RHI MAGNESITA Annual Report 2022
Annual Report 2022
Solutions
that shape
tomorrow’s
world
Strategic report
01 Our highlights
01 Investment case
02 Refractory customers and end markets
04 Global footprint with local for local strategy
06 The drive for decarbonisation
08 Business model
10 Chairman’s statement
12 CEO review
14 Our strategic framework
16 Our strategic framework
18 Strategy in action
26 Key performance indicators
28 Our performance
30 Operational review
35 Financial review
45 Our risk management approach
46 Effective risk management
48 Our internal control system
50 Viability statement
52 Principal risks
58 Sustainability
60 Introduction
62 Sustainability governance
63 Our business
64 Our planet
72 Our people
75 Our communities
78 GRI index
84 EU Taxonomy
88 Taskforce on Climate-related Financial
Disclosures (TCFD) Report
Governance
96 Chairman’s introduction to corporate
governance
98 Corporate governance statement
106 Stakeholder engagement
110 Corporate governance statement continued
114 Board of Directors
118 Executive Management Team
120 Nomination & Governance Committee report
124 Corporate Sustainability Committee report
126 Audit & Compliance Committee report
132 Remuneration Committee report
136 Directors’ Remuneration Policy
147 Annual Report on Remuneration
Financial statements
161 Consolidated Statement of Profit or Loss
162 Consolidated Statement of Comprehensive
Income
163 Consolidated Statement of Financial Position
164 Consolidated Statement of Cash Flows
165 Consolidated Statement of Changes in Equity
167 Notes to the Consolidated Financial
Statements 2022
220 Company Financial Statements of RHI
Magnesita N.V.
222 Notes to the Company Financial Statements
2022
Other information
231 Independent Auditor’s report
241 Alternative performance measures (“APMs”)
243 Glossary
245 Shareholder information
Contents
We are
RHI Magnesita
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, glass and
chemicals industries to operate. The end
markets driving demand for our products
include the construction, infrastructure,
automotive, machinery, electronics and
energy sectors.
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, performing our roles with integrity,
honesty, reliability and in respectful
collaboration with each other. Extending these
ethical behaviours to interactions with all of our
business partners is vital for the long term
sustainable success of RHI Magnesita.
01RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
01RHI MAGNESITA ANNUAL REPORT 2022
Our highlights
05
Strong competitive position
with vertical integration
• Vertical integration with low-cost, high
quality magnesite and dolomite raw material
assets providing security of supply
• Technological leadership through
innovation, with €77 million of R&D and
technical marketing spend in 2022
including low-CO
2
emission products.
New products represented 19% of revenue
(2021: 16%)
01
Sustainability
leadership
• We are a sustainability leader in the global
refractory industry, with a strong market
share in electric arc furnace refractories
and proprietary technology for increasing
the use of secondary raw materials without
loss of refractory performance, significantly
reducing CO
2
emissions. We achieved a
recycling rate of 10.5% in 2022 (2021:
6.8%) and our lowest CO
2
emissions
intensity since the merger of RHI and
Magnesita in 2017
03
Margin resilience and significant
growth opportunity
• Lower conversion costs following plant
consolidation, specialisation and
modernisation. Essential nature of
products underpins double digit EBITA
margin performance throughout multiple
business cycles
• Market share opportunities in heat
management solutions, flow control,
non-basic refractories and high-growth
geographies of China, India and Türkiye
02
Investment driven
value creation
• Capital expenditure of c.€400 million over
the period 2019-2022 including the
Production Optimisation Plan that is
expected to deliver material cost savings
from 2023
• Successful M&A growth in target markets of
India, China and Türkiye. Balanced and
dynamic approach to capital allocation
encompassing organic growth, M&A,
sustainability and shareholder returns
04
Leadership in the
refractory industry
• Market leader in the refractory industry
with a c.15% market share in a €20bn
industry for industrial applications
exceeding temperatures of 1,200 ° C
• Clear market leader in the Americas,
Europe and Middle East
• Full range of products and services enables
heat management solution offering
Investment case
Adjusted EBITA
€384m
2021: €280m
Net debt: Adjusted EBITDA
2.3x
2021: 2.6x
Reduced C0
2
emissions
1.74t CO
2
/t
2021: 1.82 t CO
2
/t
Adjusted earnings per share
€4.82
2021: €4.52
Dividend per share
€1.60
2021: €1.50 per share
Recycling rate
10.5%
2021: 6.8%
R&D and technical marketing
€77m
2021: €63m
Revenue
€3.3bn
2021: €2.6bn
Profit attributable to equity share
€226m
2021: €215m
Adjusted operating cash flow
€155m
2021: €(254)m
Long term injury frequency
0.20
2021: 0.19
Read more on our APMs
A
Page 241
A
Alternative Performance Measures (APMs) are used by the Board to monitor underlying performance at a Group and operating segment level, which are applied consistently
throughout. These APMs should be considered in addition to, and not as a substitute for, or as superior to statutory measures. For more information on APMs, see the APM section.
1,350°C
1,650°C
1,500°C
1,760°C
2,000°C
02 RHI MAGNESITA ANNUAL REPORT 2022
Steel Cement Non-ferrous
metals
Industrial
applications
2
Glass
Refractory customers and end markets
Refractories are used in almost every
industrial process involving temperatures of
1,200°C and above, protecting equipment
from the effects of heat and corrosion.
Refractories are made from inorganic,
non-metallic material that can withstand
extremely high temperatures while
maintaining their form and function during
long periods of contact with molten slag,
metals or chemicals. Magnesium oxide
(MgO) is one of the key compounds used in
RHI Magnesita refractory products and has a
melting point of 2,800°C which enables its
use across many refractory applications.
Refractories are specialist materials used in industrial processes
Refractories can withstand high temperatures and corrosive environments but they are
consumed during use, at varying rates depending on the application. For example, up to
15 kg of refractories are required per tonne of steel production compared with 1 kg per
tonne of cement production.
Refractory consumption is an operating expenses for the steel industry
Replacement cycles for refractories in the steel industry range between four hours
and six months whilst other industries have longer replacement cycles. Refractories
in cement kilns are replaced annually, whereas in the glass and non-ferrous metal
industries refractory linings are replaced up to every ten years and re-linings are
classed as capital expenditure.
RHI Magnesita is the leading refractory group worldwide
RHI Magnesita serves thousands of industrial sites worldwide with a c.15% market
share in the global steel market and c.30% share of the cement market.
Refractory
demand
for 1 tonne
~4 kg
Refractory
demand
for 1 tonne
Copper
~3 kg
Refractory
demand
for 1 tonne
EEC
NA
Refractory
demand
for 1 tonne
~10 to 15 kg
Lifetime
c.4 hours -
6 months
% of
customers’ costs
c.3%
% of global market
share by customer
market
c.15%
Refractory
demand
for 1 tonne
~1 kg
Lifetime
Annually
% of
customers’ costs
c.0.5%
% of global market
share by customer
market
c.30%
1
Lifetime
1-10 years
Lifetime
1-20 years
% of
customers’ costs
c.0.2%
% of
customers’ costs
c.0.2%
% of global market
share by customer
market
c.30%
% of global market
share by customer
market
c.5%
Lifetime
Up to 10 years
% of
customers’ costs
c.1%
% of global market
share by customer
market
c.20%
1. Change of scope following acquisitions in India industrial.
2. Industrial applications includes energy, environment, chemicals, foundry and aluminium.
03RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
How our customer industries relate to end-user markets
Demand for refractories is driven by industries requiring advanced heat-resistant materials
for their production processes, being predominantly the steel, cement/lime, non-ferrous
metals, glass, energy and chemicals industries. End market demand determines the level of
production required by industry, and the volume of refractories required is closely linked to
the amount produced.
The most important end markets for the refractory industry are construction, automotive
and transport, machinery and equipment, electronics and consumer goods as well as
energy, oil, gas and petrochemicals. These end markets were impacted by disruptive
themes which emerged or persisted during 2022 and are contributing factors in the
2023 outlook.
Construction
1
Automotive
2
Machinery
3
Electronics and
consumer goods
4
Energy
5
End markets
outlook
The outlook for end
market demand in
2023 and 2024.
Trends
We are agile and
proactive in pursuing
opportunities and
managing risks posed
by the rapidly
changing global
environment.
Supply chain
volatility
Post-pandemic supply
chain inefficiencies
continued in 2022, in
the form of high
shipping costs,
shortages of containers
and unavailability of
component supplies.
Supply chain
disruption started to
normalise towards the
end of the year.
Political trade
barriers
Trade policy
uncertainty and risk of
fragmentation
increased in 2022,
following the Russia/
Ukraine conflict and
the sanctions that were
imposed on Russia.
Increased polarisation
of trading blocs could
lead to reduced
investment and GDP
losses in 2023,
particularly for those
with high trade
restrictions.
Labour
shortages
Global labour
shortages was a big
challenge in 2022, in a
post-pandemic
market. Key drivers of
shortages included
immigration
disruptions, a shift in
worker expectations,
wage growth below
inflation and ageing
populations.
Global energy
crisis
Shortages in the oil,
gas and electricity
markets caused record
high prices during
2021 and 2022. This
was driven by a variety
of factors in the
aftermath of the
COVID-19 pandemic,
including the rapid
economic rebound in
2021 and the Russia/
Ukraine conflict.
Decarbonisation
Decarbonisation is an
increasingly important
trend, affecting RHI
Magnesita, its customers
and its end markets.
Industries are reducing
their carbon footprint
through new and
innovative technologies,
in order to be aligned with
the Paris Agreement and
comply with new policies
and regulations such
as Emissions Trading
Schemes (EU ETS, China
National ETS) and the
European Carbon Border
Adjustment Mechanism
(EU CBAM).
Customer
industries
% of 2022 revenue.
Cement Steel
Industrial
applications
Non-ferrous
metals
11%
45%
71%
17%
11%
15%10%
7%
Other 5%
2023: 1.2%
2024: 3.6%
2023: 3.7%
2024: 6.6%
2023: 1.7%
2024: 3.6%
2023: 2.2%
2024: 2.2%
2023: 2.2%
2024: 1.2%
1. Construction value added, CRU GEO DEC2022.
2. Production of cars and commercial vehicles,
CRU GEO Dec. 2022.
3. IP global, CRU GEO DEC2022.
4. Internal estimates based on Global
Economic Outlook, CRU DEC 2022.
5. Energy demand by scenario, 2018-2030
– Charts – Data & Statistics -
International Energy Agency (IEA).
04 RHI MAGNESITA ANNUAL REPORT 2022
South
America
330kt
15%
North
America
475kt
34%
China Exports
Africa
7.4%
NAM (North/Central America)
9.5%
India
13.7%
NME (Near Middle East)
14.6%
Europe/Türkiye
16.1%
Asia other
34.0%
Europe/Türkiye Exports
14.5%
NME
13.8%
Asia other
3.8%
S. America
1.3%
China
Africa
22.8%
N. America30.3%
4.7%
S. America
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. Our global footprint
enables us to supply a full range of
refractory products, services and solutions
to almost anywhere in the world.
Our supply chain
Our production plants are strategically
located close to raw material production
sites, and we export the raw materials to
customers all over the world. In 2021 and
2022, global markets and disrupted supply
chains, including major shipping routes used
by RHI Magnesita, started to re-open post
pandemic. Meanwhile in 2022, the global
energy shortage led to European production
sites diversifying away from natural gas to
liquified petroleum gas (LPG).
The following map shows the volume of
production in each region, identifying the
proportion of domestic production for local
sales alongside the proportion of imported
goods (indicating where they have come
from). The map also indicates raw material
movements, either from an internal mine
or external source.
7%
4%
4%
22%
9%
China (kt)
Total production: 473
Total sold locally: 196
Europe/Türkiye (kt)
Total production: 832
Total sold locally: 480
Proportion of domestic production compared
to imported goods, for local sales
Destination from key exporting regions
13.4%
6%
India
Our global network has been consolidated and
modernised by the Production Optimisation Plan,
progressing our “local for local” strategy. We aim to reduce
movements of raw materials and finished goods, thereby
lowering costs and improving reliability and security of
supply for our customers.
05RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Asia others
165kt
100%
100%
Africa
110kt
10%
Europe
& Türkiye
535kt
India
160kt
53%
NME
105kt
100%
China
200kt
2%
Example
123kt
95%
Case study: Europe
Europe and Türkiye have ten production facilities and four raw
material sites as well as seven recycling facilities including the new
joint venture, Horn & Co. As a mitigation against potential shortages
of gas supplies, most sites in Germany and Austria completed the
preparation by December 2022 to use LPG or light oil as an
alternative to pipeline gas from 2023 onwards. The Group also
purchased 75GWh of natural gas for physical storage in Austria.
A large proportion of exports from Europe are sent to North America,
NMEA, East Asia, China and India. We succeeded to pass higher
29%
57%
72%
8%
18%
24%
2%
98%
1%
0.5%
0.5%
8%
Refractory plants
Raw material site
R&D sites
Recycling
Raw material movement
Outer ring (country of origin):
Europe/Türkiye
China
India
NAM
SAM (South America)
NME (near Middle East & Africa)
Asia other
Africa
Inner ring:
% Imported
% Produced in region
Area size of chart represents production volumes
Outer ring:
% Produced in region
29%
90%
2%
8%
6%
39%
49%
4%
8%
European energy cost as well as energy surcharges from European raw
material suppliers on to our customers in North America and NME,
However, it was more difficult in Asia. In response to higher energy cost
in Europe, some production was shifted to India.
Whilst some freight rates improved during H2 2022, for example
inbound to Europe from China, inbound freight lanes to North America
continued to be very high cost. Given continued freight disruption,
the Group carried high inventory levels in Europe during the year
however this normalised towards the end of 2022.
06 RHI MAGNESITA ANNUAL REPORT 2022
20402022
World
excl-China
China
100
525
425
188
788
600
2.6%
CAGR
3.6%
CAGR
Carbon capture
and storage
Resource and
energy efficiency
(incl. maximal
scrap usage)
Carbon capture
and utilisation
Biomass (and
polymer)
injection into
blast furnace
NG-DRI-EAF
Hydrogen
injection in BF
Molten Oxide
electrolysis
H
2
-DRI
The drive for decarbonisation
The blast furnace and basic oxygen route (BF-BOF) currently emits up to
four times more carbon than an EAF powered by renewable electricity.
While the end-product requirements do not allow for a like-for-like
technology swap, reducing the emissions of both routes, but particularly
of the BF-BOF, is today a main challenge of the industry, and will continue
to be so in the next decades.
To tackle this challenge, there are several technologies the industry
considers. This ranges from Carbon Capture, Utilisation & Storage (CCUS)
that offsets unabated emissions from CO
2
intensive legacy technologies,
to large-scale adaptations of previously niche technologies such as
Direct Reduced Iron (DRI), an eventual adoption of green hydrogen
along the production chain, and to the more disruptive smelting
processes such as Boston Metals’ Molten Oxide Electrolysis (MOE)
using renewable energy.
Novel smelting technologies and the introduction of hydrogen into
more conventional steelmaking remains heavily in focus as the ultimate
route for steelmakers to reach net-zero emissions. However, these
smelters technology are far away from being commercially available and
economically proven, and extensive new infrastructure is required to
succeed with the transition to hydrogen. Moreover, hydrogen needs to be
priced at below $2/kilogramme to ensure competitive steel-making cost.
A more feasible and lower risk adaptation is the proliferation of DRI
usage, not only in the EAF route (a niche segment operating for decades),
but to also substitute the blast furnace in the BF-BOF route. While DRI
consumption in the EAF route is not a new technology, it requires
high-grade iron ore as input. As this niche grows strongly in the next
decades, high-grade iron ore demand will grow materially whilst
availability is expected to remain limited.
This constraint has driven research and development of steelmakers,
equipment manufacturers and RHI Magnesita to focus efforts in a
novel DRI-smelter aggregate. This new aggregate lowers ore-grade
requirements (therefore lowering barriers for adoption and upscaling)
and produces liquid iron comparable to the hot metal of a blast furnace,
at a fraction of its CO
2
emissions. At the same time, this set-up allows
steelmakers to continue to use already existing equipment (e.g. basic
oxygen furnaces and secondary metallurgy) effectively lowering the
capital expenditure and complexity required for the implementation,
while still making a step-change lower in CO
2
emissions.
This is a particularly relevant development for RHI Magnesita as this
aggregate’s set-up mimics the refractory requirements of special EAFs
used in the non-ferrous metals industry, where RHI Magnesita is the
global market leader.
EAF steelmaking by region
Emission reduction potential
Commercial readiness
Steel production makes up 7% of global carbon emissions and the simplest way
to decarbonise is through scrap steel use via electric arc furnace. RHI Magnesita is
the clear market leader in electric arc furnaces (EAFs) refractories. Steel also has an
important role to play in greener infrastructure such as wind power and electric vehicles.
H
2
Green hydrocarbon
Renewable electricity
1. Route suitable for all grades of iron ore
(with ESF).
2. Route suitable for high grade iron ore only.
BF Scrap steel
EAF BOF
DRI
1
DRI
2
EAF
ESF
1
BOF
H
2
H
2
BF: Blast furnace
BOF: Basic oxygen furnace
DRI: Direct reduced iron
EAF: Electric arc furnace
07RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Iron Ore
Electrification
Oxygen
Bubbles
Insert
Anode
Tapping
Liquid Iron
Cathode
Molten Iron
Electrolyte
The role that non-ferrous metals will play
in industry-wide carbonisation is very
important, specifically non-ferrous metals
which are a typically 35-40% gross margin
industry for RHI Magnesita.
Aluminium, copper and nickel are projected to grow materially
by 2040, with significantly increased demand from the energy
transition sectors, particularly from electric vehicles (EVs) and the
grid. More metals will be used in the battery component of the
EV as well as the vehicle itself. The grid and energy storage will
be required to support increased clean electricity generation.
RHI Magnesita’s partnership with
Boston Metal
Non-ferrous metals
Boston Metal is pioneering a new route for the primary steel-making
process by the means of MOE. Instead of the traditional route that uses
carbon to reduce iron ore, i.e. to separate the iron from the oxygen in
the ore, the MOE process uses direct electric current to reduce iron ore.
The ore is melted in an oxide electrolyte at temperatures around 1,600 °C
and the electrons that pass through the molten bath separate the iron
from the oxygen, generating as a by-product oxygen gas instead of the
normal mixture of CO and CO
2
. See equations below. The result is clean,
high-purity liquid metal that can be sent directly to ladle metallurgy
without the need for reheating. The process can be used with all iron ore
grades. The MOE process eliminates the need for coke production,
iron ore processing, blast furnace reduction and basic oxygen furnace
refinement. It can also replace the need for natural-gas fed DRI
production. The Company is also exploring the technology for other
high-value metals such as niobium and vanadium and is investing
in a pilot plant in Brazil. The new technology is expected to reach
commercialisation for steel by 2026. Since 2019, RHI Magnesita
has been a leading partner for Boston Metal.
Normal process for iron production: Fe
2
O
3
+ 3C => 2Fe + 3CO; Iron is rich
in carbon (approx. 4.2%).
MOE process: 2Fe
2
O
3
+ e- => 4Fe + 3O
2
; iron is pure and doesn’t need
BOF to decarbonise.
Cu
29
Ni
28
Al
13
Nuclear,
Geothermal
EV batteryEnergy
storage
system
Grid SolarElectric
vehicle
Wind
08 RHI MAGNESITA ANNUAL REPORT 2022
Shaped
refractories
Unshaped
refractories
Business model
What we do
We offer our customers high-quality refractory products, supported by
industry-leading R&D and underpinned by our vertically integrated
structure which provides certainty of supply of low-cost, high-quality
magnesite-based raw materials.
We mine and process c.50% of the raw materials used in our production
facilities from internal sources. At our production facilities, the mixing,
pressing, and firing of refractories takes place. In addition to the refractory
product itself, we offer solutions to our customers including logistics,
design, installation, monitoring, recycling and disposal. Our suite of
digital products provides our customers with intelligence and insights into
the refractory lifecycle at their plants, improving productivity and driving
efficiencies. Our comprehensive product range and expertise enables us
to offer full heat management solutions to customers who are seeking to
improve production efficiency and lower their costs and environmental
impacts. This unique service offering is one of our key differentiators.
Heat management solutions contracts made up 32% of revenue in 2022
(2021: 29%).
Raw material production Refractory production
Heat management solutions
Logistics
Crushing
Firing in rotary kiln
Mining
Press
Firing and/or heat treatment
Installation Monitoring, repair and
process efficiencies
Removal Recycling
Disposal
Refractory products are used in all high-temperature industrial processes
to protect equipment in a plant from hot molten metal. Without
refractories, key industries such as steel, cement, metals, glass, energy
and chemicals could not operate. Refractories withstand hostile
conditions including heat and chemical corrosion, maintaining their
form and function at temperatures over 1,200 °C. They protect
equipment such as furnaces and kilns against thermal, mechanical
and chemical stress.
RHI Magnesita has customers all over the world, and serves them through
its global footprint, spanning North and South America, Europe, China,
India, the rest of Asia and the Middle East. Around 70% of revenue is
generated from selling refractory products and solutions to our steel
customers, with the remaining c.30% of revenue generated from other
industrial customers (including industries such as cement, non-ferrous
metals, glass and industrial applications).
The main product groups include refractory bricks or mixes, and more
specialised flow control products such as slide gates, nozzles and plugs.
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
09RHI MAGNESITA ANNUAL REPORT 2022
Our value chain
How we engage with
our stakeholders
Page 106
High-quality raw materials sourcing,
production and recycling
We have a unique ability to cover and service
every step of the value chain, through our
vertical integration and we offer distinctive
customer solutions based on our technological
leadership, expertise and cost competitiveness.
Our low-cost raw material assets make a positive
contribution to Group margins, when compared
to the cost of acquiring equivalent raw materials
from external suppliers. In 2022, this
contributed 2.5% towards a 11.6% margin.
One of the most important raw materials for
refractory production is magnesite, which the
Group mines in both underground and surface
mines. Magnesite ore is crushed and fired at
1,800°C in special kilns. During this process,
CO
2
is released, and density is increased as
MgCO
3
is calcined to MgO.
Production of refractories
Raw materials are mixed and combined with
chemical additives to be sold as mixes, or some
are further processed into shaped refractory
products. Shaped refractory bricks are pressed
into different sizes and shapes depending on the
specific application, employing pressures of up
to 3,200 tonnes.
After pressing, shaped refractory bricks are
tempered at temperatures of up to 350°C and
may be further subjected to firing at 1,800°C in
tunnel kilns for a number of days. Unfired
products are primarily used in the steel industry,
whilst the main applications for fired products
are in the cement, non-ferrous metals, process
and mineral industries.
Installation, monitoring and complex
issue solving
A key component of RHI Magnesita’s ability to
add value lies in our solutions offering, which
includes the installation, monitoring, repair,
removal and recycling of refractory products
at customer sites by experienced employees.
Digital monitoring products allow us to observe
refractory performance, safely extending the
usable life of the refractory, whilst remote
gunning solutions can carry out intermediate
repairs while the refractory is in use.
After use in a customer’s production process,
some residual refractory linings can be removed
and reused, as secondary raw materials in the
production of new refractories. One tonne of
secondary raw material contributes to a saving
of 1.8 tonnes of CO
2
, compared to if the product
had used virgin raw material.
RHI Magnesita therefore operates across the
entire cycle from raw material production to
recycling of spent material into new finished
products. Thanks to a new joint venture with
Horn & Co. to form Horn & Co. RHIM Minerals
Recovery GmbH (“MIRECO”), we reached our
2025 recycling target of 10% three years early.
Product marketing, sale and delivery
RHI Magnesita has more than 70 sales offices
worldwide and services customers in more than
100 countries. We operate 33 production sites
including seven raw material sites (excluding
recycling centres), strategically located in order
to serve our customers as efficiently as possible.
The closer we work with our customers, the
greater the difference we can make for them.
Having a global network of offices, research
centres and production sites is important to us,
and to them.
Innovation, research and development
One of the fundamental drivers of our business
model is innovation and R&D, supported by
strong internal expertise in materials technology
and digitalisation. RHI Magnesita continues to
drive innovation, with significant opportunities
identified in the fields of automation, robotics
and sustainability, and aims to devote 2.2%
of revenues per year to R&D and Technical
Marketing. Investment in R&D and Technical
Marketing in 2022 was €77 million,
representing 2.3% of revenues. We are
committed to protecting the integrity of our
expanding intellectual property, and currently
have 1,674 active patents and 1,719 active
trademarks globally. New products launched
in the last five years represented 19% of
revenue in 2022 (2021: 16%).
10 RHI MAGNESITA ANNUAL REPORT 2022
The Group achieved an Adjusted EBITA of €384
million, 37% higher than 2021. Similarly, I am
pleased to report revenue increased by 30% to
cover an increase in cost of production of 30%.
Given the management and employees, tireless
efforts to implement price increases throughout
the year, to cover the cost of inflation, we were
able to achieve EBITA margins on a reported
basis of 11.6% (2021: 11.0%) with thanks to
currency tailwinds too.
Strategy
RHI Magnesita is a global refractories leader
with a growth strategy based on increasing our
market share in geographies and products
where we are currently underrepresented, both
organically and through acquisition, expanding
our business model through pioneering R&D
and technology leadership and maintaining
highly cost-competitive production. We
continue to take pride in our leadership position
in sustainability. Positioning the Group’s
products and services ahead of sustainability-
driven technological change in our customer
industries will be essential for long-term
success. Meanwhile, we are also working
hard to improve the sustainability profile
of our own business.
Sustainability advances
I am pleased to report excellent progress in
increasing the rate of use of secondary raw
materials in the refractory production process.
The 2025 target of a 10% recycling rate was
achieved three years early, following
considerable internal focus and the completion
of our recycling joint venture with Horn & Co
Minerals Recovery GmbH & Co KG (“Horn &
Co“) in May 2022. This outperformance has
enabled us to make progress against our overall
2025 CO
2
efficiency goal, offsetting delays
elsewhere due to uncertainty over fuel switches
to natural gas, which are on hold due to current
conditions in energy markets. Our recycling
plans started primarily as a sustainability-driven
initiative. We are now able to add to our raw
material business by offering these recycled raw
materials to the whole of the industry.
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.
Chairman’s
statement
2022 was a year of great challenges for global
industry. The world emerged from COVID-19
restrictions, the Russia/Ukraine conflict drove
a surge in energy costs and other inflationary
pressures, COVID-19 lockdowns in China
caused a dramatic slowdown to its economy and
supply chain volatility, which started in 2021,
and persisted through 2022. It is difficult to
recall a time when so many of our customer
markets, and our own operations, were
impacted by so many challenges at the same
time. Despite these pressures, I am very pleased
to say that the Group delivered a strong
performance and has emerged from 2022
stronger and better placed to withstand future
shocks. This is thanks, in large part, to the
decisive actions of the Group’s management
team, building on the natural resilience of RHI
Magnesita’s efficient, integrated business model
and our leadership across global markets.
Reacting to volatility
The essential nature of our products and the
depth of our customer relationships have
enabled us to maintain margins in 2022
through a price increase programme, offsetting
unprecedented cost inflation. The benefits
of this are reflected in our financial results.
Refractories are not a discretionary purchase;
our customers in the steel, cement, glass,
non-ferrous metals and other high-energy
industrial processes cannot operate without
our products. During times of volatility and
unpredictability, a seamless supply is
systemically important to our customers, who
rely upon us to keep their operations running.
The Board has therefore decided to maintain
higher levels of working capital to ensure
continuity of supply. A similar approach has
been taken to ensuring energy security for our
operations in Europe during the winter of
2022-2023. Our revenues are dependent on
the production volumes of our customers rather
than commodity prices, and that is why we are
able to achieve consistently resilient margins
compared to our customers who experience
more margin volatility.
Herbert Cordt
Chairman
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
11RHI MAGNESITA ANNUAL REPORT 2022
Board changes
As announced in October 2022, Fiona Paulus
left the Board following a three-year tenure.
I would like to thank Fiona for her valuable
contribution, commitment and service during
her time with the Company and wish her the
all the best for the future. Sigalia Heifetz has
communicated her intention to step down at the
next AGM in 2023 and we are now looking for
a replacement for both of these Independent
Non-Executive Directors (NEDs).
We are committed to pursuing diversity on our
Board, including diversity of thought, skill, and
experience, as well as gender, background, and
ethnicity. Female representation on our Board
for the majority of 2022 was 38% until Fiona’s
resignation. In recruiting for new NEDs, we will
ensure this level is maintained in the near term.
In the longer term, we have aspirations for 45%
gender diversity at the Board level, as stipulated
in the Board Diversity Policy.
Further details on the composition
and functing of the Board can
be found Pages 102 to 157
Board effectiveness
Each year we carry out a review of Board
effectiveness to assess our performance and
make appropriate improvements. This exercise
is a priority for me personally and the Board has
recently undertaken its review of 2022. The
detailed findings are currently being considered
by the Board and will be reported on at the
next opportunity. Our progress in previously
identified action areas is contained in the
Corporate Governance section of this
Annual Report.
Dividend
The Board has recommended a final dividend of
€1.10 per share in respect of the financial year
to 31 December 2022, bringing the total
dividend for the year to €1.60 per share. This
level of dividend is broadly aligned with our
policy to maintain dividend cover of below three
times adjusted earnings whilst taking into
account the other funding requirements of the
business as we manage capital expenditures,
M&A spend and gearing levels through this
important period in our strategic development.
Summary
The Board remains fully supportive of the
core pillars of the Group’s strategy, and it is
reassuring to see that there has been continued
success in advancing them despite challenging
conditions. Highlights this year have included
progress in the Group’s strategic initiatives
including the significant completion of the
Production Optimisation Plan and progress
in M&A. The Group has also improved its
presence in high priority product segments
such as flow control and in the geographical
regions of India, Türkiye and China, which
present areas of growth opportunity for
the business.
On behalf of the Board, I would like to thank
our shareholders, employees and customers
for their continued support, and I look
forward to reporting on further successes
in the coming year.
12 RHI MAGNESITA ANNUAL REPORT 2022
RHI Magnesita is a resilient business with a
proven track record of profitability throughout
economic cycles. This year we have maintained
margins and gained market share, in large
part through the prioritisation of local product
availability, against a backdrop of unprecedented
inflation in our key input costs. Given the highly
volatile supply chain environment in 2022, we
prioritised security of supply for customers by
maintaining elevated levels of inventory. As
supply chains started to normalise towards the
end of the year, we were able to release some
of this inventory, reducing our average finished
goods coverage ratio to 1.8 months against our
target of 1.9 months. Refractories are essential
for our customers to operate and I am pleased
that we were able to respond to changing
market dynamics during the year in a way
that enhanced our value proposition and
market position.
We have also been focused on extending our
sustainability leadership within the refractory
industry, both as a partner for our customers
through the continued industrial transition to
a low-carbon economy and through the work
we are doing to reduce our own CO
2
emissions.
Health & Safety
The health and safety of our employees in
the workplace is our first priority. I am pleased
to report that the Group’s lost time injury
frequency rate remained well below our target
of 0.50 per 200,000 hours, at 0.20 (2021:
0.19). We attained ISO 45001 certifications
at three further plants and work is ongoing
to roll this out further across the network.
Operational and financial performance
The Group delivered adjusted EBITA of €384
million in 2022, an outperformance against
analyst consensus expectations for the year,
and an EBITA margin of 11.6%. Reported 2022
revenues of €3.3 billion compares to analyst
consensus forecast at the start of 2022 for
revenues of €2.6 billion, an increase of €700
million in the revenue with no change to sales
volumes. Refractories are a small part of our
customers’ cost base at between 1% and 3%
of operating costs, but they are essential for
all high temperature production processes.
The non-discretionary nature of our products
combined with our low costs of production are
the driving factors behind our long-term track
record of profitability, throughout numerous
downturns and challenging periods.
Gearing, measured as the ratio of Net Debt to
EBITDA, reduced to 2.3x at the year end from
2.7x at 30 June 2022, slightly better than
guided in November 2022 due to a stronger
than forecast EBITDA performance in Q4.
Inventory monthly demand coverage ratios have
gradually reduced to target levels as supply
chains normalise, balancing the need to keep
plants running at a high enough capacity
utilisation to avoid loss of margin due to a lower
fixed cost absorption.
Prioritising high levels of local product
availability meant that we were able to
seamlessly supply our customers, leading
directly to market share gains. As a result, RHIM’s
overall steel volumes outperformed the wider
market in contracting by only 1% compared
to steel production globally (World Steel
Association), which recorded a 4% contraction,
or 7% excluding China.
A key risk to our operations during the year
was energy security in Europe. This region is
an important source of specialist products that
are shipped globally to other regions as well as
supplying our European customers. I am proud
that we moved quickly in Q1 2022, as we saw
the crisis emerging, and we were prudent in
our approach to commit €7 million of capital
investments towards installing alternative fuel
infrastructure to reduce our reliance on natural
gas. This is just one example of how we effectively
responded to high levels of supply chain volatility
this year.
Strategic delivery
Two key pillars of our long-term strategy are to
increase our competitive position by investing
in the rationalisation and modernisation of our
production footprint and to grow in new markets
through consolidation. I am pleased to report
that we have demonstrated good progress
in both areas in 2022.
We have transformed our production network
through major investments in our refractory
plants and raw material assets. We have
achieved economies of scale through various
initiatives including plant expansions and
CEO review
Stefan Borgas
Chief Executive Officer
(CEO)
RHI Magnesita is a resilient business with a
proven track record of profitability through
economic cycles. This year we have maintained
margins and gained market share.
Scan here or click here
watch our CEO’s speech on
RHIM fifth anniversary
following the merger of RHI
and Magnesita in 2017.
13RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
a higher degree of automation and digitalisation.
The cost-saving benefits of our Production
Optimisation Plan, together with substantial
price increases to reflect higher input costs,
have enabled us to maintain margins even
though costs increased by 30% in 2022. Whilst
these efficiency gains are currently being offset
by higher production and distribution costs,
they will enable us to sustainably grow margins
in the longer term.
M&A progress
During 2022 we completed the acquisitions of
Söğüt Refrakter Malzemeleri Anonim Şirketi
(“SÖRMAŞ”) in Türkiye for €46 million and
entered into a recycling joint venture with Horn
& Co Minerals Recovery GmbH & Co KG (“Horn
& Co”) in Germany for €13 million in exchange
for a 51% ownership stake and we have since
formed the new entity Horn & Co RHIM Minerals
Recovery GmbH (“MIRECO”). We also
progressed construction of a new non-basic
shaped refractory plant in Chongqing, China,
together with our joint venture partner Liangyou
following our acquisition of the existing mixed
operations there in Q4 2021. The new plant is
on track to start production in H2 2023.
During January 2023, we completed two
important strategic acquisitions in India,
including the €78 million acquisition of the
refractory business of Hi-Tech Chemicals
Limited (“Hi-Tech”) in Jamshedpur, Jharkhand.
Hi-Tech is a specialised flow control refractory
business and will thus strengthen and
enlarge RHI Magnesita’s position in the
domestic and international flow control markets.
Secondly, we acquired the Indian refractory
business of Dalmia Bharat Refractories Limited
(“DBRL”), in exchange for 27 million shares in
RHI Magnesita India Limited, the Group’s 70%
owned locally listed subsidiary (reduced to
60% post completion).
With the production footprint and the product
offering being highly complementary, the DBRL
acquisition will greatly benefit our position
within the industrials sector, especially in
cement. At the same time, we will be able to
increasingly serve customers with a ‘local for
local’ approach and supply them with the
broadest range of products and services,
more so than any other player in the region.
These transactions strengthen our market
position within the fast-growing Indian market,
with steel production growth in India of 6% in
2022 and a 7-8% CAGR forecast until 2030.
We were able to utilise highly valued equity
in our listed Indian subsidiary to fund this
acquisition, reducing the impact of the
transaction on the Group’s balance sheet.
In January 2023, we agreed to acquire a 65%
shareholding in Jinan New Emei Industries Co.
Ltd. (“Jinan New Emei”), for €40 million. Jinan
New Emei, based in Shandong, China, is a
well-established producer for refractory slide
gates, nozzles and mixes. This acquisition will
further strengthen our presence in both China
and in Flow Control.
Taken together, these acquisitions are expected
to contribute between €25-30 million of
incremental EBITDA in 2023, with further
upside from synergies of between 30% and
50% of target EBITDA to be delivered over the
next two to three years.
Given the substantial completion of the
Production Optimisation Plan, we have built a
strong platform from which to embark on the
next stage of our strategy, which is to accelerate
inorganic growth in geographies and product
segments where we continue to be under-
represented.
Our people
The strategic progress and financial
performance we have delivered this year is
founded on the dedication and professionalism
of our employees. I would like to highlight
the contribution of our operations, sales,
procurement and special project teams who
have worked tirelessly to navigate volatile
and unpredictable markets whilst achieving
production targets and making necessary
upgrades to our planning and logistics
processes. A special mention must also go
to our M&A and technical teams for whom
the transactions agreed and completed in
2022 represent multiple years of sourcing,
engagement, diligence and negotiations
with target companies. We now look to the
experience and knowledge of our integration
teams to realise the benefits of these new
additions to the Group as quickly as possible.
Our markets and outlook
Volatility and uncertainty are expected to persist
across all markets except India in 2023. The
subdued volumes in Q4 2022 are expected
to continue into H1 2023, as a contraction in
construction activity will affect steel, cement
and lime, non-ferrous metals and glass demand
globally. However, demand softness will be offset
by continued strong growth in India and the
Group will also benefit from additional earnings
from new acquisitions and cost savings from
its strategic initiatives.
The Group’s outlook for revenue, EBITDA and
EBITA in 2023 is broadly in line with current
analyst consensus, with up to a 5% reduction
in sales volumes and lower refractory pricing
expected to lead to lower revenues, before
contribution from new acquisitions. Costs are
expected to remain flat or increase as higher
energy and labour costs offset lower sea freight
and purchased raw materials, resulting in a
Group EBITA margin of around 10% in 2023
(2022: 11.6%).
Gearing levels may increase from the 2.3x
recorded on 31 December 2022 due to €200
million of cash outflow from M&A (DBRL, Hi-Tech
and Jinan New Emei) and lower profitability in
2023 caused by lower demand.
14 RHI MAGNESITA ANNUAL REPORT 2022
New product revenue
19%
2021: 16%
EBITA contribution from strategic
initiatives in 2022
€24m
2021: €49m
Return on invested capital
11.6%
2021: €9.6%
15RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Our strategic
framework
RHI Magnesita’s strategy is based
on three pillars, supported by our
people and culture. Each strategic
pillar represents an opportunity
to deliver significant long-term
value for shareholders, building
on the Group’s existing global
footprint and underpinned by
our people and our focus on
a sustainable future.
Read more on our
strategic framework
Page 16
16 RHI MAGNESITA ANNUAL REPORT 2022
RHI Magnesita’s main three
strategic pillars are as follows:
• To improve cost competitiveness in
executing cost efficiency programmes
such as the network optimisation and the
saving associated with gains of scale in
SG&A and procurement.
• To grow revenues and margins by
expanding the business model in markets
that we have strong presence.
• To drive market leadership through
M&A, increasing market share in new
geographies or product areas where the
Group is currently under-represented.
The three pillars of our strategy are
underpinned by a focus on people,
corporate culture and our commitment
to sustainability.
Each strategic pillar represents an
opportunity to deliver significant long-term
value for shareholders by expanding profit
(i.e. EBITA) margins through self-help or
consolidation, as well as by future-proofing
the business through investment in
innovation, thus enhancing the Group’s
sustainability profile and developing
a talented team.
The Group’s long-term strategy is aligned
to its purpose of mastering heat to enable
industries to build sustainable, modern life.
The Board reviews the strategy on an annual
basis, which incorporates any deviations
from the longer term strategy in order to
dynamically respond to market conditions
and stakeholder interests. The Board
believes that the Group’s strategy remains
feasible and strategically well positioned in
the longer term for the future of its customer
industries, adapted to cleaner production
routes and technologies. How the
business interacts with its stakeholders is
fundamental to its long term and sustainable
value. More information on stakeholder
engagement can be found on page 106.
Our strategic framework
Our strategic priorities Progress Outlook
Competitiveness
The Production Optimisation Plan, launched in 2019, is
now largely complete apart from the Brazilian projects.
At Contagem, Brazil, the project has been temporarily
suspended due to unfavourable economic conditions,
as well as ongoing delays at Brumado, Brazil. The cost-
saving initiatives delivered EBITA benefit of €76 million in
2022 versus 2019.
Maintaining low-cost raw material production has
become increasingly challenging due to higher energy
prices and reduced energy availability, impacting the
EBITA margin contribution from vertical integration.
The Group targets to deliver €85 million of annualised EBITA run rate
savings by 2023 against the 2019 cost base through the reduction of
cost of goods sold, including through automation and robotics.
The Group will further increase its competitiveness through the
implementation of further Selling General and Administrative (SG&A)
reduction measures against a rising inflationary environment, as well
as decreasing its inventory levels in 2023.
The Group’s EBITA margin contribution from vertical integration is
expected to reduce in 2023. It should revert to 2.5-3.5 percentage
points (ppt) levels once supply chain issues normalise and production
in Europe becomes more competitive.
Read about
this strategic
pillar
Pages 18 & 19
Reduce operating costs
The Group’s cost-saving initiatives are aimed
at consolidating, automating and reducing the
plant network footprint, in order to further
increase competitiveness against a more volatile
market backdrop.
Business model
In 2022, the Group achieved 32% of revenue from
solutions contracts, against its target of 40% by 2025.
It increased its sales of digital products, through
its solutions contracts.
Due to its strong market positions and customer
relationships, RHI Magnesita was effective in passing
rising costs onto its customers in 2022.
Sales strategies delivered €32 million of cumulative
EBITA in 2022.
The Group will continue to expand its solutions business model,
including the sale of digital products and it will increase sales of
standalone digital products.
It will continue to provide industry-leading products with lower
carbon footprints and supply into industries which are
decarbonising their processes.
The Group will achieve the lower range of its target €40-60 million
by 2023 in revenue synergies through solutions, digital products,
flow control and new markets.
Read about
this strategic
pillar
Pages 20 & 21
Expand the business model
The Group is committed to leading the refractory
industry through pioneering R&D and technology
leadership to expand its product offering. This includes
RHI Magnesita’s solutions model and its market-leading
sustainable product offering.
Markets
In 2022, the Group acquired an 87% stake in SÖRMAŞ in
Türkiye and a 51% stake in Horn & Co. Minerals Recovery
GmbH & Co KG (forming “MIRECO”).
The Group has announced two further acquisitions in
India (DBRL and Hi-Tech), and another in China (Jinan
New Emei).
The Group delivered 15.8% of revenue from Flow Control
in 2022.
Furthermore, the roll out of a regionalisation structure
enhancing the Group’s ‘local-for-local’ approach further
strengthened its position in its core and newer markets.
The Group will ramp up and scale Chongqing in China and further
scale SÖRMAŞ in Türkiye.
The Group will progress its integration of Hi-Tech, DBRL and Jinan
New Emei in 2023.
Following successful trials in flow control in 2022, the Group plans
to increase production in 2023 for new deliveries. The Group’s flow
control position in India is expected to be considerably strengthened
in 2023 through the acquisition of Hi-Tech refractories, which features
an isostatic product line.
The Group continues to actively seek out further consolidation
opportunities to expand its market share, while taking into consideration
the opportunities and challenges of a more volatile market.
Read about
this strategic
pillar
Pages 22 & 23
Grow market share in geographies and products
where we are under-represented
Already an industry leader, the Group aims to grow its
share of the global high temperature refractories market
worth €20 billion, via a consolidation strategy targeting
businesses in high growth markets or market segments
where the Group is currently under-represented.
People and culture
The decision to enhance the Group’s local-for-local
strategy through regionalisation of its operations has
increased its agility and performance and empowered
regional teams.
As well as training and development, the Group will continue
to support its colleagues across the world as they face new and
emerging challenges in a particularly volatile environment.
Read about
this strategic
pillar
Pages 24 & 25
Enablers of our strategy
A culture that celebrates innovation, openness,
pragmatism and performance is central to the success
of our strategy. Hiring and retaining leading talent
is essential for the Group to grow and maintain its
leadership position.
Sustainability
The Group increased the proportion of revenue derived
from the use of recycled products to 10.5 %, achieving
its 2025 target three years early. This was accomplished
primarily through increased internal focus and helped
by its joint venture, MIRECO. Increasing the Group’s
recycling capabilities not only increased its sustainable
product offering, but also has had a benefit in the context
of increased raw material availability.
The Group will continue to grow its sustainable product
offering through recycling and remains committed to its
2025 sustainability goals.
Read more on
sustainability
Page 58
Sustainability leadership
To be the leaders of the future refractory industry,
the Group must continue to adapt and evolve
in order to serve and supply its customers in the most
sustainable way possible. Sustainability is integral
to achieving its strategic priorities.
17RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Our strategic priorities Progress Outlook
Competitiveness
The Production Optimisation Plan, launched in 2019, is
now largely complete apart from the Brazilian projects.
At Contagem, Brazil, the project has been temporarily
suspended due to unfavourable economic conditions,
as well as ongoing delays at Brumado, Brazil. The cost-
saving initiatives delivered EBITA benefit of €76 million in
2022 versus 2019.
Maintaining low-cost raw material production has
become increasingly challenging due to higher energy
prices and reduced energy availability, impacting the
EBITA margin contribution from vertical integration.
The Group targets to deliver €85 million of annualised EBITA run rate
savings by 2023 against the 2019 cost base through the reduction of
cost of goods sold, including through automation and robotics.
The Group will further increase its competitiveness through the
implementation of further Selling General and Administrative (SG&A)
reduction measures against a rising inflationary environment, as well
as decreasing its inventory levels in 2023.
The Group’s EBITA margin contribution from vertical integration is
expected to reduce in 2023. It should revert to 2.5-3.5 percentage
points (ppt) levels once supply chain issues normalise and production
in Europe becomes more competitive.
Read about
this strategic
pillar
Pages 18 & 19
Reduce operating costs
The Group’s cost-saving initiatives are aimed
at consolidating, automating and reducing the
plant network footprint, in order to further
increase competitiveness against a more volatile
market backdrop.
Business model
In 2022, the Group achieved 32% of revenue from
solutions contracts, against its target of 40% by 2025.
It increased its sales of digital products, through
its solutions contracts.
Due to its strong market positions and customer
relationships, RHI Magnesita was effective in passing
rising costs onto its customers in 2022.
Sales strategies delivered €32 million of cumulative
EBITA in 2022.
The Group will continue to expand its solutions business model,
including the sale of digital products and it will increase sales of
standalone digital products.
It will continue to provide industry-leading products with lower
carbon footprints and supply into industries which are
decarbonising their processes.
The Group will achieve the lower range of its target €40-60 million
by 2023 in revenue synergies through solutions, digital products,
flow control and new markets.
Read about
this strategic
pillar
Pages 20 & 21
Expand the business model
The Group is committed to leading the refractory
industry through pioneering R&D and technology
leadership to expand its product offering. This includes
RHI Magnesita’s solutions model and its market-leading
sustainable product offering.
Markets
In 2022, the Group acquired an 87% stake in SÖRMAŞ in
Türkiye and a 51% stake in Horn & Co. Minerals Recovery
GmbH & Co KG (forming “MIRECO”).
The Group has announced two further acquisitions in
India (DBRL and Hi-Tech), and another in China (Jinan
New Emei).
The Group delivered 15.8% of revenue from Flow Control
in 2022.
Furthermore, the roll out of a regionalisation structure
enhancing the Group’s ‘local-for-local’ approach further
strengthened its position in its core and newer markets.
The Group will ramp up and scale Chongqing in China and further
scale SÖRMAŞ in Türkiye.
The Group will progress its integration of Hi-Tech, DBRL and Jinan
New Emei in 2023.
Following successful trials in flow control in 2022, the Group plans
to increase production in 2023 for new deliveries. The Group’s flow
control position in India is expected to be considerably strengthened
in 2023 through the acquisition of Hi-Tech refractories, which features
an isostatic product line.
The Group continues to actively seek out further consolidation
opportunities to expand its market share, while taking into consideration
the opportunities and challenges of a more volatile market.
Read about
this strategic
pillar
Pages 22 & 23
Grow market share in geographies and products
where we are under-represented
Already an industry leader, the Group aims to grow its
share of the global high temperature refractories market
worth €20 billion, via a consolidation strategy targeting
businesses in high growth markets or market segments
where the Group is currently under-represented.
People and culture
The decision to enhance the Group’s local-for-local
strategy through regionalisation of its operations has
increased its agility and performance and empowered
regional teams.
As well as training and development, the Group will continue
to support its colleagues across the world as they face new and
emerging challenges in a particularly volatile environment.
Read about
this strategic
pillar
Pages 24 & 25
Enablers of our strategy
A culture that celebrates innovation, openness,
pragmatism and performance is central to the success
of our strategy. Hiring and retaining leading talent
is essential for the Group to grow and maintain its
leadership position.
Sustainability
The Group increased the proportion of revenue derived
from the use of recycled products to 10.5 %, achieving
its 2025 target three years early. This was accomplished
primarily through increased internal focus and helped
by its joint venture, MIRECO. Increasing the Group’s
recycling capabilities not only increased its sustainable
product offering, but also has had a benefit in the context
of increased raw material availability.
The Group will continue to grow its sustainable product
offering through recycling and remains committed to its
2025 sustainability goals.
Read more on
sustainability
Page 58
Sustainability leadership
To be the leaders of the future refractory industry,
the Group must continue to adapt and evolve
in order to serve and supply its customers in the most
sustainable way possible. Sustainability is integral
to achieving its strategic priorities.
18 RHI MAGNESITA ANNUAL REPORT 2022
Refractory production and
raw material optimisation
The Group launched a global strategic initiative
in 2019 to reduce its conversion costs. It
achieved this through the consolidation of its
production plant network, as well as transferring
production from higher-cost to lower-cost
locations. It upgraded certain plants through
digitalisation and automation to create centres
of excellence. It also focused on enhancing its
localised production network by reducing
supply chains and moving production capacity
closer to raw material sites. The completion of
the programme will support the Group in
reaching our target of mid-teen EBITA margin
over the medium term.
Once complete, the programme will improve
the Group’s cost position and delivery
capabilities through the lower cost of goods sold
and the shorter supply chain between raw
materials hubs and production facilities. Return
on invested capital in 2022 was 11.6%, as the
plants started ramping up production and with
higher profitability in 2022. This programme of
work has been a significant part of the Group’s
capital allocation strategy since 2019, which
incorporated organic investment as one of
its core priorities, with c.€400 million of
organic capital expenditure invested since
2019 (project inception).
The Group created a European dolomite hub in
Hochfilzen, Austria, to consolidate its European
dolomite raw material production in a single
low-cost site. This hub will supply a new
portfolio of internally sourced dolomite raw
materials, following the decision to exit our
partnership in a joint venture with L’Hoist. In
2022, the Group celebrated the opening of its
new ‘Dolomite Resource Centre Europe’ at
Hochfilzen, which is the most modern dolomite
plant across the continent. The Group invested
a total of €45 million into the project, with a
payback period of six years. To minimise the
environmental impact of the project, a conveyor
belt in the newly built Schipfl tunnel is used to
transport around 200,000 tonnes of dolomite
annually from the mine to the rotary kiln,
avoiding the requirement for truck
transportation. The newly built rotary kiln is fired
to around 2,000 °C and is able to produce
around 100,000 tonnes of dolomite sinter per
year. The Group’s focus on strong vertical
integration, centred around sustainability, is
demonstrated through its newly opened rail
container loading terminal at Hochfilzen. It is
possible to deliver the dolomite sinter to its
dedicated sister production plants in France
by rail in a more environmentally friendly way,
avoiding road transport. RHIM’s Valenciennes
and Flaumont plants in France now produce
dolomite finished products, using internally
sourced raw material from Hochfilzen.
The Group announced it would be continuing
its operations in Mainzlar, Germany, following
a previously planned closure as part of the
Production Optimisation Plan. The increasing
demand for bricks in the glass industry and the
excellent performance of the plant were the
crucial elements for the reversal of the decision.
With the plant staying open, an old rail line to
the plant has been reopened with strong
support by local authorities and related funding
to allow incoming raw materials and finished
products to customers nearby to be transported
in a more environmentally friendly way,
replacing the need for trucks and lorries
in the local area.
RHI Magnesita’s plant in Radenthein, Austria,
is its digital flagship plant and the most modern
refractory plant globally. Its leading automated
processes include self-driving heavy load
vehicles and a range of robotics. The plant is
now 80% automated, which has significantly
lowered production costs as well as improving
health and safety. In 2022, the plant completed
its capacity expansion for magnesia-based
finished products. It has partly implemented the
MES (Manufacturing Execution System),
upgrading it to a ‘Smart Factory’, which features
computerised systems, installed to track and
document the manufacturing process via a
central control room.
In Brazil, the Group’s projects at the Brumado
raw material site, and Contagem, the Group’s
refractories production site, have been impacted
by supply-chain related delays, cost inflation,
COVID-19 related contractor availability and
changes to key parameters such as foreign
exchange rates and freight costs, all of which
impacted the original project design. The first
phase of the Contagem project was completed
in 2021. It included the installation of two new
hydraulic presses to increase production
efficiency and capacity. However, the second
phase of the project, to complete crushing and
mixing lines, has been temporarily suspended
to allow for the operations teams to focus on
improving operational delivery against
unfavourable economic parameters.
RHI Magnesita is a cost-competitive global producer
of technologically advanced refractory materials.
Through its strategic initiatives, it achieves competitive
cost of goods sold (COGS) delivered at its customers’
sites, creating sustainable shareholder value.
Strategic progress in action
Competitiveness
Execute cost
reductions
New product revenue
19%
2021: 16%
Expansionary capex
€79m
2021: € 177m
Inventory coverage ratio
1.8x
2021: 2.5x
19RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
The primary focus in the region is to complete
the Brumado upgrade as soon as possible. It is
the Group’s largest magnesite raw material
asset, and the Group commissioned a project in
2019 to replace eight shaft kilns with one rotary
kiln. The new rotary kiln has been under
construction in 2022 and it is expected to be
fully operational by the end of 2023. The
project will deliver a significant increase in
capacity of dead-burned magnesia. This will
yield a higher quality and higher value product
range, at a lower production cost and will result
in a significant increase in the life of the mine,
due to the ability to process a broader range of
lower grade material including the tailings,
previously classified as waste.
In 2022, the Group spent €79 million on
expansionary capital expenditure, which was
lower than the initial guidance (€110 million),
due to the temporary suspension of the second
phase of the Contagem project and delays to
the Alumina plant construction at Chongqing,
China and tunnel kiln at Brumado, Brazil.
However, €20 million of the 2022 expansionary
capital expenditure will now be allocated
to 2023.
The programme of work has already shown
material benefits in lower production costs
across the plant network, although some of
these benefits have been masked through
higher input costs, such as energy and labour,
during 2022.
Total savings to be derived from the cost
optimisation plan are now expected to be in the
region of €85 million compared with the
previously guided figure of €110 million due to
the temporary suspension of the second stage
of the Contagem plant upgrade in Brazil and the
decision not to close the Mainzlar plant in
Germany. The full benefits of the strategic cost
savings are now expected to be realised from
the start of 2024.
Resilience
The Group has a natural resilience in volatile
markets, due to its low-cost assets and
vertical integration. Its resilience is further
strengthened by its geographic reach and
market diversity. It also benefits from consistent
demand from customers, for whom the supply
of refractory products is absolutely essential
to business continuity.
In 2022 globally, cost volatility increased
materially due to supply chain disruption,
energy shortages, political trade barriers,
and labour shortages. Despite these challenges,
the Group achieved a resilient operating margin
of 11.6%.
This performance was supported by benefits
already realised from the Group’s Production
Optimisation Plan, as well as initiatives taken
specifically to address the new challenges.
To ensure continuity of supply to its customers,
the Group started 2022 with elevated inventory
levels and reduced these during the course of
the year. The Group reduced inventory of both
finished goods and raw materials, by 182
kilotonnes, or by 23%, and was able to
reduce inventory coverage ratio from 2.5x
months at year-end 2021 to 1.8x months at
year-end 2022.
Due to the strength of its customer
engagements and its ability to maintain a
reliable service in this environment, the Group
was able to pass some inflationary costs through
to customers whilst retaining market share.
Customer contracts were adapted region by
region to reflect extraordinary input costs, such
as higher energy costs in European contracts
and higher logistical costs in North America.
Since March 2022, the Group has also taken
measures to diversify its energy sources and
reduce its dependence on natural gas whilst it
remains in short supply globally, and specifically
in Europe.
In 2023, to maintain its resilient EBITA margins,
the Group will be taking steps to reduce its
SG&A costs. In 2022, the Group achieved
SG&A costs of 11.3% of revenues (2021: 11.6%).
Vertical integration advantage
The Group continues to benefit from its vertical
integration in basic raw materials, and in 2022
the total EBITA contribution from its raw material
assets was 2.5%. The EBITA margin contribution
in 2022 was lower than 2021 (3.4%), given the
increased production costs at the raw material
sites, which are very energy intensive. The
Group expects a lower raw material margin in
2023 however it should revert to 2.5-3.5
percentage points (ppt) levels once supply
chain issues normalise and production in
Europe becomes more competitive.
The effect of higher global energy costs
has temporarily disconnected the vertical
integration margin from raw material prices.
Our raw material assets are largely outside of
China and have been subjected to supernormal
energy prices, especially natural gas, after
supply shocks to global energy industries
following the Russia/Ukraine conflict. The raw
material conversion process is very energy
intensive and contributes materially to the
Group cost of the production of raw material.
China is the biggest magnesia producer
globally, with more than 70% of the world’s
supply. However, a weaker economic backdrop
in China led to softer Chinese raw material
prices given reduced demand, coupled with
higher energy availability in China compared
to the western world. Therefore, Chinese raw
material prices had significant competitive
advantages compared to European producers.
The Group’s vertical integration is vital to its
competitiveness, with c.70% of the Group’s
total magnesite and dolomite consumption from
its own internally sourced raw material, and
c.50% of its total raw material by value. The
Group strategically benefits from its certainty
of supply and high-quality raw material.
The strategic positioning of its production sites,
close to its raw material assets, underpins the
Group’s “local-for-local” strategy. These raw
material assets, which in some cases provide
unique products for specific applications in the
market with a bespoke blend of recipes, ensure
that it is unrivalled by its competitors given its
portfolio of basic raw material sinters.
The resilient margins we achieved in 2022
could not have been achieved without
the efficiencies we have gained from
the Production Optimisation Plan and
our effective supply chain management.
Rajah Jayendran
Chief Technology Officer (CTO)
20 RHI MAGNESITA ANNUAL REPORT 2022
Digitalisation at our customer sites
Digital disruption is a key megatrend in both the
refractory industry and the Group’s customer
industries. RHI Magnesita’s solutions contracts
for customers are augmented by digitalisation.
It offers a digital portfolio to assist customers
with maintenance through controlled downtime
(for example, Lining Evaluation Scan and
Automated Process Optimisation tools). Further
support is provided to customers by improving
the steel making process through thermo-
chemical modelling of slags, which can
recommend flux additions to optimise the
slag composition, and ultimately the overall
production process quality by using the
Ladle Slag Model (“LSM”).
The Lining Evaluation Scan (“LES”) was
developed by RHI Magnesita in 2021 to quickly
determine the remaining thickness of the lining
in cement rotary kilns by means of a 3D laser
scanner. The measurement provides area-wide
precise information about the condition of the
lining and replaces time-consuming and
incomplete conventional methods. Together
with digital documentation, virtual kiln
inspections can be carried out at any time all
over the world. LES enables RHI Magnesita’s
customers to take fast and fact-based
decisions, and contributes to improving the
kiln performance. Within the last year, RHI
Magnesita has invested in scanning equipment,
people, and a digital platform to further extend
the service in Europe, as well as North and
South America. As the feedback from users
of this service was outstanding, RHI Magnesita
will continue investing in the scale-up,
so more customers around the world can
be offered this service.
Scan the QR code to watch
the Lining Evaluation Scan
or click here.
Digital transformation in operations
In 2022, RHI Magnesita completed the
implementation of ‘SMART’ maintenance
in some of its plants, and this is expected to
be rolled out to all plants in 2023. SMART
maintenance is a concept whereby maintenance
can be fully automated and centralised into
a global system. In this way, workflows and
key performance indicators (KPIs) for
maintenance can be fully standardised across
the plant network, decreasing human error and
increasing efficiency through reduced downtime.
Scan the QR code to watch
RHI Magnesita: SMART
maintenance or click here.
Innovation and R&D
This year, RHI Magnesita built a 15-year
technology roadmap that will help our industry
meet future challenges. This addresses nine
areas: recycling and use of waste materials,
digitalisation, hydrogen compatibility, new
refractory solutions, pioneering production
routes, carbon capture, usage and storage, new
flow control solutions and future mining. The
roadmap will enable RHI Magnesita to anticipate
customers’ future needs and build out the
Group’s capabilities ahead of time, ensuring that
its technology strategy is future-proofed and
that it stays ahead of competition.
The Group participated in the ‘Verbund X
Accelerator’, which brought together leading
companies with the common goal of developing
solutions that contribute to a more sustainable
future, with involvement in two promising
projects focusing on carbon capture and on
carbon and utilisation technology.
In a renewed partnership with OMV and
voestalpine, RHI Magnesita is supporting the US
start-up Compact Membrane Systems (CMS)
with the idea of achieving a cost reduction for
carbon capture in projects. RHI Magnesita,
together with the Institute of Material Chemistry
of the Vienna University of Technology, OMV
and voestalpine, will work as a consortium
towards developing a new catalyst for CO
2
recovery from exhaust gases, which often
contain impurities such as sulphur compounds.
These can then be retrieved and used in the
creation of valuable substances such
as methanol.
RHI Magnesita India inaugurated its new R&D
facility in Bhiwadi, India. It will partner with the
global R&D network for local raw material
development, and will provide solutions
support for customer performance and local
manufacturing across India and Western Asia.
Strategic organic growth to future proof the
business through pioneering R&D and new
emerging technologies. We adapt as our
customer industries decarbonise.
Strategic progress in action
Business model
Expand the
business model
Sales strategies EBITA run rate
savings by 2023
€40-60m
Revenue from solutions contracts
32%
29% in 2021
R&D and technical marketing
€77m
2021: €63m
21RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Decarbonisation across industries
Decarbonisation of the steel industry is a
megatrend which is expected to continue into
2050 and beyond. Emerging economies are
expected to increase their capacity for EAF and
electric smelter furnaces, as availability of scrap
steel grows, and the pressure to reduce carbon
emissions intensifies. RHI Magnesita is able to
leverage this growing trend thanks to its
vertically integrated model. The raw material
required for an electric arc furnace uses iron-rich
alpine sinter, a material sourced from RHI
Magnesita’s European raw material mines in
Austria, Hochfilzen and Breitenau.
The AnkerHearth product series is used for the
hearth of the EAF and the product has proven to
be the clear market leader. The sinter features
excellent specifications, as a naturally occurring
iron-rich chemical composition which is very
difficult to replicate through synthesisation. This
contributes to RHI Magnesita’s position as the
leading refractory partner of choice in the green
transition of the steel industry. The AnkerHearth
is a high performance and high margin product
series, which is less asset intensive than the
equivalent material used for the basic oxygen
furnace. It adds significantly higher refractory
mix volumes with higher consumption per tonne
of product by up to 75% compared with a basic
oxygen furnace. However, it is a lower revenue
product, by up to 60% lower price per tonne.
RHI Magnesita is also well-positioned in the
decarbonisation of industries requiring non-
ferrous metals such as copper, aluminium, nickel,
lead and more. These non-ferrous metals will be
needed in significantly higher quantities by 2050,
as the world transitions to greener technologies
for use in electric vehicles, solar panels and
batteries. The Group has recently invested into
automation of its non-ferrous metal plant,
Radenthein, which is the Group’s bespoke
non-ferrous metals plant.
Decarbonising of our products
Recycling
RHI Magnesita announced in H1 2022 its
partnership with Horn & Co. through a joint
venture, to combine their recycling activities in
Europe. This partnership will increase
production, use and offering of secondary raw
material, obtaining a substantial reduction of CO
2
emissions. The newly formed entity will operate
as “MIRECO” (Horn & Co. RHIM Minerals
Recovery GmbH).
The partnership positioned the Group at the
forefront of the circular economy for customers in
steel, cement, glass and other process industries.
Thanks to the joint venture, RHI Magnesita was
able to increase its proportion of secondary raw
material to 10.5% in 2022, against 6.8% in 2021
and a marked improvement since 2018, 3.8%.
This will significantly help to achieve the goal of
15% reduction in CO
2
emissions by 2025 against
a 2018 baseline. Going forward, approximately
50,000 tonnes of used refractories per year will
be processed for reuse with MIRECO. This not
only saves large quantities of raw materials, but
also results in c.90,000 tonnes fewer CO
2
emissions per year. Each tonne of recycled
refractory achieves a CO
2
saving of 1.8 tonnes,
which would have to be compensated by the
equivalent of approximately 7.2 million trees.
MIRECO will be able to process c.150,000
tonnes of secondary raw material for the
European refractory industry. This equates to
c.270,000 tonnes of CO
2
saved.
MIRECO underpins this new strategic supply
chain, which is sustainable and offers security
of supply. Recycling means that the Group can
cover supply needs through both primary and
secondary raw materials. MIRECO provides
services to cover the entire recycling value chain,
including collection, cleaning, material sorting,
processing, recycling and then reuse or disposal
and it will operate from Mitterdorf, the RHI
Magnesita recycling centre in Styria, Austria.
Austrian Vice Chancellor, Werner Kogler,
inaugurated the opening in April 2022. There are
seven recycling plants throughout Europe and
MIRECO serves over 100 customers in all
European countries. In the future, MIRECO’s
recycling business will expand to more countries
and to other refractory manufacturers.
MIRECO operates a ‘CERO (Continuous
Economic Recycling Optimisation) Waste’
concept; a customised concept that uses a
circular economy to enable the use of high-
quality recycled raw materials and prevent
expensive and environmentally harmful landfill
as far as possible. It provides its customers with
superior quality secondary raw material. These
materials form the basis for a wide range of
metallurgical purposes, including slag formation,
slag fluxing, influencing the slag composition
and thermal covering agents.
Thanks to pioneering R&D at RHI Magnesita,
the Group developed a slag conditioner for an
EAF in Graz, Austria, creating savings for the
customer of one lining per year. The innovative
approach uses the obsolete dolomite at the
Flaumont plant in France, avoiding landfill
waste and saving landfill costs.
In June 2022, funding approval was granted by
the European Commission for RHI Magnesita.
A consortium of eight partners across industry
and research was formed, named ReSoURCE
“Refractory Sorting Using Revolutionising
Classification Equipment”. ReSoURCE will
innovate the full process chain of refractory
recycling in order to create a new state of the
art sorting process, aiming to achieve particle
sizes of less than 1mm.
Transparency in our supply chain
We are committed to providing more
transparency to our customers as they transition
to more sustainable supply chains and
increasingly factor in environmentally friendly
procurement decisions. We launched a data
sheet which shows the CO
2
footprint of our entire
product portfolio, across approximately 200,000
unique products. Information made available to
our customers will allow them to compare
products across RHI Magnesita and make
informed decisions around their carbon footprint
in their supply chain, as industries are increasingly
pressured to disclose the carbon footprint outside
of their own emissions. All “cradle-to-gate”
greenhouse gases (GHG), from raw material
extraction to production and packaging, are
considered in these CO
2
footprint calculations,
and are externally certified according to ISO
standards. The product carbon footprint
1
includes
all Scope 1 and Scope 2 emissions, as well as part
of the Scope 3 emissions.
Scan the QR code or click
here to watch a video on our
CO
2
footprint data sheet.
1. The Scope 1 emissions are direct emissions from RHI
Magnesita plants, while the Scope 2 emissions are indirect
emissions from the electricity (a high number of plants
already use 100% green electricity or are using electricity
with a very low CO
2
footprint). The largest share of the
Scope 3 emissions (all other indirect emissions) are coming
from the external purchased raw materials.
We are constantly innovating to find new ways of
supporting our customers and being the partner
of choice in the refractory industry.
Gustavo Franco
Chief Customer Officer (CCO)
22 RHI MAGNESITA ANNUAL REPORT 2022
RHI Magnesita has built a platform which is
primed for consolidation, following the near
completion of the Production Optimisation Plan.
The Group was founded almost 200 years ago
and has since consolidated the market to
become the global leader of the refractory
industry, represented by its c.130 subsidiaries.
The Group announced new acquisitions in India
in 2022, which will extend its footprint in growth
markets, as well as partnering with Horn & Co.
through the creation of a joint venture. It also
completed an acquisition in Türkiye in 2022 and
announced an acquisition in China in January
2023. Acquisitions either completed or
announced in 2022 are expected to generate
an EBITDA run rate of €25-30 million, in each
case we expect for each target to achieve 30
- 50% of EBITDA synergies once fully
integrated. The Group is specifically targeting
growth in new markets or product segments
such as India and China, as well as the
non-basic (Alumina) product segment. India, in
particular, is a steel growth driver of the Group,
as well as the emerging territories across Asia,
and these are expected to outweigh softness in
other geographies such as Europe. Despite
projections that China has already reached its
highest growth rate, this region remains a target
geography for the Group, given it is currently
underrepresented, coupled with expectations
that the market will start to consolidate.
Achieving growth through acquisitions
in new markets
In 2022, the Group began to integrate the
Alumina mixes plant in Chongqing, China, in
which it owns a 51% share, to serve the Chinese
cement industry. This venture will significantly
increase its local-for-local strategy. It will
expand production capacities and capabilities in
China with shorter lead times and is strategically
located near road infrastructure connecting
China to Vietnam and the ASEAN region. The
Group will, together with its partner Liangyou,
build a state-of-the-art Alumina fired bricks
plant, which has a capacity of 25,000 - 50,000
tonnes per annum and is leading Chinese
refractory production in terms of reduced carbon
emissions and lower energy consumption.
In May 2022, the Group acquired a 51% stake in
Horn & Co. Minerals Recovery GmbH & Co KG,
combining both companies, recycling activities
in Europe to increase production, use and
offering of secondary raw material for the
European refractory industry. The joint venture
will operate under a newly formed entity,
MIRECO (Horn & Co. RHIM Minerals Recovery
GmbH). This partnership will position the future
company at the forefront of the circular
economy for customers in the steel, cement,
glass and other process industries. As a result,
RHI Magnesita achieved a recycling target of
10.5% in 2022, three years ahead of schedule.
Read more about MIRECO on
Page 21
In September of this year, the Group completed
its acquisition of an 87% stake in SÖRMAŞ, a
producer of refractories for the cement, steel,
glass and other industries in Türkiye. The
acquisition significantly expands the Group’s
locally manufactured product portfolio and
serves as a production hub and platform for
business growth in Türkiye and the wider region.
Raw materials produced by Eskişehir, Türkiye,
were previously transported outside of Türkiye
for production in Europe. The acquisition of
SÖRMAŞ localises the refractory production
process, reducing the need for transportation
into Europe and import duties. Given the
localised supply chain, the Group will almost
double the volume of refractory production
compared to production from the SÖRMAŞ
asset alone, given a shift to domestic production
for Turkish customers.
The Group completed the acquisition of the
Indian refractory business, Dalmia Bharat
Refractories Limited (“DBRL”) on 5 January 2023,
which currently has a capacity of around 300 kilo
tonnes per annum (with opportunity to leverage
spare capacity). The acquisition will enable the
Group to increase its presence in the high-
growth Indian refractory market, where steel
production in India grew by 12% in 2022 and is
expected to grow at 7-8% CAGR until 2030. The
production footprint (five plants including a 51%
joint venture) and product offering of DBRL is
highly complementary to the Group’s existing
plant locations (four plants) and product range
with a focus in the industrial segment, where RHI
Magnesita is currently under-represented.
