases subject to supply chain finance arrangements. The increase in forfaiting considers to match the inventory ramp up of the company in order to avoid supply chain disruptions.

Contract liabilities mainly consist of prepayments received on orders. In 2021 €46.2 million revenue was recognised related to contract liabilities recognised as at 31 December 2020.

The item liabilities to employees primarily consists of obligations for wages and salaries, payroll taxes and employee-related duties, performance bonuses, unused vacation and flextime credits.

As a result of the increase in prepayments made and plant under construction for property, plant and equipment payables from property transactions increased accordingly in 2021.

Other current liabilities include €1.0 million (31.12.2020: €0.6 million) investment reimbursement obligation to the former subsidiary Dolomite Franchi S.p.A., and other accrued expenses.

32. Income tax liabilities

Income tax liabilities amounting to €38.2 million (31.12.2020: €25.8 million) primarily include income taxes for the current year and previous years, which domestic and foreign tax authorities have not definitively assessed. Considering many factors, including the interpretation and jurisprudence on the respective tax laws and previous experiences, adequate liabilities were recognised.

33. Current provisions

The development of current provisions is shown in the table below:

in € million	Restructuring costs		Demolition/ disposal costs, environmental damages	Warranties	Onerous/unfavourable contracts	Other	Total
31.12.2020	53.4		7.8	9.9	12.9	2.4	86.4
Currency translation	(0.1)		0.0	0.1	0.2	0.0	0.2
Disposal of subsidiaries	0.0		0.0	0.0	(3.3)	0.0	(3.3)
Utilised	(23.7)		(0.7)	(4.3)	(9.2)	(1.1)	(39.0)
Reversals	(5.5)		(0.4)	(3.4)	0.0	(0.2)	(9.5)
Additions	9.4		0.5	1.8	2.4	0.1	14.2
Reclassifications	0.0		(1.1)	0.0	7.8	(0.7)	6.0
31.12.2021		33.5	6.1	4.1	10.8	0.5	55.0

Provisions for restructuring costs amounting to €33.5 million as of 31 December 2021 (31.12.2020: €53.4 million) primarily consist of estimated benefit obligations to employees due to termination of employment and dismantling costs. Thereof, €14.9 million (31.12.2020: €22.5 million) relate to the plant closure in Mainzlar, Germany, €4.6 million (31.12.2020: €9.2 million) to the plant closure in Kruft, Germany, € 4.5 million (31.12.2020: €1.2 million) to the plant closure in Trieben, Austria and €1.0 million (31.12.2020: €0.5 million) to the plant closure in Evergem, Belgium. Further, € 3.1 million (31.12.2020: € 15.4 million) relate to other cost saving initiatives. In addition, provisions for restructuring costs amounting to €4.2 million relate to the sale of the plants in Porsgrunn, Norway and Drogheda, Ireland. Thereof, 3.9 million have been recognised for the exposure from an environmental guarantee. In 2021 €5.5 million (2020: €1.1 million) of provisions for restructuring costs were reversed mainly as a consequence of a revision of the estimate of redundancy costs payable.

The item demolition and disposal costs, environmental damages includes an amount of €2.3 million (31.12.2020: €2.5 million) which refers to the former site in Aachen, Germany. It is assumed that this provision will be used up within the next 12 months.

Provisions for warranties include provisions for claims arising from warranties and other similar obligations from the sale of refractory products.

Provisions for contract obligations include the current portion of the Oberhausen supply contract obligation amounting to €8.0 million (31.12.2020: €7.6 million). The amortisation of this provision led to an income of €7.5 million in 2021 (31.12.2020: €13.1 million). In addition, provisions for other unfavourable contracts amount to €2.9 million (31.12.2020: €2.0 million).

Furthermore, several provisions, which are individually immaterial and cannot be allocated to one of the above-mentioned categories, are included in other provisions. A large part of these costs is expected to be paid within 12 months.

NOTES TO THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS

34. Revenue

Revenue is essentially generated by product deliveries and by performing management refractory services. The distribution of revenue by product group, division and country is given in the explanations to segment reporting under Note (50).

35. Cost of sales

Cost of sales comprises the production cost of goods sold as well as the purchase price of merchandise sold. In addition to direct material and production costs, it also includes overheads including depreciation charges on production equipment, amortisation charges of intangible assets as well as impairment losses and reversals of impairment losses of inventories. Moreover, cost of sales also includes the costs of services provided by the Group or services received.

36. Selling and marketing expenses

This item includes personnel expenses for the sales staff as well as depreciation charges and other operating expenses related to the market and sales processes.

37. General and administrative expenses

General and administrative expenses primarily consist of personnel expenses for the administrative functions, legal and other consulting costs, expenses for research and non-capitalisable development costs.

Research and development expenses totalled €36.7 million (2020: €37.8 million), of which development costs amounting to €8.7 million (2020: €7.2 million) were capitalised. Income from research grants amounted to €4.0 million (2020: €3.9 million) in 2021. Amortisation and impairment of development costs amounting to €3.5 million (2020: €3.6 million) are recognised under cost of sales.

38. Restructuring

Production Optimisation Plan

The Group continued the Production Optimisation Plan initiated in 2019 throughout 2021, which led to restructuring expenses amounting to €2.8 million (2020: €46.5 million) and non-current asset write-downs amounting to €41.3 million (2020: €28.1 million). Thereof €17.4 million (2020: €19.1 million) are allocated to Segment Steel and €23.9 million (2020: €9.0 million) are allocated to Segment Industrial.

In September 2021, the plant in Dashiqiao, China, was shut down and production suspended. At the same time, the Group entered negotiations with the joint venture partner to exit the Liaoning RHI Jinding Magnesia Co., Ltd. undertaking, to give up the entity’s net assets in exchange for a waiver of the dividend payable amounting to €23.5 million as per 31 December 2021. These negotiations are still ongoing. The recoverable amount of Dashiqiao’s assets is deemed to be equal to the fair value less costs of disposal and was estimated with reference to the difference between net assets to be given up and the amount of the expected waiver of the dividend liability as per 31 December 2021. As a result, write-down expenses of €29.0 million have been recognised, of which €8.7 million are attributable to Segment Steel and €20.3 million are attributable to Segment Industrial. Further €2.4 million of idle costs were incurred until 31 December 2021 and recorded as restructuring expenses.

For the final closure of plant Trieben, Austria, restructuring expenses amounting to €16.3 million have been recognised in 2021. These expenses mainly relate to dismantling and site clean-up costs amounting to €3.1 million and write-down expenses recognised on non-current assets amounting to €12.2 million, of which €8.6 million are attributable to Segment Steel and €3.6 million to Segment Industrial. The recoverable amount of these assets was estimated with reference to their expected scrap value, which is deemed negligible.

In the course of the plant closure in Hagen, Germany, restructuring expenses totalling to €0.6 million have been recognised and land has been sold resulting in a gain from disposal amounting to €4.1 million in 2021.

Organisational restructuring

In 2020 management conducted a detailed and far-reaching review of the Group’s cost base on a long-term basis, to make sure the business is right-sized and prepared for the challenges and opportunities ahead, including reduction of management and implementation of a new structure. As this project is still ongoing, further restructuring expenses related to termination of employment costs amounting to €4.7 million (2020: €22.2 million) have been recognised in 2021.

Divestment Norway and Ireland

Following the sale of plants in Drogheda, Ireland, and Porsgrunn, Norway, in February 2021 expenses amounting to €9.9 million have been recognised. Thereof, expenses amounting to €6.6 million were incurred for the exposure to environmental risks. In 2020, write-down expenses on non-current assets amounted to €18.7 million.

Summary of restructuring and write-down expenses recognised:

in € million	2021	2020
Production Optimisation Plan	(44.1)	(74.6)
Organisational restructuring	(4.7)	(22.2)
Divestment Norway and Ireland	(9.9)	(19.5)
Other	(0.1)	2.5
Restructuring and write-down expenses	(58.8)	(113.8)

39. Other income

The individual components of other income are:

in € million	2021	2020
Amortisation of Oberhausen provision	7.5	13.1
Result from deconsolidation incl. recycling of OCI components to P&L	6.8	0.0
Income from the disposal of non-current assets	6.2	1.8
Result from derivatives from supply contracts	1.6	0.0
Reversal of provisions	0.5	0.5
Miscellaneous income	6.5	4.3
Other income	29.1	19.7

The result from deconsolidation amounting to €6.8 million relates to the disposal of RHI Normag AS, Porsgrunn, Norway and Premier Periclase Limited, Drogheda, Ireland.

40. Other expenses

Other expenses include:

in € million	2021	2020
Expenses for strategic projects	(4.7)	(6.9)
Losses from the disposal of non-current assets	(2.6)	(6.4)
Result from deconsolidation incl. recycling currency translation differences	(1.6)	(0.3)
Result from derivatives from supply contracts	0.0	(9.6)
Miscellaneous expenses	(5.6)	(3.0)
Other expenses	(14.5)	(26.2)

Expenses for strategic projects amounting to €4.7 million (2020: €6.9 million) mainly include legal and consulting fees related to organisational streamlining and M&A. Miscellaneous expenses mainly consist of expenses related to prior years.

41. Interest income

This item includes interest income on securities and shares amounting to €0.6 million (2020: €0.7 million) as well as on cash at banks and similar income amounting to €13.6 million (2020: €5.2 million) of which €10.9 million are related to the successful judicial proceeding against tax authorities in Brazil. Additional information is provided under Note (18).

42. Foreign exchange effects and related derivatives

The net gain and expense on foreign exchange effects and related derivatives consists of the following items:

in € million	2021	2020
Foreign exchange gains	119.7	147.1
Gains from related derivative financial instruments	9.2	1.9
Foreign exchange losses	(121.7)	(190.4)
Losses from related derivative financial instruments	(4.4)	(1.4)
Net gain (expense) on foreign exchange effects and related derivatives	2.8	(42.8)

The net gain on foreign exchange effects in the current reporting period resulted mainly from the revaluation of the US Dollar against the Euro.

43. Other net financial expenses

Other net financial expenses consist of the following items:

in € million	2021	2020
Interest income on plan assets	4.7	5.9
Interest expense on provisions for pensions	(8.9)	(11.2)
Interest expense on provisions for termination benefits	(0.4)	(0.6)
Interest expense on other personnel provisions	0.0	(0.2)
Net interest expense personnel provisions	(4.6)	(6.1)
Unwinding of discount of provisions and payables	(6.8)	(9.6)
Interest expense on non-controlling interests	(5.2)	(3.7)
Interest expense on lease liabilities	(1.1)	(1.3)
Reversal of impairment losses on securities	0.2	0.0
Impairment losses on securities	0.0	(0.2)
Income/Expenses from the valuation of NCI put options	1.1	(1.6)
Other interest and similar expenses	(4.8)	(7.2)
Other net financial expenses	(21.2)	(29.7)

44. Income tax

Income tax consists of the following items:

in € million	2021	2020
Current tax expense	(43.2)	(27.1)
Deferred tax (expense)/income relating to
temporary differences	(12.2)	(3.7)
tax loss carryforwards	16.0	16.9
	3.8	13.2
Income tax	(39.4)	(13.9)

The current tax expense of the year 2021 includes tax expenses for previous periods of €3.8 million (2020: €2.5 million) and income from income tax relating to prior periods of €12.2 million (2020: €8.3 million).

In 2021 the income tax for prior periods mainly includes an income resulting from tax audits of RHI Magnesita Group amounting to €9.2 million. In 2020 the income tax for prior periods mainly included income from revised tax returns in the Netherlands amounting to €3.8 million and income from a change in estimate of prior-year tax provisions in Germany amounting to €1.4 million.

Regarding the recognition of tax expenses, deferred tax assets, and deferred tax liabilities, RHI Magnesita has evaluated the impacts of the economic scenario arising, mainly, out of COVID-19’s potentially delayed global recovery. In this context, the relevant uncertainties and potential negative effects of the downturn for the Group’s financial results were taken into consideration when evaluating the recoverability of the tax assets. Special focus was given to working with the latest forecasts and assumptions to minimise the effects of economic uncertainty to reach an assessment that reflects the best analysis possible, considering the circumstances and information available. Based on this analysis it was concluded that there is no need for an impairment of deferred tax assets. Information on tax contingencies is provided under Note (57).

In addition to the income taxes recognised in the Statement of Profit or Loss, a tax expense totalling €3.1 million (2020: income totalling €41.1 million), which is attributable to other comprehensive income, was also recognised in other comprehensive income.

The reasons for the difference between the income tax expense, which would result from the application of the Austrian corporate tax rate of 25% on the profit before income tax, and the income tax reported are shown below:

in € million	2021	2020
Profit before income tax	289.1	41.5
Income tax expense calculated at 25% (2020: 25%)	72.3	10.4
Different foreign tax rates	5.1	0.3
Expenses not deductible for tax purposes, non-creditable taxes	17.6	14.6
Non-taxable income and tax benefits	(17.2)	(5.0)
Tax losses and temporary differences of the financial year not recognised	0.0	6.4
Utilisation of previously unrecognised loss carryforwards and temporary differences	(4.0)	(3.4)
Recognition of previously unrecognised loss carryforwards and temporary differences	(37.9)	(14.2)
Change in write down on deferred tax assets	1.0	0.3
Deferred taxes not usable due to plant sale or closure	8.2	16.0
Deferred tax expense due to tax rate changes	(0.2)	(6.6)
Deferred income tax relating to prior periods	2.6	0.4
Current income tax relating to prior periods	(8.4)	(5.9)
Other	0.3	0.6
Recognised tax expense	39.4	13.9
Effective tax rate (in %)	13.6%	33.5%

In 2021 expenses not deductible for tax purposes included non-deductible personnel related expenses in Austria of €1.4 million, non-creditable withholding taxes of €1.8 million, non-deductible expenses for a debt waiver of€ 1.6 million, IT costs recharged from subsidiaries being non-deductible of €1.8 million, €2.6 million in Brazil relating to Transfer Price adjustments and non-deductible expenses due to thin capitalisation of €1.2 million in Argentina. In 2020 expenses not deductible for tax purposes included non-deductible voluntary leave payments in Austria of €1.7 million, nondeductible expenses for a share sale of €0.2 million, €4.9 million in Brazil, mainly due to taxation on foreign income of Brazilian controlled subsidiaries and non-deductible expenses due to thin capitalisation of €1.1 million in Argentina.

Non-taxable income and tax benefits include non-taxable income from restructuring of €1.3 million in Austria, income of foreign permanent establishments non-taxable in Austria of €1.8 million, tax incentives from the SUDENE tax regime in Brazil of € 1.6 million and a tax depreciation of €7.5 million. In 2020 non-taxable income and tax benefits included non-taxable portions of a capital gain of €0.8 million or statutory adjustments of €0.7 million.

Previously unrecognised temporary differences of €3.4 million could be utilised in Norway due to an asset sale. Furthermore, a deferred tax asset of €37.7 million was recognised resulting from a tax depreciation for future periods. On tax losses and temporary differences €9.1 million of potential deferred tax assets have not been recognised in China, thereof relating €8.2 million to a plant closure creating deferred tax assets not usable anymore due to limited planned taxable income in future years or leading to the write down of existing deferred tax assets. In 2020 the major effects include €9.4 million of deferred tax assets being recognised due to increased planned taxable income due to a restructuring and €16.0 million impairment of deferred tax assets in Norway due to the sale of the company holding those tax assets.

Due to tax rate changes in Argentina from 30% to 35% an amount of €0.3 million increased the income from deferred income taxes in 2021. In 2020 due to tax rate changes in Brazil from 15,25% to 34% in relation to the SUDENE tax regime an amount of €6.5 million increased the income from deferred income taxes.

45. Expense categories

The presentation of the Consolidated Statement of Profit or Loss is based on the function of expenses. The following table shows a classification by expense category for 2021 and the previous year:

in € million	2021	2020
Changes in inventories, own work capitalised	(259.0)	19.3
Cost of materials	1,414.9	1,013.1
Personnel costs	547.6	575.6
Depreciation and amortisation charges	131.1	139.7
Write-down expenses	41.3	52.1
Other income	(41.2)	(32.4)
Other expenses	502.9	371.0
Total cost of sales, selling and marketing, administrative and restructuring expenses	2,337.6	2,138.4

Cost of materials includes expenses for raw materials and supplies and purchased goods of €1,189.4 million (2020: €827.9 million) as well as expenses for services received, especially energy, amounting to €225.5 million (2020: €185.2 million).

Amortisation charges of intangible assets are largely recognised in cost of sales. Other expenses mainly include freight costs, commissions, travel costs as well as consulting and other outside services.

46. Personnel costs

Personnel costs consist of the following components:

in € million	2021	2020
Wages and salaries	415.2	443.3
Pensions
Defined benefit plans	4.4	5.1
Defined contribution plans	4.8	6.2
Termination benefits
Defined benefit plans	1.2	1.7
Defined contribution plans	1.4	1.4
Other expenses	7.8	19.1
Social security costs	86.6	73.7
Fringe benefits	26.2	25.1
Personnel expenses (without interest expenses)	547.6	575.6

Personnel costs do not include amounts resulting from the interest accrued on personnel provisions. They amount to €4.6 million (2020: €6.0 million) and are recorded in other net financial expenses.

The expenses for wages and salaries include €6.2 million (2020: €-3.0 million) for share based payments.

NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

The Statement of Cash Flows shows how cash and cash equivalents of the Group change through cash inflows and cash outflows during the reporting year. In accordance with IAS 7, cash flows from operating activities, from investing activities and from financing activities are distinguished. Cash flows from investing and financing activities are determined on the basis of cash payment, while cash flow from operating activities is derived from the Consolidated Financial Statements using the indirect method.

The respective monthly changes in items of the Statement of Financial Position of companies that report in foreign currencies are translated at the closing rate of the previous month and adjusted for effects arising from changes in the group of consolidated companies or in other businesses. Therefore, the Statement of Cash Flows cannot be derived directly from changes in items of the Consolidated Statement of Financial Position. As in the Statement of Financial Position, cash and cash equivalents are translated at the closing rate. The effects of changes in exchange rates on cash and cash equivalents are shown separately.