Significant network benefits and margin
improvement potential have been identified
through the addition of production capacity in
important industrial locations in the south and
west of India, where the Group currently has
no assets.
The long-term outlook remains stable with pockets
of growth, supported by our ambitions to penetrate
new markets.
Strategic progress in action
Markets
Drive market
leadership
Revenue from India and China in 2022
17.1%
2021: 17.9%
Flow control revenue
€525m
2021: €433 million
EBITDA contribution from M&A in 2023
€25-30m
23RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
In January 2023, the Group, through its listed
subsidiary RHI Magnesita India Limited,
completed the acquisition of the refractory
business of Hi-Tech Chemicals Limited
(“Hi-Tech”). The acquisition will further
strengthen the Group’s position in the
high-growth market of India, the wider region
and export countries, as well as its target growth
market, flow control.
The Group announced in January 2023 its
intention to purchase a 65% shareholding in
Jinan New Emei Industries Co. Ltd. (“Jinan New
Emei”), a leading producer of refractory slide
gate plates and systems, nozzles and mixes for
use in steel flow control. The acquisition will
enable the Group to expand its product range in
steel flow control refractories and its solutions
contract offering in the Chinese domestic
market, both of which are key strategic priorities.
It will also give access to substantial new
customer relationships in China and deliver
additional production capacity for increasing
supply of refractories in both China and the
wider East Asia region.
Strength in core markets
The Group’s core markets are Western Europe
and the Americas, where it holds a clear leading
position in both steel and industrials markets.
The Group retains its leading position through
the strength of its relationships with its
customers, and through its unrivalled solutions
products offering. These include its suite of
digital tools and products, which are used to
drive customer insights. Out of its c.15% global
market share in a c.€20 billion market, it holds a
significant share in South America steel. Market
share in North and Central America are high,
thanks to the high proportion of solutions
contracts in the Americas. Both North America
and South America steel are expected to grow
modestly over the long term. European steel
market share, including Türkiye and excluding
Commonwealth of Independent States (“CIS”)
increased modestly in 2022, where the Group
has maintained its competitive offering
following the Production Optimisation Plan,
and through its industry-leading assets such
as the Dolomite Research Centre and the
most automated refractory plant in the world,
at Radenthein. Currently, European steel
production is expected to remain subdued over
the long term, which may be partly influenced
by European legislation on decarbonisation,
ongoing inflation and energy availability.
The Group will continue to prioritise profitability
in these regions, thereby remaining competitive
and retaining high market penetration.
Strengthening its relationships with customers
through industry-leading R&D, the Group
continues to partner with its existing customers
to improve its product offerings with bespoke
and tailored solutions.
The Group has a high share of the cement
market globally. RHI Magnesita consistently
delivers high-quality product for cement; it has
the global production capability to serve this
€2 billion industry and is vertically integrated in
magnesite, which is the main raw material used
for refractory linings in cement kilns.
Flow control
Flow control systems play a crucial role on the
continuous casting floor, as they ensure an
uninterrupted and highly precise flow
regulation from the ladle to the tundish and
from the tundish to the mould. Our holistic
approach in flow control comprises all relevant
aspects of the flow control process from systems
to refractories, to metallurgy.
Clean steel, safety, productivity and green steel
underpin the main challenges that our
customers face in steel production and flow
control processes. In 2021 and 2022, we
launched a campaign with our customers,
which was designed to address and solve these
common issues through our bespoke flow
We strengthened our position in new markets
considerably in 2022 and we continue to
evaluate new and exciting opportunities in target
products segments and geographies in 2023
and beyond.
Stefan Borgas
Chief Executive Officer
control solutions. Our innovative solutions
ensure the highest possible safety standards,
whilst delivering better metallurgical results for
our customers, helping customers drive process
efficiencies and reduce their carbon footprint.
Two new records were achieved this year for
continuous casting times at a customer site in
Bahrain and in Egypt. Using RHI Magnesita’s
INTERSTOP flow control brand, a total of 35.5
hours and a sequence length of 50 heats was
achieved with the tundish slide gate system and
an optimised submerged entry shroud in Egypt.
A continuous casting time of 35.1 hours over 48
ladle heats was achieved with a submerged
entry shroud in Bahrain.
Flow control contributed €525 million of
revenue in 2022, up from €433 million in 2021.
Flow control contributed 15.8% of Group
revenues in 2022, slightly lower compared to
2021 (17.0%). Flow control pricing increased at
a lower rate than refractory linings, especially in
the tundish product segment. However, softer
tundish pricing and profitability was offset by a
strong performance in the isostatic product
segment, thanks to the success of the flow
control campaign rollout. The Group executed
successful trials in 2022 and is preparing for a
step-up in flow control orders in 2023.
Non-ferrous metals
Non-ferrous metals include aluminium, copper,
lead, tin, zinc, gold, silver and platinum. RHI
Magnesita’s Radenthein plant is the most
automated plant in the world and is the Group’s
main production facility for non-ferrous metals,
serving customers globally. Non-ferrous metals
is the most profitable business within the Group
(37% gross margin), a segment which is
projected to grow significantly in the longer
term, strengthened by the energy transition to
greener technologies.
24 RHI MAGNESITA ANNUAL REPORT 2022
Below 3 years
28%
4-6 years
18%
7-9 years
13%
Over 10 years
40%
Under 30
17%
30 to 40
34%
41 to 50
29%
Over 50
20%
Purpose and culture lie at the heart of
the business model
RHI Magnesita fosters employee development,
prioritises talent acquisition and retention, and
understands the importance of creating the
leaders of tomorrow in order to execute the
strategy of today. Building a business with the
right people who are primed for the future of the
refractory industry is essential in this era of
volatility. The Group is equipping its employees
with the skills they need to help the business
thrive in such an environment through the
rollout of new tools and systems to drive
efficiencies within the customer value chain and
also in money-based processes.
Culture underpins employees’ day-to-day
decisions, enabling the business to prosper in a
challenging environment. The culture is based
on four segments, centred around the Group’s
customers. Bold innovation creates value for
customers, by providing the best digital and
sustainable solutions. An open mindset and
transparent way of working is centred around a
diverse and inclusive business environment.
Acting pragmatically enables fast and simple
collaboration across both functions and regions
to serve customers in the best possible way.
High performance is rooted in accountability
and responsibility. RHI Magnesita is a reliable
and resilient partner that decides and delivers
based on its customers’ needs.
Our culture is built upon our corporate purpose:
mastery of heat, enabling global industries to
build sustainable modern lives. Both culture
and purpose are deeply embedded within the
Company and its business model and form
the philosophy through which it conducts
daily operations.
Read more about our culture on
Page 72
Future proofing our business
RHI Magnesita recognises the importance of
building a pipeline of talent, which is why this
year it launched a new apprentice campaign
digitally in Austria, focused on finding the best
talent for its Austrian plants. To target a ‘Gen Z’
audience, the latest campaigns were launched
on various platforms: TikTok, Snapchat,
Instagram, YouTube and more.
You can watch the video
here or scan the QR code.
(German language only).
Since creating a network of plants with higher
automation and digitalisation, it is important to
attract the next generation workforce of digital
natives through our digital platforms. The digital
campaign reached 2.6 million people in Austria
to date and generated 16,400 clicks through
our new apprentice homepage.
Scan the QR code or click
here to access the website
(German language only)
In January 2022, the Group also welcomed its
next cohort of graduate trainees of the
“Refractory Factory”, including 21 trainees
across 11 nationalities and with 57% female
representation. The trainees completed
rotational assignments over an 18 to 24 month
period across Finance, Sales, R&D or Corporate
functions. The trainee programme has been
designed to bring young talent into the
business, helping it to build a generational
workforce.
In June 2022, RHI Magnesita officially opened
its state-of-the-art flow control training facilities
in Leoben, Austria. Located in the same building
as the Cement and Lime Training Center, the
full-scale ladle and tundish models equipped
with an INTERSTOP branded ladle gate, tundish
gate, nozzle changer, and purging plug solution
provide a hands-on opportunity for customers
to get a deep insight into flow control
technologies, refractories, and maintenance.
Furthermore, there is also the opportunity to
gain extensive practical knowledge about
isostatically pressed products. Over the last ten
years, RHI Magnesita has developed a wide
range of practical courses for customers and
employees, which also include tundish training
at the purpose-built facility in Veitsch, Austria
and lining trainings.
Read more about how we
develop our leaders on
Page 72
A talented workforce and a customer-centric
culture are critical to the long-term success of
RHI Magnesita.
Strategic progress in action
People and Culture
The driving force
of our strategy
Tenure
Age
25RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Empowerment of our regional leaders
The launch of a regionalised structure allows
every region to be fully accountable for the
earnings and balance sheet of their regional
business, improving RHI Magnesita’s ability
to execute its strategy and provide faster
and better service levels to customers. Each
regional business is led by a regional president,
who is responsible for finance, sales, operations
and R&D.
These changes will empower regional leaders
and will enable them to make faster and higher
quality decisions and utilise the expertise of the
Group’s employees worldwide. The change will
move the business closer to customers and
deliver better operational performance,
achieved through a greater understanding for
the local customer needs and cultures of each
region. This is especially important against a
much more volatile macro-backdrop globally.
Fostering diversity of thought
RHI Magnesita is committed to contributing to a
better, more diverse, and inclusive workforce. Its
goal is to make RHI Magnesita the employer of
choice where everyone feels valued, engaged,
and can enjoy a truly inclusive culture.
At RHI Magnesita, diversity has many different
aspects including gender, religion, education,
ethnicity, nationality, disability, sexual
orientation and personality amongst others.
All of these contribute unique individual
perspectives enrich the Organisation’s
innovative and creative thinking. Inclusion is
the process of allowing diversity to thrive inside
a company and the Group has measures in
place to empower individuals in realising their
full potential.
There is more work to do in encouraging
females to occupy the most senior positions
within the Company, which was 21% in 2022
(2021: 22%). Mandatory training on diversity
was launched within our compliance portal in
March 2022, to educate the workforce on the
merits of diversity within an organisation, with a
particular focus on innovation, problem solving
and reaching or exceeding financial and
strategic targets.
Read more about how we build a
diverse and inclusive workforce on
Page 73
The people and culture of RHI Magnesita is
the foundation of our market-leading position.
I am proud of the way we have executed and
overcome the challenges of the year as well
as excelling in so many opportunities.
Simone Oremovic
Executive VP People, Projects and Value Chain
26 RHI MAGNESITA ANNUAL REPORT 2022
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.
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.
Read more on risk management
Page 39
Safety: LTIF
1
Relative CO
2
emissions
1, 2
(t CO
2
/t)
Revenue Adjusted EBITA margin Adjusted EPS
0.20
0.19
0.13
0.28
2021
2020
2022
2019
1.75
1.85
1.97
1.85
2021
2020
2022
2019
€3,317m
€2,551m
€2,259m
€2,922m
2021
2020
2022
2019
11.6%
11.0%
11.5%
14.0%
2021
2020
2022
2019
€4.82
€4.52
€3.28
€5.57
2021
2020
2022
2019
KPI relevance
Safety is paramount to the successful running of our
business. Lost Time Injury Frequency (“LTIF”) is the main
indicator used to measure safety performance.
The Group’s goal is zero accidents.
KPI relevance
Climate change poses strategic and operational risks
to our business, as well as opportunities. The Group’s
target is to reduce Scope 1, 2, 3 (raw materials) by 15%
per tonne of product by 2025 (vs 2018).
KPI relevance
This demonstrates the growth of the business.
By increasing our global refractory market share,
continually enhancing our product and service
offering, the Company is focused on achieving
revenue growth and aims to outperform the
refractories market on an annual basis.
KPI relevance
EBITA margin provides a measure of profitability
and demonstrates the successful execution of the
Company’s strategy.
KPI relevance
Reflecting the income statement in a clear way and
taking the equity structure into account, the Board
believes Adjusted EPS to be one of the indicators that
demonstrates shareholder value.
How it is measured
The number of accidents resulting in lost time of more
than eight hours, per 200,000 working hours,
determined on a monthly basis.
How it is measured
Tonnes of total Scope 1, 2, 3 (raw materials) carbon
emissions per tonne of product. Scope 1 emissions
consist of on-site emissions, Scope 2 comprise
purchased electricity, and Scope 3 are measured from
raw materials production.
How it is measured
Total Group revenue, as reported in the
financial statements.
How it is measured
Adjusted EBITA divided by revenue, as reported in the
financial statements.
Adjusted EBITA is an APM and more information can be
found on page 241.
How it is measured
Earnings per share, excluding other financial income
and expenses.
Adjusted EPS is an APM and more information can be
found on page 241.
Link to strategy
Competitiveness
Markets
Business model
2022 performance
LTIF was 0.20 in 2022 (2021: 0.19), increased slightly
due to high plant loads and staff returning to the
workplace following the pandemic.
Total Recordable Injury Frequency (TRIF) decreased to
0.54 from 0,60 in 2021.
1. LTIF was restated in 2021 to 0,19 (from 0.18).
2022 performance
Petroleum coke was replaced by sustainably
sourced charcoal at the raw material production site
in Brazil, and has delivered 18kt of annualised CO
2
emission savings.
1. Historical CO
2
emission data were revised to reflect new
acquisitions and changes that were made following an
external verification process that took place in July 2022.
2. Adaptations in line with the Greenhouse Gas protocol and
refinement in reporting result in updated CO
2
and energy
efficiency figures for 2018-2022.
2022 performance
Revenue for 2022 amounted to €3,317 million,
30% higher than 2021 (€2,551 million) mostly
driven by a significant price increase programme
of €600 million and also due to currency tailwinds.
2022 performance
The Group recorded double digit EBITA margin in
2022, of 11.6% and 60bps higher than 2021. This was
due to the price increase programme fully offsetting
cost inflation, and also due to currency tailwinds.
2022 performance
Adjusted EPS of €4.82 per share was higher than the
€4.52 per share recorded at 2021 largely given the
substantial revenue growth of the Group. However, EPS
was impacted by below the line items such as higher
finance charges, unfavourable foreign exchange
movements and higher effective tax rate.
Use of secondary
raw materials
Voluntary employee
turnover
Gender diversity
in leadership
Leverage ROIC R&D and Technical
Marketing spend
10.5%
6.8%
5.0%
4.6%
2021
2020
2022
2019
6.5%
6.8%
5.1%
6.2%
2021
2020
2022
2019
21%
22%
25%
17%
2021
2020
2022
2019
2.3x
2.6x
1.5x
1.2x
2021
2020
2022
2019
11.6%
9.6%
11.5%
15.3%
2021
2020
2022
2019
€77m
€63m
€62m
€64m
2021
2020
2022
2019
KPI relevance
Recycling plays a critical role in achieving our 2025
emissions reduction target while also developing the
circularity of our business. Our target was to reach 10%
secondary raw material (SRM) content in refractories
by 2025, and this has been reached three years early.
KPI relevance
Voluntary turnover is one way of measuring the Group’s
success in retaining its employees.
KPI relevance
Diversity is important in terms of maintaining our
competitiveness and economic success, and gender
diversity is our first priority. Our target is to increase
female representation in senior leadership to 33%
by 2025.
KPI relevance
Appropriate leverage provides the business with
headroom for compelling investment opportunities,
but also enables shareholder distribution.
The leverage target range has been increased to
1.0-2.0x (2.5x for M&A).
KPI relevance
Return on invested capital (ROIC) is used to assess the
Group’s efficiency in executing its capital allocation
strategy, which is aimed at enabling organic growth,
disciplined M&A and shareholder returns.
KPI relevance
Excellence in R&D and strong Technical Marketing
capabilities are key contributors to our competitiveness.
This demonstrates our commitment to driving
innovation and to being the leading provider of services
and solutions within the refractories industries. The
Company aims to invest at least 2.2% per annum of
revenue in R&D and Technical Marketing.
How it is measured
Share of SRM content as a percentage of total
raw materials.
How it is measured
The percentage of employees who voluntarily left
the Company during the year and were replaced by
new employees.
How it is measured
Number of women as a percentage of all those in
leadership positions (Executive management team
(EMT) and EMT direct reports).
How it is measured
Net debt to adjusted EBITDA.
How it is measured
Calculated as net operating profit after tax, divided by
total invested capital for the year.
ROIC is an APM and more information can be found on
page 241.
How it is measured
Annual spend on research and development,
before subsidies and including opex and capex.
2022 performance
SRM increased considerably in 2022, thanks to
increased focus internally, pioneering research and
development and the joint venture with Horn & Co
Minerals Recovery GmbH & Co KG to form MIRECO,
which has considerably increased secondary raw
material availability to the Group.
2022 performance
Voluntary turnover remained broadly unchanged in
2022, at 6.5% and in line with historic averages. The
rate remains relatively low, associated with an
uncertainty in the global economic environment.
2022 performance
Gender diversity in leadership slightly declined in 2022
to 21%, following a new regionalised structure
implemented in 2022.
2022 performance
Leverage decreased to 2.3x at the end of 2022, 0.3x
lower than at year end 2021. Lower leverage was
achieved through higher EBITDA. Cash flow was also
improved by lower capital expenditure in 2022.
2022 performance
Return on invested capital increased in 2022 to 11.6%
due to ramp up of benefits from the Production
Optimisation Plan and increased profitability in 2022.
2022 performance
€77 million was committed to R&D and Technical
Marketing in 2022, equating to 2.3% of revenues,
exceeding the Group’s annual commitment of 2.2%
27RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
The Board and
management have
identified the following
indicators which it believes
reflect the financial and
non-financial performance
of the business.
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.
Read more on risk management
Page 39
Safety: LTIF
1
Relative CO
2
emissions
1, 2
(t CO
2
/t)
Revenue Adjusted EBITA margin Adjusted EPS
0.20
0.19
0.13
0.28
2021
2020
2022
2019
1.75
1.85
1.97
1.85
2021
2020
2022
2019
€3,317m
€2,551m
€2,259m
€2,922m
2021
2020
2022
2019
11.6%
11.0%
11.5%
14.0%
2021
2020
2022
2019
€4.82
€4.52
€3.28
€5.57
2021
2020
2022
2019
KPI relevance
Safety is paramount to the successful running of our
business. Lost Time Injury Frequency (“LTIF”) is the main
indicator used to measure safety performance.
The Group’s goal is zero accidents.
KPI relevance
Climate change poses strategic and operational risks
to our business, as well as opportunities. The Group’s
target is to reduce Scope 1, 2, 3 (raw materials) by 15%
per tonne of product by 2025 (vs 2018).
KPI relevance
This demonstrates the growth of the business.
By increasing our global refractory market share,
continually enhancing our product and service
offering, the Company is focused on achieving
revenue growth and aims to outperform the
refractories market on an annual basis.
KPI relevance
EBITA margin provides a measure of profitability
and demonstrates the successful execution of the
Company’s strategy.
KPI relevance
Reflecting the income statement in a clear way and
taking the equity structure into account, the Board
believes Adjusted EPS to be one of the indicators that
demonstrates shareholder value.
How it is measured
The number of accidents resulting in lost time of more
than eight hours, per 200,000 working hours,
determined on a monthly basis.
How it is measured
Tonnes of total Scope 1, 2, 3 (raw materials) carbon
emissions per tonne of product. Scope 1 emissions
consist of on-site emissions, Scope 2 comprise
purchased electricity, and Scope 3 are measured from
raw materials production.
How it is measured
Total Group revenue, as reported in the
financial statements.
How it is measured
Adjusted EBITA divided by revenue, as reported in the
financial statements.
Adjusted EBITA is an APM and more information can be
found on page 241.
How it is measured
Earnings per share, excluding other financial income
and expenses.
Adjusted EPS is an APM and more information can be
found on page 241.
Link to strategy
Competitiveness
Markets
Business model
2022 performance
LTIF was 0.20 in 2022 (2021: 0.19), increased slightly
due to high plant loads and staff returning to the
workplace following the pandemic.
Total Recordable Injury Frequency (TRIF) decreased to
0.54 from 0,60 in 2021.
1. LTIF was restated in 2021 to 0,19 (from 0.18).
2022 performance
Petroleum coke was replaced by sustainably
sourced charcoal at the raw material production site
in Brazil, and has delivered 18kt of annualised CO
2
emission savings.
1. Historical CO
2
emission data were revised to reflect new
acquisitions and changes that were made following an
external verification process that took place in July 2022.
2. Adaptations in line with the Greenhouse Gas protocol and
refinement in reporting result in updated CO
2
and energy
efficiency figures for 2018-2022.
2022 performance
Revenue for 2022 amounted to €3,317 million,
30% higher than 2021 (€2,551 million) mostly
driven by a significant price increase programme
of €600 million and also due to currency tailwinds.
2022 performance
The Group recorded double digit EBITA margin in
2022, of 11.6% and 60bps higher than 2021. This was
due to the price increase programme fully offsetting
cost inflation, and also due to currency tailwinds.
2022 performance
Adjusted EPS of €4.82 per share was higher than the
€4.52 per share recorded at 2021 largely given the
substantial revenue growth of the Group. However, EPS
was impacted by below the line items such as higher
finance charges, unfavourable foreign exchange
movements and higher effective tax rate.
Use of secondary
raw materials
Voluntary employee
turnover
Gender diversity
in leadership
Leverage ROIC R&D and Technical
Marketing spend
10.5%
6.8%
5.0%
4.6%
2021
2020
2022
2019
6.5%
6.8%
5.1%
6.2%
2021
2020
2022
2019
21%
22%
25%
17%
2021
2020
2022
2019
2.3x
2.6x
1.5x
1.2x
2021
2020
2022
2019
11.6%
9.6%
11.5%
15.3%
2021
2020
2022
2019
€77m
€63m
€62m
€64m
2021
2020
2022
2019
KPI relevance
Recycling plays a critical role in achieving our 2025
emissions reduction target while also developing the
circularity of our business. Our target was to reach 10%
secondary raw material (SRM) content in refractories
by 2025, and this has been reached three years early.
KPI relevance
Voluntary turnover is one way of measuring the Group’s
success in retaining its employees.
KPI relevance
Diversity is important in terms of maintaining our
competitiveness and economic success, and gender
diversity is our first priority. Our target is to increase
female representation in senior leadership to 33%
by 2025.
KPI relevance
Appropriate leverage provides the business with
headroom for compelling investment opportunities,
but also enables shareholder distribution.
The leverage target range has been increased to
1.0-2.0x (2.5x for M&A).
KPI relevance
Return on invested capital (ROIC) is used to assess the
Group’s efficiency in executing its capital allocation
strategy, which is aimed at enabling organic growth,
disciplined M&A and shareholder returns.
KPI relevance
Excellence in R&D and strong Technical Marketing
capabilities are key contributors to our competitiveness.
This demonstrates our commitment to driving
innovation and to being the leading provider of services
and solutions within the refractories industries. The
Company aims to invest at least 2.2% per annum of
revenue in R&D and Technical Marketing.
How it is measured
Share of SRM content as a percentage of total
raw materials.
How it is measured
The percentage of employees who voluntarily left
the Company during the year and were replaced by
new employees.
How it is measured
Number of women as a percentage of all those in
leadership positions (Executive management team
(EMT) and EMT direct reports).
How it is measured
Net debt to adjusted EBITDA.
How it is measured
Calculated as net operating profit after tax, divided by
total invested capital for the year.
ROIC is an APM and more information can be found on
page 241.
How it is measured
Annual spend on research and development,
before subsidies and including opex and capex.
2022 performance
SRM increased considerably in 2022, thanks to
increased focus internally, pioneering research and
development and the joint venture with Horn & Co
Minerals Recovery GmbH & Co KG to form MIRECO,
which has considerably increased secondary raw
material availability to the Group.
2022 performance
Voluntary turnover remained broadly unchanged in
2022, at 6.5% and in line with historic averages. The
rate remains relatively low, associated with an
uncertainty in the global economic environment.
2022 performance
Gender diversity in leadership slightly declined in 2022
to 21%, following a new regionalised structure
implemented in 2022.
2022 performance
Leverage decreased to 2.3x at the end of 2022, 0.3x
lower than at year end 2021. Lower leverage was
achieved through higher EBITDA. Cash flow was also
improved by lower capital expenditure in 2022.
2022 performance
Return on invested capital increased in 2022 to 11.6%
due to ramp up of benefits from the Production
Optimisation Plan and increased profitability in 2022.
2022 performance
€77 million was committed to R&D and Technical
Marketing in 2022, equating to 2.3% of revenues,
exceeding the Group’s annual commitment of 2.2%
28 RHI MAGNESITA ANNUAL REPORT 2022
Our
performance
The platform has been
strengthened through the
strategic initiatives, which
have led to resilient margins
despite the global supply
chain shocks during 2022.
Read more on our
operational review
Page 30
29RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Gross margin
23.0%
2021: 22.9%
Price increases in 2022
€600m
Shipped steel refractory volumes
in 2022 versus crude steel
production (WSA)
+3ppts
Global steel production (WSA): (4)%
30 RHI MAGNESITA ANNUAL REPORT 2022
The Europe and Türkiye region continued
to seamlessly serve its customers amidst
supply chain volatility, whilst gaining
market share. The region successfully
implemented price increases to cover
energy surcharges and to maintain
profitability and recorded strong revenue
growth despite the loss of business in
Russia as a result of sanctions.
Infrastructure was installed in most sites in
the region to allow for alternative fuels to
natural gas, and high inventory levels
ensured reliable supply to customers.
Successful price increases in North
America off-set inflationary pressures and
logistical costs, including high sea freight
costs inbound to the region. However,
steel demand started to slow in the
second half of the year and shipped
volumes softened. Meanwhile, demand in
the industrials business remained robust.
Overall, profitability was maintained, and
the region continues to be the Group’s
most profitable.
Revenue in South America increased
significantly, benefiting from a successful
price increase programme. The Group
successfully passed on energy surcharges
and inflationary costs, whilst gaining
market share.
India/West Asia/Africa outperformed the
overall strong steel production in the
region, mostly in India. As well as gaining
market share in steel, price increases were
implemented in the region to cover the
high cost of production of imported goods
from Europe. Whilst some profitability was
lost given the competitive pricing
environment, as a mitigating action, some
capacity was shifted from Europe to India
to lower production costs for India/West
Asia/Africa sales.
China/East Asia enjoyed significant
market share gains in steel, as volumes
significantly outperformed steel
production which contracted markedly in
2022. The region was also able to pass on
some inflationary costs, given some
imports to East Asia from Europe. China
and East Asia won significant contracts
with some of the largest companies in
industrials and steel.
Steel overview
Supplying the steel market with refractory
products and services accounts for c.70% of
RHI Magnesita revenues and the Group retains
its position as the market leader globally with a
c.15% market share (c.30% excl. China and East
Asia). Refractory products line all steel making
applications, protecting equipment from
extremely high temperatures of up to around
1,800°C, chemical reactions, and abrasion of
molten steel. Refractory product applications
include iron making (BF or DRI), the primary
steel-making process (BOF or EAF) as well as
ingot and continuous casting. RHI Magnesita
offers a complete set of products and solutions
for the entire steel making process. The shortest
lifespan of a refractory product in the steel-
making process is c.4 hours (the refractory part
of a slide gate), whilst the longest lifespan of a
refractory product for the steel making process
is c.6 months (the lifetime of the working inner
lining of the primary steel making application
(BOF or EAF). Refractories used in the steel-
making processes are therefore classified
as an operating expense by steel producers,
accounting for around 2-3% of the cost of steel
production, on average.
Steel Division revenues increased by 30% to
€2,371 million (2021: €1,823 million), and by
21% in constant currency (2021: €1,961 million),
largely as a result of the price increases across
the product range introduced in order to
mitigate inflationary cost pressures.
Compared to a contraction of global steel
production of 4% (7% ex-China), according to
World Steel Association data, the Group’s steel
volumes decreased by just 1%. Therefore,
volumes outperformed local steel production,
demonstrating market share gains despite
price increases.
In 2022, steel demand slowed, following a
strong rebound in 2021 as markets recovered
after COVID-19 lockdowns. Economies globally
were softer, as a result of sharp increases in
inflation, high supply chain volatility, monetary
tightening with rising interest rates and China’s
slow down. The Russia/Ukraine conflict had a
profound impact on energy markets globally,
especially in Europe. The appreciation of the US
dollar on major global currencies presented
another headwind globally, impacting US
denominated debt in some economies, which
reduced capacity for fiscal and private spending
and debt roll-over. However, the India steel
market, the second largest steel market globally,
grew significantly in 2022, with steel production
in India increasing by 6%.
Freight availability and costs started to ease
during 2022, following significant disruption in
the prior year. Supply chains were further
disrupted by supernormal energy costs and
labour market tightness, which had an adverse
impact on production costs, specifically raw
material production. Ocean freight rates on
lanes inbound to North America from South
America and Europe remained stubbornly high
with poor reliability.
Industrial overview
In addition to its Steel Division, RHI Magnesita
supplies refractory products to customers in the
cement and lime, non-ferrous metals, glass,
energy, environmental and chemicals
industries. Overall, the Industrial Division makes
up c.30% of Group revenues. These customer
applications have longer replacement cycles,
on average between 1 – 20 years, and are
classified as capital expenditure projects. Given
the longer replacement cycles, refractory
products account for only between 0.2% –
1.5% of the customer cost base. RHI Magnesita
has a significant market share globally of c.30%
in the cement and lime business, c.30% market
share in the non-ferrous metals business,
c.20% in glass, and c.5% across industrial
applications (energy, environment, chemicals,
foundry and aluminium).
The Industrial Division recorded revenue of
€946 million in 2022, an increase of 30%
compared to 2021 (2021: €729 million), or 23%
in constant currency (2021: €767 million). This
was significantly higher given successful cost
increases passed on to customers from energy
surcharges, in addition to favourable foreign
exchange movements.
The cement and lime business makes up 11% of
Group revenues and in 2022 recorded revenue
of €378 million (2021: €339 million in constant
currency). Cement and lime volumes were
lower across all regions other than North
America, and globally volumes were 4% lower
compared to 2021. This was due to lower
construction activity in most geographies,
with China impacted by COVID-19 lockdowns
and Europe by the Russia/Ukraine conflict.
Demand for non-ferrous metal refractory
products was very strong in 2022, given higher
volumes of shipments to complex projects for
base metals producers, and the delivery of
some delayed projects from 2021. The Group
recorded 44% higher revenue than the prior
year in constant currency to €219 million (2021:
€152 million). This was largely due to the effect
of price increases, but also a significant increase
in volumes by 22%, globally. The non-ferrous
metals business is the most profitable customer
segment for RHI Magnesita, and the gross
margin was 37% in 2022 (2021: 41%). Markets
related to decarbonisation industries such as
electric vehicles and batteries, including the
copper, nickel, lead and zinc markets, reached
pre-COVID-19 level volumes in 2022. However,
ferro-alloy markets have not yet recovered to
pre-COVID-19 volumes. Two new greenfield
copper projects have been contracted in Asia.
Performance
Operational review
31RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
North America
29%
Europe/CIS/Turkey
24%
India/West Asia/Africa 20%
South America
16%
China and East Asia
10%
Cement/Lime 40%
Nonferrous metals
23%
Glass
16%
Industrial applications 11%
Minerals
10%
The Group’s glass business was very strong
in 2022 and recorded 41% higher revenue
in constant currency of €154 million
(2021: €109 million). Higher volumes of 9%
were supported by demand from China and an
increase in demand from container and bottle
production, as well as solar panels. Demand for
insulating materials such as glass and mineral
wool also increased in the year, from rising
energy costs and an increased focus on CO
2
reduction measures.
Industrial applications of refractory products
include environment, energy, chemicals,
aluminium and foundry businesses. Revenue
relating to these applications increased by 4%
in constant currency to €102 million (2021:
€99 million). Volumes increased by 5%, and
increased demand was mostly from the waste
incineration sector and the aluminium industry.
However, there was some pressure on the
energy-intensive industries like petrochemicals,
given higher energy costs.
The minerals business recorded revenue of
€92 million, 47% higher than in 2021 (2021:
€63 million) and 36% higher in constant
currency (2021: €68 million).
Europe & Türkiye
In Europe & Türkiye, revenues increased by 24%
to €866 million (2021: €701 million) and by
24% in constant currency (2021: €696 million),
despite lower volumes compared to 2021 as
business was lost from sanctioned customers in
Russia. The steel market was softer in the
second half of the year given high inflation and
energy costs. High inflation and consequently
higher interest rates across Europe resulted in
higher financing costs, which reduced end
market demand (specifically relating to
construction). High energy costs led to some
EAF shutdowns regionally, as the cost of
production became too high. Demand for
white goods slowed following an initial boom
after the supply chain constraints started in
2021, whilst automotive demand remained
soft, due to supply chain bottlenecks for
semiconductors persisting.
However, the Group expanded market share
across steel and industrial industries across the
region by c.2 ppts to c.22%, whilst successfully
implementing price increases to cover
inflationary input costs, especially relating to
energy. Steel revenue in the region increased
by 22% in constant currency to €571 million
(2021: €468 million). According to the World
Steel Association, steel production in the region
contracted by 14%, where high energy prices
forced some steel mills to close. However, the
Group shipped volumes exceeded regional
steel production materially, and the region
recorded 8% lower steel volumes compared to
the prior year, a decline mainly attributable to
business lost in Russia. Steel demand is
expected to continue to contract in 2023 with
energy availability remaining tight, exacerbated
by lower demand from a slowdown in China.
Industrial Division revenues increased by 29%
in constant currency to €295 million (2021:
€228 million), given price increases across all
segments. However, European customers in the
Industrial Division were more sensitive to price
increases towards the end of the year, as input
costs increases started to flatten. The Group’s
end markets of construction and machinery
have been especially impacted by the
slowdown in the European market, driving a
reduction in demand for steel and cement,
whereas demand for glass and non-ferrous
metals remained strong and is characteristically
affected later in the economic cycle.
The supply chain issues in the region started
to ease towards the end of 2022, including
stabilisation of major ocean freight lanes to
China. As supply chains slowly started to
normalise, the region was able to reduce
inventory coverage ratio to 1.4, from 1.7 at the
end of 2021. RHI Magnesita was able to
seamlessly serve its customers with considerably
reduced lead times compared to 2021.
The Russia/Ukraine conflict had an
unprecedented impact on the global energy
markets, and more specifically on the availability
and cost of natural gas. The European plant
network, made up of 12 refractory production
plants and four raw material plants (excluding
recycling facilities), relies heavily on natural gas.
In order to mitigate the impact of a natural gas
supply shortage on production, €7 million on
capex was invested during the year to install the
necessary infrastructure in the plants to
substitute natural gas with LPG.
In the region, the Group continued to
strengthen its flow control product line and
secured new business for isostatic pressed
products and tundish slide gate systems.
A customer in Slovenia expanded its solutions
contract to cover connected machinery and
refractory optimisation, and another contract
was won with a customer in Eastern Europe
which included digitalisation tools and a stock
management system.
Digitalisation at the customer site continues to
be a major focus, used as a tool to cement and
win market share in the region. A contract was
secured to supply a large French customer with
the AGELLIS system, enabling visibility of the
steel bath level in the tundish, and allowing for
increased steel yield and lower costs. Another
major customer in Eastern Europe implemented
a suite of RHI Magnesita digital tools, including
stock management, connected machines, a
refractory consumption dashboard and the
customer portal.
It is becoming increasingly common for
customers to request products with a lower
carbon footprint. The technical datasheets of
RHI Magnesita’s entire refractory portfolio
provide full transparency of the carbon footprint
and are unique within the refractory industry.
Steel revenue
€2,371m
2021: €1,823m
Industrial revenue
€946m
2021: €729m
Revenue breakdown by
geography in Steel Division
Revenue breakdown by
industry in Industrial Division
Does not add up to 100 due to rounding.
32 RHI MAGNESITA ANNUAL REPORT 2022
Revenue for steel in North America was €694
million, an increase of 22% versus 2021 in
constant currency (2021: €569 million). Steel
production in the region contracted by 6%,
according to World Steel Association data.
Shipped refractory volumes were stronger than
regional steel production, and contracted by
just 2%. The steel market started to soften in H2
2022, and by the end of the year average steel
prices and lead times for domestic producers
had reverted to near pre-pandemic levels, as
the strong recovery of the US economy slowed.
Sharp interest rate increases by the Federal
Reserve to cool inflation has led to a slowdown
of manufacturing activities and construction.
The Biden government’s $1 trillion infrastructure
spend is expected to bolster demand despite
the deteriorating economic environment.
Meanwhile, vehicle production in North
America is expected to remain strong provided
supply chain bottlenecks ease, such as
semiconductor availability.
Industrial Division revenues increased by 14% in
constant currency to €196 million compared to
2021 (2021: €172 million) thanks to price
increases and a 4% increase in volumes. Within
the industrial product range, non-ferrous metals
increased by 20% on a constant currency basis
whilst volumes increased by 7% and cement
and lime adjusted revenue increased by 17%
with volume increase of 6%.
Despite headwinds impacting North America,
operational execution continued to be a priority
and high inventory volume levels allowed for
shorter lead times for customers. Inventory
coverage ratios reached 3.0x at the end of 2022
from 4.3x at the beginning of the year, given an
increased focus on reducing inventory following
a peak in H2 2022, as supply chains stabilised.
The region made good progress in flow control,
completing customer trials in new tundish mix
product lines, which benefit the customer
through increased productivity and efficiency in
shorter re-lining and pre-heating times. The
region has also run successful trials with its
customers across the ISO and slide gate
product lines.
The solutions business model is prominent in
the North American market, and accounts for
over 40% of revenues. In 2022, a contract was
secured for nine years, worth $150 million, for a
steel customer based in the US. Another major
steel customer has renewed solutions contracts
across eight sites in the US, varying between
one to five years tenure.
Across technology and digitalisation, new
contracts were secured for the Terminator XL
(laser scanner for residual refractory lining
measurement with Automatic Guided Gunning)
and Hot Vision EAF (visualisation camera at
high-temperature environment) with major
American steel customers. Across the industrial
space, digital refractory profile mapping was
extended to cement and lime customers. In
2022, 17 steel customers in North America
implemented the SAR+ (Refractory Application
System) to collect data to control refractory
consumption and this will soon be rolled out
across non-ferrous metals too.
In the UK, a major steel customer has converted
to the tundish lining solution, which is 100%
free of natural gas consumption. A customer in
Austria implemented basic gunning mixes with
an ultra-lower CO
2
footprint. The sustainability
agenda in the region was significantly
supported by the joint venture with Horn & Co.,
creating ‘MIRECO’, to increase use of secondary
raw material. Read page 21 of the Strategy
report and page 66 of the Sustainability report
for more information.
North America
Revenues for the year totalled €890 million in
North America, an increase of 35% compared to
2021 (2021: €659 million) or by 20% on a
constant currency basis (2021: €740 million).
The US dollar appreciated against the euro on
average by c.11% over the year. Growth in
revenue was reflective of the price increases
implemented over the first half of the year. Prices
stabilised in the second half of the year given
softer raw material costs and lower inbound
freight costs to North America from China.
Performance
Operational review
continued
33RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Thanks to the dedicated teams at RHI Magnesita,
not only were we able to pass price increases
through to match inflation, but we also won
market share overall.
Gustavo Franco
Chief of Sales
The Group implemented new R&D projects in
2022, which will increase recycled refractory
volume by c.40%, increasing the rate in the
region from 4% to 7%. Secondary raw material
was converted into other new sustainable
products such as ladle backfill, increasing
recovery rates further. New K-binder
technology (a new type of organic binder used
in refractory recipes) was introduced for some
steel applications, which is also a cost-
competitive way to reduce Scope 1 and 2
emissions since it substitutes the firing process
with lower temperature tempering.
South America
South America recorded revenue of €515
million, a significant increase of 43% on 2021
(2021: €359 million), or by 26% in constant
currency (2021: €409 million). This was due to
the successful management of price increases
as inflationary costs and surcharges were
passed through to customers in the Steel and
Industrial Divisions. The demand in Q4 2022
started to soften, given a highly competitive cost
environment. Steel revenue increased by 22%
in constant currency to €389 million (2021:
€319 million). Shipped refractory volumes in the
Steel Division were 5% lower than in 2021,
compared to steel production in the region
which was also 5% lower, according to World
Steel Association data.
Industrial revenues in constant currency
increased by 39% over the period to €125
million (2021: €90 million), almost entirely
driven by the price increases as industrial
volumes increased by 2%.
Steel demand in many countries in South
America experienced a contraction in 2022,
driven by challenges from a high inflationary
environment leading to customer destocking
and slowing construction, and lower export
demand. Tighter fiscal policy, inflation and
higher interest rates could also reduce GDP
growth in the region in 2023, coupled with
lower commodity prices reducing demand.
The automotive sector in the region has also
been affected by the scarcity of semiconductors
produced in Asia.
The manufacturing sector, mainly in Brazil,
was impacted by delays to imports of inputs,
shortage of raw materials and high costs.
Inventory coverage ratio reached 1.7x months in
the region from 2.3x months at the end of 2021,
owing to a more regionalised business model
and supply chains started to normalise towards
the end of the year.
A new solutions package for value-added
services for the cement industry is being piloted
in North and South America, which will be
available in three tiers of service levels.
Currently, the Group provides over 100 digital
solutions to all the industries it serves. The
Group’s leading research and development
expertise combined with cutting-edge
technologies like image recognition, Artificial
Intelligence, and Blockchain have produced
solutions like RefracChain (platform which hosts
smart contracts), LES, APO (Automated Process
Optimisation), ARO (Automated Refractory
Optimisation) and Connected Machines.
Circular economy agreements were made with
two major cement and lime customers based on
a bundled offer of refractory sales and returned
material, allowing for a record level of use of
secondary raw material to be reached in the
region. Over 200 tonnes of secondary raw
material per month will be used for cement
products, following investment in patented
washed material technology. South America
achieved over a 10% recycling rate during 2022
due to combined sourcing, processing,
consumption and sales efforts. Over the year,
spent refractories also from the paper, cellulose
and aluminium industries were collected,
supporting customers across all markets with
their recycling efforts. In Argentina, the Group
focused on supplying a full range of high-
quality recycled products to the regional
market, in a closed loop approach with
steel customers.
India, West Asia & Africa
The India, West Asia & Africa region recorded
revenue of €627 million in 2022, a significant
increase of 31% in constant currency compared
to 2021 (€478 million). This increase was mostly
due to price increases, supported by 8% higher
sales volumes. On a reported basis, revenue
increased by 38% (2021: €455 million). The
steel market in India continued to grow in 2022
given higher levels of urban consumption and
infrastructure spending, driving demand for
capital goods, automobiles and materials for
roads and metro projects. India’s demand
outlook remains strong, led by an increase in
India’s steel consumption per capita and
supported by the government’s target to double
India steel production capacity by 2030. In
West Asia and Africa, higher oil prices are
expected to bolster demand for construction
activities in the medium term as well as from
large infrastructure projects in Egypt.
Steel revenue grew by 27% in the region in
constant currency to €486 million (2021: €381
million), with a 9% increase in volumes. This is
against a 5% increase in steel production in the
region, according to World Steel Association
data, which demonstrated significant market
share gains. Steel production in India is
expected to be stronger than previously
anticipated in 2023 given the reversal of a
policy to impose an export duty of 15% on steel,
although this is expected to be somewhat
offset by the imposition of import duties of
raw materials.
In West Asia and Africa, further price increases
will be implemented in 2023, as some contracts
do not yet fully reflect the higher cost
environment. There has been an strong focus
on increasing the number of solutions contracts
in West Asia and Africa, to protect customers
from supply chain volatility.
Industrial revenue increased by 47% in
constant currency to €141 million compared
to 2021 (€96 million). This was driven by price
increases and through the sale of more
profitable products such as non-ferrous metals.
Industrials volumes increased by 3%.
34 RHI MAGNESITA ANNUAL REPORT 2022
China & East Asia
The China & East Asia region recorded a
revenue increase of 12% compared to 2021,
to €420 million (€376 million) on a reported
basis and by 4% on a constant currency basis
(2021: €405 million) given the depreciation of
the euro against the Chinese Yuan and US
dollar. Volumes increased by 2% and the Group
was able to pass through some inflationary
costs. Steel revenues in the region increased
by 3% in constant currency to €231 million
(2021: €225 million), whilst volumes were flat.
Comparatively, World Steel Association data
reported a contraction of steel production in
China of 2% and a 3% contraction in the region
of China and East Asia.
The Chinese economy cooled in 2022,
impacted by strict COVID-19 lockdowns aligned
to its zero COVID-19 policy, which was
abolished in December 2022. The Chinese real
estate market, and therefore construction, was
especially weak during the year. Infrastructure
investment from government measures is
expected to support this end market in 2023.
Given the Group has a steel market share of just
1%, in the largest steel market globally, China
still presents a compelling growth opportunity.
Outside of China, developed markets Japan and
South Korea weakened towards the end of
2022, impacted by rising material costs and
labour shortages causing construction delays.
The region was also impacted by currency
devaluation and lower demand. Recovery is
expected in 2023 led by the automotive end
market, as supply chain issues ease, and yet
downside risks remain, given the region is a net
exporter of steel against a weakening global
economic backdrop.
Industrial revenue increased by 5% in 2022
compared to the prior year in constant currency
to €189 million (2021: €180 million), driven by
volumes increasing by 4%. This is reflective of
progress to regionalise the cement market, new
technology in glass and winning contracts in
non-ferrous metals with key customers.
Supply of refractories into the Chinese and
Eastern Asian cement market is expected
to strengthen in 2023, with the opening of
the new Alumina fired bricks plant in
Chongqing, China.
Given higher input costs in the western
hemisphere, sourcing of some raw materials
and finished products was moved to Asia,
which helped to reduce lead times and this
ensured products could be priced more
competitively. Inventory coverage ratios
decreased to 1.5x at 31 December 2022,
from 1.6x at 31 December 2021.
The Group targets the high-quality steel
segment in the region. Here, the Group’s
leading capabilities in R&D will benefit sales in
2023 as customers opt for more sophisticated
products and services, especially in flow
control, such as isostatic products and slide
gates. Successful trials of isostatic products
have been initiated in Japan and Korea. Given
China’s cost competitive position, new tundish
mixes have been developed in China as an
alternative to Eskişehir, Türkiye, given the
inflationary environment in Türkiye.
The solutions business model continues to be
an effective way of winning and retaining market
share. The Group was selected to be the
complete solutions provider of refractories for
future projects with the largest steel producer in
the world, based in China. A major contract with
the largest steel producer Vietnam, was
successfully renegotiated for three years at a
price of €65 million, where RHI Magnesita
manage their working capital, helping to drive
efficiency gains against volatile supply chains.
The Group have agreed to partner with
a major customer based in South Korea on the
design and development of refractories for the
DRI smelting unit, as the sustainable partner of
choice, as customers start to decarbonise
their processes.
Adjusted revenue in the cement business
increased by 31% however cement volumes in
the India/West Asia/Africa region decreased by
3%. Some market share in the cement business
was selectively lost in India, given tight plant
capacity. However, the Group’s market share in
cement grew in West Asia and Africa, coupled
with higher margins. A dynamic pricing
approach has been taken across the region for
industrial customers, offsetting cost volatility.
High inventory levels ensured seamless supply
for customers and reduced supply chain
volatility. A concerted effort was made to create
a more localised supply chain and allow for a
reduction in inventory. Shifting some production
to India from Europe reduced inventory at sea,
and the inventory coverage ratio in the region
reduced to 1.5x at year end (2021: 2.4x).
Digitalisation in the region has gained traction
and in 2022 the SAR+ was implemented to two
customers in West Asia and Africa, and there
was increased utilisation of the customer
portal for solutions contracts. The EMLI
(Electromagnetic Level Indicator) was installed
at the tundish of a major steel customer in India,
the first of its kind in the region. The APO was
installed at two major customer sites in India
on steel applications, and a further two were
implemented in West Asia.
Within Flow Control, successful trials were
executed in the isostatic thin slab segment,
tundish cold setting mixes, slide gates and
purge beams which either led to customer
orders in the region or are expected to convert
into orders in 2023. Lastly, a major steel
customer in the region made a new order for
billet caster refractories.
Performance
Operational review
continued
35RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Reporting approach
The Company uses a number of alternative
performance measures (“APMs”), in addition
to those reported in accordance with
International Financial Reporting Standards
(“IFRS”), which reflect the way in which the
Board and the Executive Management Team
assesses the underlying performance of the
business. The Group’s results are presented
on an “adjusted” basis, using APMs that are not
defined or specified under the requirements
of IFRS, but are derived from the IFRS financial
statements. The APMs are used to improve
the comparability of information between
reporting periods and to address investors’
requirements for clarity and transparency of
the Group’s underlying financial performance.
The APMs are used internally in the
management of our business performance,
budgeting and forecasting. A reconciliation
of key metrics to the reported financials is
presented in the section titled APMs.
All references to comparative 2021 numbers
in this review are on a reported basis, unless
stated otherwise. Figures presented at
constant currency represent 2021 translated
to average 2022 exchange rates as disclosed
in Note 3 to the Financial Statements. All
reported volume changes year-on-year are
excluding mineral sales, which is reported
under the industrials division. All reported
volume changes year-on-year are excluding
mineral sales. Revenue for mineral sales is
reported under the industrials division.
I am pleased to report that
we delivered a strong
increase in revenue,
earnings and profit
margins thanks to the
success of the price
increases, off-setting input
cost inflation, and
reduced financial
leverage.
Read more on APMs on
Page 241
Revenue
The Group recorded revenue of €3,317 million,
22% higher than 2021 (€2,729 million) on a
constant currency basis and by 30% on a
reported revenue basis (€2,551 million). The FX
revenue tailwind was largely due to a significant
appreciation of key currencies against the euro
including: 11% appreciation of US dollar (39% of
Group revenues), appreciation of Brazilian real
by 14% (6% of Group revenues), appreciation of
Indian rupee by 6% (7% of Group revenue) and
appreciation of Chinese yuan by 8% (6% of
Group revenues). The Turkish lira depreciated
by 66% against the euro (1% of Group
revenues). The Group benefited from a material
increase in product price increases throughout
2022 of €600 million to offset a significant rise
in input costs including labour, raw materials
and energy.
Raw material prices
The price of high grade dead burned magnesia
(“DBM”) from China was on average 2.2%
higher in 2022 compared to 2021, and medium
grade DBM was on average 7.7% higher.
During 2022 raw material prices softened
following a sharp increase in prices during Q4
2021, with high grade Chinese DBM declining
by 14% in 2022 and medium grade DBM from
China declining by 22%. The price of Chinese
electrofused magnesia declined by 25% given
weak demand and overcapacity. Chinese raw
materials prices softened during 2022 given
stable energy markets and subsidies in China,
keeping local production costs low. Prices
are likely to remain at current levels through
H1 2023.
Steel Division
The Group’s Steel Division delivered revenue of
€2,371 million, an increase of 30% on a
reported basis (2021: €1,823 million) and 21%
on a constant currency basis (2021: €1,961
million) and represents 71% of Group revenue.
Revenue from South America increased by
40% on a reported basis and by 22% on a
constant currency basis. Reported revenue from
North America increased by 38%, and 22% on
a constant currency basis. Volumes in South
America decreased by 5% and in North America
also decreased by 2%; however the Group was
successfully able to implement price increases
across these regions which was coupled with a
strong FX tailwind from the strength of the US
dollar and Brazilian real. Revenue in India &
West Asia increased by 35%, and by 27% on
a constant currency basis, as it benefited from
significant steel market growth reflected in
shipped volumes which increased by 9%.
Revenue in Europe and Türkiye increased by
20%, or by 22% on a constant currency basis,
given small market share gains and the
implementation of price increases in the region
to off-set high inflationary pressures, notably
energy. Volumes in the Europe & Türkiye region
decreased by 8%. Revenue in China and East
Asia increased by 12%, or 3% on a constant
currency basis, with regional steel volumes flat
despite the slowdown in China and steel
production contraction.
Industrial Division
The Industrial Division recorded revenues of
€946 million, 30% higher on a reported basis
(2021: €729 million) and 23% higher than 2021
(2021: €767 million) on a constant currency
basis. Cement and lime represents 11% of Group
revenues, and in 2022 grew by 18% to €378
million, from €322 million in 2021. Pricing for
cement and lime recovered in 2022 following
softer pricing in 2021 given the lower raw
material pricing environment in 2020.
Non-ferrous metal revenues increased by 51%
in 2022 to €219 million (2021: €145 million),
largely due to significant price increases during
2022, where implementation was delayed in
2021 due to later cycle contracts, and also from
increased demand, especially for copper and
nickel. Revenue in the glass division increased
by 47% to €154 million from €105 million in
2021, benefiting from increased demand from
China and from the solar panel market.
Industrial applications increased by 9% to
€102 million (2021: €94 million). Mineral
sales recorded revenue of €92 million
(2021: €63 million).
Ian Botha
Chief Financial Officer
(CFO)
Performance
Financial review
Adjusted EBITA margin %
36 RHI MAGNESITA ANNUAL REPORT 2022
Vertical integration margin
Refractory margin
2010 2011 2012 2013 2014 2015 2016
2017
2018
2019
202220212020
15
10
5
0
RHI standalone RHI Magnesita
11.6%
9.1%
2.5%
7.6%
6.1%
1.5%
8.5%
6.8%
1.7%
9.5%
7.3%
2.2%
9.0%
6.7%
2.2%
9.2%
6.7%
2.5%
7.9%
5.7%
2.2%
7.7%
5.1%
2.2%
9.7%
5.9%
3.8%
13.9%
8.4%
5.5%
14.0%
9.0%
5.0%
11.5%
9.1%
2.4%
11.0%
7.8%
3.2%
Cost of goods sold
Cost of goods sold increased by 30% to
€2,554 million in 2022, from €1,968 million
and by 22% from €2,097 million on a constant
currency basis.
Cost inflation was especially high compared to
2021 across purchased raw materials, energy,
plant personnel costs, freight and supplies.
Cost of production was also higher due to fixed
cost under absorption as production was
reduced to lower inventory levels, an impact
of €63 million.
Externally purchased raw materials costs
increased by €197 million to €1,173, an increase
of 20% on the prior year on constant currency
(2021: €976 million).
Energy markets became extremely volatile in
2022 following a significant increase in costs
starting in H2 2021 as post pandemic demand
returned, coupled by the Russia/Ukraine
conflict which caused a shortage of natural gas
globally and especially in Europe. Energy costs
during the year increased by 41% on constant
currency to €285 million from €202 million in
2021. The Group had pre-purchased 53% of its
energy contracts (including European natural
gas and power contracts), mitigating some of
this volatility.
The cost of ocean freight lanes, which
substantially increased during 2021, started to
normalise in 2022 as represented by the
Shanghai Containerised Freight Index, which
was on average 12% lower in 2022 than 2021,
reflective of overall Asia outbound freight rates
returning back to pre-pandemic levels.
However, the cost of some commonly used
freight lanes by the Group such as inbound to
North America (East Coast) and South America
from Europe remained very high and
significantly above pre-pandemic levels. Port
congestion decreased significantly however,
which has improved planning accuracy. Land
freight and transport costs increased during
2022, mostly due to fuel and labour costs.
Compared to 2021, freight costs increased by
17% on constant currency to €285 million in
2022 (2021: €244 million).
General supplies such as pallets, packaging
and spare parts increased to €171 million,
an increase of 18% on constant currency
(2021: €145 million).
Gross profit
The Group recorded gross profit of €763 million
in 2022, an increase of 31% (2021: €584
million) and 21% on a constant currency basis
(2021: €632 million). Gross margin was 23.0%,
10bps higher than 2021 (2021: 22.9%), however
20bps lower on a constant currency basis
(2021: 23.2%). Strength of major currencies
against the euro such as the US dollar, Indian
rupee and Brazilian real were an FX tailwind to
gross profit.
Broadly stable gross margin on an FX adjusted
basis reflects how effectively the price increase
programme offset the inflationary cost pressures
of raw material, energy, freight and labour.
On a divisional basis, gross profit in the Steel
Division of €521 million represented an increase
of 32% against the previous year (2021: €394
million), while gross margin increased by 40bps
to 22.0%, (2021: 21.6%). Gross profit in the
Industrial Division amounted to €242 million
(2021: €190 million), up by 27% against the
prior year, and gross margin declined by 50bps
to 25.6% (2021: 26.1%).
Steel 2022 2021 (reported) Change
Revenue (€m) 2,371 1,823 30%
Gross profit (€m) 521 393 32%
Gross margin 22.0% 21.6% 40bps
Industrial 2022 2021 (reported) Change
Revenue (€m) 946 729 30%
Gross profit (€m) 242 190 27%
Gross margin 25.6% 26.1% (50)bps
Performance
Financial review
continued
37RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
SG&A
Total selling, general and administrative
expenses, before R&D related expenses, were
€375 million, representing a 26% increase
against the prior year (2021: €297 million) given
inflationary costs. Personnel and personnel-
related expenses increased by €32 million.
FX impacted SG&A by a further €14 million.
The Group also incurred bad debts of
€4 million. Additional expenditure in the year
related to supply chain management initiatives,
digitalisation and sustainability.
Adjusted earnings per share
€4.82
2021: €4.52 per share
Adjusted EBITA margin
11.6%
2021: 11.0%
Capital expenditure
€157m
2021: €252m
Depreciation and amortisation
Depreciation for 2022 amounted to €116 million
(2021: €109 million), 6% higher than 2021.
Depreciation was flat on a constant currency
basis (2021: €117 million). Depreciation in 2023
is expected to be around €120 million,
excluding depreciation of the assets of DBRL,
Hi-Tech and Jinan New Emei. These will
contribute a further c.€10 million in
depreciation in 2023.
Amortisation of intangible assets amounted to
€29 million in 2022 (2021: €22 million).
Adjusted EBITDA
Adjusted EBITDA amounted to €500 million,
up by 28% compared to 2021 (2021: €389
million). The adjusted EBITDA margin for 2022
was 15.1%, compared to 15.2% in the prior year,
a decrease of 10bps. At constant currency,
EBITDA margin was 80bps lower (2021: 15.9%)
Adjusted EBITA
The Group delivered adjusted EBITA in 2022 of
€384 million, an increase of 37% compared to
2021 (2021: €280 million), as the €600 million
increase in revenues more than offset the €542
million of supply chain, raw material and energy
related cost headwinds and slightly softer sales
volumes of €16 million. The Group realised
an incremental €24 million in 2021 from its
strategic initiative programmes, with cost-saving
initiatives contributing €10 million and sales
strategies €14 million.
Given the success of the price increases over
the year, revenue grew by 30% in line with cost
of sales which also increased by 30%, and the
Group adjusted EBITA margin increased by
60bps to 11.6% (2021: 11.0%). On a constant
currency basis it remained broadly flat at 11.6%
(2021: 11.7%).
(€m) 2022 2021
2021 at
constant
currency
% change
reported
% change at
constant
currency
Revenue 3,317 2,551 2,729 30% 22%
Cost of sales (2,554) (1,968) (2,097) 30% 22%
Gross profit 763 584 632 31% 21%
SG&A (375) (297) (308) 26% 22%
R&D expenses (33) (28) (29) 17% 13%
Other Income & Expenses(OIE) (11) (44) (42) (74)% (73)%
EBIT 344 214 252 61% 36%
Amortisation 29 22 24 29% 21%
EBITA 372 236 276 58% 35%
Adjusted items 11 44 42 (74)% (73)%
Adjusted EBITA
1
384 280 318 37% 21%
Refractory EBITA 301 199 – 52% –
Vertical integration EBITA 81 81 – – –
1. Adjusted EBITA s an APM used by the Group. Refer to page 241 for definitions.
(€m) 2022 2021
Net interest expenses (19) (7)
Interest income 8 14
Interest expenses (27) (21)
FX effects (23) 3
Balance sheet translation (10) (2)
Deliverables (13) 5
Other net financial
expenses (31) (21)
Present value adjustment (9) (6)
Factoring costs (7) (5)
Pension charges (6) (5)
Non-controlling interest
expenses (1) (4)
Other (8) (1)
Total (73) (25)
The Group’s vertical integration margin was
impacted by higher cost of production of raw
materials for internal consumption given higher
energy and labour costs, and it consequently
decreased by 70bps to 2.5% (2021: 3.2%). The
Group’s refractory margin improved by 130bps
to 9.1%, as the Group recovered its supply
chain headwind costs through price increases
compared to 2021 where there was a delay
in implementing price increases to cover
the higher cost environment. The EBITA
contribution of the Group’s raw material assets
was €81 million, unchanged from 2021 (2021:
€81 million), based on external market price
benchmarks for the raw materials produced.
Net finance costs
Net finance costs in 2022, including gains and
losses relating to foreign exchange, amounted
to €73 million (2021: €25 million).
Net interest expense amounted to €19 million in
2022 (2021: €7 million), with interest expenses
on borrowings of €27 million (2021: €21 million)
and interest income of €8 million (2021:
€14 million). Interest income in 2021 benefited
from a one-off gain of €11 million relating to a
favourable indirect tax ruling in Brazil. Interest
income in 2022 benefited from a higher interest
rate environment.
Interest expenses on borrowings increased due
to higher benchmark interest rates on floating
debt, and the average cost of borrowing
increased from 1.4% to 1.9% (including swaps),
as well as higher average gross debt.
38 RHI MAGNESITA ANNUAL REPORT 2022
Performance
Financial review
continued
Foreign exchange losses of €23 million were
incurred including losses on embedded
currency derivatives in sales contracts of €13
million and net exchange losses on translation
of monetary assets and liabilities of €10 million.
This given the considerably more volatile
foreign exchange movements in 2022.
Comparatively, a foreign exchange gain of
€3 million was incurred in 2021.
Other net financial expenses amounted to
€31 million in 2022 (2021: €21 million). This
was mostly due to the recurring non-cash
impact of the onerous raw material supply
contract, imposed as an EU remedy upon the
merger of RHI and Magnesita of €9 million
(2021: €6 million), factoring costs of €7 million
(2021: €5 million), interest costs and fair value
adjustments on puttable or fixed term non-
controlling interest liabilities of €1 million (2021:
€4 million) and pension charges of €6 million
(2021: €5 million). Other mainly includes
transaction costs and interest on finance leases.
Adjusted net financial expenses of c.€65 million
are guided for 2023, comprising net interest
expenses on debt facilities and cash balances
of c.€40 million (2022: €19 million) and
other financial expenses of c.€25 million
including above others, present value
adjustments, pensions charges, factoring
and transactions costs.
The expected increase in net interest expenses
is driven by higher interest costs on floating
debt facilities and newly refinanced facilities
as well as additional borrowings to fund
acquisitions during the period.
Other expenses that are excluded from the
adjusted net financial expenses guidance given
above include the potential impact of foreign
exchange rates on balance sheet translations
and the value of embedded derivatives in sales
contracts, which amounted to expenses of
€23 million in 2022.
Items excluded from adjusted
performance
In order to accurately assess the performance of
the business, the Group excludes certain items
from its adjusted figures, to better understand
underlying performance. In 2022, these
adjustments comprise:
• €11 million recorded in “restructurings,
other income and expenses”, relating to the
reversal of the impairment of the Mainzlar
plant, Germany and Russia bad debts
and inventory write downs, land sales,
termination of a sales agent contract, one-off
project expenses, acquisitions and internal
business restructurings;
• €29 million amortisation of intangible assets;
• €7 million non-cash other net financial
expenses, these include €6 million
non-cash present value adjustment of the
provision for the unfavourable contract
required to satisfy EU remedies at the time of
the combination of RHI and Magnesita to
form RHI Magnesita; and
• €24 million income tax adjustments mainly
from non-cash one-off (i) restructuring,
(ii) charges following agreements with
tax authorities on the allocation of
group functions and responsibilities,
(iii) adjustments to prior year tax provisions.
(€m)
2022
reported
Items excluded
from adjusted
performance
2022
adjusted
2021
reported
Items excluded
from adjusted
performance
2021
adjusted
EBITA
1
372 11 384 236 44 280
Amortisation (29) 29 – (22) 22 –
Net financial expenses (73) 7 (66) (25) 6 (19)
Result of profit in joint ventures 0 – 0 100 (91) 9
Profit before tax 270 47 318 289 (19) 270
Income tax (104) 24 (80) (39) (10) (49)
Profit after tax 167 70 237 250 (28) 222
Non-controlling interest 11 – 11 7 – 7
Profit attributable to shareholders 156 70 226 243 (28) 215
Shares outstanding
2
47.0 – 47.0 47.6 – 47.6
Earnings per share (€ per share) 3.31 1,51 4.82 5.10 (0.58) 4.52
1. EBITA reconciled to revenue on page 37. EBITA is an APM, refer to page 241 for definition.
2. Total issued and outstanding share capital as at 31 December 2022 was 47,017,695. The Company held 2,460,010 ordinary shares in treasury. Weighted average number of shares used for basic
earnings per share 47,000,708.
Numbers may not cast due to rounding.
We have a long dated amortisation profile with
competitive cost of debt, with an average interest
rate of around 190bps, all-in, in 2022.
Rodrigo Guerra
Group Treasurer
39RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
ROIC
11.6%
2021: 9.6%
Adjusted EBITA
€384m
2021: €280m
Operating cash flow
€155m
2021: €(254)m
Shareholder returns & M&A
€136m
Profit after tax
On a reported basis, the Group recorded a profit
after tax of €167 million (2021: €250 million)
and earnings per share of €3.31 per share in
2022 (2021: €5.10 per share). Adjusted profit
after tax was €237 million (2021: €222 million)
and adjusted earnings per share for 2022 was
€4.82 per share (2021: €4.52 per share).
A full reconciliation of EBITA to EPS and
adjusted EBITA to adjusted EPS can be found
on the table on page 38.
Earnings guidance
The Group’s outlook for revenue, EBITDA and
EBITA in 2023 is broadly in line with current
analyst consensus.
Refractory sales volumes are expected to be up
to 5% lower in 2023, reflecting lower steel
demand from customers in China and South
America, and a contraction in construction
activity which will affect steel, cement and lime,
non-ferrous metals and glass demand globally.
Finished goods pricing is forecast to be softer
compared to 2022 as lower raw material prices
and normalisation of sea freight rates are only
partially offset by higher energy and labour
costs for non-vertically integrated competitors.
Reduced costs from lower prices for externally
purchased raw materials and normalised sea
freight rates are expected to be offset by higher
year on year energy costs and labour inflation.
Whilst spot energy prices in certain
geographies and benchmarks have returned to
lower levels, oil prices remain elevated and the
Group’s overall hedged position for energy
prices in 2023 is an increase on 2022 actual
costs. Broadly flat unit costs are therefore
expected to lead to a direct pass through of
lower pricing to profitability.
The low vertical integration EBITA margin
contribution of 1.7% recorded in the second half
of 2022 is expected to persist into 2023 due to
lower global prices for magnesite and dolomite
based raw materials, combined with higher
energy and labour costs at the Group’s raw
material production sites. Refractory margins
may also be impacted by lower refractory
pricing, resulting in a total Group EBITA margin
of around 10% in 2023 (2022: 11.6%).
Working capital
Working capital increased by €241 million
to €918 million (2021: €677 million), which
represented 25.4% in working capital intensity
(2021: 23.3%), measured as a percentage of
the last three months’ annualised revenue of
€3,615 million.
Working capital comprised; €1,049 million of
inventory (2021: €977 million) and inventory
intensity of 29.0% (2021: 33.6%), accounts
receivable of €375 million (2021: €349 million)
and accounts receivable intensity of 10.4%
(2021: 12.0%) and accounts payable of €507
million (2021: €649 million) and accounts
payable intensity of 14.0% (2021: 22.3%).
Inventories increased by €72 million during
2022 to €1,049 million (2021: €977 million),
given inflationary costs and foreign exchange
impacts. Non-cash foreign exchange translation
differences amounted to €23 million, given the
volatile foreign exchange movements during
2022. Cost inflation of finished goods and raw
material increased the inventory value by a
further €195 million. The inventory balance
increased by an additional €19 million from
M&A. These headwinds more than off-set the
reduced inventory volumes to 607 kilotonnes,
182 kilotonnes lower than at year-end 2021
(2021: 789 kilotonnes). The volume reduction
had a positive impact on the inventory balance
of €(165) million.
A decision was taken in 2021 to pro-actively
increase inventory of raw materials and finished
products given disruption across ocean freight
lanes and supply bottlenecks, as economies
re-opened. As these have improved in recent
months, the finished goods coverage ratio has
been reduced from 2.5x months at 31 December
2021 to 1.8x months at 31 December 2022, and
raw materials coverage ratio from 2.4x months
at 31 December 2021 to 2.3x months at
31 December 2022.
Accounts receivable increased by €26 million
at the end of 2022 reflective of higher product
pricing and including an additional €9 million
of accounts receivable from the integration of
SÖRMAŞ and Horn & Co. Accounts receivable
is calculated as trade receivables plus contract
assets less contract liabilities, and a full
reconciliation can be found in the APMs on
page 241.
Accounts payable decreased by €143 million
to €507 million (2021: €649 million), due to
a lower volume of externally purchased raw
materials than in 2021. Accounts payable refers
to trade payables as per the financial statements
on note 32.
Taxation
Total tax for 2022 in the income statement
amounted to €104 million (2021: €39 million),
representing a 38% reported effective tax rate
(2021: 14%). The effective tax rate in 2022
increased, mainly from non-cash one-off items
including (i) restructuring, (ii) charges following
agreements with tax authorities on the
allocation of group functions and
responsibilities, and (iii) reduction in the
deferred tax asset valuation following the
reduction in the Austrian tax rate. See note 14.
Reported profit before tax amounted to €270
million (2021: €289 million). Adjusted profit
before tax amounted to €318 million (2021:
€270 million), with an adjusted effective tax rate
of 25% (2021: 18%). Adjusted items include tax
expenses related to one-off restructuring or
unrelated business items.
The adjusted effective tax rate guidance is
between 23 – 25% for 2023.
40 RHI MAGNESITA ANNUAL REPORT 2022
Performance
Financial review
continued
Capital expenditure
Capital expenditure (“capex”) in 2022 was
€157 million (2021: €252 million), comprising
€77 million of maintenance capex (2021:
€75 million) and €79 million of project capex
including €13 million from businesses acquired
(2021: €177 million). Capex has started to
return to lower levels in 2022, following the
peak capex year for the Group in 2021 as it
invested in its production optimisation plan.
In 2022, the Group invested €37 million
(2021: €61 million) towards its raw material
assets, including maintenance capex of
€13 million (2021: €13 million) and project
capex of €24 million (2021: €48 million).
The project capex of €79 million spent in 2022
was below prior guidance of €115 million given
delayed projects and the Group’s decision to
temporarily suspend the project at Contagem,
Brazil. Project capex amounting to €20 million
has moved into 2023 from 2022, to complete
the Brumado tunnel kiln, the Alumina plant
expansion at Chongqing, China and the
manufacturing execution systems (“MES”)
project at Radenthein, Austria.
Capital expenditure in 2023 is expected to be
around €200 million. This comprises €85
million of maintenance capex and €75 million of
expansionary capex, both as previously guided.
In addition, there is €20 million of maintenance
and integration capex at new acquisitions in
India and China and €20 million of
expansionary capex previously guided to be
incurred in 2022 carried forward into 2023 due
to the timing of payments on capital projects.
Cash flow
The Group generated adjusted operating
cash flow of €155 million in 2022 (2021:
€(254) million outflow), representing cash flow
conversion from adjusted EBITA of 40%
(2021: (91)%). Adjusted operating cash flow was
materially higher in 2022 compared to 2021,
given lower expansionary capex, following the
peak investment on the Production Optimisation
Plan in 2021. Despite the inflationary
environment, the inventory volume reduction
helped to lower working capital cash outflow in
2022 compared to 2021. Lower cash outflows
were coupled with higher EBITDA by 28%.
Free cash flow was €43 million (2021: €(347)
million). Income taxes paid €54 million (2021:
€39 million) and net interest paid were
€36 million (2021: €25 million).
Cash change in net debt was an increase of
€82 million (2021: €416 million). Investment in
subsidiaries including the acquisitions of Horn
and SÖRMAŞ amounted to €65 million (2021:
€3 million – inflow). Dividend payments were
flat €71 million (2021: €71 million).
Working capital financing, used to provide
low-cost liquidity and support the Group’s
commercial offering to customers, stood at
€314 million at the end of the year (31 December
2021: €320 million). This comprised €245
million of accounts receivable financing
(factoring) (2021: €178 million) and €69 million
of accounts payable financing (forfeiting) (2021:
€142 million). Working capital financing levels
vary according to business activity, and the
Group targets an upper limit of €320 million.
Working capital cash outflow amounted to
€195 million. Non-cash negative impact from
working capital on the balance sheet amounted
to €46 million, with €24 million relating to
consolidation of M&A and €22 million relating
to currency translation.
The Group made good progress in reducing its
inventory volumes by 23% in 2022, with a
weighting towards H2. In 2023 the Group plans
to keep production volumes broadly in line with
demand. The Group is running at higher levels
of inventory compared to before the pandemic
in 2019, as it prioritises security of supply for its
customers. This delivered material benefits in
the form of market share gains and price
increases in 2022. Given the value creation
from higher inventory levels in 2022, the Group
is now targeting for working capital intensity to
remain at around 25% during 2023.
Other assets and liabilities
Cash flows from other assets and liabilities
amounted to €(2) million (2021: €(115) million)
mainly relating to; indirect and other tax of €29
million (2021: €(53) million), employee pension
pay outs and pension provision movements of
€(25) million (2021: €(19) million), employee
variable remuneration and employee related
provisions of €16 million (2021: €(17) million)
and other of €(21) million (2021: €(25) million).
We increased our cash flow conversion to 40%
from (91)% in 2021, thanks to higher profitability,
lower working capital outflows and lower capex.
Ian Botha
CFO
41RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Cash flow €m
1,2
2022 2021
Adjusted EBITDA 500 389
Share based payments – gross non cash 8 6
Working capital changes (195) (283)
Changes in other assets and liabilities (2) (115)
Investments in PPE, IA (157) (252)
Adjusted operating cash flow
3
155 (254)
Income taxes paid (54) (39)
Cash effects of other income/expenses and restructuring (24) (51)
Cash inflows from the sale of PPE, IA 2 12
Cash inflows from the sale of financial assets 3 0
Investment subsidies received 1 2
Cash inflow from joint ventures and associates 0 8
Net interest paid/received (36) (25)
Net derivative cash inflow/outflow (2) 1
Dividend payments to NCI (2) (1)
Free cash flow 43 (347)
Investment in subsidiaries net of cash (SÖRMAŞ, Horn, Chongqing) (65) 3
Cash in from sales of subsidiaries net of cash 9 95
Treasury stock 0 (96)
Dividend payments (71) (71)
Change financial receivables from joint ventures & associates 2 0
Cash change in net debt (82) (416)
Debt from acquisitions (Horn/SÖRMAŞ) (19) –
New lease obligations (20) (13)
Exchange effects (33) (3)
Actual change in net debt (154) (432)
1. The cash flow reconciliation to net debt has been restated to reflect a change in definitions of adjusted operating cash flow,
free cash flow and cash change in net debt.
2. A full reconciliation to the change in cash and cash equivalents can be found in the APM section on page 241.
3. Adjusted operating cash flow is an APM. A definition and reconciliation can be found in the APM section on page 241.
Net debt
1
Net debt at the end of 2022 was €1,168 million
(2022: €1,014 million), comprising total
borrowing of €1,624 million, IFRS 16 leases
of €64 million, cash and cash equivalents of
€521 million.
Net debt to Adjusted EBITDA at the year-end
was 2.3x (2021: 2.6x) and as such an
outperformance against most recent guidance
in November 2022 that leverage at the end of
the year would be around 2.4x.
Additional refinancing was conducted in
2022 to maintain liquidity levels, extend debt
maturities and establish links to the Group’s
sustainability performance.
In May 2022, RHIM refinanced the outstanding
principal of €260m of the €305 million
OeKB Term Loan maturing in June 2023 and
increased the overall facility amount by signing
an additional OeKB-backed tranche of €90
million. The total outstanding loan balance as
of 31 December 2022 is €350 million and the
refinanced loan now has a final maturity in May
2027. In July 2022, the Group secured a new
environmental, social and governance (“ESG”)
linked €250 million term loan maturing in 2027
of which proceeds were used to refinance the
$200 million term loan maturing in 2023 at
very competitive interest rates. Additionally,
the maturity of the Group’s €600 million
Syndicated RCF was extended by one year
to 2028 through the execution of the third
extension option.
Out of the total gross debt of €1,624 million,
96% is denominated in euro. The floating to
fixed ratio of the gross debt is 24% to 76%
and the average interest rate is 1.9%
(including swaps).
Total liquidity for the Group at year end was
€1,121 million, including undrawn committed
facilities of €600 million and a cash balance of
€521 million.
The Group will have debt maturities of
€215 million in 2023, of which €79 million
are rollable facilities.
Gearing levels may increase from the 2.3x
recorded on 31 December 2022 due to
€200 million of cash outflow from M&A
(DBRL, Hi-Tech and Jinan New Emei) and lower
profitability in 2023 caused by lower demand.
RHI Magnesita India Limited (“RHIM India”), the
Group’s 60% owned subsidiary, which is listed
on the National Stock Exchange of India and the
Bombay Stock Exchange, has requested
authority from its shareholders to raise funds
from the issuance of new equity up to an
amount of ₹ 1,500 crore (c.€170 million). The
proceeds from any potential equity raise would
be used for the repayment or partial repayment
of ₹ 1,300 crore (c.€147 million) of loans used to
finance the acquisitions of DBRL and Hi-Tech,
which completed in January 2023, and for
general corporate purposes. If approved, the
shareholder authority would remain in place for
12 months. Any equity raise carried out under
this authority is subject to market conditions.
The Group will retain its majority shareholding
in RHIM India.
1. Net debt is an APM. The definitions and calculations thereof
can be found in the APM section on page 241.
42 RHI MAGNESITA ANNUAL REPORT 2022
Return on invested capital
2
ROIC is used to assess the Group’s efficiency in
executing its capital allocation strategy, which is
aimed at enabling organic growth, disciplined
M&A and shareholder returns. The Group ROIC
in 2022 was 11.6% (2021: 9.6%), from a total of
€2,587 million of invested capital (2021: €2,291
million) and €301 million net operating profit
after tax (NOPAT) (2021: €219 million). Raw
material ROIC was 12.3% (2021: 16.2%), from
a total of €466 million of invested capital
(2021: €377 million) and €57 million NOPAT
(2021: €61 million).
2. ROIC is an APM used by the Group. The definitions and
calculations thereof can be found in the APM section on
page 241.
Strategic initiatives
The Group is progressing two significant
strategic programmes to sustainably increase
earnings.
The Production Optimisation Plan seeks to
rationalise the Group’s global production
footprint through the closure of up to ten sites
(with a focus on Europe and South America) and
investments in remaining facilities to increase
plant scale and specialisation, reduce raw
material costs and implement new
technologies.
The Group has completed all plant closures
and projects across North America, Germany,
India and China during 2022. The Group
completed its project to create the leading
Dolomite Resource Centre in Europe through
the investment in a new mine and installation
of a tunnel kiln at Hochfilzen, Austria. It also
made substantial progress at its Radenthein
plant, Austria.
In 2022, the cost reduction initiatives delivered
EBITA benefit of €76 million, representing an
incremental increase of €10 million on 2021.
The cumulative targeted benefits from sales
strategies in 2023 remains €40-60 million.
However, total savings to be derived from the
cost optimisation plan are now expected to be
in the region of €85 million in 2023 compared
to the previously guided figure of €110 million,
due to the suspension of the second stage of
the Contagem plant upgrade in Brazil and the
decision not to close the Mainzlar plant in
Germany. The full benefits of the strategic cost
savings are now expected to be realised from
the start of 2024 due to construction delays at
the rotary kiln in Brumado. The Mainzlar plant
will operate more competitively in the future
following the launch of a new line of doloma
products to serve new customers, with raw
material sourced from Hochfilzen, Austria.
The Group’s sales strategies seek to grow RHI
Magnesita’s presence in new markets including
India and China, increase market share in the
flow control product range and expand the
solutions business targeting 40% of revenue by
2025, supported by investment in digitalisation.
Sales strategies delivered €32 million of
cumulative EBITA in 2022. The Group is
targeting to achieve the lower end of €40 –
60 million in 2023 but exceeded its target of
€30 million in 2022. The Group increased the
percentage of Group revenue from solutions
contracts to 32% in 2022 (2021: 29%).
The Group benefitted from strong organic
and inorganic revenue contribution from new
markets, and the JV with Chongqing in China
and acquisition of SÖRMAŞ in Türkiye. It will
benefit further in 2023 from the acquisitions
of the refractory business of Hi-Tech and the
Indian refractory business of DBRL, both based
in India. Increased flow control sales are
expected in 2023 following successful trials
during 2022. Flow Control is a target product
group given its higher margins, higher return
on capital and complimentary cross-selling
to customers.
Flow Control pricing increased at a lower rate
than refractory linings, especially in the tundish
product segment, and percentage of revenue
decreased to 15.8% (2021: 17.0%). 2021 Flow
Control revenue was restated to €433 million
(from €430 million) due to a re-classification
internally).
For more information on the strategic initiatives,
read pages 14 and 25 of the strategic review.
Performance
Financial review
continued
Debt amortization profile
(€m as at 31 December 2022)
136
339
235
586
687
600
87
64
23
215
2023
1
2024
2025
2026
2027
2028
2029+
IFRS 16
Revolving credit facility Debt
1. €79m are rollable facilities.
Change to target gearing range
As part of its stated capital allocation policy, the
Group has previously sought to maintain a net
debt to EBITDA ratio of 0.5 to 1.5x, with potential
to increase to over 2.0x in the case of M&A.
The Board believes it is appropriate to revise
the targeted gearing range, considering:
(i) the Group’s current and forecast level of
gearing in the medium term;
(ii) the resilience of margins and profitability
throughout economic cycles;
(iii) the improved reliability for customers
resulting from higher levels of working
capital in 2022; and
(iv) the strength of the current M&A pipeline.
For the duration of the expected phase of
consolidation in the refractory industry, the
Group will now target a net debt to EBITDA
ratio of 1.0 to 2.0x, with flexibility to increase
to over 2.5x in the case of compelling M&A
opportunities. The Board believes that it is in the
interests of shareholders to seek this increased
flexibility due to the acquisition opportunities
that are available and the demonstrated stability
of the Group’s earnings.
43RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
M&A
The Group targets acquisition opportunities in
new markets in which it is underrepresented
such as India, China and Türkiye, and
complementary to its existing plant footprint. It
also targets new product segments, such as the
non-basic segment (e.g. Alumina). The Group
seeks to achieve synergies in excess of 30%
EBITDA upon integration, and integration
would usually complete within two years.
In December 2021, the Group completed
the acquisition of a 51% ownership stake in
Chongqing Boliang Refractory Materials in
return for an initial consideration of €5 million
and is currently investing €15 million into a new
production capacity to build a state-of-the-art
Alumina fired bricks plant to serve the
Cement market. The new plant is on track
to start production in Q3 2023.
In May 2022, the Group acquired a 51% stake in
Horn & Co Minerals Recovery GmbH & Co KG,
to combine its recycling activities in Europe to
create a newly formed entity, MIRECO Horn &
Co. RHIM Minerals Recovery GmbH. The Group
increased its recycling rate to 10.5% in 2022
and benefited from increased availability of raw
material supply.
In September 2022, the Group completed its
acquisition of an 87% ownership stake in Söğüt
Refrakter Malzemeleri Anonim Şirketi
(SÖRMAŞ), a producer of refractories for the
cement, steel, glass and other industries in
Türkiye, for a consideration €45 million in cash.
On 5 January 2023, the Group closed the
acquisition of the Indian refractory business of
Dalmia Bharat Refractories Limited (DBRL) via
a Share Swap Agreement, in exchange for
27 million shares in RHI Magnesita India Limited,
a 60% owned subsidiary of the Group which
is listed on the Bombay Stock Exchange and
National Stock Exchange of India. DBRL is one
of the leading refractory producers in India with
production capacity of over 300k tonnes per
annum from five refractory plants, inclusive of
a 51% joint venture in Katni, India. Following the
acquisition, the Group’s shareholding in RHI
Magnesita Limited reduced from 70% to 60%
and the Dalmia Bharat Group and minority
shareholders in DBRL now hold a combined
14% stake in RHI Magnesita India Limited. Based
on the closing share price of RHI Magnesita
India Limited on 18 November 2022 of ₹645 per
share, the Consideration Shares had a value of
approximately ₹17,424 million (€212 million).
DBRL recorded adjusted EBITDA of ₹945 million
(€12 million) in the year to 31 March 2022 and
had Gross Assets of ₹13,925 million (€170
million) at 31 March 2022. The Group will
consolidate its earnings and approximately
€54 million of net debt through its majority
shareholding in RHI Magnesita India Limited,
resulting in a marginal increase in gearing at
Group level. The acquisition is expected to be
accretive to Group earnings per share.
As announced on 13 January 2023, the Group
entered into an agreement to acquire a 65%
shareholding in Jinan New Emei Industries Co.
Ltd, a company registered in China. Jinan New
Emei is a well established producer of refractory
slide gate plates and systems, nozzles and mixes
for use in steel flow control, employing over
1,300 people and headquartered in Shandong
province, China. The Group will acquire
the initial 65% shareholding for a total
cash consideration of around €40 million
(CNY 293 million).
On 31 January 2023, the Group, through
its listed subsidiary in India, RHI Magnesita
India Limited, completed the acquisition of
the flow control refractory business of Hi-Tech
Chemicals Limited (Hi-Tech) for a total
consideration of c.€78 million. The refractory
business recorded profit before tax of €8.2
million in the year to 31 March 2022. The
acquisition will further strengthen the Group’s
position in the high-growth market of India,
as well as its target market Flow Control.
The acquisition will be funded through a
combination of intercompany loans from
the Group and local bank lending.
The Group spent €65 million in cash on
transactions in 2022 and expects to spend a
further c.€200 million in cash in 2023 from
the transactions announced in late 2022 and
early 2023.
The aggregate incremental EBITDA
contribution from MIRECO, SÖRMAŞ, Hi-Tech,
DBRL and Jinan New Emei is expected to be
€25-30 million in 2023. EBITDA synergies of
between 30 and 50% of trailing EBITDA are
targeted following the full integration of each
business into the Group’s global network over
the next two to three years.
Returns to shareholders
The Board’s capital allocation policy remains
to support the long-term Group strategy,
providing flexibility for both organic and
inorganic investment opportunities and
delivering attractive shareholder returns over
the midterm. These opportunities will be
considered against a framework of strategic fit,
risk profile, rates of return, synergy potential and
balance sheet strength.
The Group spent €79 million on project
capital expenditure in 2022, which includes
investment towards the Production Optimisation
Plan and M&A. In 2022, the Group incurred
total capital expenditure of €157 million.
Given the resilient performance of the business
in 2022, the Board has recommended a final
dividend of €1.10 per share for the full financial
year, and €52 million in aggregate. This
represents a dividend cover of 3.0x adjusted
earnings per share. Subject to approval at the
AGM on 24 May 2023, the final dividend will be
payable on 6 July 2023 to shareholders on the
register at the close of trading on 9 June 2023.
The ex-dividend date is 8 June 2023. This
represents a full year dividend of €1.60
per share.
The Board’s dividend policy remains to target a
dividend cover of below 3.0x adjusted earnings
over the medium term. Dividends will be paid on
a semi-annual basis with one third of the prior
year’s full year dividend being paid at the interim.
44 RHI MAGNESITA ANNUAL REPORT 2022
45RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Our risk
management
approach
The Group has an established
risk management approach
with the objective of identifying,
assessing and controlling
uncertainties and risks that
could impact the delivery of
RHI Magnesita’s strategy.
Read more
on our risk management
Page 46
46 RHI MAGNESITA ANNUAL REPORT 2022
1
Identification
Starting from all the possible
categories of risks potentially
impacting the Group, specific
risks relevant to RHI Magnesita
are identified through several
analytical tools, including
comparative analysis and risk
benchmarking.
2
Assessment
The risks identified are linked
to potential root causes and
assessed for their inherent
likelihood, inherent impact,
and velocity. Risk analysis to
develop an understanding of
the possible interdependen-
cies between risks is
performed.
4
Monitoring
Risks and associated
mitigating measures are
reassessed quarterly during
the year, with increased
frequency for those areas
experiencing significant
changes in the risk landscape.
The remaining risk level is
evaluated to ensure that it is
aligned with the Group’s risk
appetite and reviewed on a
quarterly basis by the EMT.
3
Mitigation
All risks considered to be outside of the Group risk
appetite, due to their nature or their potential
financial or qualitative impacts, are mitigated by
appropriate risk management strategies. The
implementation and effectiveness of the defined
mitigation measures are reviewed, and additional
actions are defined if necessary. For this purpose,
risks are assessed based on their likelihood
and impact before and after the implementation
of those mitigation measures.
5
Reporting
Risks that require immediate
action are reported
immediately to line
management for action. Risks
that do not require immediate
action are reported
periodically to the operational
management and on a
quarterly basis to the EMT.
Risk management cycle
Reporting
5
Identification
1
Assessment
2
Mitigation
3
Monitoring
4
Herbert Cordt
Chairman of the
Board of Directors
Our approach to risk management
Our risk management efficiency and
effectiveness further improved in 2022 by
enhancing the Group-wide integrated risk
management approach established in 2020.
During the third year of this established
approach, the Group focused on maturing the
risk management framework by further
embedding the risk tools, culture and awareness
into key areas of the Company. A regionalised
risk management approach was further
developed with the purpose of providing the
Regional Leadership Teams with insights into
current and emerging risks and a
comprehensive regional risk profile, which is
fully integrated within the Group-wide risk
management approach.
The risk management approach combines
top-down, bottom-up and deep-dive risk
assessments. The top-down risk assessment is
performed by the EMT and reviewed by the
Audit & Compliance Committee and the Board
of Directors. Reporting against these risks is
included within quarterly EMT meetings,
Audit & Compliance Committee meetings and
the annual Board-led strategic review.
The bottom-up risk assessment is based on
each of the operational sites, which maintain
ongoing risk management activity linked to the
ISO risk management practices.
Deep-dive risk assessments are performed for
areas of emerging or prevailing risks, which, in
2022, included capex, plant operations, fraud
management and sustainability, including
climate-related risks and opportunities. In
addition, the Group undertook a series of ‘Black
Swan Workshops’ to develop a framework for
the identification and mitigation of high-impact
and very low-probability events.
The information from the bottom-up and the
deep-dive risk assessments is integrated into
the top-down risk assessments to ensure that
the Group risk profile is complete and accurate.
Risks and strategy
Our risk management approach helps the Board
and EMT to understand the risks associated with
the adopted strategy, periodically assess if the
strategy is aligned with our risk appetite and
Risks
Effective risk
management
During the year, the macroeconomic environment has increased
in complexity and the Group’s risk management capabilities have
proved to be robust in the face of the challenges presented.
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.
47RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Impact
low moderate high critical
Likelihood
very likely
likely
possible
unlikely
5 6 8
9
10
4
7
3
2 1
Principal risks 2021 Principal risks 2022
1
Macroeconomic environment
1
Macroeconomic and geopolitical environment
2
Supplier dependency risk
–
Deprioritised
3
Inability to execute key strategic initiatives
2
Inability to execute key strategic initiatives
4
Significant changes in the competitive
environment or speed of disruptive innovation
3
Significant changes in the competitive
environment or speed of disruptive innovation
5
Reliability of the end-to-end value chain
4
Reliability of the end-to-end supply chain
6
Sustainability – environmental and
climate risks
5
Sustainability – environmental and climate risks
7
Sustainability – Health and Safety risks
6
Sustainability – Health and Safety risks
8
Regulatory and compliance risks
7
Regulatory and compliance risks
9
Cyber and information security risks
8
Cyber and information security risks
10
Ability to predict and pass cost increases to
customers
9
Ability to strategically price and deliver price
increases
11
Organisational capacity to execute strategy,
including demonstrating Company cultural
values
10
Organisational capacity to execute strategy,
including demonstrating Company cultural
values
Unchanged Scope broadened Deprioritised
understand how the chosen strategy could
affect the Group’s risk profile, specifically the
types and amount of risk to which the Group
is potentially exposed. As part of this process,
risk scenarios are evaluated to assess
potential outcomes.
The assessment, monitoring and mitigation of
key risks to the strategy are prominent features
of the enhanced approach to risk management
adopted in 2020 and further enhanced in
2022. Risk workshops have been conducted
with the EMT 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. The Group’s key financial risks are
disclosed under Note 37 to the Consolidated
Financial Statements.
Risk appetite
We define risk appetite as ‘the nature and extent
of risk RHI Magnesita is willing to accept in
relation to the pursuit of its objectives’. We look
at risk appetite from different angles, such as the
severity of the consequences should the risk
materialise, any relevant internal or external
factors influencing the risk, and the status of
management actions to mitigate or control the
risk. A scale is used to help determine the risk
appetite threshold for each risk, recognising that
risk appetite will change over time.
If a particular risk exceeds its risk appetite
threshold, it will threaten our objectives and
therefore require significant risk mitigation and
potentially a change to the strategy. Risks that
approach the limit of the Group’s risk appetite
may require acceleration or enhancement of
management actions to ensure that risk remains
within appetite levels.
The risk management approach is based on an
assessment of the risk appetite formed by the
Board, covering the key risk categories (‘averse’,
‘limited’, ‘moderate’ and ‘high’). The risk appetite
statements are approved by the Board and are a
foundational element of our risk framework as
they provide guidance to management on the
amount and type of risk we seek to take in
pursuing our objectives.
Our principal risks
The principal risks are those the Board considers
may have a significant impact on the results
of the Group and on its ability to achieve its
strategic objectives. This does not represent an
exhaustive list of risks faced by the Group but
encompasses those considered to be most
material to business performance.
The risks can occur independently from each
other or in combination. Extraordinary events,
such as the Russia/Ukraine conflict or global
logistic challenges, have the potential to
crystallise multiple principal risks simultaneously,
significantly magnifying the adverse impact.
In 2022, the macroeconomic and geopolitical
environment increased the risk management
challenges in key areas of the business.
As a response to the current circumstances,
continuous monitoring of the Group’s risk
profile, with specific reference to the potential
cumulative impact arising from the crystallisation
of risks, was undertaken by the EMT during the
year and mitigating actions were taken.
Ten out of 11 principal risks included in the 2021
Annual Report have been confirmed to be
equally relevant in 2022. The risks have been
reviewed throughout the year, and it has been
determined that the principal risk, ‘Supplier
dependency risk’, should no longer be reported
as a principal risk. This risk has been
deprioritised due to significant progress in
finding alternative suppliers for raw material
previously sourced from a single supplier.
Further, the principal risk ‘Macroeconomic
environment’ was extended to ‘Macroeconomic
and geopolitical environment’ to also cover
political unrests, country risks and the energy
supply risk.
A comparison against the principal risks of 2021
is highlighted in the table above.
Emerging risks
Identifying emerging risks is a key part of our risk
management process. The risks captured by the
Regional or Global Risk Dashboards are directly
Group risk chart
linked to RHI Magnesita Principal Risks which
are included in the Annual Report, hence why
this is called “Top-Down Risk Assessment”.
An additional process to identify risks was a
workshop with the EMT and Board of Directors
assessing black swan events. This exercise
resulted in reaffirming emerging risks,
reconciled with Principal Risks and the
Group Risk Dashboard. Examples include:
• Demand shifts of end-users
• Disruptive regulations for CO
2
reduction
• Regional market tensions
• Disruption of global/regional logistics.
Bottom-Up Risk Assessment are further
embedded with the Top-Down perspective
to ensure that any emerging risk highlighted
is brought to the attention of the regional
leadership team and EMT, assessed and
potentially included in the Risk Dashboards
for monitoring and periodic evaluation.
48 RHI MAGNESITA ANNUAL REPORT 2022
The Board reviews the effectiveness of the
system of internal financial, operational
and compliance controls and the risk
management framework.
process and the process of preparing the
financial statements. These systems include
policies and procedures to ensure that adequate
accounting records are maintained and
transactions are recorded accurately and fairly
to permit the preparation of financial statements
in accordance with the applicable accounting
standards. For the accounting process, an
accounting handbook (and related knowledge
portal and training) is used to structure the
internal controls over the accounting process.
In early 2022, the Group re-structured a number
of roles and processes to give more direct
ownership and empowerment to five regional
leadership teams. The move was made to
promote the ‘local for local’ model, bring decision
making closer to the customer and to reflect what
was learned from the Group’s experiences during
the pandemic where fast regional decision
making proved pivotal to the Group’s high level of
resilience. In process areas such as Supply Chain,
Procurement, Finance and People & Culture,
regional roles were created and formalised to
assume responsibilities previously performed in
central, typically head office-based functions.
Other functions such as IT, Treasury and Tax
retained their previous Group-based model. A
specific exercise was performed in respect of
each process transferred to identify the
accountability and responsibility for the modified
control framework, ensure that the integrity of the
internal control framework was maintained and
manage the transition. In Q1 2023, Management
will complete a review of the regionalisation
model and may enact some refinements based
on the observed performance.
In 2022, the Group focused on a series of
initiatives to improve the design and
performance of key controls (i.e. ‘fix the machine
room’). Increased capabilities have been
established and matured in 2022 by managing
the large cross functional transformation
projects. These strategic initiatives have
impacted the governance of the Company in a
positive way by improving the execution
through embedding the retained organisation in
global project management group that further
lead to improve the KPI reporting. These were
spearheaded by two Group-wide projects:
‘End2End Value Chain’ and ‘Money Value
Stream’. The former has focused on segmenting
our customers into nine value chains and
delivering global process enhancements and
related internal controls which enable the
Group to deliver the value desired by our
customers. ‘Money Value Stream’ has addressed
40 work packages across Finance-related
global processes to improve the internal control
framework in areas such as Planning, Costing,
Pricing, Master Data and Operational Steering.
A specialist external review was performed on
the ‘IT Roadmap’ which gave the Board insight
into the strengths and weaknesses of the IT
underpinning the internal control framework.
Increased emphasis will be placed on managing
IT architecture in 2023 and maximising the
effectiveness with which the IT tools combine
to form a global control framework.
The Group has an Internal Audit function,
with a reporting line to the Chairman, Audit &
Compliance Committee and a secondary
reporting line, for day-to-day operational
matters, to the CFO. The Internal Audit function
provides assurance to the Audit & Compliance
Committee and the Board on the design and
effectiveness of the internal control framework.
Internal Audit operates within a single
department also comprising Risk Management
and Compliance. The Audit & Compliance
Committee and management ensure that
appropriate safeguards are in place to maintain
the independence of Internal Audit. The
Internal Audit, Risk and Compliance function is
structured into regional teams providing a
locally focused governance presence to support
regional management in line with the
established Group-wide objectives.
During 2022, a highly experienced Ernst &
Young partner, with Risk Management (CRMA)
and Internal Audit (CIA) accreditations, was
engaged under a 12-month outsourced
contract to provide Head of Internal Audit
services. This change was made by the Audit &
Compliance Committee to enable the previous
Head of Internal Audit, Risk & Compliance to
lead the ‘Money Value Stream’ project. Risk &
Compliance was overseen by the regional
Heads of Finance in 2022. The Audit &
Compliance Committee have closely monitored
the results of this arrangement throughout
2022 to ensure that the independence of
Internal Audit and the effectiveness of Risk
Management and Compliance have not been
compromised. It is anticipated that the 2021
operating model of Internal Audit, Risk &
Compliance will be restored in early 2023.
Risks
Our internal
control system
RHI Magnesita follows the corporate
governance requirements of the regulations of
both the Netherlands, given the location of its
incorporation, and the UK, given the location of
its listing. Where possible, the disclosures are
combined in this report, however there are
certain risk areas where the respective
governance requirements necessitate similar
but separate assessments.
One such risk area is the required disclosure
and description of RHI Magnesita’s control
environment and systems. Therefore, the
Company provides both a Management
‘In-Control Statement’ as is required by the
Dutch Corporate Governance Code and an
internal control system report as is required
under the UK Corporate Governance Code.
Both outline the measures that RHI Magnesita
takes to ensure a strong control environment.
Internal control system
The Board is ultimately responsible for
maintaining effective corporate governance,
which includes the Group’s risk management
approach, the Group’s system of internal controls
and the Group’s internal audit approach.
The Board reviews the effectiveness of the
system of internal financial, operational and
compliance controls, and the risk management
framework. The Board examines whether the
system of internal controls operates effectively
throughout the year and will make
recommendations when appropriate.
These systems are based on the three lines of
defence model, supported by an end-to-end
process model and a delegation of authorities
structure reflecting the responsibility for risk
management and internal controls at all
management levels.
The Group’s internal control framework is
designed to enable the application of the
Group’s risk appetite. This typically seeks to
avoid or mitigate risks rather than to completely
eliminate the risks associated with the
accomplishment of the Group’s strategic
objectives. It provides reasonable but not
absolute assurance against material
misstatement or loss.
The Group has in place a specific risk
management approach and an internal control
framework in relation to its financial reporting
49RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
An External Quality Assessment of the
effectiveness and capability of the Internal Audit
function was performed in 2021. The delivery of
improvement points from this report has been
completed. An internal effectiveness review of
Internal Audit was performed in 2022.
During 2022, Internal Audit conducted
19 planned internal audits and one special
investigation, reporting the most relevant
observations and recommendations to the
Audit & Compliance Committee.
The reports by management and Internal
Audit, Risk and Compliance also facilitated
consideration by the Audit & Compliance
Committee of management actions in respect of
the following key control framework challenges:
• Improving internal controls over inventory
management and processes.
• Increasing oversight and effectiveness over
investments, fixed assets and projects.
• Supporting continuous operational
efficiency and control environment at sites
and contract service’s locations.
• Strengthening the Customer Service
Representatives based on a centralised
organisational set-up.
The Board considers the Company’s risk
management and internal control system are
appropriate and effective to give reasonable,
but not absolute, assurance against material
misstatement or loss. Improvements on the
internal control systems implemented and
planned have been discussed regularly
between the Board and Audit & Compliance
Committee. The Board welcomed the internal
control system improvements delivered in
2022 by projects such as ‘Money Value Stream’.
However, given the dynamic nature of the
Group and the continuing evolution of the
regionalisation model, the Board emphasises
the importance of further internal control
system improvements in 2023, most notably the
completion of global process standardisation
work to drive a potential medium-term new ERP
system implementation.
Management ‘In-Control Statement’
The Board and EMT are responsible for ensuring
the Company has adequate risk management
and internal controls systems in place.
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 create a more regionally focused and
agile structure. The regional focus was further
increased in early 2022. Dedicated teams
examined each process area and re-designed
the accountabilities and responsibilities in areas
including Supply Chain, Procurement, Finance
and People & Culture to significantly increase
regional ownership. Global processes were
enhanced by the two Group-wide
transformation projects – ‘End2End Value
Chain’ and ‘Money Value Stream’. A further step
change in process standardisation is expected in
2023 with the process level foundational work
ahead of a medium term ERP implementation.
The key internal control measures include
reviews of financial performance and key
control weaknesses at each Board meeting.
To complement the regionalisation and to
increase the focus on performance, financial
reporting and internal controls, a new corporate
meeting structure was introduced in 2022.
Regional leadership team meetings now review
regional delivery against strategy and financial
performance each month. These outputs are
consolidated in a standard format into a two-day
EMT member-led Monthly Performance Review
(MPR) meeting to review operational financial
performance, strategy delivery and control
weaknesses primarily with a regional focus but
also including Group functions on a rotational
basis. The EMT monthly meetings have now
been re-focused to primarily consider high-
level and Group-wide strategic matters and
those matters reserved for EMT approval in the
Delegation of Authorities.
A dedicated project supported by external
experts reconsidered the zero-based business
planning process, with particular focus on
Selling, General and Administrative expenses.
The EMT continues to monitor the effectiveness
of the adoption of corporate culture and values
especially to the more remote areas of the
Company – the enhancement of the corporate
culture has been accelerated by the regional
approach. The Code of Conduct will be
updated in early 2023 and reinforced through
increased training and communication. The
Board and EMT monitor the response to issues
raised via the whistleblowing process. All key
changes in the internal control framework were
reviewed by the EMT.
Each leader is accountable for the effectiveness
of the internal controls within their areas of
responsibility and is required to complete a
self-certification of their assessment. For 2022,
the self-certification is signed-off on a regional
level. Measures are applied in each functional
area and region to assess the effectiveness of
internal controls and to escalate any identified
issues. Control weaknesses identified by
management and those identified through
the quality management system reviews,
risk management activity and internal audit
reports are escalated to the EMT for review and
resolution, all of which is overseen by the Audit
& Compliance Committee. The key control
weaknesses identified from these processes were
addressed within 2022. The key theme of the
2022 leadership conference was task execution
and the importance of leaders setting the tone for
the consistent performance of key controls.
In 2022, risk management activity continued to
focus on increasing the depth of the assessment
of the top 20 Group risks and on the set-up of
consistent reviews to monitor the evolution of
such risks by the EMT, to review the Group risk
profile on a quarterly basis and to take any
additional mitigating action. Plant risk
management and fraud risk management were
executed in 2022 following the established
approaches. This approach continued to further
strengthen the link between strategy setting
and risk management enhanced by extensive
collaboration between the respective teams.
The improvements in the risk management
approach, the milestones achieved, the results
of the internal quality assessment and planned
next steps were reviewed by the Audit &
Compliance Committee. In addition, the risk
appetite was discussed and approved by the
Audit & Compliance Committee and the Board
following a series of discussion workshops.
During 2023, the focus will be on enhancing
risk management approaches within the regions
and ensuring consistency and alignment
between the regional areas of focus and those
primarily addressed by group functions.
50 RHI MAGNESITA ANNUAL REPORT 2022
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 2025.
Assessment period
In accordance with provision 31 of UK Corporate
Governance Code, the Board has assessed the
prospects and the viability of the Group over
a longer period than the 12 months required
by the ‘Going Concern’ provision. The Board
assesses the business over a number of time
horizons for different reasons, including the
following: one-year detail financial plan
(i.e. 2023) and the long term plan to 2025.
The Board believes that three years, assessment
period remains appropriate. It is based on
management’s reasonable expectations of
the position and performance of the Group over
this period, it’s internal budget and planning
timeframes, and the targets and aims that it
has set out.
The assessment process and key
assumptions
The Board assessment included the review
of the potential financial impact of, and the
financial headroom that could be available in
the event of, the most but plausible scenarios
that could threaten the viability of the Group.
The assessment took into consideration the
current financial position of the Group and
the potential mitigations that management
reasonably believes would be available to the
Company over this period.
Mitigations considered include the use of
cash, access to debt facilities and credit lines,
reductions in capital expenditure, divestments
and dividend reductions.
The financial forecast is based on a number of
key assumptions, the most important of which
include product prices, exchange rates, raw
material, energy, freight and labour costs,
estimates of production volumes, future capital
expenditure and delivery of our strategic cost
reduction and sales initiatives. All scenarios
consider the acquisitions of Dalmia and Hi-tech
completed in early 2023. In addition, the
forecast does not assume the renewal of
existing debt facilities or raising of new debt.
A key component of the financial forecast and
strategic plan is the expected growth of steel
production and the output of non-steel clients
in all regions, combined with the development
of the specific refractory consumption taking
account of technological improvements.
Management also performed a reverse stress
test assuming a severe decrease in sales
volumes of 18% sustained over 15 months.
Management analysed the impact of 2008
global financial crisis and the COVID-19 impact
over sales volumes and margins. Whilst the
decrease in volumes was notable in those
events, the Group rapidly recover the volumes
over the next 12 months.
The scenarios that have been modelled are
based on severe but plausible outcomes and
associated costs are based on actual experience
where possible. The scenarios have been
considered individually and as a cluster of events.
Risks
Viability
statement
Scenario Principal risks Severity of the impact
Severe macroeconomic
downturn
1. Macroeconomic and geopolitical environment. Low
Severe macroeconomic
downturn with impact of
multiple principal risk
1. Macroeconomic and geopolitical environment,
2. Inability to deliver strategic projects,
3. Significant changes in the competitive environment
or speed of disruptive innovation,
4. Reliability of end-to-end supply chain,
5. Organisational capacity to execute strategy,
including demonstrating company cultural values.
Medium
Reverse stress test assuming
significant sustained reduction
in sales volumes
1. Macroeconomic and geopolitical environment. High
51RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Assessment of viability
The Group’s liquidity amounts to €1,121 million
comprising cash and cash equivalents of €521
million and undrawn committed credit facilities
of €600 million as of 31 December 2022. This is
sufficient to absorb the financial impact of the
risks modelled in the stress and sensitivity
analysis. However, if these risks were to
materialise, the Group also has a range of
additional mitigating actions that enable it
to maintain its financial strength, including
reduction in fixed costs and capital expenditure,
raising debt or reducing or cancelling
the dividend.
Viability statement
The Directors believe that the Group is
well-placed to manage its principal risks
successfully. In making this statement, the
Directors have considered the resilience of the
Group, taking account of its current position,
the risk appetite, the principal risks facing the
business in severe but plausible scenarios,
and the effectiveness of any mitigating actions.
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 2025.
Going concern
In assessing the appropriateness of the going
concern assumption over the period to
31 December 2024 (the ‘going concern period’),
management have used the viability
assessment to conclude on going concern
assumption. Management stress-tested RHIM’s
most recent financial projections to incorporate
a range of potential future outcomes by
considering RHIM’s principal risks, further
potential downside macroeconomic conditions
and cash preservation measures, including
reduced future operating costs, capital
expenditure and dividend distributions. This
assessment confirmed that RHI Magnesita has
adequate cash and undrawn credit facilities to
enable it to meet its obligations as they fall due
in order to continue its operations during the
going concern period. Therefore, the Directors
consider it appropriate to continue to adopt the
going concern basis of accounting in preparing
the Consolidated Financial Statements.
52 RHI MAGNESITA ANNUAL REPORT 2022
1. Macroeconomic
environment and
geopolitical risk
Link to strategy
Target risk appetite
KPIs
Revenue, Adjusted EBITA
Margin, Adjusted EPS, ROIC
Internally monitored metrics
Key macroeconomic and
financial market indicators,
steel and cement forecasted
production.
Risk description
Changes in the global economic environment, financial markets conditions and adverse geopolitical developments may
have an impact on the Group’s revenue and profitability.
The macroeconomic environment changes leading to sales volume reductions can arise from industrial factors or from
wider global issues, such as a global economic downturn or global logistic challenges.
The demand for refractory products is directly influenced by steel, cement and non-ferrous metal production, metal and
energy prices and the production methods used by customers.
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.
• Increasing prices of core resources and supplies (e.g. energy, freight, packaging)
• In 2022, geopolitical factors also led to an emerging risk of gas shortages, significantly impacting European production.
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.
• A range of measures were enacted to reduce the Group’s
reliance on natural gas, particularly within Europe.
• Enhanced awareness campaign to highlight the impact
that a restriction on gas supplies would have on the
refractory sector.
• Close monitoring of production costs fluctuations to
guarantee the expected profitability.
• 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
During 2022, the macroeconomic environment was highly
volatile. The refractory market, together with most other
sectors, experienced a drop in customer demand as a result
of broader economic risk factors such as higher inflation
levels and interest rate fluctuations.
Events such as the Russia/Ukraine conflict created higher
risks relating to the cost and supply reliability of energy,
specifically natural gas.
Disruption in the global logistics mechanisms, whilst less
significant than in 2021, still presented a material risk.
The risk appetite remains high (no changes from 2021). The
risk score is within the risk appetite but has the potential to
exceed it and is closely monitored.
Risks
Principal risks
Link to strategy
Appetite
High LimitedModerate Averse
Competitiveness MarketsBusiness model
53RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
2. Inability to execute key
strategic initiatives
Link to strategy
Target risk appetite
KPIs
Voluntary Employee Turnover,
Revenue, Adjusted EBITA
Margin, Adjusted EPS, Leverage,
ROIC
Internally monitored metrics
Adjusted EBITA from strategic
initiatives, ROIC from strategic
initiatives, completion of
strategic initiatives on-time and
on-budget.
Risk description
The Group’s strategic initiatives include sales expansion, new product and service models, production network
optimisation, digitalisation and M&A projects.
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.
The failure to effectively execute these initiatives because of external or internal circumstances may lead to lower than
planned financial performance, including loss of revenue and margin.
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.
• Inability to fully realise benefits from capex investments.
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.
• Learnings from capex projects through post-
implementation reviews.
• Increased focus on the risk-based assessment of
potential capex investments and enhanced financially
based tracking during the capex project delivery phase.
Risk movement
During 2022, the macroeconomic environment and
associated risks have intensified. Given the inherently
challenging nature of the Group’s strategic projects, this has
significantly increased the complexity of execution of key
strategic initiatives.
This is particularly visible within capex execution, which is
currently outside of the risk appetite due to challenges on
managing resources.
The Group recognises the rapidly evolving difficulties
associated with managing capex investments and remains
focused on optimising the planning and execution to reduce
the level of risk back to within the risk appetite.
Considering that the principal risk covers a broad range of
strategic initiatives including recycling and M&A projects,
the overall risk score remains within the risk appetite, but
requires close monitoring
3. Significant changes
in the competitive
environment or speed
of disruptive innovation
Link to strategy
Target risk appetite
KPIs
Revenue, Adjusted EBITA
Margin, Adjusted EPS, ROIC,
R&D & Technical Marketing
Spend
Internally monitored metrics
R&D & Technical Marketing
spend, ROIC on such spend and
time-to-market, sales of digital
products, cost saving generated
by usage of digital technologies.
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 2022, this was an area of significant management focus, which enabled the
Group to progress in its digital transformation journey.
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.
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.
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
The Group conducted a review of all strategic projects,
including digitalisation and R&D-based projects. These
projects were refocused and reassessed. Further changes to
the strategic management department are planned in 2023
to ensure the Group remains competitive.
The risk remains within the risk appetite and is consistently
monitored.
54 RHI MAGNESITA ANNUAL REPORT 2022
4. Reliability of the
end-to-end supply chain
Link to strategy
Target risk appetite
KPIs
Revenue, Adjusted EBITA
Margin, Adjusted EPS, ROIC
Internally monitored metrics
Refractory lead times, plants’
capacity utilisation, supply in full
on time, Inventory levels,
customer surveys.
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.
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.
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.
Examples of specific risks:
• Global logistics challenges impacting the stability, speed and cost of our end-to-end supply 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
• Recurring supply chain initiatives to improve and
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.
• Concentrated efforts on increasing transparency and
enhancing the communication flow.
Risk movement
During the beginning of 2022, the global end-to-end
supply chain environment, in terms of costs and availability,
has deteriorated for the entire refractory industry. This
weakening was mainly driven by COVID-19 lockdowns,
the Russia/ Ukraine conflict, and inflationary markets.
Consequently, the Group faced difficulties in the supply
chain and production management.
However, in the second half of 2022, the external logistic
situation became more stable and internally the Group
managed to improve its visibility over the dynamics of the
logistics industry.
Therefore, the overall risk level reduced, and the risk is back
within the risk appetite.
Risks
Principal risks
continued
Link to strategy
Appetite
High LimitedModerate Averse
Competitiveness MarketsBusiness model
55RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
5. Sustainability –
environmental and
climate risks
Link to strategy
Target risk appetite
KPIs
Relative CO
2
emissions, use of
secondary raw material,
Revenue, Adjusted EBITA
Margin, Adjusted EPS, ROIC
Internally monitored metrics
Relative CO
2
emissions, use of
secondary raw material,
progress towards the
achievement of environmental
and climate targets.
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.
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 stakeholder expectations.
Risk mitigation
• Regular environmental audits and risk monitoring at
all sites.
• Well-established Board-level Corporate Sustainability
Committee (CSC) to oversee and challenge
management’s environmental and climate strategy.
• We manage, measure and report our climate- related
risks and opportunities according to the Task Force on
Climate-related Financial Disclosures (TCFD)
recommendations (as described on pages 89 to 93).
• A climate strategy focused on recycling, carbon
capture and usage, fuel switch, energy efficiency,
and innovative customer solutions. Read more in
Tackling Climate Change on pages 64 to 70.
• Increased focus on the use of secondary raw
material as a core element of the Group’s strategy.
• €9 million investments in the next three-year
R&D programme to pilot new sustainable
production technologies.
• The geographical diversity of the Group’s operations
and the ability to shift production reduce the possibility
of single events impacting specific geographies.
• Increased focus on sustainable procurement. Executive
long-term incentive plan (LTIP) and Employee Bonus
linked to achievement of the Group’s CO
2
reduction
and recycling targets.
Risk movement
The inherent likelihood of this risk has slightly risen due to the
increasing regulatory complexity and rising stakeholder
expectations, as for example with the implementation of the
CBAM starting in 2026. If the CBAM would fully be
implemented by 2026 for the refractory industry, it could
create a significant impact. Therefore, the potential impacts,
including reputational and financial, of this risk crystallising
have increased.
The medium-term R&D programme focused on sustainability
improvement initiatives continued during 2022.
In addition, a range of additional risk-mitigating measures
were implemented during the year. These include the
achievement of the Group’s CO
2
target in the employees’
bonus criteria, maintaining the ‘Gold’ ESG EcoVadis rating, an
A- rating for Carbon Disclosure Project (CDP) and the
increased focus on sustainable procurement.
The risk is within the Group’s risk appetite and is continuously
monitored by management.
6. Sustainability – Health
and Safety risks
Link to strategy
Target risk appetite
KPIs
LTIF, Revenue, Adjusted EBITA
Margin, Adjusted EPS, ROIC
Internally monitored metrics
Total Recordable Injury, LTIF,
Severe Lost Time Injuries, Near
Misses, Preventive Ratio, Unsafe
Situations.
Risk description
Employees and contractors may be exposed to Health and Safety (H&S) hazards in our plants that cannot be completely
eliminated.
Our activities and products may potentially cause accidents at our customers’ sites.
Beyond the harm to individuals, H&S incidents can lead to high financial penalties, site closure and a loss in reputation for
the Group.
Considering the nature of the industry and the ongoing context of a pandemic, the health of our employees and contractors
is a significant area of risk to the Group.
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.
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-19 taskforces are 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.
• Globally harmonised safety instruction videos.
• Global personal protective equipment (PPE) standards
implemented.
Risk movement
The risk level remains the same as in 2021 due to the
continuing risk impact of the COVID-19 pandemic and the
inherent Health and Safety risk of the refractory industry.
Several measures to protect the health of our staff are in place
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 Group’s risk
appetite and is constantly monitored to ensure that any
necessary action is taken promptly.
56 RHI MAGNESITA ANNUAL REPORT 2022
7. Regulatory and
compliance risks
Link to strategy
Target risk appetite
KPIs
Revenue, Adjusted EBITA
Margin, Adjusted EPS, ROIC
Internally monitored metrics
Completion rate of various
internal compliance trainings,
whistleblowing reports, data
privacy incidents
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.
We are exposed to regulatory and compliance risks that may result in financial losses or operational restrictions.
Regulatory changes could impact the profitability of our operations and require investment to achieve compliance.
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.
• Violation of sanctions and export controls regulations.
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.
• Various whistleblowing channels are available to
employees and external parties to report compliance
concerns. Concerns can also be reported
anonymously, and all reports are followed up by
qualified professionals.
• Specific high-level multi-function working group
established to manage risks associated with Russia/
Ukraine conflict.
Risk movement
In 2022, the complexity and scale of the various sanctions
regimes markedly increased. This particularly impacted the
Group’s operations in Russia. The inherent risk of sanctions
violations increased due to global geopolitical instabilities.
Having a clearly defined and embedded process to monitor
existing sanctions regulations and continuously screen new
ones, the residual risk level remains unchanged compared
with previous year. Furthermore, the focus on key compliance
risks has continued, enhanced by trainings, 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 remains, is within the Group’s risk
appetite but requires close monitoring. The risk continues
to be monitored by management.
8. Cyber and information
security risks
Link to strategy
Target risk appetite
KPIs
Revenue, Adjusted EBITA
Margin, Adjusted EPS, ROIC
Internally monitored metrics
Security incidents classified by
severity, phishing test fail rates,
triage escalation time.
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.
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.
Examples of specific risks:
• Intellectual property or confidential data theft.
• Personal data breach.
• Software or hardware failure leading to critical business process interruption.
• Cyber-attacks on office and production IT leading to financial losses e.g. ransomware, sabotage.
Risk mitigation
• Global information and cyber security policies in line
with information security best practices, standards and
frameworks.
• Continuous awareness campaigns and training.
• Regular risk assessment and penetration testing.
• Cyber security detection and response team.
• Network, device and application protection.
• Audit & Compliance Committee oversight and specific
focus on cyber security-related controls.
• Email security (phishing and malware protection).
• Operations Technology (OT) security monitoring to
protect our production.
• Security oriented approach when integrating newly
acquired companies.
Risk movement
The Group experienced a continued increase in the inherent
risk level of cyber and information security risks due to the
fast-evolving cyber and information security global
landscape.
The Group continued to implement additional risk-mitigating
measures to respond to this rising threat, including awareness
campaigns, data encryption and OT security monitoring. Due
to a continuous and strong development of several mitigation
measures, the overall residual risk score remained
unchanged from 2021.
The risk was evaluated to be within the Group’s risk appetite
and closely monitored to enable fast to drive fast responses to
changing external threats.
Risks
Principal risks
continued
Link to strategy
Appetite
High LimitedModerate Averse
Competitiveness MarketsBusiness model
57RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
9. Ability to strategically
price and deliver
price increases
Link to strategy
Target risk appetite
KPIs
Revenue, Adjusted EBITA
Margin, Adjusted EPS, ROIC
Internally monitored metrics
Price increase realised,
price fulfilment, leading cost
indicators.
Risk description
The Group is exposed to increases in its variable costs such as raw materials, energy, logistics and labour costs. In 2022,
some of these costs increased materially due to global factors.
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.
Examples of specific risks:
• Inability to identify early signs of increases in the variable costs.
• Inability to effectively negotiate price increases with customers.
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 €354 million in
2022, relative to December 2021 and €600m
relative to the average of the year.
• Close management monitoring of progress
towards price increase implementation.
• Mitigation energy cost increases through a
combination of strategies, which include energy
hedging, alternate fuel supplies and energy
supply guarantees.
Risk movement
2022 was characterised by an increasing inflationary cost
environment, especially for energy, freight, and labour.
A range of risk-mitigating measures were implemented in
2022, which included the successful delivery of price
increases as well as the enhancement of leading indicators
that improve future visibility and enable effective
decision making.
The significant progress made in risk mitigation ensures this
outlook is within the Group’s risk appetite. Lead indicators
and mitigation methods are continually monitored by
management to enable a fast reaction to additional changes
in external costs. Focus remains on structural process
improvements to enhance visibility over internal and external
costs changes.
10. Organisational
capacity to execute
strategy, including
demonstrating
Company cultural
values
Link to strategy
Target risk appetite
KPIs
Gender diversity in leadership,
Voluntary Employee Turnover,
Adjusted EBITA, Adjusted EPS,
ROIC
Internally monitored metrics
Gender diversity in leadership,
Voluntary Employee Turnover,
Adjusted EBITA from strategic
initiatives, ROIC on strategic
initiatives.
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.
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.
A key focus of the Group’s corporate culture is gender, ethnic and generational diversity, which is seen as an important
driver to enhance performance.
Examples of specific risks:
• Inconsistent behaviour across the Group.
• Lack of accountability and responsibility.
• Inability to attract and retain top talent.
Risk mitigation
• Continuous emphasis on the Company culture as
a key enabler of performance and driver of strategy
execution.
• In 2022, a review of the Group’s flexible working
policies and increased range of tools to support
remote working.
• Range of other awareness-based leadership training
and initiatives to support the attraction and retention
of ‘Generation Z’ talent.
• 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
During 2022, the changes seen in the global human
resource landscape (arising from COVID-19 and related
factors) have impacted the Group in several geographies
(particularly North America and Europe). Therefore, it
required management to focus to enhance risk mitigation
actions. As a result, the Group has managed to maintain
the retention and attraction rates at satisfactory levels.
The Group has increased its leadership level and project
management skills, and therefore mitigated the
increasing complexity to manage the Group’s operations,
projects, and strategic initiatives in a context of increasing
global challenges.
The overall risk has slightly decreased but still requires
management focus to enhance risk mitigation actions to
bring the risk within the Group’s risk appetite.
58 RHI MAGNESITA ANNUAL REPORT 20225 8 RHI MAGNESITA ANNUAL REPORT 2022
The ongoing geopolitical conflicts,
rising of energy insecurity and
worsening physical consequences
of climate change require business
resilience and active engagement
towards a sustainable transition.
Read more on our
CEO review
Page 12
Building a
sustainable
future
Sustainability
Approach
59RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
59RHI MAGNESITA ANNUAL REPORT 2022 59RHI MAGNESITA ANNUAL REPORT 2022
Recycling rate
10.5%
2021: 6.8%
RHI Magnesita has developed proprietary
technology for increasing the use of secondary raw
materials with no loss in refractory performance.
This reduces customer waste and eliminates CO
2
emissions which would otherwise be released in
the mining and processing of new raw materials.
In 2022 the Group launched its new recycling and
decarbonisation joint venture in Europe, MIRECO.
Reduce carbon intensity by
8%
in comparison to 2018 baseline year. RHI Magnesita
is taking steps to reduce the carbon intensity of its
energy sources by switching to more CO
2
efficient
options and increasing the use of renewable energy.
Product carbon footprint
No.1
RHI Magnesita is leading the refractory industry by
providing transparency on the CO
2
footprint of every
product. This enables our customers to make the
right choices to reduce their own Scope 3 emissions
from the consumption of refractories.
60 RHI MAGNESITA ANNUAL REPORT 2022
Our purpose
RHI Magnesita’s purpose is to master heat,
enabling global industries to build sustainable
modern life. Our advanced products are
essential for our customers in the steel, cement,
metals, glass, energy and chemicals industries.
Through the reliable supply of innovative
refractory products and services, we enable
our customers to sustainably deliver the basic
materials that are essential for modern life.
We aim to be our customers’ partner of choice
on their own decarbonisation journeys.
Our sustainability strategy
We strive to be a sustainability leader in our
sector. Our sustainability strategy is aligned
with and based on the ten Principles of the UN
Global Compact (UNGC) covering human
rights, labour, environment, and anti-corruption.
RHI Magnesita’s sustainability strategy
is focused on:
• Excellent performance in Health & Safety.
• Climate change mitigation actions.
• Increased use of secondary raw materials to
reduce CO
2
emissions.
• R&D investment to develop emissions
avoidance, alternative fuels, and carbon
capture, storage and utilisation technologies
• Partnering with our customers to reduce
their emissions through innovative refractory
products or heat management solutions.
• Building market share in segments that are
essential to the transition away from fossil
fuels in our customer industries e.g. EAF,
direct reduction, electrolysis.
• Sustainable procurement practices.
• Upholding diversity in the workplace.
• Minimising environmental impacts.
• Building strong relationships with all
stakeholders including communities,
employees and governments.
• Linking debt facilities and management
compensation to sustainability performance.
Our 2025 targets
Our 2025 sustainability targets were defined in
2019 based on engagement with internal and
external stakeholders, which identified the
following areas of materiality for our business:
CO
2
emissions, Energy use, recycling, Diversity,
Health & Safety, NOx and SOx emissions.
These topics were reconfirmed on a materiality
analysis realised at the year end of 2022. The
results of this analysis will be the base to update
the existing targets, and to set up new targets.”
More details can be seen here on our website.
Standards, frameworks and reporting
RHI Magnesita is committed to leading
sustainability standards and frameworks.
In the period from 01.01.2022 – 31.12.2022, we
reported in accordance with GRI Standards. As
a supporter of the Taskforce on Climate-Related
Financial Disclosures (TCFD), we have identified
and quantified the climate-related risks and
Sustainability
Introduction
We continue to take pride in our leadership position in
sustainability. Positioning the Group’s products and services
ahead of sustainability driven technological change in our
customer industries will be essential for long term success,
while we are also working hard to improve the sustainability
profile of our own business.
Herbert Cordt
Chairman
Contribution to SDGs
We support the UN Sustainable
Development Goals (“SDGs”) and have
identified these as the goals our business is
best placed to actively support.
opportunities. We submitted annual climate
reports to CDP in 2022 and scored an A- rating,
which is in the Leadership band. In accordance
with the EU taxonomy,we report the proportion
of our revenue, operating expenditure and
capital expenditure for FY 2022 that are
taxonomy-non eligible, eligible and aligned.
Our integrated management system is
compliant with ISO 14001 (environmental),
ISO 50001 (energy), ISO 45001 (occupational
health and safety) and ISO 9001 (quality).
We also report our gender diversity progress
to the FTSE Women Leader Review each year.
We are fully committed to open and
transparent reporting. As a signatory of the
UNGC since 2018, we report annually on our
progress, engagement and contribution to the
UN Sustainable Development Goals (SDGs),
that are most relevant to our business
operations. This report acts as our
Communication on Progress.
This non-financial report covers all activities,
sites, and industrial assets operated or
contractually managed by RHI Magnesita N.V.
or one of its subsidiaries.
RHI Magnesita commissioned Deloitte Audit
Wirtschaftsprüfungs GmbH for an independent
third-party limited assurance engagement on
the non-financial report for the year ended
31 December 2022, according to Dutch
transposition of the NFI-Decree, the Taxonomy
Regulation ((EU) 2020/852) and GRI Standards.
Please click here for more details on the
assurance process and conclusions.
61RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Our 2025 targets
Material issue
Targets by
2025 vs 2018
baseline year Progress in 2022 2018 2019 2020 2021 2022 SDG
1. CO
2
emissions
Reduce by 15%
per tonne of
product –
Scope 1, 2, 3
(raw materials)
CO
2
intensity has been reduced
by 8.0% versus the 2018
baseline year. Recycling has
outperformed. At Ponte Alta
raw material production site
in Brazil, a successful switch
away from petroleum coke to
sustainable sourced charcoal
has delivered 18kt of annualised
CO
2
emission savings.
Absolute
(t CO
2
)
1
5.483 4.702 4.297 5.050 4.196
Relative
(t CO
2
/t)
2
1.90 1.89 1.97 1.85 1.75
2. Energy
Reduce by 5%
per tonne of
product
By end of 2022, 65% of
purchased electricity was from
low carbon or renewable
sources. This marks an
increase of 48% and reduces
our Scope 2 emissions to 90 kt.
Absolute
energy
consumption
(GWh)
5,718 5.227 4.577 5.163 4.842
In 2022, energy efficiency
decreased by 5% compared to
2021. The main reason for that
was the increase in sourcing of
raw material from the Group’s
own assets as the new rotary
kiln processing dolomite ore in
Hochfilzen, Austria, and overall
reduced capacity utilisation.
Relative
(MWh/t)
2
2.00 1.97 2.03 1,90 2.02
3. Recycling
Increase use
of secondary
raw materials
to 10%
Recycling rate of 10.5% in
2022, achieved 2025 target of
10% three years early.
Use of
secondary
raw
materials
3.8% 4.6% 5.0% 6.8% 10,5%
4. Diversity
Increase
women on
our Board
and in senior
leadership
to 33%
Gender diversity target of 33%
achieved at Board level, further
progress required at EMT + EMT
direct reports where female
representation has increased
to 21% from 12% in 2018.
Board 7% 23% 25% 38% 33%
EMT and EMT
direct reports
12% 17% 25% 22% 21%
5. Safety
Maintain LTIF at
<0.5 (goal: zero
accidents)
Health & Safety target to
maintain LTIFR below 0.50
achieved.
per 200,000
hours
worked
0.43 0.28 0.13 0.19 0.20
6. NOx and
SOx emissions
Reduce by
30% by 2027
(vs 2018)
NOx and SOx reductions
proceeding on track. China
target achieved in 2021, US in
progress (2022): NOx and SOx
abatement technologies
installed.
China
target
2021
North
America
target
2025
Europe
target
2027
South
America
target
2027
1. Historical CO
2
emission data were revised to reflect new acquisitions and changes that were made following an external verification process that took place in July 2022.
2. Adaptations in line with the Greenhouse Gas protocol and refinement in reporting result in updated CO
2
and energy efficiency figures for 2018-2022.
62 RHI MAGNESITA ANNUAL REPORT 2022
Sustainability
Governance
RHI Magnesita is committed to leading
governance and sustainability practices, as
demonstrated by its commitment to the UN
Global Compact and to the reporting of its
sustainability performance according to Global
Reporting Initiative standards.
At Board level, a dedicated CSC supports the
Board, acting as an advisory body to ensure the
long-term sustainability of the business. The
CSC monitors performance against relevant
KPIs and assesses risks and opportunities
associated with climate change, environmental,
health and safety, stakeholder relations and
other ESG risks.
At executive level, The Chief Technology
Officer (CTO) and functional leaders are
allocated responsibility for delivering the
Group’s sustainability priorities in their specific
areas or regions. The Global Sustainability Team
has responsibility for external reporting,
reviewing and assessing sustainability-related
risks and opportunities and liaising with the
Board, management and key external
stakeholders (such as ESG ratings agencies) to
develop and implement strategies for driving
sustainability across our business. The team
works in close collaboration with senior
leadership, functional and regional business
units, plant managers and other internal
sustainability stakeholders to determine,
monitor and deliver the sustainability strategy
and targets.
The Global Sustainability Team provides regular
updates on performance to the CSC including
an annual review of sustainability performance.
A Sustainability Forum has been established to
bring together various executives with
responsibility for improving sustainability
performance.
In 2022, we increased our focus on supply chain
sustainability with the creation of a dedicated
team to develop our global sustainable
procurement strategy and provide guidance to
the Group’s regional operations. Each region
has a sustainable procurement expert who is
responsible for driving initiatives such as
desktop and on-site supplier assessments. The
global sustainable procurement team supports
and cooperates with the Global Sustainability
Team and reports as required to the CSC.
Ethics and compliance
In 2022, we enhanced and further embedded
our compliance policies and procedures and
conducted training and communications
initiatives in the areas of sanctions and export
controls, business partner due diligence,
data privacy and anti-bribery and corruption.
Anti-corruption is one of the UN Global
Compact’s ten principles which we have
committed to integrating into our business
strategy and operations. We take a zero-
tolerance approach to any incidents of fraud,
bribery or corruption in our operations and value
chain. This approach is set out in our Code of
Conduct and the Supplier Code of Conduct.
Comprehensive online training on topics such
as business ethics, anti-corruption, data privacy
or sanctions and export controls and regular
monitoring of the completion rates ensures that
all office-based employees, including new
hires, are trained. Additional sessions are
provided as necessary, for example for sales
staff. Anti-corruption and other key compliance
topics are regularly included in global and
regional communications campaigns.
We regularly conduct compliance risk
assessments, such as fraud risk assessments,
with results presented to management and the
Audit & Compliance Committee each year. We
have implemented digital registers, workflows
and employee guidelines to address, document
and monitor conflicts of interest declarations,
gifts and invitations and community investment
approvals.
Business partners (e.g. customers, sales
intermediaries and suppliers) and transactions
such as mergers or acquisitions are subject to a
due diligence process. In 2022, additional focus
was placed on business partner checks to
ensure compliance with sanctions and export
control regulations. All sales agents are certified
by TRACE International, a leading anti-bribery
standard-setting organisation.
We are committed to upholding human rights
and labour rights. In 2022, the CSC, on behalf
of the Board, approved a Human Rights Policy.
82% of our employees belong to unions, are
represented by works councils or are subject
to collective bargaining agreements. In 2022,
we reviewed our Code of Conduct, implemented
a global Anti-Discrimination and Anti-
Harassment Policy and launched a new Diversity
Charter and online training in diversity and
inclusion.
This focus on human rights and labour rights is
now being expanded to include suppliers. The
Supplier Code of Conduct, which all suppliers
are required to commit to, includes provisions
addressing both human rights and labour rights.
The Board approves an annual statement in
accordance with the UK Modern Slavery Act
2015 and California Transparency in Supply
Chains Act.
We encourage anyone with ethics or
compliance concerns to report them to an
independently operated hotline, which is
confidential and anonymous. We are firmly
committed to whistleblower protection. Reports
are independently investigated and appropriate
follow-up actions are taken if necessary. The
Audit & Compliance Committee receives
regular data on cases submitted via the hotline
and other channels. In 2022, the hotline and
additional reporting channels generated 64
reports (vs 63 in 2021); The majority of reports
were Human Resource-related cases with
approximately 75% of all reports originating
from Brazil. The tendency regarding the high
number of cases from Brazil is rooted in the
whistleblowing hotline being the preferred
escalation route for Human Resource-related
queries or concerns in Brazil, where the
whistleblowing hotline is frequently used for the
escalation of personnel-related queries that are
dealt with through different communication
channels in other regions.
63RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Sustainability
Our business
Our customers
Product Carbon Footprint
To increase transparency for our customers,
the Group completed a major project in 2022
to disclose the CO
2
footprint of each of its
c.200,000 refractory products. “Cradle-to-
gate” greenhouse gases, from raw material
extraction to production and packaging, are
included in the calculations which follows the
principles of ISO 14067 standard.
The carbon footprint includes all Scope 1 and
Scope 2 emissions and part of the Scope 3
emissions associated with the manufacturing of
the product. The largest share of Scope 3
emissions arises from the purchase of refractory
raw materials that are not sourced from within
the Group. Limited data is available from
suppliers for the carbon footprint of externally
purchased raw material and the Group is
continuing to refine its estimates in this area.
The CO
2
footprint data enables us to (i) better
address customer needs with the most suitable
technical and sustainable products and
solutions; (ii) gain a competitive edge via
sustainability criteria in tender processes, and
(iii) incorporate sustainability and environmental
indicators into our product design and
production cycles.
Net zero products
The progressive reduction of CO
2
emissions has
become a fundamental target for our customers
and RHI Magnesita aims to be the preferred
refractory partner as this transition is realised.
We are also committed to developing a circular
economy in the refractory industry, aiming at a
zero-waste product life cycle to preserve natural
resources.
RHI Magnesita’s ‘Net Zero Brick’ project addresses
both of these customer priorities, reducing CO
2
emissions by 85% and fully utilising reclaimed raw
materials to create a refractory containing up to
100% recycled raw materials, excluding graphite
and binders. There are now six ‘Net Zero’ shaped
products currently being trialed with customers
in real-world conditions. The Group has also
successfully developed basic gunning mixes with
Our suppliers
Sustainable Procurement
RHI Magnesita seeks to integrate sustainability
priorities into its procurement processes.
Supply chain due diligence
Supplier Code of Conduct
The Supplier Code of Conduct requires
suppliers to follow the same principles as set out
in RHI Magnesita’s own Code of Conduct. It is
distributed to all suppliers who are then
required to confirm compliance.
Supplier assessments through EcoVadis
An assessment system developed with EcoVadis
is used to rate potential suppliers for
sustainability impacts such as energy use, CO
2
emissions and waste. The ratings resulting from
this assessment form an important part of the
Group’s procurement decision-making process.
An initial phase of supplier assessments was
carried out in 2021 based on contract size and
risk mapping. The process has continued in
2022, now covering 31% of spending. Our
target is to cover two-thirds of the supplier
base by 2025, including all suppliers delivering
raw materials with a high CO
2
intensity.
Supplier on-site assessments
The Group conducts on-site assessments
to evaluate suppliers based on quality,
Health & Safety and ESG aspects. In 2022,
RHI Magnesita conducted nine on-site
assessments, including eight in India and
one in Europe (2021: no assessments).
Supplier product carbon footprint
Since the contribution of raw material extraction
and processing is the largest single source of
CO
2
emissions in the refractory value chain,
the Group is seeking to increase the accuracy
of its supplier CO
2
emissions data. Accurate
information enables the Group to prioritise
suppliers with lower emissions to minimise
Scope 3 emissions. Engagement on the subject
of emissions also highlights to potential suppliers
that reducing CO
2
is a key priority for the Group,
which is expected to drive changes in supplier
behaviour and energy use in the long term.
similar sustainability benefits. The ANKERJET XW
low-carbon gunning mix has achieved an 85%
reduction in carbon footprint with no loss of
performance compared to conventional products.
The increased use of recycled materials improves
raw material availability, reduces the cost and
resource-intensive process of raw material
extraction and processing and significantly
reduces CO
2
emissions, with each tonne of
recycled material used saving approximately
two tonnes of CO
2
emissions.
Digital solutions
RHI Magnesita offers digital solutions and
associated physical equipment which achieve
CO
2
emission reductions through process
efficiencies, such as wear monitoring and
gunning repairs to extend the safe working life
of refractory linings. Safely extending the
working life of refractory linings can achieve
significant energy savings for steel producers
by reducing the number of heating and cooling
cycles required per unit of steel output.
Four main digital solutions contribute to CO
2
savings at our customer sites:
• APO – uses process data to accurately
predict the usable lifetime of a refractory.
Allows longer safe working cycles,
delivering a reduction in energy-intensive
heating phases.
• PROIL – optimises steel or metal flow to
reduce scrap rate and achieve higher quality,
improving energy and CO
2
efficiency.
• VISIR LadleSafe – measures residual
thickness of ladle working lining. The
information provided allows longer safe
running times, reducing the number of
energy-intensive heating cycles.
• Ladle Slag Model – optimises the input of
slag conditioner, reducing energy demand.
The Group also offers advanced refractory
products which enable its customers to
substantially reduce GHG emissions by
reducing electricity consumption, improving
yield and reducing oxygen consumption, saving
up to 13kg of CO
2
per tonne of steel produced.
Other solutions and products which directly
contribute to CO
2
emissions reductions at
customer sites include cold setting mixes,
EAF direct purging plugs and converter gas
purging products.
64 RHI MAGNESITA ANNUAL REPORT 20226 4 RHI MAGNESITA ANNUAL REPORT 2022
Sustainability
Our planet
Tackling Climate Change
Driving down carbon emissions is a key priority
for RHI Magnesita. In addition to charting our
own transition, we want to be a trusted partner
to our customers on their journey to a low
carbon economy.
The Group’s emission reduction plans target a
15% reduction in CO
2
emissions intensity for
Scope 1, 2 and 3 (raw materials) emissions by
2025, compared to 2018. Our climate strategy
is based on:
1) reducing the carbon footprint of our raw
materials, including through the increased
use of circular raw materials;
2) increasing energy efficiency in our
operations;
3) reducing the carbon intensity of our energy
sources; and
4) providing innovative solutions to reduce
customer emissions.
Climate governance
The Board of Directors’ CSC has responsibility
for overseeing RHI Magnesita’s climate strategy.
The Corporate Sustainability Committee (CSC)
regularly reviews climate risks and
opportunities, strategy and performance, while
the Remuneration Committee reviews and
approves bonus payments linked to climate.
The Chief Technology Officer (CTO) reports
regularly to both the CEO and Board CSC on
a quarterly basis. The CTO is part of the EMT
and has responsibility for overseeing the
development of the Company CO
2
reduction
strategy and its implementation across the
organisation.
In 2022, CO
2
considerations were built into key
remuneration incentive processes as follows:
• A new internal pricing mechanism was
introduced to incentivise sales teams to
prioritise products with higher recycled
content.
• 25% of the Long-Term-Incentive-Plan (LTIP)
payout criteria is linked to the Group’s target
to reduce CO
2
emissions per tonne against
2018 baseline year.