47. Cash generated from operations

in € million	2021	2020
Profit after income tax	249.7	27.6
Adjustments for
income tax	39.4	14.0
depreciation	108.7	120.3
amortisation	22.4	19.4
write-down of property, plant and equipment and intangible assets	41.3	46.8
income from the reversal of investment subsidies	(0.9)	(0.6)
write-ups / impairment losses on securities	(0.2)	0.2
gains / losses from the disposal of property, plant and equipment	(6.3)	0.1
gains / losses from the disposal of subsidiaries	(5.2)	0.3
net interest expense and derivatives	24.4	36.0
result from joint ventures and associates	(100.2)	(7.6)
other non-cash changes	(12.7)	23.2
Changes in working capital
inventories	(474.3)	64.2
trade receivables	(132.6)	35.9
contract assets	(1.6)	(0.1)
trade payables	314.8	(5.8)
contract liabilities	10.7	3.1
Changes in other assets and liabilities
other receivables and assets	(56.9)	13.1
provisions	(49.0)	(4.1)
other liabilities	(24.8)	(19.4)
Cash (used in) / generated from operations	(53.3)	366.6

In 2021 cash generated from operations was negative due to the supply chain disruptions impacting the business, which resulted in increased working capital, especially in increased level of inventory of raw materials and finished goods. This is a non-recurring effect, as supply chains are expected to stabilise im 2022.

Other non-cash expenses and income include mainly the net interest expenses for defined benefit pension plans amounting to €4.6 million (2020: €6.1 million), net remeasurement gains of monetary foreign currency positions and derivative financial instruments of €6.4 million (2020: €-4.3 million), foreign exchange effects and the amortisation of Oberhausen provision (see Note 39).

48. Net cash flow from financing activities

The reconciliation of movements of financial liabilities and assets to cash flows arising from financing activities for the current and the prior year is shown in the tables below:

			Cash changes	Non-cash changes
in € million		31.12.2020		Changes in foreign exchange rates	Reclass	Interest expense and other changes	Additions and modifications of leases (IFRS 16)	31.12.2021
Liabilities to financial institutions	1,105.6		390.1	15.0	0.0	23.4	0.0	1,534.1
Lease liabilities	56.8		(17.4)	1.6	0.0	1.1	13.4	55.5
Liabilities to fixed-term or puttable non-controlling interests	38.8		(1.3)	3.7	(8.8)	27.6	0.0	60.0
Other financial liabilities and capitalised transaction costs	8.9		(5.4)	0.3	0.0	1.2	0.0	5.0
Changes of financial liabilities and assets arising from financing activities	1,210.1		366.0	20.6	(8.8)	53.3	13.4	1,654.6

		Cash changes	Non-cash changes
in € million	31.12.2019		Changes in foreign exchange rates	Disposal group IFRS 5	Interest expense and other changes	Additions and modifications of leases (IFRS 16)	31.12.2020
Liabilities to financial institutions	1,043.1	51.1	(15.1)	0.0	26.5	0.0	1,105.6
Lease liabilities	61.9	(17.1)	(6.7)	(9.6)	1.3	27.0	56.8
Liabilities to fixed-term or puttable non-controlling interests	35.8	(1.6)	(0.8)	0.0	5.4	0.0	38.8
Other financial liabilities and capitalised transaction costs	11.9	(2.6)	(1.7)	0.0	1.3	0.0	8.9
Changes of financial liabilities and assets arising from financing activities	1,152.7	29.8	(24.3)	(9.6)	34.5	27.0	1,210.1

The reconciliation of the cash impact of net financing in 2021 and 2020 is shown in the tables below:

2021		Reconciliation to cash net finance cost
in € million	Profit or loss	financing cash movements	other cash and non-cash movements	Cash impact of net financing costs
Interest income	14.2	0.0	11.5	2.7
Interest expenses on borrowings	(20.7)	(4.4)	(4.4)	(20.7)
Net expense on foreign exchange effects and related derivatives	2.8	0.0	1.9	0.9
Other net financial expenses	(21.2)	(1.3)	(16.6)	(5.9)
Net finance costs	(24.9)			(23.0)

2020		Reconciliation to cash net finance cost
in € million	Profit or loss	financing cash movements	other cash and non-cash movements	Cash impact of net financing costs
Interest income	5.9	0.0	(0.1)	6.0
Interest expenses on borrowings	(20.1)	(4.2)	(4.4)	(19.9)
Net expense on foreign exchange effects and related derivatives	(42.8)	0.0	(44.3)	1.5
Other net financial expenses	(29.7)	(3.1)	(22.2)	(10.6)
Net finance costs	(86.7)			(23.0)

Non cash-movements in interest income mainly consist of accrued interest on a tax benefit that was recognised as a result of a successful judicial proceeding against tax authorities in Brazil relating to revenue based taxes. Non-cash movements in other net financial expenses are mainly related to net interest expenses on personnel provisions and non-controlling interests as well as to expenses from the discount on provisions.

49. Total interest paid and interest received

Total interest paid amounts to €29.8 million in the reporting period (2020: €31.7 million), of which €0.0 million (2020: €1.0 million) is included in cash flow from operating activities, €3.2 million (2020: €0.2 million) in cash flow from investing activities and €26.6 million (2020: €30.5 million) in cash flow from financing activities.

Total interest received amounts to €2.7 million for the financial year 2021 (2020: €6.1 million), of which €0.0 million (2020: €0.2 million) are included in cash flow from operating activities and €2.7 million (2020: €5.9 million) in cash flow from investing activities.

OTHER DISCLOSURES

50. Segment reporting

Segment reporting by operating company division

The following tables show the financial information for the operating segments for the year 2021 and the previous year:

2021 in € million	Steel	Industrial	Group 2021
Revenue	1,822.9	728.5	2,551.4

Gross profit	393.7	189.8	583.5

EBIT			213.8
Net finance costs			(24.9)
Result from joint ventures and associates			100.2
Profit before income tax			289.1

Depreciation and amortisation charges	(93.1)	(38.0)	(131.1)

Segment assets 31.12.2021	2,146.3	724.2	2,870.5
Investments in joint ventures and associates 31.12.2021			5.7
Reconciliation to total assets			1,037.9
			3,914.1
Investments in property, plant and equipment and intangible assets (according to non-current assets statement)	196.0	83.5	279.5

2020 in € million	Steel¹⁾	Industrial¹⁾	Group 2020
Revenue	1,569.9	689.1	2,259.0

Gross profit	367.8	182.3	550.1

EBIT			120.6
Net finance costs			(86.7)
Result from joint ventures and associates			7.6
Profit before income tax			41.5

Depreciation and amortisation charges	(98.5)	(41.2)	(139.7)

Segment assets 31.12.2020	1,514.7	553.9	2,068.6
Investments in joint ventures and associates 31.12.2020			16.3
Reconciliation to total assets			967.8
			3,052.7
Investments in property, plant and equipment and intangible assets (according to non-current assets statement)	127.1	47.7	174.8

1) Adjusted to reflect the changes in presentation.

No single customer contributed 10% or more to consolidated revenue in 2021 and in 2020. Companies which are known to be part of a group are treated as one customer.

When allocating revenue to product groups, a distinction is made between shaped products (e.g. hydraulically pressed bricks, fused cast bricks, isostatically pressed products), unshaped products (e.g. repair mixes, construction mixes and castables), refractory management services (e.g. full line service, contract business, cost per performance) as well as other revenue. Other mainly includes revenue from the sale of non-group refractory products.

In the reporting year, revenue is classified by product group as follows:

in € million	Steel	Industrial	Group 2021
Shaped products	842.7	518.9	1,361.6
Unshaped products	338.2	146.0	484.2
Management refractory services	575.0	0.0	575.0
Other	67.0	63.6	130.6
Revenue	1,822.9	728.5	2,551.4

In 2020, revenue was classified by product group as follows:

in € million	Steel¹⁾	Industrial¹⁾	Group 2020
Shaped products	738.5	484.3	1,222.8
Unshaped products	279.1	143.9	423.0
Management refractory services	481.2	0.0	481.2
Other	71.1	60.9	132.0
Revenue	1,569.9	689.1	2,259.0

1) Adjusted to reflect the changes in presentation.

Total revenue includes revenue from Solution Business amounting to €749.2 million (2020: €618.3 million). Thereof, €659.9 million (2020: €537.5 million) are attributable to Segment Steel and €89.3 million (2020: €80.8 million) are attributable to Segment Industrial. Solution Business is a customer classification, where RHI Magnesita sums up all customer relations in which we enable our customers to focus on their core competences. It is typically characterised by sales of end-to-end solutions covering large parts of the customer process chain. Examples of this would be CPP/FLS, but also customers where we focus on technological development of bespoke products or where we are a strategic partner.

Revenue from shaped and unshaped products is transferred to the customers at a point in time, whereas revenue from management refractory services is transferred over time. Other revenue amounting to €48.0 million (2020: €55.2 million) is transferred over time and an amount of €82.6 million (2020: €76.8 million) is transferred at a point of time.

Segment reporting by country

Revenue in 2021 is classified by customer sites as follows:

in € million	Steel	Industrial	Group
Netherlands	6.0	2.2	8.2
All other countries
USA	364.1	52.7	416.8
India	221.3	34.1	255.4
Brazil	191.5	60.5	252.0
PR China	73.8	127.4	201.2
Mexico	89.1	40.7	129.8
Germany	78.9	45.6	124.5
Italy	73.8	23.6	97.4
Canada	45.8	41.5	87.3
Russia	52.7	21.6	74.3
Other countries, each below €44.3 million	625.9	278.6	904.5
Revenue	1,822.9	728.5	2,551.4

Revenue in 2020 is classified by customer sites as follows:

in € million	Steel¹⁾	Industrial¹⁾	Group
Netherlands	6.3	6.0	12.3
All other countries
USA	323.8	60.5	384.3
Brazil	173.8	56.3	230.1
India	161.7	25.9	187.6
PR China	67.2	99.9	167.1
Mexico	82.6	31.4	114.0
Germany	68.4	45.2	113.6
Italy	61.5	24.5	86.0
Russia	59.5	17.9	77.4
Canada	39.5	35.5	75.0
Other countries, each below €55.6 million	525.6	286.0	811.6
Revenue	1,569.9	689.1	2,259.0

1) Adjusted to reflect the changes in presentation.

The carrying amounts of goodwill, other intangible assets and property, plant and equipment are classified as follows by the respective sites of the Group companies:

in € million	31.12.2021	31.12.2020
Brazil	396.5	338.2
Austria	331.4	259.4
USA	229.3	220.5
PR China	161.8	177.4
Germany	149.9	139.6
India	71.0	61.6
Mexico	35.7	34.9
France	32.9	27.5
Turkey	27.8	28.5
Other countries, each below €16.8 million (31.12.2020: €15.9 million)	50.4	47.5
Goodwill, intangible assets and property, plant and equipment	1,486.7	1,335.1

51. Earnings per share

In accordance with IAS 33, earnings per share are calculated by dividing the profit or loss attributable to the shareholders of RHI Magnesita N.V. by the weighted average number of shares outstanding during the financial year.

	2021	2020
Profit after income tax attributable to the owners of the parent (in € million)	243.1	24.8
Weighted average number of shares for basic EPS	47,629,647	49,075,426
Effects of dilution from share options	519,546	363,519
Weighted average number of shares for dilutive EPS	48,149,193	49,438,945
Earnings per share basic (in €)	5.10	0.51
Earnings per share diluted (in €)	5.05	0.50

The weighted average number of shares for basic and dilutive EPS considers the weighted average effect of the newly issued ordinary shares as well the effect of changes in treasury shares during the reporting period. As of 31 December 2021, there are 554,238 diluting options (31.12.2020: 363,519).

52. Dividend payments and proposed dividend

The proposed dividend is subject to the approval of the Annual General Meeting on 25 May 2022 and was not recognised as a liability in the Consolidated Financial Statements 2021. Together with the already paid interim dividend of €0.50 per share in September, the final proposed dividend for 2021 will amount to €1.00 per share (2020:€1.50 per share).

In line with the Group’s dividend policy the Board paid out an interim dividend in September 2021 of €0.50 per share for the first half of 2021 amounting to
€24 million.

Based on a resolution adopted by the Annual General Meeting of RHI Magnesita N.V. on 10 June 2021 the final dividend amounted to €1.00 per share for the shareholders of RHI Magnesita N.V for 2020. Together with the already paid interim dividend of €0.50 per share in December, the total dividend for 2020 amounted to €1.50 per share.

Dividend payments to the shareholders of RHI Magnesita N.V. have no income tax consequences for RHI Magnesita N.V.

53. Additional disclosures on financial instruments

The following tables show the carrying amounts and fair values of financial assets and liabilities by measurement category and level and the allocation to the measurement category in accordance with IFRS 13. In addition, carrying amounts are shown aggregated according to measurement category.

		31.12.2021				31.12.2020
in € million	Measurement category IFRS 9¹⁾		Level	Carrying amount	Fair value	Carrying amount	Fair value
Other non-current financial assets
Interests in subsidiaries not consolidated	FVPL		3	0.6	0.6	0.6	0.6
Marketable securities	FVPL		1	13.2	13.2	13.0	13.0
Shares	FVPL		3	0.5	0.5	0.5	0.5
Other non-current financial receivables	AC		-	0.3	-	0.4	-
Trade and other current receivables	AC		-	414.4	-	255.6	-
Other current financial assets
Derivatives	FVPL		2	2.5	2.5	0.3	0.3
Other current financial receivables	AC		-	0.4	-	0.0	0.0
Cash and cash equivalents	AC		-	580.8	-	587.2	-
Financial assets				1,012.7		857.6
Non-current and current borrowings
Liabilities to financial institutions	AC		2	1,534.1	1,551.6	1,105.6	1,118.3
Other financial liabilities and capitalised transaction costs	AC		2	5.0	-	8.9	-
Non-current and current other financial liabilities
Lease liabilities	AC		2	55.5	-	56.8	-
Derivatives	FVPL		2	0.1	0.1	3.4	3.4
Interest derivatives designated as cash flow hedges	-		2	9.6	9.6	18.3	18.3
Liabilities to fixed-term or puttable non-controlling interests²⁾⁴⁾	AC		2/3	60.0	60.0	38.8	38.8
Power supply contract Norway³⁾	AC		2	0.0	0.0	15.5	15.5
Trade payables and other current liabilities	AC		-	688.5	-	337.6	-
Financial liabilities				2,352.8		1,584.9
Aggregated according to measurement category
Financial assets measured at FVPL				16.8		14.4
Financial assets measured at amortised cost				995.5		843.2
Financial liabilities measured at amortised cost				2,343.1		1,563.2
Financial liabilities measured at FVPL				0.1		3.4

1)FVPL: Financial assets/financial liabilities measured at fair value through profit or loss.

AC: Financial assets/financial liabilities measured at amortised cost.

2) Reclassification of puttable non-controlling interests amounting to €8.8m to non-controlling interest within equity upon completion of the merger of the Indian entities, see Note (5).

3) Relating to the termination of the power supply contract in the course of the sale of NORMAG; termination fee paid in January 2021.

4) Including the put option of the newly founded RHIMNGG amounting to €23.4 million, see Note (5).

In the RHI Magnesita Group marketable securities, derivative financial instruments, shares, and interests in subsidiaries not consolidated are measured at fair value.

Fair value is defined as the amount for which an asset could be exchanged, or a liability settled, between market participants in an arm's length transaction on the day of measurement. When the fair value is determined it is assumed that the transaction in which the asset is sold or the liability is transferred takes place either in the main market for the asset or liability, or in the most favourable market if there is no main market. RHI Magnesita considers the characteristics of the asset or liability to be measured which a market participant would consider in pricing. It is assumed that market participants act in their best economic interest.

RHI Magnesita takes into account the availability of observable market prices in an active market and uses the following hierarchy to determine fair value:

Level 1:	Prices quoted in active markets for identical financial instruments.
Level 2:	Measurement techniques in which all important data used are based on observable market data.
Level 3:	Measurement techniques in which at least one significant parameter is based on non-observable market data.

The fair value of securities, shares, and interests in subsidiaries not consolidated is based on price quotations at the reporting date (Level 1), where such quotations exist. In other cases, a valuation model (Level 3) would be used for such instruments with the exception if such instruments are immaterial to the Group, in which case amortised cost serves as an approximation of fair value.

The fair value of interest derivatives in a hedging relationship (interest rate swaps) is determined by calculating the present value of future cash flows based on current yield curves taking into account the corresponding terms (Level 2).

The fair value of other derivative contracts corresponds to the market value of the forward exchange contracts and the embedded derivatives in open orders denominated in a currency other than the functional currency, as well as the market value of a short-term power supply contract. These derivatives are measured using quoted forward rates that are currently observable (Level 2).

RHI Magnesita takes into account reclassifications in the measurement hierarchy at the end of the reporting period in which the changes occur. Other than those from the initial application of IFRS 9, there were no shifts between the different measurement levels in the two reporting periods.

Liabilities to financial institutions, other financial liabilities and capitalised transaction costs, lease liabilities and liabilities to fixed-term or puttable non-controlling interests are carried at amortised cost in the Consolidated Statement of Financial Position. The fair values of the liabilities to financial institutions are only disclosed in the notes and calculated at the present value of the discounted future cash flows using yield curves that are currently observable (Level 2). The carrying amount of other financial liabilities approximate their fair value at the reporting date. Puttable non-controlling interests in the amount of €8.8 million have been reclassified to non-controlling interest within equity upon completion of the merger of the Indian entities. Further information is provided under Note (5). In December 2021, RHI Magnesita recognised a put option liability related to the newly founded group company RHIMNGG in China (see Note 5), amounting to €23.4 million. The fair value is based on the present value of performance-related contractual cashflows with a maturity in 2031. The principal valuation parameters are deemed to be non-observable (Level 3). Other liabilities to fixed-term or puttable non-controlling interests are valued at Level 2 of the fair value hierarchy.

The carrying amounts of financial receivables approximately correspond to their fair value as due to the amount of the existing receivables no material deviation between the fair value and the carrying amount is assumed and the credit default risk is accounted for by forming valuation allowances.

Trade and other current receivables and liabilities as well as cash and cash equivalents are predominantly short-term. Therefore, the carrying amounts of these items approximate fair value at the reporting date.

No contractual netting agreement of financial assets and liabilities were in place as at 31 December 2021 and 31 December 2020.

Net results by measurement category in accordance with IFRS 9

The effect of financial instruments on the income and expenses recognised in 2021 and 2020 is shown in the following table, classified according to the measurement categories defined in IFRS 9:

in € million	2021	2020
Net loss from financial assets and liabilities measured at fair value through profit or loss	7.2	(4.9)
Net loss from financial assets and liabilities measured at amortised cost	(20.9)	(73.9)

The net gain from financial assets and liabilities measured at fair value through profit or loss includes income from securities and shares, income from the disposal of securities and shares, impairment losses and income from reversals of impairment losses, unrealised results from the measurement of a long-term commodity futures contract, changes in the market value and realised results of forward exchange contracts and embedded derivatives in open orders in a currency other than the functional currency of RHI Magnesita, interest derivatives which do not meet the requirements of hedge accounting in accordance with IFRS 9 and interest income from securities.