• Increase of secondary raw material accounts
for 10% of the annual bonus for all eligible
employees.
• Enhanced monthly monitoring of CO
2
emissions was integrated into the Group’s
enterprise resource planning tool.
65RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
2018
33%
9%
57%
Scope 3 (only raw material)
Scope 2
Scope 1
2022
Climate risk
Climate change represents both strategic and
operational risks to our business. These are
grouped as physical risks and transitional risks.
Physical risks include greater severity of
flooding, droughts or other extreme weather
events which could disrupt our operations or
supply chain.
Transitional risks range from new regulatory
frameworks and the rising price of CO
2
emissions
allowances to the viability and customer
acceptance of emerging technologies.
In 2022, two climate scenarios (representative
concentration pathways 2.6 and 8.5) were
considered based on the Intergovernmental
Panel on Climate Change Fifth Assessment
Report to update RHI Magnesita’s modelling
and risk analysis. This exercise concluded that
physical risks remained unchanged, whilst there
were new developments to assess in transitional
risks, for example in the case of emissions
legislation developments in Europe. Full details
of risk assessments can be found in the
Group’s 2022 TCFD report (see Appendix –
Pages 89-93).
Climate strategy
Our short-term target is a 15% reduction in
emissions intensity by 2025 in Scope 1, 2 and 3
(raw materials) compared to the 2018 baseline
year. We are working to reduce our emissions by
investing in recycling, using alternative energy
sources and increased energy efficiency. We are
also carrying out research and development on
carbon capture and storage technology and the
use of hydrogen as an alternative to fossil fuels.
In 2022, total CO
2
emissions (Scope 1, 2 and 3 –
raw materials) were 4.2 million tonnes and our
emissions intensity has reduced by 8%. Since the
baseline year of 2018, the Group has exceeded its
targets in recycling but this has been offset by
slower progress on switching to alternative fuels
which is now uncertain due to disruption in the
market for natural gas. If reliable supplies of natural
gas are not secured by 2025 the Group may fail to
meet its CO
2
intensity reduction target, with the
current estimated outcome excluding fuel
switches at 12%.
Governance • Describe the Board’s oversight of climate-related risks and opportunities – See page 89
• Describe management’s role in assessing and managing climate-related risks and opportunities – See page 90
Strategy • Describe the climate-related risks and opportunities the organisation has identified over the short, medium and long term – See page 90
• Describe the impact of climate-related risks and opportunities on the organisation’s business, strategy and financial planning – See page 91
• Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario – See page 90
Risk
Management
• Describe the organisation’s processes for identifying and assessing climated-related risks – See page 91
• Describe the organisation’s processes for managing climate-related risks – See pages 91-92
• Describe how processes for identifying, assessing and managing climated-related risks are integrated into the organisation’s overall risk management.
– See pages 91-92
Metrics and
targets
• Disclose the metrics used by the organisation to assess climate-related risks and opportunities, in line with its strategy and risk management process – See page 93
• Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 GHG emissions, and the related risks – See page 93
• Describe the targets used by the organisation to manage climate-related risks, opportunities and performances against targets – See page 93
Our Carbon Emissions Reduction
2018 vs. 2022
66 RHI MAGNESITA ANNUAL REPORT 2022
Carbon emission per Scope
Scope 1; of which geogenic emissions 26.5%
Scope 1; of which fuel-based emissions 25.8%
Scope 2; electricty 2.1%
Scope 3; emissions only raw material 45.6%
Sustainability
Our planet
continued
Recycling and the circular economy
RHI Magnesita is leading the refractory industry
in the use of circular raw materials. For every
tonne of waste refractory material that is
re-used, approximately two tonnes of CO
2
emissions, which would otherwise have been
emitted in the extraction and processing of
new raw material, can be saved.
Historically, the use of circular raw material in
the industry has been limited because of the
reduced effectiveness of refractories made with
recycled material. RHI Magnesita has developed
new technology for using circular raw material
without impacting performance.
The Group’s recycling target is to increase use
of circular raw material to 10% of raw material by
2025 and in 2022 we have already achieved
over 10% (2021: 6.8%). Due to the geogenic
CO
2
emissions and energy consumption
involved in the processing of new raw material,
increasing the recycling rate is an effective route
for the Group to reduce its CO
2
emissions in
the short term. Working towards this not only
develops the circularity of our business but is
also the single most important contributor to
achieving our 2025 emissions reduction target.
Around half (2022: 51%) of our Scope 1 CO
2
emissions are geogenic, released from
carbonate minerals during processing.
Replacing these virgin raw materials with
recycled or circular raw materials avoids these
emissions. Reaching our target of 10% recycled
content will therefore avoid up to 300,000
tonnes of CO
2
and 150,000 tonnes of landfill
waste per year. Early achievement of the 10%
target was due to improvements in the
collection and processing of circular raw
material. We have identified four key drivers of
success in recycling:
• Improving the flow of spent refractories to
our recycling centres from customers and
traders.
• Developing new sites and technologies to
process spent refractories.
• Increasing consumption of recycled raw
materials across our product range without
impacting performance.
• Growing customer awareness and sales of
products with high recycled content.
In H1 2022, a new joint venture between
RHI Magnesita and Horn & Co Group was
established in which the Group holds a 51%
stake. A new brand for the joint venture,
MIRECO has been established which is
intended to be an open platform servicing all
participants in the refractory production cycle.
MIRECO will be active across Europe, including
the Balkans and Türkiye, with a local-for-local
approach. Further investment is planned at
Mitterdorf, Austria, in 2023 to install automated
sorting technology.
We are also investing in new recycling facilities
and processing technologies outside of Europe.
In 2022 we installed a magnesia carbon brick
treatment plant in Brazil and in 2023 a new
magnesia carbon treatment station in India
and a recycling centre in South America are
planned.
The impact of increasing the use of recycled
raw material is now visible to our customers after
the launch of carbon footprint datasheets for all
products. Developing more recipes with higher
recycling content is another key focus. The
ANKRAL LC (low carbon) series of bricks for the
cement industry includes up to 50% recycled
content. Trials of new basic refractory mixes are
also underway for products with 20-50%
recycled content. These brands are already well
established in Europe and the concept is now
starting to gain momentum in the China & East
Asia region.
Decarbonisation of refractory production
Refractory production is a ‘hard to abate’
industry. Raw material processing generally
uses fossil fuels for ignition and burning of
carbonate rock, which results in significant
geogenic CO
2
emissions. These geogenic
emissions are classified as Scope 1 when
resulting from the Group’s own production
or Scope 3 in the case of externally purchased
raw materials.
Significant energy is also required for firing of
products in the refractory manufacturing stage.
Further emissions are generated in the shipping
and distribution of refractory products to
customers worldwide.
Through its investment in research and
development of emissions avoidance or
reduction technologies, the Group has
developed a theoretical pathway to decrease its
Scope 1, Scope 2 and Scope 3 (raw materials)
carbon emissions from refractory production to
close to zero. The required measures have been
prioritised in order of deliverability, with those
items that are fully within the control of the
Group to be expedited.
The first stage of CO
2
emissions reduction is to
be delivered through measures which can be
implemented by the Group without significant
external support, including increased use of
recycled raw materials, fuel switches and
energy efficiency measures. It is estimated that
these measures could deliver an absolute
reduction of around 1 million tonnes of CO
2
emissions, or 20% of the baseline total by 2035.
Beyond this initial reduction, decarbonisation
measures become progressively harder to
deliver. Recycling has a natural ceiling since
refractories are consumed during use and only
residual materials can be reclaimed, whilst fuel
switches to natural gas only offer a partial
reduction. The pathway for stages 2 to 4 is
reliant on the provision of (i) new infrastructure
or renewable energy sources such as hydrogen
by outside parties; (ii) the use of technologies
which do not yet exist or are not proven at pilot
or production scale and (iii) significant capital
expenditure, which may not be possible for the
In accordance with GHG Protocol, biogenic emissions
are reported independently from the scopes. In 2022,
our biogenic emissions were 13 thousand tonnes.
67RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
2018 2025 2060
2030 2035 2040 2045 2050 2055
CO2 Avoidance CCSU Green Energy Sustainable Supply Chain
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
Company to generate from its existing
operations, obtain from its finance providers or
receive via government funding.
The costs of emitting carbon, which could
provide an incentive to accept higher capital
expenditure and operating costs for the
purposes of reducing CO
2
emissions, apply in
certain jurisdictions and provide a business case
for reducing emissions in those geographies.
Estimates of future potential CO
2
costs are
built into the Group’s financial forecasts and
planning decisions. However, the Group has a
global production and customer network and
competes with other refractory producers who
are not subject to additional CO
2
costs.
Our decarbonisation commitment
Working within these limitations, the Group is
committed to:
1. leading the refractory industry by
decarbonising its operations as fast as
sustainably possible;
2. annually updating its decarbonisation
pathway based on the latest developments
in technology, infrastructure and estimated
capital expenditure;
3. continuing to invest in the development of
new technologies to avoid CO
2
emissions,
proving our technical readiness to use
alternative low-carbon energy sources and
to capture CO
2
emissions for storage or
utilisation;
4. offering our customers enabling
technologies for their own low-carbon
production technologies together with
low-carbon products and heat management
solutions (with full transparency on carbon
footprint) to enable them to reduce their
Scope 3 CO
2
emissions from the purchase
of refractories;
5. lobbying governments to invest in the
necessary infrastructure to decarbonise
the refractory industry and other energy
intensive industries, including additional
renewable energy generation, hydrogen
supply networks, CO
2
transportation and
storage and carbon capture and utilisation
technologies;
6. working with partners in the private sector to
develop new renewable energy solutions,
hydrogen energy networks and carbon
capture and utilisation technologies.
Offsetting carbon emissions
The Group has significant CO
2
emissions
within its own value chain and there are large
emissions savings that can be delivered for its
customers through improved heat management
or other solutions. The Board therefore
considers that the priority should be to allocate
capital and other resources to reducing the
Group’s own CO
2
footprint and the emissions of
its customers rather than investing in carbon
offset projects. The Board believes that taking
this approach will deliver a faster, greater and
more sustainable decrease in net CO
2
emissions
than could be delivered by allocating capital
to offsets.
2022 decarbonisation update
Partnership and industry co-operation
RHI Magnesita supports industry partnerships
for the development of carbon capture and
usage technologies. These include the K1-MET
consortium in the Austrian steel industry and
the Industrial Advisory Board of the EU-funded
MOF4AIR project, a development of the new
Metal Organic Framework for capturing CO
2
.
In 2022, we progressed a joint programme with
the University of Leoben to research the
possibility of re-mineralisation of captured CO
2
.
RHI Magnesita also takes part in broader
multilateral platforms to address the most
complex sustainability challenges such as the
Verbund X Accelerator 2022.
In terms of industrial partnerships, the Group
is working with other major CO
2
emitters in
Austria and Germany to address key regional
constraints such as power access and options to
use or transport CO
2
. Our customers in the
cement, steel and chemical industries face the
same challenges and are working to develop
similar technologies. An early definition on the
future of industrial hubs which could utilise CO
2
and benefit from pipeline access for hydrogen
and CO
2
transport will have wider benefits
across several different industries.
Carbon capture and utilisation
In 2022, trials were progressed to assess
technologies which could be used for CO
2
capture at our raw material production sites.
Theoretical decarbonisation pathway
68 RHI MAGNESITA ANNUAL REPORT 2022
Key milestones
1
Key dates regulations
Addressing climate change
RHI Magnesita Decarbonisation Plan
Sustainability
Our planet
continued
2018
• Set up 2018
as baseline
• Set up 10%
reduction target of
our CO
2
emissions
by 2025
• Set up 10%
recycling
rate of SRM
2019
• Committed to invest
€50 million in new
and emerging
technologies
• Austrian sites
operate with 100%
green electricity
• Upgraded CO
2
emission target to
-15% by 2025
2020
• Launched Ankrall
low carbon bricks
• Project Railway in
Hochfilzen, Austria
• Rated B at CDP
Climate report –
first submission
2021
• Performed climate
risk assessment for
all sites
• Launched net-zero
brick project
• Achieved 48%
of purchased
electricity from
low-carbon or
renewable sources
(German sites
operate 100% with
green electricity)
• Performed oxyfuel
trials in Breitenau
• Bonn Climate
Change Conference
• Year of climate
extremes
• US National Climate
Assessment
• UN Emissions
Gap Report
• IPCC Special Report
on 1.5°C
• UN Climate
Change Conference
in Madrid
• Bonn Climate
Conference
• EU Sustainable
Finance Disclosure
Regulation (SFDR)
• COVID 19 Pandemic
• UN Climate Change
Dialogues (Virtuals)
• Adoption EU
Hydrogen Strategy
• EU Taxonomy
• TCFD – Aligned
Disclosures
mandatory in UK
• Establishment of
International
Sustainability
Standards Board
(ISSB)
• Chinese Emissions
Trading Scheme
(ETS) – power
sector only
1 Future milestones may vary depending on technology development and external support, provided for illustrative purposes only
69RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
2022
• Launched MIRECO
• Achieved 2025 target
of 10% recycling rate
• Implemented fuel
switch project in
Ponte Alta, Brazil.
(charcoal use)
• 6 products containing
up to 80% recycled
material are part of
RHI Magnesita’s
portfolio
• Rated A- at CDP
Climate report
2025
• Implement fuel
switch projects in
York and Hochfilzen
• Achieve 15%
recycling rate
• Increase the use of
green electricity
• Implement the use of
SRM at rotary kilns
2030
• Implement fuel switch
projects in Brumado
and Chizhou
• Increase recycling rate
• Further use of SRM in
rotary kilns
• Achieve 100% green
electricity
• Increase the rate of
hydrogen firing in
tunnel kilns
2050
• Achieve oxyfuel firing
in all rotary kilns
• Increase recycling rate
• Implement green
energy (H
2
and
electrification) for
tunnel kilns
• Implement CCUS
technologies
• Address sustainable
supply chain
(Scope 3)
• Russia invasion in
Ukraine – Gas supply
crisis
• COP 27
• EU CBAM
• CDP Methodology
changes
• EU CSRD
• Aluminium and
Cement included in
Chinese ETS
• Mandatory ESG
reporting in India from
2023
• Paper and chemicals
to be included
in Chinese ETS
from 2024
• 55% GHG emission
reduction against
1990 levels in EU
• 50-52% GHG
Emissions reduction
against 2005 levels
in US
• Net-zero targets for
US, EU and UK
70 RHI MAGNESITA ANNUAL REPORT 2022
In collaboration with a major equipment
supplier, a high-density sinter was produced at
a test centre in Bethlehem, Pennsylvania, whilst
achieving a high level of CO
2
enrichment in the
offgas with an efficient sealing concept. Proving
this concept is a key step towards large scale
CO
2
capture and storage or utilisation.
Research continues on the use of various other
post-combustion processes for carbon capture
including chemical separation, cryogenic
processes and membranes. In the area of
carbon utilisation, our focus in 2022 was to
investigate options to re-mineralise CO
2
, fixing
it permanently in a solid state.
Alternative fuels including hydrogen and
biofuels
Hydrogen is a potentially carbon-free energy
source which offers a promising alternative to
fossil fuels for use in high temperature
processes. In addition to lab trials for calcination
and sintering, the Group is testing the use of
hydrogen in production processes. The first pilot
will be conducted at the Marktredwitz plant in
2023, including an assessment of the possibility
to generate hydrogen on site.
Reducing the carbon intensity of energy
We are continuing our efforts to reduce the
carbon intensity of our energy sources.
However, in Europe the switch from CO
2
intensive petroleum coke to more CO
2
efficient
natural gas in our plants has been postponed
due to uncertainty over natural gas supply. To
secure energy for our European operations
through the winter of 2022-23, the Group has
Sustainability
Our planet
continued
installed multi-fuel burners to be able to use
alternative fuels such as fuel oil and liquid
petroleum gas. The use of these alternative
fossil fuels may result in higher CO
2
intensity at
these sites in the short term. We continuously
monitor energy markets to ensure that we use
the least CO
2
intensive fuel possible.
At the Ponte Alta raw material production site in
Brazil, a successful switch away from petroleum
coke to sustainably sourced charcoal has
delivered 18kt of annualised CO
2
emissions
savings (4kt in 2022).
We continue to reduce the CO
2
intensity of
purchased electricity. In Brazil and Türkiye, we
switched to a fully green electricity supply in
2022. The Group is also investigating potential
for solar generation at several of its sites. By the
end of 2022, 65% of purchased electricity was
from low carbon or renewable sources. This
marks an increase of 48% and reduces our
Scope 2 emissions to 90kt (2021: 147kt).
Energy use
2019 2020 2021 2022
Total
consumption
(GWh)
1
5.227 4,577 5,163 4.842
MWh/t
1
1.97 2.03 1.90 2.02
1. Refinement of historical data to reflect new acquisitions
in 2022.
In 2022, RHI Magnesita consumed 4.842GWh
of energy, an absolute decrease of
approximately 6% compared to the prior year.
(2021: 5.163GWh). The main reason for lower
energy consumption was a lower production
volume in 2022 compared to 2021.
The Group has a target to increase its energy
efficiency by 5% by 2025 compared to 2018.
In 2022, energy efficiency decreased by 6%
compared to 2021. The main reason for that was
the increase in sourcing of raw material from the
Group’s own assets as the new rotary kiln
processing dolomite ore in Hochfilzen, Austria,
was commissioned and ramped up; and overall
reduced capacity utilisation. At our Radenthein
site in Austria we replaced primary energy with
waste heat for drying, saving around 4 GWh per
year. At Tlalnepantla, Mexico, improved process
control enabled energy savings of c.0.5 GWh
and at Niederdollendorf, recipe modifications
reduced firing temperature from 1500°C to
1300°C, resulting in a significant decrease in
energy required. We continue to roll out the
implementation of ISO 50001 across all our
operations and by end of 2022, 34% of sites
had implemented ISO 50001.
Reducing NOx and SOx emissions
Our target is to reduce our nitrogen oxides (NOx)
and sulphur oxides (SOx) emissions by 30% by
2025 compared to 2018. The target was
achieved in China in 2021 and the current focus
is now on North America. We significantly
reduced NOx emissions in York, Pennsylvania,
by implementing a two-stage combustion
process in the rotary kilns. SOx reduction
appliances have also been installed and are
successfully reducing emissions.
Understanding our reduction measures
Recycling
Non-carbonate based raw materials
Electrification
Green fuels
(H
2
bio-fuels)
in depleted gas or oil fields or saline aquifers
in proximity to our raw material sites
Zero air combustion Post-combustion
Transformation to bio-fuels
(eg methane, ethanol, polyols)
or direct use
(sell to CO
2
market)
Raw
material &
Refractory
production
CCUS
Avoidance Storage
(Re)mineralisation
Avoidance
Utilisation
71RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Case Study – Environment
Energy use from
non-renewable sources 92%
Energy use from
renewable sources 8%
Water consumption
in non-scarce areas 85%
Water consumption
in water scarce areas 15%
Protecting biodiversity
The Group is committed to protecting
biodiversity at its operational sites and taking
every possible step to minimise its impact on
local plant and animal life. At the Brumado mine
and raw material processing site in Brazil the
Group is required to restore land to its prior state
after use, including the planting of native
vegetation which matches that found in the
local area. For this purpose and for wider
community benefits, over 20,000 seedlings
were grown in the on-site tree nursery and
planted inside and outside RHI Magnesita’s
properties by employees and community
members in 2022.
Water stewardship
In 2022, we drew 12,1 million m³ of water from
surface and groundwater sources, with 15% of
this consumption taking place in areas at risk of
water scarcity. At Bhiwadi, India, a modification
to the cooling system reduced water
consumption by 17% and at Flaumont, France,
a water underground storage system was
implemented to protect nearby rivers from
waste water emissions.
Release of wild animals in the legal reserve of RHI Magnesita
On November 29, 2022, the Centro de
Triagem de Animais Silvestres (CETAS) of
Vitória da Conquista held together with
the RHI Magnesita’s Environment team,
the release of 164 birds (rescued from
animal trafficking), and jiboya at Serra
das Éguas, within the legal reserve of RHI
Magnesita in Brumado. In Brazil, birds are
the mostly captured and sold animals in
the illegal market. The most targeted
species are psittaciformes (macaws,
parrots and parakeets), passerines (birds),
dendrobatids (poisonous and coloured
frogs), primates and lepidopterans
(butterflies). Moreover, nine out of ten
animals trafficked die before reaching
their final destination. The release held
within the legal reserve of RHI Magnesita
shows how important is the preservation
of native areas and the commitment of
RHI Magnesita with environmental
sustainability.
Our energy use by source Our Water Use
RHI MAGNESITA ANNUAL REPORT 202272
A culture that supports people in
reaching their potential
Customer focus is the centre of our culture,
which has four key dimensions: innovation,
openness, pragmatism and performance. To
drive and maintain our culture we must attract,
develop and retain a diverse and high-
performing workforce. Our colleagues expect
and deserve an inclusive, safe and empowering
work environment. Employees from over 90
countries bring with them a wide range of
experiences, backgrounds, and perspectives.
We support and encourage a mindset of
lifelong learning, and personal and professional
growth.
In 2018, we introduced the ‘culture champions’
network with over 60 employees worldwide
engaging with colleagues on a regular base to
promote our corporate culture and this work
continued in 2022. In 2023, the cultural
champions will include the theme of
unconscious bias in their activities.
In 2022, we introduced a new global anti-
harassment policy as a further step towards
our diversity and inclusion commitment.
Sustainability
Our people
RHI Magnesita will continue promoting
diversity amongst its employees including in
management positions, where good progress
has been made to date but further efforts are
required to meet our 2025 target.
Developing our leaders
Developing an internal talent pool of future
leaders has always been a key focus at RHI
Magnesita and we are building our leadership
pipeline through strategic succession
management. Succession planning secures a
sustainable pipeline of internal high performers
for our most senior and critical positions, which
includes future female leaders. With our global
footprint, we aim to reflect the geographic
diversity of our business and we have appointed
female leaders to senior roles in each of our five
regions. We also seek to increase representation
from different age groups to enable us to benefit
from a multi-generational workforce.
Through our global trainee programme, we aim
to attract and retain young talent as the future
leaders of our business. In 2022, we introduced
a second cohort of global trainees with a 57%
female intake.
In 2022, we reported to the FTSE Women
Leaders Review.
33%
Of female leaders by 2025
104
Manager roles held by women
5
Women on the Board of directors
Goal: we aim for 33%
women in leadership roles
by 2025.
This year, we launched the “New Leaders
Programme” in Europe, which offers training to
newly appointed leaders to help them to excel
in their roles. The programme addresses key
trends such as digitalisation, decarbonisation,
and increasing complexity and volatility in
global markets, focusing on leadership in times
of change and uncertainty.
73RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Diversity needs Decision, Development & Dedication
RHI Magnesita’s 2022 Programme for Gender Equality
Decision
for diverse leaders
Hire and promote diverse
people. Leaders and HR are
accountable for execution of
future organisation.
Development
of diverse people
Fill the pipeline. Train and
support diverse talents.
Empowerment of diverse
people is key to prepare them
for future roles.
Dedication
for a diverse environment
Create and promote a
workplace of equity and
inclusion: fair working
conditions & high awareness
at leadership.
2022 Q1 Q2 Q3 Q4
Global
Diversity
Dashboard
Women’s
Learning
network
Diversity
LinkedIn
Learning
Diversity
G Hiring
Process
Talent
Support
Program
Diverse
Project
Teams
Female
Community
Networking
Trainee
Program
Support
Corporate
Diversity
Charter
Mandatory
Diversity
Training
+
Decision
Development
Dedication
Progress of measures, agreed in December 2021, to be executed in 2022:
100% = Ready to be launched
Building a diverse and inclusive
workforce
As one of our key core values, diversity is
promoted within our corporate culture. We are
committed to providing equal opportunities for
all employees, regardless of age, gender, skin
colour, ethnicity, sexual orientation or disability.
Through our diversity and inclusion strategy, our
goal is to provide a culture of inclusion and
wellbeing for all our employees. RHI Magnesita
believes that companies should reflect the
world around us. Embracing diversity and
building inclusion into everything we do is
important for the success of our business and
helping us connect with the customers that we
serve. The diversity of our employees is key to
this, as it gives rise to new ideas and approaches.
We require a broad range of talent and
perspectives from a varied workforce, which we
assess based on gender diversity, international
representation, and generation management.
In December 2021, a new diversity strategy was
launched including the adoption of our
Diversity Charter. In 2022, key initiatives have
included a survey of the needs of female
leaders, trainee workshops, external events
participation, global anti-discrimination and
diversity training and a LinkedIn learning
diversity campaign.
Gender diversity
Our internal women’s network helps to shape
our gender diversity agenda. Its intended
refreshment in 2023 will focus on promoting
global and regional measures to improve
diversity, keep track of progress and co-ordinate
roll out of diversity initiatives with line functions
Board female representation at the 2022 year
end was 33%. Currently, 21% of all senior
leadership positions are held by females (2018:
12%) including the EMT and their direct reports.
RHI Magnesita’s goal is to increase the share of
female leaders at both Board and EMT plus
direct report level to 33% by 2025.
Succession planning and leadership development for RHI
Magnesita means sharing one fundamental goal: getting
the right people with the right skills in the right place.
74 RHI MAGNESITA ANNUAL REPORT 2022
Health & Safety
Our employees and contractors are entitled
to a safe and healthy workplace. Since the
COVID-19 pandemic, this fundamental
employer obligation has taken on even greater
significance and we have worked hard to protect
health, safety and wellbeing of everyone who
works with us.
During 2022, we continued to follow COVID-19
safety protocols. Routine testing helped to
protect the safety of our workforce and the
continuity of our business.
We strengthened the presence of regional
Health & Safety coordination and execution and
established a culture of communication,
benchmarking and knowledge sharing across
the regions.
High plant loads combined with reduced
staffing due to COVID at the beginning of the
year were contributory factors behind a slight
increase in LTIF from 0.19 in 2021 to 0.20 in
2022. However, TRIF decreased from 0.61 to
0.54 in 2022. Most regrettably, one contractor
died as a result of a workplace traffic accident in
India. An urgent investigation into the root
causes of this incident was carried out and
changes were made to relevant guidelines
worldwide to improve safety procedures.
Sustainability
Our people
continued
Health & Safety performance
1. Total recordable injury frequency rate per 200,000 hours.
2. Lost time injury frequency rate per 200,000 hours.
2018 2019 2020
2021
2022
0.0
0.4
0.8
1.2
1.6
2.0
TRIF
1
LTIF
2
We continued to progress our occupational
health & safety programmes, seeking to balance
leading and lagging indicators in order to be
more pro-active and less reactive. Leading
indicators are helping our employees to
understand the strengths and weaknesses of
their safety efforts, giving direction and insights
into the typical behaviour and conditions that
precede any incident. We have almost doubled
our Preventive Rate indicator compared to last
year, demonstrating ongoing improvement in
our safety awareness culture and we are
extending implementation of ISO 45001
standards to our refractory installations
business. Overall, RHI Magnesita proceeds to
accelerate the standardisation with a global
Health & Safety Management System and its
certification by an external notified auditing
body including local needs.
Hence, in 2022, the following operational sites
have achieved a successful certification against
ISO45001 Occupational Health & Safety
Management System:
• Anhui (Brick & Sinter) (China)
• Visakhapatnam (India)
• Cuttack (India)
75RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Health & wellbeing 28%
Education 23%
Other 15%
Emergency relief 13%
Youth development 12%
Environment 6%
Arts/culture 2%
Economic development 1%
Community spend 2022 by focus area
Case study
As a developer of natural resources and major
employer in the areas close to our operations,
fostering a strong and positive relationship with
our host communities is essential to our success.
Our sites are located in diverse regions and it is
essential for use to understand local context.
We regularly engage and consult with our
stakeholders, seeking to understand and
respect their interests and priorities.
The Group operates a community investment
programme in all of its key operational
regions, seeking partnerships with local
non-governmental organisations (NGOs) or
delivering projects using in-house resources
or volunteering where appropriate. Each
project is designed to bring about long-lasting
social improvements.
Our pillars
Our approach to community investment has
been developed based on the UN Global
Compact, focusing on three main pillars:
Education
Our investments seek to make education
accessible, equitable and of a high quality,
leading to relevant and effective learning
outcomes.
Youth Development
We aim to create and support programmes that
engage young people in intentional, dynamic
and valuable ways while recognising and
enhancing their strengths.
Environment
In addition to the multiple initiatives that we are
implementing to decarbonise our business, we
seek to support wider environmental projects in
our local communities.
Sustainability
Our communities
Teach for Austria
Since 2019, we have partnered with
Teach for Austria, a local organisation
which enhances educational
opportunities for students who haven’t
had the best start in life. Through their
main project, graduates and young
professionals are trained to teach in
urban low-income schools. The initiative
has directly benefited 32 children
in 2022.
The Group expanded its participation
in 2022 by including the Teach for
Austria initiative within its volunteering
programme for Vienna-based
employees. RHI Magnesita staff gave
interview training and career advice
for students at an event hosted by
the Company.
It was a real pleasure to get to
know the bright young minds of
the class and contribute to their
personal and professional
growth. Their curiosity and
willingness to learn more
impressive.
Aleksandra Sanadrovic
Volunteer
RHI MAGNESITA ANNUAL REPORT 202276
Case study
Sustainability
Our communities
continued
Our Initiatives
Sustainable Bonds/Brumado, Brazil
In Campo Seco, a remote community in
Brumado, Brazil, the programme “Sustainable
Bonds” set up a factory that produces hand-
made brooms using recycled PET bottles.
In cooperation with a local NGO, 29 women
have been trained in the cleaning, preparing
and assembling of the necessary materials.
The process recycles 14,000 bottles each
month with the finished product sold in
multiple retail outlets to fund the wages of
the project participants.
Through this initiative, more than 40 families
from Campo Seco have now a source of income,
increasing quality of life and creating a focal
point for the community.
Dual Education Program/Ramos Arizpe,
Mexico
Facing the challenge of high demand for
technically skilled workers in the north of
Mexico, RHI Magnesita established the ‘Dual
Education Programme’ in Ramos Arizpe in
September 2013 which has now been running
for nine years and has had an important impact
on the community.
This was the first Corporate Social
Responsibility (CSR) project implemented, and
its main purpose was the improvement of
technical vocational training for high school
students. In the final two years of their studies,
participants spend 80% of their time in the
plant, where they apply what they have learned
in the classroom.
Identid’Art/Brumado, Brazil
This socio-cultural initiative offers violin,
viola and flute lessons for free to children
aged ten to 14 in Brumado. The project
started in 2020 and now over 120
children per year participate.
Identid’Art aims to promote culture and
musical education as a catalyst for social
inclusion for the participants, their
families and local society.
Life can be transformed by
music. This project brought to
the community much more
than an extra activity for the
children… some of the children
had never seen or heard a violin
before, having this opportunity
expands their perspective. My
musical path comes from a very
similar project back in my town.
Ailin Ayres
Project leader
This project is very important
for me and all my friends,
because it gives everyone
the chance to discover
something about themselves:
either skills, strengths or areas
of opportunity.
Maria Luisa
Project participant
77RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
A total of 14 apprentices have graduated
through the programme, and the vast majority
have continued their professional training.
Today, four of the colleagues at Ramos Arizpe
are products of the Dual Training programme,
working full time as technicians and engineers.
The initiative has positioned RHI Magnesita as a
leader in dual training in Mexico and gives real
long-term value to apprentices.
“Not a day goes by when Miguel doesn’t teach
us something. He’s always looking out after us,
willing to share his knowledge with everyone.”
Jared Limon Flores, apprentice, Ramos Arizpe.
Volunteering
RHI Magnesita encourages corporate
volunteering as a key strategy to increase
community engagement and make a positive
impact on the communities in which we operate.
In 2022, a pilot programme was launched for
the Group’s Vienna-based employees, with the
longer-term aim of developing a comprehensive
framework for the implementation of a global
programme.
Under the pilot, every employee in the Vienna
office has been assigned one working day of
paid volunteer leave per year and access to a
programme of events to participate in.
Indigenous people
RHI Magnesita recognises and respects
Indigenous people, their rights and heritage,
knowledge, and practices. None of the Group’s
operational sites are located close to any
Indigenous communities. RHI Magnesita
supports the strengthening of legal recognition
for Indigenous territories including protection
against illegal mining and guaranteeing
Indigenous people a strong voice in local
and global dialogues that affect their future.
It can be hard to feel like you are able to make a difference
to the society you live in. It is great that the Company
gives us this chance to take an active role in contributing
to our community.
Sally Caswell
Company Secretary
78 RHI MAGNESITA ANNUAL REPORT 2022
Sustainability
Appendices
RHI Magnesita Global Reporting Initiative Standards Index
General disclosures 2021
Location/page
Annual Report 2022 Additional content
Disclosure number Description
The Organisation and its
reporting practices
GRI-2-1 Organisational details – Please click here for more details.
GRI-2-2 Entities included in the organisation’s
sustainability reporting
60 This non-financial report covers all activities, sites, and industrial assets
operated or contractually managed by RHI Magnesita N.V. or one of its
subsidiaries.
GRI-2-3 Reporting period, frequency and
contact point
60 Non-financial data in this report are for financial year 2022
sustainability@rhimagnesita.com
GRI-2-4 Restatement of information –
61
EU Taxonomy 2021 – the revenue, opex and denominator capex reported
as part of the EU Taxonomy disclosure table from the economic activity
“Material recovery from non-hazardous waste” as eligible in 2021 is restated
(originally reported: Revenue 2021: €82 million; opex 2021: €3 million;
restated: revenue €34 million; opex 2021: €1 million; Denominator capex
(originally reported: capex 2021: €261 million; restated: capex €279,5 million))
(see Appendix – Taxonomy)
Historical CO
2
emission data were revised to reflect new acquisitions and
changes that were made following an external verification process that took
place in July 2022.
Adaptations in line with the Greenhouse Gas protocol and refinement in
reporting resulted in updated CO
2
and energy efficiency figures for 2018-2022.
GRI-2-5 External assurance 60 RHI Magnesita commissioned Deloitte Audit Wirtschaftsprüfungs GmbH for an
independent third-party limited assurance engagement on the non-financial
report for the year ended 31 December 2022, according to Dutch transposition
of the NFI-Decree, the Taxonomy Regulation ((EU) 2020/852) and GRI
Standards. For more information, click here for more details on the assurance
process and conclusions.
Activities and workers
GRI-2-6 Activities, value chain and other
business relationships
1-9 RHI Magnesita engages mainly manufacturing suppliers. Our largest 20
suppliers cover roughly 20% of our spend, largest 200 suppliers cover roughly
60%. RHI Magnesita engages suppliers that produce raw materials specifically
for refractory industry, energy suppliers to allow conversion of raw materials
into finished products, transport suppliers as well as manufacturing suppliers.
With a few exceptions mainly for critical raw materials and energy supplies, our
contractual commitments usually do not exceed one year. In most cases we
have recurring demands, only in a few cases our purchases are project specific.
RHI Magnesita operates in a capital and energy intensive business regarding
the equipment to produce raw materials and finished products for our
customers. A high share of specific raw materials to our industry are sourced in
China which means a long supply chain. In the industry in which we are
operating, the procurement spend equals roughly two thirds of the revenue.
With the exception of a higher share of Chinese raw materials, the suppliers are
mostly located in the country and region where we operate production
facilities. As a result, Europe still has a higher share of suppliers than the other
regions, followed by China, Brazil, USA and India.
79RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
General disclosures 2021
Location/page
Annual Report 2022 Additional content
Disclosure number Description
GRI-2-7 Employees 24-25 a. Total number of employees by employment contract (permanent and
temporary) and by gender (headcount):
• Permanent: 12,248 (of which 10,564 male, 1,684 female)
• Temporary: 1,483 (of which 1,157 male, 326 female )
b. Total number of employees by employment contract (permanent and
temporary), by region (headcount):
• Western Europe: Permanent: 3,228; Temporary: 473
• Eastern Europe: Permanent:59; Temporary: 11
• Near and Middle East: Permanent: 613; Temporary: 2
• South America: Permanent: 4,729; Temporary: 153
• North America: Permanent 1,344; Temporary: 34
• Asia Pacific: Permanent: 2,231; Temporary: 807
• Africa: Permanent: 44; Temporary: 3
c. Total number of employees by employment type (full-time and part-time), by
gender (headcount):
• Full time: 13,515
• Part time: 216
• Full time male: 11,662
• Full time female 1,853
• Part time male: 59
• Part time female: 157
GRI-2-8 Workers who are not workers – For 2022, an estimation would result in an average FTE of 1.100.
Governance
GRI-2-9 Governance structure and
composition
100-105/115-117
GRI-2-10 Nomination and selection of the
highest governance body
98
GRI-2-11 Chair of the highest governance
body
98 Herbert Cordt, Chairman of the Board of Directors
GRI-2-12 Role of the highest governance body
in overseeing the management of
impacts
100
GRI-2-13 Delegation of responsibility for
managing impacts
100
GRI-2-14 Role of the highest governance body
in sustainability reporting
124 Chairman of Corporate Sustainability Committee
GRI-2-19 Remuneration policies 134 Chairman of Remuneration Committee
Strategy, policies and
practices
GRI-2-22 Statement on sustainable
development strategy
60 Refer to Sustainability strategy
GRI-2-23 Policy commitments 62 Refer to Ethics & Compliance section
GRI-2-24 Embedding policy commitments 62 See also here.
GRI-2-25 Processes to remediate negative
impacts
62 RHI Magnesita follows the precautionary principle in all its operations.
All major operations in the EU follow the requirements of the EU IPPC Directive
on the precautionary principle. Operations outside the EU follow
the precautionary principle in line with national regulatory requirements.
Please click here for more details.
GRI-2-26 Mechanisms for seeking advice and
raising concerns
62 See also here.
GRI-2-27 Compliance with laws and
regulations
– There were no significant instances of non-compliance with laws and
regulations that resulted in fines or sanctions during the reporting period
according to Management. Provisions for potential litigations can be seen
on Annual Report 2022, Notes 31. The Group will work to establish a
comprehensive approach to report this indicator.
80 RHI MAGNESITA ANNUAL REPORT 2022
General disclosures 2021
Location/page
Annual Report 2022 Additional content
Disclosure number Description
GRI-2-28 Membership of associations – • World Refractories Association (WRA)
• European Refractories Producers Federation (PRE), via the Association of the
Austrian Mining and Steel Producing Industry of the Austrian Federal
Economic Chamber
• Association of the Austrian Mining and Steel Producing Industry of the Austrian
Federal Economic Chamber
• Austrian Society for Metallurgy
• Association of the German Refractory Industry
• Steel Institute VDEh
• Brazilian Association of Metallurgy, Materials & Mining (ABM)
• Brazilian Association of Refractories Producers (ABRAFAR)
• SIRef/MG (Minas Gerais State Refractory Industry Union)
• Latin-American Association of Refractories Producers (ALAFAR)
• SIR (Brazilian Refractory Industry Union)
• Industriellenvereinigung (Federation of Austrian Industries)
• Cerame-Unie
• Euromines
• European Technical Platform of Sustainable Mineral Resources (ETPSMR)
• European Cement Research Academy (ECRA)
• American Ceramic Society
• Bergmännischer Verband Österreichs
• US National Lime Association
Stakeholder engagement
GRI-2-29 Approach to stakeholder
engagement
106-109 Stakeholder engagement chapter
GRI-2-30 Collective bargaining agreements 82% of employees are covered
Material topics 2021
GRI-3-1 Process to determine material topics 60 RHI Magnesita conducts a materiality assessment as part of our sustainability
reporting process. This tool is used to identify issues that are important to the
Company’s long-term value creation and the demands of its stakeholders.
Stakeholder engagement is a key component of the process, as it provides
an understanding of what is material and allows the Company to work together
to establish solutions for future challenges, even if there are conflicting
perspectives from different stakeholders.
In 2022, RHI Magnesita continued to prioritise stakeholder engagement
and launched an online survey to collect the perspectives of different
stakeholders in different regions, as well as an internal survey with employees.
The Company reconfirmed Health and Safety, Recycling, Climate Change and
Decarbonisation, Other Emissions, Energy Efficiency, and Diversity as material
topics as they all fell in the quadrant of extremely important for all stakeholders.
This materiality includes the double materiality concept, which considers the
impact of topics on the value of the company. Three different levels of impact
were considered (low, medium, high) based on a risk management approach
that takes into account four dimensions (compliance, strategy, financial, and
operation), as well as the likelihood of the risk becoming true.
For more information, please see our updated materiality matrix on our
website.
GRI-3-2 List of material topics 60 No significant changes in the list of material topics for 2022 and topic
boundaries. Material topics/KPIs review will be based on updated materiality
matrix (see above).
Requirement 7 Publish a GRI Index – Please click here for more details.
Requirement 8 Provide a statement of use 60 RHI Magnesita has reported in accordance with GRI Standards for the period
01.01.2022-31.12.2022.
Specific Standard Disclosures/Key RHI Magnesita Topics
Location/Page
Annual Report 2022 Additional Content
Disclosure number Description
Economic Performance 2016
GRI-201-1 Direct economic value generated and
distributed
6-9; 16-22; 29-34
GRI-201-2 Financial implications and other risks
and opportunities due to climate
change
47; 55; 91 Financial implications are described in our TCFD Report (pages 90-92).
Sustainability
Appendices
continued
RHI Magnesita Global Reporting Initiative Standards Index continued
81RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Specific Standard Disclosures/Key RHI Magnesita Topics
Location/Page
Annual Report 2022 Additional Content
Disclosure number Description
Anti-corruption 2016
GRI-3-3 Management of material topics 62 RHI Magnesita’s Code of Conduct outlines anti-corruption, conflicts of
interest, and gifts & invitations policies. There are digital workflows in place
to report potential conflicts of interest, seek pre-approval for gifts & invitations,
and process proposals for community contributions. An independently
operated whistleblowing hotline is available for employees and third parties to
report potential violations. Regular reporting to executive management,
regional management, and the Audit & Compliance Committee is conducted
regarding key compliance issues. There is an annual audit of anti-bribery &
corruption controls. Sales agents are required to have a TRACE certification
and all suppliers are expected to follow the Supplier Code of Conduct.
GRI-205-2 Communication and training about
anti-corruption policies and
procedures
62
Energy 2016
GRI-3-3 Management of material topics 70 • Base year 2018
• Acquisitions conducted in 2022 partly included
• Transportation, sales offices and other administrative buildings not included
GRI-302-1 Energy consumption within the
organisation
70 • Historical energy data were revised to reflect new acquisitions and integration to
the data collection system GET
• No steam is used and we use some climate-chambers ISO-production that is
reported under electricity.
GRI-302-3 Energy intensity 70 Adaptations in line with the Greenhouse Gas protocol and refinement in
reporting result in updated CO
2
and energy efficiency figures for 2018-2022.
GRI-302-5 Reductions in energy requirements of
products and services
70 The Group strives to have all sites supplied with renewable sources of
electricity; 65% of our sites have green electricity, and increase of 48%
against 2021 data (2021: 44%).
Water 2018
GRI-3-3 Management of material topic 71 • Acquisitions conducted in 2022 partly included (Sörmaş in Türkiye)
• Transportation, sales offices and other administrative buildings not included
GRI-303-1 Interactions with water as a shared
resource
71 See below
GRI-303-3 Water withdrawal 71 2022 Water withdrawal (million m³):
• Groundwater 10,5
• Drinking water 1,6
• Total 12,1 million m³
Biodiversity 2016
GRI 3-3 Management of material topics 71 All RHI Magnesita sites that are under direct control are considered.
GRI-304-3 Habitats protected or restored 71
Emissions 2016
GRI-3-3 Management of material topics 64-70 • Base year 2018
• Acquisitions conducted in 2022 included
• Transportation, sales offices and other administrative buildings not included
• Historical CO
2
emission data were revised to reflect new acquisitions and
changes that were made following an external verification process that took
place in July 2022
GRI-305-1 Direct (Scope 1) GHG emissions 66 Biogenic emissions (thousand tonnes): 2018: 5; 2019: 8; 2020: 10; 2021: 13;
2022: 13
For questions on the emission factors and calculation methods, please
contact: sustainability@rhimagnesita.com
GRI-305-2 Energy indirect (Scope 2) GHG
emissions
66 For questions on the emission factors and calculation methods, please
contact: sustainability@rhimagnesita.com
GRI-305-3 Other indirect (Scope 3) GHG
emissions
66 Reported Scope 3 covers only CO
2
emissions from purchased raw materials.
For questions on the emission factors and calculation methods, please
contact: sustainability@rhimagnesita.com
Waste 2020
GRI-3-3 Management of material topics – All RHI Magnesita sites that are under direct control are considered.
GRI-306-3 Waste generated – Data reported annually and split into hazardous and non-hazardous waste
Hazardous waste:9,8 ktonnes; Non-hazardous waste:82,6 ktonnes
Employment 2016
82 RHI MAGNESITA ANNUAL REPORT 2022
Specific Standard Disclosures/Key RHI Magnesita Topics
Location/Page
Annual Report 2022 Additional Content
Disclosure number Description
GRI-401-1 New employee hires and employee
turnover
– a. Total number and rate of new employee hires during the reporting period,
by age group, gender and region.
i. Age group
Under 30 years old: 1,257 (53,2%)
30 - 50 years old: 1619 (18,5%)
Over 50 years old: 282 (10,8%)
Excluding seasonal staff
Total: 3,157
ii. Gender
Male: 2,591 (22,1%)
Female: 568 (28,3%)
iii. Region
Western Europe: 752 (20,3%)
Eastern Europe: 6 (17,3%)
Near and Middle East: 237 (38,5%)
South America: 1,203 (24,6%)
North America: 433 (31,4%)
Asia Pacific: 525 (17,3%)
Africa: 1 (2,1%)
Excluding seasonal staff
Total: 2,468 (18%)
b. Total number and rate of employee turnover during the reporting period,
by age group, gender and region.
i. Age group
Under 30 years old: 866 (36,6%)
30 - 50 years old: 1,141 (13%)
Over 50 years old: 461 (17,7%)
ii. Gender
Male: 2,032 (17,3%)
Female: 436 (21,7%)
iii. Region
Western Europe: 849 (22,9%)
Eastern Europe: 2 (2,9%)
Near and Middle East: 13 (2,1%)
South America: 1072 (22%)
North America: 338 (24,5%)
Asia Pacific: 193 (6,4%)
Africa: 1 (2,1%)
GRI-401-3 Parental leave – b. Total number of employees that took parental leave, by gender.
Total: 53 (Male: 30 (56,6%); Female: 23 (43,4%))
c. Total number of employees that returned to work in the reporting period
after parental leave ended, by gender.
Total: 49 (Male: 26 (88,5%); Female: 23 (82,6%))
d. Total number of employees who returned to work after parental leave ended
were still employed 12 months after their return, by gender.
Total: 45 (Male: 19 (42,2%); Female: 26 (57,8%))
e. Return to work and retention rates of employees that took parental leave,
by gender.
Return to work rate:
Total: 49 (Male: 26 (53%); Female: 23 (47%))
Retention rate: see GRI401-3 c
Occupational Health & Safety 2018
GRI-3-3 Management of material topics 74 All RHI Magnesita employees and contracted workers under direct control as
well as contracted workers without direct control considered. For 2022, Health
&Safety data are partially considering the acquisitions; only Sörmaş. Other
sites are starting the integration of data reporting.
GRI-403-1 Occupational Health & Safety
Management System
74 Occupational Health & Safety is part of RHI Magnesita’s Integrated
Management System (IMS) with respective policy and procedures.
ISO45001 certifications based on this MS ongoing (three more plants achieved
ISO45001-certification in 2022).
GRI-403-2 Hazard identification, risk assessment,
and incident investigation
– Global procedure for hazard identification and risk assessment as part of IMS
implemented. For incident investigations the methodology of 5-Whys and
Fishbone are in use.
GRI-403-3 Occupational Health Services – By fulfilling local legal obligations and the respective RHIM procedure for
Hazard Identification/Risk Assessment the participation of Occupational
Physicians is obligatory.
Sustainability
Appendices
continued
RHI Magnesita Global Reporting Initiative Standards Index continued
83RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Specific Standard Disclosures/Key RHI Magnesita Topics
Location/Page
Annual Report 2022 Additional Content
Disclosure number Description
GRI-403-4 Worker participation, consultation,
and communication on occupational
health and safety
– For global aspects to be considered as well as for local, detailed information
RHIM provides Safety boards, daily/weekly safety talks, participation of
workforce-representatives in Safety Committees (also represented at the CSC
– Corporate Sustainability Committee).
GRI-403-5 Worker training on occupational Health
& Safety
74 Beside legally required trainings for specific tasks and exposures, all persons
visiting our operational sites need to participate in a standardised basic
Safety-training.
GRI-403-6 Promotion of worker health 74 RHIM provides in every location a set of health promotion offers and activities
for which the participation rate for employees is measured.
GRI-403-7 Prevention and mitigation of
occupational health and safety impacts
directly linked by business relationships
– RHIM performs onsite services (OSS) at customer operational facilities for
which the same global requirements as per IMS (integrated management
system) apply.
GRI-403-8 Workers covered by an occupation
Health & Safety Management System
– All RHI Magnesita employees and contracted workers under direct control as
well as contracted workers without direct control considered.
GRI-403-9 Work-related injuries 74 RHI Magnesita reports in particular on frequency-rates based on 200,000
hours worked, considering the LTI – Lost Time Injuries (41 cases for 2022) and
TRI – Total Recordable Injuries (109 cases for 2022), – including employees
and non-employees (temporary workers/leased personnel, contractors).
The reporting of high-consequence incidents as defined by GRI will be
adopted in future.
Diversity and equal opportunity 2016
GRI-3-3 Management of material topics 73
• Base year: 2018
• Focus on Gender Diversity (Board and senior levels)
GRI-405-1 Diversity of governance bodies and
employees
73 a. Percentage of individuals within organization’s governance bodies in each
of the following diversity categories:
i. Gender
Executive Management Team (including the Executive Directors):
Male: 5 (71%)
Female: 2 (29%)
ii. Age group: under 30 years old, 30-50 years old, over 50 years old
Under 30 years old: 2,363 (17%)
30 - 50 years old: 8,767 (64%)
Over 50 years old: 2,601 (19%)
b. Percentage of employees per employee category in each of the following
diversity categories:
i. Gender
Male: 11,721 (85%)
Female: 2,010 (15%)
Salaried staff: Male: 5,146 (75%); Female: 1,651 (25%)
Wage earners: Male 6,575 (95%): Female: 359 (5%)
ii. Age group: under 30 years old, 30-50 years old, over 50 years old;
Salaried staff: Under 30 years old: 1,345 (19%); 30-50 years old:
4,304 (62%); over 50 years old: 1,285 (19%)
Wage earners: Under 30 years old: 1,018 (15%); 30-50 years old:
4,463 (66%); over 50 years old: 1,316 (19%)
Non-discrimination 2016
GRI-3-3 Management of material topics — The Code of Conduct of an organisation covers the topic of human rights, such
as non-discrimination, prohibition of child or forced labour. RHIM’s Code of
Conduct is available in 11 different languages and was last reviewed in
November 2022. In addition, the organization provides a whistleblowing
hotline and other reporting channels for employees and third parties to report
any violations of the Code of Conduct. All reports are investigated by the
Internal Audit, Risk & Compliance department.
GRI-406-1 Incidents of discrimination and
corrective actions taken
– One incident was reported in 2022 via our whistleblowing channels which
proved to be unsubstantiated.
Local communities 2016
GRI-413-1 Operations with local community
engagement, impact assessments,
and development programmes
75-77 Acquisitions conducted in 2022 are not included.
Supplier Social
Assessment 2016
GRI-414-1 New suppliers that were screened
using social criteria
63 Partially reported
84 RHI MAGNESITA ANNUAL REPORT 2022
DISCLOSURE INSIGHT ACTION
Sustainability
Appendices
continued
ESG ratings
The Group’s strong commitment to
sustainability is reflected in the ESG ratings that
RHI Magnesita scored in 2022. A rating of “A-”
was awarded by CDP, which is in the Leadership
band. This is higher than the Europe regional
average of B, and higher than the global
average of C. RHI Magnesita rated “AA” from
MSCI and “Gold” for EcoVadis, with an overall
ESG score of 69 out of 100.
EU Taxonomy
The EU Taxonomy Regulation (“EU Taxonomy”)
applies in respect of the financial year to
31
st
December 2022 and requires the Group to
report annually on the proportion of its turnover,
operating expenditure and capital expenditure
attaching to economic activities that are
considered to be environmentally sustainable.
The EU Taxonomy identifies the six
environmental objectives: climate change
mitigation; climate change adaptation; the
sustainable use and protection of water and
marine resources; the transition to a circular
economy; pollution prevention and control; and
the protection and restoration of biodiversity
and ecosystems. In respect of the 2022
financial year, the Group, RHI Magnesita has
reviewed its activities that qualify as
environmentally sustainable according to the
EU Taxonomy Regulation. These activities are
eligible and aligned according to the published
technical screening criteria for climate change
mitigation and adaptation.
As no sector-specific guidance for the refractory
industry has been published yet and therefore
the Group is required to use its own judgement
against the eligibility criteria.
The NACE ( the statistical classification
of economic activities in the European
Community) codes most closely describing
the activities of the Company are
“23.20 Manufacture of refractory products”
and “08.99 Other mining and quarrying”. These
NACE codes are not listed in Annex I or Annex II
of the Taxonomy Regulation, but certain
activities carried out by the Group do meet the
definitions of economic activities listed in Annex
I of the Regulation. As elaborated further by the
Commission on Taxonomy, if the NACE code of
an economic activity is not mentioned in the
Climate Delegated Act, but the economic
activity corresponds to the description of the
activity, it can qualify as Taxonomy eligible.
The EU Taxonomy distinguishes between
taxonomy eligibility and taxonomy alignment.
An economic activity can be considered eligible
if it is listed in the Annex I or Annex II. However,
in order to be considered “aligned”, further
technical criteria must be met. This requires a
further assessment of the eligible activities
identified. This involves evaluating the
Technical Screening Criteria (TSC) and the
Do-No-Significant-Harm criteria (DNSH) for
each of the environmental objectives associated
with the relevant business activities, as well as
assessing the Minimum Social Safeguards (MSS)
at the corporate level. The overall aim of this
process is to establish the taxonomy-eligibility
and alignment and to gather evidence of the
substantial contribution.
The EU Taxonomy Alignment refers to the
process of aligning the EU’s Taxonomy
Regulation with existing and proposed national
and international sustainable finance initiatives.
Accounting policy
RHI Magnesita N.V. prepares consolidated
financial information in accordance with
generally accepted accounting principles under
IFRS, as adopted by the EU and the financial
information for turnover, operating expenditure
and capital expenditure presented under the EU
Taxonomy has been prepared under the same
accounting principles.
Our performance in ESG rankings
AA
A-
Gold
Prime C+
Taxonomy eligible activities of RHI
Magnesita referring to the activities of
Annex I and II
Economic activities of RHI Magnesita that are
described in Annex I and II of the Delegated
Regulation (EU) 2021/2139, are considered
eligible. In the case of RHI Magnesita, the
following activities are considered relevant:
• Manufacture of other low carbon
technologies.
• Material recovery from non-hazardous
waste.
• Close to market research, development
and innovation.
Manufacture of other low carbon
technologies
The economic activity “Manufacture of other
low carbon technologies covers the
“Manufacture of technologies aimed at
substantial GHG emission reductions in other
sectors of the economy”.
1
EAF refractories
RHI Magnesita provides refractory products
specifically designed for EAFs. Additionally, RHI
Magnesita provides heat management solutions
and services to its customers to reduce their
GHG emissions,including digital solutions as
well as advanced refractory products.
EAFs are a vital enabling technology for the
reduction of CO
2
emissions in the steel industry.
EAFs can be powered using electricity sourced
partially or wholly from renewable electricity
and replace the BOF phase of the traditional
integrated steel manufacturing process, which
pairs a blast furnace with a BOF and is highly
CO
2
intensive. To replace a BOF, EAF
steelmaking requires scrap steel, and a source
of virgin iron like DRI or pig iron produced from
the reduction of iron ore. EAF steel-making
requires a source of scrap steel or sponge iron
produced from the reduction of iron ore.
DRI using elevated levels of or exclusively
hydrogen is a new technology under
development that seeks to eliminate CO
2
emissions from the reduction of iron ore in blast
furnaces using coke. If sufficient quantities of
hydrogen manufactured from renewable
sources can be accessed and if a DRI furnace
can be paired with an EAF for the second stage
of the steelmaking process that is also powered
by renewable energy, CO
2
emissions from steel
production can be largely eliminated. A key
limiting factor for increased DRI production is
currently the availability of suitable iron ore, as
DRI production requires highest quality iron ore
pellets while blast furnaces can consume
almost any kind of iron ore facing no restrictions.
RHI Magnesita has a leading market position in
EAF-specific refractories, services and heat
management solutions, in part due to the
unique chemical composition of the Group’s
1. RHI Magnesita offers products and services which help to make CO
2
-intensive processes in the steel industry more efficient and therefore achieve emissions reductions in the global steel industry.
85RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
vertically integrated raw material supply. EAF
refractories produced by RHI Magnesita directly
enable substantial reductions in CO
2
emissions
at steel plants, if the EAF output is displacing
steel that would otherwise have been produced
using a blast furnace and BOF.
Digital solutions and other products that
increase energy efficiency
RHI Magnesita offers digital solutions and
associated physical equipment which achieve
CO
2
emissions reductions through process
efficiencies, such as wear monitoring and
gunning repairs to extend the safe working life
of refractory linings. Safely extending the
working life of refractory linings can achieve
significant energy savings for steel producers by
reducing the number of heating and cooling
cycles required per unit of steel output.
The Group also offers advanced refractory
products which enable its customers to
substantially reduce GHG emissions by
reducing electricity consumption, improving
yield and reducing oxygen consumption, saving
up to 13kg CO
2
per tonne of steel produced.
Other solutions and products which directly
contribute to CO
2
emissions reductions at
customer sites include cold setting mixes,
EAF direct purging plugs and converter inert
gas purging.
Material recovery from
non-hazardous waste
Material recovery from non-hazardous
waste covers the “construction and operation
of facilities for the sorting and processing
of separately collected non-hazardous
waste streams into circular raw materials
involving mechanical reprocessing, except
for backfilling purposes.”
RHI Magnesita increased its SRM input to 10% of
raw material used in production of refractories.
As part of this effort, RHI Magnesita operates
facilities for the sorting and processing of spent
refractories from customers’ industries. Circular
raw materials which are mechanically processed
by RHI Magnesita and transformed from waste to
raw material are eligible for consideration under
the EU Taxonomy, whilst circular raw material
processed by a third party and purchased
externally by the Group are non-eligible.
Close to market research, development
and innovation
Close to market research, development and
innovation covers “research, applied research
and experimental development of solutions,
processes, technologies, business models and
other products dedicated to the reduction,
avoidance or removal of GHG emissions (RD&I)
for which the ability to reduce, remove or avoid
GHG emissions in the target economic activities
has at least been demonstrated in a relevant
environment, corresponding to at least
Technology Readiness Level (TRL) 6”.
RHI Magnesita conducts close to market
research, development and innovation among
others to directly avoid GHG emissions (e.g.
research on chemically bonded bricks which do
not need firing in kilns) or which support other
eligible economic activities (e.g. material
recovery from non-hazardous waste). These
R&D activities may be included in the operating
expenditure of the other eligible economic
activity and are therefore excluded to prevent
double counting.
KPIs
Share of Taxonomy eligible revenue, operating
expenditure and capital expenditure – Climate
change mitigation:
Turnover
The turnover KPI is calculated as the ratio of
turnover associated with taxonomy-eligible
economic activities in the reporting period to
total turnover in that period. The total turnover
of the financial year 2022 of €3,317 million
forms the denominator of the turnover key figure
and can be taken from the consolidated income
statement on page 27 of this Annual Report.
The following eligible activities have been
identified as relevant in view of turnover:
• Manufacture of other low carbon
technologies.
• Material recovery from non-hazardous waste.
The total turnover reported in the consolidated
income statement is analysed across all Group
Companies to assess whether it is associated
with taxonomy-eligible activities. A detailed
analysis of the items included in the total
turnover is used to allocate the respective
turnover to the taxonomy eligible activities.
Capital expenditure
The capital expenditure KPI indicates the
proportion of capital expenditure that is either
related with taxonomy-aligned economic
activities, or related to the purchase of outputs
and products from taxonomy-aligned economic
activities. There is neither a capex plan to
expand RHI Magnesita’s Taxonomy-aligned
economic activities nor to upgrade Taxonomy-
eligible economic activities to render them
Taxonomy-aligned.
The following eligible activities have been
identified as relevant regarding the capital
expenditure KPI:
• Manufacture of other low carbon
technologies.
• Material recovery from non-hazardous waste.
• Close to market research, development
and Innovation.
The project descriptions of the additions of
assets in the reporting year served as a basis for
the necessary identification.
The sum of these identified additions of assets in
the reporting year equals the numerator of
taxonomy-aligned capital expenditure. The
total capital expenditures in line with point
1.1.2.1. Annex 1 of the Disclosure Delegated Act
equal the denominator.
Total capex consists of additions to tangible and
intangible fixed assets during the financial year,
before depreciation, amortisation and any
re-measurements, including those resulting
from revaluations and impairments, as well as
excluding changes in fair value. It includes
acquisitions of tangible fixed assets (IAS 16),
intangible fixed assets
2
(IAS 38), right-of-use
assets (IFRS 16) and investment properties (IAS
40). Additions resulting from business
combinations are not included.
Operating expenditure
The denominator of the operating expenditure
KPI shall cover direct non-capitalised costs that
relate to R&D, building renovation measures,
short-term lease, maintenance and repair, and
any other direct expenditures relating to the
day-to-day servicing of assets of property, plant
and equipment by the undertaking or third party
to whom activities are outsourced that are
necessary to ensure the continued and effective
functioning of such assets.
The numerator equals to the part of the
operating expenditure included in the
denominator related with taxonomy-aligned
economic activities or related to the purchase of
outputs and products from taxonomy-aligned
economic activities.
The following eligible activities have been
identified as relevant regarding the operating
expenditure KPI:
• Manufacture of other low carbon
technologies.
• Material recovery from non-hazardous waste.
• Close to market research, development and
innovation.
For the identification of relevant operating
expenditure, costs including direct
noncapitalised costs that relate to R&D as
well as maintenance and repair have been
considered.
Avoidance of double counting
To avoid double counting, data sources for
the various reported items are individually
crosschecked to identify overlapping
classifications.
Where double counting is identified,
overlapping data is removed from the
eligible amount.
1. For more information, see Notes 19.
2. For more information, see Notes 18.
86 RHI MAGNESITA ANNUAL REPORT 2022
Material areas identified for removal of double
counting are as follows:
• Revenue from EAF (manufacture of other low
carbon technologies); and
• Revenue from recycling (material recovery
from non-hazardous waste.
Taxonomy aligned activities of RHI
Magnesita referring to the activities of
Annex I and II
For the eligible economic activities of RHI
Magnesita previously described, the following
activities are considered aligned:
• Manufacture of other low carbon
technologies.
• Material recovery from non-hazardous waste.
Concerning Close to market research,
development and innovation activities, an
internal assessment identified that figures were
not material for the FY2022 and therefore the
alignment assessment had not been performed.
In respect to alignment criteria, RHI Magnesita
considered its activities under “Material
recovery from non-hazardous waste”
aligned because for each raw material recovery
site, monthly yield reports demonstrate
a constant yield above 50% which fulfil
the alignment criteria.
In respect to “Manufacture of other low carbon
technologies”, RHI Magnesita could demonstrate
CO
2
emission reductions for those who use its
EAF products, solutions, and digital solutions.
Does Not Significant Harm (DNSH)
To fulfil the DNSH criteria for the identified
taxonomy-eligible economic activities,
corresponding analyses and surveys were
carried out in accordance with (EU) 2021/2139
to establish taxonomy alignment.
For the economic activity Manufacture of other
low carbon technologies (3.6) the following
DNSH criteria need to be met: climate change
adaptation, sustainable use and protection of
water and marine resources, transition to a
circular economy, pollution prevention and
control and protection and restoration of
biodiversity and ecosystems.
For the economic activity Material recovery from
non-hazardous waste (5.9), the DNSH criteria to
climate change adaptation and to protection
and restoration of biodiversity and ecosystems
need to be met.
DNSH to climate change adaptation
Activities 3.6 and 5.9
For the climate risk and vulnerability analysis
for objective 2 “climate change adaptation”,
potential climate hazards were analysed and
assessed for their risk potential in accordance
with the requirements of Appendix A (EU)
2021/2139, RHI Magnesita conducted climate
risk assessment considering both physical and
transitional climate risks aligned with TCFD. Two
climate scenarios (representative concentration
pathways 2.6, and 8.5) were considered based
on the Intergovernmental Panel on Climate
Change Fifth Assessment Report and the
International Energy Agency (“IEA”) Sustainable
Development Scenario. The results of the
assessment indicated that the impact for
physical risks is limited.
DNSH to sustainable use and protection
of water and marine resources
Activity 3.6
For objective 3 “sustainable use and protection
of water and marine resources”, appendix B
of Regulation (EU) 2021/2139 was relevant.
To fulfil the DNSH criteria, RHI Magnesita
conducted a water scarcity risk assessment
covering all operational sites. The assessment
showed that 10 operations are in locations
at risk of water scarcity. For these operations,
water management actions have been
developed which follow local requirements
on water such as ground water level monitoring,
water withdrawal limits, and affected sites
take water management actions to reduce
water consumption.
DNSH to transition to a circular economy
Activity 3.6
The economic activities at RHIM falling into the
category of “Manufacture of other low carbon
technologies” are mainly the production of
refractory products for EAF which are designed
for durability. Electric Arc Furnaces (EAF) is a
prerequisite for the recycling of steel and other
metals. Furthermore, RHIM has made the use of
secondary raw materials in its own production
as well as recycling a strategic priority, so the
DNSH-criteria of objective 4 “transition to a
circular economy” are in our business model.
DNSH to pollution prevention and control
Activity 3.6
To meet the requirements for the DNSH criteria
of objective 5 “pollution prevention and control”,
a survey and analysis of the substances listed in
Appendix C of Regulation EU 2021/2139 were
carried out. RHI Magnesita is fulfiling all
requirements for substances and mixtures
referred to in appendix C (persistent organic
pollutants, mercury, substances that deplete
the ozone layer, hazardous substances in
electrical and electronic equipment and
substances in REACH regulation).
DNSH to protection and restoration of
biodiversity and ecosystems
Activities 3.6 and 5.9
The requirements for Objective 6 “Biodiversity”
according to Appendix D of Regulation (EU)
2021/2139 are ensured due to the legal
framework within the EU. For sites outside the
EU, the national legal framework was analysed.
RHI Magnesita considers its mining sites as the
part of the production process with the highest
potential for adverse effects on biodiversity.
Therefore, the assessment focuses on mining
sites. For all RHI Magnesita’s mining sites an
environmental impact screening has been
conducted. Out of the six mining sites. The
mining sites operate within or near IUCN
category Ia, II, IV, VI and unclassified (Natura
2000) protected areas. All mining sites fulfil
general environmental protection requirements
in line with legal requirements. Activity 5.9
Material recovery from non-hazardous waste
replaces virgin materials with secondary raw
materials; thus, contributes in an effective way to
reduce the environmental impact associated
with raw material extraction.
Minimum Social Safeguards
To ensure compliance with minimum social
safeguards RHI Magnesita established a due
diligence process. According to Art. 8 (EU)
2020/852, the OECD Guidelines for
Multinational Enterprises, the UN Guiding
Principles on Business and Human Rights,
including the principles and rights set out in
the eight fundamental conventions identified
in the Declaration of the International Labour
Organisation on Fundamental Principles
and Rights at Work and the International
Bill of Human Right were considered by
RHI Magnesita.
In 2022, RHI Magnesita adopted a Human
Rights Policy. Additionally, the Group revised
its Code of Conduct, instituted a global
Anti-Discrimination and Anti-Harassment
Policy. Our Code of Conduct is available in
11 languages on the internet, intranet, and
Compliance Portal. We also update our
Anti-Slavery Statement annually and publish
it on the RHIM website. We are committed
to having our suppliers adhere to the same
principles as outlined in our Supplier Code of
Conduct, which includes laws related to the
protection of human rights. Furthermore,
RHI Magnesita has implemented processes
to continuously screen business partners in
high-risk countries for compliance with
fundamental human and labour rights.
RHI Magnesita has established an independent
whistleblowing hotline and web-based system,
which allows both employees and third parties
to make reports anonymously. Additionally,
other reporting channels are available. All cases
reported are investigated by IA, R&C in
conjunction with other relevant departments.
Moreover, all sales agents must have a Trace
certification, which is updated annually and
includes a reputational screening that can
detect any human rights violations that may
have occurred.
With all these measures, RHI Magnesita ensures
compliance with the minimum safeguards for
itself and its suppliers, and processes are
implemented to become aware of suspicious
cases of human rights violations, corruption,
and bribery and to be able to react accordingly.
Sustainability
Appendices
continued
87RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Taxonomy disclosure table
Turnover Substantial contribution criteria
Economic activities Code(s) Absolute turnover
Proportion of
turnover
Climate
change
mitigation
Climate
change
adaptation
Water and
maritime
resources
Circular
Economy Pollution
Biodiversity
and
ecosystems
A. Ta xonomy- eligible activities
A.1 Environmentally sustainable activities
(Taxonomy-aligned)
Manufacture of other low carbon technologies 3.6 €556,524,461 16.8% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Material recovery from non-hazardous waste 5.9 €63,191,061 1.9% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Turnover of environmentally sustainable
activities (Taxonomy-aligned) €619,715,522 18.7% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0%
A.2 Taxonomy-Eligible but not
environmentally sustainable activities
(not Taxonomy-aligned activities)
Close to market research, development,
innovation 9.1 €– 0%
Turnover of Taxonomy-eligible but not
environmentally sustainable activities
(not Taxonomy-aligned activities) (A.2) €– 0%
Total A.1 + A.2 €619,715,522 18.7%
B. Taxonomy non-eligible activities €2,697,454,640 81.3%
Total A+B €3,317,170,162 100.0%
opex Substantial contribution criteria
Economic activities Code(s) Absolute opex
Proportion of
opex
Climate
change
mitigation
Climate
change
adaptation
Water and
maritime
resources
Circular
Economy Pollution
Biodiversity
and
ecosystems
A. Ta xonomy- eligible activities
A.1 Environmentally sustainable activities
(Taxonomy-aligned)
Manufacture of other low carbon technologies 3.6 €16,485,870 12.5% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Material recovery from non-hazardous waste 5.9 €1,875,900 1.4% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Opex of environmentally sustainable
activities (Taxonomy-aligned) €18,361,770 13.9% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0%
A.2 Taxonomy-Eligible but not
environmentally sustainable activities
(not Taxonomy-aligned activities)
Close to market research, development,
innovation 9.1 €1,312,216 1.0%
Opex of Taxonomy-eligible but not
environmentally sustainable activities
(not Taxonomy-aligned activities) (A.2) €1,312,216 1.0%
Total A.1 + A.2 €19,673,986 14.9%
B. Taxonomy non-eligible activities €112,058,281 85.1%
Total A+B €131,732,267 100.0%
capex Substantial contribution criteria
Economic activities Code(s) Absolute capex
Proportion of
capex
Climate
change
mitigation
Climate
change
adaptation
Water and
maritime
resources
Circular
Economy Pollution
Biodiversity
and
ecosystems
A. Ta xonomy- eligible activities
A.1 Environmentally sustainable activities
(Taxonomy-aligned)
Manufacture of other low carbon
technologies 3.6 €5,329,175 2.7% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Material recovery from non-hazardous waste 5.9 €741,000 1.9% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Capex of environmentally sustainable
activities (Taxonomy-aligned) €9,070,175 4.6% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0%
A.2 Taxonomy-Eligible but not
environmentally sustainable activities
(not Taxonomy-aligned activities)
Close to market research, development,
innovation 9.1 €445,630 0.2%
Capex of Taxonomy-eligible but not
environmentally sustainable activities
(not Taxonomy-aligned activities) (A.2) €445,630
Total A.1 + A.2 €9,515,805 4.8%
B. Taxonomy non-eligible activities €187,884,195 95.2%
Total A+B €197,400,000 100.0%
88 RHI MAGNESITA ANNUAL REPORT 2022
Taxonomy disclosure table continued
DNSH criteria (‘Does Not Significantly Harm’)
Economic activities
Climate
change
mitigation
Climate
change
adaptation
Water and
maritime
resources
Circular
economy Pollution
Biodiversity
and
ecosystems
Minimum
safeguards
Taxonomy aligned
proportion of
turnover year
2022
Taxonomy aligned
proportion of
turnover year
2021
Category
(enabling
activity)
Category
(transitional
activity)
A. Ta xonomy- eligible activities
A.1 Environmentally sustainable activities
(Taxonomy-aligned)
Manufacture of other low carbon technologies Y Y Y Y Y Y 16.8% E
Material recovery from non-hazardous waste Y Y Y Y Y Y 1.9% E
Turnover of environmentally sustainable
activities (Taxonomy-aligned) 18.7%
A.2 Taxonomy-Eligible but not
environmentally sustainable activities
(not Taxonomy-aligned activities)
Close to market research, development,
innovation E
Turnover of Taxonomy-eligible but not
environmentally sustainable activities
(not Taxonomy-aligned activities) (A.2)
Total A.1 + A.2 18.7% 100.0%
B. Taxonomy non-eligible activities
Total A+B
DNSH criteria
Economic activities
Climate
change
mitigation
Climate
change
adaptation
Water and
maritime
resources
Circular
economy Pollution
Biodiversity
and
ecosystems
Minimum
safeguards
Taxonomy aligned
proportion of
Opex year 2022
Taxonomy aligned
proportion of Opex
year 2021
Category
(enabling
activity)
Category
(transitional
activity)
A. Ta xonomy- eligible activities
A.1 Environmentally sustainable activities
(Taxonomy-aligned)
Manufacture of other low carbon technologies Y Y Y Y Y Y 12.5% E
Material recovery from non-hazardous waste Y Y Y Y Y Y 1.4% E
Opex of environmentally sustainable
activities (Taxonomy-aligned) 13.9%
A.2 Taxonomy-Eligible but not
environmentally sustainable activities
(not Taxonomy-aligned activities)
Close to market research, development,
innovation E
Opex of Taxonomy-eligible but not
environmentally sustainable activities
(not Taxonomy-aligned activities) (A.2)
Total A.1 + A.2 14.9% 100%
B. Taxonomy non-eligible activities
Total A+B
DNSH criteria
Economic activities
Climate
change
mitigation
Climate
change
adaptation
Water and
maritime
resources
Circular
economy Pollution
Biodiversity
and
ecosystems
Minimum
safeguards
Taxonomy aligned
proportion of
Opex year 2022
Taxonomy aligned
proportion of
Opex year 2021
Category
(enabling
activity)
Category
(transitional
activity)
A. Ta xonomy- eligible activities
A.1 Environmentally sustainable activities
(Taxonomy-aligned)
Manufacture of other low carbon
technologies Y Y Y Y Y Y 2.7% E
Material recovery from non-hazardous waste Y Y Y Y Y Y 1.9% E
Capex of environmentally sustainable
activities (Taxonomy-aligned) 4.6%
A.2 Taxonomy-Eligible but not
environmentally sustainable activities
(not Taxonomy-aligned activities)
Close to market research, development,
innovation E
Capex of Taxonomy-eligible but not
environmentally sustainable activities
(not Taxonomy-aligned activities) (A.2)
Total A.1 + A.2 4.8% 100%
B. Taxonomy non-eligible activities
Total A+B
Sustainability
Appendices
continued
89RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Board of Directors
Corporate Sustainability
Committee
Audit & Compliance
Committee
Remuneration Committee
Health, Safety &
Environment
Supply Chain
Executive Management Team (EMT)CTO
Global Sustainability Team
R&D
Communications
Finance
Internal Audit, Risk and
Compliance
EU Taxonomy reporting in the year to
31 December 2022
RHI Magnesita commissioned Deloitte
Audit Wirtschaftsprüfungs GmbH for an
independent third-party limited assurance
engagement on the non-financial report for
the year ended 31 December 2022, according
to Dutch transposition of the NFI-Decree, the
Taxonomy Regulation ((EU) 2020/852) and
GRI Standards. For more information, click
here for more details on the assurance process
and conclusions.
Task Force on Climate-Related Financial
Disclosures (TCFD)
Introduction
RHI Magnesita is committed to being
transparent about its climate-related risks and
opportunities. In line with this commitment,
we support the Task Force on Climate-related
Financial Disclosures (TCFD) and the EU
Taxonomy. We have made it a priority to
identify, evaluate, and manage climate-related
risks and opportunities, and we are always
striving to improve our process while providing
essential information to our stakeholders to
make informed decisions.
RHI Magnesita has reported according to the
TCFD Recommendations since 2019 and has
updated its climate related risk assessment and
enlarged its disclosure in 2022.
The TCFD Recommendations are the world’s
most commonly accepted standard for
disclosing climate-related risks and
opportunities. They focus on four key pillars
of Governance, Strategy, Risk Management
and Metrics and Targets.
Table 1. TCFD Recommendations
Pillar of TCFD
Recommendations Description
Governance • Describe the Board’s oversight of climate related risks and opportunities
• Describe the management’s role in assessing and managing climate related risks and opportunities
Page 90
Page 90
Strategy • Describe the climate -related risks and opportunities the organisation has identified over the short, medium and long term
• Describe the impact of climate-related risks and oportunities on the organisation’s business, strategy and financial planning
• Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C
or lower scenario
Page 91
Page 91
Page 91
Risk Management • Describe the organisation’s processes for identifying and assessing climated-related risks
• Describe the organisation’s processes for managing climate-related risks
• Describe how processes for identifying, assessing and managing climated-related risks are integrated into the organisation’s
overall risk management
Page 91
Page 92
Page 92
Metrics and Targets • Disclose the metrics used by the organisation to assess climate related risks and opportunities, in line with its strategy and risk
management process
• Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks
• Describe the targets used by the organisation to manage climate-related risks, opportunities and performances against targets
Page 93
Page 93
Page 93
Climate Governance
90 RHI MAGNESITA ANNUAL REPORT 2022
Sustainability
Appendices
continued
Board oversight
The Board of RHI Magnesita guides the
development of our strategy and appetite
towards risk. It also has oversight of other
material matters such as regulatory
developments or reputational and financial
topics. Responsibility for and oversight of
climate-related risks and opportunities has
been assigned to the Corporate Sustainability
Committee (CSC).
The Chairman of the Committee, who is
responsible for overseeing RHI Magnesita’s
climate strategy, engages directly with RHI
Magnesita managers and employees on climate
topics as required between the regular
Committee meetings. Certain members of the
Executive Management Team regularly attend
the Committee meetings. The Committee
Chairman reports to the Board on climate-
related matters on a regular basis. The CSC
regularly reviews climate risks and
opportunities, strategy and performance, while
the Remuneration committee reviews and
approves bonus payment linked to climate.
Climate-related progress is discussed at every
CSC meeting, with the Chair engaging directly
with those driving the CO
2
strategy in between
CSC meetings as needed. Recommended
disclosures are presented on Table 1. The
Audit & Compliance Committee oversees
any material ESG risks, including climate-
related risks.
Management
At Management level, in the C-Suite, the CTO
reports regularly to both the CEO and Board
CSC on a quarterly basis and anytime in-
between as necessary. The CTO is also on the
Executive Management Team. He directly
oversees the development of the company’s
CO
2
strategy and its implementation across the
organization. The Global Sustainability Team
reports to CTO and manages and facilitates
sustainability across RHI Magnesita.
Driven by our Board and led by our Executive
Management Team, we engage widely with
stakeholders, investigate risks, and identify
opportunities aligned with our ambitious
strategy. Our climate governance is outlined on
the Figure 1.
In 2022 we further integrated carbon
considerations into key processes:
• A new internal pricing mechanism was
introduced to incentivise sales teams to
prioritise products with higher recycled
content
• 25% of the Long-Term Incentive Plan (LTIP)
payout criteria is linked to the Group’s target
to reduce CO
2
emissions per tonne against
2018 baseline year
• Increase the use of secondary raw material
accounts for 10% of the annual bonus for all
eligible employees
• Enhanced monthly monitoring of CO
2
emissions (Scope 1 and 2) was integrated
into the Group’s enterprise resource
planning tool.
In addition to that, we are currently
implementing a more structured approach to
engage with suppliers to fully integrate
sustainability considerations – including
climate change – into our procurement
process.
Our goal is that by 2025 two-thirds of our
suppliers will be rated by EcoVadis. Using the
Carbon Action Scorecard of EcoVadis we are
provided with a maturity status of a prospective
supplier regarding carbon management and
mitigation. Engagement on the subject of
emissions also highlights to potential suppliers
that reducing CO
2
is a key priority for the Group,
which is expected to drive changes in supplier
behaviour and energy use in the long term.
Climate strategy
Driving down carbon emissions is a key priority
for RHI Magnesita. Besides mapping out our
own transition path, we would like to be a
reliable ally to our customers as they venture
into a carbon-reduced economy.
The Group’s emission reduction plans target
a 15% reduction in CO
2
emissions intensity for
Scope 1, 2 and 3 (raw materials) emissions by
2025, compared to 2018. Our climate strategy
is based on:
1) reducing the carbon footprint of our raw
materials, including through the increased
use of circular raw materials;
2) increasing energy efficiency in our operations;
3) reducing the carbon intensity of our energy
sources; and
4) providing innovative solutions to reduce
customer emissions.
All risks and opportunities were assessed in a
qualitative scenario analysis, and the most
material climate-related risks and opportunities
(those with an inherent risk or opportunity rating
of ‘high’) underwent quantitative scenario
analysis to help better estimate the potential
financial impact on the business.
For our analysis, we used two climate scenarios
to understand the potential range of impacts we
face. The climate scenarios considered are
based on the Intergovernmental Panel on
Climate Change Fifth Assessment Report.
and the International Energy Agency (“IEA”)
Sustainable Development Scenario. The
scenarios consider greenhouse gas
concentration trajectories in the atmosphere
and relate to a below 2°C temperature increase,
and above 4°C temperature increase in the
global average surface temperature in 2100.
• Below 2°C increase (RCP 2.6): Based on the
Intergovernmental Panel on Climate
Change (“IPCC”) Shared Socio-economic
Pathway (SSP) 1 – 2.6 and the International
Energy Agency (“IEA”) Sustainable
Development Scenario. This scenario
assumes a gradual buildup of climate
policies over time and predicts that through
the implementation of moderate mitigation
measures, global net zero emissions can be
achieved by 2070.
• Hot house World (RCP 8.5): Associated with
approximately 4 degrees of global warming,
based on the IPCC’s SSP 5 – 8.5 scenario.
This scenario assumes that without actions
to limit emissions, it is likely the rise of
temperature, leading to a variety of physical
risks and substantial impacts.
We have conducted our analyses across three
different time horizons. The short-term (2025)
sits within our short-term business plan, while
the medium (2030) and long-term (2050) time
horizons are oriented towards the broader
international policy developments, including
the Paris Agreement and the EU Green Deal.
Having reviewed the analysis, the Corporate
Sustainability Committee believes the Group is
well positioned to mitigate the risks and
embrace the opportunities associated with the
climate-change related developments across
both scenarios. These could range from
disruptive regulatory developments, physical
hazards for our operations or new business
opportunities. The Group believes that through
monitoring market developments and
enhancing its business adaptability and
planning, RHI Magnesita can maintain a strong
level of climate resilience over the short,
medium and long-term across both scenarios.
We remain committed to supporting our
customers’ decarbonisation efforts as well as
actively managing our own climate-related risks
and opportunities.
Climate risks management
The Group has an established risk management
approach with the objective of identifying,
assessing, mitigating, monitoring and reporting
uncertainties and risks that could impact the
delivery of RHI Magnesita’s strategy. Since the
environment and climate change represents
both strategic and operational risk to our
business, they are considered as RHI
Magnesita’s principal risks (see our risk
management approach on our Annual Report
2022, page 46). Several mitigation measures
are in place to ensure that the risk is
appropriately managed and within the
Group’s risk appetite.
Risks were grouped as physical risks and
transitional risks.
Physical risks include greater severity of
flooding, droughts or other extreme weather
events which could disrupt our operations and
supply chain.
91RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
Climate
drivers Risk/Opportunity Category Impact (see reference table) RHI Magnesita response and strategy
Main affected
Time Horizon Related metrics and targets
Policy-
making &
Regulatory
pressure
Carbon Pricing Risk RHI Magnesita foreseens an
impact due to the increase in
operating costs because of
increase in level or scope of
carbon pricing
• The Group integrates carbon permit price
projections into its financial planning and has
a hedging programme in place to fix future
exposures
• We are developing new technologies, such as
carbon capture and utilisation/storage to
reduce our emissions, investing €50 million in
research and development of these solutions
• The Group aims to increase the use of
secondary raw materials which will reduce
CO
2
emissions compared
to the mining or purchase of fresh raw material
• We will continue to invest in fuel switching,
renewable energy and energy efficiency
as additional methods to reduce our
carbon intensity
Medium-
Long Term
We have set a 15% emissions
intensity reduction target by
2025 on a 2018 baseline of
Scope 1, 2 and 3 raw materials
emissions. By the end of 2022,
our emissions intensity was
8% lower than the 2018
baseline
Market &
Customers
Increased demand
for the Group’s
products arising
from the
development of or
transition to
lower-carbon
emitting industrial
processes by our
customers
Opportunity RHI Magnesita foreseens a low
financial impact regarding the
increased demand from
customers for refractory
products that help them
reduce their emissions is
considered low (e.g. EAF)
• We are already providing our customers with
refractory products that support low carbon
production processes. This includes our steel
and cement customers who account for 80%
of our business. For example, we provide
products supporting EAFs for the steel
industry, which is an enabling technology for
CO
2
emissions reduction
• RHI Magnesita has a higher market share in
lower CO
2
emitting applications (such as EAF)
and a lower relative market share in high
emitting applications (e.g. BOF, Blast Furnace)
• We will continue to offer our low energy
and carbon services and product offering
including process optimisation, recycling
services, coating technologies and
digital solutions
Short-
Medium-
Long Term
Sales of refractory products
supporting EAFs, associated
with the lower carbon
production of steel, was 552
million in 2022
Market &
Customers
Increased demand
for RHI Magnesita
products that are
produced
with lower carbon
footprint
Opportunity Higher revenue due to
increased demand for
low-carbon (e.g. recycled)
refractory products
• In the short term, increasing the share of SRM
in our products will help us to reduce our
geogenic emissions from raw materials and
create attractive low-carbon products
• In the longer term, if the Group is successful at
developing and operating carbon capture and
sequestration or utilisation technologies and
switching to renewable energy sources,
refractory products could be manufactured
with low
or potentially zero CO
2
emissions
• This is expected to translate into a pricing and/
or market share advantage compared to
competitor products with high emissions,
particularly as customers focus more on their
Scope 3 emissions
Short-
Medium-
Long Term
• We have set a target of 10%
SRM content in refractory
products by 2025. We
achieved 10,5% of SRM
content in 2022 (2021: 6.8%)
• Our target is to reduce CO
2
intensity by 15% by 2025
Opportunities Risks
High >€875m High >€875m
Medium €175m-€875m Medium €175m-€875m
Low <€175m Low <€175m
Transitional risks range from regulatory
frameworks and the rising price of carbon
to the viability and customer acceptance
of emerging technologies.
Our most material climate-related risks and
opportunities result from disruptive regulations
for CO
2
emissions reduction.
In 2022, the Group has updated the modelling
and analysis of climate related transitional risks
and opportunities that are foreseen to impact
the Group over the short, medium, and
long-term horizons. Results have shown that
physical risks remained unchanged, and the
impact of transitional risks was reviewed (see
table 2).
Short term (2025)
Our first set of sustainability targets are planned
within this timeframe. We are also actively
monitoring emerging trends and opportunities
that may require us to adjust our strategic plans.
We are committed to staying agile and adapting
our plans as needed to ensure that we remain
competitive in the marketplace and continue
to meet our sustainability goals, specially
our 2025 climate-related target (for more
information, see our Annual Report,
2025 Targets, page 61).
Medium term (2030)
This is the most likely horizon for the regulatory
frameworks (such as the EU Emissions Trading
System and Carbon Border Adjustment
Mechanism) currently set to come into force
in a three years transition period, and set to be
expand to all sectors within EU ETS by 2030
thus having partial effect due to the gradual
phase out of free allocations. We are
anticipating and considering major adjustments
to our industrial footprint.
Table 2. Climate-related transitional risks and opportunities
92 RHI MAGNESITA ANNUAL REPORT 2022
193
204
112
Equity Value
Base Case
Carbon Pricing EAF Recycling Equity Value
including parameters
Sustainability
Appendices
continued
2022 Valuation Bridge Analysis
Long term (2050)
The deadline that has been set by the UN
and many policy-making bodies to set
decarbonisation goals is the year 2050. During
2021 and 2022, we completed a detailed
assessment of all possible measures to reduce
CO
2
emissions in our operations based on
proven technology and available financial
resources. Whilst it may be possible to reduce
emissions in line with a “well below 2 degrees”
scenario, it is our current assessment that it is
not possible to set a target that is aligned with a
1.5-degree scenario which is not dependent on
the development of as-yet unknown
technologies or significant external financial
and infrastructure support.
We are committed to reduce our carbon
footprint and we will continue to monitor the
variables which support this conclusion and
update our transition plan accordingly if the
Group’s own R&D activities result in the
development of new technologies that could
deliver a faster reduction in CO
2
emissions that
is financially achievable.
Transition-related risks and
opportunities
Operating in an emissions intensive industry, it is
likely that RHI Magnesita’s business model will
be affected by the transition to a low-carbon
economy. As well as risks, there are a number of
significant opportunities that the Group is well
positioned to benefit from.
RCP 8.5 RCP 2.6
Country Plant Likelihood Dominant hazard Likelihood Dominant hazard
India Cuttack 2025 High Riverine Flooding High Riverine Flooding
2030 High Riverine Flooding High Riverine Flooding
2050 High Riverine Flooding High Riverine Flooding
France Flaumont 2025 Moderate Riverine Flooding Moderate Riverine Flooding
2030 Moderate Riverine Flooding Moderate Riverine Flooding
2050 Moderate Riverine Flooding Moderate Riverine Flooding
Mexico Tlalnepantla 2025 Moderate Soil Subsidence Moderate Soil Subsidence
2030 Moderate Soil Subsidence Moderate Soil Subsidence
2050 Moderate Soil Subsidence Moderate Soil Subsidence
Brazil Vale do Aço 2025 Moderate Riverine Flooding Moderate Riverine Flooding
2030 Moderate Riverine Flooding Moderate Riverine Flooding
2050 Moderate Riverine Flooding Moderate Riverine Flooding
Mexico Ramos Arizpe 2025 Moderate Soil Subsidence Moderate Soil Subsidence
2030 Moderate Soil Subsidence Moderate Soil Subsidence
2050 Moderate Soil Subsidence Moderate Soil Subsidence
US Ashtabula 2025 Moderate Forest Fire Moderate Forest Fire
2030 Moderate Forest Fire Moderate Forest Fire
2050 Moderate Forest Fire Moderate Forest Fire
China Chizhou 2025 Moderate Forest Fire Moderate Forest Fire
2030 Moderate Forest Fire Moderate Forest Fire
2050 Moderate Forest Fire Moderate Forest Fire
Table 2 illustrates the material climate-related
risks and opportunities selected for quantitative
scenario analysis.
Risks
RHI Magnesita’s main risk is the additional
operating expense resulting from carbon pricing
developments. The financial impact of this risk has
increased due to implementation of CBAM in
Europe, which is an EU policy instrument designed
to level the playing field for domestic producers
subject to carbon pricing by implementing a
carbon-based import tariff on goods from
countries without equivalent carbon pricing.
The CBAM is designed to protect domestic
producers from competitive disadvantages
resulting from carbon pricing by making imports
from countries without equivalent carbon
pricing more expensive. This mechanism would
help to ensure that domestic producers and
consumers are not put at an economic
disadvantage by having to bear the cost of
carbon pricing, while their international
competitors do not. The CBAM is intended to
incentivise countries to adopt similar carbon
pricing policies, thereby reducing the global
emissions of greenhouse gases.
Table 3. Climate-related physical risks
93RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCE
STRATEGIC REPORT
The implementation of the Carbon Border
Adjustment Mechanism (CBAM) is expected to
have a financial impact on the Group from 2030
onwards as free carbon allowances under
EU-ETS are phased-out. This is due to levies on
imported materials, which are designed to
protect the EU domestic business. This is
expected to increase refractory pricing for all
suppliers selling into the EU. Additionally,
products manufactured in the EU and then
exported will incur higher costs, as there are
currently no compensation mechanisms for
exporters. The financial impacts of the CBAM
have been included in the Group’s updated
TCFD modelling, resulting in impact on
equity value ranging from €193 million
to €320 million.
Opportunities
Two opportunities were identified (i) increased
demand for products that customers will require
for technology transition, e.g. EAF refractories,
and (ii) increased demand for low-carbon
refractory products containing recycled raw
materials.
The steel industry is undergoing a
decarbonisation process which is predicted to
continue into 2050 and beyond. This
megatrend has led to an increased demand for
electric arc furnaces (EAF) and electric smelter
furnaces. As the pressure to reduce carbon
emissions intensifies, RHI Magnesita is
well-positioned to benefit from this growing
trend. With its vertically integrated model, RHI
Magnesita has access to the raw material
required for an electric arc furnace from its
European mines in Austria, Hochfilzen and
Breitenau. This gives RHI Magnesita a
competitive edge and makes it the leading
refractory partner of choice in the green
transition of the steel industry (read more on
decarbonising across industries on Annual
Report 2022, page 21).
Besides that, in the first half of 2022, RHI
Magnesita entered into a joint venture with
Horn & Co. to combine their recycling activities
in Europe and increase production, use and
offering of secondary raw materials. This will
result in a significant decrease in CO
2
emissions.
The newly formed entity, MIRECO (Horn & Co.
RHIM Minerals Recovery GmbH), will be
positioned at the forefront of the circular
economy, providing services to customers
in steel, cement, glass and other process
industries (read more on decarbonising our
products on Annual Report 2022, page 21).
The net impact on equity value of these
opportunities combined is +€123 million
(2021: +€352 million).
Table 4. Metrics and Targets
1
Absolute emissions (thousand tonnes of CO
2
)
2018 2019 2020 2021 2022
Scope 1 2,400 2,007 1,973 2,499 2,193
of which geogenic emissions 1,305 1,066 1,075 1,340 1,112
of which fuel-based emissions 1,045 918 873 1,146 1,082
of which other emissions 50 24 25 14 –
Scope 2 208 188 143 147 89
Scope 3 (only raw material) 2,875 2,506 2,181 2,404 1,912
TOTAL 5,483 4,702 4,297 5,050 4,196
Carbon Intensity (t CO
2
/t product)
2
1.90 1.89 1.97 1.85 1.75
Biogenic Scope 1 emissions 5 8 10 13 13
1. Historical CO
2
emission data were revised to reflect new acquisitions and changes that were made following an external
verification process that took place in July 2022.
2. Adaptations in line with the Greenhouse Gas protocol and refinement in reporting result in updated CO
2
intensity figures for
2018-2022.
Physical-related risks and opportunities
The Group assessed its major production sites
and strategic port locations across a broad
range of physical climate hazards. The table 3
presents seven highest risk assets that were
selected for ‘deep dive’ analysis. These sites
remain in the ‘Moderate’ or ‘High’ VAR
1
categories across 2025, 2030 and 2050 and
both scenarios. We considered the impacts
including asset damage, disruption to
operations and impacts on the value chain
(upstream and downstream). Riverine flooding
was identified to be the most dominant hazard
to our portfolio in relation to value at risk of
damage across both scenarios and all
three-time horizons.
The results of the assessment indicated that the
overall risk profile for physical risks is limited.
Our current insurance coverage provides
sufficient coverage for asset damage and
operational disruption. The assessment did not
indicate that there are likely to be any material
increases in the cost or coverage of insurance in
the future. The results of the assessment will be
used to guide resilience building within our
operations and value chain.
This assessment will be reviewed to include the
new assets RHI Magnesita is acquiring during
the year 2022.
Climate risks also form part of our third CDP
climate submission, for which we were awarded
a A-rating by CDP in December 2022.
Metrics and targets
We continue to publish our Scope 1, 2 and 3
(raw materials) GHG emissions within our
Annual Report. In 2022, the Group’s new
product carbon footprinting methodology
was independently verified and we are in the
process of integrating monthly monitoring of
CO
2
into the Group’s enterprise resource
planning tool. Reducing CO
2
emissions was
introduced as a remuneration target in 2021 and
now accounts for 10% of the annual bonus for
all eligible employees.
In addition to that, in 2022, the Group
completed a major project to increase
transparency for its customers by disclosing the
carbon footprint of its c.200,000 refractory
products. The calculations follow the principles
of ISO 14067 standard and include all scope 1
and 2 emissions, as well as relevant scope 3
emissions related to the manufacturing process
(known as “cradle-to-gate” greenhouse gases
from raw material extraction to production and
packaging).
Tracking our progress
We use metrics and targets to track our progress
in relation to our material climate-related risks
and opportunities.
Outlook
We recognise the importance of understanding
our risk and opportunity landscape in guiding
our climate strategy. In addition to charting our
own transition, we want to be a trusted partner
to our customers on their journey to net zero.
We will further deepen our climate-related
initiatives in the coming years to help us to
continue to be a sustainability leader within
the sector.
1. MVAR is a measure of the annual risk of damage to an asset. The MVAR captures the costs of expected extreme weather and climate-related damage, relative to the replacement cost of the building.
94 RHI MAGNESITA ANNUAL REPORT 2022RHI MAGNESITA ANNUAL REPORT 202294
95RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORTSTRATEGIC REPORT
Governance
Companies do not exist in isolation.
Successful and sustainable
businesses underpin our
economy and society by
providing employment and
creating prosperity.
– Introduction, UK Corporate Governance Code, 2018
96 RHI MAGNESITA ANNUAL REPORT 2022
Chairman’s introduction
to corporate governance
Board review
Our review of 2022 is in the process of
concluding, and we expect to report fully
on the output in next year’s reporting. In our
Nomination & Governance Committee report,
we outline progress made in 2022 on actions
identified from prior Board effectiveness reviews.
Details can be found on pages 112, 120 and 121.
Sustainability, stakeholders,
and strategy
Throughout the 2022 Board programme
we continued to devote considerable time
to the deliberation of the Company’s strategy,
particularly to assessing progress against our
2025 strategy and the execution capability
required to deliver it. Through engaging in
discussion with experts, the Board ensured they
had the right context to make decisions and
guide management,
Sustainability has been a constant seam
throughout many of our conversations as a
Board and also with stakeholders. It was a
cornerstone of the annual strategy discussion
and was discussed at nearly every Board
meeting in the year, with Directors recognising it
as both a risk and opportunity for the business,
and our wider communities. The Corporate
Sustainability Committee (CSC) has reported
back to the Board on the proceedings of each
of its meetings and the CSC also welcomed
various Board members and key senior
management as attendees to those meetings
throughout the year, ensuring that conversation
has been taking place at the highest levels
of the organisation. Sustainability continues
to be key for our strategic success and the
management is focusing on how to leverage
its benefits for the communities we operate in,
the customers we serve and our shareholders.
At RHI Magnesita, we recognise the role we
play in the lives of our employees, customers,
suppliers, shareholders, and the communities
in which we operate. You can read more about
our stakeholder engagement and how our
understanding of stakeholder expectations
feeds into our decision making on pages 106
to 109.
Dear Shareholder,
On behalf of the Board, I am pleased to present
the Corporate Governance Statement for the
year ended 31 December 2022, summarising
the role of the Board in providing effective
leadership to promote the long-term
sustainable success of RHI Magnesita. I have
taken the opportunity to highlight some of the
key points of this section below.
Board composition
In October 2022, Fiona Paulus stepped down
from the Board, having joined us in late 2018.
We benefited hugely from Fiona’s commercial
and strategic insights over her years with us and
we extend our deepest thanks for the dedication
and support she showed throughout her tenure.
We continue to review the skills and experience
needed on the Board, as well the diversity
expectations that are important to key
stakeholders and will underpin our future
success. Full details of our Board and Executive
succession planning and the current
recruitment process for Non-Executive
Directors (NEDs) can be found on pages 121 and
123. Board and EMT biographies are on pages
114 to 119.
Return to in-person meetings and
site visits
As a Board, and Company, with international
composition, we were seriously hampered by
travel restrictions across multiple jurisdictions
in 2020 and 2021. In 2022, we returned to
in-person meetings for the majority of our
sessions, and the Board were delighted to
visit multiple sites, engaging with colleagues,
observing the culture at different sites,
seeing the results of Board decisions and the
successes of management, as well as areas
for improvement. You can read more about this
on pages 101, 102 and 112.
Herbert Cordt
Chairman
In 2022, the Board
has focused the
management team on
operational excellence,
driving the principles
of regionalisation,
and engaged in deep
discussion about
stakeholder priorities
and reflecting those
in their decisions.
97RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Male 67%
Female 33%
Independent 55%
Not independent
45%
Board gender diversity
1
Board independence
1
1 As calculated by reference to the UK
Corporate Governance Code and
excluding the ERDs.
Governance
In the course of 2022, we updated the scope
of our Nomination Committee to become the
Nomination & Governance Committee. This
was to ensure that corporate governance
matters, which are subject to upcoming
changes in our regulatory geographies, are
given chance to be well considered and
recommended accordingly to the Board.
The report of our compliance in respect of each
of the UK Corporate Governance Code 2018
(UKCGC) and the Dutch Corporate Governance
Code 2016 (the DCGC, and together “the
Codes”) can be found on pages 98 and 99.
Where we could improve our reporting in line
with the DCGC issued in December 2022 we
have, and we intend to report against this new
Code in our 2023 Annual Report. Our
compliance with the new UK Listing Rules on
diversity is reported on page 122.
At our Annual General Meeting (AGM) in 2023,
we will propose a change to the Articles of
Association to give the Company flexibility
should the Dutch law enabling virtual AGMs to
be implemented in the future. In recent years,
we have enjoyed the ability to hold our AGM
virtually, seeing it as an opportunity for an
efficient and cost-effective way of engaging
with as many shareholders as possible, given
the disparate locations of shareholders and
directors. We have seen good levels of
participation at these virtual AGMs and our
Investor Relations team work tirelessly
throughout the year to ensure there are also
plenty of other opportunities for shareholders to
engage with the Company. Whilst a fully virtual
AGM in 2023 will not be possible, for the
reasons outlined above, we will hold a hybrid
meeting with limited presence in the
Netherlands.
Finally, with the exception of Sigalia Heifetz, all
Directors will seek re-election at our AGM on
24 May 2023 and we look forward to engaging
with our shareholders at that event.
Herbert Cordt,
Chairman of the Board of Directors
98 RHI MAGNESITA ANNUAL REPORT 2022
Corporate governance statement
Compliance with the Dutch Corporate
Governance Code (DCGC) and the UK
Corporate Governance Code (UKCGC)
The Board has applied the principles of,
complies with and intends to continue to
comply with the requirements of both the
DCGC and the UKCGC, save that the Company
does not comply with Provisions 9, 19, 24, and
reports partial compliance with 36, 40 and 41 of
the UKCGC. The explanations are set out below.
Deviations from the UK Corporate
Governance Code in 2022
Provision 9 & 19
Provision 9 states that the Chairman of the Board
should be independent on appointment. The
Chairman is not considered to be independent
for the purposes of the UKCGC, having served
on the Board for more than nine years (including
time on the Board of RHI AG prior to the merger
with Magnesita). This also means the Company
is not compliant with Provision 19. The Board
continues to see the value that Herbert Cordt
brings to the Company, being most notably
continuity of corporate memory which
contextualises, and drives focus on, operational
performance improvements through detailed
organisational and business knowledge. Further
positive assessment by the Board of his
Chairmanship can be found on page 121.
Provision 24
As detailed in the 2021 report, Wolfgang
Ruttenstorfer is no longer deemed to be
independent under the criteria outlined in the
UKCGC, as a result of his time on the Board,
which includes his role on the RHI AG
Supervisory Board from 2012. The Board
continues to benefit greatly from Wolfgang’s
financial experience, the continuity he provides,
his challenge to management and contributions
to the Audit & Compliance Committee, and as
such, Wolfgang will continue to be a member of
the Committee. We have therefore decided to
explain our position in respect of Provision 24 of
the UKCGC.
Provisions 36, 40 and 41
Since the introduction of the current UKCGC in
2018, the Company has taken steps in order to
be able to report compliance with the principles
and provisions relating to remuneration.
Following the publication of Financial Reporting
Council (FRC) guidance in 2021 titled,
“Improving the quality of ‘comply or explain’
reporting”, we report partial compliance with
Provisions 36, 40 and 41.
Provision 36
The Company consulted c.70% of its
shareholder base about the current
Remuneration Policy (the Policy) prior to its
approval at the 2021 AGM, explicitly referring to
the proposed policy for post-employment
shareholding requirements, which comprises
the continuation of holding periods for annual
bonus shares and the LTIP post-cessation of
employment. Our Policy received 95.95%
support at the 2021 AGM. However, the
Company notes the clarification by the FRC in
2021, specifically that it is not enough to
achieve compliance with the UKCGC by
including a policy that only provides for holding
periods to continue post-employment.
The Board believes that its current Policy for
post-employment shareholding requirements is
appropriate and, with other elements of the
Policy, achieves the right balance between
providing a remuneration structure that is both
incentivising and retentive. The Policy ensures
alignment to shareholder interests and
long-term sustainable performance of the
business, both whilst the executives are
employed by the business post-employment. In
reaching this conclusion, the Board has taken
into account the different elements of the Policy
that together achieve these aims including
post-employment holding periods for annual
bonus shares and vested LTIPs, for both good
and bad leavers, in-flight unvested LTIPs for
good leavers, as well as shares beneficially
owned by the executives.
As we review our Remuneration Policy in 2023,
ready to propose to shareholders at the AGM in
2024, we will be consulting with shareholders
and relevant stakeholders, ensuring that we take
regulatory guidance and investors’ views
into consideration.
Provisions 40 and 41
The Company benefits from employee
representation on the Board, and the Board
annually approves executive remuneration on
the recommendation of the Remuneration
Committee. This provides a mechanism for our
Employee Representative Directors (ERDs) to
understand and engage on behalf of the
workforce regarding the alignment of executive
remuneration with wider Company pay policy
and to provide feedback. In 2022, they met with
the Chairman of the Remuneration Committee
as part of their induction, which gave
background to executive remuneration and
outlined the key matters the Board are required
to decide upon in respect of remuneration.
Our remuneration policies and practices,
including our approach to salary increases and
annual bonus structure, are aligned throughout
the business. Given this alignment, and the
extant mechanism for engagement with the
ERDs, the Board is comfortable with the existing
approach and does not consider it necessary to
provide any additional forms of engagement
with the workforce to explain how executive
remuneration aligns with wider Company pay
policy. The Remuneration Committee will
continue to keep this under review.
Deviations from the Dutch Corporate
Governance Code in 2022
The Company does not comply with best
practice provision 2.2.2 of the DCGC which
recommends that, in the case of a one-tier board,
a Non-Executive Director should be appointed
for a period of four years. The appointment of the
NEDs (other than ERDs) has been made on the
basis of nominations for three-year terms, subject
to performance and annual re-election at the
AGM. The Board considers that the three-year
term is more consistent with UK listed company
practice and does not compromise the spirit of
the DCGC provision.
In 2022, the Company partially complied
with best practice provision 4.1.8, which
recommends that Directors nominated for
appointment should attend the AGM at which
votes will be cast for their nomination. The
partial compliance is due to Sigalia Heifetz’s
non-attendance at the AGM at which she was
proposed to be re-elected, owing to a short-
notice personal matter. The Company notes this
was of an incidental nature, and its policy is to
fully comply with this provision, as it has done in
all previous years.
As explained on page 103, we do not include
our ERDs as part of the denominator in our
Board independence calculations.
In the Company’s assessment of compliance
with the DCGC, the Company has used the
DCGC published in 2016. The DCGC was
updated in December 2022 to be reported on
in the reporting period commencing 1 January
2023. In anticipation of this, the Company has
assessed its compliance with the 2022 DCGC
and has identified areas for focus in 2023 to
ensure effective compliance and reporting in
next year’s report.
Corporate governance declaration
In complying with the requirements of the
DCGC, the Company publishes this corporate
governance statement including information
relating to its compliance with the DCGC,
including a further explanation of the
Company’s Board Diversity Policy and the way
in which it is implemented in practice. The
information required to be included in this
Corporate Governance Statement can be found
in the following sections and pages of this
Annual Report (Annual Report) and are deemed
to be included and repeated in this statement:
• the information concerning compliance with
the DCGC can be found on page 98;
• the information concerning the main
features of the Company’s internal risk
management and control systems relating to
the financial reporting process can be found
on pages 46 to 49;
• the information regarding the functioning of
the General Meeting and its main authorities
and the rights of the Company’s
shareholders and holders of depositary
interests in respect of shares in the Company
and how they can be exercised can be found
on pages 96 to 157;
• the information regarding the composition
and functioning of the Board and its
Committees can be found on pages 100
to 157;
99RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
• the Diversity Policy with regard to the
composition of the Board and its
Committees, can be found on page 121; and
• the information concerning the disclosure of
the following items, where they exist, may be
found on pages 99 to 113:
– participations in the Company for which a
disclosure obligation exists;
– special control rights attached to shares
and the name of the person entitled to
such rights;
– any limitation of voting rights, deadlines
for exercising voting rights and the issue
of depository interests for shares with the
co-operation of the Company;
– the regulations in respect of the
appointment and dismissal of Executive
Directors and NEDs and amendments to
the Articles of Association;
– the powers of the Board, in particular to
issue shares and to acquire own shares by
the Company; and
– the number of shares without voting
rights and the number of shares that do
not give any, or only a limited, right to
share in the profits or reserves of the
Company, with an indication of the
powers which they confer.
Listing Rules information
Certain information is required to be published
by the Listing Rules (LR 9.8.4 R and LR 9.8.4C R)
and this information can be found in the Annual
Report as set out in the table below:
Item
Location in this
Annual Report
1. Interest capitalised Page 190
2. Publication of unaudited
financial information
N/A
3. Details of long-term incentive
schemes
Pages 132 to
157
4. Waiver of emoluments by a
Director
N/A
5. Waiver of future emoluments by
a Director
N/A
6. Non pre-emptive issues of equity
for cash
N/A
7. Item (6) in relation to major
subsidiary undertakings
N/A
8. Parent participation in a placing
by a listed subsidiary
N/A
9. Contracts of significance N/A
10. Provision of services by a
controlling shareholder
Refer to Note
43
11. Shareholder waiver of dividends N/A
12. Shareholder waiver of future
dividends
N/A
13. Agreements with controlling
shareholders
Refer to Note
43
Major shareholdings
The Dutch Financial Supervision Act requires
institutions and individuals holding a (potential)
capital and/or voting interest of 3% or more in
the Company, to disclose such interest to the
Dutch Authority for the Financial Markets (AFM).
Shareholders only have to update their filings
if their capital and/or voting interest crosses
the 3% or a subsequent 5% threshold.
The AFM processes these disclosures in its
publicly available register, which can be found
at www.afm.nl. In providing the table of
shareholdings below, the Company has
included the total interests registered at the
AFM on 24 February 2023, or where the
Company has been made aware of more
up-to-date information through a direct
notification by the shareholder, it has used this
information. The total % of issued share capital
in the table is calculated excluding treasury
shares held by the Company.
These stated interests may differ from the
current interests of the relevant shareholders
as these interests are based on the number of
shares owned at the time of the notification and
are not adjusted for any purchases or sales since
that date. Additionally, shareholders only have
to update their filings if their capital and/or
voting interest crosses the 3%, or a subsequent
5%, threshold.
Shareholder
5
Number
of shares
Total % of
issued and
outstanding
capital
1
MSP Stiftung 13,333,340 28.36%
Fidelity Management & Research Company LLC 4,693,933 9.98%
E. Prinzessin zu Sayn-Wittgenstein Berleburg
2
2,088,461 4.44%
K.A. Winterstein
3
2,088,461 4.44%
FEWI Beteiligungsgesellschaft mbH 1,891,292 4.02%
GLG Partners LP
4
1,788,605 3.80%
1. These percentages have been calculated using the number of shares notified by the relevant shareholder to the AFM or the
Company and the current issued and outstanding share capital of the Company (and therefore excluding treasury shares). It is
noted that for purposes of the Dutch Financial Supervision Act, the calculation must be made on the basis of the issued share
capital, and therefore including treasury shares, and therefore the AFM’s register will refer to other percentages.
2 The interest is held through Chestnut Beteiligungsgesellschaft mbH (Chestnut). Ms. Sayn-Wittgenstein made an agreement
with Mr. Winterstein which allows Chestnut to exercise the voting rights of Silver Beteiligungsgesellschaft mbH (Silver) in the
Issuer. Ms. Sayn-Wittgenstein and Mr. K.A. Winterstein share a family relationship.
On 6 November 2022, Ms. Sayn-Wittgenstein acquired 1,071,722 shares in the Company from Mr. W. Winterstein (held in part
directly and in part indirectly through FEWI Beteiligungsgesellschaft mbH) with whom she shares a family relationship. The
acquisition of the 1,071,722 shares by Ms. Sayn-Wittgenstein has been disclosed in the AFM’s register on manager’s
transactions under article 19 of Regulation (EU) No. 596/2014 (MAR) (which can be found at www.afm.nl) and on the Issuer’s
website. No notification has been made by Ms. Sayn-Wittgenstein in the AFM’s separate substantial holdings register for this
transfer, and consequently the number and percentage mentioned in the table (reflecting a notification to the AFM on
27 October 2017) will not reflect the actual number of shares of Ms. Sayn-Wittgenstein in the Company.
3 The interest is held through Silver. Ms. Sayn-Wittgenstein made an agreement with Mr. K.A. Winterstein which allows
Chestnut to exercise the voting rights of Silver in the Issuer. Ms. Sayn-Wittgenstein and Mr. K.A. Winterstein share a family
relationship.
4 GLG Partners LP have notified voting rights of 1,487,887 held directly and 300,718 held via a swap agreement.
5 The Company holds 2,460,010 (4.97%) of its own shares in treasury as a result of the buybacks undertaken during the period,
2019 to 2021. Shares held in treasury cannot be voted upon.
There are no restrictions on voting and profit
rights and no holders of any securities with
special control rights. Depositary interests in
respect of the Company’s shares have been
issued by the Company with the Company’s
co-operation, which can be settled
electronically through, and held in the system
of, CREST. The depositary interest holders hold
the beneficial ownership in the shares instead
of legal title. Nederlands Centraal Instituut
voor Giraal Effectenverkeer B.V. (also known
as Euroclear Nederland) holds the legal title
to the underlying shares.
Shares may be issued pursuant to a resolution
of the General Meeting or of the Board, if and
insofar as, the Board has been designated for
that purpose by a resolution of the General
Meeting. Such designation shall be as set out
in the Company’s Articles of Association. The
Company shall notify each issuance of shares in
the relevant calendar quarter to the Dutch Trade
Register, stating the number of shares issued.
Transactions with majority shareholders
There have been no transactions between the
Company and MSP Stiftung within the meaning
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, no declaration in
accordance with best practice provision 2.7.5 of
the DCGC has to be published.
100 RHI MAGNESITA ANNUAL REPORT 2022
Corporate governance structure
RHI Magnesita Board
Remuneration
Committee
Nomination
&
Governance
Committee
Audit &
Compliance
Committee
Corporate
Sustainability
Committee
Chief
Executive
Officer
Executive
Management
Team
Outline of anti-takeover measures
No anti-takeover measures have been
implemented. The Company acquired a
secondary listing in 2019 on the Vienna Stock
Exchange (Wiener Börse) to extend regulatory
protections to its shareholders, which could
have been lost as a result of the UK’s exit from
the EU. Austria has become the Company’s
sole host member state and the Netherlands
continues to be the Company’s home
member state.
The main effect of this is that the Company
notifies disclosures, such as share dealing,
to each of the three authorities in the UK,
the Netherlands and Austria. The Company
complies with the relevant corporate and
listing regulations across all three jurisdictions.
The Company’s governance structure continues
to be primarily derived from its primary listing
status in the UK, although there are minor
areas in which regulations in other jurisdictions
take precedence.
Prime listing in Vienna
In December 2022, the Company upgraded its
secondary listing on the Wiener Börse, which
was the home market for RHI AG, prior to the
merger in Magnesita in 2017, to the prime
market. This is intended to increase the
Company’s visibility and accessibility to its
Austrian investor base. The prime market listing
in Vienna does not affect the Company’s
Premium Listing on the London Stock Exchange,
which remains our primary listing venue.
Furthermore, as the Company already declares
compliance with a Corporate Governance Code
in an EU Member State, the DCGC, it is not
required to report compliance with the Austrian
Corporate Governance Code. The Company’s
compliance with the ongoing obligations of the
prime market of the Wiener Börse can be found
on the Corporate Governance section of the
Company’s website and within this report.
Share buyback
As previously reported, the Company undertook
share buybacks during the course of 2021 under
the authority given by shareholders at the AGM.
In 2022, no such share buybacks have been
undertaken and the authority received under
the AGM 2022 remains at 10%, less the amount
of shares held by the Company and its
subsidiaries in Treasury.
As at 31 December 2022, the Company held a
total of 2,460,010 ordinary shares in Treasury,
which represented 4.97% of the issued share
capital (including treasury shares) at the date of
acquisition of the shares. This number is
reduced from 2021 because of the satisfaction
of the CFO’s conditional award which vested on
26 November 2022, and was satisfied through
the transfer of treasury shares. You can find
more details about this in the Remuneration
Report on page 150. The Company continues to
assess the treatment of these treasury shares
and they may be used to satisfy awards made
under the terms of the Company’s Long-Term
Incentive Plan or cancelled, subject to
shareholder approval, in due course.
The Board kept the capital allocation of the
Company, including the potential for share
buybacks, under review in 2022, discussing the
risks and benefits and closely considering the
medium-term liquidity, leverage profile, outlook
and going concern of the Company with
detailed presentations from management and
consultations with the corporate brokers. The
Board will continue to evaluate the potential for
additional share buyback programmes and/or
tender offers to further enhance shareholder
returns, after taking into account market
conditions and the Group’s wider capital
allocation priorities.
Compliance with Listing Rules
on Diversity
In 2022, the UK Financial Conduct Authority
introduced new Listing Rules (LR 9.8.6R(9) and
LR 14.3.33R(1)), and made changes to Disclosure
& Transparency Rule 7.2.8AR. The Company’s
position against these items is on page 122.
Board powers, responsibilities
and representation
The Board is collectively responsible for the
leadership and management of the Company
and its business. Its role is to establish the
strategy, purpose and values to ensure the
Group’s long-term and sustainable success.
The Board assesses the strategic risks it is willing
to take in pursuit of this strategy, ensures
sufficient resources, and measures the
performance of the management team against
agreed objectives, aligned with the strategy.
The Board ensures that appropriate controls and
systems are in place to manage risk and
considers the Company culture and practices,
reviewing alignment with the purpose, values
and strategy.
The Board Rules and Matters Reserved to the
Board, which are available on the Company
website, set out those matters that are reserved
for the Board to consider, including, among
other items, overall responsibility for strategy
and management, major acquisitions and
investments, structure and capital, financial
reporting and controls, and corporate
governance. You can read more about the
matters considered by the Board in 2022 on
pages 110 to 111.
The Board has delegated some responsibilities
to Committees of the Board, which are outlined
in the respective Committee Terms of Reference,
available on the Company website, and
summarised in their individual reports on pages
120 to 157. The Chairman of each Committee
provides a report to each Board on the matters
discussed and resolved upon in the recent
Committee meetings.
Each Board Committee has considered the
required matters from the respective Terms of
Reference and has assessed its performance
in 2022. The composition of the Committees,
the number of meetings, attendance at those
meetings and key items discussed can be found
in each Committee Report on pages 120 to 157.
Pursuant to the Articles of Association, the Board
may, if it elects to do so, assign duties and powers
to individual Directors and/or committees that
are composed of two or more Directors, with
the day-to-day management of the Company
entrusted to the Executive Directors. Both
Executive Directors and NEDs must perform
such duties as are assigned to them pursuant to
the Articles of Association and the Board Rules
or a resolution of the Board. Each Director has a
duty towards the Company to properly perform
the duties assigned to them. Tasks that have not
been specifically allocated to a specific Director
fall within the power of the Board as a whole.
The Directors share responsibility for all decisions
and acts of the Board, and for the acts of each
individual member of the Board, regardless
of the allocation of tasks. Furthermore, each
Director has a duty to act in the corporate interests
of the Company and its business. Under Dutch
law, corporate interest extends to the interests
of all stakeholders of the Company, such as
shareholders, creditors, employees and other
stakeholders. You can read more about
stakeholder engagement on pages 106 to 109.
The Board as a whole is entitled to represent the
Corporate governance statement
continued
101RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Company. Additionally, (i) the CEO and the
Chairman, (ii) the Senior Independent Director
(SID) and Deputy Chairman
1
and the Chairman
and (iii) two Executive Directors, acting jointly,
are also authorised to represent the Company.
Pursuant to the Articles of Association, the
Board may appoint officers who are authorised
to represent the Company within the limits of
the specific powers delegated to them. You can
find our Articles of Association and the role
profiles of the above roles on our website.
The Board has delegated responsibility for day-
to-day management of the Company to the CEO
and the EMT. There is a clear separation of
responsibilities between the Board and the EMT,
and the main responsibilities of the EMT are to
assist the Board with its oversight of strategy,
which involves making strategic
recommendations to the Board, being
accountable for implementing the Board’s
decisions, and being responsible for directing
and overseeing the Company’s operations.
investments, resources, and delivering the
Company’s purpose and value to stakeholders.
EMT & delegation of authority
The Board has documented the matters
reserved for its approval, including approvals of
major expenditure, investments, and key
policies. This was revisited and revised as part of
the annual review to ensure it reflected the
current organisational structure, and provided
as much clarity as possible to the Board, and the
organisation as a whole, to enable effective
delegation of authority.
The EMT then work within this delegation of
authority, as approved by the Board, and set out
parameters for the rest of the organisation to
work within.
The EMT comprises senior managers reporting
to the CEO who are accountable for the key
functions in the business. They convene
meetings at least monthly to discuss key
business performance indicators, to drive
operational performance and to agree strategic
initiatives to be proposed to the Board. The EMT
members attend each Board meeting, giving
reports on both standing items and ad-hoc
initiatives, per the approved forward agenda
planner. Individual EMT members are
responsible for the reporting to the Board
Committees and leading the organisation in
meeting objectives as set out by the Executive
Directors and NEDs of the Board. As part of this,
they meet and discuss matters one on one with
the Chairmen of the Board Committees.
Board appointment
Pursuant to the Articles of Association, the
Directors, other than the ERDs, are appointed by
the General Meeting by a majority of votes cast,
irrespective of the represented capital. The
Board makes nominations to the General
Meeting for such appointments. A resolution to
appoint a Director other than in accordance with
a nomination by the Board may be adopted by
the General Meeting by an absolute majority
of votes cast representing more than one-third
of the Company’s issued capital.
NEDs (other than ERDs) will be nominated
for a term of three years, subject to satisfactory
performance and annual reappointment by the
General Meeting. ERDs are appointed for a term
of not more than four years. The term of office
for each Director (other than ERDs) will end
on the day of the AGM in the year following
appointment. Pursuant to the Articles of
Association, Directors may be reappointed for
an unlimited number of terms, but the Board’s
consideration of NEDs (other than ERDs) for
reappointment for a third term would always take
into account overall Board independence and
stakeholder views, as well as relevant Corporate
Governance Codes and associated guidance.
The General Meeting has the power to suspend
or remove a Director at any time, by means of a
resolution for suspension or removal as outlined
in the Articles of Association. The General
Meeting is authorised to resolve to amend the
Articles of Association, on the proposal of
the Board.
Conflict of interest
Dutch law provides that a Director may not
participate in the discussions and decision-
making by the Board if such Director has a direct
or indirect personal interest conflicting with
the interests of the Company or the business
connected with it.
Pursuant to the Articles of Association and the
rules adopted by the Board (the “Board Rules”),
the Board has adopted procedures under which
each Director is required to declare the nature
and extent of any personal conflict of interest
to the other Directors.
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. In April 2022, travel was still
somewhat restricted and so the Board travelled
to European sites, being in closer proximity to
the majority of Directors. Over a period of five
days the Directors visited our plants in
Hochfilzen (Dolomite Resource Centre Europe
in Austria, focused on mining of magnesite and
dolomite, sinter production and production of
monolithic mixes), Marktredwitz (a plant in
Germany producing slide gate systems for
tundishes, converters and ladles), and Urmitz
(Central European hub in Germany for
non-basic refractory products such as bricks,
mixes, and pre-fabricated components).
At the sites, Board members met employees
involved in a variety of different tasks from
mining, health and safety, plant management,
lean process management, quality assessment,
supply chain management, production,
capex investments as well as works council
representatives. They also met cultural
champions and had the opportunity to observe
working practices and discuss the culture at our
European plants. The newly appointed Regional
Presidents also joined part of the trip and the
Board heard from them on their challenges,
opportunities, and strategic priorities in the
respective regions. Topics included customer
and employee focus areas, capex investments,
market share and progress against KPIs. The
Board also advised what their priorities were for
the Regional Presidents. Feedback on the
overall trip was very positive and the experience
was felt to be extremely valuable for the Board
and the colleagues whom they met.
Other site visits by certain Directors took place
throughout 2022 and reports were provided to
the rest of the Board at the following relevant
meetings to share learnings and perspectives
from the experience:
• Mitterdorf, Austria – the CSC, along with
additional Directors, visited the newly
acquired recycling plant in Mitterdorf,
Austria, seeing secondary raw material
sorting in action and meeting local
management. They also received
presentations at the Leoben pilot plant of
the in-trial sorting initiatives to demonstrate
what would be implemented in future.
• Interstop, Switzerland – a Director visited
the robotics-focused site to understand
more about our progress in digitalisation and
automation.
• Siegen, Germany – a Director visited the
MIRECO joint venture site to understand the
sorting, processing and finishing operations
of the newly formed joint venture.
• Rotterdam office, the Netherlands – a
Director visited our Global Supply Chain
team to enhance the Board’s understanding
of the implications of extant external factors
on our Supply Chain strategy. They had an
opportunity to jointly host, with
management, a townhall for employees
based there.
In April 2023, the intention of the Board is to visit
the North America region, including Mexico.
Culture and purpose
In 2022, the Board took all available
opportunities to engage with colleagues in the
business in order to observe and understand the
culture within the Company. Some examples
are given above in the description of the Board
site visits.
Cultural values support the Company purpose,
and the purpose underpins the Company’s
stakeholder engagement, demonstrating the
Company’s place within our wider environment
and society. You can read more about how
the Board incorporates stakeholder viewpoints
into its decision-making process on pages 106
to 109.
1. A dual role held by one individual, John Ramsay.
102 RHI MAGNESITA ANNUAL REPORT 2022
customer
focus
innovative
open
pragmatic
performing
We live innovation to create
value for our customers, by
being bold and providing
the best digital and
sustainable solutions.
We act pragmatically to
enable fast and simple
collaboration across functions
and regions to serve
our customers best.
Our open mindset and
transparent way of working is
flanked by a diverse, respectful
and friendly business
environment, where we care
about our customers
and colleagues.
Our high performance
is rooted in accountability
and responsibility. We are
a reliable partner that
decides and delivers
based on our
customers' needs.
Culture has remained an integral element of NED
discussions, and the Board and its Committees
use many sources to assess culture. Given that
culture can arguably best be described as
“the way we do things around here”, it is difficult
to use quantitative metrics that accurately
communicate the culture to the Board.
The matters reserved to the Board include
monitoring Group culture and workforce
policies and practices to ensure these are
aligned with the purpose, values and strategy
of the Group, and seeking assurance that
management has taken corrective action where
this is not the case. Policies reserved for Board
approval include the Code of Conduct and
the Whistleblowing Policy.
Nonetheless, inputs used by the Directors
to measure culture include whistleblowing
reports, Code of Conduct compliance
reports, reports from the Internal Audit and
Compliance teams, talent assessment and
succession planning, Health & Safety reports,
responses to Internal Audit reports and the
corresponding outstanding actions, and
workforce remuneration. Directors engage
directly with management at EMT and below,
throughout the meeting cycle and also beyond,
which enables their assessment of management
culture, being that which sets the tone from the
top of the organisation, in more intangible ways.
When receiving presentations in meetings, the
Board uses these opportunities to seek input
from management, asking direct questions,
particularly of those at the level below EMT,
focusing on how a team operated or a region
approached problems to broaden their
understanding.
As the Board considered the various operational
difficulties and changes in the year, management
were prompted to consider how culture
contributed to root causes of issues and
the solutions. On business-critical projects,
the EMT ensured the Board had face time with
colleagues working directly on key matters
who could communicate and demonstrate the
culture of the Company.
Culture continues to be a central part of
performance evaluations for employees and
the Company’s internal communications are
underpinned by our cultural values. Given the
multiple global locations of operations, local
culture is also discussed by the Board when
considering the impact and likely success of
initiatives, particularly when planning the
integration of newly acquired businesses,
which is going to be a significant focus in 2023.
The Internal Audit reports to the Audit &
Compliance Committee demonstrate that
organisational culture is a key factor in achieving
good audit results and, where there are
improvements to be made, culture is a focus
to enable successful implementation. Culture
is considered in discussions to identify trends
and challenges facing the business. The CSC
specifically considers behaviour and culture
as key success factors of health and safety
campaigns; you can find more details on
page 124.
The consideration of culture at Board level has
provided context to performance in teams such
as supply chain management, finance and
sales, as well as on the ground in our plants and
operations. The Board has considered the
culture of different teams, and discussed with
management how that culture has contributed
to decision making and performance levels of
the business. The Board continues to consider
how best to effectively measure and assess
culture at Board level. The below key cultural
themes determine the actions of the Company
and specifically feed into performance reviews
across the Group, succession planning and
risk management.
Whistleblowing
Potential concerns about ethical misconduct
or any compliance matters can be reported by
all stakeholders (both internal and external) to
an independently operated, confidential, and
anonymous whistleblowing hotline, available in
areas where the Company operates as well as
other locations, in several languages. Contact
details are communicated throughout the
business and are available externally on the
website. In addition to the hotline, whistleblowing
reports can also be submitted via other channels,
such as to a dedicated email address. All reports
are assessed by the Internal Audit, Risk &
Compliance team and then addressed on
a case-by-case basis.
The Audit & Compliance Committee and Board
reviews this process and the reports arising from
it, ensuring there are arrangements in place for
the appropriate and independent investigation
of these cases and that follow-up actions to
address the root causes are completed.
Board workforce engagement
RHI Magnesita’s governance structure has,
from the beginning, included ERDs. This was
a requirement from the merger between RHI
AG and Magnesita in 2017 and reflects the
approach in continental Europe, particularly
the DACH region. The ERDs, currently Michael
Schwarz, Karin Garcia, and Martin Kowatsch,
have been appointed by their respective works
councils in line with the Company’s Articles
of Association, and, with experience of the
frontline of operations, seek to directly represent
the views of the workforce at the highest level
of the Company.
The Board welcomes the different viewpoints
they provide, bringing increased opportunity
for challenge of the executive management,
and holding them to account from a different
perspective, being that of the workforce who
are on the ground. The ERDs can attest to
the impact of the executives’ actions within
the business and contribute to the Board
accordingly. Not only do the ERDs have the
ability to challenge management, but they can
also contribute to the NEDs’ view of management
and understanding of the Company culture,
strengthening the independence the NEDs
have, through providing a broader knowledge
of the Company.
The information and discussions at Board
meetings helps the ERDs’ support of the
workforce and provide a mutually beneficial link
between colleagues and the Board. Specific
details are included in the Board stakeholder
engagement report on pages 106 to 109.
The effectiveness of this approach to workforce
engagement is considered from time to time
by the Directors.
Board composition
The Board is composed of 15 Directors, which
includes two Executive Directors, three ERDs
and ten NEDs.
The size of the Board at 15 Directors continues to
be a challenge, as seen in findings of the Board
reviews. However this is mitigated by the careful
behaviour of Directors in meetings, the dedicated
work of the Committees, who then feed their
pre-work on matters into the Board meetings,
and the familiarity of the Board with the nuances
of being a dual-listed Company with obligations
in three jurisdictions.
Corporate governance statement
continued
103RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Independence
Under the UKCGC, the Company’s practice has
been when calculating the length of time
served by a Director on the Board, to include
time served by that Director on the board of RHI
AG prior to the merger with Magnesita in 2017.
On this basis, in 2021 Wolfgang Ruttenstorfer
ceased to meet the independence criteria of the
UKCGC, having joined RHI AG’s Supervisory
Board in 2012 and therefore exceeding nine
years of service. He meets no other criteria in
Provision 10 of the UKCGC and the Board
continues to be comfortable that he provides
strong, independent challenge to management,
particularly on financial business cases, balance
sheet management and risk assessments.
Additionally, per our 2021 annual report, as
European corporate law requires the Company to
allow for a significant portion of the Board to be
ERDs, the Board feels it is appropriate to follow
the process of calculating independence as it is
undertaken in the relevant jurisdiction. Which is
to say that only Directors who can be appointed
by shareholders are counted in the calculation
and ERDs are excluded from the denominator.
Accordingly, the Board has six Directors out
of 11 eligible Directors, who are deemed
independent (as set out in the table below),
thereby constituting a Board that is composed
of at least half NEDs (excluding the Chairman)
considered by the Board to be independent.
The Board has considered the independence of
the NEDs, including potential conflicts of interest.
Each of these Directors has also confirmed that
there is no reason why they should not continue
to be considered independent.
Skills and experience
The Nomination & Governance Committee
seeks to ensure the right balance of skills,
knowledge and experience on the Board, taking
account of the business model, long-term
strategy and the sectors and geographic
locations in which the Group operates.
The Board is structured so that the following
experience and capabilities are adequately
represented across the Board:
• knowledge and understanding of the
business and products of the Company and
its subsidiaries, and the markets and
geographies in which the Company and its
subsidiaries operate, in particular the trends
and future developments of these markets
and geographies;
• an international background and
geopolitical exposure;
• broad Board experience, including
knowledge of corporate governance issues
at main Board level as appropriate for the
Company with reference to its size and
international spread of activities;
• understanding of corporate social
responsibility and sustainability matters;
• practical experience in, and relating to,
financing and accounting and/or experience
in relation to IFRS, as well as in the areas of risk
management and internal controls;
• understanding of the markets where the
Company is active, in particular
emerging markets;
• science, technology and innovation expertise;
• experience and understanding of human
resources and remuneration-related
matters; and
• personal qualities such as impartiality,
integrity, tolerance of other points of view,
ability to challenge constructively and act
critically and independently.
The Nomination & Governance Committee
considers that all of these aspects are well
represented across the Board. In the search for
new NEDs, the Board has agreed to seek
At the date of this Annual Report, the Board is composed as follows:
Name Position Gender Nationality Year of birth
Date of
appointment
Expiry/
reappointment date
Herbert Cordt Chairman
1
Male Austrian 1947 20 June 2017 2023 AGM
John Ramsay Deputy Chairman and Senior Independent
Director
2, 3
Male British 1957 6 October 2017 2023 AGM
Stefan Borgas Executive Director (CEO)
4, 5
Male German 1964 20 June 2017 2023 AGM
Ian Botha Executive Director (CFO)
4, 5
Male British/
South
African
1971 6 June 2019 2023 AGM
Janet Ashdown Independent Non-Executive Director
2, 3
Female British 1959 6 June 2019 2023 AGM
David Schlaff Non-Independent Non-Executive Director
4, 5
Male Austrian 1978 6 October 2017 2023 AGM
Stanislaus Prinz zu
Sayn-Wittgenstein-Berleburg
Non-Independent Non-Executive Director
4, 5
Male German 1965 6 October 2017 2023 AGM
Jann Brown Independent Non-Executive Director
2, 3
Female British 1955 10 June 2021 2023 AGM
Karl Sevelda Independent Non-Executive Director
2, 3
Male Austrian 1950 6 October 2017 2023 AGM
Marie-Hélène Ametsreiter Independent Non-Executive Director
2, 3
Female Austrian 1970 10 June 2021 2023 AGM
Sigalia Heifetz Independent Non-Executive Director
2, 3
Female Israeli 1961 10 June 2021 -
Wolfgang Ruttenstorfer Non-Independent Non-Executive Director
6
Male Austrian 1950 20 June 2017 2023 AGM
Karin Garcia Employee Representative Director
4, 5
Female Spanish 1970 9 December 2021 9 December 2025
Martin Kowatsch Employee Representative Director
4, 5
Male Austrian 1972 14 December 2021 14 December 2025
Michael Schwarz Employee Representative Director
4, 5
Male German 1966 8 December 2017 9 December 2025
1. Herbert Cordt is not deemed to be independent on appointment within the meaning of the UKCGC on the grounds of his length of service (including time served on the Supervisory Board of RHI AG).
2. Independent within the meaning of the UKCGC.
3. Independent within the meaning of the DCGC.
4. Non-Independent within the meaning of the UKCGC.
5. Non-Independent within the meaning of the DCGC.
6. Wolfgang Ruttenstorfer is considered independent under the DCGC and non-independent under the UKCGC.
104 RHI MAGNESITA ANNUAL REPORT 2022
additional capabilities and experience in
operational excellence in supply chains and
processes, with desirable expertise in digital
initiatives and sales & marketing. The Board is
committed to encouraging diversity to deliver
long-term sustainable success for the Company
and will continue to pursue its programme in
this regard,
You can read about Board diversity in the
Nomination & Governance Committee report
on pages 121 and 122.
Individual roles
Roles of Chairman, SID & Deputy
Chairman, and CEO
The roles of Chairman, CEO, SID & Deputy
Chairman have been formally recorded by the
Board. All of these documents can be found on
the Company website. The composition of the
Board has been structured such that no one
individual can dominate the decision-making
processes of the Board.
Non-Executive roles
The Employee Representative, Non-
Independent, and Independent NEDs engage
with the business of the Board from different
perspectives, enabling multifaceted scrutiny to
be applied to the Board’s decision-making,
ensuring that the viewpoints of the Company’s
key stakeholders are represented. All Directors
are required to exercise their independent
judgement and act in the best interests of the
Company, taking into account the interests of its
stakeholders, in their decision-making.
Non-Independent Non-Executive
Director roles
Herbert Cordt, Stanislaus Prinz zu Sayn-
Wittgenstein-Berleburg, David Schlaff and
Wolfgang Ruttenstorfer are not considered
independent under the UKCGC, on the grounds
of length of service (including time served on
the Supervisory Board of RHI AG prior to the
merger in 2017 with Magnesita). However,
because of that experience, they contribute
strongly to the Board’s culture and personality,
adding valuable insight gained through
experience of the markets in which the Group
operates and corporate memory. They can
constructively challenge the Executive
Directors and scrutinise the performance of
management in meeting their objectives with
the benefit of historical experience of the
operations and industry of the business.
Stanislaus Prinz zu Sayn-Wittgenstein-
Berleburg and David Schlaff can provide an
investor perspective to the management team
and challenge them accordingly. The detail of
all the Directors’ independence and the detail of
compliance with the criteria of each Code can
be found above and on page 103.
The Chairman’s other significant commitments
are set out in the following table:
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 Metalcraft/
Experi-Metal, Inc.
Advisory Board member
Cooper & Turner Group Advisory Board member
Time commitment
On appointment, and each subsequent year,
NEDs confirm that they have sufficient time
to devote to the Company’s affairs. The
Nomination & Governance Committee
considers any additional external commitments,
and the Board is advised of any changes
The Board is satisfied that, having considered
the demands of the external appointments of
each NED and the time requirements from the
Company, all NEDs standing for re-election at
the upcoming AGM are contributing effectively
to the operation of the Board. Whilst the
NEDs are re-elected each year at the AGM,
their letters of appointment state a term of
three years.
Executive Directors
In accordance with Dutch law, an Executive
Director may not be allocated the tasks of: (i)
serving as Chairman; (ii) participating in the
adoption of resolutions (including any
deliberations in respect of such resolutions)
related to the remuneration of Executive
Directors or instructing an auditor to audit the
Company’s annual accounts if the General
Meeting fails to do so; or (iii) nominating
Directors for appointment.
The role of an Executive Director is, amongst
other things, to bring commercial and internal
perspectives to the boardroom. The Executive
Directors, being the CEO and CFO, are
responsible for the leadership and management
of the Company according to the strategic
direction set by the Board.
Company Secretary
Sally Caswell was appointed by the Board as
Company Secretary in January 2020. All
Directors have access to the advice and services
of the Company Secretary, whose
responsibilities include ensuring that Board
procedures are followed, assisting the Chairman
in relation to corporate governance matters and,
in conjunction with the General Counsel,
ensuring the compliance of the Company with
legal and regulatory requirements.
Board and Committee structure
The Company has a one-tier board structure,
with a board consisting of both Executive
Directors and NEDs (collectively the “Directors”
or the “Board”). As at the date of this Annual
Report, the provisions of Dutch law that are
commonly referred to as the “large company
regime” (structuurregime) do not apply to
the Company.
The Board has four Board Committees to ensure
a strong governance framework for decision
making and assessment of performance against
the Company’s strategy: the Audit &
Compliance Committee, the Remuneration
Committee, the Corporate Sustainability
Committee, and the Nomination & Governance
Committee. Each Committee receives support
from the Company Secretary. The Terms of
Reference of these Committees can be found
on our website and the reports of each
Committee, including membership and
attendance at meetings in 2022, can be found
on pages 120 to 157.
Information and support for Directors
There is an established procedure for Directors
to seek independent professional advice in the
furtherance of their duties if they consider
this necessary.
The Company maintains Directors’ and Officers’
liability insurance, which provides appropriate
cover for legal action brought against its
Directors. In line with Dutch best practice and
corporate law, at each AGM there is a resolution
to release the Directors from liability for the
exercise of their respective duties during the
financial year.
In order to build and increase the NEDs’
appreciation and understanding of the Group’s
people, businesses, and markets, senior
managers are regularly invited to make
presentations at Board meetings. The strategy
meeting involved multiple break-out sessions to
provide detail on certain areas of business focus
such as initiatives to reduce CO
2
emissions, and
digitalisation projects.
Training and discussion sessions were held with
the Directors throughout 2022 on topics such
as macroeconomic and geopolitical factors, and
how they would impact on the business and
markets, including the historical development of
interest rates, inflation events, the trends and
patterns in the labour market, teach-ins about
changeable regions in which the Company
operates, and Market Abuse regime training.
Training and additional information sessions
took place with certain directors as desired on
areas such as M&A, equity financing, capital
allocation and financial reporting. Directors also
maintain their own individual training schedule
based on their known needs and interests and
have therefore attended a variety of virtual
training events hosted by external providers.