The net loss from financial assets and liabilities measured at amortised cost includes interest income and expenses, changes in valuation allowances and losses on derecognition, foreign exchange gains and losses as well as expenses related to the measurement of put options. The net loss is mainly related to financial liabilities measured at amortised cost.

Net finance costs include interest income amounting to €14.2 million (2020: €5.9 million) and interest expenses of €33.0 million (2020: €32.6 million), which result from financial assets and liabilities which are not carried at fair value through profit or loss.

54. Derivative financial instruments

Commodity forward

RHI Magnesita Group terminated its energy supply contract following the closure of the fused magnesia plant in Porsgrunn, Norway. The original contract term was December 2023 and the settlement payment amounts to €24.0 million. The first payment installment was made in July 2020 (€8.5 million), the second in January 2021 (€15.5 million). Since 2015 this energy supply contract had been accounted for as a derivative financial instrument in accordance with IFRS 9, as the “own-use-exemption” was no longer applicable as the majority of the contracted electricity was sold on the market. From 30 June 2020 onward until final settlement, measurement of this financial instrument was based on the settlement payment and recognised as other financial liability.

In addition, Magnesita Refratários S.A., Contagem, Brazil signed a commodity forward contract for electricity in January 2012 which is accounted for as a financial instrument in accordance with IFRS 9 since 1 January 2020 as the “own-use exemption” no longer applied. The term of the contract expired in the fourth quarter of 2021 and the corresponding financial liability has been reduced to €0.0 million (31.12.2020: €1.6 million).

Interest rate swaps

RHI Magnesita has concluded interest rate swaps to hedge the cash flow risk associated to financial liabilities carrying variable interest rates. Variable interest cash flows of financial liabilities were designated as hedged items. The Group has established a hedge ratio of 1:1 and the cash flow changes of the underlying hedged items, which result from the changes of the variable interest rates, are balanced out by the cash flow changes of the interest rate swaps. These hedging measures pursue the objective to transform variable-interest financial liabilities into fixed interest financial liabilities, thus hedging the cash flow from the financial liabilities. Potential hedge ineffectiveness could arise out of the credit value/debit value adjustment on the interest rate swaps which is not matched by the loan or out of differences in critical terms between the interest rate swaps and the loans. Credit risk may affect hedge effectiveness, however this risk is assessed to be very low at RHI Magnesita as only first class international banks are involved.

In the year 2018, RHI Magnesita concluded an amortising interest rate swap with a nominal volume of €305.6 million maturing in 2023. As of December 2021, the outstanding amount of the interest rate swap was €259.7 million (31.12.2020: €290.3 million). The interest and compensation payments are due on a quarterly basis. Fixed interest rate amounts to 0.28%, the variable interest rate is based on the EURIBOR. Furthermore, one other interest rate swap has been concluded in 2018, with a nominal volume of USD 200.0 million and a term until 2023. The interest and compensation payments are also due on a quarterly basis. Fixed interest rate amounts to 3.1%, the variable interest rate is based on the USD LIBOR. In December 2021, RHI Magnesita hedged two of the floating tranches from the issued €250.0 million bonded loans (“Schuldscheindarlehen”). One interest rate swap amounting to €97.5 million maturing in 2027 was fixed at 0.38%, the other interest rate swap amounting to €12.0 million maturing in 2028 was fixed at 0.48%. The interest and compensation payments for both swaps are due on a half-year basis.

The fair values of the interest rate swaps totalled €-9.6 million at the reporting date (31.12.2020: €-18.3 million) and are shown in other non-current financial liabilities in the Consolidated Statement of Financial Position. For the reporting period 2021, €8.7 million (2020: €-3.6 million) have been recognised in other comprehensive income and an income amounting to €0.0 million (2020: €0.0) has been reclassified from other comprehensive to profit or loss and recognised within other net financial expenses. No ineffectiveness has been recognised in profit or loss.

The financial effect of the hedged item and the hedging instrument for the period 2021 and 2020 is shown as follows:

in € million	Carrying amount	Statement of Financial Position	Change in fair value used for measuring ineffectiveness	Nominal amount
2021	(9.6)	Other non-current financial liabilities	8.7	USD 200 million EUR 369.2 million
2020	(18.3)	Other non-current financial liabilities	(3.6)	USD 200 million EUR 290.3 million

in € million	Change in fair value used for measuring ineffectiveness	Change in fair value used to measure ineffetiveness net of deferred tax
2021	8.7	6.6
2020	(3.6)	(2.7)

Forward exchange contracts

A forward exchange contract was put into place as of 31 December 2020, selling USD 100.0 million against EUR. As of 31 December 2021 there is no USD/EUR forward exchange contract outstanding.

In addition, a forward exchange contract was put into place as of 30 June 2021 selling BRL 100.0 million against USD. The instrument has been rolled on a monthly basis, with a forward exchange contract in place as of 31 December 2021, in the amount of BRL 80.0 million, selling BRL against USD. Forward exchange contracts are renewed and rolled on a monthly basis depending on the current next exposure to the currency pairs.

The nominal value and fair value of forward exchange contracts as of 31 December 2021 are shown in the table below:

		31.12.2021
Purchase	Sale	Nominal value in million		Fair value in € million
USD	BRL	BRL	80.0	0.1
EUR	USD	USD	0.0	0.0
Forward exchange contracts				0.1

The nominal value and fair value of forward exchange contracts as of 31 December 2020 are shown in the table below:

		31.12.2020
Purchase	Sale	Nominal value in million		Fair value in € million
EUR	USD	USD	100.0	0.3
Forward exchange contracts				0.3

55. Financial risk management

Financial risks are incorporated in RHI Magnesita’s corporate risk management and are centrally controlled by Corporate Treasury.

None of the following risks have a significant influence on the going concern of the RHI Magnesita Group.

Credit risks

The maximum credit risk from recognised financial assets amounts to €1,012.7 million (31.12.2020: €842.2 million) and is primarily related to investments with banks and receivables due from customers.

The credit risk with banks related to investments (especially cash and cash equivalents) is reduced as business transactions are only carried out with prime financial institutions with a good credit rating. Individual counterpart exposures limits are assigned to each financial institution based on a matrix composed of the credit rating (S&P or Moody’s) and balance sheet assets.

Receivables from customers are hedged as far as possible through credit insurance and collateral arranged through banks (guarantees, letters of credit) in order to mitigate credit and default risk. Credit and default risks are monitored continuously, and provisions are formed for risks that have occurred and are identifiable.

In the following, the credit risk from trade receivables is shown classified by customer industry, by foreign currency and by term.

This credit risk, which is hedged by existing credit insurance, letters of credit and bank guarantees, is shown by customer segment in the following table:

in € million	31.12.2021	31.12.2020
Segment Steel	300.4	183.3
Segment Industrial	103.3	71.0
Trade receivables	403.7	254.3
Credit insurance and bank guarantees	(206.2)	(83.2)
Net credit exposure	197.5	171.1

The following table shows the carrying amounts of receivables denominated in currencies other than the functional currencies of the Group companies. The carrying amounts of the receivables in the functional currency of the respective Group company are included under other functional currencies:

in € million	31.12.2021	31.12.2020
US Dollar	59.9	39.8
Euro	6.1	7.2
Pound Sterling	2.7	6.8
Other currencies	2.3	3.7
Other functional currencies	332.7	196.8
Trade receivables	403.7	254.3

The movement in the valuation allowance in respect of trade and other receivables and contract assets during the year and the previous year was as follows.:

in € million	2021		2020
	Individually assessed - credit impaired	Collectively assessed - not credit impaired	Individually assessed - credit impaired	Collectively assessed - not credit impaired
Accumulated valuation allowance at beginning of year	30.0	0.6	32.3	1.3
Currency translation	0.3	-	(1.6)	-
Addition	3.5	-	7.7	-
Use	(5.2)	-	(6.3)	-
Reversal	(5.4)	-	(2.1)	-
Net remeasurement of loss allowance	0.0	-	0.0	(0.7)
Accumulated valuation allowance at year-end	23.2	0.6	30.0	0.6

For trade receivables and contract assets, for which no objective evidence of impairment exists, lifetime expected credit losses have been calculated using a provision matrix as shown below. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due.

in € million	Trade receivables - days past due
31.12.2021	Not past due	less than 30 days	between 31 and 60 days	between 61 and 90 days	between 91 and 180 days	more than 180 days	Total
Expected credit loss rate in %	0.03-0.37%	0.06-0.86%	0.25-8.09%	0.52-17.84%	0.91-27.98%	3.01-50.55%
Gross carrying amount	351.9	26.3	4.6	2.2	1.7	(1.3)	385.4
Life time expected credit loss	(0.4)	(0.1)	(0.1)	(0.1)	(0.1)	(0.2)	(1.0)

in € million	Trade receivables - days past due
31.12.2020	Not past due	less than 30 days	between 31 and 60 days	between 61 and 90 days	between 91 and 180 days	more than 180 days	Total
Expected credit loss rate in %	0,02-0,53%	0,03-1,23%	0,08-9,46%	0,15-18,77%	0,26-26,25%	0,91-55,39%
Gross carrying amount	222.8	13.3	2.80	1.30	2.00	0.2	242.4
Life time expected credit loss	0.30	0.04	0.02	0.03	0.05	0.20	0.6

Climate-related events or adverse changes in climate-related legislature could potentially affect the creditworthiness of customers, e.g. due to business interruption or lower profitability. RHI Magnesita has incorporated these considerations when incorporating forward-looking information into the expected credit loss estimation, and assessed that such events would have an immaterial impact on the estimated loss rates.

Liquidity risk

Liquidity risk refers to the risk that financial obligations cannot be met when due. The Group’s financial policy is based on long-term financial planning and is centrally controlled and monitored continuously at RHI Magnesita. The liquidity requirements resulting from budget and medium-term planning are secured by concluding appropriate financing agreements. As of 31 December 2021, RHI Magnesita has a committed Revolving Credit Facility (RCF) of €600.0 million, which was fully unutilised (31.12.2020: committed RCF was €600.0 million and was also unutilised). The €600.0 million committed RCF is a syndicated facility with multiple international banks and matures in 2027. The liquidity of the subsidiaries of the RHI Magnesita Group is managed regionally, continued access to liquidity and optimised cash levels is ensured by Corporate Treasury, which supports business needs and lowers borrowing costs.

Non-derivative financial instruments

An analysis of the terms of non-derivative financial liabilities based on undiscounted cash flows including the related interest payments shows the following expected cash outflows:

			Remaining term
in € million	Carrying amount 31.12.2021	Cash outflows	up to 1 year	2 to 5 years	over 5 years
Liabilities to financial institutions
fixed interest	534.0	551.4	69.9	337.3	144.2
variable interest	1,000.1	1,022.9	154.3	706.7	161.9
Other financial liabilities and capitalised transaction costs	5.0	5.4	2.3	3.0	0.1
Lease liabilities	55.5	59.9	16.9	29.7	13.3
Liabilities to fixed-term or puttable non-controlling interests	60.0	197.9	3.0	20.0	174.9
Trade payables and other current liabilities	688.5	688.5	688.5	0.0	0.0
Non-derivative financial liabilities	2,343.1	2,526.0	934.9	1096.7	494.4

			Remaining term
in € million	Carrying amount 31.12.2020	Cash outflows	up to 1 year	2 to 5 years	over 5 years
Liabilities to financial institutions
fixed interest	135.0	144.7	2.7	106.2	35.8
variable interest	970.6	994.2	131.2	594.3	268.7
Other financial liabilities and capitalised transaction costs	8.9	11.3	4.4	6.9	0.0
Lease liabilities	56.8	61.8	14.2	32.3	15.3
Liabilities to fixed-term or puttable non-controlling interests	38.8	170.2	12.9	11.9	145.4
Power supply contract Norway	15.5	15.5	15.5	0.0	0.0
Trade payables and other current liabilities	337.6	337.6	337.6	0.0	0.0
Non-derivative financial liabilities	1,563.2	1,735.3	518.5	751.6	465.2

Derivative financial instruments

The remaining terms of derivative financial instruments based on expected undiscounted cash flow as of 31 December 2021 and 31 December 2020 are shown in the table below:

			Remaining term
in € million	Carrying amount 31.12.2021	Cash flows	up to 1 year	2 to 5 years	over 5 years
Receivables from derivatives with net settlement
Forward exchange contracts	0.1	0.1	0.1	0.0	0.0
Derivatives in open orders	2.4	2.4	2.4	0.0	0.0
Liabilities from derivatives with net settlement
Interest rate swaps	9.6	12.5	7.5	4.9	0.1
Derivatives in open orders	0.1	0.1	0.1	0.0	0.0

			Remaining term
in € million	Carrying amount 31.12.2020	Cash flows	up to 1 year	2 to 5 years	over 5 years
Receivables from derivatives with net settlement
Forward exchange contracts	0.3	0.3	0.3	0.0	0.0
Liabilities from derivatives with net settlement
Derivatives from supply contracts	1.6	1.6	1.6	0.0	0.0
Interest rate swaps	18.3	9.6	4.7	4.9	0.0
Derivatives in open orders	1.8	1.8	1.8	0.0	0.0

Foreign currency risks

Foreign currency risks arise where business transactions (operating activities, investments, financing) are conducted in a currency other than the functional currency of a company. They are monitored at Group level and analysed with respect to hedging options. Usually the net position of the Group in the respective currency serves as the basis for decisions regarding the use of hedging instruments.

Foreign currency risks are created through financial instruments which are denominated in a currency other than the functional currency (in the following: foreign currency) and are monetary in nature. Important primary monetary financial instruments include trade receivables and payables, cash and cash equivalents as well as financial liabilities as shown in the Consolidated Statement of Financial Position. Equity instruments are not of a monetary nature, and therefore not linked to a foreign currency risk in accordance with IFRS 7.

The majority of foreign currency financial instruments in the RHI Magnesita Group result from operating activities, above all from intragroup financing transactions, unless the foreign exchange effects recognised to profit or loss on monetary items, which represent part of a net investment in a foreign operation in accordance with IAS 21, are eliminated or hedged through forward exchange contracts. Significant provisions denominated in foreign currencies are also included in the analysis of risk.

The following table shows the foreign currency positions in the major currencies as of 31 December 2021:

in € million	USD	EUR	GBP	INR	Other	Total
Financial assets	654.7	56.0	14.5	30.3	68.4	823.9
Financial liabilities, provisions	(622.9)	(72.8)	(14.2)	(0.4)	(17.6)	(727.9)
Net foreign currency position	31.8	(16.8)	0.3	29.9	50.8	96.0

The foreign currency positions as of 31 December 2020 are structured as follows:

in € million	USD	EUR	GBP	INR	Other	Total
Financial assets	663.6	72.6	21.8	9.4	40.6	808.0
Financial liabilities, provisions	(358.1)	(98.2)	3.5	0.0	(32.9)	(485.7)
Net foreign currency position	305.5	(25.6)	25.3	9.4	7.7	322.3

The disclosures required by IFRS 7 for foreign exchange risks include a sensitivity analysis that shows the effects of hypothetical changes in the relevant risk variables on profit or loss and equity. In general, all non-functional currencies in which Group companies enter into financial instruments are considered to be relevant risk variables. The effects on a particular reporting period are determined by applying the hypothetical changes in these risk variables to the financial instruments held by the Group as of the reporting date. It is assumed that the positions on the reporting date are representative for the entire year. The sensitivity analysis does not include the foreign exchange differences that result from translating the net asset positions of the foreign group companies into the Group currency, the Euro.

A 10% appreciation or devaluation of the relevant functional currency against the following major currencies as of 31 December 2021 would have had the following effect on profit or loss and equity (both excluding income tax):

	Appreciation of 10%		Devaluation of 10%
in € million	Gain/(loss)	Equity	Gain/(loss)	Equity
US Dollar	(19.1)	(8.6)	23.3	10.6
Euro	1.8	6.3	(2.1)	(7.7)
Indian Rupee	(2.7)	(2.7)	3.3	3.3
Other currencies	(4.0)	(4.0)	4.8	4.8

The hypothetical effect on profit or loss at 31 December 2020 can be summarised as follows:

	Appreciation of 10%		Devaluation of 10%
in € million	Gain/(loss)	Equity	Gain/(loss)	Equity
US Dollar	(42.9)	(33.3)	52.4	40.7
Euro	2.0	12.0	(2.5)	(14.7)
British Pound Sterling	(2.0)	(2.0)	2.4	2.4
Indian Rupee	(0.9)	(0.9)	1.0	1.0
Other currencies	(0.7)	(0.7)	0.9	0.9

Net investment hedge

Non-current borrowings as of 31 December 2021 include USD 200.0 million which have been designated as a hedge of the net investments in two subsidiaries in the USA as of 1 July 2019. This borrowing is used to hedge the Group´s exposure to the USD foreign exchange risk on these investments. Gains or losses on the translation of this borrowing are reclassified to Other Comprehensive Income to offset any gains or losses on translation of the net investments in the subsidiaries.

There is an economic relationship between the hedged item and the hedging instrument as the net investment creates a translation risk that will match the foreign exchange risk on the USD borrowing. The Group has established a hedge ratio of 1:1 as the underlying risk of the hedging instrument is identical to the hedged risk component. Hedge ineffectiveness could arise when the amount of the investment in the foreign subsidiary becomes lower than the amount of the fixed rate borrowing. For the reporting period, there was no ineffectiveness to be recorded from net investments hedges.

The impact of the hedging instrument for the period 2021 and 2020 is shown as follows:

in € million	Carrying amount	Statement of Financial Position	Change in fair value used for measuring ineffectiveness	Nominal amount
2021	176.8	Non-current borrowings	(14.1)	USD 200 million
2020	162.6	Non-current borrowings	15.8	USD 200 million

The change in the carrying amount of the non-current borrowing as a result of the foreign currency movements since 1 July 2019 is recognised in Other Comprehensive Income within the currency translation differences.

The impact of the hedged item for the period 2021 and 2020 is shown as follows:

in € million	Change in fair value used for measuring ineffectiveness	Change in fair value used to measure ineffetiveness net of deferred tax
2021	14.1	(10.6)
2020	(15.8)	(11.9)

The hedging gain or loss recognised in the currency translation differences is also including the corresponding tax effect. The hedging gain or loss recognised before tax is equal to the change in the fair value used for measuring effectiveness.