Corporate governance statement
continued
105RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Induction
Upon joining the Board, any new Director is
offered a comprehensive and tailored induction
programme covering all aspects of the value
chain, with visits to key sites and meetings with
senior managers and other colleagues or
advisers as required. New members to
Committees are provided with the opportunity
for a full and detailed induction, even if they are
existing members of the Board.
In late 2021, two new ERDs joined the Board
and were provided with a tailored induction
programme taking into account their
employment and existing knowledge of the
Company. Their induction programme covered
topics such as M&A and strategic
considerations, finance, and balance sheet
management. They also met with the Company
Secretary to discuss their duties as Directors of a
listed company, the Company’s corporate
make-up, listing requirements in London and
Vienna, disclosure requirements and corporate
governance matters pertinent to the Company.
She also covered Board processes and
procedures, with reference to Board policies,
the Matters Reserved and Board Rules.
The ERDs also met with the Chairmen of Board
Committees to discuss the Committee functions,
recent topics and ongoing discussions with
management and key areas of focus.
In addition, the Remuneration and Corporate
Sustainability Committees welcomed new
members who were already on the Board. These
new members were offered inductions specific
to the Committee; each received access to all
the historic Committee documents and met
with key members of management, as required,
to understand the details of ongoing matters at
the Committees. Additional external briefings
on remuneration were provided to give an
overview of stakeholder expectations,
regulations and market practice. The Chairman
of each Committee made time available as
required to discuss the key relationships,
stakeholder views and recent decisions taken.
Board attendance
Seven Board meetings were planned for the
year (2021: ten). An additional five ad-hoc
meetings were required in the year on topics
such as discussion and approval of M&A
opportunities and activities, and on matters
that received insufficient time in the previous
meetings to reach a decision. These ad-hoc
meetings took place in a hybrid or entirely
virtual setting and were naturally shorter
meetings, given their focused agendas. Where
they were called on short notice, it was not
always possible for them to be at a time suitable
for all Directors to attend.
The adjacent table shows the number of
scheduled meetings attended and the
maximum number of scheduled meetings that
the Directors were eligible to attend.
Only in exceptional circumstances would
Directors not attend Board and Committee
meetings. None of our NEDs have raised
particular concerns over the time commitment
required of them to fulfil their duties and the
Nomination & Governance Committee
considered the time required of NEDs as part of
its regular programme.
Board attendance 2022
Total
attended
Total
meetings
1
Herbert Cordt 12 12
John Ramsay 12 12
Stefan Borgas 12 12
Ian Botha 12 12
Janet Ashdown 10 12
David Schlaff 12 12
Stanislaus Prinz zu
Sayn-Wittgenstein-
Berleburg
12 12
Fiona Paulus
2
9 9
Jann Brown 12 12
Karl Sevelda 12 12
Marie-Hélène Ametsreiter 12 12
Sigalia Heifetz 6 12
Wolfgang Ruttenstorfer 12 12
Karin Garcia 12 12
Martin Kowatsch 12 12
Michael Schwarz 12 12
1. In the year, six Board sub-committees were held to approve
matters specifically delegated by the Board in accordance
with article 17.5 of the Company’s Articles of Association.
These are not included in the table above.
2. Fiona Paulus resigned on 17 October 2022 and these are the
meetings she was eligible to attend.
Board operation
The Board meets regularly throughout the year
at Board and Committee sessions, which are
usually spread over two days, in person in
Vienna. Board meetings can also be convened
as deemed necessary by the Chairman or the
Senior Independent Director and
Deputy Chairman.
In 2022, the Board was delighted to return to
meetings in person. Those who could not
attend in person from time to time were
facilitated via video conference. In the meetings,
the Chairman takes care to ensure that each
Director has opportunity to comment and be
heard, whilst enabling an orderly flow and
healthy discussion.
At the end of each Board meeting, the NEDs
meet, without the Executive Directors and
management, to enable an open and frank
exchange of views and assessment of
performance. Additionally, the SID holds a
meeting with the other NEDs to discuss the
Chairman’s performance in the course of the
year, in conjunction with the Board review
process. The Chairman and other NEDs hold
regular informal, individual, meetings with the
Executive Directors and other senior managers
in the business, providing the opportunity to
raise questions and cover points of interest,
which contributes to the development of both
the NEDs and the management.
Board papers are circulated in advance of
meetings, using a secure web-based portal, to
allow Directors sufficient time to consider the
content prior to the meeting. The Chairman is
assisted in this responsibility by the Company
Secretary and CEO. The management team
continues to take feedback from the Board via
the review process on how papers and
presentations can be improved to assist the flow
of the meeting. An information room within the
papers portal provides access to useful
information, including corporate governance
reference materials, analyst reports, and
Company finance, treasury, and
strategy information.
The Board takes the views of its key stakeholder
groups into account when challenging
management, and in its discussions and
decision-making. Inputs to this process include
the Company’s Net Promoter Score, the ERDs’
views, regular Investor Relations reports, analyst
coverage and views of two Non-Independent
NEDs who represent shareholders.
The Board recognises the importance of
balancing stakeholder views, whilst acting in
the best interests of the Company. In the event
of a decision which has a potentially negative
impact on a specific stakeholder group, efforts
are made to mitigate these. As an example, in
the event of an organisational restructure, which
does not benefit certain employees, a detailed
communications strategy is designed to explain
the decision and employees are treated in a
respectful and generous manner. This aligns
with the Company values to be open in
decision-making and accountable for
actions taken.
106 RHI MAGNESITA ANNUAL REPORT 2022
Stakeholder engagement
Consistent, effective and transparent engagement with
our stakeholders helps us better understand their needs
and opinions, thereby informing our strategy and enabling
us to meet their expectations.
Shareholders Debt holders and lenders
Why they are important
As providers of capital and owners of the business, our shareholders play a
central role in the Company’s growth and development. By fostering and
maintaining their support, we are able to implement our strategy
and objectives.
How the Company engages
The Executive Directors meet regularly with investors and analysts (both in
person and via digital channels).
The Investor Relations department maintains an ongoing, transparent
dialogue with shareholders and analysts and reports regularly to the Board.
Regular engagement with our shareholders is facilitated via one-on-one
meetings, investor presentations and webcasts, the AGM, industry
conferences and events, capital markets days and site visits.
In December 2022, RHI Magnesita upgraded to the prime segment of the
Vienna stock exchange. Its primary listing remains on the premium segment of
the London Stock Exchange.
How the Board engages
The Investor Relations team regularly presents analyst coverage of the market
and shareholder sentiment to the Board. This includes verbatim
shareholder feedback.
Where required, on behalf of the Board, the Investor Relations department
engages regularly with shareholders on a range of issues including
sustainability and governance. The relevant Board Committee Chairmen and
SID participated in annual shareholder roadshows organised by the Investor
Relations team.
Priority topics raised by stakeholders
• Company strategy and implementation
• Operational and financial performance
• Capital structure and liquidity
• Capital allocation
• Sustainability agenda – specifically, climate change, diversity, supply chain
sustainability and preventing modern slavery
• Linking remuneration to ESG
Outcomes
Shareholder perspectives were considered in Board discussions on capital
allocation decisions, remuneration, sustainability governance and
ESG strategy.
Feedback about the Group’s acquisition strategy from shareholders informs
the business strategy and planning for the future in terms of liquidity and
business capacity. A number of acquisitions were made in 2022.
Two dividends were paid in 2022, in line with the dividend policy and
shareholder expectations.
Achievement of better accessibility for Austrian investors through the prime
listing on the Wiener Börse.
Why they are important
Our lenders and debt holders are an important source of the financial liquidity
that the Group requires to operate and are integral to the long-term
sustainable success and growth initiatives of the business.
How the Company engages
The CFO and Group Treasurer execute strategies approved by the Board by
regularly engaging with debt holders and lenders to secure favourable terms,
mitigate risks and ensure sustainable and solid relationships.
How the Board engages
The Treasury department maintains an ongoing, transparent dialogue with its
debt holders and lenders, and reports regularly to the Board.
Regular engagement with these stakeholders is facilitated via one-on-one
and Group meetings and presentations.
The Board has a clearly defined approval and delegation of authorities matrix
for the contracting of debt instruments, and actively contributes and engages
in discussions with the CFO and Group Treasurer.
Priority topics raised by stakeholders
• Company strategy and implementation
• Operational and financial performance and outlook
• Capital structure and liquidity
• Sustainability initiatives
• Risk management
Outcomes
In 2022, the Treasury department engaged with its debtholders to refinance
two of its structural debt facilities. A €260 million OeKB Term loan maturing in
2023 was increased to a notional amount of €350 million while extending the
final maturity date to 2027. A $200 million term loan maturing in 2023 was
converted to EUR and increased to €250 million, extending maturity to 2027.
Both refinanced debt facilities are ESG-linked and have been refinanced at
competitive rates.
Additionally, the maturity of the Group’s €600 million Syndicated Revolving
Credit Facility has been extended by one year to 2028 through the execise of
the third extension option.
107RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Employees
Why they are important
Attracting, retaining and developing talent is central to the success of the
Company. We aim to cultivate an engaged, innovative and collaborative
workforce, with a strong focus on diversity.
How the Company engages
We emphasise the importance of frequent, constructive and open
communication with our employees.
Communication channels include townhall meetings, social media, email and an
employee app (MyRHIMagnesita).
Colleagues throughout the Company, who are designated as Culture
Champions, engage with the workforce on an ongoing basis to embed our culture
and values.
Regional leadership teams hold townhalls to address regional specific issues e.g.
local supply chain issues, local COVID-19 updates and restrictions, vaccinations
and production site or office changes.
Our annual Leaders Conference focuses on processes, culture, collaboration and
specific KPIs.
Implemented the Supply Chain Academy to reinforce the Group’s efforts to
manage supply chain volatility in 2022. This training has increased the
understanding of important processes and KPIs, giving colleagues knowledge
that makes their daily work easier and connects them better with their colleagues
across the globe.
How the Board engages
Three ERDs sit on the Board, feeding in on a range of workforce issues such as
remuneration, feedback on executive management, shift patterns, and the
COVID-19 response.
The Chairman of the Board attended the annual RHI Magnesita Austrian Works
Council Conference to present on challenges such as labour shortages, pricing,
Russia/Ukraine conflict, climate change and inflation.
The Board carries out both individual and group site visits to meet with plant
employees and management. More details can be found on page 101.
Local and global townhalls and Q&A sessions are run both virtually and in
person, at both regular intervals and when there are specific communications to
be delivered.
The CSC considers employee safety KPIs at each meeting, including a root cause
analysis of any safety incidents. The Board also receives a report of Health &
Safety statistics from the CEO at each meeting.
Priority topics raised by stakeholders
• Operational and financial performance including process and controls
improvement
• Business restructuring
• Production halts and plant closures
• Recruitment, talent development and retention
• Job safety
• Cost of living and inflation
• Workforce remuneration
• Health and safety
Outcomes
The employer brand was refocused with the intention of attracting more
female talent.
Communications were tailored to support recruitment and retention in the
changing labour market.
An employee engagement team was set up in Q4 2022 and is implementing
digital tools to help people management and cultural value development.
Social plans for plant closures in Austria (such as Trieben) were implemented in
2022, which included support for outgoing employees like additional training for
a new job and career counselling sessions. Under this social plan, entitlement to
unemployment benefits is extended to a maximum of three years. This can be
used to complete training, apprenticeships, degrees, etc., to upgrade skills or gain
additional qualifications before starting a new job. RHI Magnesita invested almost
€1 million to financially support valuable employees who have to leave the
Company by mutual agreement.
The workforce’s overall average remuneration increased, taking into account
inflation and collective and union agreements. A strata approach to pay increases
was taken to support lower paid employees.
The CSC encouraged management to improve Health & Safety performance,
through challenge of the performance reported to the CSC.
Employees’ concerns regarding climate change supported our focus on
decarbonisation.
Integration planning is undertaken to support and retain employees following
completion of M&A transactions.
Our people are the driving force of our culture. Our culture
activation programme strongly supports us in bringing our
Company culture to life and launching local initiatives.
Claudia Bergner
Global Senior Vice President, People & Culture
108 RHI MAGNESITA ANNUAL REPORT 2022
Stakeholder engagement
continued
Communities
Why they are important
Wherever we operate, our business depends on maintaining the trust of local
communities. In return for this social licence to operate, we must conduct our
business ethically and responsibly. We must also strive towards sustainability,
not only in our own operations but also to support socio-economic
development and environmental protection.
How the Company engages
As a member of the UN Global Compact, we support the UN Sustainable
Development Goals and implement the Global Compact principles
(anti-corruption, human rights, labour rights and environment). These
commitments drive our engagement with policymakers, Non-Governmental
Organisations, and others at a national and international level.
At a local level, each operation engages with local communities and other
stakeholders to understand their concerns and how we can support them.
In 2022, we specifically focused on education, youth development and
environmental protection.
How the Board engages
The Board received regular updates on COVID-19 infection rates and received
reports from management on how Group resources were deployed to help its
global communities with their COVID-19 response.
The CSC considered, and reported back to the Board, on community
engagement, including charitable fundraising for local communities and
received updates from management on projects in communities in Mexico,
China, the US and Brazil. You can read more about these initiatives on pages 75
to 77.
Priority topics raised by stakeholders
• COVID-19
• Climate change
• Skills and employment programmes
• Protecting existing programmes and partners
Outcomes
Employees are encouraged to volunteer in our community programmes. A
new programme was launched in 2022, initially through a pilot in the
Vienna-based headquarters, through which we are partnering with six
non-profit organisations.
When concluding that the Mainzlar plant, Germany, should remain open, the
Company considered the plant’s impact on the local community and
accordingly, it was agreed that railway would be used to transport raw material
and finished goods, rather than road transport.
We made further progress on our decarbonisation plan to help improve the
world we live in for future generations and were pleased to see an increase in
our use of secondary raw materials from 6.8% in 2021, to 10.5% 2022.
By investing in alternative
energies and its own gas
reserves, RHI Magnesita
is taking an important step
towards independence and
setting a good example.
Austrian Chancellor Karl Nehammer
after his visit to RHI Magnesita’s plant in Veitsch
Customers and innovation partners
Why they are important
Our customers are at the heart of our business model. They are fundamental to
the sustainable future of the Group.
We collaborate with external partners such as accelerators, start-ups, open
innovation platforms, companies and institutions to foster innovation and drive
developments in R&D.
How the Company engages
The Company is increasingly connecting with partners from the private and
public sector, innovators and academia to exchange ideas and build trust.
We work closely with our customers to ensure we are aware of their needs
through day-to-day contact fact-finding, technical consulting, installation
and operations supervision and site visits.
The Company runs regular Customer Satisfaction surveys and the Company’s
Net Promoter Score is measured regularly. It is used as a key metric for
customer-facing teams, to ensure focus on providing a positive customer
experience in every interaction.
Our R&D and Commercial Excellence & Digital Solutions teams, amongst
others, collaborate and engage with innovation partners on an ongoing basis.
How the Board engages
Customers continue to be at the heart of the Company’s values and culture,
and as such form a central part of every Board decision.
The Executive Directors meet regularly with customers to discuss joint
strategies, at industry congresses, seminars and webinars, and at technology
events and fairs.
The CSC works with innovation partners on the development of the
Company’s sustainability strategy, and feeds into the Board.
Priority topics raised by stakeholders
• Climate action
• Partner of choice in the green transition of steel and cement
• COVID-19
• Customer service levels, lead times and supply chain issues
• Price increases in response to widespread inflationary costs
Outcomes
Customer feedback informed the Board’s decisions around product pricing to
manage inflationary pressure, as well as the strategy for developing the service
offering and product portfolio, particularly with regard to sustainable and
tailored products.
Impact on customers is considered when exploring M&A opportunities.
The Board made changes to the EMT and introduced regional leadership
teams in 2022 to deliver strong customer experience and alignment.
After receiving a lower delivery performance customer rating during 2022,
management focused on improving outcomes, resulting in improved customer
satisfaction for delivery performance six months later.
All relationships with Russian sanctioned customers were terminated in 2022.
109RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Governments and authorities Suppliers
Why they are important
Governments and authorities set the regulatory framework within which we
operate. Where appropriate, we engage with politicians, industry associations
and officials to ensure that we can help in shaping new policies, regulations
and standards, and ensure compliance with existing requirements.
How the Company engages
We have further intensified our collaboration with government officials in
2022 when geopolitical uncertainties called for urgent action from many
industries.
You can find a list of our industry associations on page 80.
The Company welcomed Austrian Chancellor Nehammer to our plant in
Veitsch to demonstrate the Company’s efforts to transition to alternative
energies.
We were also honoured to welcome Austria’s Federal President Alexander Van
der Bellen to our Veitsch plant to celebrate the 120th anniversary of its workers’
band and the contribution of the plant towards Veitsch’s social and economic
empowerment. He took the chance to meet with young female employees to
understand their perspective on sustainability, peace, innovation, and
inclusion.
The Company has actively participated in forums such as the Clean Energy
Action Forum in Pittsburgh in September 2022.
In North America, RHI Magnesita has held meetings and tours at our York plant
and quarry for Pennsylvania state legislators and local economic council
members to discuss the Company’s commitment to the local community and
ways in which RHI Magnesita’s focus on sustainability and a circular economy
align with state priorities regarding alternative energy and emissions reduction.
How the Board engages
The Board approved an €8 million capital expenditure investment to diversify
energy sources at its European plants to alternative fuels.
The Chairman and broader management welcomed Austrian Vice Chancellor
Werner Kogler to the Company’s recycling hub in Mitterdorf in April 2022.
Priority topics raised by stakeholders
• COVID-19
• Inflation
• Russia/Ukraine conflict
• Supply chain issues
• Energy market volatility
• Alternative energies
• Sustainability, climate change, and decarbonisation
Outcomes
Transparent communication and open information sharing supports a
collaborative relationship with the Austrian government, where RHI Magnesita
operates four plants.
The strong progress in the field of recycling and activities such as the
establishment of a joint venture with Horn & Co (MIRECO). has garnered great
interest from government officials. In 2022, the recycling rate increased to
10.5% (2021: 6.8%)
During the Clean Energy Action Forum in Pittsburgh, management met with
international energy ministers and environmental experts from around the
world. This resulted in fruitful discussions about visions and solutions in the
areas of climate change, energy security and decarbonisation.
Why they are important
Strong relationships with our suppliers are vital for the effective running of our
operations. We rely on our suppliers to deliver services and materials, and we
recognise that the availability of these goods impacts how we operate as a
Company.
How the Company engages
The Company evaluates its suppliers through:
• a sustainability risk matrix that assesses suppliers according to country and
category risk; and
• a goal-based framework to evaluate the majority of RHI Magnesita’s
purchase spend by supplier under its sustainability criteria, until 2025.
All suppliers are requested to sign the Supplier Code of Conduct, and a
Sustainable Procurement Guideline and Supplier Audit Guidelines are
implemented consistently across our operations.
A risk-based approach is taken with external parties undertaking audits on
behalf of the Company in higher risk areas.
The Company operates fair payment terms for suppliers, whilst leveraging
benefits for its own financial health.
How the Board engages
The CSC received reports from management on supplier audits and
engagement and considered progress on the Company’s sustainable
procurement initiatives.
The Board receives regular updates on the business’s work to future-proof our
supply chain and the work undertaken to adapt our processes to an
increasingly volatile environment.
In 2022, the Board considered and approved the Modern Slavery Act
Statement for publication, following a recommendation from the CSC. The
statement can be found on our website.
Priority topics raised by stakeholders
• The impact of supply chain volatility on profitability
• Inventory levels
• Shipment delays
• COVID-19
• Climate action
• Safety
• Raw materials
• Sustainable procurement
Outcomes
The Group made good progress throughout 2022 on sustainable
procurement in a more challenging supply chain environment. Specialist
consultants were engaged to guide management in 2021 on tactical and
strategic supply chain management and this work continued in 2022.
The 2021 taskforce implemented changes such as more efficient
transportation reporting, regular updates of freight costs, the creation of a lead
time dashboard, an automated critical raw material check and regional support
for backlog prioritisation. The focus of management in 2022 has been on
driving sustained, better performance in supply chain management and
demand planning.
Suppliers are requested to sign up to the Supplier Code of Conduct and will
increasingly be part of our supplier audit programme.
Financial process work has included some specific work packages that provide
better outcomes for suppliers. Focus has been applied to improving the
effectiveness of the purchase order process to accelerate the matching of
purchase invoices to orders with a consequent improvement in the timeliness
of the payments process, providing a better outcome for our suppliers.
110 RHI MAGNESITA ANNUAL REPORT 2022
Key areas of Board focus and activity
in 2022
Amongst other matters, the Board focused on
the following areas in the year:
Group strategy and long-term value
creation/ preservation
• Conducted an annual two-day strategy
meeting session with members of the EMT
and senior management team to assess the
current strategy and ensure it was fit for
purpose. As part of these discussions, the
Board considered the global outlook and
macroeconomic trends, developments in
key markets in each region, structural trends,
technical innovation, and sustainable
product initiatives, review of the business
model, and the competitive environment.
• Participated in a risk-management
workshop, discussing risks aligned with the
strategic opportunities and focused
break-out sessions on future opportunities
and current position of topics such as the
European steel markets and digitalisation.
• Received reports throughout the year
outlining potential business development
opportunities as they arose, including
strategic M&A.
• Approved disposals and acquisitions, with
reference to the Company’s strategic intent
and the balance sheet capacity. In approving
M&A, the Board focused on the synergies to
be leveraged, which will support a
sustainable business model, and any risks to
that development that are to be mitigated.
Furthermore, the impact on the Company’s
sustainability strategy was considered with
each potential acquisition.
• Considered geopolitical and
macroeconomic trends and factors,
particularly those impacting employees,
costs of production, delivery to customers
and the implementation of the strategy.
• Discussed the Company’s Raw Materials
strategy, the strategy for provision of
products and services to customers.
• Considered progress against the 2025
strategy, through consideration of a strategic
initiatives dashboard, and discussed the
execution of the strategy and any
associated barriers.
People, succession and leadership
• Board composition, particularly that arising
from the departure of Fiona Paulus and
Sigalia Heifetz’s decision to stand down at
the 2023 AGM.
• Reviewed Board Committee composition
and received updates from the Nomination
& Governance Committee on the Board
composition and skills represented.
• Considered the executive management
structure, arising from changes proposed by
the CEO, considering the capability and
capacity of various members for
changed roles.
• Considered talent pipeline, EMT succession
and particularly CFO and CEO succession
plans and related actions.
• Considered the 2021 internal Board review
and the actions relating to the review,
including progress against the actions
identified in the year. Considered the scope
and approach of the 2022 Board review.
• Reviewed and approved the bonus for 2021
performance and the remuneration of the
Chairman, Executive Directors and EMT.
• Discussed retention, performance and
resourcing. Made recommendations to
management in respect of training,
incentivisation and external support.
• Discussed employee engagement, morale
and wellbeing, particularly in the context of
key decisions such as regionalisation and
organisational restructure.
• Received presentations on organisational
diversity, ratified the EMT-signed Diversity
Charter, and agreed the focus areas for
improvement to drive greater gender
diversity, as well as other forms of diversity.
Corporate governance statement
continued
111RHI MAGNESITA ANNUAL REPORT 2022
GOVERNANCE OTHER INFORMATION
FINANCIAL
STATEMENTSSTRATEGIC REPORT
Financial performance
• Approved the annual budget for 2022.
• Reviewed and approved the Group’s
full-year 2021 and half-year 2022 results
together with the 2021 Annual Report,
including ensuring that it was fair, balanced
and understandable, and confirming that the
Group was a going concern. As part of this,
the Board considered the external auditor’s
reports and the key matters raised.
• Received regular financial updates covering
revenue, margins, costs, performance
year-to-date and outlook on a monthly basis.
• Reviewed the Group’s debt, capital, and
funding arrangements, particularly in
respect of ensuring the ability to take
advantage of any opportunities as they arise,
such as acquisitions that were considered at
various points in 2022.
• Reviewed liquidity, cash flow and scenario
planning, particularly with reference to
macro factors such as inflation and supply
chain issues, requiring careful management
of inventory.
• Considered capital allocation and payment
of dividends, including the approval of the
interim dividend at H1 2022.
• Considered disclosures to the market and
noted the work of the Disclosure Committee
to continually monitor matters at hand.
• Received updates on the Company’s tax
position and matters at hand with local
authorities in various locations.
Markets and sales
• Received updates at each meeting on sales
performance, market share and progress
against sales initiatives, particularly with
reference to customers.
• Considered strategic pricing and costs of
production, particularly in the context
of inflation.
• Received reports on sustainable recycling
and digital initiatives designed to meet
customer expectations and develop the
Company’s offering.
• Discussed with management the sales teams’
behaviours, and the consequent links to the
operational performance of the Company.
Operational performance
• Received updates at each meeting on
operational performance, including any
impacts to customers and current H&S
compliance levels.
• Received briefings on operational projects,
including project management, business
cases for payback, timescales, and any
barriers to completion.
• Considered reviews of completed projects,
which included lessons learned by
management for use in future projects
and planning.
• Considered individual plant performance as
appropriate and, with reference to the
Company’s strategy, noted management’s
decisions to pause production and project
work at plants as required.
• Received frequent reports on supply chains
and value chains, including the work of the
project to address the issues and considered
management’s proposals to improve
performance across the value chain.
• Appraised the principal risks, mitigating
actions and controls around operational
performance.
• Approved ad-hoc requests to facilitate
flexibility in the face of energy shortages and
considered the contingency planning
accordingly.
Technical innovation and sustainability
• Received updates on the development of
low-carbon products and market
developments in carbon capture and storage.
• Considered future strategy, partnerships
with external parties, and processes to
encourage innovation.
Legal and compliance matters
• Received regular updates on
whistleblowing, including an annual review
of the process.
• Reviewed and approved a refreshed Code
of Conduct and the associated
compliance report.
• Received updates on the Group’s
compliance and cyber security programmes.
• Considered compliance reports, and also
received a benchmarking report on the
number of compliance cases compared
with peers.
• Received updates on any legal developments
as they related to the Company.
• Considered and approved revised share
dealing and inside information policies,
Matters Reserved to the Board, the
associated Delegation of Authority matrix,
and Board Rules.
Stakeholder engagement and governance
• Approved the Notice and business of the AGM.
• Received input from the ERDs.
• Considered the Company culture as an
ongoing matter.
• Received reports on investor engagement,
including verbatim feedback, the discussions
held as part of the annual roadshow, and the
detailed perception study.
• Approved the annual statement for the
Modern Slavery Act and California
Transparency in Supply Chains Act.
• Received reports on customer satisfaction
levels, including Net Promoter Scores and
feedback from customers.
• Received a report from the Remuneration
Committee on the workforce remuneration
and operation of various bonus schemes in
the organisation designed to incentivise
good behaviours.
• Received regular updates on corporate
governance and other matters from the
Company Secretary, including reviews of
any potential conflicts of interest.
See stakeholder report for
more details on
Pages 106 to 109
112 RHI MAGNESITA ANNUAL REPORT 2022
Board review
In 2022, the Board considered the findings of
the 2021 Board review and the progress against
actions. This review was conducted internally
through completion of questionnaires by each
Board director. Areas that were felt to have
improved included the diversity of the Board,
updates on key developments between Board
meetings, Board cohesion, as a result of
COVID-19 crisis, the clarity of strategy, the
integration of sustainability matters, and
understanding of strengths and weaknesses.
Areas for improvement in 2022 included Board
papers and the Board continued to request
more understanding of stakeholders as a
priority, such as employees, minority
shareholders, customers, and suppliers. In
2022, no formal Group-wide employee surveys
were undertaken, but management reported
anecdotal feedback they heard from selected
groups in response to questions from the NEDs
and ensured the Board had opportunities to
engage with colleagues on site visits. The Board
has encouraged management to request more
structured feedback from employees. More
detail on actions from the 2021 review and
progress can be found on page 121.
As outlined in the Chairman’s introduction, the
Board decided to engage EY to conduct
interviews for the internal Board review of 2022.
This review is ongoing at the time of publication
and will be reported on in full in our 2023
Annual Report; the initial indications are the
Board can be comfortable that it is operating
effectively. It has been conducted through
interviews in Q1 2023 and is designed to be
more discursive. The scope of the review is
therefore more high level but has been
designed to focus on:
• Board dynamics, communication, and
cohesion, including, support and challenge
of the EMT, quality of discussion, and
relationships between Directors and
management;
• Chairman’s performance of his duties;
• governance, how it is demonstrated in the
Company, including the Company culture,
risk management, internal controls and
succession planning;
• priorities for 2023 – both for the Board and
the Company as whole; and
• any other matters for comment, such as
Board support, meeting management and
focus, quality of Board materials, and
oversight of stakeholders’ priorities.
Board Committees considered their respective
Committee effectiveness in 2022 with input
from management who regularly attend the
meetings and other Directors who regularly
attend as guests. Each Committee identified
areas of progress and any matters for
improvement. You can read more details in each
Committee report on pages 120 to 157.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the
Company’s Annual Report. The Company’s
Annual Report comprises, among others, the
Strategic Report, the Governance Report, and
the Consolidated Financial Statements. The
Directors are responsible for preparing the
Annual Report for each financial year in
accordance with applicable law and
regulations, including in accordance with IFRS
as adopted by the EU and the relevant
provisions of the Dutch Civil Code. The
Directors must not approve the Annual Report
unless they are satisfied that it gives a true and
fair view of the state of affairs of the Company
and its consolidated Group companies, and of
the profit or loss of the Group for that period. In
preparing the Annual Report, the Directors are
required to:
a) select suitable accounting policies and then
apply them consistently;
b) make judgements and accounting estimates
that are reasonable and prudent;
c) state whether applicable IFRS as adopted by
the EU and the relevant provisions of the
Dutch Civil Code have been followed,
subject to any material departures disclosed
and explained in the Annual Report; and
d) prepare the Annual Report on the going
concern basis, unless it is inappropriate to
presume that the Company will continue
in business.
Corporate governance statement
continued
113RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
RHI MAGNESITA ANNUAL REPORT 2022 113
The Directors are responsible for keeping
adequate accounting records that are sufficient
to show and explain the Company’s transactions
and disclose, with reasonable accuracy at any
time, the financial position of the Company and
the Group, and enable them to ensure that the
Annual Report complies with applicable law
and, as regards the Consolidated Financial
Statements, the IAS Regulation. They are also
responsible for safeguarding the assets of the
Company and the Group and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities.
Each of the Directors, whose names and
functions are listed on page 219 confirm that,
to the best of their knowledge:
• the Company’s financial statements and the
Consolidated Financial Statements, which
have been prepared in accordance with IFRS
as adopted by the EU and the relevant
provisions of the Dutch Civil Code, give a
true and fair view of the assets, liabilities,
financial position and profit or loss of the
Group; and
• the Annual Report gives a true and fair view on
the situation on the balance sheet date, the
development and performance of the
business and the position of the Company and
its consolidated Group companies and
includes a description of the principal risks and
uncertainties that the Company faces; and
having taken all matters considered by the
Board and brought to the attention of the
Board during the financial year into account,
the Directors consider that the Annual Report,
taken as a whole is fair, balanced and
understandable. The Directors believe that
the disclosures set out in the Annual Report
provide the information necessary for
shareholders to assess the Company’s
position, performance, business model
and strategy.
After conducting a review of management’s
analysis, the Directors have reasonable
expectation that the Group has adequate
resources to continue in operational existence
for the foreseeable future. For this reason, the
Directors consider it appropriate to adopt the
going concern basis in preparing the Annual
Report. Directors are also required to provide a
broader assessment of viability over a longer
period which can be found on pages 50 to 51
(the “Viability Statement”) of the integrated
report and accounts. The consolidated financial
statements on pages 160 to 219 were approved
and signed by the Board on 26 February 2023.
There are no special events that should be
taken into account for these consolidated
financial statements.
The Group’s liquidity position at the beginning of
2023 is strong due to the additional refinancing
conducted in 2022 to maintain our liquidity
levels and extend debt maturities.
John Ramsay
Chairman of Audit & Compliance Committee
114 RHI MAGNESITA ANNUAL REPORT 2022
Herbert Cordt
N
Chairman
John Ramsay
A
N
Senior Independent Director
and Deputy Chairman
Stefan Borgas
Chief Executive Officer
Ian Botha
Chief Financial Officer
Herbert was Chairman of the
Supervisory Board of RHI AG from 2010
until 2017, as well as Vice-Chairman
from 2007 to 2010. He is Managing
Partner at Cordt & Partner GmbH, his
international boutique corporate
finance consultancy, which advises
clients on corporate finance matters. In
the course of his career he has held a
variety of senior executive and
managing director positions in
telecommunications and financial
institutions in European firms, providing
a wide range of business acumen and
international experience. He has also
served as a non-executive director on
the boards of a number of industrial
companies.
Herbert obtained a Doctorate in Law
from the University of Vienna, graduated
from the Diplomatic Academy of Vienna
and received a Master’s of Science
degree in Foreign Service from
Georgetown University Washington D.C
Current external appointments:
Watermill Group Boston (Advisor),
Cooper & Turner Group (Advisory Board
Member), Quality Metalcraft/
Experi-Metal, Inc. (Advisory Board
Member), CORDT & PARTNER
Management und
Finanzierungsconsulting GesmbH
(Managing Partner), Georgetown
University’s School of Foreign Service
for its MSFS Program (Advisory Board
Member).
John has held senior financial executive
roles across the world, including serving
as Chief Financial Officer of Syngenta
AG, as well as being their Interim CEO
for a period. John started with Syngenta
AG as Group Financial Controller in
2000 and prior to that was Finance
Head of Asia Pacific for Zeneca
Agrochemicals. Earlier in his career he
was a Financial Controller of ICI
Malaysia and regional controller for
Latin America. He started his career
working in audit and tax at KPMG and
his knowledge in accounting and
finance provides valuable practical
experience.
John is a Chartered Accountant and
also holds an Honours Degree in
Accounting.
Current external appointments:
Koninklijke DSM N.V. (Supervisory Board
Member), Croda International plc
(Non-Executive Director, Chair of Audit
Committee) and Babcock International
plc (Non-Executive Director).
Stefan’s career has focused on business
transformations. He was CEO at RHI AG
from December 2016 until October
2017, when he became CEO of RHI
Magnesita, following the merger.
Prior to that, he was president and CEO
at Israel Chemicals Ltd and between
2004 and 2012, he was CEO at Lonza
Group. In his early career, he worked at
BASF Group, where he held various
management positions.
Stefan has a business administration
degree from the University Saarbrücken
and an MBA from the University of St.
Gallen-HSG.
Current external appointments: Afyren
SAS (Chairman) and Borgasadvisory
GmbH (owner).
Ian enjoyed a highly successful career
with FTSE listed Anglo American plc in
the related mining and metals industry
for over 20 years. Whilst there, he held
a variety of international executive roles
including as Group Financial Controller
and divisional Chief Financial Officer,
and most recently as Finance Director of
listed Anglo American Platinum. Ian has
significant experience in finance and
accounting, investor relations, strategy,
M&A and governance, as well as
excellent business acumen and a track
record in financial and performance
improvements.
Ian holds a Bachelor’s degree in
Commerce from the University of Cape
Town and is a Chartered Accountant.
Current external appointments: none.
Board of Directors
Board Committee member
Nomination & Governance Committee
Audit & Compliance Committee
Corporate Sustainability Committee
Remuneration Committee
Chairman of Committee
N
A
S
R
115RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
As described in the Corporate Governance Statement, these statistics do not include the Employee Representative Directors.
Directors
by length of tenure
0–3 42%
3–5 17%
5–9 8%
9+ 33%
Directors
by ethnicity
White 75%
Prefer not to say 25%
Directors
by age
40–49 8%
50–59 34%
60–69 33%
70–80 25%
Directors
by nationality
Austrian 42%
British 25%
German 17%
Israeli 8%
South African / British 8%
Stanislaus Prinz zu Sayn-
Wittgenstein-Berleburg
S
Non-Independent
Non-Executive Director
David Schlaff
Non-Independent
Non-Executive Director
Wolfgang Ruttenstorfer
A
Non-Independent
Non-Executive Director
Janet Ashdown
S
R
Independent
Non-Executive Director
Stanislaus was a member of the
Supervisory Board of RHI AG from 2001.
He has been a Supervisory Board
member on several “Stadtwerke”
(municipality owned utilities) as well as
undertaking senior executive roles,
including CEO and CFO, in the energy
industry. He has deployed industrial
knowledge combined with financial
detail throughout his career, and was an
Investment Banking Director at
Deutsche Bank AG. Over the past five
years he has focused on private equity
work in a German mid-cap environment
and also engages in a broad range of
asset management activities in a family
office environment.
Stanislaus holds a Sloan Fellows
Master’s in Business Administration from
MIT Sloan School of Management and
studied Business Administration and
Economics at Université de Fribourg. He
is a Chartered Financial Analyst (CFA).
Current external appointments: STUV
Steinbach & Vollmann Holding
GmbH (CEO).
David was a member of the Supervisory
Board at RHI AG from 2010 until 2017.
Currently Chief Investment Officer and
joint Managing Director at M-Tel, he has
key management and supervisory
experience in international financial and
manufacturing institutions. He has
undertaken roles at LH Financial
Services Corporation and Forstmann-
Leff Associates Inc, and he has held
advisory and supervisory board
positions at Latrobe Specialty Steel
Company and A/S Ventspils Nafta.
David holds a Bachelor’s degree in
Business Administration from the
Interdisciplinary Center Herzliya in
Israel.
Current external appointments: M-Tel
Holding GmbH (Chief Investment
Officer and Joint Managing Director).
Wolfgang was a member of the
Supervisory Board of RHI AG from 2012
to 2017, where he acted as the Interim
CEO for six months, following the
sickness-related absence of the CEO.
He started his professional career in oil
and gas at OMV, where he became CEO
and then Chairman of the Management
Board. He has held numerous
supervisory board roles, including as
Chairman, in industries such as
telecommunications, real estate,
healthcare and insurance. Wolfgang
also served as Secretary of State in the
Austrian Federal Ministry of Finance. His
varied career brings a wide range of
strategic and business management
experience.
Wolfgang graduated from the Vienna
University of Economics and Business.
Current external appointments: Erne
Fittings GmbH (Supervisory Board
member).
Janet has had a distinguished career
working for BP plc for over 30 years,
holding a number of international
executive positions throughout the
value chain. Until the end of 2012, Janet
was CEO of Harvest Energy Ltd and
throughout her career has provided
leadership through change. Janet also
has a wide range of board and
committee experience as a Non-
Executive Director, including the UK
Nuclear Decommissioning Authority, a
public body where she chairs the Safety
and Sustainability Committee. Her
experience in the energy sector has
provided her with significant skills in
general management, particularly in
environmental and sustainability
matters.
Janet holds a BSc in Energy Engineering
from Swansea University.
Current external appointments:
Nuclear Decommissioning Authority UK
(Senior Independent Director and Chair
of Safety & Sustainability), Victrex plc
(Non-Executive Director, Chair of
Remuneration) and Stolt-Nielsen
Limited (Non-Executive Director).
116 RHI MAGNESITA ANNUAL REPORT 2022
Independent
Non-Executive Directors
Janice “Jann” Brown
A
R
Independent Non-Executive Director
Karl Sevelda
R
N
Independent Non-Executive Director
Marie-Hélène Ametsreiter
S
Independent Non-Executive Director
Sigalia Heifetz
Independent Non-Executive Director
Jann started her career with KPMG,
where she qualified as a Chartered
Accountant and a Chartered Tax
Adviser, moving into industry in 1998
and since then has worked in a number
of roles, both executive and non-
executive, primarily in the energy sector
but also in engineering services,
manufacturing and investment
management. As a result of these roles,
Jann has extensive international
business experience, particularly in
India and the Middle East. Her listed
company board experience, both as an
executive and a non-executive, brings
an awareness of the importance of
governance, culture and strong ethics.
She is an experienced financial
professional and is a Past President of
the Institute of Chartered Accountants
of Scotland.
Jann is a Chartered Accountant, and
also holds an Honours Degree in History
from Edinburgh University.
Current external appointments: Pharos
Energy plc (Managing Director), and
ICAS Foundation (Trustee and
board member).
Karl progressed to CEO of Raiffeisen
Bank International AG after being
Deputy CEO and undertaking
management roles in the Raiffeisen
Bank group where he was responsible
for corporate customers and corporate
trade and export finance worldwide.
Prior to this he held several senior
management positions in Creditanstalt-
Bankverein where he focused on
corporate and export finance.
Additionally, he has held the position of
Secretary to the Federal Minister for
Trade and Industry of Austria.
Karl holds a Master’s and Doctorate
Degree from Vienna University of
Economics and Business.
Current external appointments: SIGNA
Prime Selection AG (Supervisory Board
member), SIGNA Development
Selection AG (Supervisory Board
member), Liechtensteinische
Landesbank AG (Non-Executive
Director), and Custos Privatstiftung
(Management Board member).
Marie-Hélène has been a General
Partner with Speedinvest, a leading
European Venture Capital firm, since
2014. As the lead partner of the
Industrial Tech team, she drives seed
stage investments in start-ups
supporting the digitisation of Europe’s
industrial sector, including
manufacturing, logistics, construction
and climate technology. Before
Speedinvest, Marie-Hélène was
responsible for the Corporate
Sustainability Program at OMV, a
leading Austrian oil and gas producer,
and prior to that was CEO of the
Croatian mobile telecom operator
Vipnet. She has extensive skills and
experience in sustainability, digitisation
and automation.
Marie-Hélène graduated in Business
Administration from the Vienna
University of Economics and studied at
the University of California.
Current external appointments:
Greyparrot.ai Ltd (Non-Executive
Director), AMODO, Inc. (Non-Executive
Director) and Speedinvest Deutschland
GmbH (Managing Director).
Sigalia served in the Israeli Air Force as
Operation Room Controller and Training
Commander, and later joined BDO. She
was a member of professional
committees at the Israeli Institute of
CPAs until 1997, when she became a
Partner at BDO until 2003. Since 2008
Sigalia has provided consulting services
to international investors. She holds
non-executive directorships at a
number of leading public corporations
across a range of sectors and industries.
She brings a wealth of international
experience and geopolitical exposure,
alongside solid business and financial
acumen. Sigalia will not stand for
re-election at the 2023 AGM.
Sigalia holds a BA in Accounting &
Economics from the University of Tel
Aviv (Israel) and is a Certified Public
Accountant. She has completed two
Executive MBAs with INSEAD (France)
and Tsinghua (China).
Current external appointments:
Plus500 Ltd (Non-Executive Director),
Maman Cargo Terminals and Handling
Ltd (Non-Executive Director), Tamar
Petroleum Ltd (Non-Executive Director),
Clal Biotechnology Industries Ltd
(Non-Executive Director, including Clal
Industries and subsidiaries within the
group) and Vesta Investment and
Management Ltd (Owner).
Board of Directors
continued
Board Committee member
Nomination & Governance Committee
Audit & Compliance Committee
Corporate Sustainability Committee
Remuneration Committee
Chairman of Committee
N
A
S
R
117RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Employee Representative
Directors
Karin Garcia
Employee Representative Director
Martin Kowatsch
Employee Representative Director
Michael Schwarz
Employee Representative Director
Karin studied at the University of Oviedo
and finished her degree in computer
science in 1994, specialising in systems
support. She started with the Group at
RHI in 1997, first working in the
commercial execution team and then
she transferred to the IT on-site support
in Oviedo as a Regional Site Service
Coordinator where she continues to
work as a senior site coordinator.
Karin has been appointed as an
Employee Representative Director by
the Spanish Works Council.
Current external appointments: none.
Martin has been with the Company
since 1987. He is Chairman of the Group
Works Council, as well as the Chairman
of the Works Council at the Digital Plant
Flagship in Radenthein. He is a trained
industrial electrician, and has
completed a one-year Chamber of
Labour/trade union training. He
successfully completed a Master´s
degree programme in “Education and
Group Dynamics”.
Martin received his doctorate in history
(focusing on educational development)
from the Alpen-Adria-Universität
Klagenfurt.
Current external appointments: none.
Michael has been with the Group
since 1983 and is a member of the
works council at RHI Magnesita
Deutschland AG.
Michael has been appointed as an
Employee Representative Director
by the German Works Council.
Current external appointments: none.
Directors serving
part of 2022
Fiona Paulus
Independent Non-Executive Director
Appointment date: 6 June 2019
Resignation date: 17 October 2022
118 RHI MAGNESITA ANNUAL REPORT 2022
Executive Management Team
Gustavo Franco
Chief Customer Officer
Gustavo was appointed Chief Sales
Officer in January 2019, prior to which
he was Senior VP of Process Industries
and Minerals. He joined Magnesita in
2001 as a Technical Marketing
Engineer, after finishing his Bachelor’s
degree in Mechanical Engineering at
the Federal Center for Technological
Education of Minas Gerais and since
then has developed his career in the
refractory industry.
Over the course of six years, he
progressed through various sales
managerial roles in South and North
America and was part of the Executive
Committee of Magnesita Refratários
from 2015 to 2017. In 2018 he
completed the Senior Executive
Programme with the London
Business School.
Rajah Jayendran
Chief Technology Officer
Rajah has held various senior
operational and strategic development
roles at multinational companies such
as Thyssen-Krupp Uhde GmbH, Bayer
MaterialScience AG, Lonza AG, and
ChemChina-Bluestar Group Co,
working in China, Singapore and
Switzerland. He has valuable
experience in the industry in Asia. He
also has experience in renewable
solutions and operational performance
management. In 2018, Rajah became a
key team member at RHI Magnesita,
holding the position of Senior Vice
President Operations Europe/CIS/
Türkiye until, in October 2021, he
joined the EMT as Chief Operations
Officer (COO), before his role became
Chief Technical Officer. Rajah brings a
detailed knowledge of the Company’s
global operations and expertise in
production efficiencies.
Rajah graduated in engineering from
TU – Ruhr-Universität Bochum.
The EMT combines broad experience
and complementary skill sets to deliver
the Group’s strategic priorities.
Stefan Borgas
Chief Executive Officer
Ian Botha
Chief Financial Officer
For full biographies, see
Page 114
119RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Simone Oremovic
Executive Vice President,
People, Projects and Value Chain
Simone joined RHI Magnesita in an
executive capacity in November 2017.
Simone has 20 years of experience in
Human Resources.
She started her career at General
Electric where her main focus was on
leadership and talent management, as
well as Human Resources process. She
is a certified Six Sigma Master Black
Belt. She has held leading Human
Resources roles in Telekom Austria
Group, IBM Austria, and Baxter AG.
Her role since October 2021 covers
People, Culture, Global Projects for
the Group as well as building the new
end-to-end Value Chain and running
the operational supply chain.
Simone has a degree from the
European Business School (Paris)
and from the Economic University
of Vienna.
Ticiana Kobel
Executive Vice President,
Legal & Digital Transformation
Ticiana has extensive legal experience
in a wide range of global businesses,
such as SR Technics Group and Bühler
Group, leading legal departments in
manufacturing, aviation, technology,
the service sector and engineering
industries. In these roles. She was in
charge of crucial projects pertaining to
varied matters, such as complex
strategic procurement, spin-offs, sales
and acquisitions, and corporate
governance issues, and assisted with
the design and implementation of
compliance functions, mergers and
acquisitions, and partnerships.
Ticiana has a law degree with an
emphasis in corporate law from the
Federal University of Minas Gerais and
an LLM in International Economic Law
and European Law at the University
of Geneva.
Luis Rodolfo Bittencourt
In February 2023, Luis took a senior
specialist role, focusing on Company’s
Global Research & Development and
Raw Materials strategy. He was Chief
Technology Officer in 2022.
Luis started working for Magnesita in
1986 and has held several positions in
his career in the refractory and mining
industry including Mining/Geology
Manager, Technical Purchasing
Manager, Plant Manager, and R&D VP.
He is a past President of the Brazilian
Refractory Producers Association and
the Latin America Refractory
Producers Association. He holds a
Bachelor’s degree in mining
engineering from the Federal
University of Minas Gerais, a Master’s
degree in Metallurgical Engineering
from the University of Utah, and a PhD
degree on Ceramic Engineering from
the University of Missouri.
Executive serving in 2022
120 RHI MAGNESITA ANNUAL REPORT 2022
Nomination & Governance
Committee report
Activities in 2022
The Committee met three times in 2022,
covering the roles and responsibilities set out
above and in particular, the Committee
considered the following matters:
Scope of the Committee
In 2022, the Committee resolved to widen its
scope to consider governance matters,
changing its name to reflect this, and updating
the Terms of Reference accordingly. The
Company reports against two corporate
governance codes, in the Netherlands and the
UK, and there are an increasing number of
matters for consideration in respect of corporate
governance such as those arising from the UK
Government’s Corporate Governance & Audit
reforms and UK Listing Rules changes.
Furthermore, the Dutch Corporate Governance
Code was updated in December 2022 (to be
reported against from 1 January 2023) and the
UK Corporate Governance Code is expected to
be updated in the near future. The intention is
that the Committee will support the Board with
these changes through focused attention and
relevant knowledge.
Time commitment from NEDs
The Committee considered, as it does annually,
the review of time required from the NEDs to
fulfil their duties satisfactorily. This covered
meetings, required preparation time and any
additional time Directors spent outside of
meetings in discussion with management. For
2022, this assessment recognised the
additional complexity of Company operations,
given the ongoing volatility in the business
environment and additional time required from
the Board to consider M&A opportunities in the
year. No NED has raised significant concerns
about the time requested of them in 2022 and
the Committee will continue to keep this
under review.
The Board received a report detailing the
external appointments held by Directors and
was comfortable that none of the Directors
standing for re-election in the 2023 AGM are
compromised by their other commitments in
the time they can dedicate to the Company.
Committee purpose, roles and
responsibilities
The Committee’s purpose is to ensure that the
Company has the competencies and depth of
skills within the Board and senior executives to
meet the demands of a global business and to
support the development of the Group’s
strategy, whilst paying particular attention to
independence and diversity.
Roles and responsibilities:
• Review the structure, size and composition
(including the skills, knowledge, experience
and diversity) of the Board and its
Committees, recommending any changes to
the Board.
• Consider succession planning for Directors
and the senior executives.
• Lead the process for recruitment of any new
Directors, including the Chairman, and their
recommendation to shareholders.
• Assess annually the time commitment
required from NEDs, including the approval
of any additional external appointments on
behalf of the Board.
• Review the results of the Board effectiveness
review relating to composition of the Board
or the effectiveness of any individual
Director.
• Consider annually the Company’s
compliance with the UK & Dutch Corporate
Governance Codes and review key
documents related to corporate governance.
More detail on the duties of the Committee can
be found in its Terms of Reference on the
corporate governance section of our website.
Herbert Cordt
Chairman of the Committee
Committee members and
meeting attendance
Attendance
in 2022
Member
since
Herbert Cordt
(Chairman)
3/3 October 2017
John Ramsay 3/3 October 2020
Karl Sevelda 3/3 June 2021
The Committee
continues to consider
what skills and
experience are required
on the Board to best
progress management’s
strategic focus and
operational execution to
achieve sustainable
success for the
Company.
121RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Board review
The Committee takes responsibility for the
preparation of the annual Board effectiveness
reviews. In 2021, following three years of
external reviews facilitated by Lintstock, the
Board review was undertaken internally.
The findings of the 2021 Board review still
showed significant impacts from COVID-19
restrictions; in 2022, a much greater number of
physical meetings was possible. The role of the
Chairman in generating greater cohesion,
despite the limitations on personal interaction,
was highlighted by respondents. Particular
improvements were noted on updates in
between meetings, particularly on current and
emerging matters, on the clarity of strategy,
understanding of strengths and weaknesses,
and the integration of sustainability.
The Board agreed actions for focus in 2022, with
a view to further improving its effectiveness. Key
points considered are outlined in the table below.
The Board has been satisfied to see sustained
improvement in Board effectiveness since listing
in 2017. For the 2022 internal Board review,
the Directors agreed that interviews would be
an effective use of time, and EY were engaged
to support the Company Secretary with this
approach.
The effectiveness of each Board Committee
for 2022 has been reviewed, with inputs from
management and suggestions for practical
improvements, such as trackers of strategic
goals and continuation of certain practices like
deep-dive topics and site visits. Generally,
actions from Committees’ 2021 review had been
progressed with improvements observed, and
the Board is comfortable the Committees have
continued to operate effectively.
Board diversity
The Committee and the Board have dedicated
time in the annual schedule to discussing
diversity, both at Board level and within the
organisation. Board gender diversity for the
majority of 2022 was at 38% and with the new
appointments currently being sought, the Board
will ensure this level of diversity is maintained.
The Board Diversity Policy (available here on
our website) outlines an aspiration of 45%
gender diversity at the Board level which
continues to be the aim. The policy also takes
account of diversity represented through an
individual’s background and ethnicity. It is being
implemented through all-female shortlists for
the open positions, with ethnicity as a further
key consideration, providing the required
experience and skills can be also identified in
the candidates. In respect of the currently
ongoing NED recruitment process, the
Committee is confident it can identify an
all-female shortlist who can meet the specified
criteria.
Of the collective Board Committee member
positions, 42% are held by women and two of
the Committees have a female Chairman, as a
result of the Board’s pursuit of gender diversity
in recent years. Committee composition is
considered carefully by the Committee and
extant Company commitments, experience and
skills are considered when making changes.
This policy will be reviewed in 2023 to consider
any desired changes arising from the new DCGC
and revised UK Disclosure and Transparency
Rules, DTR 7.2.8AR.
Board Review
improvement area Progress in 2022
Stakeholder
oversight
ERDs were encouraged and expressly invited to speak directly on topics to give the employee voice at the Board table. The Chairman attended the Works
Council Conference 2022 to hear directly from Works Council members in Austria and to give the perspective of the Board in a two-way conversation.
Please see pages 106 to 109 for more detail.
Delivery of the
2025 Strategy
Management have been focused on ensuring lessons learned are outlined and considered with the Board for improvement in future projects.
This enables the Board to hold the wider management to account more effectively to ensure delivery of the 2025 Strategy. The structure of agendas
and topics for discussion are evolving to focus on strategic matters and the results of the 2022 Review will be the indicator of progress here.
Board papers The Board paper portal remains under consideration with respect to available developments and products. Paper quality is improved from some areas of
the business, with areas of further focus from other departments identified for improvements.
Board skills In 2022, the Board has had focused sessions led by an external expert in a particular field on strategic topics related to the Board discussion. Directors
continue to pursue their own structured learning and useful resources such as webinars and articles are circulated by the Company Secretary.
There was formal training on Market Abuse Regime and responsibilities as Persons Discharging Managerial Responsibilities to the EMT and the Board.
Culture Opportunities to experience organisational culture directly were taken by the Directors on their site visits and one director co-hosted an employee
townhall on site in Rotterdam. Please see more details on pages 101 to 102.
122 RHI MAGNESITA ANNUAL REPORT 2022
Compliance with Listing Rules on Diversity
In 2022, the UK Financial Conduct Authority
introduced new Listing Rules relating to
diversity (LR 9.8.6R(9) and (10), and LR
14.3.33R(1)). The Company’s position against
these items is set out within this report (right).
The Company agreed on a reference date of
31 October to align with reporting to the FTSE
Women Leaders Review. The Company’s
reported data (right) shows the position as at
31 October 2022. The EMT has changed
composition and consequently is now 50% male
and 50% female (the Executive Directors are
included under the Board reporting).
As discussed in the Corporate Governance
Statement, the ERDs, being appointed by the
workforce with no input by the Board or
shareholders, are not able to be influenced in
terms of appointment. Therefore, the Board’s
view is that it is inappropriate to include them in
any calculation of Board diversity, unless
defined by law. Nonetheless, the Board were
pleased to welcome Karin Garcia, as the
nomination from our Spanish Works Council, to
the Board in December 2021.
The Committee and the Board will continue to
support the Company’s approach in facilitating
people development, ensuring that talent,
regardless of age, gender, and background,
enjoys career progression within the Group.
Diversity of nationality, culture and ethnicity are
all important factors to engender diversity of
thought. The Committee believes that the
diversity of nationalities and culture represented
amongst the Board and EMT provides a diverse
and global perspective. More details on the
Group’s diversity and inclusion work can be
found on pages 25 and 73.
Nomination & Governance
Committee report continued
Listing Rule target
Company’s
position Comment
At least 40% of the board are
women.
33% Our aspiration is to achieve 45% gender diversity,
recognising that it requires a careful and measured
approach to accommodate Board attrition, whilst
maintaining the existing profile of desired skills and
experience. The Board in 2022 comprised 38% female
representation prior to the resignation of Fiona Paulus.
At least one of the senior
board positions (Chair, Chief
Executive Officer (CEO),
Senior Independent Director
(SID) or Chief Financial Officer
(CFO)) is a woman.
0 positions
meet this target
This is an area that would require sudden and significant
change, and cannot be immediately implemented without
disruption to the organisation. The intention is to take this
into consideration as part of succession planning.
At least one member of the
board is from a minority ethnic
background (which is defined by
reference to categories
recommended by the UK Office
for National Statistics (ONS)).
0 Board members
meet this target
The Board continues to take ethnic diversity into account
when considering appointments, as per its Diversity Policy,
whilst noting it will continue to consider diversity of the Board
and the Company as a whole, based on our global footprint
and operations, in a way which is best aligned with our growth
agenda. Being an international company, we naturally reflect
many different nationalities in the Board and senior
management. This is a valuable input to ensure different
cultures are represented within decision makers, warding
against groupthink.
Table 1: Reporting table on sex/gender representation
Number of board
members
Percentage of the
board
Number of senior
positions on the
board (CEO,
CFO,SID and
Chair)
Number in
executive
management
Percentage of
executive
management
Men 10 66% 4 3 60%
Women 5 33% 0 2 40%
Not specified/ prefer not to say
Table 2: Reporting table on ethnicity representation
Number of
Board
members
Percentage
of the Board
Number of senior
positions on the
Board
(CEO,CFO,SID
and Chair)
Number in
executive
management
Percentage
of executive
management
White British or other White
(including minority -white groups)
12 80% 4 4 80%
Mixed/Multiple Ethnic Groups
Asian/Asian British 1 20%
Black/African/ Caribbean/Black
British
Other ethnic groups, including Arab
Not specified/ Prefer not to say 3 20%
Notes to the tables:
1. Data collection of the Board and the EMT was undertaken as part of our regular year-end data collection.
2. The Board and EMT were provided with the categories above and asked to advise how they identified.
3. The personal data has been collected once and it will be up to the individuals to advise of any changes.
123RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Succession planning
EMT succession planning
The Committee monitors the development of
the EMT below the Board to ensure that there
is a diverse supply of senior executives and
potential future Executive Directors with
appropriate skills and experience.
The Committee considers the skills and
experience of individuals at different levels
in the organisation with an indication of their
expected time to develop to the next level,
and requirements in order to achieve that
progression, such as experience of a different
business function or additional training.
Furthermore, it considered how succession
planning would be treated in different scenarios
(e.g. in an immediate scenario or in an orderly
fashion). A summary of this was provided to the
Board for its consideration. Diversity is considered
as part of succession planning, and management
are encouraged to incorporate tools and
measures to further generate and encourage
diversity in the pipeline of the organisation.
The continuing decrease in gender diversity of
the EMT’s direct reports, as a result of various
restructures and departures of individuals who
were not replaced, was noted by the Board as
disappointing. The associated causes have been
noted and in Board discussions, management
have been encouraged to refocus their efforts in
order to drive progress in 2022. The Head of
Diversity, People & Culture has outlined the
initiatives being taken by the organisation to
promote diversity, particularly gender, in
recruitment processes and networking support
for existing female leaders. Information on the
gender diversity of the EMT and its direct
reports is on page 61. Board members have also
offered their assistance with mentoring to
further support efforts.
As a result of the regionalisation and the SG&A
cost reduction programme, the CEO, supported
by the Board, took steps to reorganise the
allocation of responsibilities amongst the EMT.
The role profiles, capability and capacity of
each EMT member were considered and
responsibilities reallocated so as to better align
with the regional focus and the strategic
priorities of the business. This resulted in Luis
Bittencourt stepping away from his EMT role to
take on a specialist role focused on Global
Research & Development and Raw Materials
strategy. Rajah Jayendran will take on
responsibility at the EMT for the Group’s
sustainability governance and will be the
interface with the CSC. The EMT as whole is
involved and active in the sustainability strategy
and agenda.
These EMT changes were effected in early
2023, with further organisational changes
occurring below EMT in Q2 2023, and the
Board expects that the organisation will
benefit from fresh perspectives and
reinvigorated approaches.
Board succession planning and
composition
Since the Committee last reported to
shareholders, Fiona Paulus resigned her
position as an Independent NED and Sigalia
Heifetz has indicated her intention not to stand
for re-election at the next AGM in 2023. The
Committee has recommended to the Board that
a search for two new Independent NEDs be
undertaken. The Committee is leading this
search and is considering a clear scope of
desired attributes, skills and experience agreed
with the Board. As part of its ongoing monitoring
of Board composition, the Committee takes into
account the independence and diversity of the
Board, and these are cornerstone considerations
in the search for new Directors.
A range of candidates are being considered,
and in order to make a selection, a shortlist will
be made and then a thorough interview process
undertaken, with a number of different
Directors, and detailed references obtained
before nomination by the Board to shareholders.
The Committee is focused on ensuring a full
and detailed, open search for the right persons
for the roles who meet the business’ needs,
and do not want to undertake this search with
undue haste. The Committee is aided in the
comprehensive search by Egon Zehnder,
signatory to the Voluntary Code of Conduct
for Executive Search Firms. Egon Zehnder
has no other connection to the Company
or individual Directors.
The Committee considers succession planning
for key roles such as the CEO and CFO on an
ongoing basis, both on the basis of immediate
and orderly succession. The development of
internal candidates for these roles is considered
by the Committee and the Board, along with the
wider assessment of talent and resources to
enable consideration of succession planning in
the organisation.
On an ongoing basis, the Committee considers
the tenure of Directors with reference to the
retirement and resignation profile, which can be
found on the Company website. In thinking
about future recruitment to the Board, the
Committee continues to monitor Directors’ skills
and experiences, as well as diversity, to
engender constructive debate and a varied mix
of ideas. The Board profile is published on the
Company website.
As of November 2022, there were changes in
Board Committee composition following the
departure of Fiona Paulus:
• Jann Brown became a member of the
Remuneration Committee.
• Stanislaus Prinz zu Sayn-Wittgenstein-
Berleburg became a member of the CSC.
The Committee ensured that the refreshment
of Board Committee composition made use of
the Directors’ skill sets and experience, and
complied with the parameters of the respective
terms of reference. The induction plans provided
gave opportunity for greater understanding of
these areas and the Committees are benefiting
from fresh perspectives.
The membership of Board Committees can be
found on pages 114 to 116.
Herbert Cordt
Chairman, Nomination & Governance Committee
124 RHI MAGNESITA ANNUAL REPORT 2022
Corporate Sustainability
Committee report
Janet Ashdown
Chairman of the Committee
Committee members and
meeting attendance
1
Attendance
in 2022
Member
since
Janet Ashdown
(Chairman)
5/5 June 2019
Fiona Paulus
2
4/4 June 2019
to October
2022
Marie-Hélène
Ametsreiter
5/5 June 2021
Stanislaus
Prinz zu
Sayn-
Wittgenstein
-Berleburg
3
1/1 November
2022
1. One meeting was a joint meeting of the
Audit & Compliance and Corporate
Sustainability Committees.
2. Fiona Paulus resigned as a Director of RHI
Magnesita NV on 17 October 2022 and
accordingly ceased to be a Committee
member.
3. Stanislaus Prinz zu Sayn-Wittgenstein was
approved as a Committee member by the
Board on 29 November 2022 and attended
one meeting in 2022 as a nominee.
Committee purpose, roles,
and responsibilities
The role of the Corporate Sustainability
Committee is to support the Board and act
as an advisory body to ensure the long-term
sustainability of the business and the
communities in which it operates.
• Through the oversight of relevant KPIs and
the Group’s performance against them,
the Committee ensures that the Group’s
activities generate sustainable value, not
only for customers and shareholders, but
also for employees, suppliers and
communities wherever the Group operates.
• On behalf of the Board, the Committee
oversees the effective management of ESG
risks including, but not limited to, climate
change, health and safety and diversity.
More detail can be found in the Terms of
Reference in the corporate governance section
of our website.
Activities in 2022
The CSC met five times in 2022. In addition to
performing the duties listed above, the
Committee addressed the following issues:
Climate change
• Reviewed progress against RHI Magnesita’s
2025 Targets including, but not limited to,
CO
2
emissions intensity reduction targets.
• Reviewed the achievability of a Paris-aligned
‘Science Based Target’ and supported a
decarbonisation strategy based on the
proven and existing technologies that are
feasible and commercially available.
• Received reports on the Group’s carbon
capture technologies research programme,
pilot plants and reviewed opportunities to
reduce customer CO
2
emissions.
• Received reports on the increased use of
secondary raw materials, including
undertaking a site visit to the Group’s new
recycling facility in Austria, new
technologies, and trials of products with
higher recycled content.
• Discussed management’s approach to
Internal Carbon pricing.
• Received reports on CBAM forthcoming
regulation and its associated impacts on RHI
Magnesita’s operations.
Health & Safety
• Monitored RHI Magnesita’s Health & Safety
KPIs against 2025 Targets and
benchmarking.
• Monitored performance at operational sites
both employees and contractors and
reviewed the incident reporting process,
followed by recommendations of
improvement and setting high priority on:
– Preventing injuries and minimising risks.
– Investing in control measures.
– Engaging your entire workforce in health
and safety.
– Leading and striving for continual
improvement in Health & Safety
performance.
Sustainability risks
Reviewed revised sustainability risks in the
context of the evolving regulatory environment,
increased stakeholders’ focus, and the Group’s
commitment to sustainability:
• Reviewed RHI Magnesita’s sustainability risk
assessment for 2022.
• Main changes in comparison to 2021 were in
the fields of climate and environment,
diversity, health and safety.
Communities
• Reviewed community relations and
initiatives across the Group, followed by
recommendations for improvements.
Diversity
• Monitored progress of RHI Magnesita’s
Diversity KPIs against 2025 Targets and the
organisation’s plans to improve the position.
Sustainable Supply Chain
• Received updates on sustainable
procurement initiative to assess suppliers
against ESG criteria via EcoVadis.
• Reviewed status quo of data gathering for
product carbon footprint (PCF) data and the
outlook for 2023.
125RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Sustainability data assurance
• The Committee held a joint meeting with the
Audit & Compliance Committee to consider
the sustainability reporting data assurance
plan. This joint meeting approved
management’s plan and requested that they
continue to respond to stakeholders’
expectations and check for conformity with
the forthcoming legal requirements (e.g.,
CSRD sets out compulsory external
assurance for FY 2024). The scope of
assurance comprises conformity with GRI
Standards, ISAE3000 (International
Standard on Assurance Engagements) and
EU Taxonomy regulation.
Group Policies
• Diversity Charter
• Quality, Health & Safety, Energy and
Environment (IMS) Policy
• Human Rights policy
• Code of Conduct
External ESG ratings
The Committee was pleased to note that RHI
Magnesita maintained its leading ESG score for
CDP and a Gold rating from EcoVadis, amongst
other positive ratings from independent
analysts.
• CDP – A-
• EcoVadis – Gold
• MSCI – AA
• Sustainalytics – medium ESG risk
Janet Ashdown
Chairman, Corporate Sustainability Committee
The role of the Corporate Sustainability
Committee is to support the Board
and act as an advisory body to ensure
the long-term sustainability of the
business and the communities
in which it operates.
126 RHI MAGNESITA ANNUAL REPORT 2022
Audit & Compliance
Committee report
John Ramsay
Chairman of the Committee
Committee members and
meeting attendance
Attendance
in 2022
1
Member
since
John Ramsay
(Chairman)
6/6 October 2017
Jann Brown 6/6 June 2021
Wolfgang
Ruttenstorfer
6/6 October 2017
1. One meeting was a joint meeting of the
Audit & Compliance and Corporate
Sustainability Committees.
Committee purpose, roles
and responsibilities
The Committee monitors the effectiveness of
the Group’s corporate reporting, systems of
internal control and risk management and the
integrity and quality of the Group’s external
and internal audit processes.
The Committee’s key responsibilities include
but are not limited to:
Financial reporting
• reviewing the potential impact on the
consolidated financial statements of the
implementation of the Company’s strategy,
climate change and energy transition work;
• advising the Board on whether, taken as a
whole, the reported financial information is
fair, balanced, and understandable and
provides the information necessary for
shareholders to assess RHI Magnesita’s
position and performance, business model
and strategy; and
• reviewing and discussing with management
the appropriateness of judgements involving
the application of accounting principles and
disclosure requirements.
Risk management and internal control
• advising the Board on the Group’s overall risk
appetite, tolerance, current risk exposures
and future risk mitigation strategy; and
• evaluating the effectiveness of the system of
risk management and internal control.
Internal audit
• monitoring the functioning and quality of the
Internal Audit department;
• reviewing and approving the annual Internal
Audit work plan and taking note of the
findings and considerations of the Internal
Audit department;
• supervising the compliance with
recommendations and observations of the
internal and external auditors;
• assessing annually Internal Audit’s
performance and effectiveness.
Compliance and governance
• overseeing compliance with applicable legal
and regulatory requirements, including
monitoring ethics and compliance risks;
• reviewing the adequacy and effectiveness of
the Group’s Compliance function.
External audit
• considering the annual external audit plan,
approving related remuneration, including
fees for audit and non-audit services;
• assessing the performance, qualifications,
effectiveness and independence of the
external auditor and the audit process,
including assessing the quality of the audit;
and
• recommending the appointment of the
external auditor to the Board for approval at
the AGM.
Financial management
• advising the Board on the appropriateness of
management Capital Allocation Policy; and
• reviewing on behalf of the Board
management Treasury debt and Funding
proposals.
Committee governance
Committee meetings normally take place the
day before the Board meetings. The Committee
Chairman reports to the Board, as a separate
agenda item, on the activity of the Committee
and matters of particular relevance. The Board
has access to the Committee’s papers and
receives copies of the meeting minutes.
The Committee Chairman, the CFO, the Head
of Financial Reporting, the Head of Internal
Audit, Risk and Compliance and the External
Auditor attend the Committee meetings and the
Company Secretary acts as Secretary to the
Committee. Board members can attend at their
discretion; the Company Chairman and the
CEO typically attends each meeting and other
Company executives are invited to attend for
specific agenda items. The Committee has had
private sessions throughout the year with the
External Auditor and Chief Audit Executive to
discuss views on management and responses to
issues raised in the meetings. The Committee
Chairman has had regular private discussions
with the External Auditor, the CFO, the Head of
Financial Reporting and the Chief Audit
Executive during the year.
The primary role of the
Committee is to assist
the Board in fulfilling its
oversight responsibilities
in relation to the Group’s
audit, the effectiveness
of the risk management
framework and system
of internal control,
the integrity of the
financial reporting as
well as consideration
of compliance and
ethics matters.
127RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Wolfgang Ruttenstorfer, a member of the
Committee, is not independent under Provision
24 of the UK Corporate Governance Code.
He is, however, independent under the Dutch
Corporate Governance Code. The Committee’s
Terms of Reference clarify that a member must
be independent under either Code and the
Directors remain comfortable that Wolfgang
remains independent in his approach and
actions as a Director and member of the
Committee. Further explanation of the position
under Provision 24 of the UK Corporate
Governance Code can be found on page 98.
Activities during the year
Contact with regulators
In November 2022, the Committee reviewed a
letter received from the UK FRC on its review of
the Group’s 2021 Annual Report and Accounts.
Their review was limited to those aspects of
the report and accounts that relate to the
application of ‘IAS 33 Earnings per Share (EPS).