Interest rate risks

The interest rate risk in the RHI Magnesita Group is primarily related to financial instruments carrying variable interest rates, which may lead to fluctuations in results and cash flows. At 31 December 2021, interest rate hedges amounting to a nominal value of €369.2 million (31.12.2020: €290.3 million) and a nominal value of USD 200.0 million (31.12.2020: USD 200.0 million) existed. In all cases, a variable interest rate was converted into a fixed interest rate through interest rate swaps. Further information is provided under Note (54).

The exposure to interest rate risks is presented through sensitivity analyses in accordance with IFRS 7. These analyses show the effects of changes in market interest rates on interest payments, interest income and interest expense and on equity.

The RHI Magnesita Group measures fixed interest financial assets and financial liabilities at amortised cost, and did not use the fair value option - a hypothetical change in the market interest rates for these financial instruments at the reporting date would have had no effect on profit and loss or equity.

Changes in market interest rates on financial instruments designated as cash flow hedges to protect against interest rate-related payment fluctuations are considered with hedge accounting have an effect on equity and are therefore included in the equity-related sensitivity analysis. If the market interest rate as of 31 December 2021 had been 25 basis points higher or lower, equity would have been €1.1 million (31.12.2020: €1.9 million) higher or lower considering tax effects.

Changes in market interest rates have an effect on the interest result of primary variable interest financial instruments whose interest payments are not designated as hedged items as a part of cash flow hedge relationships against interest rate risks, and are therefore included in the calculation of the result-related sensitivities. If the market interest rate as of 31 December 2021 had been 25 basis points higher or lower, the interest result would have been €0.3 million (31.12.2020: €0.1 million) lower or higher.

Other market price risk

RHI Magnesita holds certificates in an investment fund amounting to €13.2 million (31.12.2020: €13.0 million) to provide the legally required coverage of personnel provisions of Austrian group companies. The market value of these certificates is influenced by fluctuations of the worldwide volatile stock and bond markets.

56. Capital management

The objectives of the capital management strategy of the RHI Magnesita Group are to continue as a going concern and to provide a capital base to finance growth and investments, to service debt, and to increase shareholders value, including the payment of dividends to shareholders.

The RHI Magnesita Group manages its capital structure through careful monitoring and assessment of the overall economic framework conditions, credit, interest rate and foreign exchange risks and the requirements and risks related to operations and strategic projects.

The capital structure key figures at the reporting date are shown below:

	31.12.2021	31.12.2020
Net debt (in € million)	1,013.8	582.1
Net gearing ratio (in %)	123.3%	87.4%
Net debt to adjusted EBITDA	2.61x	1.53x

Net debt, which reflects borrowings and lease liabilities net of cash and cash equivalents and marketable securities, is managed by Corporate Treasury. The main task of the Corporate Treasury department is to execute the capital management strategy as well as to secure liquidity to support business operations on a sustainable basis, to use banking and financial services efficiently and to limit financial risks while at the same time optimising earnings and costs.

The net gearing ratio is the ratio of net debt to total equity.

Net debt excluding lease liabilities/adjusted EBITDA is the main financial covenant of loan agreements. The key performance indicator for net debt in the RHI Magnesita Group is the group leverage, which reflects the ratio of net debt to adjusted EBITDA, including lease liabilities. It is calculated as follows:

in € million	31.12.2021	31.12.2020
EBIT	213.8	120.6
Amortisation	22.4	19.4
Restructuring and write-down expenses	58.8	113.8
Other operating income and expenses	(14.6)	6.5
Adjusted EBITA	280.4	260.3
Depreciation	108.7	120.3
Adjusted EBITDA	389.1	380.6

Total debt	1,539.1	1,114.5
Lease liabilities	55.5	56.8
Cash and cash equivalents ¹⁾	580.8	589.2
Net debt	1,013.8	582.1

Net debt excluding IFRS 16 lease liabilities	958.3	525.3

Net debt to adjusted EBITDA	2.61x	1.53x

Net debt to adjusted EBITDA excluding IFRS 16 lease liabilities	2.46x	1.38x

1) thereof shown under assets held for sale € 2.0 million in 2020.

In both 2021 and 2020, all externally imposed capital requirements were met. The Group has sufficient liquidity headroom within its committed debt facilities.

RHI Magnesita N.V. is subject to minimum capital requirements according to its articles of association. The articles of association stipulate a mandatory reserve of €288,699,230.59 which was created in connection with the merger.

57. Contingent liabilities

At 31 December 2021, warranties, performance guarantees and other guarantees amount to €52.5 million (31.12.2020: €48.0 million). Contingent liabilities have a remaining term between two months and three years, depending on the type of liability. Based on experiences of the past, the probability that contingent liabilities are used is considered to be low.

In addition, contingent liabilities from sureties of €0.2 million (31.12.2020: €0.3 million) were recorded, of which €0.2 million (31.12.2020: €0.3 million) are related to contingent liabilities to creditors from joint ventures.

Individual administrative proceedings and lawsuits which result from ordinary activities are pending as of 31 December 2021 or can potentially be exercised against RHI Magnesita in the future. The related risks were analysed with a view to their probability of occurrence.

Since RHI Magnesita is continually adapting its global presence to improve customer service and maintain its competitive advantage, the Group leads open discussions with tax authorities, mostly about the transfer of functions between related parties and their exit value. In this regard, disputes may arise, where the Group’s management understanding differs from the positions of the local authorities. In such cases, when an appeal is available, the Group’s management judgements are based on a likely outcome approach based on in-house tax experts, professional firms, and previous experiences when assessing the risks.

The Group is party to several tax proceedings in Brazil which involve estimated contingent liabilities amounting to €200.8 million (31.12.2020: €169.1 million). These tax proceedings are as follows:

There are three proceedings in which Brazilian Federal Tax Authorities issued tax assessments rejecting the amortization of goodwill generated in two corporate operations executed between 2007 and 2008, which can be deducted for purposes of Corporate Income Taxes according to Brazilian laws and regulations. The first group of operations analysed involved the acquisition of shares of Magnesita S.A. by the GP Investment Group. The second group of operations analysed was the acquisition of companies outside of Brazil by the Group, whose control was then held by the Rhône Group. The Tax Authorities considered that the Group did not observe the formal and material requirements for the goodwill tax deductions, while the Group presented defenses in all proceedings claiming all requirements were met. The three proceedings are divided as follows:

Proceeding 1 (31.12.2021: €61.2 million; 31.12.2020: €59.3 million) comprises the deductions executed in 2008 and 2009 and is currently under trial in the Federal Administrative Council of Tax Appeals (“CARF”). The latest decision issued cancelled more than 90% of the tax assessment but is still subject to appeals filed by both the Group and the General Counsel to the National Treasury (“PGFN”). The final ruling for this proceeding is expected within one to two years. After the administrative trial ends, the Group may still challenge any residual charges before Judicial courts according to its convenience.
Proceeding 2 (31.12.2021: €40.6 million; 31.12.2020: €38.8 million) comprises the deductions executed in 2013, 2014, 2015, 2016, 2017 and 2018 and is currently under trial in CARF. The first CARF decision is expected within one to two years. After the administrative trial ends, the Group may still challenge any residual charges before Judicial courts according to its convenience.
Proceeding 3 (31.12.2021: €28.8 million; 31.12.2020: €27.7 million) comprises the deductions executed in 2011 and 2012 and is currently under trial in CARF. The latest decision issued cancelled 100% of the tax assessment but is still subject to appeals filed by both the Group and PGFN. The final ruling for this proceeding is expected within two to three years. After the administrative trial ends, the Group may still challenge any residual charges before Judicial courts according to its convenience.

The Group is party to 42 proceedings where the Brazilian Mining Authorities (“ANM”) challenge the criteria used for calculating and paying the Financial Compensation for Exploration of Mineral Resources (“CFEM”), which are mining royalties paid to the Brazilian Federal Government by every mining company. In essence, the Authorities claim that CFEM should be paid based on production costs incurred in a later stage of the mineral processing flow, while the Group defends that CFEM should be paid based on production costs incurred in a prior stage of the mineral processing flow. Based on the opinion of its technical and legal advisors, the Group has presented defenses against all assessments sent by ANM, and most of the procedures are still ongoing within ANM administrative courts. Final decisions of the first cases are expected within four to five years. As of 31 December 2021, the potential risk amounts to €23.6 million, including interest and penalties (31.12.2020: €10.6 million).

Furthermore, Brazilian Tax Authorities issued tax assessments against former Brazilian companies that were merged into Magnesita Refratários S.A., named Partimag and Edelweis. The assessments relate to the offsetting of federal tax credits and debts performed by such companies up to and including 2008, which have not been approved by Tax Authorities. Legal opinions demonstrate that the offsets executed are solidly based on supporting documentation and therefore the Group presented administrative and judicial defenses against the assessments in 17 procedures. The first final decisions are expected within three to four years. As of 31 December 2021, the potential risk amounts to €5.1 million, including interests and penalties (31.12.2020: €9.5 million).

In 2020, the Group received a tax assessment in which Brazilian Federal Tax Authorities claim that Social Security Taxes (“PIS/COFINS”) were not correctly calculated in years 2017 and 2018. Authorities have stated that some financial revenues were not taxed and that some tax credits which were offset were not allowed. The Group presented its defense and currently the proceeding awaits trial in the first instance court of the Federal Revenue Service (“RFB”). A final decision is expected within four to five years. As of 31 December 2021, the potential risk amounts to €3.9 million, including interest and penalties (31.12.2020: €3.8 million).

In 2020, Brazilian Federal Tax Authorities sent a tax assessment to the Group stating that some financial revenues were not taxed in year 2016 when an entity of the Group altered its tax regime for financial revenues from a cash to an accrual-based regime. Based on opinion of its legal advisor, the Group presented defenses claiming the assessment was void and that the calculations of the authorities were wrong and currently the proceeding awaits trial in the first instance court of the Federal Revenue Service (“RFB”). A final decision is expected within four to five years. As of 31 December 2021, the potential risk amounts to €3.8 million, including interest and penalties.

In 2013, Brazilian Federal Tax Authorities raised a tax assessment affirming that the Group allegedly failed to pay Social Security Contributions (“INSS”) in the period from January to December 2009. Such contributions are calculated based on certain amounts that are included in the payroll of companies in Brazil and the authorities claimed that some values paid to employees were unduly not taxed. Legal opinions demonstrate that the Group has grounds for reversing the assessment. In 2021 the administrative proceeding ended, and a minor part of the assessment cancelled, therefore the Group has decided to continue challenging the assessment before Judicial courts. The final decision is expected within five to six years. As of 31 December 2021, the potential risk amounts to €3.7 million, including interest and penalties (31.12.2020: €3.1 million).

In 2019, Brazilian Federal Tax Authorities rejected the offsetting of some federal tax debts with Corporate Income Tax credits the Group was entitled to in year 2015. Authorities claimed the credits were non-existent or did not comply with the formal requirements set for in Brazilian laws and regulations which allowed their utilisation. Legal opinions demonstrate that the Group and the tax credits are based on solid legal and material grounds. Therefore, the Company presented its defense and currently the proceeding awaits trial in the first instance court of the Federal Revenue Service (“RFB”). As of 31 December 2021, the potential risk amounts to €2.6 million, including interest and penalties (31.12.2020: €2.5 million).

Group entities in Brazil are also involved in other minor lawsuits totaling €27.5 million (31.12.2020: €23.3 million) which relate to several assessments concerning various taxes and related obligations.

Furthermore, Magnesita Refratários S.A., Contagem, Brazil, is party to a public civil action for damages allegedly caused by overloaded trucks in contravention with the Brazilian traffic legislation. In 2017, a decision was rendered in favour of Magnesita in the trial court considering the requests submitted by the Federal Public Attorney's Office to be completely devoid of legal merit. The decision taken by the trial court was subject to appeal by the Public Ministry of Minas Gerais. In 2021, a judgement was rendered by the Federal Regional Court, in favor of Magnesita, maintaining the understanding that the requests of the Federal Public Attorney’s Office are devoid of legal merit. The final decision is expected in 5 years. The potential loss from this proceeding amounts to €11.6 million as of 31 December 2021 (31.12.2020: €10.6 million).

Other minor proceedings and lawsuits in which subsidiaries are involved have no significant negative influence on the financial position and performance of the RHI Magnesita Group.

58. Other financial commitments

Capital commitments amount to €35.5 million as at 31 December 2021 (31.12.2020: €49.5 million) and are exclusively due to third parties. They are shown at nominal value.

In addition, the RHI Magnesita Group has purchase commitments related to the supply with raw materials, especially for electricity, natural gas, strategic raw materials as well as for the transport of raw materials within the Group. This results in other financial commitments of the nominal value of €410.8 million at the reporting date (31.12.2020: €219.2 million). The increase in other financial commitments in the current financial year compared to the previous year mainly results from energy supply contracts concluded or prolonged in 2021 as well as from increases in raw material and energy prices. The remaining terms of the contracts amount to up to four years. Purchases from these arrangements are recognised in accordance with the usual course of business. Purchase contracts are regularly reviewed for imminent losses, which may occur, for example, when requirements fall below the agreed minimum purchase volume or when contractually agreed prices deviate from the current market price level.

59. Expenses for the Group independent auditor

The expensed fees for the activities of the Group independent auditor ‘PricewaterhouseCoopers Accountants N.V.’ that are included in the Consolidated Statement of Profit or Loss are shown in the following table:

in € million	2021	2020
Audit of the Financial Statements	2.8	2.6
thereof invoiced by PwC Accountants N.V.	1.2	1.2
thereof invoiced by PwC network firms	1.6	1.4
Tax compliance services	0.0	0.0
Other non-audit services	0.0	0.1
Total fees	2.8	2.7

In 2021, other audit related services, tax compliance services and other non-audit services amounting to €0.0 million (2020: €0.1 million) were performed and invoiced by PwC network firms outside of the Netherlands.

The expensed fees for the audited financial statements in 2021 and 2020 include the half year review procedures.

60. Annual average number of employees

The average number of employees of the RHI Magnesita Group based on full time equivalents amounts to:

	2021	2020
Salaried employees	5,720	4,733
Waged workers	6,564	7,831
Number of employees on annual average	12,284	12,564

108 full time equivalents of salaried employees work in the Netherlands. In 2020 98 full time equivalents of salaried employees worked in the Netherlands.

61. Transactions with related parties

Related companies include subsidiaries that are not fully consolidated, joint ventures, associates and MSP Foundation, Liechtenstein, as a shareholder of RHI Magnesita N.V. since it exercises significant influence based on its share of more than 25% in RHI Magnesita N.V. In accordance with IAS 24.9, the personnel welfare foundation of Stopinc AG, Hünenberg, Switzerland, and Chestnut Beteiligungs GmbH, Germany also have to be considered related companies.

Related persons are persons having authority and responsibility for planning, directing and controlling the activities of the Group (key management personnel) and their close family members. Since 26 October 2017, key management personnel comprises of members of the Board of Directors of RHI Magnesita N.V. and the Executive Management Team.

Related companies

In 2021 and 2020, the Group conducted the following transaction with its related companies:

	Joint ventures		Associates		Non-consolidated subsidiaries
in € million	2021	2020	2021	2020	2021	2020
Revenue from the sale of goods and services	1.0	2.7	0.0	0.0	0.0	0.0
Purchase of raw materials	5.0	2.7	14.4	14.6	0.0	0.1
Interest income	0.1	0.1	0.2	0.8	0.0	0.0

Trade and other receivables	0.0	0.2	0.0	0.0	0.3	0.2
Loans granted	0.0	0.0	0.8	0.8	0.0	0.0

Trade liabilities	0.0	0.3	1.3	0.9	0.7	0.7

Dividends received	6.8	10.9	0.0	0.0	0.0	0.0

In 2021 and 2020, the Group charged electricity and stock management costs to the joint venture MAGNIFIN Magnesiaprodukte GmbH & Co KG, St. Jakob, Austria, and purchased raw materials. In 2021 and 2020, the associate Sinterco S.A., Nameche, Belgium, sold sintered doloma to the RHI Magnesita Group. Furthermore, the Group has a financing receivable of €0.8 million (31.12.2020: €0.8 million) from a loan agreement with Sinterco. The balances at the end of 2021 are unsecured and will be paid in cash.

In 2021 and 2020, no transactions were carried out between the RHI Magnesita Group and MSP Foundation and Chestnut Beteiligungs GmbH, with the exception of the dividend paid.

A service relationship with respect to the company pension scheme of the employees of Stopinc AG exists between the personnel welfare foundation of Stopinc AG and the fully consolidated subsidiary Stopinc AG. Stopinc AG makes contribution payments to the plan assets of the foundation to cover pension obligations. The pension plan is recognised as a defined benefit plan and is included in Note (27). At 31 December 2021, no current accounts receivable existed (31.12.2020: €0.0 million). In the past reporting period, employer contributions amounting to €0.6 million (2020: €0.6 million) were made to the personnel welfare foundation. At 31 December 2021 a net defined benefit liability of €0.8 million (31.12.2020: €0.9 million) is recognised.

Related persons

Remuneration of key management personnel of the Group, which is subject to disclosure in accordance with IAS 24, comprises the remuneration of the active Board of Directors and the Executive Management Team (EMT) in 2021, 2020, 2019 and in 2018 as well as the former Management Board and Supervisory Board of RHI AG until October 2017.

For the financial year 2021, expenses for the remuneration of the Executive Directors and EMT members, active in 2021, recognised in the Consolidated Statement of Profit or Loss total €10.4 million (2020: €9.8 million). The expenses, not including non-wage labour costs, amount to €9.4 million (2020: €9.1 million), of which €5.5 million (2020: €7.7 million) were related to current benefits (fixed, variable and other earnings) and €3.9 million (2020: €1.4 million) to share-based remuneration. At 31 December 2021, liabilities for performance-linked variable earnings and share-based payments for active members of the former Management Board of €1.1 million (2020: €2.5 million) are recognised as liabilities. There are no obligations arising from post-employment benefits and legally required termination benefits.

In addition to the variable remuneration, the members of the former Management Board of RHI AG active in 2017 were also entitled to share-based payments. The program was terminated after RHI AG merged with and into RHI Magnesita N.V and the provisioned amount was paid in 2021 (€1.0 million paid in 2020).

For Non-Executive Directors, remuneration totalling €1.2 million (2020: €1.1 million) was recognised through profit or loss in the year 2021. The compensation paid to the Non-Executive Directors only consists of short-term employee benefits.

Employee representatives acting as Non-Executive Directors of RHI Magnesita N.V. who are employed by the Group, do not receive compensation for their activity as Non-Executive Directors. For their activity as employees in the Company expenses of €0.4 million (2020: €0.2 million) are recognised.

No advance payments or loans were granted to key management personnel. The RHI Magnesita Group did not enter into contingent liabilities on behalf of the key management personnel.

Share Dealing reports of persons discharging managerial responsibilities are published on the websites of RHI Magnesita N.V. and via regulatory news services. The members of the Board of Directors are covered by Directors & Officers insurance at RHI Magnesita.

Detailed and individual information on the remuneration of the Board of Directors is presented in the Annual Report on Remuneration,in the Remuneration Committee report and the Remuneration Policy on pages 96 to 121 of the Annual Report of the RHI Magnesita Group.

Earnings of former members of the former Management Board amounted to €0.6 million (2020: €0.7 million), of which €0.3 million (2020: €0.2 million) are related to share-based remuneration.

RHI Magnesita and a close relative of a Non-Executive Director concluded a non-remunerated consultancy agreement to advise the Group on the economic and political framework in countries in which it does not yet have strong business links.

In the ordinary course of business, RHI Magnesita had the following transactions with various organisations with which certain members of the Board of Directors are associated. All transactions with related parties are conducted on an arm’s-length basis and in accordance with normal business terms.

Until December 2020, Karl Sevelda held a position as a supervisory board member at Siemens AG Austria. Siemens AG Austria is both a supplier and customer of the Group with only immaterial transaction volumes. The related party was not involved in the decision making of any of these transactions.

Furthermore, Fiona Paulus is an independent non-executive board member of Interpipe Group. RHI Magnesita supplied the Interpipe Group with refractory materials amounting to about € 2.6 million in 2021 (2020: € 1.9 million). However, the materiality of these sales is not significant for the Group.

Equity-settled share option plan (LTIP)

The Company implemented a share option plan for the members of senior management of the Group starting with 2018 which was approved by shareholders at the Annual General Meeting held on 7 June 2018. The Group currently operates three different share option awards, one applicable for the financial year 2021, 2020 and 2019 each. The plan for the financial year 2018 expired on 7 June 2021. None of the performance targets have been met and the awards have therefore lapsed. The amounts recognised in equity relating to market-related performance condition were not subsequently reversed.

Each share option converts into one ordinary share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry rights to dividends but no voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry, except for members of the Executive Management Team who have a holding period of two years.

The number of options granted is approved by the Board in accordance with the Remuneration Policy, approved by the shareholders at the Annual General Meeting.

The formula rewards employees to the extent of the Group’s achievements judged against quantitative criteria which are explained in detail in the Remuneration Committee report.

The vesting period for each share option plan is three years. If the options remain unexercised after a period of seven years from the vesting date the options expire. Options are generally forfeited if the employee leaves the Group before the options vest.

	2021	2020
LTIP 2021	Number of options	Number of options
As at 1 January	0	0
Granted during the year	172,623	0
Exercised during the year	0	0
Forfeited during the year	(6,300)	0
As at 31 December	166,323	0
Vested and exercisable at 31 December	0	0

	2021	2020
LTIP 2020	Number of options	Number of options
As at 1 January	363,519	0
Granted during the year	12,158	370,014
Exercised during the year	0	0
Forfeited during the year	(5,139)	(6,495)
As at 31 December	370,538	363,519
Vested and exercisable at 31 December	0	0

	2021	2020
LTIP 2019	Number of options	Number of options
As at 1 January	169,517	179,775
Granted during the year	6,445	4,797
Exercised during the year	0	0
Forfeited during the year	(1,688)	(15,055)
As at 31 December	174,274	169,517
Vested and exercisable at 31 December	0	0

The options outstanding at 31 December 2021 have a weighted-average contractual life of 1.9 years.

The outstanding share options for the LTIP 2019, which were granted on 19 August 2019, will expire on 20 August 2022. The fair value at grant date for the 188,856 options was €46.32. The outstanding share options for the LTIP 2020, which were granted on 8 April 2020, will expire on 9 April 2023. The fair value at grant date for the 370,014 options was €18.31. The outstanding share options for the LTIP 2021, which were granted on 15 March 2021, will expire on 16 March 2024. The fair value at grant date for the 167,037 options was €42.55.

The assessed fair value at grant date of options of the LTIP 2019 granted during the year ended 31 December 2021 was €47.18 per option. The assessed fair value at grant date of options of the LTIP 2020 granted during the year ended 31 December 2021 was €19.70 per option. The assessed fair value at grant date of options of the LTIP 2021 granted during the year ended 31 December 2021 was €44.31 per option. The fair value of share options with non-market performance conditions has been calculated using the Black-Scholes option pricing model. The fair value of options with market-related performance conditions has been measured using the Monte Carlo model. The calculation takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield, the risk free interest rate for the term of the option and the correlations and volatilities of the peer group companies.

The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payment plans for 2021, for 2020 and 2019 were as follows:

LTIP 2021 in € million		2021
Fair value at grant date		7.4
Expected volatility (weighted-average)		46.73%
Dividend yield		3.68%
Risk-free interest rate		0.41%

LTIP 2020 in € million	2021	2020
Fair value at grant date	7.3	6.6
Expected volatility (weighted-average)	41.75%	41.75%
Dividend yield	4.97%	4.97%
Risk-free interest rate	0.51%	0.51%

LTIP 2019 in € million	2021	2020
Fair value at grant date	8.2	8.3
Expected volatility (weighted-average)	30.36%	30.36%
Dividend yield	4.28%	4.28%
Risk-free interest rate	0.47%	0.47%

For LTIP 2019 none of the performance targets have been met and the awards are therefore expected to lapse. Amounts recognised in equity relating to market-related performance condition will not be subsequently reversed.

Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous years. The expected life used in the model has been adjusted, based on management’s best estimate, for the effect of non-transferability, exercise restrictions, and behavioural considerations.

Expenses for share based payments are disclosed in Note (46).

62. Board of Directors of RHI Magnesita N.V.

The members of the Board of Directors are as follows:

Executive Directors
Stefan Borgas	Ian Botha

Non-Executive Directors

Herbert Cordt

Janet Ashdown

Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg

Janice Brown

Marie-Hélène Ametsreiter

Wolfgang Ruttenstorfer

John Ramsay

David Schlaff

Fiona Paulus

Karl Sevelda

Sigalia Heifetz

Employee Representative Directors

Karin Garcia

Michael Schwarz

Martin Kowatsch

63. Material events after the reporting date

RHI Magnesita has 63 staff based but no refractory production sites in Russia or Ukraine. Approximately 3.4% of Group revenues are from the CIS region in 2021. This business will be impacted by sanctions. Sanction escalation will be kept under close review to remain in full compliance. The main financial impact is estimated to come from higher energy costs.

After the reporting date on 31 December 2021, there were no events of special significance which may have a material effect on the financial position and performance of the RHI Magnesita Group.

Company Financial Statements of RHI Magnesita N.V.

Company Balance Sheet as at 31 December 2021

(before appropriation of result)

in € million	Note	31.12.2021	31.12.2020
ASSETS

Non-current assets
Property, plant and equipment		0.5	0.3
Non-current financial assets	(A)	644.8	480.6
Securities		0.5	0.5
Deferred tax assets		32.5	10.6
Total non-current assets		678.3	492.0

Current assets
Receivables from group companies		138.1	165.8
Other current receivables		0.4	0.6
Cash and cash equivalents	(B)	0.6	3.5
Total current assets		139.1	169.9

Total assets		817.4	661.9


EQUITY AND LIABILITIES

Equity
Share capital	(C)	49.5	49.5
Additional paid-in capital	(D)	361.3	361.3
Legal and mandatory reserves	(E)	84.3	25.7
Other reserves		164.7	206.3
Treasury shares	(F)	(117.0)	(21.5)
Result for the period	(I)	243.1	24.8
Shareholders' Equity		785.9	646.1

Non-current liabilities
Non-current liabilities	(G)	2.0	0.0

Current liabilities
Other current liabilities	(H)	29.5	15.8
Total liabilities		31.5	15.8

Total equity and liabilities		817.4	661.9

Company Statement of Profit or Loss for the period 1 January 2021 to 31 December 2021

in € million	Note	2021	2020
General and administrative expenses	(J)	(25.5)	(18.6)
Result before taxation		(25.5)	(18.6)
Net financial result	(K)	0.1	0.4
Profit before income tax		(25.4)	(18.2)
Income tax		29.3	2.3
Net result from investments	(L)	239.2	40.7
Net result for the period	(M)	243.1	24.8

Notes

to the Company Financial Statements 2021

Movements in Shareholders’ Equity

				Legal and mandatory reserves				Other reserves
in € million	Share capital	Treasury shares	Additional paid-in capital		Cash flow hedges	Currency translation	Mandatory reserve	Retained earnings	Net result	Equity attributable to shareholders

31.12.2020	49.5	(21.5)	361.3		(13.7)	(249.3)	288.7	206.3	24.8	646.1
Appropriation of prior year result								24.8	(24.8)	-
Net result									243.1	243.1
Shares repurchased		(95.5)								(95.5)
Share-based expenses								6.2		6.2
Dividends								(71.2)		(71.2)
Net income / (expense) recognised directly in equity					6.6	52.0		(1.4)		57.2
31.12.2021	49.5	(117.0)	361.3		(7.1)	(197.3)	288.7	164.7	243.1	785.9

				Legal and mandatory reserves			Other reserves
in € million	Share capital	Treasury shares	Additional paid-in capital	Cash flow hedges	Currency translation	Mandatory reserve	Retained earnings	Net result	Equity attributable to shareholders

31.12.2019	49.5	(18.8)	361.3	(11.0)	(79.8)	288.7	95.0	139.0	823.9
Appropriation of prior year result	-	-	-	-	-	-	139.0	(139.0)	-
Net result	-	-	-	-	-	-	-	24.8	24.8
Shares repurchased	-	(2.7)	-	-	-	-	-	-	(2.7)
Share-based expenses	-	-	-	-	-	-	(3.1)	-	(3.1)
Dividends	-	-	-	-	-	-	(24.6)	-	(24.6)
Net income / (expense) recognised directly in equity	-	-	-	(2.7)	(169.5)	-	-	-	(172.2)
31.12.2020	49.5	(21.5)	361.3	(13.7)	(249.3)	288.7	206.3	24.8	646.1

General

The shares of RHI Magnesita N.V. (ISIN code NL0012650360) are listed on the Main Market of the London Stock Exchange and are included in the FTSE 250 index.

Basis of preparation

The Company financial statements have been prepared in accordance with the provisions of Part 9 of Book 2 of the Dutch Civil Code. The Company uses the option of Section 362, subsection 8, of Part 9, Book 2, of the Dutch Civil Code to prepare the Company financial statements on the basis of the same accounting principles as those applied for the Consolidated Financial Statements. Valuation is based on recognition and measurement requirements of accounting standards adopted by the EU (i.e. only IFRS that is adopted for use in the EU at the date of authorisation) as explained further in the notes to the Consolidated Financial Statements.

Fiscal Unity

For corporate income tax and sales tax purposes, RHI Magnesita NV, Vienna Branch, acts as the head of a corporate tax group in Austria with the following companies:

RHI Magnesita GmbH
Veitscher Vertriebsgesellschaft GmbH
“Veitsch-Radex” Vertriebgesellschaft GmbH
Refractory Intellectual Property GmbH
Veitsch-Radex GmbH
Radex Vertriebsgesellschaft GmbH
RHI Refractories Raw Material GmbH
Lokalbahn Mixnitz-St. Erhard Aktien-Gesellschaft

Pursuant to the Collection of State Taxes Act, the Company and its subsidiaries are both severally and jointly liable for the tax payable of the combination.

According to the group and tax compensation agreement, the members of the group have to pay a positive tax compensation of 20% of the taxable profit to the head of the Group if the result is positive, as long as tax loss carry forwards exist with the head of the group; subsequently 25% of the taxable profit have to be paid. In case of a tax loss of the group member, the head of the group has to pay a negative tax compensation to the member of the group, with a rate of 12.5% being applied insofar as the loss can be utilised within the group. In case the losses of a group member were compensated (negative tax allocation payment) and this group member generates taxable income within the next three years (after compensation), the positive tax allocation amounts to 12.5%. In case of a loss in the tax group, an unused tax loss of a group member is retained and offset against future taxable profits of the group member. When the contract is terminated, a compensation payment is agreed for unused tax losses of a group member, which were allocated to the head of the group, see Note (7).

All income and expenses are settled through their intercompany (current) accounts.

Significant accounting policies

Non-current financial assets

Investments in Group companies in the Company Financial Statements are accounted for using the equity method.

Receivables from Group companies

Accounts receivable are measured at fair value and are subsequently measured at amortized cost, less allowance for credit losses. The carrying amount of the accounts receivable approximates the fair value.

Net result from investments

The share in the result of investments comprises the share of the Company in the result of these investments.

Fixed assets

(A) Financial fixed assets

The financial fixed assets comprise investments in:

		31.12.2021	31.12.2020
Name and registered office of the company	Country of core activity	Share in %	Share in %
RHI Magnesita Deutschland AG, Wiesbaden, Germany	Germany	12.5	12.5
RHI Refractories Raw Material GmbH, Vienna, Austria	Austria	25.0	25.0
RHI Magnesita GmbH, Vienna, Austria	Austria	100.0	100.0
RHI Magnesita Trading B.V., Rotterdam, Netherlands	Netherlands	0.0	100.0

As a result of the contribution of shares of RHI Magnesita Trading B.V. from RHI Magnesita N.V. to RHI Magnesita GmbH, the share in RHI Magnesita Trading B.V. was reduced to 0.0%.

The investments have developed as follows:

in € million	2021	2020
At beginning of year	480.6	815.3
Transactions with non-controlling interests without change of control	(21.7)	0.0
Capital contributions	70.0	0.0
Changes from currency translation and cash flow hedges	58.6	(172.1)
Changes from defined benefit plans	20.2	(0.2)
Equity settled transaction	(2.1)	(3.1)
Dividend distribution	(200.0)	(200.0)
Net result from investments	239.2	40.7
Balance at year-end	644.8	480.6

The following list, prepared in accordance with the relevant legal requirements (Dutch Civil Code, Book 2, Sections 379), shows all companies in which RHI Magnesita N.V. holds a direct or indirect share of at least 20% (with the exception of the RHISA Employee Trust):

		31.12.2021		31.12.2020
Ser. no.	Name and registered office of the company	Share- holder	Share in %	Share- holder	Share in %
1.	RHI Magnesita N.V., Arnhem, Netherlands
	Fully consolidated subsidiaries
2.	Agellis Group AB, Lund, Sweden	52.	100.0	52.	100.0
3.	Baker Refractories Holding Company, Delaware, USA	39.	100.0	39.	100.0
4.	Baker Refractories I.C., Inc., Delaware, USA	3.	100.0	3.	100.0
5.	Baker Refractories, Las Vegas, USA	-	0.0	39.	100.0
6.	Betriebs- und Baugesellschaft mit beschränkter Haftung - Bebau, Wiesbaden, Germany	-	0.0	10.	100.0
7.	D.S.I.P.C.-Didier Société Industrielle de Production et de Constructions, Valenciennes,France	10.	100.0	10.	100.0
8.	Didier Belgium N.V., Evergem, Belgium	67.,103.	100.0	67.,101.	100.0
9.	Didier Vertriebsgesellschaft mbH, Wiesbaden, Germany	-	0.0	10.	100.0
10.	RHI Magnesita Deutschland AG, Wiesbaden, Germany	1.,52.	100.0	1.,52.	100.0
11.	Dutch Brasil Holding B.V., Arnhem, Netherlands	109.	100.0	107.	100.0
12.	Dutch MAS B.V., Arnhem, Netherlands	10.	100.0	10.	100.0
13.	Dutch US Holding B.V., Arnhem, Netherlands	109.	100.0	107.	100.0
14.	FE "VERA", Dnepropetrovsk, Ukraine	52.	100.0	52.	100.0
15.	Feuerfestwerk Bad Hönningen GmbH, Wiesbaden, Germany	114.	100.0	112.	100.0
16.	GIX International Limited, Dinnington, United Kingdom	115.	100.0	113.	100.0
17.	INDRESCO U.K. Ltd., Dinnington, United Kingdom	16.	100.0	16.	100.0
18.	Intermetal Engineers Private Limited, Mumbai, India	49.	99.9	49.	99.9
19.	INTERSTOP (Shanghai) Co., Ltd., Shanghai, PR China	-	0.0	106.	100.0
20.	Liaoning RHI Jinding Magnesia Co., Ltd., Dashiqiao City, PR China 1)	52.	83.3	52.	83.3
21.	LLC "RHI Wostok Service", Moscow, Russia	52.,70.	100.0	52.,70.	100.0
22.	LLC "RHI Wostok", Moscow, Russia	52.,70.	100.0	52.,70.	100.0
23.	Lokalbahn Mixnitz-St. Erhard Aktien-Gesellschaft, Vienna, Austria	94.	100.0	92.	100.0
24.	LWB Holding Company, Delaware, USA	53.	100.0	53.	100.0
25.	LWB Refractories Belgium S.A., Liège, Belgium	41.,114.	100.0	41.,112.	100.0
26.	LWB Refractories Beteiligungs GmbH & Co. KG, Wiesbaden, Germany	53.	100.0	32.,53.	100.0
27.	LWB Refractories Hagen GmbH, Wiesbaden, Germany	114.	100.0	112.	100.0
28.	LWB Refractories Holding France S.A.S., Valenciennes, France	114.	100.0	112.	100.0
29.	Magnesit Anonim Sirketi, Eskisehir, Turkey 2)	52.	100.0	52.	100.0
30.	Magnesita Asia Refractory Holding Ltd, Hong Kong, PR China	28.	100.0	28.	100.0
31.	Magnesita Finance S.A., Luxembourg, Luxembourg	11.	100.0	46.	100.0
32.	Magnesita Grundstücks-Beteiligungs GmbH, Wiesbaden, Germany	-	0.0	46.	100.0
33.	Magnesita International Limited, London, United Kingdom	46.	100.0	46.	100.0
34.	Magnesita Malta Finance Ltd., St. Julians, Malta	35.,114.	100.0	35.,112.	100.0
35.	Magnesita Malta Holding Ltd., St. Julians, Malta	41.,114.	100.0	41.,112.	100.0
36.	Magnesita Mineração S.A., Brumado, Brazil	46.	100.0	31.,46.	100.0
37.	Magnesita Refractories (Canada) Inc., Montreal, Canada	3.	100.0	3.	100.0
38.	Magnesita Refractories (Dalian) Co. Ltd., Dalian, PR China	31.	100.0	31.	100.0
39.	Magnesita Refractories Company, York, USA	24.	100.0	24.	100.0
40.	Magnesita Refractories Mexico S.A. de C.V., Monterrey, Mexico	3.,4.	100.0	3.,4.	100.0
41.	Magnesita Refractories GmbH, Wiesbaden, Germany	114.	100.0	112.	100.0
42.	Magnesita Refractories Ltd., Dinnington, United Kingdom	3.	100.0	3.	100.0
43.	Magnesita Refractories Middle East FZE, Dubai, United Arab Emirates	31.	100.0	31.	100.0
44.	Magnesita Refractories S.C.S., Valenciennes, France	28.,114.	100.0	28.,112.	100.0