The FRC had no questions or queries that
they wished to raise with the Group. The FRC
highlighted a number of areas where it
believed that users would benefit from further
improvements to the disclosures as explained in
more detail within APMs section below; where
appropriate, the Group has enhanced these
disclosures in its 2022 Annual Report and
Accounts.
In February 2023, the Committee reviewed the
Company’s response to the FRC Consultation
on Audit Committee Standard.
Financial reporting
How the Committee reviewed financial
disclosures
The Committee reviewed the half-year and
annual financial statements with management,
focusing on:
a) Integrity of the group’s financial reporting
process
b) Compliance with the relevant legal and
financial reporting standards
c) Application of significant judgements and
estimates
d) Clarity of disclosures
As part of its review, the Committee received
regular updates from management and the
External Auditor in relation to accounting
judgements and estimates, including those
relating to recoverability of asset carrying
values, provisions and uncertain tax treatments.
Furthermore, the Committee received an
update as to how Management have complied
with the European- Single Electronic Format
requirements in 2022.
Alternative Performance Measures
RHI Magnesita uses APMs to provide greater
insights into its financial and operating
results and provide readers with a more
understandable and comparable view on
underlying performance. The Committee
regularly considers the APMs used in RHIM’s
reporting, the reconciliations to IFRS financial
statements and explanations for changes
from the previous quarter. The Committee
reviews the overall presentation of APMs with
management to ensure they are not given
undue prominence in relation to IFRS financial
measures. The Committee discusses adjusting
items with management including any changes
to methodology.
Following the letter received from the FRC,
management have clarified the definition of
‘Adjusting items’ to provide further transparency
on the items it includes. The Committee has
also considered the presentation of Generally
Accepted Accounting Principles (GAAP) and
non-GAAP measures to ensure appropriate
prominence is given to GAAP measures and
that non-GAAP measures are presented
consistently and can be clearly reconciled.
Fair, balanced and understandable
The Group’s Annual Report should be fair,
balanced, understandable and provide the
information necessary for stakeholders to assess
the Group’s position, performance, business
model and strategy. The Committee and the
Board are satisfied that the 2022 Annual Report
meets this requirement, with appropriate weight
having been applied to both positive and
negative developments throughout the year.
To arrive at this conclusion, the Committee
critically assessed drafts of the 2022 Annual
Report, including the financial statements,
and discussed with management the process
undertaken to ensure that the relevant
requirements were met. This process included:
review structural changes to the financial
statements in 2022 to make them clear, concise
and focusing on enhancing the disclosure on
key accounting judgement and estimates,
verifying the consistency of the narrative
disclosures and the financial statements, the
assurance received for non-financial reporting.
Further actions included comparing the
contents of the 2022 Annual Report to ensure
it is consistent with the information shared with
the Board and with disclosures to shareholders
during the year to support the Committee’s
assessment of the Group’s position and
performance; ensuring that consistent
materiality thresholds are applied for favourable
and unfavourable items; and receiving
assurance from the Executive Management.
Compliance
Compliance programme
The Committee reviewed and challenged the
annual Compliance programme as presented
by management. The Committee sought to
ensure that the Compliance programme
remained fresh, as well as enquiring of
management to understand resource levels,
capabilities and training. The Committee
discussed investigations of cases involving
ethics and compliance concerns. The
Committee discussed management’s findings
in such cases to satisfy itself that a rigorous
process had been followed, and that
appropriate disciplinary action had been
taken where necessary and management had
embedded learnings into RHI Magnesita’s
systems and controls. Furthermore the
Committee reviewed and approved the
anti-corruption policy and updates to the
Code of Conduct.
Whistleblowing programme
The whistleblowing programme, which is
monitored by the Committee and overseen by
the Board of Directors, is designed to enable
employees, customers, suppliers, managers,
or other stakeholders to raise concerns on a
confidential basis where conduct is deemed
to be in violation of our Code of Conduct or
contrary to our values.
The Committee discussed with management
the whistleblower reports received in 2022.
The Committee made enquiries of management
in relation to the reports received on the
whistleblowing programme in order to conclude
its effectiveness during 2022. The Committee
accepted management’s explanation that the
cases in 2022 each related to individual
circumstances and had been appropriately
investigated and root causes addressed.
128 RHI MAGNESITA ANNUAL REPORT 2022
Examples of how accounting judgements and estimates were considered and addressed
Significant financial judgements and areas of estimation How the Committee addressed these judgements and areas of estimation
Carrying value of property, plant and equipment (PP&E) The Committee reviewed the assessment prepared by management on certain assets. In particular,
management presented a detailed overview of the assessment in relation to the impairment and impairment
reversal indicators.
The Committee enquired on the judgements made and the sensitivities to the Group weighted average cost of
capital.
Conclusion: The Committee concurred with management’s assessment and ensured there was an adequate
disclosure of this judgement in the Annual Report and Accounts.
Going concern and viability A detailed cash flow analysis was prepared by management and provided to the Committee, including a
number of sensitivity scenarios. The Committee then reviewed and challenged the assumptions and
judgements in the underlying going concern and viability statement forecast cash flows. Following the
feedback and challenge from the Committee, management have introduced a reverse stress test as part of their
analysis. The Committee discussed with management the risks, sensitivities and mitigations identified to ensure
the Company can continue as a going concern and viable.
Conclusion: The Committee concurred with management’s assessment and ensured there was an adequate
disclosure of this judgement in the Annual Report and Accounts.
Own use exemption on take or pay gas and electricity
contracts
The Committee review management’s judgement on the use of take or pay gas and electricity contracts used in
2022. Management uses judgement to conclude that the Group can use the ‘own use exemption’ under
accounting standards.
Conclusion: The Committee is satisfied by the judgement applied and the disclosures made in the
Consolidated Financial Statements. Please refer to Note 3 of the financial statements.
Goodwill Management provided the Committee with an update on the Goodwill impairment review that it is performed
annually. Management makes use of various estimates and assumptions in determining the cash flow forecasts
used in the impairment testing for goodwill, including terminal value, inflation, and discount rates.
Conclusion: The Committee concurred with management’s assessment and ensured there was an adequate
disclosure of this judgement in the Annual Report and Accounts.
Uncertain tax and regulatory treatments The Committee reviewed management’s assessment of the Group’s uncertain tax treatments, which took into
account the views of the relevant tax authorities and any external advice it received. In particular, it considered
the Group’s claims in Brazil given the total exposure to the Group.
Conclusion: The Committee was satisfied that the provisions and disclosures made in respect of uncertain tax
positions were appropriate. The relevant disclosures are set out in Note 39 of the financial statements.
The impact of climate change on the
Group’s financial reporting and financial statements.
The Committee was briefed on key regulatory requirements including the FRC and EU disclosure requirements
and their implications for RHI Magnesita’s external disclosures.
The Committee reviewed the new Note 4 of the financial statements summarising the key climate risks impacts
on the Financial Statements as well as the new impairment sensitivity disclosures using carbon price outlooks
based on different external climate change scenarios.
Conclusion: The Committee, recognising the evolving nature of climate change risks and responses, concluded
that climate change has been appropriately considered by management and agreed with the disclosure made
by management. The relevant disclosures are set out in Note 4 of the financial statements.
Retirement benefit obligations The value of the Group’s defined benefit pension plan obligations is determined by making financial and
demographic assumptions, both of which are significant estimates made by management.
The Committee was briefed on the risks in relation to retirement benefits in 2022, including financial,
operational, and regulatory developments. The Committee reviewed the key assumptions, including inflation,
discount rates and sensitivities as part of the 2022 Annual Report review.
Conclusion: The Committee was satisfied that management had used appropriate assumptions that reflected
the Group’s most recent experience and were consistent with market data and other information. The
Committee was also satisfied that the Group’s disclosures made in respect of retirement benefit obligations are
appropriate. The relevant disclosures are set out in Note 29 of the financial statements.
Assessing control over Horn & Co Minerals Recovery GmbH
& Co KG (‘Horn & Co’)and recognition of non-controlling
interest.
During the year, the Group acquired a 51% interest in Horn & Co which has been fully consolidated as part of
the Group. In arriving at this conclusion, management provided the Committee with a review of the judgement
they applied to assess the level of control in Horn & Co. In particular, the ability to exert control through its
voting rights at the shareholding meeting which is deemed the ultimate decision-making body.
Conclusion: The Committee agreed with management that the Group has the ability to direct the relevant
activities of Horn & Co joint venture and therefore. The relevant disclosures are set out in Note 3 of the
financial statements.
Audit & Compliance Committee report
continued
129RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Risk management
How risk management was assessed
The Internal Audit, Risk & Compliance team
provides key assurance to the Committee on
the Group’s governance, risk management and
internal control. Throughout the year, the
Committee discussed the reports on risk
management and challenged management on
whether risks had been sufficiently considered
and reflected. Management took onboard
the comments and adjusted assessments
as necessary.
The Committee evaluated a presentation that
discussed the risk of ‘black swan’ events. As part
of this discussion they challenged capital
expenditure and the benefit realisation,
considered the competitive landscape with
reference to regional strategies, and the
associated supply-chain costs of such
strategies.
The Committee also received reports with an
overview of the effectiveness of the programme
to manage ethics and compliance risks in the
Group’s business activities, regulatory
developments, and compliance activities.
The Committee also discussed investigations of
cases where ethics and compliance concerns
were highlighted. The Committee discussed
management’s findings in such cases to satisfy
itself that a rigorous process had been followed,
that appropriate disciplinary action had been
taken, where necessary, and management had
embedded learnings into RHIM’s systems
and controls.
Internal control
In order to monitor the effectiveness of the
procedures for internal control over financial
reporting, compliance and operational matters,
the Committee reviews reports on risks and
controls, including the annual assessment of
the system of risk management and internal
control. This annual assessment includes the
Committee’s review of outcomes from the
Group management representation letter
process. The Group management
representation letter process involves each
EMT member and Regional President and their
direct reports conducting a structured internal
assessment of compliance with internal
controls, legal and ethical requirements.
The Committee discussed a number of areas
where further straightening of internal control
can be achieved. These are noted on page 49
of the Annual Report.
Internal audit
Reviewing the results of Internal Audit
work and the 2023 plan
The Committee reviewed the effectiveness and
resources of the Internal Audit department and
concluded that the Internal Audit function is
effective and has adequate resources. The
Committee gave particular focus to the
assessment of the independence of Internal
Audit within the combined departmental model
of Internal Audit, Risk & Compliance. The
Committee recognised the range of findings
from Internal Audit work which demonstrated
the required level of Internal Audit
independence and the overall high quality of
the audit work performed. The Committee
satisfied itself that the 2022 internal audit plan
was on track and discussed areas where control
improvement opportunities were identified,
particularly enquiring into the root causes and
the embedding of internal control
improvements. The Committee also reviewed
progress in completion of agreed management
actions.
In 2022, the role of the Chief Audit Executive
(CAE) has been outsourced to EY whilst the
former CAE moved to a role leading an internal
project for the enhancement of financially-
based processes. The Committee reviewed the
effectiveness of this set-up and concluded it to
be effective.
The Committee reviewed the proposed 2023
Internal Audit plan. The Committee raised
a series of challenges to the plan focusing
on any impact to Internal Audit quality and
independence and following receiving
appropriate assurances and supplementary
information, the Committee approved the
proposed approach. The Committee approved
the 2023 Internal Audit plan, having discussed
the scope of work and its relationship to the
Group’s risks.
The Committee considered and endorsed the
proposal to retain the outsourced CAE until
31 March 2023. From 1 April 2023, the former
CAE will return to the role having completed the
role leading the process improvement project.
External audit
How the Committee assessed audit risk
and audit effectiveness
PricewaterhouseCoopers Accountants N.V.
(PwC) set out its audit plan for 2022, identifying
significant audit risks to be addressed during the
course of the audit. These included:
• significant assumptions used to estimate the
impairment of goodwill are not reasonable;
• significant assumptions used to estimate the
impact of uncertain tax treatments on
current and deferred taxes are not
reasonable;
• management override of controls; and
• fraud in revenue recognition.
In view of the Group’s elevated levels of
inventory and a deteriorating macroeconomic
outlook, the Committee directed the external
auditors to enhance the testing on inventory
and trade receivables.
The Committee reviewed and discussed the
audit plan and evaluated whether the planned
materiality levels and proposed resources to
execute the audit plan were consistent with the
scope of the audit. The Committee received
updates throughout the year on the audit
process, including how the auditor had
challenged the group’s assumptions on the
significant audit risks.
As part of its oversight of the External Auditor,
the Committee annually assesses the
performance and effectiveness of the External
Auditor and the audit process. This includes
assessing the quality of the audit, how the
auditor handled key judgements, and the
auditor’s response to the Committee questions.
The Committee receives a summary of areas of
opportunity for improvements to processes
related to financial reporting or internal control
identified as part of the audit process and
management’s response to recommendations
identified and progress made against prior year.
130 RHI MAGNESITA ANNUAL REPORT 2022
How the Committee assessed
the audit fees
The Committee reviews the fee structure,
resourcing, and terms of engagement for
the External Auditor once a year; in addition,
it reviews the non-audit services that the
auditor provides to the Group half-yearly.
How the auditor independence and
objectivity were assessed
The Committee considers the reappointment
of the External Auditor each year before making
any recommendation to the Board. The
Committee assesses the independence and
objectivity of the External Auditor on an
ongoing basis, taking into account the
assurances provided by the External Auditor
and the level of non-audit fees. Furthermore,
the External Auditor is required to rotate the
lead partner every five years and other senior
staff every five to seven years.
The Committee reviews on an annual basis
updates to the auditor independence policy
in respect of the provision of services by the
External Auditor for necessary changes in
response to changes in related standards and
regulatory requirements.
During 2022, non-audit work mainly relate to
the interim review of the Consolidated Financial
Statements at 30 June 2022 amounting to
€0.2m (2021: €0.2m)
Other matters:
Enhancement of financially based
processes
The Committee received three updates on the
timescale, scope, progress and outcomes of
the project driving enhancements to financially
based processes. The Committee discussed
with management the root causes for the
challenges faced in driving effective process
execution. Various team members from the
project presented to the Committee to show the
achievements and respond to challenges from
the Committee on the solutions being adopted.
The Committee made enquiries to understand
the historical context and status of the
processes and to challenge the impact of
corporate strategies (such as devaluation of
responsibility to geographical region) on core
process execution and internal controls. The
Committee welcomed the transparency,
requested additional clarity in the update
reporting of the project and emphasised the
important roles of ongoing training and change
management in the continual improvement
and the effectiveness of the organisation
and its culture.
Tax
The Committee reviewed and approved the
Global Tax Policy as well as the Tax Control
Management System, The Committee
challenged Management on the methodology
to calculate the ETR and the impact to the ETR
calculation in respect to the unrecognised
Austrian tax asset following the discussions with
the Austrian Tax authorities. The Committee
received an update of the progress with
these discussions.
Information security risks
The Committee continued to focus on
information security risks, particularly as
specified in the Dutch Corporate Governance
Code. Cyber and information security risk is
included as one of the Group’s principal risks on
pages 52 to 57. Multiple presentations were
received by the Committee to both inform the
Committee of the emerging risks and outline the
internal controls. The Committee gave specific
attention to the results of “phishing” tests and
the measures taken by management to improve
awareness levels amongst staff of this risk. The
Committee requested a greater insight into the
Company Crisis Management plans and their
application to any information security risk
based incident.
Treasury
The Committee reviewed the Treasury policy
and made enquiries of management in relation
to the funding options to support the delivery of
the Company’s strategy. Furthermore, the
Committee reviewed the syndicated loan term
refinancing and recommended the Board for its
approval. Management also presented the
proposed hedging strategy, its policy, the
delegated authority levels and the different
accounting consequences.
Audit & Compliance Committee report
continued
131RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
131RHI MAGNESITA ANNUAL REPORT 2022
Committee effectiveness
As part of the overall Board Effectiveness
review 2021, the Committee considered its
performance in early 2022 which continued to
be rated as highly effective. The Committee
agreed on areas of focus for 2022 around
financial and business systems and process
improvement, ensuring the effectiveness of the
Internal Audit function in being outsourced to
EY, the increase in non-financial disclosures
and their importance, and cyber security in
the environment of increased threats. The
Committee reviewed its 2022 performance
in February 2023 and the assessment will be
reported on in the 2023 Annual Report.
Site visit during the year
In April 2022, the Directors of the Board
conducted a week-long visit to sites in Austria
and Germany, and a Committee meeting took
place in the course of the trip. Key areas of
discussion during the site visit included
inventory management, feed of financial
information from the plants to the central teams
and how this impacts on the overall financial
reporting. More details on the Board site visit
are provided on page 101.
John Ramsay
Chairman, Audit & Compliance Committee
Regulatory developments
In June 2022, the UK Government’s
Department for Business, Energy & Industrial
Strategy (BEIS) released the response to the
consultation paper entitled “Restoring trust in
audit and corporate governance” launched in
March 2021. The Committee and management
discussed the Government’s response to the
consultation paper, including implications for
the Company, the Board, and the Committee.
The Committee reviewed management’s
proposed plans to address the changes and
discussed the potential implementation
roadmap to certain topics in the consultation
paper, whilst acknowledging that further clarity
and precision is expected in due course.
Disclosure committee
The Disclosure Committee, chaired by the
CFO, ensures compliance with the Market
Abuse Regime. It shares the minutes and
matters considered with the Committee
on an ongoing basis to provide transparency
of matters considered by the management
to keep the Company compliant with its
disclosure requirements.
132 RHI MAGNESITA ANNUAL REPORT 2022
Committee members and
meeting attendance
3
Attendance
in 2022
Member
since
Janet Ashdown
(Chairman)
5/5 October 2020
Karl Sevelda 5/5 October 2017
Fiona Paulus
1
4/4 June 2021, resigned
October 2022
Jann Brown
2
1/1 December 2022
1 Fiona Paulus resigned as a Director on 17 October 2022.
2 Jann Brown was appointed to the Committee by the
Board on 29 November 2022.
3 Each Committee meeting was constituted, in line with the
Committee Terms of Reference, with membership that
was compliant with the Dutch and UK Corporate
Governance Codes.
Remuneration
Committee report
• Reviewing the remuneration of the Executive
Directors, EMT, and Senior Management within
the context of wider global workforce
remuneration
• Reviewing the fee for the Chairman of
the Board
• Overview of the incentivisation and
remuneration of the Group’s wider workforce to
ensure that it is competitive and aligns with
Company culture
• Review of the performance of remuneration
advisors and their scope of services
Dear Shareholders
On behalf of the Board, I present our 2022
Directors’ Remuneration Report. This report
includes my letter to the shareholders, our
Directors’ Remuneration Policy, approved by
shareholders at the 2021 Annual General
Meeting and our Annual Report on Remuneration
for the year ending 31 December 2022.
RHI Magnesita is incorporated and registered in
the Netherlands, making it subject to Dutch
corporate law. It has its primary listing on the
London Stock Exchange and a secondary listing
on the Vienna Stock Exchange. We are required
to comply with UK, Dutch and Austrian reporting
requirements and the UK and Dutch Corporate
Governance Codes. You can read more about our
Governance on page 97. Our Remuneration
Report is therefore presented on this basis and,
recognising transparency of reporting, includes
certain voluntary disclosures. This letter on pages
132 to 135, the summary on page 135 and the
Annual Report on Remuneration on pages 137 to
147 will be presented for approval by an advisory
vote at our AGM on 24 May 2023.
Remuneration is aligned with our
strategy, culture and operations
Our Remuneration Policy is to maintain a
competitive remuneration package that promotes
the long-term success of the business, avoids
excessive or inappropriate risk taking and aligns
management’s interests with those of
shareholders. We are committed to transparent
communication with all our stakeholders,
including our shareholders. Performance for
senior management and all other managers is
measured against one set of Company KPIs. There
is clear alignment between the performance of
the Company, the business strategy, and the
reward paid to Executive Directors.
Current Committee membership
and operation
Janet Ashdown is the Chairman of the
Committee. Jann Brown and Karl Sevelda are
current members of the Committee. All
Committee members are Independent NEDs
within the meaning of the UK and Dutch
Corporate Governance Codes. The Company
Secretary is the secretary to the Committee.
Other individuals, such as the Chairman of the
Board, the Chief Executive Officer, the Executive
Vice President People, Projects & Value Chain
(who is responsible for Human Resources), and
external professional advisers may be invited to
attend for all or part of any meeting as and when
appropriate and necessary. No individual is
present when their own remuneration is
discussed. The Committee 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
The Remuneration Committee’s purpose is to
develop a reward package for Executive Directors
and senior managers that supports our vision and
strategy as a Group, and to ensure the rewards
are performance based, encourage long term
shareholder value creation, and take account
of the remuneration of the whole workforce.
Please click here to Terms of Reference.
Changes in the Committee
Jann Brown joined the Committee as a member
following Fiona Paulus who stepped down as
a Director on 17 October 2022.
Activities in 2022
The key activities and decisions taken
throughout the year were:
• Considering market and corporate
governance trends and how they might
apply to the Company. Reviewing and
amending the Terms of Reference of the
Committee
• Committee effectiveness review and action
steps agreed
• Considering retention and incentivisation
concerns in light of LTIPs continuing not to vest
• Considering the outturn of the 2021 and 2022
bonus, the performance of in-flight LTIPs,
reviewing the 2022 and 2023 bonus and LTIP
performance conditions and targets
Janet Ashdown
Chairman of the Committee
The Remuneration Committee
ensures that rewards are
consistent with performance
and that the Company’s
Remuneration Policy provides a
strong alignment between its
shareholders and executives.
133RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Annual Bonus Plan
As part of target setting for the 2022 annual
bonus the Committee reviewed and set the
threshold level of payment for the Executive
Directors at 25% of maximum to align with the
rest of the business and to reflect the level of
stretch set in the threshold targets.
Despite the continued economic uncertainty and
the general impact the Russia/Ukraine conflict
has had on the global economy, EBITA
performance was just above threshold with
Operating Cash Flow below. Performance
against our strategic objectives has been strong.
The resulting bonus of 42% of maximum for both
Executive Directors is considered fair and
appropriate taking into account the alignment to
bonus payments for the rest of the business and
in the context of overall performance of the
business against the continuing economic and
market challenges. The Committee has noted
the exceptional work that has been undertaken
to manage the business including ensuring
continuity of energy supplies through this
continued period of uncertainty. As a result, the
Committee agreed that the level of formulaic
bonus was appropriate and the exercise of
discretion was not required.
Further details of our performance against 2022
bonus targets can be seen on page 150.
LTIP
With regard to performance over the longer
term, the 2020 LTIP Awards will vest to the
extent that the EPS growth and Total
Shareholder Return (TSR) performance targets
are met. The EPS targets were assessed against
performance to 31 December 2022 and there is
maximum vesting under this element. For the
TSR element, performance is assessed for a
period of three years from the date of grant,
therefore the Company’s TSR and vesting of the
TSR element cannot be ascertained until April
2023. Based on a recent assessment of the
Company’s TSR the threshold target for the TSR
element is close to being met but is still below
threshold. On this basis, the total estimated
vesting for this award is therefore 50% of
maximum. The Committee considered business
performance during 2022 as well as over the
longer three-year performance period for the
2020 awards and is comfortable that the
formulaic outcome of the incentives, based on
vesting of the EPS element only at this time,
appropriately reflects Group performance as
well as the executives’ individual contribution
and that no discretion to adjust is necessary.
The Committee is also very pleased to see the
first vesting of an LTIP award since our initial
public offering (IPO). The actual TSR
performance and vesting level will be provided
in the 2023 Directors’ Remuneration Report.
More details are available on page 150.
RHI Magnesita’s performance
during 2022
2022 has been another extraordinarily difficult
year for everyone, including RHI Magnesita.
Business volatility has continued, arising from
global supply constraints, including energy
supply and pricing, and more general
inflationary pressures (caused by the Russia/
Ukraine conflict); stagnation and recession
remain evident. The Russia/Ukraine conflict has
significantly impacted our business with both
Ukraine and Russia. The cost escalation and
inflationary pressures persist in spot energy
markets and on certain freight routes utilised
by RHI Magnesita. Despite this the Company
continues to demonstrate resilience due to its
balanced and diversified global footprint. Some
costs have been successfully passed on to
customers via increased product pricing and our
plans for ensuring continuity of energy supplies
in Europe are on track including new
infrastructure to offset potentially reduced gas
availability through switching to alternative
fuels. All measures together will replace up to
50% of our normal usage of natural gas in
Europe in the event of supply rationing.
However, our order books are full and demand
of refractories for steel and cement remain
broadly stable. Our working capital has also
increased due to increases in raw material
inventories ahead of anticipated shortages as
detailed on page 39. As laid out in the
Chairman’s Statement and the CEO Review,
despite all these difficulties, the Group recorded
in 2022 a robust revenue of €3,317 million,
which means an increase of 30% against the
prior year; adjusted EBITA of €384 million, an
increase of 37.1% compared to 2021; and an
increase in operating free cashflow of €155
million compared to € (236) million in 2021. It
has been within this context that the Committee
has considered the Annual Bonus scheme, the
2022 outturn and the 2023 targets, as well as
reviewing 2020 LTIP performance and agreeing
2023 LTIP performance conditions.
Executive Directors’ remuneration 2022
As set out in the Annual Report on
Remuneration, our remuneration outcomes
for the year were as follows:
Salary and benefits
As set out in the 2021 Remuneration Report, the
salary of the CEO and CFO were increased by
4.5% which aligned to the workforce in Austria.
The CEO’s benefits were also reviewed for 2022
to include health insurance and tax advisory
support.
Windfall gains
The Committee is aware of investor and proxy
agency concerns regarding LTIP “windfall gains”
and has considered whether market movements
risk creating a windfall gain for executives on the
vesting of the 2020 LTIP. RHI Magnesita’s share
price volatility has resulted in LTIP awards being
granted over a number of years at wide ranging
share prices. Because of this year to year
volatility, it is very difficult for the Committee to
assess and determine a prior year grant price
against which a level of scale back for future
LTIP grants should be considered. Therefore,
the Committee has taken the approach of
reserving discretion to scale back awards at
vesting if it considers the level of vesting in all
the circumstances to be inappropriate including
where the resulting vesting would give rise, in
the Committee’s view, to a “windfall gain”.
The 2020 award will not vest until the third
anniversary of grant on 8 April 2023 and the
matter of windfall gains will not be finally
determined until that time. However, given the
current share price of broadly £27 and the grant
price of £19.98, the level of estimated vesting at
50% of maximum, the total estimated vesting
value and noting that this is the first award since
IPO where there is some vesting, the Committee
does not consider at this time that there will be
“windfall gains” that require the Committee to
consider a scale back of the vesting level.
The Committee is comfortable that the Policy
operated as intended during the year.
LTIP awards granted in the year
LTIP awards were made to the CEO and CFO on
8 March 2022 at normal grant levels of 200%
of salary for the CEO and 150% of salary for the
CFO. The measures for the 2022 awards were of
50% adjusted EPS, 25% absolute TSR and 25%
Reduction in CO
2
emissions per tonne to
support management’s focus on delivering
material increases in the share price (plus
dividends) and sustained aggregate EPS over
the performance period as well as our
environmental commitments. Details of the
awards and performance conditions can be
found on page 151.
134 RHI MAGNESITA ANNUAL REPORT 2022
Implementation of the Remuneration
Policy for 2023
Base salaries
The base salaries of the CEO and CFO were
increased by 4% with effect from 1 January 2023
compared to average employee increase in
Austria of 8.9%. The same 4% increase for the
Executive Directors has been applied to the
Chairman and Non-Executive Director fees.
More generally the Committee has noted, and is
comfortable with, the overall approach that has
been made to salary increases. The business has
focused the most significant part of the salary
budget on the lower paid who have faced the
greatest challenge with inflation and cost of
living pressure with broadly all of our employees,
except of the most senior levels of management,
receiving salary increases based on actual
inflation rates in their country of employment.
Annual bonus
The maximum bonus opportunity for 2023 is
unchanged from 2022 at 150% of salary. The
Committee has reviewed the performance
measures for 2023 and has made the following
adjustments which reflect the key priorities of
the business for the year ahead. Profit of course
remains a key performance indicator accounting
for 55% of the bonus opportunity. We have
increased the weighting to Group EBITA
(excluding new acquisitions) from 35% to 45%
of the total bonus with a further 10% focused on
EBITDA from new acquisitions. Operating Cash
Flow has not been an effective measure over the
year primarily because of the impact of cost
inflation on working capital and our sales cycle.
We are therefore replacing it with Inventory
Coverage and reducing the weighting to 25% of
the bonus focusing the business on managing
costs and product availability within acceptable
ranges. Within our strategic bucket we are
retaining our focus on recycling, measuring the
use of secondary raw material and have
introduced a customer focused measure, PIFOT
(produced in full on time), measuring delivery of
product and transport in time to your customers.
Our bonus metrics are cascaded throughout our
business and PIFOT is a specific area of focus for
the year ahead. The targets and performance
against them will be disclosed retrospectively in
the 2023 Remuneration Report, provided they
are not considered to be commercially sensitive
at that time.
LTIP
The quantum of the CEO and CFO’s LTIP awards
for 2023 remain unchanged with a face value of
200% and 150% of salary, respectively. The
awards will be made in March 2023 based on the
share price at that time. Executives will receive
the award shares in 2028 (following the
three-year vesting period and two-year holding
period) if performance targets are met. The
performance targets that will determine vesting
of the share awards, will continue to be based on
absolute TSR and Adjusted EPS targets reflecting
the ongoing focus of management to deliver
material increases in the share price (plus
dividends) and sustained EPS growth. The
Committee continues to include a third ESG
related performance measure, the reduction of
CO
2
emissions intensity supporting the
longer-term focus of management on reducing
carbon emissions with our targets aligned to our
updated 2025 plan which is referred to in further
detail on page 65. The performance targets
are set out on page 157. The Committee is
comfortable, taking into account the ongoing
economic and market uncertainty as well
as the business outlook that the targets are as
challenging as those set for prior LTIP awards,
whilst recognising the need to provide the right
balance in terms of incentivisation and retention.
The Committee will review the share price at the
time the 2023 LTIP awards are made. However,
at this time, noting that the current share price
at circa £27 and the price at which awards were
made last year, it is not concerned that the 2023
LTIP award could result in windfall gains.
ESG metrics
RHI Magnesita continues to demonstrate
significant commitment to ESG matters through
relevant initiatives and measures. We are proud
to be the first company within our industry to
make the CO
2
footprints of our c.200,000
products transparent and comparable by
disclosing them in our technical data sheets.
The Company has also set ambitious targets in
respect of reducing CO
2
emissions (“CO
2
intensity reduction target”). Since the baseline
year of 2018, the Group has exceeded its targets
in use of Secondary Raw Materials which has
contributed to progress against the CO
2
intensity reduction target, but this has been
offset by slower progress on switching to
alternative fuels. These fuel switches are now
uncertain due to disruption in the market for
natural gas. If reliable supplies of natural gas are
not secured by 2025, the Group may fail to
meet its CO
2
intensity reduction target, with the
current estimated outcome, excluding fuel
switches, being at 12%. For further details on
progress against our sustainability targets,
please refer to page 65 of this document.
We continue with the approach taken in 2022
to include Secondary Raw Materials and CO
2
emissions intensity targets in our bonus and LTIP
respectively. The Chairman of the Committee
is also the Chairman of the Corporate
Sustainability Committee, our ESG targets
are quantifiable, based on regularly reported
operational and management information,
and CO
2
emissions intensity are assured by an
independent third party.
Remuneration Committee report
continued
How our remuneration practices support our strategy
Element of reward Metrics
Strategic
Pillar- Market
Leadership
Strategic
Pillar- Enhance
Business Model
Strategic
Pillar- Execute
Cost Reductions
Bonus Profit
Free Cash Flow
Inventory coverage
Strategic initiatives
LTIPs Earnings Per Share
Total Shareholder Return
Economic Profit
Use of Secondary Raw Materials
Reduction of CO
2
emissions
135RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Engagement with the workforce
In 2022 the Board continued with visits to
several plants including Leoben, Marktredwitz,
Hochfilzen, Urmitz and Koblenz, taking the
opportunity to hear feedback directly from
colleagues across the Company. The feedback
we received was very supportive. During the
year, the Committee also reviewed the bonus
structure for all employees. The Chairman
of the Board participated in the Austrian
Works Council Conference where he gave
insights on the world economy situation
and a macroeconomic outlook.
Our conversations with our shareholders
Our current Remuneration Policy was approved
at the 2021 AGM. The Committee is comfortable
that the Policy meets shareholder expectations,
and that the Remuneration Policy has operated
as intended during 2022. The remuneration
outcomes for 2022 are aligned to the Company’s
strategy, the complex structure of the business
and the long-term shareholder interests.
Last year I mentioned that during 2022 the
Committee would take the time to consider
the Company’s remuneration practices and
Remuneration Policy afresh in light of the
macro-social economic changes we had
experienced as a result of the COVID pandemic,
to ensure it remains fit for purpose. The
Committee did this but concluded that no
immediate changes were required, given the
triennial review timetable requires shareholders
to approve an updated policy at our 2024 AGM.
During the course of 2023 I will therefore be
reaching out to our shareholders to seek
feedback on our current policy and any changes
that we are proposing.
As outlined in the Corporate Governance
Statement on page 98, we are reporting partial
compliance with Provisions 36, 40 and 41 of the
UK Corporate Governance Code on
Remuneration. We explain our partial
compliance in the Corporate Governance
Statement and will continue to keep our
practices under review in respect of these
provisions, particularly as part of the review
during 2023 of our Directors’ Remuneration
Policy which is subject to shareholder approval
at our 2024 AGM.
At a glance: Operation of Remuneration Policy for the financial year ending 31 December 2022
Policy element Implementation
Annual Base salary from 1 January 2022 • CEO – €1,098,800
• CFO – €642,300
% Increase from prior year 4.5%
1
Retirement allowance Allowance of 15% of base salary
Annual bonus 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; increasing global value market share,
reducing conversion cost and the use of secondary raw material.
Amount paid for threshold performance 25% of maximum annual bonus
Amount paid for target performance 50% of maximum annual bonus
Actual bonus result for 2022 performance 42% of maximum (€ 695,286 for the CEO and € 406,427 for the CFO).
Payment of bonus in shares 50% of annual bonus in excess of target after tax is used by the executive to acquire shares that are held for a
minimum of three years. There is no deferral for 2022 annual bonus.
LTIP Award • CEO – 200% of salary
• CFO – 150% of 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: Reduce CO
2
emissions per tonne
Payment for threshold performance 25%
2020 LTIP vesting 50% of maximum vesting
2
Performance & post vesting holding periods 3 years and 2 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 2022 year-end • CEO – 56%
• CFO – 73%
1. Salary increases are 4.5% rounded down to the nearest 100.
2. The performance period for the TSR element of the award was not complete at the time of writing and so the level of vesting provided is estimated. The actual vesting level will be provided in the
2023 Directors’ Remuneration Report.
At the 2023 AGM, shareholders will be asked
to vote on the Directors’ Remuneration Report
(excluding our Remuneration Policy which is
subject to a shareholder vote at our 2024 AGM).
I hope that the Committee will have your support.
On behalf of the Committee, I would like to thank
shareholders for their input and engagement in
the year, and we welcome any comments you
may have on this report.
Janet Ashdown
Chairman, Remuneration Committee
136 RHI MAGNESITA ANNUAL REPORT 2022
The forward-looking Remuneration Policy for
Executive Directors and Non-Executive
Directors was approved at the AGM held on
10 June 2021 and applies for three years from
that date. A summary of the policy, including
key remuneration elements, is set out below and
is provided for information only. Some of the
following sections refer to the implementation
of Policy and change from year to year. The full
Remuneration Policy as approved by
shareholders is available in the 2020 Annual
Report on our website under Reports &
Presentations. No changes have been made to
our policy since its approval.
Policy overview
The aim of the Company’s remuneration
strategy is to provide a level of fixed pay that,
together with incentives, will attract, retain and
motivate high-calibre, high-performing
executives, aligning them to the long-term
performance of the Company and its long-term
share performance while rewarding them for
creating and delivering shareholder value.
The policy is aligned to and supports our
cultural values which are set out below:
• Innovative
• Open
• Pragmatic
• Performing
The mission of the Company is “Taking innovation
to 1200°C and beyond”. Achieving our mission
requires high-performing senior management
and the Policy is designed to motivate them to
perform to a high standard and reach the
stretching goals set. In addition, the remuneration
arrangements for the Executive Directors
contribute to long-term value creation by:
• providing a fair and appropriate level of fixed
remuneration that does not result in
overreliance on variable pay and undue
risk-taking, thereby encouraging the
executives to focus on sustained long-term
value creation;
• providing a balance of short- and long-term
incentives to ensure there is focus on
short-term objectives that will over time
build to create long-term value creation as
well as long-term goals;
• requiring executives to acquire and retain
shares in the Company;
• offering long-term incentives where the
reward is delivered in shares which aligns
executives to shareholder interests and value
as well as the performance of the Company
over the longer term;
• requiring performance measures in our
long-term incentive to be measured over the
longer term and for shares to be held
post-vesting for a further two-year period;
• incorporating metrics focused on long-term
shareholder value, such as total shareholder
return and reduction of both our and our
customers’ carbon emissions through the
increased use of secondary raw material.
When implementing the Remuneration Policy,
the Remuneration Committee considered the
six factors listed under Provision 40 of the UK
Corporate Governance Code:
• Clarity: The Policy and the way it is
implemented is clearly disclosed in this
policy section of the Remuneration Report
and the Annual Statement and supporting
reports, with full transparency of all
elements of Directors’ remuneration.
• Simplicity: The Policy is simple and
straightforward, based on a mix of fixed and
variable pay. The annual bonus and LTIP
include performance conditions which are
aligned with key strategic objectives and
drivers of the RHI Magnesita business.
• Risk: The Committee believes that the
performance targets in place for the
incentive schemes provide appropriate
rewards for stretching levels of performance
without driving behaviour which is
inconsistent with the Company’s risk profile.
Potential reward is aligned with market levels
of peer companies and the reputational risk
from a perception of “excessive” pay-outs is
limited by the maximum award levels set out
in the Policy and the Committee’s discretion
to adjust formulaic remuneration outcomes.
To avoid conflicts of interest, Committee
members are required to disclose any
conflicts or potential conflicts ahead of
Committee meetings. No Executive Director
or other member of management is present
when their own remuneration is under
discussion.
• Predictability: The Policy includes full details
of the individual limits in place for the
incentive schemes as well as “scenario
charts” which set out potential pay-outs in
the event of different levels of performance,
based on a number of reasonable
assumptions. Any discretion exercised by the
Committee in implementing the Policy will
be fully disclosed.
• Proportionality: The link between the
delivery of strategy, long-term performance,
shareholder return and the remuneration of
the Executive Directors is set out in the
Remuneration Report.
• Alignment to culture: As explained above
and in the rest of this report, the approach to
Directors’ remuneration is consistent with
the Group’s culture and values.
When determining the implementation of the
Remuneration Policy, the Committee also
reviews and considers those matters referred to
in section 3.1.2 of the Dutch Corporate
Governance Code which comprise: long-term
value creation, scenario analyses, ratio of fixed
to variable remuneration components, market
price of shares, terms and conditions governing
share and share option awards.
When reviewing the Remuneration Policy, the
Committee will follow the process set out below:
• The Committee will consider market and
governance developments (including the UK
Corporate Governance Code and Dutch
Corporate Governance Code) as well as
wider pay context, such as pay ratios and
Group reward arrangements.
• The Committee will consider the guidelines
of shareholder representative bodies, proxy
agencies and investor expectations.
• The Committee will consult with
shareholders and employees ahead of any
future AGMs where the remuneration policy
is put to a vote.
• All changes, adoption or revisions to the
existing policy will be brought to
shareholders for approval.
Directors’ Remuneration Policy
137RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
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 over reliance
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.
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
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.
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
well-being 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
138 RHI MAGNESITA ANNUAL REPORT 2022
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 (after tax) which will be held for a minimum
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 be disclosed then they
will be disclosed in the following year.
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.
Directors’ Remuneration Policy
continued
139RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
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
TSR 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 after three years subject to
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 fifth anniversary of award).
Dividend equivalents 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.
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.
200% of salary None.
140 RHI MAGNESITA ANNUAL REPORT 2022
The table below sets out the Remuneration Policy for the Non-Executive Directors (including the 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.
Fees are reviewed periodically.
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.
Performance criteria
The Committee assesses annually at the beginning of the relevant performance period, which performance measures, or combination and weighting
of performance measures, are most appropriate for both annual bonus and any LTIP awarded to reflect the Company’s strategic initiatives for the
performance period. The Committee has the discretion to change the performance measures for awards granted in future years based upon the
strategic plans of the Company, as it will do for 2023’s award. The Committee sets what it considers are demanding targets for variable pay in the
context of the Company’s trading environment and strategic objectives and considering the Company’s internal financial planning, and market
forecasts. Any non-financial goals will be well defined, and the performance against the goals will be independently assured.
The short term financial and non-financial criteria of our variable remuneration may, as noted above, vary from year to year to ensure alignment with
the strategic plans of the Company. Set out below is a summary of the measures for 2023 and other measures that have been used since 2018 and
may be incorporated again (in addition to other measures) for future incentives:
Annual bonus
Financial criteria
• Adjusted EBIT, EBITA and EBITDA are a reflection of the Company’s operating profits, operating performance and business efficiency supporting
the value of RHI Magnesita for the shareholders. They reflect the way in which management assesses the underlying performance of the business,
excluding certain items from the adjusted figures, to better understand underlying performance.
• Operating cash flow supports the Company’s capacity to expand its operations or investment in additional assets/ acquisitions, as well as dividends
paid to shareholders. It is calculated by taking adjusted EBITDA plus changes in working capital and in other assets/liabilities minus capex spend.
• Inventory coverage which covers Finished Goods and Raw Material.
– Finished Goods Coverage Ratio: is a supply chain metric that shows the period expressed in months during which a company can meet customer
demand with the available inventory. To calculate, we divide the amount of stock by the average demand of a specific period in the future.
– Raw Material Coverage Ratio: is a supply chain metric that shows the period expressed in months during which a company can meet production
demands for raw materials with the available inventory. To calculate, we divide the amount of stock by the average consumption for a specific
period in the past. The coverage ranges lead to more sustainable inventory management and customer service levels.
Non-financial criteria
Strategic Deliverables supporting financial targets such as adjusted EBIT or EBITA and operating cash flow with initiatives and strategic projects, such
as enhancing the current business model or company’s footprint and global value market share and ESG measures such as CO
2
emissions intensity
reduction and PIFOT ( a measure where to check the delivery against customer promise and internal process adherence. It measures two dimensions
in one metric i.e. shipping as per our ex-work date on-time and in full and execution of the customer order fulfilment process as per the process against
a customer sales order line. It is calculated as (Number of sales order lines with deliveries issued in full or before confirmed customer EXW date) ÷
(Total sales order lines), as well as the use of Secondary Raw Materials and reducing conversion costs.
Directors’ Remuneration Policy
continued
141RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
LTIP
Financial criteria
• TSR – combination of movements in share price and dividends earned on shares reflecting the total return earned by holding the Company’s
shares.
• Adjusted EPS – reflects the income statement in a clear way and takes the equity structure into account, the Board believes adjusted EPS to be
one of the indicators which demonstrates the value created for its shareholders.
• Economic Profit Growth – measures value creation, considering all economic resources employed within the business, taking into account the
costs of making and selling a product/service.
Bonus & LTIP
Non-financial criteria
• Use of Secondary Raw Materials – measures the rate at which secondary raw material is used in our production network compared to virgin raw
materials. Despite this not being a wholly financial target, this will nonetheless be independently verified by an external provider.
• Reduction of CO
2
emissions intensity – reduce the tonnes of CO
2
emitted per tonne of production with incentive targets taking into account our
longer term ambitions.
The criteria listed above directly link to the Company’s strategy, long-term interests and sustainability. Performance targets are set at a level to
maintain good financial health. This enables the Company to perform well, deliver shareholder returns and invest sustainably to achieve strategic
deliverables. The assessment of the fulfilment of performance criteria for the annual bonus and for LTIP awards is set out on pages 150 and 151.
Discretions retained by the Committee
The Committee operates the Group’s variable pay plans according to their respective rules. In administering these plans, the Committee may apply
certain operational discretions.
These include the following:
• determining the extent of vesting based on the assessment of performance.
• determining the status of leavers and, where relevant, the extent of vesting.
• determining the extent of vesting of LTIP awards under share-based plans in the event of a change of control.
• making appropriate adjustments required in certain circumstances (e.g., rights issues, corporate restructuring events, variation of capital and
special dividends).
• adjusting existing targets if events occur that cause the Committee to determine that the targets set are no longer appropriate and that amendment
is required so the relevant award can achieve its original intended purpose, provided that the new targets are not materially less difficult to satisfy.
The Committee also retains discretion to make non-significant changes to the Policy without reverting to shareholders (for example, for regulatory, tax,
legislative or administrative purposes).
Malus & Clawback
The Committee may, at any time within three years from the date of LTIP awards vesting or payments under the annual bonus plan, determine that
malus or clawback provisions may apply. Malus enables the Committee to reduce bonus or share awards (including to nil) before they vest. Clawback
enables the Committee to reclaim shares acquired from share awards and/ or bonuses paid including the cash value of shares and dividends. The
Committee can also operate clawback through the reduction including to nil of other awards held by the individual before they vest or bonus before it
is paid. The provisions apply in the following circumstances: (i) material misstatement of the Company’s financial results; (ii) an error in calculating the
level of grant or level of vesting or payment; (iii) a failure of risk management including the liquidation of the Group; (iv) 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.
Executive Directors’ service contracts and payments for loss of office
Service contracts and letters of appointment are available for inspection at the Company’s registered office.
142 RHI MAGNESITA ANNUAL REPORT 2022
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 service contracts for the Executive Directors
are terminable by either the Company or the Executive Director on 12 months’ notice.
Service contracts and loss of office
Name Position Date of Appointment Notice Period
Stefan Borgas CEO 20 June 2017 12 months
Ian Botha CFO 1 April 2019 12 months
The Committee’s policy in relation to termination of service contracts is to deal with each case on its merits having regard to the circumstances of
the individual, the termination of employment, any legal advice received and what is in the best interests of the Company and its shareholders.
An Executive Director’s service contract may be terminated early (other than for cause) by payment in lieu of salary in equal monthly instalments over
the notice period. The Company may include pension contributions and benefits within the payment in lieu of notice if this is deemed appropriate
or is specifically provided for in the service contract. Unless a contract specifically provides otherwise, all payments would discontinue or reduce
to the extent that alternative employment is obtained. There are no enhanced provisions on a change of control and there are no specific severance
arrangements. Whilst not part of the formal policy, in the event of a change of control, LTIP awards will vest based on performance to the change of
control. In addition, awards will normally be scaled back pro rata to the proportion of the performance or vesting period served, with the Remuneration
Committee having the discretion to reduce the scale back in exceptional circumstances if it deems it to be appropriate.
An Executive Director’s service contract may be terminated without notice for certain events such as gross misconduct in which case no payments or
compensation beyond sums accrued to the date of termination will be paid.
The Company may also pay out placement costs, legal costs and other reasonable relevant costs associated with termination and may settle any claim
or potential claim relating to the termination.
Treatment of variable pay awards on termination
Annual bonuses and LTIP awards are non-contractual and are dealt with in accordance with the rules of the relevant plans.
At the discretion of the Committee, in certain circumstances, for example, to incentivise short-term retention and completion of key business
deliverables, and where poor performance is not relevant to the cessation, a pro-rata bonus may become payable at the normal payment date for
the period of employment with financial performance targets based on full-year performance. Where the Committee decides to make a payment,
the rationale will be fully disclosed in the Annual Report on Remuneration.
The default treatment for share-based awards is that any unvested award will lapse on termination of employment or, in certain circumstances on the
executive giving notice. However, under the rules of the LTIP under which awards will be made, in certain prescribed circumstances, such as death,
injury, ill-health, retirement with the Company’s agreement, redundancy, leaving the Group because the employer company or business leaves the
Group or where the Committee determines otherwise, awards are eligible to vest subject to the performance conditions being met over the normal
performance period (or a shorter period where the participant has died) and with the award being reduced (unless the Committee considers, in
exceptional circumstances, a different treatment is appropriate) by an amount to reflect the proportion of the performance period not actually served.
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 salary may be set below the
normal market rate, with phased increases as the Director demonstrates performance within the Company. Annual bonus opportunity will reflect the
period of service for the year.
The normal annual LTIP award limit is 200% of salary face value in a financial year (face value being the 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 in exceptional circumstances for the Company to be able to
attract and secure the right candidate if required. A LTIP award may be made shortly after an appointment if the usual annual award date has passed.
With internal appointments, any variable pay element awarded in respect of the candidate’s prior role will normally be allowed to continue according
to its terms.
The Policy enables the Committee to include those benefits it deems appropriate for an Executive Director. On recruitment, this may include benefits
such as relocation, housing or schooling expenses. In arriving at a benefits package, the Committee’s prevailing consideration will be to pay only what
is considered necessary and appropriate, taking into account the importance of securing the right candidate for the job, acting in the best interests of
the Company’s stakeholders and limiting certain benefits to a specified period where possible.
On recruitment, the Company may compensate for incentive pay (or benefit arrangements) foregone from a previous employer. Replacement share
awards would be made under the Company’s LTIP and any subsequently adopted share plans using the separate specific limit for these purposes of
250% of salary (face value) or as necessary and as permitted under the Listing Rules. The new awards would take account of the structure of awards
being forfeited (cash or shares), quantum foregone, the extent to which performance conditions apply, the likelihood of meeting any existing
performance conditions and the time left to vesting.
Directors’ Remuneration Policy
continued
143RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Policy for Executive Directors on external appointments
Subject to Board approval, Executive Directors may accept external non-executive positions and retain the fees payable for such appointments.
Non-Executive Directors
Letters of appointment and policy on recruitment
All Non-Executive Directors have letters of appointment for a fixed period of three years, subject to reappointment each year at the AGM. No
additional compensation is payable on termination, with fees being payable to the date of termination. The appointments are terminable by either
party on three months’ written notice.
On appointment of a new Non-Executive Director, the fee arrangement will be set in accordance with the approved remuneration policy in force at
that 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
Michael Schwarz Employee Representative Director 8 December 2017 9 December 2025
1
Karin Garcia Employee Representative Director 9 December 2021 9 December 2025
1
Martin Kowatsch Employee Representative Director 14 December 2021 14 December 2025
1
1. Michael Schwarz, Karin Garcia and Martin Kowatsch are the Employee Representative Directors and have been selected in accordance with the applicable local law provisions by the employee
representatives. They are appointed for a term of not more than four years.
How the views of shareholders and employees are taken into account
Owing to the Board members’ wide range of experience and backgrounds, and with Employee Representatives members and shareholders
represented in person, there is ample opportunity for stakeholder feedback on the Policy and its implementation on an ongoing basis.
The Committee formally consults directly with employees on executive pay via the Employee Representative Directors appointed to the Board.
Other engagement activities include CEO calls, regular townhall meetings and an active CEO Channel, as part of the MyRHIMagnesita App, where
employees can ask questions on any issues including executive pay. The Committee receives periodic updates from the CEO and the Executive VP
People, Projects and Value Chain which include employee feedback received on remuneration practices across the Group. No substantive questions
have been raised on executive remuneration. The Committee takes due account of the overall approach to remuneration and the remuneration
structures for employees in the Group when setting pay for the Executive Directors.
There are representatives of two of the Company’s major shareholders on the Board and thus regular consultation on all elements of remuneration is
ongoing. The Committee Chairman meets directly with representatives of various institutional shareholders on remuneration and appreciates the
opportunity to understand their questions, seek to understand their expectations and then provide those views to the Committee and to the wider
Board as required. During November and December 2022, the Committee Chairman participated in an investor roadshow with the Deputy Chairman
where ESG matters, and particularly the links with the sustainability agenda, human capital management and remuneration matters were discussed
with four institutional shareholders. The Committee, and the wider Board, found the sessions very useful to hear direct feedback from investors and
understand their expectations for the future in terms of driving management performance through incentives.
The Committee Chairman seeks feedback from shareholders on any substantive remuneration matters and any consultation exercise would typically
cover over 70% of shareholders. This feedback, best practice in the market, and any views also received from time to time, as well as guidance from
shareholder representative bodies more generally, will be considered as part of the Company’s annual review of remuneration policy and
implementation of that policy. The Committee will engage with shareholders regarding the Policy renewal in advance of the 2024 AGM.
144 RHI MAGNESITA ANNUAL REPORT 2022
How the views of shareholders and employees are taken into account
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
a section dedicated to investors, which includes certain remuneration information, such as our LTIP rules, our investor calendar, financial results,
presentations, press releases, with news relating to RHI Magnesita financial and operational performance and contact details.
Remuneration market data for companies of a comparable size and complexity to the Company was considered as part of the Committee’s formulation
of our current 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 amount and structure of their remuneration and the provisions
of 3.1.2 of the Dutch Corporate Governance Code (matters that should be taken into consideration when formulating the Remuneration Policy) have
been brought to their attention.
You can read more on our stakeholder engagement on page 98 to 101.
How the Executive Directors’ Remuneration Policy relates to the wider Group
The Policy described above applies specifically to the Company’s Executive and Non-Executive Directors. The Committee is aware of and provides
feedback on the wider Group remuneration structures.
Our remuneration package elements for our Executive Directors are with some minor differences, the same as for the next level of management,
our senior leaders.
Base salaries for the whole Group are operated under broadly the same policy as for the Executive Directors and are reviewed annually.
On the annual bonus since 2019, the bonus targets are the same for Executive Directors and for all eligible white-collar employees. All our employees
take part in annual discretionary bonus schemes, which is based on the same metrics as those applicable to the Executive Directors as shown in
Annual Report on Remuneration. Our approach is to incentivise our employees to focus on and contribute to the Company’s key goals.
LTIP awards are awarded to those employees identified as having the greatest potential to influence strategic outcomes. Given the cost of operating
such a plan, the Committee considers this is the right approach and in the best interests of the Company and its shareholders.
A comparison of the remuneration structure between the wider workforce 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%1 25%
1
150-200%
Executive Management Team 5 80-140% 85%2 15%
2
80-150%
Senior Leaders c30 40% 100% 0% 20-50%
Functional Directors c90 30% 100% 0% 0%
Senior Managers c150 25% 100% 0% 0%
Managers c500 20% 100% 0% 0%
Specialists c1,700 10% 100% 0% 0%
Professionals c2,000 5% 100% 0% 0%
Other bonused employees c8,900 various
3
100% 0% 0%
1. Half of annual bonus in excess of target, after tax, is used by the Executive Directors to acquire shares that must be held for a minimum of three years.
2. EMT members are required to acquire shares in the Company with 30% of the amount above target (after tax) which must be held for a minimum of three years.
3. Various local bonus programmes are in place for the operational, administrative and blue-collar employees of the Company.
Directors’ Remuneration Policy
continued
145RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
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
Page 137
RHIM salary is the basis for a competitive total reward package for all
employees, and we conduct an annual salary review for all
employees. As we determine salaries in this review, we take account of
comparable pay rates from market references, skills, knowledge and
experience of everyone, individual performance, and the overall
budget we set for each country. In setting the budget each year, we
forecast inflation, unions and collective agreements and business
context related to such things as growth plans, workforce turnover
and affordability.
We review the salaries of our Executive Directors and executive team
annually. The primary purpose of the review is to stay aligned with
relevant market comparators and stay competitive, as well as to
ensure any increases are aligned with the wider workforce in Europe
and North America, except in exceptional circumstances.
Pensions and benefits
Read more on
Page 137
We offer market-aligned benefits packages reflecting normal practice
in each of our countries we operate like pension, worldwide
accidental insurance (leisure/work), health insurance, meal
allowance/voucher,
We have differences in the Executive Directors’ benefits to reflect
market practice and role differentiation.
Our incumbent Executive Directors’ pension allowance (and that for
new appointments) is aligned to that of the workforce in their country
of appointment.
Annual bonus and LTIP
Read more on
Pages 138 and
139
Our white collar global workforce participate 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 RHIM. We also 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
The Dutch Corporate Governance Code recommended from the financial year 2018, and the UK Directors’ Reporting Regulations required from 2019,
that the Committee report pay ratios including changes from the prior year as part of its determination of executive pay and wider executive
remuneration decisions. The total employee remuneration figure used for the ratio below is for all employees in all Group companies and includes
countries with significantly lower levels of pay than Europe and the United States. RHI Magnesita only has around 150 employees in the UK and falls
below the required threshold for UK pay ratio reporting requirements. As UK employees represent less than 1% of RHI Magnesita’s employees, the
Committee considers that the above approach is appropriate in the circumstances.
RHI Magnesita is positioned around the upper quartile CEO pay ratio of other basic materials and industrial companies of a similar size listed on the
FTSE.
A significant proportion of the Executive Directors’ remuneration is delivered through incentives, annual bonus and LTIP, where awards are linked to
company performance and share price movement over the longer term. This means that the pay ratio will depend on the incentive outcome.
The table below shows the pay ratio in respect of each year from 2018 to 2022:
Pay ratio 2022
1
2021
2
2020
3
2019 2018
CEO 64:1 21:1 41:1 34:1 49:1
CFO 45:1 13:1 25:1 16:1
4
N/A
1. The CEO and CFO pay ratio increased in 2022. This is predominantly due to the vesting of the 2020 LTIP and a higher bonus outturn in 2022. Executive Directors receive higher levels of variable
pay opportunity than other employees to reflect their roles in the business.
2. Pay ratio is lower due to not achieving target bonus KPIs.
3. The pay ratio rose due to the increase in base salary for the CEO and CFO in 2020.
4. CFO pay ratio is lower as Ian Botha joined the Company on 1 April 2019, with the full salary and bonus, the ratio would be 21:1.
The proportion of fixed and variable remuneration
To support the Policy’s objectives to deliver long-term sustainable success of the Company, the remuneration package of our Executive Directors
includes a mix of fixed and variable remuneration. The proportion for 2023 is approximately 40% for fixed pay and 60% variable remuneration on a
target basis (calculated on the same basis as the target scenario shown below). Variable pay is split between the annual bonus, with 50% of payment
over target being held in shares, and long-term incentive.
146 RHI MAGNESITA ANNUAL REPORT 2022
Maximum Maximum
with share
price
increase
21%
35%
18%
Minimum
40%100%
Target
25%
26%
34%
32%
26%
43%
Fixed pay Annual bonus LTIP
LTIP value with 50% share price growth
3,328,894
5,328,619
6,471,319
1,329,169
31%
15%
28%
28%
36%
30%
36%
1,781,229
2,783,229
3,284,229
779,229
Maximum Maximum
with share
price
increase
Minimum Target
24%44%100% 28%
Maximum Maximum
with share
price
increase
21%
35%
18%
Minimum
40%100%
Target
25%
26%
34%
32%
26%
43%
Fixed pay Annual bonus LTIP
LTIP value with 50% share price growth
3,328,894
5,328,619
6,471,319
1,329,169
31%
15%
28%
28%
36%
30%
36%
1,781,229
2,783,229
3,284,229
779,229
Maximum Maximum
with share
price
increase
Minimum Target
24%44%100% 28%
Remuneration scenarios for Executive Directors
The Policy provides that a significant proportion of remuneration is determined by Group performance. The graph below illustrates how the total pay
opportunities vary under four different performance scenarios: minimum, target, maximum and maximum assuming a share price appreciation of 50%
for the LTIP award during the performance period.
Assumptions
Minimum: Fixed pay only (base salary, pension and benefits, excluding relocation benefits).
Target: Fixed pay plus 50% of 2023 maximum annual bonus opportunity for the CEO and CFO with 50% vesting of the 2023 LTIP award.
Maximum: Fixed pay plus maximum annual bonus opportunity and 100% vesting of 2023 LTIP award.
Maximum with share price increase: Fixed pay plus maximum annual bonus opportunity and 100% vesting of 2023 LTIP award with an assumed share
price appreciation of 50% for the LTIP award during the performance period.
As required under the Dutch Corporate Governance Code, scenario analysis was carried out as part of the formulation of the Policy and to establish
that the policy results in appropriate and fair levels of remuneration, including that the level and ratio of fixed to variable pay does not encourage
inappropriate risk-taking or overreliance on variable pay while ensuring there is sufficient alignment to investors, the long-term performance of the
Company and development of the market value of the shares of the Company.
All values below are in euros
Directors’ Remuneration Policy
continued
Stefan Borgas (CEO) Ian Botha (CFO)
147RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Annual Report on Remuneration
Annual Report on Remuneration
The following section provides details of how the Company’s Directors were paid during the financial year to 31 December 2022.
As a Dutch incorporated and registered and UK and Austrian listed company RHI Magnesita is required to comply with UK, Dutch and Austrian
reporting requirements, including the UK, Austrian and Dutch Corporate Governance Codes.
The Committee together with the Board has determined to provide certain voluntary disclosures recognising the importance of transparency of
reporting and investor expectation as a UK listed company to comply with the UK Directors’ Remuneration Reporting Regulations. This Annual Report
is compiled on this basis.
The Remuneration Committee members, activities and meetings during the year are set out on page 132, along with the Committee’s purpose, roles
and responsibilities and is thereby included in this part of the report by reference.
Advisers
Korn Ferry (“KF”), signatories to the UK Remuneration Consultants Group’s Code of Conduct (“Code of Conduct”), was appointed by the Committee in
2017 having submitted a proposal which demonstrated their skills and experience in executive remuneration. KF’s appointment is subject to annual
review by the Committee. KF provides advice to the Committee on matters relating to UK governance, including consulting on the remuneration
report and analysing market trends.
The Committee was satisfied that the advice provided by Korn Ferry was objective and independent having noted their commitment to the Code of
Conduct. Korn Ferry’s fees for advice to the Committee in 2022 were £51,118. Korn Ferry’s fees were charged on the basis of the time spent advising
the Committee. Korn Ferry provided other human capital related services during the year to a separate part of the business, but these services were
carried out by a team wholly separate to the remuneration advisory team. The Committee is comfortable that the controls in place at Korn Ferry do not
result in the potential for any conflicts of interest to arise.
Statement of voting at AGM
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
25 May 2022 AGM
Advisory vote on the 2021 Directors’ Remuneration Report
(excluding the Directors’ Remuneration Policy)
35,808,248 99.31 248,942 0.69 36,061,102 76.73 3,912
10 June 2021 AGM
Binding vote on 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
For 2022 AGM, 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
46,999,019 and for the 2021 AGM 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.
148 RHI MAGNESITA ANNUAL REPORT 2022
Single total figure table (audited)
The following table shows a single total figure of remuneration in respect of qualifying services for the 2022 financial year for each Executive and
Non-Executive Director of the Company, together with comparative figures for 2021.
Director
1
Salary Taxable benefits
2
Bonus LTIP Pension
3
Other Total remuneration Total fixed remuneration Total variable remuneration
2022 2021 2022 2021 2022 2021 2022
4
2021 2022 2021 2022
5
2021 2022 2021 2022 2021 2022 2021
Executive Directors
Stefan Borgas €1,098,800 €1,052,000 €15,064 €183 €695,286 €374.775 €1,041,043 –
€164,820 €157.80 – – €3,015,013 €1,584,758 €1,278,684 €1,209,983 €1,736,329 €374.775
Ian Botha €642,300 €615,000 €11,029 €12,003 €406,427 €219.094 €456,583 – €96,345 €92.25 €489,687 – €2,102,371 €938.35 €749,674 €719,253 €1,352,697 €219,094
Non-Executive Directors
Herbert Cordt £251,700 £241,000 – – – – –
£251,700 £241,000 £251,700 £241,000
John Ramsay £128,200 £122,900 – – – – – £128,200 £122,900 £128,200 £122,900
Janet Ashdown £114,000 £104,522 – – – – – £114,000 £104,522 £114,000 £104,522
David Schlaff £74,200 £71,100 – – – – – £74,200 £71,100 £74,200 £71,100
Stanislaus Prinz zu Sayn-
Wittgenstein-Berleburg
£74,698 £71,100 – – – – £74,698 £71,100 £74,698 £71,100
Fiona Paulus £70,395 £84,728 – – – – – £70,395 £84,728 £70,395 £84,728
Jann Brown £83,456 £52,566 – – – – – – £83,456 £52,566 £83,456 £52,566
Karl Sevelda £88,611 £82,314 – – – – £88,611 £82,314 £88,611 £82,314
Marie-Hélène Ametsreiter £84,400 £48,017 – – – – – £84,400 £48,017 £84,400 £48,017
Sigalia Heifetz £79,800 £48,017 – – – – – £79,800 £48,017 £79,800 £48,017
Wolfgang Ruttenstorfer £82,700 £79,300 – – – – £82,700 £79,300 £82,700 £79,300
Michael Schwarz
6
– – – – – – – – – – –
Karin Garcia
6
– – – – – – – – – – –
Martin Kowatsch
6
– – – – – – – – – – –
1. All amounts are disclosed in the currencies in which the relevant elements of pay are set. Actual payment may be made in the currency where the recipient resides using the exchange rate at the
time of payment.
2. Benefits in 2022 comprise for Stefan Borgas benefits of tax advice, private health insurance and car benefits. The benefits for Ian Botha included a car benefit and insured benefits
3. Pension figures represent the 15% of salary cash allowance received by Executive Directors.
4. Value of shares based on a three-month average share price of £20.09 to 31 December 2022 and an exchange rate of 0.88512. Grant share price was £19.976 and vesting share price is estimated
to be £20.09 (using three-month average share price to 31 December 2022). The increase in share price between grant and vesting is £0.11. As a result, the value attributable to share price
appreciation based is £5,153 (€ 5,821) for Stefan Borgas and £2,260 (€ 2,553) for Ian Botha. The number of shares delivered as dividend equivalents is 668 for Stefan Borgas and 293 for Ian Botha.
Further details are set out on page 150.
5. Value of shares based on a three-month average share price of £20.09 to 31 December 2022 and an exchange rate of 0.88512. Grant share price was £19.976 and vesting share price is estimated
to be £20.09 (using three-month average share price to 31 December 2022). The increase in share price between grant and vesting is £0.11. As a result, the value attributable to share price
appreciation is £5,153 (€ 5,821) for Stefan Borgas and £2,260 (€ 2,553) for Ian Botha. The number of shares delivered as dividend equivalents is 668 for Stefan Borgas and 293 for Ian Botha.
Further details are set out on page 150.
6. Employee Representative Directors do not receive additional remuneration for this role as they are remunerated as employees of the Group.
No loans, advances or guarantees have been provided to any Director.
Annual Report on Remuneration
continued
149RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Single total figure table (audited)
The following table shows a single total figure of remuneration in respect of qualifying services for the 2022 financial year for each Executive and
Non-Executive Director of the Company, together with comparative figures for 2021.
Director
1
Salary Taxable benefits
2
Bonus LTIP Pension
3
Other Total remuneration Total fixed remuneration Total variable remuneration
2022 2021 2022 2021 2022 2021 2022
4
2021 2022 2021 2022
5
2021 2022 2021 2022 2021 2022 2021
Executive Directors
Stefan Borgas €1,098,800 €1,052,000 €15,064 €183 €695,286 €374.775 €1,041,043 –
€164,820 €157.80 – – €3,015,013 €1,584,758 €1,278,684 €1,209,983 €1,736,329 €374.775
Ian Botha €642,300 €615,000 €11,029 €12,003 €406,427 €219.094 €456,583 – €96,345 €92.25 €489,687 – €2,102,371 €938.35 €749,674 €719,253 €1,352,697 €219,094
Non-Executive Directors
Herbert Cordt £251,700 £241,000 – – – – –
£251,700 £241,000 £251,700 £241,000
John Ramsay £128,200 £122,900 – – – – – £128,200 £122,900 £128,200 £122,900
Janet Ashdown £114,000 £104,522 – – – – – £114,000 £104,522 £114,000 £104,522
David Schlaff £74,200 £71,100 – – – – – £74,200 £71,100 £74,200 £71,100
Stanislaus Prinz zu Sayn-
Wittgenstein-Berleburg
£74,698 £71,100 – – – – £74,698 £71,100 £74,698 £71,100
Fiona Paulus £70,395 £84,728 – – – – – £70,395 £84,728 £70,395 £84,728
Jann Brown £83,456 £52,566 – – – – – – £83,456 £52,566 £83,456 £52,566
Karl Sevelda £88,611 £82,314 – – – – £88,611 £82,314 £88,611 £82,314
Marie-Hélène Ametsreiter £84,400 £48,017 – – – – – £84,400 £48,017 £84,400 £48,017
Sigalia Heifetz £79,800 £48,017 – – – – – £79,800 £48,017 £79,800 £48,017
Wolfgang Ruttenstorfer £82,700 £79,300 – – – – £82,700 £79,300 £82,700 £79,300
Michael Schwarz
6
– – – – – – – – – – –
Karin Garcia
6
– – – – – – – – – – –
Martin Kowatsch
6
– – – – – – – – – – –
1. All amounts are disclosed in the currencies in which the relevant elements of pay are set. Actual payment may be made in the currency where the recipient resides using the exchange rate at the
time of payment.
2. Benefits in 2022 comprise for Stefan Borgas benefits of tax advice, private health insurance and car benefits. The benefits for Ian Botha included a car benefit and insured benefits
3. Pension figures represent the 15% of salary cash allowance received by Executive Directors.
4. Value of shares based on a three-month average share price of £20.09 to 31 December 2022 and an exchange rate of 0.88512. Grant share price was £19.976 and vesting share price is estimated
to be £20.09 (using three-month average share price to 31 December 2022). The increase in share price between grant and vesting is £0.11. As a result, the value attributable to share price
appreciation based is £5,153 (€ 5,821) for Stefan Borgas and £2,260 (€ 2,553) for Ian Botha. The number of shares delivered as dividend equivalents is 668 for Stefan Borgas and 293 for Ian Botha.
Further details are set out on page 150.
5. Value of shares based on a three-month average share price of £20.09 to 31 December 2022 and an exchange rate of 0.88512. Grant share price was £19.976 and vesting share price is estimated
to be £20.09 (using three-month average share price to 31 December 2022). The increase in share price between grant and vesting is £0.11. As a result, the value attributable to share price
appreciation is £5,153 (€ 5,821) for Stefan Borgas and £2,260 (€ 2,553) for Ian Botha. The number of shares delivered as dividend equivalents is 668 for Stefan Borgas and 293 for Ian Botha.
Further details are set out on page 150.
6. Employee Representative Directors do not receive additional remuneration for this role as they are remunerated as employees of the Group.
No loans, advances or guarantees have been provided to any Director.
150 RHI MAGNESITA ANNUAL REPORT 2022
2022 Annual bonus performance against targets (audited)
The targets set for the annual bonus and performance against them are set out below.
Pay-out
Measure Weighting
Threshold
(25% of
maximum)
Target
(50% of
maximum)
Max
(100% of
maximum)
Actual
performance
Pay-out
(% of max)
2
Pay-out
(% of salary) CEO CFO
Adjusted EBITA €m 35% 367 410 451 384 35% 18% €200,826 €117,392
Operating Cash Flow €m
1
35% 213 243 273 155 0% 0% €0 €0
Increase global value market share 10% 14.40% 14.70% 14.90% 16.3% 100% 15% €164,820 €96,345
Reduce conversion cost 10% -11.30% -11.80% -12.30% -13.6% 100% 15% €164,820 €96,345
Use of secondary raw material 10% 7.10% 7,50% 7.70% 10.5% 100% 15% €164,820 €96,345
Total 100% 42% 63% €692,286 €406,427
1. Operating cash flow at constant currency. EBITA without restructuring expenses + capex + change in working capital + cash tax.