		31.12.2021		31.12.2020
Ser. no.	Name and registered office of the company	Share- holder	Share in %	Share- holder	Share in %
45.	Magnesita Refractories S.R.L., Milano, Italy	114.	100.0	112.	100.0
46.	Magnesita Refratários S.A., Contagem, Brazil	11.	100.0	11.	100.0
47.	Magnesita Resource (Anhui) Company. Ltd., Chizhou, PR China	71.	100.0	30.	100.0
48.	Mezubag AG, Freienbach, Switzerland	-	0.0	106.	100.0
49.	RHI Magnesita India Limited	11.,13.,115.	66.5	13.	66.5
50.	Premier Periclase Limited, Drogheda, Ireland	-	0.0	13.	100.0
51.	Producción RHI México, S. de R.L. de C.V., Ramos Arizpe, Mexico	87.,115.	100.0	85.,113.	100.0
52.	Radex Vertriebsgesellschaft m.b.H., Leoben, Austria	111.	100.0	109.	100.0
53.	Rearden G Holdings Eins GmbH, Wiesbaden, Germany	31.	100.0	31.	100.0
54.	Refractarios Argentinos S.A.I.C.M., San Nicolás, Argentina	11.,56.	100.0	46.,56.	100.0
55.	Refractarios Magnesita Chile S/A, Santiago, Chile	46.,54.	100.0	46.,54.	100.0
56.	Refractarios Magnesita Colombia S/A, Sogamoso, Colombia	11.	100.0	46.	100.0
57.	Refractarios Magnesita del Perú S.A.C., Lima, Peru	11.,56.	100.0	46.,56.	100.0
58.	Refractory Intellectual Property GmbH & Co KG, Vienna, Austria	59.,70.	100.0	59.,70.	100.0
59.	Refractory Intellectual Property GmbH, Vienna, Austria	70.	100.0	70.	100.0
60.	Reframec Manutenção e Montagens de Refratários S.A., Contagem, Brazil	46.	100.0	46.	100.0
61.	RHI Argentina S.R.L., Buenos Aires, Argentina	13.,115.	100.0	13.,113.	100.0
62.	RHI Canada Inc., Burlington, Canada	115.	100.0	113.	100.0
63.	RHI Chile S.A., Santiago, Chile	16.,115.	100.0	16.,113.	100.0
64.	RHI Clasil Private Limited, Mumbai India	-	0.0	113.	53.7
65.	RHI Dinaris GmbH, Wiesbaden, Germany	103.	100.0	101.	100.0
66.	RHI Finance A/S, Hellerup, Denmark	70.	100.0	70.	100.0
67.	RHI GLAS GmbH, Wiesbaden, Germany	103.	100.0	101.	100.0
68.	RHI India Private Limited, Navi Mumbai, India	-	0.0	11.,113.	100.0
69.	RHI ITALIA S.R.L., Brescia, Italy	70.	100.0	70.	100.0
70.	RHI Magnesita GmbH, Vienna, Austria	1.	100.0	1.	100.0
71.	RHI Magnesita China Ltd., Shanghai, China	52.	100.0	-	0.0
72.	RHI Magnesita (Chongqing) Refractory Materials Co., Ltd.	71.	51.0	-	0.0
73.	RHI Magnesita Distribution B.V., Rotterdam, Netherlands	74.	100.0	72.	100.0
74.	RHI Magnesita Trading B.V., Rotterdam, Netherlands	70.	100.0	1.	100.0
75.	RHI Magnesita Vietnam Company Limited, Ho Chi Minh City, Vietnam	85.	100.0	83.	100.0
76.	RHI Magnesita Services Europe Gerbstedt GmbH, Gerbstedt/Hübitz, Germany	77.	100.0	75.	100.0
77.	RHI Magnesita Services Europe GmbH, Kerpen, Germany	10.	100.0	10.	100.0
78.	RHI MARVO S.R.L., Ploiesti, Romania	52.,109.	100.0	52.,107.	100.0
79.	RHI Magnesita Properties MO, LLC, Missouri, USA	110.	100.0	108.	100.0
80.	RHI Normag AS, Porsgrunn, Norway	-	0.0	52.	100.0
81.	RHI Refractories (Dalian) Co., Ltd., Dalian, PR China	52.	100.0	52.	100.0
82.	RHI Refractories (Site Services) Ltd., Dinnington, United Kingdom	17.	100.0	17.	100.0
83.	RHI Refractories Africa (Pty) Ltd., Sandton, South Africa	52.,106.	100.0	52.,104.	100.0
84.	RHI Refractories Andino C.A., Puerto Ordaz, Venezuela	115.	100.0	113.	100.0
85.	RHI Refractories Asia Pacific Pte. Ltd., Singapore	70.	100.0	70.	100.0
86.	RHI Refractories Egypt LLC., Cairo, Egypt, i.l.	52.,109.	100.0	52.,107.	100.0
87.	RHI Refractories España, S.L., Oviedo, Spain	-	0.0	10.,12.	100.0
88.	RHI Refractories France SA, Valenciennes, France 3)	107.	100.0	105.	100.0

		31.12.2021		31.12.2020
Ser. no.	Name and registered office of the company	Share- holder	Share in %	Share- holder	Share in %
89.	RHI Refractories Ibérica, S.L., Oviedo, Spain	107.	100.0	105.	100.0
90.	RHI Refractories Italiana s.r.l., Brescia, Italy	-	0.0	105.	100.0
91.	RHI Refractories Liaoning Co., Ltd., Bayuquan, PR China 1)	52.	66.0	52.	66.0
92.	RHI Refractories Mercosul Ltda., Sao Paulo, Brazil	109.,115.	100.0	107.,113.	100.0
93.	RHI Refractories Nord AB, Stockholm, Sweden	107.	100.0	105.	100.0
94.	RHI Refractories Raw Material GmbH, Vienna, Austria	1.,52.,70.	100.0	1.,52.,70.	100.0
95.	RHI Refractories Site Services GmbH, Wiesbaden, Germany	10.	100.0	10.	100.0
96.	RHI Refractories UK Limited, Bonnybridge, United Kingdom	10.	100.0	10.	100.0
97.	RHI Refratários Brasil Ltda, Contagem, Brazil; i.l.	13.,46.	100.0	13.,36.	100.0
98.	RHI Sales Europe West GmbH, Urmitz, Germany	10.,107.	100.0	10.,105.	100.0
99.	RHI Trading (Dalian) Co., Ltd., Dalian, PR China	52.	100.0	52.	100.0
100.	RHI Ukraina LLC, Dnepropetrovsk, Ukraine	52.,109.	100.0	52.,107.	100.0
101.	RHI United Offices America, S.A. de C.V., Monterrey, Mexico	74.,87.	100.0	85.,100.	100.0
102.	RHI Refractories España, S.L., Lugones, Spain	10.,12.	100.0	85.	100.0
103.	RHI Urmitz AG & Co. KG, Mülheim-Kärlich, Germany	10.,95.	100.0	9.,10.	100.0
104.	RHI US Ltd., Delaware, USA	13.	100.0	13.	100.0
105.	RHI-Refmex, S.A. de C.V., Ramos Arizpe, Mexico	87.,115.	100.0	85.,113.	100.0
106.	RHISA Employee Trust, Sandton, South Africa 4)	-	0.0	-	0.0
107.	SAPREF AG für feuerfestes Material, Basel, Switzerland	115.	100.0	113.	100.0
108.	RHI Magnesita Interstop AG, Hünenberg, Switzerland	10.,52.	100.0	10.,52.	100.0
109.	Veitscher Vertriebsgesellschaft m.b.H., Vienna, Austria	70.	100.0	70.	100.0
110.	Veitsch-Radex America LLC., Delaware, USA	104.	100.0	102.	100.0
111.	Veitsch-Radex GmbH & Co OG, Vienna, Austria	70.,112.	100.0	70.,110.	100.0
112.	Veitsch-Radex GmbH, Vienna, Austria	70.	100.0	70.	100.0
113.	Veitsch-Radex Vertriebsgesellschaft m.b.H., Vienna, Austria	70.	100.0	70.	100.0
114.	Vierte LWB Refractories Holding GmbH, Wiesbaden, Germany	26.,53.	100.0	26.,53.	100.0
115.	VRD Americas B.V., Arnhem, Netherlands	52.,70.	100.0	52.,70.	100.0
116.	Zimmermann & Jansen GmbH, Wiesbaden, Germany	10.	100.0	10.	100.0
	Subsidiaries not consolidated due to minor significance	.		.
117.	Dr.-Ing. Petri & Co. Unterstützungsgesellschaft m.b.H., Wiesbaden, Germany	10.	100.0	10.	100.0
118.	Guapare S.A, Montevideo, Uruguay	-	0.0	46.	100.0
119.	Magnesita Refractories A.B., Stocksund, Sweden	114.	100.0	112.	100.0
120.	Magnesita Refractories PVT Ltd, Mumbai, India	53.,114.	100.0	53.,112.	100.0
121.	Magnesita Refractories S.A. (Pty) Ltd., Sandton, South Africa	41.	100.0	41.	100.0
122.	MAG-Tec Participações Ltda. Ltda., Contagem, Brazil; i.l.	46.	98.7	46.	98.7
123.	MMD Araçuaí Holding Ltda., São Paulo, Brazil	-	0.0	46.	100.0
124.	Refractarios Especiales Y Moliendas S.A., Buenos Aires, Argentina; i.l.	54.	100.0	54.	100.0
125.	Refractarios Magnesita Uruguay S/A, Montevideo, Uruguay	46.	100.0	46.	100.0
126.	RHI Réfractaires Algérie E.U.R.L., Sidi Amar, Algeria	86.	100.0	86.	100.0
	Equity-accounted joint ventures and associated companies	.		.
127.	Chongqing Boliang Refractory Materials Co. Ltd, Chongqing, China	71.	51.0	-	0.0
128.	Magnesita Envoy Asia Ltd., Kaohsiung, Taiwan	3.	50.0	3.	50.0
129.	MAGNIFIN Magnesiaprodukte GmbH & Co KG, St. Jakob, Austria	-	0.0	52.,128.	50.0
130.	Sinterco S.A., Nameche, Belgium	53.	70.0	53.	70.0
	Other immaterial investments, measured at cost	.		.
131.	MAGNIFIN Magnesiaprodukte GmbH, St. Jakob, Austria	-	0.0	52.	50.0

1)In accordance with IAS 32, fixed-term or puttable non-controlling interests are shown under liabilities.

2)Further shareholders are VRD Americas B.V., Lokalbahn Mixnitz St. Erhard Aktien-Gesellschaft and Veitscher Vertriebsgesellschaft mbH.

3)Further shareholders are RHI Magnesita Deutschland AG, RHI Dinaris GmbH and RHI GLAS GmbH.

4)Controlling influence due to contractual terms and conditions.

i.l. in liquidation

Current assets

(B) Cash and cash equivalents

Cash and cash equivalents are at RHI Magnesita N.V.’s free disposal.

Equity

The Company’s authorised share capital amounts to €100,000,000, comprising 100,000,000 ordinary shares, each of €1 nominal value. As at 31 December 2021, RHI Magnesita N.V.’s issued and fully paid-in share capital consists of 46,999,019 ordinary shares (31.12.2020: 49,008,955 ordinary shares). For additional information on treasury shares see (F).

(D) Additional paid-in capital

Additional paid-in capital comprises premiums on the issue of shares less issue costs by RHI Magnesita N.V.

(E) Legal and mandatory reserves

Cash flow hedges

The item cash flow hedges include gains and losses from the effective part of cash flow hedges less tax effects. Further information on hedge accounting is included in Note (55) of the Consolidated Financial Statements.

Currency translation

Currency translation includes the accumulated currency translation differences from translating the Financial Statements of foreign subsidiaries as well as unrealised currency translation differences from monetary items which are part of a net investment in a foreign operation, net of related income taxes. If foreign companies are deconsolidated, the currency translation differences are recognised in the Statement of Profit or Loss as part of the gain or loss from the sale of shares in subsidiaries. In addition, when monetary items cease to form part of a net investment in a foreign operation, the currency translation differences of these monetary items previously recognised in other comprehensive income are reclassified to profit or loss.

The cash flow hedges reserve and the currency translation reserve are legal reserves and are restricted for distribution.

Mandatory reserve

The articles of association stipulate a mandatory reserve of €288,699,230.59 which was created in connection with the merger.

No distributions, allocations or additions may be made, and no losses of the Company may be allocated to the mandatory reserve.

(F) Treasury shares

Non-current liabilities

(G) Other non-current liabilities

in € million	31.12.2021	31.12.2020
Personnel provisions	1.7	0.0
Other non-current financial liabilities	0.3	0.0
Total non-current liabilities	2.0	0.0

Current liabilities

(H) Other current liabilities

in € million	31.12.2021	31.12.2020
Trade payables	1.6	1.0
Payables to group companies	21.5	9.4
Accrued liabilities	6.4	5.4
Total current liabilities	29.5	15.8

The current liabilities are due in less than one year. The fair value of other current liabilities approximates the book value, due to their short-term character.

Employee benefits

in € million	31.12.2021	31.12.2020
Wages and salaries	19.7	9.5
Social security charges	2.0	1.0
Pension contributions	0.5	0.4
Other employee costs	0.7	0.3
Total wages and salaries	22.9	11.2

(J) General and administrative expenses

in € million	31.12.2021	31.12.2020
External services/consulting expenses	2.6	3.7
Cost for principal services Austria	(3.0)	2.2
Personnel expenses	22.9	11.2
Other expenses	3.0	1.5
Total general and administrative expenses	25.5	18.6

(K) Net financial result

The 2021 net financial result mainly consists of €0.1 million dividends received on shares held (2020: €0.3 million).

(L) Net results from investments

In year 2021 the full year results of the investments amount to a profit of €239.2 million (2020: €40.7 million) and are recognised in the Company Statement of Profit or Loss.

(M) Net result for the period

In 2021, there are no differences in the result between the Company Financial Statements and the Consolidated Financial Statements.

Proposed appropriation of result

It is proposed that pursuant to Article 27 clause 1 of the articles of association of the Company the result shown in RHI Magnesita N.V. income statement be appropriated as follows:

in € million	2021
Profit attributable to shareholders	243.1
In accordance with Article 27 clause 1 to be transferred to reserves	0.0
At the disposal of the General Meeting of Shareholders	243.1

For 2021, the Board of Directors will propose a dividend of €1.00 per share for the shareholders of RHI Magnesita N.V. The proposed dividend is subject to the approval by the Annual General Meeting on 25 May 2022.

Other notes

Number of employees

The average number of employees of RHI Magnesita N.V. during 2021 amounts to 67 (2020: 48).

Off balance sheet commitments

RHI Magnesita N.V. as an ultimate parent company provided a corporate guarantee of €1.530,3 million (31.12.2020: €1,086.5 million) for the borrowings of the Group. The Borrowings are as disclosed in Note (25). Additionally €79.2 million (31.12.2020: €36.0 million) of corporate guarantees are issued in favor of customers and suppliers of the Group. The increase results from the inventory ramp-up and the increase in demand following energy price highs.

Other information

Information regarding independent auditor's fees, number of employees of RHI Magnesita Group and the remuneration of the Board of Directors is included in Note (59), (60) to (62) of the Consolidated Financial Statements.

The Company opened a branch in Vienna, Austria and started as of February 2020 to employ staff in the branch office and undertake services.

Material events after the reporting date

There were no material events after the reporting date other than those disclosed in note (63) of the Consolidated Financial Statements.

Vienna, 27 February 2022

Board of Directors

Executive Directors
Stefan Borgas	Ian Botha

Non-Executive Directors

Herbert Cordt

Janet Ashdown

Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg

Janice Brown

Marie-Hélène Ametsreiter

Wolfgang Ruttenstorfer

John Ramsay

David Schlaff

Fiona Paulus

Karl Sevelda

Sigalia Heifetz

Employee Representative Directors

Karin Garcia

Michael Schwarz

Martin Kowatsch

Other information

Provisions of the articles of association on profit and distributions

The stipulations of Article 27 and 28 of the Articles of Association concerning profit and distributions are:

27 Profit and distributions

27.1 The Board may resolve that the profits realised during a financial year will fully or partially be appropriated to increase and/or form reserves. With due regard to Article 26.2, a deficit may only be offset against the reserves prescribed by law to the extent this is permitted by law.

27.2 The allocation of profits remaining after application of Article 27.1 shall be determined by the General Meeting. The Board shall make a proposal for that purpose. A proposal to make a distribution of profits shall be dealt with as a separate agenda item at the General Meeting.

27.3 Distribution of profits shall be made after adoption of the annual accounts if permitted under the law given the contents of the annual accounts.

27.4 The Board may resolve to make interim distributions and/or to make distributions at the expense of any reserve of the Company, other than the Mandatory Reserve.

27.5 Distributions on shares may be made only up to an amount which does not exceed the amount of the Distributable Equity. If it concerns an interim distribution, the compliance with this requirement must be evidenced by an interim statement of assets and liabilities as referred to in Section 2:105 paragraph 4 of the Dutch Civil Code. The Company shall deposit the statement of assets and liabilities at the Dutch Trade Register within eight days after the day on which the resolution to make the distribution is published.

27.6 Distributions on shares payable in cash shall be paid in Euro, unless the Board determines that payment shall be made in another currency.

27.7 The Board is authorised to determine that a distribution on shares will not be made in cash but in kind or in the form of shares, or to determine that shareholders may choose to accept the distribution in cash and/or in the form of shares, all this out of the profits and/or at the expense of reserves, other than the Mandatory Reserve, and all this if and in so far the Board has been designated by the General Meeting in accordance with Article 6.1. The Board shall set the conditions under which such a choice may be made.

28 Release for payment

Distributions of profits and other distributions shall be made payable four weeks after adoption of the relevant resolution, unless the Board or the General Meeting at the proposal of the Board determine another date.

Independent auditor’s report

To: the general meeting of RHI Magnesita N.V.

Report on the financial statements 2021

Our opinion

In our opinion:

• the consolidated financial statements of RHI Magnesita N.V. together with its subsidiaries (‘the Group’) give a true and fair view of the financial position of the Group as at 31 December 2021 and of its result and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (‘EU-IFRS’) and with Part 9 of Book 2 of the Dutch Civil Code;
• the company financial statements of RHI Magnesita N.V. (‘the Company’) give a true and fair view of the financial position of the Company as at 31 December 2021 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code.

What we have audited

We have audited the accompanying financial statements 2021 of RHI Magnesita N.V., Arnhem. The financial statements include the consolidated financial statements of the Group and the company financial statements.

The consolidated financial statements comprise:

the consolidated statement of financial position as at 31 December 2021;
the following consolidated statements for the year 2021: profit or loss, comprehensive income, cash flows and changes in equity; and
the notes to the consolidated financial statements, comprising the significant accounting policies and other explanatory information.

The company financial statements comprise:

the company balance sheet as at 31 December 2021;
the company statement of profit or loss for the period 1 January to 31 December 2021;
the notes, comprising the accounting policies applied and other explanatory information.

The financial reporting framework applied in the preparation of the financial statements is EU-IFRS and the relevant provisions of Part 9 of Book 2 of the Dutch Civil Code for the consolidated financial statements and Part 9 of Book 2 of the Dutch Civil Code for the company financial statements.

The basis for our opinion

We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. We have further described our responsibilities under those standards in the section ‘Our responsibilities for the audit of the financial statements’ of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of RHI Magnesita N.V. in accordance with the European Union Regulation on specific requirements regarding statutory audit of public-interest entities, the ‘Wet toezicht accountantsorganisaties’ (Wta, Audit firms supervision act), the ‘Verordening inzake de onafhankelijkheid van accountants bij assuranceopdrachten’ (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics).

Our audit approach

We designed our audit procedures in the context of our audit of the financial statements as a whole and forming our opinion thereon. The information in support of our opinion, e.g. comments and observations regarding individual key audit matters, our audit approach regarding fraud risks and our audit approach regarding going concern was set up in this context and we do not provide a separate opinion or conclusion on these matters.

Overview and context

RHI Magnesita N.V. is a global producer of refractory products. The Group comprises of several components and therefore we considered our group audit scope and approach as set out in the section ‘The scope of our group audit’. We paid specific attention to the areas of focus driven by the operations of the Group, and factors listed below.

The adverse effects of the COVID-19 pandemic on the global economy diminished during 2021 with a steep increase in demand across multiple sectors, including the steel and industrial businesses. This created global supply chain challenges, resulting in higher logistics costs, raw materials scarcity, and the need to pass on those costs to customers through price increases in the latter half of the year. In addition, the second half of the year showed significant unforeseen increases in energy costs. Management considered these developments when preparing its financial statements.

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where the board of directors made important judgements, for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. We paid attention to, amongst others, the assumptions underlying the physical and transitional climate change related risks.

In Note 9 of the financial statements the Company describes the areas of judgement in applying accounting policies and the key sources of estimation uncertainty. Given the significant estimation uncertainty (due to higher complexity and subjectivity of assumptions) and related higher inherent risks of material misstatement in the impairment assessment of goodwill and other intangible assets, and the recognition and recoverability of deferred tax assets, we considered these matters as key audit matters as set out in the section ‘Key audit matters’ of this report.

Other areas of focus, that were not considered as key audit matters, were the accounting of factoring agreements, accounting for the production optimisation program, application of the own use exemption on physical delivery of CO2 certificates, valuation of a put option liability and valuation of uncertain tax positions. In addition, we performed audit procedures on the items marked ‘audited’ in the remuneration report such as reconciling the disclosed remunerations to underlying supporting documents.

In executing our audit, we ensured that the audit teams at both group and component levels included the appropriate skills and competences which are needed for the audit of an international industrial products company. We therefore included experts in the areas of valuations, and employee benefits, as well as built our team with specialists in IT and corporate income taxes.

The outline of our audit approach was as follows:

'Please unpack the Result.zip and reopen this file.'

Materiality

• Overall materiality: €12.6 million.

Audit scope

• We conducted audit work in 14 locations.
• Site visits were conducted to Austria and Brazil. We have also performed remote file reviews for India, Austria, Brazil China and the USA and held periodic video conferences with teams in Turkey, Switzerland, Italy, Germany and Spain.
• Audit coverage: 85% of consolidated revenue, 85% of consolidated total assets and 72% of consolidated profit before tax.

Key audit matters

• Recognition and recoverability of deferred tax assets
• Valuation of goodwill and other intangible assets

Materiality

The scope of our audit was influenced by the application of materiality, which is further explained in the section ‘Our responsibilities for the audit of the financial statements’.

Based on our professional judgement we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and to evaluate the effect of identified misstatements, both individually and in aggregate, on the financial statements as a whole and on our opinion.

Overall group materiality	€12.6 million (2020: €9.7 million)
Basis for determining materiality	We used our professional judgement to determine overall materiality. As a basis for our judgement we used 5% of profit before tax adjusted for exceptional items.
Rationale for benchmark applied	We used profit before tax adjusted for exceptional items (i.e. restructuring expenses, certain impact of purchase price allocation from acquisitions, disposal of assets held for sale) as the primary benchmark, based on our analysis of the common information needs of users of the financial statements. On this basis, we believe that profit before tax adjusted for exceptional items is an important metric for the financial performance of the Company.
Component materiality	Based on our judgement, we allocate materiality to each component in our audit scope that is less than our overall group materiality. The range of materiality allocated across components was between €1.0 million and €12.5 million.

We also take misstatements and/or possible misstatements into account that, in our judgement, are material for qualitative reasons.

We agreed with the board of directors that we would report to them misstatements, identified during our audit, above €0.7 million (2020: €0.6 million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

The scope of our group audit

RHI Magnesita N.V. is the parent company of a group of entities. The financial information of this group is included in the consolidated financial statements of RHI Magnesita N.V.

We tailored the scope of our audit to ensure that we, in aggregate, provide sufficient coverage of the financial statements for us to be able to give an opinion on the financial statements as a whole, taking into account the management structure of the Group, the nature of operations of its components, the accounting processes and controls, and the markets in which the components of the Group operate. In establishing the overall group audit strategy and plan, we determined the type of work required to be performed at component level by the group engagement team and by each component auditor.

The group audit included 12 components which were subject to audits of their complete financial information, selected on the relative size of their operations. Out of twelve, three components are individually financially significant to the Group and on which primarily focused:

RHI Magnesita GmbH, Austria
RHI US Ltd, USA; and,
Magnesita Refratários S.A., Brazil.

Additionally, we selected nine components for full scope audit procedures to achieve appropriate coverage on financial line items in the consolidated financial statements.

In total, in performing these procedures, we achieved the following coverage on the financial line items:

Revenue	85%
Total assets	85%
Profit before tax	72%

None of the remaining components represented more than 5% of total group revenue or total group assets. For those remaining components we performed, among other things, analytical procedures to corroborate our assessment that there were no significant risks of material misstatements within those components.

Where component auditors performed the work, we determined the level of involvement we needed to have in their work to be able to conclude whether we had obtained sufficient and appropriate audit evidence as a basis for our opinion on the consolidated financial statements as a whole.

We issued instructions to the component audit teams in our audit scope. These instructions included amongst others our risk analysis, materiality and scope of the work. We explained to the component audit teams the structure of the Group, the main developments that are relevant for the component auditors, the risks identified, the materiality levels to be applied and our global audit approach. We had individual calls with each of the in-scope component audit teams during the year and upon conclusion of their work. During these calls, we discussed the significant accounting and audit issues identified by the component auditors, their reports, the findings from their audit procedures and other matters, which could be of relevance for the consolidated financial statements.

The group engagement team visits the component teams and local management on a rotational basis, to the extent permitted by COVID-19 or other travel restrictions. In the current year the group audit team visited RHI Magnesita GmbH (Austria) and Magnesita Refratários S.A. (Brazil) given the judgements involved in valuation of deferred tax assets (refer to key audit matter recognition and recoverability of deferred tax assets) as well as visited Austrian operating locations. During our visits we met with local management as well as component auditors, discussed significant business developments, accounting matters and the areas of significant risks. Furthermore, we reviewed selected working papers of four component auditors in India, Austria, Brazil, China and the USA. We also conducted a series of video conference meetings with local management along with our component teams. During these meetings, we discussed the strategy and financial performance of the local businesses, as well as the audit plan and execution, significant risks and other relevant audit topics.

The group engagement team performed the audit work for the parent company RHI Magnesita N.V. as well as the Integrated Business Services (IBS) office activities in Spain on areas such as fixed assets, cash and cash equivalents and aspects of accounts payable and accounts receivable. In addition, the group engagement team performed the audit work over the headquarter related activities in Vienna. This includes group consolidation, inventory valuation, financial statement disclosures, remuneration disclosures and several complex items, such as goodwill impairment testing, share based compensation and compliance of accounting positions taken by the Group in accordance with EU-IFRS.

By performing the procedures above at components, combined with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence on the Group’s financial information, as a whole, to provide a basis for our opinion on the financial statements.

The impact of climate change on our audit

In 2021 management of RHI Magnesita N.V. further expanded the climate change related risk assessment. We refer to section ‘Principal Risks’ on page 47, ‘Progress against sustainability targets’ on page 59 and ‘Climate and environment’ on pages 60 - 63 of the Group’s Strategic Report where management defined potential physical as well as transitional risks, risk mitigating activities, risk governance, strategy and metrics. Management acknowledged that the inherent likelihood of the climate change related risk has risen since prior year due to the increasing regulatory complexity and stakeholders’ expectations. Therefore, the potential reputational and financial impact of this risk further crystalized and increased in the reporting period. Climate change initiatives and commitments impact the preparation of the Group’s financial statements in a variety of ways, all with inherent uncertainties. In note 9, ‘Critical accounting judgments and key sources of estimation uncertainty’, management highlighted that it expects additional sources of estimation uncertainty regarding climate change to have impact on the net realizable value of inventories through the stricter regulatory sustainability requirements to the quality; and on the useful lives and residual values of assets that could become physically unavailable or commercially obsolete earlier than initially expected. Management considers those effects of climate risks on the financial statements 2021 to be immaterial, however concluded that due to the high degree of estimation uncertainty this may change in the future.

As we have not been engaged in expressing assurance over the sustainability reporting, our procedures in this context consisted primarily of making inquiries with officers of the entity and determining the plausibility of the information reported. During our planning procedures, we have made enquiries of management to understand and assess the extent of potential impact of climate related risk on the Group’s financial statements.

We challenged the appropriateness of management’s assessment of the potential impact (e.g. estimated useful life of assets, potential diminished access to financing) on major accounting estimates. The impact of climate related risks is not considered to be a separate key audit matter.

Audit approach fraud risks

We identified and assessed the risks of material misstatements of the financial statements due to fraud. During our audit we obtained an understanding of the entity and its environment and the components of the system of internal control, including the risk assessment process and management’s process for responding to the risks of fraud and monitoring the system of internal control and how the supervisory board exercises oversight, as well as the outcomes. We refer to section “Effective risk management” of the Strategic report for management’s fraud risk assessment and section “Sustainability governance” of the Strategic report in which management reflects on this fraud risk assessment.

We further evaluated fraud risk factors with respect to financial reporting fraud, misappropriation of assets and bribery and corruption. We assessed whether those factors indicate that a risk of material misstatement due to fraud is present. In doing this we:

We performed an inquiry of Audit Committee members as to fraud risks and related party transactions to identify the areas of their concerns in relation to fraud.
We inquired with the Head of Internal Audit, Risk and Compliance about fraud cases identified throughout the year and reviewed the reports of Internal Audit function relevant to the reporting period. We also assessed the matters reported through the Group’s whistleblowing and complaints procedure and results of management’s investigation and follow-up on such matters.
We inquired with Group and local executive management, other members of management and the board of directors as to whether they have any knowledge of (suspected) fraud, their views on overall fraud risks within the Group and their perspectives on the Groups mitigating controls addressing the risk of fraud.
We assessed the IT environment around key systems. We paid specific attention to the access safeguards in the IT system and the possibility that these lead to violations of the segregation of duties.

Based on fraud risk factors identified we performed the following specific procedures over the identified fraud risk factors:

Identified fraud risks

Audit procedures

Risk of management override of controls

It is generally presumed that management is in a unique position to perpetrate fraud because of the available opportunity to manipulate accounting records and prepare fraudulent financial statements by overriding controls that otherwise appear to be operating effectively.

Upfront and updated throughout the year, the board of directors provides guidance to the market on revenue and (adjusted) EBITDA. Lagging actuals provide a risk of override or bypassing of controls as management may be inclined to ensure meeting guidance as communicated to the market.

In this context, we paid specific attention to non-routine transactions and areas of significant management estimations where management bias may result in fraudulent reporting, i.e. valuation of goodwill, intangible and tangible assets and liabilities.

To address this specific risk, we executed the following strategy:

Where relevant to our audit, we evaluated the design and effectiveness of controls in the processes of generating and processing journal entries. We assessed whether deficiencies in controls, may create additional opportunities for fraud and incorporated respective corroborative procedures in our audit approach.

We considered the outcome of our audit procedures over the estimates and significant accounting areas and assessed whether control deficiencies and misstatements identified were indicative of fraud. Where necessary, we planned and performed additional auditing procedures to ensure that fraud risk is sufficiently addressed in our audit.

We evaluated key accounting estimates and judgements used in key accounting areas (like goodwill valuation, valuation of assets and liabilities) for biases, including retrospective reviews of prior year’s estimates where available. Further reference is made to key audit matters in this auditor’s report.

We performed data analysis and focused on journal entries related to the fraud risk factors identified during fraud risk assessment. Where we identified instances of unexpected journal entries, we performed additional audit procedures to address each identified risk.

We evaluated whether the business rationale (or lack thereof) of the significant transactions concluded in 2021 suggests that the Group may have been entered into to engage in fraudulent financial reporting or to conceal misappropriation of assets.

We incorporated an element of unpredictability in the nature timing and extent of procedures.

We performed substantive testing procedures over the consolidation entries.

Our audit procedures did not lead to specific indications of fraud or suspicions of fraud with respect to management override of the internal controls.

Risk of fraud in revenue recognition

Upfront and updated throughout the year, the board of directors provides guidance to the market on revenue and (adjusted) EBITDA. In 2021, lagging actuals provide a risk of override or bypassing of well-established controls as management may be inclined to ensure meeting guidance as communicated to the market to meet shareholders expectations.

In 2021, the Company faced pressure from decreasing margins and volumes and at the same time started a price increase strategy. Therefore, identified fraud risk factors pertain to risk of management override of controls and possible revenue overstatement through the recording of non-existent revenue or premature revenue recording following that the Company is under the pressure to achieve targets and meet shareholder expectations.

To address this specific risk, we executed the following strategy:

We discussed with the Audit Committee and executive management (e.g. the chief executive, finance and sales officers) the increased risk of overriding or bypassing controls when sales targets were increased.

We discussed and inquired with the Group’s sales officer, and local sales managers into the tone at the top, to assess to what extent not meeting targets have an impact on career opportunities or bonuses within the Company, and whether they have any knowledge of (suspected) fraud. In our conversations we addressed their views on overall fraud risks within the Group and their perspectives on the Groups mitigating controls addressing the risk of fraud in revenue.

We updated our understanding of the revenue and receivable process through performing an end-to end walkthrough of the process whereby identifying individual revenue streams applicable to the Company and its subsidiaries.

We assessed the IT environment around key systems, including IT dependent controls related to the revenue and receivables cycle. We also assessed the design and effectiveness of the internal control measures related to revenue recognition and processing journal entries related to revenue. We examined whether changes were made to internal control measures in the last months of the year. We paid attention to whether deficiencies in controls may create additional opportunities for fraud and incorporated respective corroborative procedures in our audit approach.

We performed disaggregated revenue analytical procedures at significant components and planned additional audit procedures where unusual fluctuations were noted. No particular fraud matters were identified as a result.

Using data analysis, we identified revenue entries with a credit impact to revenue accounts and non-regular off-sets and substantively tested them to verify that their nature did not represent fraudulent transactions or reporting.

We performed substantive audit procedures to assess whether IFRS 15 criteria for recognising revenue in 2021, were met. We also performed substantive audit procedures over the credit notes issued to customers after year end (where material) to verify that no transactions were recorded in 2021 that were subsequently reversed through credit notes in 2022. Where material, our component auditors were required to test rebate accruals.

Our audit procedures did not lead to specific indications of fraud or suspicions of fraud with respect to the accuracy of the revenue reporting.

Audit approach going concern

As disclosed in section ‘Principles and methods’ on page 129 in the financial statements, Management prepared the financial statements on the assumption that the entity is a going concern and that it will continue its operations for the foreseeable future. Our procedures to evaluate management’s going concern assessment included, amongst others:

Review of management’s going concern assessment. We corroborated management’s analysis with the approved budget 2022, facts and circumstances that came to our attention from our auditing procedures.
Inquiries of corporate and local management as to their knowledge of going concern risks beyond the period of management’s assessment.
Review of management’s analysis of the forecasted levels of net debt, available undrawn borrowing facilities, compliance with debt covenants and the debt maturity profile.
Corroboration of consistency between management’s going concern analysis, the analysis of the forecasted levels of net debt with the future cash flow forecast as incorporated in goodwill impairment test. In evaluating management’s forecasts and cash flows, we performed a look-back analysis to assess the accuracy of the forecasting process.
An analysis of the financial position per balance sheet date in comparison to prior year’s year-end to assess whether events or circumstances exist that may lead to a going concern risk.
Consideration of the potential indications of the component’s going concern uncertainty based on audit procedures performed by the component auditors. We evaluated the impact of such indications on the overall use of the going concern assumption applied by the Group.

Our procedures did not result in outcomes contrary to management’s assumptions and judgments used in the application of the going concern assumption.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements. We have communicated the key audit matters to the board of directors. The key audit matters are not a comprehensive reflection of all matters identified by our audit and that we discussed. In this section, we described the key audit matters and included a summary of the audit procedures we performed on those matters.

We addressed the key audit matters in the context of our audit of the financial statements as a whole, and in forming our opinion thereon. We do not provide separate opinions on these matters or on specific elements of the financial statements. Any comment or observation we made on the results of our procedures should be read in this context.

Since the amount of new restructuring efforts decreased significantly in 2021 compared to 2020, the accounting for the production optimisation program was removed from the list of key audit matters.

Key audit matter

Our audit work and observations

Recognition and recoverability of deferred tax assets

Refer to note 7, 9, 16 and 44 of the consolidated financial statements

The Group recorded deferred tax assets for tax loss carryforwards and deductible temporary differences arising on various items for the amount of €102.3 million. Reference is made to note 16 of the financial statements.

Deferred tax assets are capitalised based on the assumption that sufficient taxable income will be generated against which loss carry-forwards and other deductible temporary differences can be offset. This assumption is based on estimates of the current and the estimated taxable results, and any future measures implemented by the company in several jurisdictions concerned that will have an effect on income tax, taking into account the available carry-forward period. The Group also has losses and other temporary differences for which no deferred tax asset has been recognised in these consolidated financial statements.

The Group’s principal functions are based in Austria. Consequently, after applying transfer pricing policies, certain residual profits will be taxed in Austria.

Due to the inherent level of uncertainty, the potential limitations in the recoverability of deferred tax assets and the significant judgement involved, we considered the recoverability of deferred tax assets to be a key audit matter for our audit.

We have requested and obtained evidence for the existence and accuracy of the tax loss carryforwards and assessed the expiration dates per jurisdiction. Where there was uncertainty around the acceptance of losses by the tax authorities, we requested and received a tax opinion from the Group’s tax advisors.

Where significant management estimates and judgements involved is susceptible to management bias, we have critically reviewed the underlying facts to assess recognition and assessed the recoverability of deferred tax assets. In auditing recoverability, we have critically assessed the underlying assumptions of the forecasted taxable income through agreeing the forecasted future taxable profits with approved business plans in a tax jurisdiction. We also assessed the past performance against the expected future tax profits in the business plans used by the Group, by using our knowledge of the Group and the industry in which it operates.

In addition, we have considered the local remaining carry-forward period together with any applicable restrictions in recovery for each individual jurisdiction.

We assessed and corroborated the adequacy and appropriateness of the disclosure made in the consolidated financial statements.

Based on the audit procedures performed, we found the Group’s estimates and judgment used in the recognition and recoverability assessment of the deferred tax assets to be supported by the available evidence.

Valuation of goodwill and other intangible assets

Refer to note 7, 9, 10, 11, and 38 of the consolidated financial statements

The Group capitalized goodwill of €114.4 million, mainly related to the acquisition of the Magnesita Group in 2017. In addition, the company capitalised intangible assets of €282.6 million. These assets form part of cash-generating units (‘CGUs’) to the extent that they independently generate cash inflows. If and to the extent to which these CGUs include goodwill or intangible assets with indefinite useful lives, or show signs for impairment, the recoverable amount is assessed. Annual planning process data is used to make assumptions on the discount rates, profitability as well as growth rates, and sensitivity analyses are carried out regarding any accounting effects. The assessment did not result in an impairment.

As disclosed also in note 7 ‘Principles of accounting and measurement’ of the financial statements, the Group has considered raw material pricing and carbon emission pricing scenarios in assessing the impact of climate change on the results of impairment testing of goodwill and intangible assets with indefinite useful life. Management acknowledges the potential impact of climate change related risks on future costs and expects to invest €50 million over the next four years for research and development of new technologies to reduce and capture CO2 emissions. This is not expected to have a material impact on impairment assessment and therefore is not included in the valuation.

We understood that during the preparation for compliance with TCFD, the Group has identified and modelled possible risks and opportunities related to climate change. As it is unlikely that these materialise before 2025, management did not include them in the impairment test and the Strategic planning that covers the period until 2025.

We identified the impairment assessment as a key audit matter due to significant estimates and assumptions about the discount rates, profitability as well as growth rates.

As part of our audit procedures, we have evaluated and challenged the composition of management’s future cash flow forecast and process applied to identify and define cash-generating units, calculate the recoverable amount, test for impairment, calculate the capital cost rate and the growth rate as well as the calculation model.

We have reconciled the assumed future cash flows used in the budget planning with the information included in the forecast made by management.

Given that the areas where significant management estimates and judgements involved is susceptible to management bias and creates opportunities for fraud, we, with the support of our valuation specialists, have evaluated management’s assumptions such as revenue and margin, the discount rate, terminal value, operational and capital expenditure. We have obtained corroborative evidence for these assumptions. We performed analyses to assess the reasonableness of forecasted revenues, margins and expenditures in line with the level of activity forecasted and corroboration to contracted revenue for the coming years and price trends and obtained further explanations when considered necessary. We compared the long-term growth rates used in determining the terminal value with economic and industry forecasts. We have re-performed calculations, compared the methodology applied with generally accepted valuation techniques, assessed appropriateness of the cost of capital for the company and comparable assets, as well as considered territory specific factors. Finally, we assessed the appropriateness of disclosure of the key assumptions and sensitivities underlying the tests.

Based on the audit procedures performed, we found the assumptions to be reasonable and supported by the available evidence.

Report on the other information included in the annual report

The annual report contains other information. This includes all information in the annual report in addition to the financial statements and our auditor’s report thereon.

Based on the procedures performed as set out below, we conclude that the other information:

is consistent with the financial statements and does not contain material misstatements;
contains all the information regarding the directors’ report and the other information that is required by Part 9 of Book 2 and regarding the remuneration report required by the sections 2:135b and 2:145 subsection 2 of the Dutch Civil Code.

We have read the other information. Based on our knowledge and the understanding obtained in our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements.

By performing our procedures, we comply with the requirements of Part 9 of Book 2 and section 2:135b subsection 7 of the Dutch Civil Code and the Dutch Standard 720. The scope of such procedures was substantially less than the scope of those procedures performed in our audit of the financial statements, except for the audit performed on information in the remuneration report that marks ‘audited’.

The board of directors is responsible for the preparation of the other information, including the directors’ report and the other information in accordance with Part 9 of Book 2 of the Dutch Civil Code. The board of directors are responsible for ensuring that the remuneration report is drawn up and published in accordance with sections 2:135b and 2:145 subsection 2 of the Dutch Civil Code.

Report on other legal and regulatory requirementsand ESEF

Our appointment

We were appointed as auditors of RHI Magnesita N.V. by the board of directors following the passing of a resolution by the shareholders at the annual meeting held on 4 October 2017. Our appointment has been renewed annually by shareholders and now represents a total period of uninterrupted engagement of 5 years.

European Single Electronic Format (ESEF)

RHI Magnesita N.V. has prepared the annual report, including the financial statements, in ESEF. The requirements for this format are set out in the Commission Delegated Regulation (EU) 2019/815 with regard to regulatory technical standards on the specification of a single electronic reporting format (these requirements are hereinafter referred to as: the RTS on ESEF).

In our opinion, the annual report prepared in XHTML format, including the partially marked-up consolidated financial statements as included in the reporting package by RHI Magnesita N.V. complies in all material respects with the RTS on ESEF.

The board of directors is responsible for preparing the annual report, including the financial statements, in accordance with the RTS on ESEF, whereby the board of directors combines the various components into a single reporting package. Our responsibility is to obtain reasonable assurance for our opinion whether the annual report in this reporting package, complies with the RTS on ESEF.

Our procedures, taking into account Alert 43 of the NBA (Royal Netherlands Institute of Chartered Accountants), included amongst others:

Obtaining an understanding of the entity’s financial reporting process, including the preparation of the reporting package.
Obtaining the reporting package and performing validations to determine whether the reporting package, containing the Inline XBRL instance document and the XBRL extension taxonomy files, has been prepared, in all material respects, in accordance with the technical specifications as included in the RTS on ESEF.
Examining the information related to the consolidated financial statements in the reporting package to determine whether all required mark-ups have been applied and whether these are in accordance with the RTS on ESEF.

No prohibited non-audit services

To the best of our knowledge and belief, we have not provided prohibited non-audit services as referred to in article 5(1) of the European Regulation on specific requirements regarding statutory audit of public-interest entities.

Services rendered

The services, in addition to the audit, that we have provided to the Company or its controlled entities, for the period to which our statutory audit relates, are disclosed in note 59 to the financial statements.

Responsibilities for the financial statements and the audit

Responsibilities of the board of directors for the financial statements

The board of directors is responsible for:

the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code; and for
such internal control as the board of directors determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

As part of the preparation of the financial statements, the board of directors is responsible for assessing the Company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, the board of directors should prepare the financial statements using the going-concern basis of accounting unless the board of directors either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so. The board of directors should disclose in the financial statements any event and circumstances that may cast significant doubt on the Company’s ability to continue as a going concern.

The board of directors is responsible for overseeing the Company’s financial reporting process.

Our responsibilities for the audit of the financial statements

Our responsibility is to plan and perform an audit engagement in a manner that allows us to obtain sufficient and appropriate audit evidence to provide a basis for our opinion. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high but not absolute level of assurance, which makes it possible that we may not detect all material misstatements. Misstatements may arise due to fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

Materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.

A more detailed description of our responsibilities is set out in the appendix to our report.

Rotterdam, 27 February 2022

PricewaterhouseCoopers Accountants N.V.

Original has been signed by E.M.W.H. van der Vleuten RA MSc

Appendix to our auditor’s report on the financial statements 2021 of RHI Magnesita N.V.

In addition to what is included in our auditor’s report, we have further set out in this appendix our responsibilities for the audit of the financial statements and explained what an audit involves.

The auditor’s responsibilities for the audit of the financial statements

We have exercised professional judgement and have maintained professional scepticism throughout the audit in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit consisted, among other things of the following:

Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the intentional override of internal control.
Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the board of directors.
Concluding on the appropriateness of the board of directors’ use of the going concern basis of accounting, and based on the audit evidence obtained, concluding whether a material uncertainty exists related to events and/or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report and are made in the context of our opinion on the financial statements as a whole. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluating the overall presentation, structure and content of the financial statements, including the disclosures, and evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Considering our ultimate responsibility for the opinion on the consolidated financial statements, we are responsible for the direction, supervision and performance of the group audit. In this context, we have determined the nature and extent of the audit procedures for components of the Group to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole. Determining factors are the geographic structure of the Group, the significance and/or risk profile of group entities or activities, the accounting processes and controls, and the industry in which the Group operates. On this basis, we selected group entities for which an audit or review of financial information or specific balances was considered necessary.

We communicate with the board of directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. In this respect, we also issue an additional report to the audit committee in accordance with article 11 of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor’s report.

We provide the board of directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related actions taken to eliminate threats or safeguards applied.

From the matters communicated with the board of directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.

Alternative performance measures (“APMs”)

APMs used by the Group are reviewed below to provide a definition from each non-IFRS APM to its IFRS equivalent, and to explain the purpose and usefulness of each APM.

In general, APMs are presented externally to meet investors' requirements for further clarity and transparency of the Group's underlying financial performance. The APMs are also used internally in the management of our business performance, budgeting and forecasting.

APMs are non-IFRS measures. As a result, APMs allow investors and other readers to review different kinds of revenue, profits and costs and should not be used in isolation. Commentary within the Half Year Results, including the Financial Review, as well as the Consolidated Financial Statements and the accompanying notes, should be referred to in order to fully appreciate all the factors that affect our business. We strongly encourage readers not to rely on any single financial measure, but to carefully review our reporting in its entirety.

Return on invested capital (ROIC)

ROIC is calculated as adjusted net operating profit after tax (NOPAT), divided by total invested capital for the year. Invested capital is a sum of non-current assets including deferred tax assets, trade and other current receivables, inventories and income tax receivables less other non-current financial assets, deferred tax liabilities, trade and other current liabilities, income tax liabilities and current provisions. Adjusted net operating profit after tax (NOPAT) is calculated as sum of Adjusted EBITA, amortisation expense and result from joint ventures less income taxes paid.

Liquidity

Liquidity comprises cash and cash equivalents and undrawn committed credit facilities of €600 million.

EBITA

EBIT, as presented in Consolidated Statement of Profit and Loss, excluding amortisation and impairments.

EBITDA

EBIT, as presented in Consolidated Statement of Profit and Loss, excluding depreciation, amortisation and impairments.

Adjusted EBITDA and EBITA

To provide further transparency and clarity to the ongoing, underlying financial performance of the Group, adjusted EBITDA and EBITA are used. Both measures exclude other income and expenses as presented in Consolidated Statement of Profit and Loss.

Adjusted earnings per share (“EPS”)

Adjusted EPS is used to assess the Company's operational performance per ordinary share outstanding. It is calculated using adjusted EBITA (as described above) and removes the impact of certain foreign exchange effects, amortisation, one-off restructuring expenses and impairments, other non-cash financial income and expenses, that are not directly related to operational performance. Effective tax rate for adjusted EPS is calculated by applying the effective tax rate normalised for restructuring expenses and impairments.

Operating cash flow and free cash flow

Alternative measures for cash flow are presented to reflect net cash inflow from operating activities before certain items. Free cash flow is considered relevant to reflect the cash performance of business operations after meeting the usual obligations of financing and tax. It is therefore measured before all other remaining cash flows, being those related to acquisitions and disposals, other equity-related and debt-related funding movements, and foreign exchange impacts on financing and investing activities.

Working capital

Working capital and intensity provides a measure how efficient the Company is in managing operating cash conversion cycles. Working capital is the sum of manageable working capital, composed of inventories, trade receivables and trade payables and other receivables and payables. Working capital intensity is measured as a percentage of last three months annualised revenue.

Net debt

We present an alternative measure to bring together the various funding sources that are included in the Consolidated Balance Sheet and the accompanying notes. Net debt is a measure defined in the Group’s principal financing arrangements and reflects the net indebtedness of the Group and includes all cash, cash equivalents and marketable securities; and any debt or debt-like items.

Glossary

AC AuditCommittee ERD Employee Representative Director

AGM AnnualGeneralMeeting ESG Environmental Social Governance

AI artiﬁcialintelligence EU EuropeanUnion

APM alternativeperformancemeasures GRI Global ReportingInitiative

APO AutomatedProcess Optimisation IAS International AccountingStandards

ANKRAL LC RHIMagnesitalow-carbonproductseries,whichis

designedtosupportcustomersastheyreduceemissionsin

theirsupplychain

IFRS International Financial ReportingStandards

ISO Isostaticallypressed

ANKRAL X RHIMagnesitaproductseries,whichcombinesclinkermelt

resistancewithﬂexibility

BOF basicoxygenfurnace

KPI keyperformance indicator

LTIFR losttimeinjuryfrequencyrate (per200,000working

hours)

LTIP long-termincentive plan

BST BroadbandSpectralThermometer

MAR MarketAbuseRegulations
CAGR compoundannualgrowthrate

M&A mergersandacquisitions
Capex capitalexpenditure

MES manufacturingexecutionsystems
CCU carboncaptureand usage

NFM non-ferrousmetals

CDC CentersforDiseaseControlandPrevention

CDP globaldisclosuresystemforinvestors,companies,cities,

statesandregionstomanagetheirenvironmentalimpacts

NGO non-governmental organisation

NMEA nearMiddle EastandAfrica

CEO ChiefExecutiveOﬃcer

NOx nitrogenoxides

CFO ChiefFinancialOﬃcer

NPS NetPromoterScore

CoGS Cost of Goods Sold

OIE Otherincome andexpenses

COVID-19 coronavirusdisease2019

QCK QuickCheck

CSO ChiefSalesOﬃcer

ROIC returnoninvestedcapital

CSC CorporateSustainability Committee

RFID radiofrequencyidentiﬁcation

CIS commonwealth of independent states

SDGs UnitedNationsSustainableDevelopmentGoals

CO₂carbondioxide

SG&A selling,general andadministrative expenses

CSC CorporateSustainability Committee

SKU stock-keepingunit

DBM deadburnedmagnesia

SOx sulphuroxides

DCGC DutchCorporateGovernanceCode2016

SRM secondaryrawmaterials

EAF electricarcfurnace

STEM science,technology,engineeringandmathematics

EBIT earningsbeforeinterestandtaxes

TAC Technical AdvisoryCommittee

EBITA earningsbeforeinterest,taxesandamortisation

TCFD TaskForceonClimate-relatedFinancialDisclosures

EBITDA earningsbeforeinterest,taxes,depreciationand

amortisation

EEC environment, energy and chemicals

ED ExecutiveDirector

EMT ExecutiveManagement Team

EPS earningspershare

TRIF totalrecordable injuryfrequency

TSR total shareholderreturn

UKCGC UKCorporateGovernance Code2018

VR virtualreality

WHO WorldHealthOrganisation

Shareholder information

RHI Magnesita N .V. is a public company

with limited liability under Dutch law

and was incorporated on 20 June 2017.

IthasitscorporateseatinArnhem,theNetherlands,itsadministrativeseatin

Vienna,AustriaanditsregisteredoﬃceatKranichberggasse6,1120Vienna,

Austria.

The telephone number of the Issuer is +43 50 2136200.

TheCompanyshares,representedbydepositoryinterests,ofRHIMagnesita

N.V, are listed on the Premium Segment of the Oﬃcial List on the Main

Market of the London Stock Exchange, and RHI Magnesita N.V holds a

secondarylistingontheViennaStockExchange(WienerBörse).

Tickersymbol:RHIM

ISINCode:NL0012650360

Investor information

TheCompany’swebsitewww.rhimagnesita.comprovidesinformationfor

shareholdersandshouldbetheﬁrstportofcallforgeneralqueries.The

Investorssection(https://ir.rhimagnesita.com/)containsdetailsonthe

currentandhistoricalshareprice, analystpresentations,shareholder

meetingsaswellasa“ShareholdersInformation”section.Annualand

InterimReportscanalsobedownloadedfromthissection.

Investor Relations department

Kranichberggasse 6,

1120Vienna,

Austria

T: +43 699 1870 6493

Email: investor.relations@rhimagnesita.com

Corporate brokers

Peel Hunt LLP

MoorHouse

120LondonWall

LondonEC2Y5ET

UnitedKingdom

T: +44 20 7418 8900

www.peelhunt.com

BarclaysBankPLC

5TheNorthColonnade

CanaryWharf

LondonE144BB

UnitedKingdom

T: +44 20 7623 2323

www.barclays.com

Auditor

Youcanalsosubscribetoan“Investorsmailalertservice”toautomatically

receiveanemailwhensigniﬁcant announcements aremade.

Shareholding information

PricewaterhouseCoopersAccountantsN.V,

ThomasR.Malthusstraat5

1066JRAmsterdam

P.O. Box 90357

PleasecontactourRegistrar,Computershareforalladministrative enquiries

aboutyourshareholding,suchasdividendpayments,ora change of

address:

T: +31 88 792 00 20

www.pwc.nl

ComputershareInvestorServicesPLC

ThePavilions,

BridgwaterRoad

BristolBS996ZZ

UnitedKingdom

www.computershare.com/uk
T: +44 (0) 370 702 0003

Financial calendar

Q1 TradingUpdate 5 May 2022
AnnualGeneralMeeting 25 May 2022
HalfYearResults 27 July 2022