2. The maximum CEO and CFO annual bonus in 2022 was 150% of salary.
Executive Directors are required to acquire shares in the Company with 50% of the amount paid in excess of target (after tax) which will be held for a
minimum period of three years. As the target bonus as a percentage of salary was not achieved (75%), the bonus is payable wholly in cash.
2019 Conditional Award (audited)
Ian Botha was appointed as CFO on 1 April 2019 and as set out in the 2019 Remuneration Report, he received a Conditional Share award to
compensate for deferred bonus share awards forfeited on joining RHI Magnesita. This award vested on the third anniversary of grant as detailed below.
Grant date Vest date
Number of shares granted
and vesting Dividends at vesting Value on vesting
26 November 2019 26 November 2022 16,592 2084 €489,687
1. The value shown is based on a share price of £22.50 and an exchange rate of 0.85812.
LTIP awards vesting
LTIP awards where vesting is based on performance periods ending
(or substantially ending) during the financial year ending 31 December 2022 (audited)
Performance against targets and vesting of the LTIP awards granted on 8 April 2020 which are due to vest in 2023 is set out below.
Performance measure Weighting
Threshold
1
(25% vesting)
Intermediate
1
(75% of vesting)
Maximum
1
(100% vesting)
Performance
period
2
Performance
2
Vesting % of
that element
Absolute TSR
50% 30% cumulative
TSR growth
over the
3 years
50% cumulative
TSR growth
over the
3 years
70% cumulative
TSR growth
over the
3 years
8 April 2020 to
7 April 2023
Estimated
10.46%
0%
Cumulative Underlying Earnings Per
Share
50% €6.50/share €8.00/share €9.50/share 1 January 2020
to
31 December
2022
€12.62/share 100%
1. Awards vest on a straight-line basis between threshold, intermediate and maximum.
2. The targets for the Cumulative Underlying Earnings Per Share element were assessed against performance to 31 December 2022. For the TSR element, performance is assessed for a period of
three years to the 7 April 2023, three years from the date of grant. Based on the Company’s TSR performance to 16 January 2023, it is estimated that none of the TSR element will vest. The actual
TSR and vesting level will be provided in the 2023 Directors’ Remuneration Report.
Annual Report on Remuneration
continued
151RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
The details of the LTIPs vesting in 2023 as a result of performance noted above are shown below (audited)
Executive Grant date Vest date
Number of shares
granted
Number of shares
to vest
Estimated number
of dividend
equivalents
Total estimated
value
Stefan Borgas 8 April 2020 8 April 2023 90,396 45,198 668 € 1,041,043
Ian Botha 8 April 2020 8 April 2023 39,647 19,823 293 € 456,583
Value of shares based on a three-month average share price of £20.09 to 31 December 2022 and an exchange rate of 0.88512 (based on the exchange rate on 31 December 2022).
LTIP awards awarded during the financial year ending 31 December 2022 (audited)
During the year, the CEO and CFO received LTIP awards as set out below.
Director Scheme Basis of award Date of award
Percentage of
salary award
Share price
used
1
Face value
€000
Percentage
vesting at
threshold
performance
Number of
shares
End of
performance
period
Stefan Borgas LTIP
Annual
award
2
8 March 2022 200% €31.228 2,197.6 25% 70,372 8 March 2025
Ian Botha LTIP
Annual
award
2
8 March 2022 150% €31.228 963.6 25% 30,852 8 March 2025
1. The face value of the awards was calculated using the average closing price for the five trading days prior to the award being granted being £25.90 converted to € (using average FX rate over the
same five-day period of £0.8295 to €1 = € 31.22).
2. Awards are structured as nil cost options. In line with the remuneration policy, a two-year holding period post vesting holding period applies after the date of vesting.
In line with the remuneration policy, a two-year holding period post vesting holding period applies after the date of vesting.
Performance measure Weighting
Threshold
(25% vesting)
1
Intermediate
(75% of vesting)
1
Maximum
(100% vesting)
1
Performance
period
2
Absolute TSR 25% 15% 22% 27% and above
8 March 2022
to 7 March 2025
Adjusted EPS (cumulative for the three-year performance period) 50% €14.25 €16.50 €19.25 1 January 2022
to 31 December
2024Reduce CO
2
emissions against 2018 25% -11.5% -12.5% -13.0%
1. Awards vest on a straight-line basis between threshold intermediate and maximum.
2. For the TSR element, measured from date of grant to third anniversary on 8 March 2025 with a two-month average TSR before each date and for the EPS element and CO
2
reduction element,
three financial years until 31 December 2024.
Performance targets for 2021 LTIP awards.
Performance measure Weighting
Threshold
(25% vesting)
1
Intermediate
(75% of vesting)
1
Maximum
(100% vesting)
1
Performance
period
2
Absolute TSR 25% 13% 20% 25% and above
15 March 2021
to 14 March 2024
Adjusted EPS (cumulative for the three-year performance period) 50% €12.00 €14.50 €16.89 1 January 2021
to 31 December
2023Use of Secondary Raw Material
3
25% 6.5% 7.5% 8.0%
1. Awards vest on a straight-line basis between threshold intermediate and maximum.
2. For the TSR element, measured from date of grant to third anniversary on 15 March 2024 with a two-month average TSR before each date and for the EPS element and Secondary Raw Material
element, three financial years until 31 December 2023.
3. Use of secondary raw material as a percentage of total raw materials used, evaluated at the end of 2023 based on the current production network (and excluding any changes in raw material
usage due to any future M&A activity).
152 RHI MAGNESITA ANNUAL REPORT 2022
Statement of Directors’ shareholding and share interests (audited)
Under the share ownership requirements set out in the Directors’ Remuneration Policy, the Executive Directors are normally required to build and
maintain over five years a shareholding equivalent to at least 200% of salary.
At the 2022 year-end, the Executive Directors each held shares in the Company as detailed below. Shares are valued using the Company’s closing
market share price on 30 December 2022 of £22.24.
The table below shows how each Director complies with the shareholding guidelines on 31 December 2022:
Shares
held at
31 December
2022
Shares
held by
connected
persons
Shares
held at
31 December
2021
Number
of shares
Number
of options
Unvested
and subject
to a service
requirement
only
Unvested
and subject
to
performance
conditions
Vested but
unexercised
Exercised
during
the year
Shareholding
requirement
Current
shareholding
% Salary
1
Requirement
met?
Executive Directors
Stefan Borgas 24,350
2
1,150 21,300
2
24,350 204,347 204,347
200%
salary 56% No
Ian Botha 18,676 – – – 89,606 108,282
200%
salary 73% No
Non-Executive Directors
Herbert Cordt 350,000 – 350,000 – – – – –
John Ramsay 4890 – 2,130 – – – – –
Janet
Ashdown – – – – – – – –
David Schlaff
4
– – – – – – – –
Stanislaus
Prinz zu
Sayn-
Wittgenstein
-Berleburg
4
1,071,722 – 1,071,722 – – – – –
Jann Brown
Karl Sevelda 2,000 – 2,000 – – – – –
Marie-Hélène
Ametsreiter
Sigalia Heifetz
Wolfgang
Ruttenstorfer – – – – – – – –
Karin Garcia – – – – – – – –
Martin
Kowatsch 1,223 – 1,223 – – – – –
Michael
Schwarz – – – – – – – –
Fiona Paulus
5
– – – – – – – –
1. Shareholding determined using an FX rate of 0.88512 for GBP to EUR on 31 December 2022. This is then used to assess the whether the shareholding requirement has been met.
2. Includes shareholdings of connected persons.
3. According to the latest disclosures by the shareholder: 13,333,340 held directly by MSP Stiftung. MSP Stiftung is a foundation under Liechtenstein law, whose founder is Mag. Martin Schlaff.
4. On 6 November 2022, Ms. Sayn-Wittgenstein acquired 1,071,722 shares in the Company from Mr. W. Winterstein (held in part directly and in part indirectly through FEWI
Beteiligungsgesellschaft mbH) with whom she shares a family relationship. The acquisition of 1,071,722 shares by Ms. Sayn-Wittgenstein has been disclosed in the AFM’s register on manager’s
transactions under article 19 of Regulation (EU) No. 596/2014 (MAR) (which can be found at www.afm.nl) and on the Issuer’s website. Furthermore, according to the most recent disclosures by
Ms. Sayn-Wittgenstein in the AFM’s separate substantial holdings register (which can be found at www.afm.nl), she held 2,088,461 shares in the Issuer through Chestnut
Beteiligungsgesellschaft mbH (“Chestnut“) at the time of such disclosures (27 October 2017). Ms. Sayn-Wittgenstein made an agreement with Mr. K.A. Winterstein which allows Chestnut to
exercise the voting rights of Silver Beteiligungsgesellschaft mbH (“Silver”) in the Issuer. Ms. Sayn-Wittgenstein and Mr. K.A. Winterstein share a family relationship. Further information on the
majority shareholdings can be found on page 99.
5. Shareholding for Fiona Paulus are only considered until 17 October 2022, when she stepped down from the Board.
Annual Report on Remuneration
continued
153RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
There were no changes in the Directors’ shareholdings and share interests between the end of the year and 24 February 2023.
Directors’ interests in RHI Magnesita’s LTIP
The table below details outstanding share awards including the annual LTIP awards granted to the CEO and CFO during 2022.
Scheme Award Date
Share price
used
€
Share awards
held at
1 January
2022
Awarded
during the
year
Vested
during the
year
Share awards
lapsed
during
the year
Share awards
held at
31 December
2022 Vesting date
Stefan Borgas
Performance shares 19 August 2019 44.534 38,397 – – 38,397
1
– 19 August 2022
Performance shares 8 April 2020 22.7 90,396 90,396
2
8 April 2023
Performance shares 15 March 2021 48.28 43,579 43,579
3
15 March 2024
Performance shares 8 March 2022 31.228 70,372 70,372
4
15 March 2025
Ian Botha
Performance shares 19 August 2019 44.534 16,840 – 16,840
1
– 19 August 2022
Performance shares 19 August 2019 44.534 16,841 – 16,841
1
– 19 August 2022
Performance shares 8 April 2020 22.7 39,647 39,647
2
8 April 2023
Performance shares 15 March 2021 48.28 19,107 19,107
3
15 March 2024
Performance shares 8 March 2022 31.228 30,852 30,852
4
8 March 2025
Conditional Award
26 November
2019 45.202 16,592 16,592 16,592
5
26 November
2022
1. Following the testing of the performance conditions, this award has now lapsed.
2. Award levels were calculated using the average closing price for the five trading days prior to the award being granted being £19.976 converted to € (using average FX rate over the same five-day
period of £0.881 to €1 = €22.7).
3. Award levels were calculated using the average closing price for the five trading days prior to the award being granted being £41.38 converted to € (using average FX rate over the same five-day
period of £0.857 to €1 = € 48.28).
4. Award levels were calculated using the average closing price for the five trading days prior to the award being granted being £25.90 converted to € (using average FX rate over the same five-day
period of £0.8295 to €1 = € 31.228).
5. Award levels were was calculated using the average closing price for the five trading days prior to the LTIP award being granted being £38.73 converted to € (using average FX rate over the same
five days period of £0.8569 to €1 = €45.202).
Review of past performance and CEO remuneration table (unaudited)
Share price performance
Shares are valued using the Company’s closing market share price on 30 December 2022 of £22.24 (2021: £33.06). During 2022, the shares traded in
the range of £15.84– £37.02.
154 RHI MAGNESITA ANNUAL REPORT 2022
RHI Magnesita total shareholder return
The graph below compares the Total Shareholder Return of the Company with the FTSE 350 Index from Admission date of 27 October 2017
to 31 December 2022. This is considered an appropriate comparator for RHI Magnesita because it is a constituent of the index.
27/10/17
31/12/17 31/12/20
31/12/19
31/12/18
31/12/2231/12/21
40
60
80
100
120
140
160
180
FTSE 350RHI Magnesita
Source: Datastream (Thomson Reuters)
Remuneration of the CEO
2017 2018 2019 2020 2021 2022
Single figure of total remuneration
1
Stefan Borgas €476,981 €2,073,350 €1,490,427 €1,892,862 €1,584,758 €3,015,013
Annual bonus payout as % of maximum
2, 3
Stefan Borgas 83.16% 88.04% 38.9% 50% 24% 42%
Long-term incentive vesting rates as % of maximum
4
Stefan Borgas N/A N/A N/A 0% 0% 50%
1. The 2017 Single figure of Total Remuneration relates to the period 27 October 2017 to 31 December 2017.
2. The 2017 Annual bonus payout as a % of maximum relates to bonus targets set prior to the merger of the two companies that now form RHI Magnesita NV.
3. The percentage of maximum shown for the 2020 Annual bonus is the amount paid to the CEO. The formulaic bonus outcome was 100% of maximum. However, the bonus was capped at 50% of
maximum due to the impact of the pandemic.
4. A long-term incentive plan was introduced when the Company was formed in October 2017. The first 2018 LTIP award was eligible to vest in 2021.
Annual percentage change in remuneration of the CEO (unaudited)
The table below illustrates the percentage change in annual salary, benefits and bonus between 2021 and 2022 for the CEO and the average for all
Austrian employees of the Company. The CEO is an Austrian-based employee; therefore, the Committee feels that a comparator based on all Austrian
employees is appropriate for the purposes of this analysis.
Salary change
(2021-2022)
Benefits change
(2021 to 2022)
Annual
bonus change
(2021 to 2022)
CEO 4.45% 8132%
1
85.52%
Average of employees 5.1% 2.2% 76.9%
1. Due to the first-time coverage of costs for health insurance and tax advisory costs, which have been part of the CEO’s benefits since 2022 in the amount of up to € 15,064 (prior year € 183), there
is a disproportionately high increase in benefits shown as a percentage increase compared to the absolute amount.
Annual Report on Remuneration
continued
155RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Directors and employee remuneration over time (unaudited)
The table below shows the Directors’ total remuneration year on year change (on a full-time equivalent basis).
Year
Total
Remuneration in
FY 2022
Change %
2021 to 2022
Change %
2020 to 2021
1
Change %
2019 to 2020
1
Change % from
2018 to 2019
1
Executive Directors
2
Stefan Borgas € 3,015,013 90.3%
2
-16.28% 27% -28.1%
Ian Botha € 2,102,371 124.1%
2
-16.45% N/A
3
N/A
3
Non-Executive Directors
Herbert Cordt £251,700 4.4% 6.09% 3.2% –
John Ramsay £128,200 4.3% 31.92% 12.9% 6.4%
Janet Ashdown
4
£114,000 9.1% 19.92% N/A
3
N/A
3
David Schlaff £74,200 4.4% 5.98% 3.2% –
Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg
4
£74,698 5.1% 5.98% 3.2% –
Fiona Paulus £70,395 N/A
3
5.99% N/A
3
N/A
3
Jann Brown £83,456 N/A
2
N/A
3
– –
Karl Sevelda
4
£88,611 7.6% 10.02% 3.2% –
Marie-Héléne Ametsreiter £84,400 N/A
3
N/A
3
– –
Sigalia Heifetz £79,800 N/A
3
N/A
3
– –
Wolfgang Ruttenstorfer £82,700 4.3% 5.99% 3.2% –
Karin Garcia
5
– – – – –
Martin Kowatsch
5
– – – – –
Michael Schwarz
5
– – – – –
Company performance
Adjusted EPS 4.8 6.6% 36.0% -41.1% 4.8%
Reported EBIT in € million 344 60.7% 7 7.3% -55.8% -4.4%
Operating Cash Flow in € million 155 165.7% -18.72% 1.7% -23.0%
Average remuneration (on a full-time equivalent basis)
Employees of the Company
6
€81,029 8.7% -3.4% 7.7% 4.1%
1. For notes on the change from 2018 to 2019, please see the 2019 Annual Report, for the change from 2019 to 2020 the 2020 Annual Report and 2020 to 2021 the 2021 Annual Report.
2. The total remuneration for the Executive Directors has increased due to a higher bonus payout in 2022 and the vesting of the 2020 LTIP award.
3. Where the incumbent did not serve for the full year, the calculation has not been made as it is unrepresentative.
4. Janet Ashdown was appointed as Chairman of Remuneration Committee in June 2021, Karl Sevelda was appointed to the Nomination Committee in June 2021 and Stanislaus Prinz zu
Sayn-Wittgenstein -Berleburg was appointed as Chairman of the Corporate Sustainability Committee on 29. November 2022. As a result, the total fees paid increased year-on-year.
5. Employee Representative Directors do not receive remuneration for that role, they are remunerated as employees of the Group.
6. The group of RHIM employees covers the parent company, namely all employees within the Austrian subsidiaries.
156 RHI MAGNESITA ANNUAL REPORT 2022
Relative importance of spend on pay (unaudited)
The following table sets out the change in distributions to shareholders by way of dividend and share buyback and overall spend on pay in the
financial year ended 31 December 2021 compared with the financial year ended 31 December 2022.
2022
€ million
2021
€ million
Percentage
change
Total gross employee pay 627.8 547.6 14.65%
Dividends 71.0 71.2 0.3%
Share buyback 0 95.5 N/A
Payments to past Directors (audited)
There were no payments to past Directors in the period 1 January to 31 December 2022.
Payments for loss of office (audited)
Fiona Paulus stepped down from the Board on 17 October 2022 and received fees to that date (£70,395). There were no additional payments.
2023 remuneration (unaudited)
Set out below is how the Directors’ Remuneration Policy will be implemented during 2023.
Salaries and fees for 2023
Directors’ salaries and fees (on a full-time equivalent basis)
Subject to approval at the 2023 AGM, the Directors’ salaries and fees will be increased from 1 January 2023 by 4%. This compares to the increase to
the wider workforce in Austria of 8.6%.
2023
1
2022
1
Percentage
change
Executives
Stefan Borgas €1,142,700 €1,098,800 4%
Ian Botha €668,000 €642,300 4%
Non-executives
Chairman (inclusive of all Committee fees) £261,700 £ 251,700 4%
Non-Executive Directors £77,100 £ 74,200 4%
Deputy Chairman & Senior Independent Director £29,600 £ 28,500 4%
Chairmen of Audit & Compliance Committee, Remuneration Committee, Nomination Committee (unless held by
the Chairman) and Corporate Sustainability Committee £20,600 £ 19,900 4%
Membership of the Audit and Compliance and Remuneration Committees £8,800 £ 8,500 4%
Membership of the Nomination and Corporate Sustainability Committee £5,800 £ 5,600 4%
1. Fee and salary increases are 4% and then rounded down to the nearest 100.
The Company does not contribute to defined benefit pension schemes on behalf of Executive Directors or Non-Executive Directors. No director has a
prospective entitlement under a defined benefit scheme.
Annual Report on Remuneration
continued
157RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATION
GOVERNANCESTRATEGIC REPORT
Annual bonus for 2023
The maximum potential annual bonus opportunity for FY23 remains at 150% of salary for both the CEO and CFO. Adjusted EBITA has been retained
as one of the financial targets and for 2023 the Committee has agreed to introduce Inventory coverage as a new financial measure. As a result, 70% of
the bonus will be based on financial measures and 30% will continue to be based on key strategic objectives. The management believes that the
inventory coverage target, which replaces operating cash flow as a KPI will create accountability on the reduction of inventory volumes in the
organization and therefore will lead to a more sustainable inventory management over the financial year. Both the CEO and the CFO are required to
use 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.
Performance criteria 2023 2022
Adjusted EBITA 45% 35%
Operating Cash Flow N/A 35%
Inventory Coverage 25% N/A
Strategic Initiatives
1
Increase global Value Market Share N/A 10%
Adjusted M&A EBITDA on signed transaction 10% N/A
Reduce conversion cost N/A 10%
PIFOT 10% N/A
Use of Secondary Raw Material 10% 10%
1. The specific targets relating to the 2023 bonus have not been disclosed at this stage as they are considered by the Committee to be commercially sensitive, and it is not considered in the interests
of shareholders to disclose further details on a prospective basis. Details will be provided on a retrospective basis in next year’s Annual Report on Remuneration.
2023 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% of salary. The performance measures are the same as those set for the 2022 LTIP grant. The measures and the targets are set out below.
Performance measure Weighting
Threshold
(25% vesting)
Intermediate
(75% of vesting)
Maximum
(100% vesting)
Performance
period
TSR
1
25% 15% 22% 27% 2023 to 2025
(+2 year
holding
period post
vesting)
Adjusted EPS (cumulative for the three-year performance period)
2
50% 11.90/ps 12.65/ps 13.40/ps
Reduce CO
2
emissions per tonne against 2018
2
25% -11% -11.5% -12%
1. Measured from the date of grant to 3rd anniversary with a two-month average before each date.
2. Measured over the three financial years to 31 December 2025.
3. Awards vest on a straight-line basis between threshold intermediate and maximum.
This report was reviewed and approved by the Board on 26 February 2023 and signed on its behalf by order of the Board.
Janet Ashdown
Chairman of the Remuneration Committee
158 RHI MAGNESITA ANNUAL REPORT 2022
159RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS OTHER INFORMATIONGOVERNANCESTRATEGIC REPORT
Financial
Statements
Consolidated Financial Statements 2022
Consolidated Statement of Profit or Loss
for the year ended 31 December 2022
in € million | Note | 2022 | 2021 |
Revenue | (5) | ||
Cost of sales | (5) | ( | ( |
Gross profit | |||
Selling and marketing expenses | ( | ( | |
General and administrative expenses | ( | ( | |
Result from operating joint ventures and associates | |||
Restructuring | (6) | ( | |
Other income | (7) | ||
Other expenses | (8) | ( | ( |
EBIT | |||
Interest income | (11) | ||
Interest expenses on borrowings | ( | ( | |
Net (expense)/income on foreign exchange effects and related derivatives | (12) | ( | |
Other net financial expenses | (13) | ( | ( |
Net finance costs | ( | ( | |
Result from joint ventures and associates | |||
Profit before income tax | |||
Income tax | (14) | ( | ( |
Profit after income tax | |||
RHI Magnesita N.V. shareholders | |||
Non-controlling interests | (26) | ||
in € | |||
Earnings per share - basic | (15) | ||
Earnings per share - diluted | (15) |
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2022
in € million | Note | 2022 | 2021 |
Profit after income tax | |||
Currency translation differences | |||
Unrealised results from currency translation | |||
Unrealised results from net investment hedge and foreign operations | (37) | ( | ( |
Deferred taxes thereon | (14) | ( | |
Current taxes thereon | (14) | ||
Reclassification to profit or loss - Disposal subsidiaries | ( | ||
Cash flow hedges | |||
Unrealised fair value changes | (36) | ||
Reclassification to profit or loss | ( | ||
Deferred taxes thereon | (14) | ( | ( |
Items that will be reclassified subsequently to profit or loss, if necessary | |||
Remeasurement of defined benefit plans | |||
Remeasurement of defined benefit plans | (29) | ||
Deferred taxes thereon | (14) | ( | ( |
Share of other comprehensive income of joint ventures and associates | |||
Reclassification to other reserves due to disposal of joint ventures and associates | ( | ||
Items that will not be reclassified to profit or loss | |||
Other comprehensive income after income tax | |||
Total comprehensive income | |||
RHI Magnesita N.V. shareholders | |||
Non-controlling interests | (26) |
Consolidated Statement of Financial Position
as at 31 December 2022
in € million | Note | 31.12.2022 | 31.12.2021 |
ASSETS | |||
Non-current assets | |||
Goodwill | (17) | ||
Other intangible assets | (18) | ||
Property, plant and equipment | (19) | ||
Investments in joint ventures and associates | |||
Other non-current financial assets | (35) | ||
Other non-current assets | (20) | ||
Deferred tax assets | (14) | ||
Current assets | |||
Inventories | (21) | ||
Trade and other current receivables | (22) | ||
Income tax receivables | (14) | ||
Other current financial assets | (35) | ||
Cash and cash equivalents | (23) | ||
EQUITY AND LIABILITIES | |||
Equity | |||
Share capital | (24) | ||
Group reserves | (25) | ||
Equity attributable to shareholders of RHI Magnesita N.V. | |||
Non-controlling interests | (26) | ||
Non-current liabilities | |||
Borrowings | (27) | ||
Other non-current financial liabilities | (28) | ||
Deferred tax liabilities | (14) | ||
Provisions for pensions | (29) | ||
Other personnel provisions | (30) | ||
Other non-current provisions | (31) | ||
Other non-current liabilities | |||
Current liabilities | |||
Borrowings | (27) | ||
Other current financial liabilities | (28) | ||
Trade payables and other current liabilities | (32) | ||
Income tax liabilities | (14) | ||
Current provisions | (31) | ||
Consolidated Statement of Cash Flows
for the year ended 31 December 2022
in € million | Note | 2022 | 2021 |
Cash generated from/(used in) operations | (33) | ( | |
Income tax paid less refunds | ( | ( | |
Net cashflow from operating activities | ( | ||
Investments in property, plant and equipment and intangible assets | ( | ( | |
Investments in subsidiaries net of cash acquired | ( | ||
Cash flows from sale of subsidiaries net of cash disposed of | ( | ||
Cash receipts from the sale of equity instruments of interests in joint ventures | |||
Cash inflows from the sale of property, plant and equipment | |||
Cash inflows from the sale of financial assets | |||
Dividends received from joint ventures and associates | |||
Investment subsidies received | |||
Interest received | |||
Cash inflows/outflows from non-current receivables | ( | ||
Net cash used in investing activities | ( | ( | |
Repurchase of treasury shares | ( | ||
Acquisition of non-controlling interests | ( | ||
Dividends paid to RHI Magnesita shareholders | ( | ( | |
Dividend paid to non-controlling interests | ( | ( | |
Proceeds from long-term financing | |||
Repayments of long-term financing | ( | ( | |
Changes in current borrowings | ( | ||
Interest payments | ( | ( | |
Repayment of lease obligations | ( | ( | |
Interest payments from lease obligations | ( | ( | |
Cash flows from derivatives | ( | ||
Net cash (used in)/provided by financing activities | (34) | ( | |
Total cash flow | ( | ( | |
Change in cash and cash equivalents | ( | ( | |
Cash and cash equivalents at beginning of period | |||
Foreign exchange impact | ( | ||
Cash and cash equivalents at end of period | (23) |
Consolidated Statement of Changes in Equity
for the year ended 31 December 2022
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 | Equity attributable to shareholders of RHI Magnesita N.V. | Non-controlling interests | Total equity |
Note | (24) | (25) | (25) | (25) | (25) | (25) | (25) | (25) | (26) | ||
31.12.2021 | ( | ( | ( | ( | |||||||
Profit after income tax | |||||||||||
Currency translation differences | ( | ||||||||||
Cash flow hedges | |||||||||||
Defined benefit plans | |||||||||||
Other comprehensive income after income tax | ( | ||||||||||
Total comprehensive income | |||||||||||
Transactions with shareholders | |||||||||||
Dividends | ( | ( | ( | ( | |||||||
Share transfer/vested LTIP | ( | ||||||||||
Change in non-controlling interests due to addition to consolidated companies 1) | |||||||||||
Reclassification of puttable non-controlling interests without a change of control 1) | ( | ( | ( | ( | |||||||
Change in non-controlling interests due to addition to consolidated companies 2) | |||||||||||
Change in non-controlling interests without a change of control 2) | ( | ( | ( | ( | |||||||
Share-based payment expenses | |||||||||||
Transactions with shareholders | ( | ( | ( | ||||||||
31.12.2022 | ( | ( | ( | ||||||||
1)Further information is provided under Note (35) and Note (42).
2)Further information is provided under Note (42).
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 | (24) | (25) | (25) | (25) | (25) | (25) | (25) | (25) | (26) | |||
31.12.2020 | ( | ( | ( | ( | ||||||||
Profit after income tax | ||||||||||||
Currency translation differences | ( | |||||||||||
Cash flow hedges | ||||||||||||
Defined benefit plans | ||||||||||||
Share of other comprehensive income of joint ventures and associates | ( | |||||||||||
Other comprehensive income after income tax | ( | ( | ||||||||||
Total comprehensive income | ( | |||||||||||
Dividends | ( | ( | ( | ( | ||||||||
Shares repurchased 1) | ( | ( | ( | |||||||||
Reclassification of puttable non-controlling interests without change of control | ( | ( | ||||||||||
Change in non-controlling interests due to addition to consolidated companies | ||||||||||||
Reclassification of puttable non-controlling interests without a change of control | ( | ( | ( | ( | ||||||||
Share-based payment expenses | ||||||||||||
Transactions with shareholders | ( | ( | ( | ( | ||||||||
31.12.2021 | ( | ( | ( | ( | ||||||||
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.
Notes
to the Consolidated Financial Statements 2022
Principles and Methods
1. Authorisation of Financial Statements and Statement of Compliance with International Financial Reporting Standards
The Consolidated Financial Statements of RHI Magnesita N.V. public limited company 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 Kranichberggasse 6, 1120 Vienna, Austria
The Group is a global industrial group whose core activities include 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.
Basis for preparation
The Consolidated Financial Statements of the Group have been prepared on a going concern basis and in accordance with IFRSs as issued by the IASB and interpretations issued by the IFRIC, as endorsed by the European Union (EU).
The accounting policies that follow have been consistently applied to all years presented, except where otherwise indicated. 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.
The financial year of RHI Magnesita N.V. and the Group corresponds to the calendar year. Subsidiaries with a financial year different to the Group, due to local legal requirements, provide financial information to allow consolidation consistent with the Group’s financial year. The Consolidated Financial Statements are presented in Euros and all values are rounded to the nearest € million, except where otherwise indicated. The Group has availed the exemption provided by section 264 paragraph 3 HGB of the German commercial Code for the following entities: RHI Urmitz AG & Co. KG (Koblenz), Magnesita Refractories GmbH (Wiesbaden), RHI GLAS GmbH (Wiesbaden), RHI Refractories Site Services GmbH (Wiesbaden), RHI Magnesita Deutschland AG (Wiesbaden). The exemption permits these entities, which are consolidated, to not prepare their stand-alone Financial Statements under local regulations.
Basis of consolidation
The Consolidated Financial Statements consolidate the Financial Statements of the Group. Subsidiaries are consolidated from the date on which the Group obtains control, including when control is obtained via potential voting rights, and continue to be consolidated until the date that control ceases.
The financial information of subsidiaries is prepared for the same reporting year as the parent company, using consistent accounting policies. When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in the Statement of Profit or Loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in Other Comprehensive Income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This treatment may mean that amounts previously recognised in Other Comprehensive Income are recycled through the Statement of Profit or Loss. Intercompany balances and transactions, including unrealised profits arising from intragroup transactions, are eliminated in full. Unrealised losses are eliminated in the same way as unrealised gains except that they are only eliminated to the extent that there is no evidence of impairment.
Non-controlling interests represent the equity in subsidiaries that is not attributable, directly or indirectly, to the Group’s shareholders.
Please refer to the Company Financial Statements of RHI Magnesita N.V. for a list of the Company’s subsidiaries, joint ventures and associates in which it holds more than 20%.
Going concern
In considering the appropriateness of adopting the going concern basis in preparing the Consolidated Financial Statements, the Directors have assessed the potential cash generation of the Group and considered a range of downside scenarios that model different degrees of potential economic downturn, using the same model performed for the viability assessment. This assessment covers the period to 31 December 2024.
The scenarios considered by the Directors include a severe but plausible downside and a reverse stress test which determines the level of EBITDA that could breach the Group’s debt covenant. Further mitigating actions within management control would be undertaken in such scenarios, including but not limited to: fixed cost and capital expenditure reduction, raising debt or reducing or cancelling the dividend. These mitigation actions were not incorporated in the downside modelling.
The Directors have also considered the Group’s current liquidity and available facilities. As of 31 December 2022, the Consolidated Statement of Financial Position reflects cash and cash equivalents of €520.7 million. In addition, the Group has access to a €600 million Revolving Credit Facility (RCF), which is currently undrawn and not relied upon for the purpose of the going concern assessment. The Group is in compliance with the debt covenant.
In the scenarios assessed and taking into account liquidity, available resources and before the inclusion of all mitigating actions, the Directors consider it is appropriate to continue to adopt the going concern basis in preparing the Consolidated Financial Statements for the period ended 31 December 2022.
2. Impact of new financial reporting standards and interpretations
Adoption of new financial reporting standards and interpretations
The following amendments of standards have become effective during the reporting period. None of these amendments had a material impact on the Group’s accounting and measurement principles.
Standard | Title | Effective date1) | Effects on RHI Magnesita Consolidated Financial Statements |
Amendments of standards | |||
IFRS 3 | Amendments to IFRS 3 Business Combinations (Update of an outdated reference to the Conceptual Framework in IFRS 3 without significantly changing the requirements in the standard) | 01.01.2022 | No material impact |
IAS 16 | Amendments to IAS 16 Property Plant and Equipment (Proceeds received from selling items produced while the entity is preparing the asset for its intended use, is prohibited from deducting against the cost of an item of PP&E. Instead, such proceeds are to be recognised in profit or loss) | 01.01.2022 | No material impact |
IAS 37 | Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets (Onerous Contracts — Cost of Fulfilling a Contract. It clarifies that the direct costs of fulfilling a contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly related to fulfilling contracts) | 01.01.2022 | No material impact |
Annual Improvements 2018-2020 | Annual Improvements to IFRS Standards 2018–2020 (IFRS 1, IFRS 9, IFRS 16 and IAS 41) | 01.01.2022 | No material impact |
1) According to EU Endorsement Status Report of 22.09.2022.
New financial reporting standards and interpretations not yet applied
The following financial reporting standards have been adopted by the EU and were not early adopted and are not expected to have a significant impact on the Group.
Standard | Title | Effective date1) | Impact |
New standards | |||
Amendments of standards | |||
IFRS 17 | Amendments to IFRS 17 Insurance contracts (Require a current measurement model where estimates are remeasured in each reporting period. Also allows a choice recognising changes in discount rates) | 01.01.2023 | No material impact |
IAS 12 | Amendments to IAS 12 Income Taxes (Require to recognise deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences) | 01.01.2023 | No material impact |
IAS 1 | Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 (Disclosure of material rather than significant accounting policies) | 01.01.2023 | No material impact |
IAS 8 | Amendments to IAS 8 Accounting policies (Changes in Accounting Estimates and Errors clarifies how to distinguish changes in accounting policies from changes in accounting estimates) | 01.01.2023 | No material impact |
1) According to EU Endorsement Status Report of 22.09.2022.
The IASB issued further standards, amendments to standards and interpretations yet to be adopted by the EU. They are not expected to have a significant impact on the Group.
Standard | Title | Effective date1) | Impact |
New standards | |||
Amendments of standards | |||
IAS 1 | Amendments to IAS 1 Presentation of Financial Statements (Classification of Liabilities as Current or Non-current, depending on the rights that exist at the end of the reporting period) | 01.01.2023 | No material impact |
IFRS 16 | Amendments to IFRS 16 Leases (Lease Liability in a Sale and Leaseback) | 01.01.2024 | No material impact |
1) According to EU Endorsement Status Report of 22.09.2022.
3. Significant Accounting Policies, Judgements and Estimates
Interests in other entities
Business combinations
Business combinations are accounted for using the acquisition method. The identifiable assets acquired and liabilities assumed, including any contingent consideration, are recognised at their fair values at the acquisition date. The amount of the purchase consideration and value of non-controlling interest on acquisition, if any, above the fair value of assets and liabilities is recognised as goodwill (see separate policy). Negative goodwill, if any, is recognised within other income immediately. Transaction costs related to a business combination are expensed as incurred. When control is obtained, any non-controlling interest is recognised as the proportionate share of the identifiable net assets. The acquisition of a non-controlling interest in a subsidiary and the sale of an interest while retaining control, are accounted for as transactions within equity unless they result in the loss of control. The difference between the purchase consideration or sale proceeds after tax and the relevant proportion of the non-controlling interest, measured by reference to the carrying amount of the interest’s net assets at the date of acquisition or sale, is recognised in retained earnings as a movement in equity attributable to the Group’s shareholders.
Where the Group acquires less than 100% of shares in a business combination, IFRS 3 ‘Business Combinations’ allows an accounting policy choice whereby non-controlling interest is either reflected at fair value including allocation of goodwill or at the fair value of the assets and liabilities acquired, excluding goodwill. This accounting policy choice can be exercised individually for each acquisition. For business combinations achieved in stages, the Group’s previously held equity interest is remeasured to fair value at the acquisition date. Any gains and losses arising from such remeasurement are recognised in profit or loss.
Net assets of subsidiaries not attributable to the Group are shown separately in equity as non-controlling interests.
As part of a business acquisition or subsequently, the Group may enter into agreements with non-controlling interests in the form of a call or written put option to acquire the outstanding shares. A call option provides the Group with the right to acquire the outstanding shares not already owned while a written put option allows the non-controlling interest to sell their shares to the Group. The option price may be based on an earnings multiple such as EBITDA subject to contractual limits, if any, or may be fixed and exercisable at a future date. A financial liability is recognised on the written put option at the present value of the estimated redemption amount. Where the option is assessed to result in the non-controlling interest transferring the risks and rewards of ownership to the Group, on acquisition, the financial liability forms part of the purchase consideration with no value assigned to non-controlling interests. The financial liability is measured in line with IAS 32 ‘Financial Instruments: Presentation’ at amortised cost with subsequent changes in value reflected in the Statement of Profit or Loss. For fixed price call and put options, the risks and rewards of ownership relating to the outstanding shares are assumed to have transferred to the Group.
Where the risks and rewards of ownership under the option are not transferred to the Group, the financial liability is not considered as part of the purchase consideration and a non-controlling interest is recognised on acquisition. The financial liability is initially recognised against equity. The Group applies the provisions of IAS 32 ‘Financial Instruments: Presentation’ and subsequently derecognises the non-controlling interest to the extent that it is equal or less than the financial liability, against equity. The financial liability is measured at amortised cost with changes in the carrying amount reflected in the Statement of Profit or Loss.
Dividends paid to non-controlling interest with a fixed price or option are reflected as an expense within other finance expense unless there is a contractual right to reduce the liability.
Significant judgements: Control over Horn & Co Minerals Recovery and SÖRMAŞ During the year, the Group acquired 51.0% and 86,8% interest in Horn & Co Minerals Recovery (“Mireco”) and SÖRMAŞ, respectively. Judgement is required in assessing the level of control or influence over another entity in which the Group holds an interest. The Group considered its respective rights and power to control in terms of the purchase agreements and judged that the Group controls both entities and consolidated these from the date of control. The Group exercises control over Mireco and SÖRMAŞ as it has the power to steer the relevant activities of the business and can use this power to affect the variable returns that it is exposed to. This is achieved through the Group’s voting rights and management representation. |
Significant judgements: Recognition of non-controlling interest of Mireco The acquisition of Mireco includes a call and written put option for the Group to acquire the outstanding shares based on an EBITDA to net debt earnings multiple. The Group has judged, based on the terms and pricing of the call and written put option, that the risks and rewards of ownership associated with the outstanding shares have not been transferred and a non-controlling interest was recognised on acquisition. The financial liability arising from the call and written put option has been recognised against the carrying value of the non-controlling interest and equity in accordance with the Group’s policy. |
Significant estimates Estimates relating to the calculation of fair values of acquired assets, liabilities and contingent liabilities are required within the context of business combinations. Where 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. Fair values of physical assets are estimated with reference to comparable assets in the market. When making estimates in the context of purchase price allocations on major acquisitions, the Group consults with independent experts who accompany the execution of the discretionary decisions and record it in appraisal documents. The Group has a period of one year from the date of control of the acquired businesses to update initial fair value estimates. The Group does not expect changes in these fair value estimates to have a significant impact on the recognised assets and liabilities over the remaining measurement period. |
Goodwill and Other intangible assets
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities of a subsidiary at the date of acquisition. Goodwill is initially recognised at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill recognised as an asset is reviewed for impairment at least annually.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Other intangible assets
Mining rights
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 economically viable volume.
Customer relationships
Customer relationships arise from the acquisition of business and are measured at assigned fair values on acquisition, less accumulated amortisation and impairments. These intangibles are amortised on a straight-line basis over their expected useful lives.
Development costs
Research costs are expensed in the year incurred and included in general and administrative expenses. Development costs, including internally developed software are only capitalised if the costs can be measured reliably and are expected to result in future economic benefits either through use or sale. Capitalisation will also only arise when the product or process development can be clearly defined and is feasible in technical, economic and capacity terms. For internally developed software, costs are capitalised when these can be directly and conclusively allocated to individual programmes and represent a significant extension or improvement on existing software. All other internally developed software costs are expensed. Development costs are amortised on a straight-line basis over their expected useful lives of up to ten years, with internally developed software amortised over a period of up to four years. Amortisation is recognised in cost of sales.
Other intangible assets
These mainly represent purchased third party software, land-use rights and patent fees and are recognised when future associated economic benefits are expected to accrue to the Group. These intangibles are initially measured at their acquisition cost and amortised over their expected useful lives.
The useful lives of the Group’s main classes of intangible assets are:
Customer relationships | 6 to 15 years |
Internally generated intangible assets | 4 to 18 years |
Other intangible assets | 4 to 65 years |
The useful economic lives of intangible assets are reviewed regularly and adjusted if necessary.
The carrying value of other intangible assets are assessed at each reporting period for indicators of impairments. See below for accounting policy relating to impairment of non-current assets other than goodwill and intangible assets with indefinite useful live.
Significant judgement: Mineral Rights Management have assessed that given the few or no viable alternatives for the Group’s refractory products, which are extracted from the Group’s mines and used in the construction and automotive industries together with their continued use in the transition to a green economy, no indicators of impairment have arisen and as a consequence the useful lives remain unchanged. |
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 their expected useful life to their estimated residual values and from when they are available for use in the manner intended by management.
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 a cost of the assets. 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 its 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.
Land and plant under construction are not depreciated. Depreciation of property, plant and equipment is based on the following useful lives:
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 |
The carrying value of property, plant and equipment is assessed at each reporting period for indicators of impairments. See below for accounting policy relating to impairment of non-current assets other than goodwill and intangible assets with indefinite useful live.
The residual values and economic useful lives of property, plant and equipment, 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 when economic benefits are expected to arise to the Group. 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.
Significant estimates 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. No such events are expected to arise which would have a material impact on carrying values within 12 months from the balance sheet date. |
Leases
A contract, or part of a contract, that conveys the right to control the use of an identified asset for a period of time in exchange for payments to be made to the owners (lessors) is accounted for as a lease. Contracts are assessed to determine whether it is or contains, a lease at inception or when the terms and conditions of a contract are significantly changed. The lease term is the non-cancellable period of a lease, together with contractual options to extend or to terminate the lease early, where it is reasonably certain that an extension option will be exercised, or a termination option will not be exercised. At the commencement of a lease contract, a right-of-use asset and a corresponding lease liability are recognised, except for low-value items or for lease terms of less than 12 months. The commencement date of a lease is the date on which the underlying asset is made available for use. The lease liability is measured at an amount equal to the present value of the lease payments during the lease term that are not paid at that date. The lease liability includes contingent rentals and variable lease payments that depend on an index, rate, or where they are fixed payments in substance.
The lease liability is remeasured when the contractual cash flows of variable lease payments change due to a change in an index or rate when the lease term changes following a reassessment. Lease payments are discounted using the interest rate implicit in the lease. If that rate is not readily available, the incremental borrowing rate is applied. The incremental borrowing rate reflects the rate of interest that the lessee would have to pay to borrow over a similar term and similar security, the funds necessary to obtain an asset of a similar nature and value to the right-of-use asset in a similar economic environment.
In general, a corresponding right-of-use asset is recognised for an amount equal to each lease liability, adjusted by the amount of any pre-paid lease payment relating to the specific lease contract, less any lease incentives and for estimated restoration and removal costs. The depreciation on right-of-use assets is recognised in the Statement of Profit or Loss. Right-of-use assets are assessed for impairment indicators (see accounting policy on impairment of non-current assets).
Impairment of goodwill, property, plant and equipment and other intangible assets
Goodwill
Goodwill is reviewed at least annually for impairment. Any impairment loss is recognised as an expense immediately and is not subsequently reversed. For the purpose of impairment testing, goodwill is allocated to groups of individual Cash-Generating Units (CGUs) expected to benefit from the combination. If the recoverable amount of the CGU is less than the carrying amount of goodwill allocated to it, the resulting impairment loss is applied first to the allocated goodwill and then to the other assets on a pro-rata basis of the carrying amount of each asset. Reversals of impairment losses on goodwill are not permitted. The cash flows used to determine the recoverable amount of the CGU, including goodwill, is consistent with the description provided below for property, plant and equipment and other intangibles.
Significant estimates: Goodwill Management makes use of various estimates and assumptions in determining the cash flow forecasts used in the impairment testing for goodwill. Key input assumptions include discount rates used to discount cash flows and the perpetual growth rate of the associated CGU. The effect of a 10% adverse change in the estimated discount rate or an adverse change of 50% in the perpetual growth rate would not result in an impairment of goodwill. For further details on goodwill impairment, refer to Note (17). |
Property, plant and equipment and other intangibles
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. An asset is considered to be impaired if its recoverable amount is less than its carrying amount. In the Group, individual assets do not generate cash inflows independent of one another and assets are combined in CGUs, which largely generate independent cash inflows. These CGUs are combined in strategic business units and reflect the market presence and appearance and drive cash inflows. 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 the 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 products at the customer’s plant, from the appropriate installation and support of optimal operations, to environmentally sound disposal with the customer or 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 CGUs 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.
The recoverable amount of a CGU is the higher of its fair value less costs of disposal and its value in use (present value of future cash flows). In assessing value in use, the estimated future cash flows of the asset or CGU in its present condition are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks, including country, specific to the CGU. In determining fair value less costs to sell, consideration will be given to whether the value of the CGU can be determined from an active market (e.g., recognised exchange) or a binding sale agreement which are classified as level 1 in the fair value hierarchy under IFRS 13 ‘Fair Value Measurements’. Where this is not determinable, fair value less costs to sell for a CGU is usually estimated with reference to a discounted cash flow model, similar to the method used for value in use, but may include estimates of future production, revenues, costs and capital expenditure not included in the determination of value in use. Additionally, cash flow estimates include the impact of tax and are discounted using a post-tax discount rate. An estimate made on this basis is classified as level 3 in the fair value hierarchy.
The cash flows used in determining the recoverable amount are aligned with the first four years of the strategic business and financial planning models and incorporates a terminal value. 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. To forecast the CGUs’ cash flows, management predicts the growth rate using external sources for the development of the customers’ industries and expert assumptions, including forecasts about the regional growth of steel production and the output of the non-steel clients. Growth rates are also influenced by the development of the specific refractory consumption patterns, including technological improvements.
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 or for other intangible assets ceases to exist, a reversal of the impairment is recognised in profit or loss. An impairment loss is reversed only to the extent that the CGUs carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised in prior years.
Significant judgements Management reviewed CGUs for indicators of impairment. These indicators included both external factors affecting the CGUs, such as laws and regulations in specific countries and global and local economic conditions and internal factors, including but not limited to, useful lives of assets, major breakdowns or decisions to divest from certain businesses. Based on the impairment indicator review, no impairment indicators were identified at any of the CGU, which did not have goodwill allocated to it. Additionally, management has assessed the useful lives of assets and these continue to be appropriate due to the limited refractory and other product alternatives available and as the steel and industrial sectors in which the Group operates, continue to play a significant part in the transition towards sustainable output and the transition to a green economy. |
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 at amortised cost, fair value through profit or loss or 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.
Financial assets are classified as amortised cost, if the contractual cash flows include solely payments of principal and interest and held in order to collect the contractual cash flows. If the contractual cash flows include solely payments of principal and interest, but are held collect both the contractual cash flows and sell the financial asset, then they are classified as fair value through other comprehensive income. If the contractual cash flows do not solely include payments of principal and interest, then they are classified as fair value through profit or loss.
The Group initially recognises securities on the trading date when it 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.
Investment in debt securities are 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.
Investments in equity securities, including non-consolidated subsidiaries, are of minor importance and recognised and measured at fair value through profit or loss, since the irrevocable option for subsequent measurement at fair value through OCI was not exercised.
Financial assets at amortised costs are measured by applying the effective interest method.
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 below).
In factoring arrangements, trade receivables are derecognised where the Group transfers substantially all the risks and rewards associated with the financial assets.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, cheques received, cash at banks and short-term cash deposits with an original term of up to three months. Moreover, investments in money market funds exposed to insignificant value fluctuations due to their high credit rating and investments in short-term money market instruments that can be converted to defined cash amounts within a few days at any time, are also reflected as cash equivalents.
Borrowings
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 periods, these liabilities are measured at amortised cost applying the effective interest rate method.
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.
Trade payables and other current liabilities
These liabilities are initially recognised at fair value, and subsequently measured at amortised cost. The Group may participate in supply chain finance arrangements whereby suppliers may elect to receive a discounted early payment of their invoice from a bank as opposed to the agreed contractual payment terms. Where this arises, the Group settles the amount owed to the bank. The invoice due date as well as the value of the original liability remains unaltered. The Group assesses whether these arrangements modify the terms of the original trade payable. Financial liabilities subject to supply chain finance arrangements, that do not modify the terms of the original invoice, continue to be classified as trade payables.
Significant Judgement: Trade payables subject to supply chain finance arrangements Management have judged that trade payables subject to supply chain finance arrangements do not modify the terms of the original invoice and as such the affected invoices continue to be recognised as such. |
Derivative financial instruments and hedging activities
Derivative financial instruments not designated as hedges
Derivative contracts are used in the management of interest rate risk, commodity price risk and foreign currency risk. These derivative financial instruments, which are not designated in an effective hedging relationship in accordance with IFRS 9 ‘Financial Instruments’, are recognised initially at fair value on the date on which a derivative contract is entered into and subsequently remeasured at fair value with changes in fair value reflected in the Statement of Profit or Loss. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
Derivative financial instruments include forward exchange contracts and embedded derivatives in open orders denominated in a currency other than the functional currency of either contracting party, with the assessment 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.
Forward purchase or sale arrangements for the physical delivery of non-financial assets that are entered into in line with the Group’s expected purchase, sale or usage requirements (“own use”) and are normally entered into to hedge the associated price risk are not recognised or measured at fair value. These forward contracts are assessed to be off-balance-sheet executory contracts due to their own use features. If the own use exemption is not met, the forwards will be recognised at fair value, with fair value remeasurement recorded in the Statement of Profit or Loss.
Significant Judgement: Own use exemption on gas and power forward purchase and physical delivery CO2-certificate forwards Due to the reduction of free CO2 emission certificates and the expected increase in CO2 market prices, the Group hedges the associated price risk by use of physical delivery forward purchases for own use. The Group also enters into fixed price and quantity forward gas and power contracts to secure supply for its production process and reduce price volatility. The own use exemption does not require fair value recognition and measurement of the forward purchases and thus avoid volatility in the Statement of Profit of Loss. The own use exemption requires that purchases of these forward contracts will be utilised. The Group settles the forwards through physical delivery and does not intend to sell any (unexpected) surplus of either gas, power or CO2 emission certificates for speculative purposes. Management have judged that these forward purchases based on current and expected future requirements satisfy the own use exemption and have not applied fair value recognition and measurement. |
Derivative financial instruments designated as Cash flow hedges
For derivative financial instruments which are designated as an effective cash flow hedge in accordance with IFRS 9 ‘Financial Instruments’, hedge accounting is applied. The hedging instruments, used to hedge the underlying items, are measured at fair value with the effective part of the fair value changes recorded in Other Comprehensive Income as an unrealised gain or loss. At the time of the realisation of the underlying transaction, the fair value changes of the hedging instrument recognised in Other Comprehensive Income 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. Where the hedged item is a non-financial asset or liability, the amount accumulated in Other Comprehensive Income is transferred to the initial carrying amount of the asset or liability. If the hedged transaction is no longer expected to take place, the accumulated amount recorded in Other Comprehensive Income is reclassified to the Statement of Profit or Loss. All relationships between hedging instruments and hedged items are documented, as well as risk management objectives and strategies for undertaking hedge transactions. The effectiveness of hedges is also continually assessed and hedge accounting is discontinued when there is a change in the risk management strategy.
Hedge of net investment
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 in Other Comprehensive Income is reclassified to the Statement of Profit or Loss.
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 under the contract and the cash flows expected to be received. The measurement of expected credit losses is generally a function of the probability of default, loss given default and the exposure at default.
Loss allowance is measured for expected credit losses on debt instruments, trade receivables and contract assets measured at amortised cost. 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 ECL 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 relevant in determining if the 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.
The Group makes use of the practical expedient for financial instruments with an ‘investment grade’ rating that it is assumed to be of low credit risk and with no significant increase in the credit risk. Under the practical expedient, 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 assumes that a default event has occurred when trade receivables are 180 days past due unless reasonable and supportable information confirms otherwise. 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 recovering amounts due.
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 materials 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.
Provisions
Provisions are recognised when the Group incurs a legal or constructive obligation as a result of past events, 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.
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 recognised once 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.
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 a probable loss. Assessment of the likelihood of loss includes analysis of available evidence, including the opinion of internal and external legal advisors of the Group.
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 within current provisions.
Employee related benefits
Provisions for Post-employment benefits
Pension plans
With respect to post-employment benefits relating to pensions, a differentiation is made between defined contribution and defined benefit plans.
Defined contribution plans limit the Group’s obligation to the agreed contributions to earmarked pension schemes. The contributions are expensed as incurred.
Defined benefit plans require the Group to provide agreed benefits to active and former employees and their dependents.
Pension obligations are measured using the projected unit credit method and is netted against the fair value of the plan assets, if any. If the plan assets are not sufficient to cover the obligation, the net obligation is recognised as a liability. However, if the plan assets exceed the obligations, the net surplus recognised is limited to reductions of future contribution payments to the plan and is presented as other non-current assets in the Statement of Financial Position. The Group applies the requirements of IFRIC 14 and restricts recognition of the net surplus by applying an asset recognition ceiling where the Group does not have an unconditional right to a refund, assuming full settlement of the liabilities. Changes in the asset ceiling are recorded in Other Comprehensive Income.
The present value of defined benefit obligations are determined separately for each plan, annually, by independent qualified actuaries. 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, which are based 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 are based on an average of past years, which is also considered to be realistic for the future, while the retirement age is based on the respective statutory provisions of the country concerned.
Remeasurement gains and losses are recorded net of deferred taxes under Other Comprehensive Income in the period incurred.
Significant estimate: Pension plans The measurement of defined benefit obligation and plan assets requires use of estimates such as discount rates, mortality rates, salary increases and inflation. These estimates are reviewed and update when a valuation is performed by third party experts. Further details of the estimates and assumptions together with sensitivities on changes to assumptions is reflected in Note (29). Changes in these assumptions may result in differences between cash outflows expected at the reporting date and actual cash outflows. |
Other post employment benefits
Includes provisions for termination benefits 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 and is regarded as a post employment benefit under IAS 19 ‘Employee Benefits’. 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 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 plans and included in the personnel expenses of the functional areas.
Other employee benefits
This includes service anniversary bonuses, payments to semi-retirees and lump-sum settlements.
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. 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.
Income taxes
Income tax expense represents the sum of current tax and deferred tax.
Income tax is recognised in the Statement of Profit or Loss, except to the extent that it relates to items recognised in Other Comprehensive Income or directly in equity, including tax related impacts.
Current tax is based on the taxable profit for the period and is determined in accordance with the rules applicable in the relevant jurisdictions and includes taxes relating to prior periods. The liability for current tax is calculated using tax rates and laws that have been enacted or substantively enacted at the balance sheet date.
Deferred tax is provided, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences except:
- • Where the deferred tax liability arises on initial recognition of goodwill
- • Where the deferred tax liability arises on the initial recognition of an asset or liability in a transaction that is not a business combination, at the time of the transaction, affects neither accounting profit nor taxable profit or loss and, at the time of the transaction, does not give rise to equal taxable and deductible temporary differences
- • In respect of taxable temporary differences associated with investments in subsidiaries and associates and interest in joint arrangements, where the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future
- • For financial instruments which were issued by subsidiaries to non-controlling interests and which are classified as a financial liability in accordance with IFRS
Deferred tax assets are recognised for deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which these can be utilised, except where the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit and loss and, at the time of the transaction, does not give rise to equal taxable and deductible temporary differences.
In respect of deductible temporary differences associated with investments in subsidiaries, associates and interest in joint arrangements, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable or increased to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. Deferred taxes of the Austrian group companies are determined at the corporation tax rate which is expected to be applicable when the temporary differences reverse (24.0% if the temporary difference is reversing in 2023 and 23.0% if the temporary difference reverses in 2024 or later). Deferred tax assets and liabilities of the Brazilian group companies are measured at 34.0%.
Deferred tax assets and liabilities are offset only when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the current tax assets and liabilities on a net basis or to realise the assets and settle the liabilities simultaneously.
Where tax legislation may not be clear or result in uncertainty, the Group will determine its tax obligations and resulting income tax expense using an approach which it believes has a probable chance of being accepted by the tax authorities based on historical experience, legal advice and communication with the tax authorities, as appropriate. Where the Group adopts an approach to an uncertain tax position that it regards as having a less than probable chance of being accepted by the tax authorities, the income tax expense and resulting income and deferred tax balances are adjusted to reflect this uncertainty using either the most likely outcome method or the expected value method.
Significant judgement: Uncertain tax treatments and recognition of deferred tax assets Management makes judgements in relation to the recognition of current and deferred income taxes. In making judgements, management believes that the tax positions the Group adopts are in line with the applicable legislation and reflect the probable outcome. The tax obligations and receivables, upon audit by the tax authorities at a future date, may differ as a result of differing interpretations. These interpretations may impact the expected timing and quantum of taxes payable and recoverable. |
Significant estimates: Recognition of deferred tax assets Income tax expense is based on the tax laws applicable in the individual countries. Due to their complexity, the tax items presented may be subject to different interpretations by local finance authorities. When determining the amount of the deferred tax assets to be recognised, mainly relating to tax-losses, an estimate is required of future taxable income which is influenced by factors such as prices, gross profit margins and interest rates. A 10% change in the future taxable profit from the assumption made on the reporting date within the planning period defined for the accounting and measurement of deferred taxes would not result in a significant change in the carrying amount of deferred tax assets on recognised tax losses, over a 12-month period from the date of these Consolidated Financial Statements. |
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. Revenue is recognised 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 at inception and limits the recognition of revenue subject to the variability, until it is highly probable that a significant reversal of cumulative revenue recognised will not occur. The Group applies the practical expedient in IFRS 15 ‘Revenue from Contracts with Customers’ and does not recognise the impact of financing for payment terms as the average credit terms is currently 60 days. 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 obligation. 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.
For the delivery 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. 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 usually performed before control of the products is transferred to the customer.
In consignment arrangements, the Group retains control of the goods generally until a withdrawal of the products from the consignment 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 usually comprise of two performance obligations being (1) the promise to transfer products and (2) provide services which are capable of being distinct and separately identifiable in the context of the contract. Accordingly, the transaction price is allocated based on the relative stand-alone selling prices of the product and service. Revenue from services is recognised over time using an input method to measure progress towards completion of the service as 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.
Expected penalty fees from guaranteed durabilities on refractory products are considered as a variable consideration in the form of a contract or a refund liability. However, the estimation of the variable consideration is not subject to a constraint as the Group has significant experience with promising durabilities and as a consequence does not expect significant reversal of revenue recognised in prior periods. All other product warranties issued by the Group 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 and is conditional on something other than the passage of time, a contract asset, excluding any amounts presented as a receivable is recognised.
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.
Contract costs, which are defined as the incremental costs of obtaining a contract, are recognised as an asset where the Group expects to recover those costs, except for those costs which are expected to be recovered within 12 months.
As the term of customer contracts is less than one year, the Group adopted the practical expedient not to disclose performance obligations for contracts with original expected duration of less than one year.
Significant Judgement: 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 being the performance of a management refractory service, exists. |
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.
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.
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.
Interest income and expenses
Interest income and expenses are recognised in accordance with the effective interest method.
Dividends
Dividends from investments that are not accounted for using the equity method are recognised in the Statement of Profit or Loss at the time the legal claim arises.
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.
Consolidated subsidiary financial information is based on the currency of the primary economic environment in which it operates (functional currency).
Foreign currency transactions and balances
In individual subsidiaries, joint ventures and associates, transactions in foreign currency are translated into the functional currency at the rate of exchange prevailing on the dates 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 the Statement of 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, other than those measured at fair value, are carried at historical rates and not retranslated subsequent to initial recognition.
Group companies
Financial information of foreign subsidiaries with a functional currency different to the Euro are translated 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.
On disposal of a non-Euro functional currency subsidiary, joint venture or associate, the related accumulated exchange gains and losses recognised in equity are reclassified to the Statement of Profit or Loss. 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.
The Euro exchange rates of the currencies of the Group’s significant operations are shown in the following table:
Closing rate | Average rate1) | ||||
Currencies | 1 € = | 31.12.2022 | 31.12.2021 | 2022 | 2021 |
Brazilian Real | BRL | 5.63 | 6.30 | 5.47 | 6.38 |
Canadian Dollar | CAD | 1.45 | 1.44 | 1.37 | 1.49 |
Chinese Renminbi Yuan | CNY | 7.42 | 7.20 | 7.09 | 7.68 |
Indian Rupee | INR | 88.26 | 83.89 | 82.50 | 87.76 |
US Dollar | USD | 1.07 | 1.13 | 1.06 | 1.19 |
1) Arithmetic mean of the monthly closing rates.
4. Climate change and energy transition
In 2019 the Group announced its commitment to reduce Scope 1 and Scope 2 and 3 (raw materials) CO2 emissions intensity by 15% by 2025, compared to a 2018 baseline. The below describes how the Group has considered climate related impacts in some key areas of the Consolidated Financial Statements and how this translates into the valuation of its assets and measurement of liabilities, as progress is made in reducing its own CO2 emissions and prepares for the energy transition and technological changes that are likely to affect its customer industries.
Note (3) includes the significant accounting estimates, judgements and key sources of estimation uncertainties and how those uncertainties have the potential to have a material effect on the Consolidated Statement of Financial Position in the next 12 months. This note describes the key areas of climate impacts that potentially have longer-term effects on amounts recognised at 31 December 2022.
Financial planning assumptions
As disclosed in the Sustainability section on page 65, climate related risks faced by the Group include physical and transitional risks. The most material transitional risk impact is expected to be higher operating costs due to an increase in the level or scope of carbon pricing and changes to regulatory frameworks. This risk is most prominent in Europe where the existing system of allowances is to be replaced by the Carbon Border Adjustment Mechanism, with all existing CO2 emissions allowances to be progressively phased out by 2034. The Group has also identified climate related opportunities, such as increased demand for its products arising from the transition by its customers to lower-carbon emitting industrial processes and increased demand for refractory products that are produced with a lower carbon footprint.
The Consolidated Financial Statements are based on reasonable and supportable assumptions that represent management’s current best estimate of the range of economic conditions that may exist in the foreseeable future. The Group has performed an assessment of the potential future impact of climate change on key elements of its Consolidated Financial Statements utilising the Paris-aligned Mitigation and Hot House World Limited mitigation scenarios. The largest impact from higher carbon prices as contained in these scenarios is from 2026 onwards. The negative impacts are concentrated within the Group’s assets located in Europe whilst opportunities are expected to be global in nature.
The Group is investing in the research and development of new technologies for the manufacturing of refractories which may enable it over the long term to avoid or capture its CO2 emissions and thereby mitigate the impact of higher carbon prices.
Impairment of Goodwill and PP&E
Cash flow projections for its CGUs are based on the Group’s one-year internal forecasts, the results of which are reviewed by the Board. The forecasts are extrapolated to five years based on management’s expectations. Management then applies a terminal value which is derived from the fifth year forecasted cash flows.
The nominal growth rate is equal to the long-term rate of growth in steel/cement and/or inflation (depending on the country and business involved) and in any case no higher than the average long-term growth rate of the reference market. The Group has also taken account of the long-term impact of climate change, in particular by considering in the estimation of the terminal value a long-term growth rate in line with the change in steel/cement demand in 2030-2050 based on the specific characteristics of the businesses involved.
The Group is not currently subject to the European Carbon Border Adjustment Mechanism (‘CBAM’). However, management believes that it is plausible that the CBAM could impact the Group from 2030 and have modelled the potential impact of the CBAM into its EU assets. Management is currently assessing the strategy and options to maximise the opportunities and minimise the impact of this regulation. Absent to any mitigating action by management, it is expected that the gross profit could reduce by 26% from 2030, on average across the EU assets and increase by 20% in regions outside the EU.
Restoration provisions
Management recognises liabilities that are expected to be incurred in relation to rehabilitation and restoration of the mining sites. As of balance sheet date, the Group’s mines have an expected life between 13 and 100 years. The introduction of more stringent legislation could result in our mining operations to become uneconomical earlier than anticipated thus affecting the timing of our restoration liabilities. The discount rate used to measure asset restoration provisions is between 10-50-years term, in line with available government bond rates.
Management does not expect any reasonably possible change in the expected timing of restoration of our mines to have a material effect on the Group total provisions, assuming cash flows remain unchanged.
Deferred Tax assets
In jurisdictions where new or additional climate change related legislation is enacted, our taxable profits could be affected thereby impacting the recoverability of deferred tax assets. It is expected that sufficient deferred tax liabilities and forecasted taxable profits are available for recovery of the deferred tax assets recognised at 31 December 2022. The assessment of deferred taxes is described in Note (14). For certain deferred tax assets recognised in Brazil, the period extends beyond 5 years. Currently, no legislation is in place in Brazil that could limit the timing and, or the extent of the recognised deferred tax assets.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5. Segmental analysis
The Group comprises the operating segments Steel and Industrial. The segmentation of the business activities reflects the internal control and reporting structures and is regularly monitored by the Chief Executive Officer (Chief Operating Decision Maker (CODM)), who has the responsibility over allocation of resources and evaluates the performance of each segment.
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 and 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. Revenues and Gross profit are the key internal performance measures provided to and used by the CODM. 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 centrally and separately and thus not allocated to the segments.
Segment assets include trade receivables and inventories, which are available to the operating segments and are reported to the CODM for control and measurement, property, plant and equipment, goodwill and other intangible assets, are allocated to the segments based on the capacity of the productive assets base. All other assets are not allocated.
Segment reporting by operating company division
The following tables show the financial information for the operating segments for the year 2022 and the previous year:
2022 in € million | Steel | Industrial | Group 2022 |
Revenue | 2,371.4 | 945.8 | 3,317.2 |
Gross profit | 521.0 | 242.4 | 763.4 |
EBIT | 343.6 | ||
Net finance costs | (73.1) | ||
Profit before income tax | 270.5 | ||
Depreciation and amortisation charges | (101.2) | (43.3) | (144.5) |
Segment assets 31.12.2022 | 2,231.9 | 911.3 | 3,143.2 |
Investments in joint ventures and associates 31.12.2022 | 5.7 | ||
Reconciliation to total assets | 926.0 | ||
4,074.9 | |||
Additions to property, plant and equipment and intangible assets | 128.6 | 68.8 | 197.4 |
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 | |||
Additions to property, plant and equipment and intangible assets | 196.0 | 83.5 | 279.5 |
No single customer contributed 10% or more to consolidated revenue in 2022 and in 2021. Companies that 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 2022 |
Shaped products | 1,100.4 | 692.6 | 1,793.0 |
Unshaped products | 449.3 | 192.1 | 641.4 |
Management refractory services | 755.7 | 0.2 | 755.9 |
Other | 66.0 | 60.9 | 126.9 |
Revenue1) | 2,371.4 | 945.8 | 3,317.2 |
In 2021, revenue was 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 |
Revenue1) | 1,822.9 | 728.5 | 2,551.4 |
1) Revenue includes €1,047.9 million (2021: €749.2 million) relating to the Solutions Business. Solutions Business is a customer classification that is characterised by sales of end-to-end solutions covering large parts of the customer process chain.
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 €44.7 million (2021: €48.0 million) is transferred over time and an amount of €82.2 million (2021: €82.6 million) is transferred at a point of time.
Segment reporting by country
The Revenue is based on the locations of the customers.
in € million | 2022 | 2021 |
Netherlands | 11.2 | 8.2 |
USA | 586.5 | 416.8 |
India | 344.0 | 255.4 |
Brazil | 367.8 | 252.0 |
PR China | 221.6 | 201.2 |
Other countries | 1,786.1 | 1,417.8 |
Revenue | 3,317.2 | 2,551.4 |
The carrying amounts of goodwill, other intangible assets and property, plant and equipment are classified based on the location of the Group companies:
in € million | 31.12.2022 | 31.12.2021 |
Brazil | 464.8 | 396.5 |
Austria | 352.9 | 331.4 |
USA | 234.1 | 229.3 |
PR China | 171.4 | 161.8 |
Other countries | 434.0 | 367.7 |
Goodwill, intangible assets and property, plant and equipment | 1,657.2 | 1,486.7 |
6. Restructuring
Summary of restructuring and write-down expenses recognised as follows:
in € million | 2022 | 2021 |
Restructuring income/(expenses) | 6.8 | (58.8) |
2022
Following the approval by the regional government in Germany for the repair, upgrade and connection of the railway infrastructure to the Mainzlar plant, the Group committed to continue with its operations. The commitment was regarded as an indicator of an impairment reversal, following the write down of the non-current assets in 2020 of €7.7 million. The reversal of the write down amounted to €5.3 million in 2022. Additionally, around €6.4 million in employee restructuring and plant dismantling provisions were reversed.
The Group decided to close the operations at the plant in Dashiqiao, China, resulting in employee restructuring expenses of €2.2 million. Plant idling costs incurred during 2022 of €3.4 million are included within restructuring expenses. The Group continues its negotiations with the joint venture partner to exit its share of the net assets and amounts due of €26.4 million, see Note (28).
2021
In September 2021, the plant in Dashiqiao, China, was shut down and production suspended. The recoverable amount of Dashiqiao’s assets was 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 were recognised, of which €8.7 million was attributable to the Segment Steel and €20.3 million to the Segment Industrial. Further €2.4 million of idle costs were incurred until 31 December 2021 and recorded as restructuring expenses.
For the plant closure at Trieben, Austria, restructuring expenses amounting to €16.3 million were recognised. These mainly related to dismantling and site clean-up costs of €3.1 million and write-down expenses on non-current assets of €12.2 million, of which €8.6 million was attributable to the Segment Steel and €3.6 million to the Segment Industrial. The recoverable amount of these assets was estimated with reference to their expected scrap value, which was deemed negligible.
Following the sale of the plants in Drogheda, Ireland and Porsgrunn in Norway in February 2021, €9.9 million expenses mainly relating to environmental risks were recognised.
In the course of the plant closure in Hagen, Germany, restructuring expenses totalling to €0.6 million were recognised and land was sold resulting in a gain of €4.1 million.
Employee restructuring expenses of €4.7 million were recognised in 2021 under the Group’s 2020 reorganisation plans, which ended in early 2022.
7. Other income
in € million | 2022 | 2021 |
Net amortisation of Oberhausen provision | 2.0 | 7.5 |
Result from deconsolidation incl. recycling of OCI components to P&L | 0.0 | 6.8 |
Income from the disposal of non-current assets | 0.5 | 6.2 |
Miscellaneous income | 2.3 | 8.6 |
Other income | 4.8 | 29.1 |
The net amortisation of the Oberhausen provision includes €9.2 million (2021: €7.5 million) release for the performance against the onerous contract, offset by €7.2 million (2021: €0.0 million) arising from updated estimates. Miscellaneous income mainly includes Government subsidies accrued for certain operational expenses. In 2021, 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.
8. Other expenses
in € million | 2022 | 2021 |
Expenses for strategic projects | (10.1) | (4.7) |
Losses from the disposal of non-current assets | (1.7) | (2.6) |
Miscellaneous expenses | (11.2) | (7.2) |
Other expenses | (23.0) | (14.5) |
Expenses for strategic projects amounting to €10.1 million (2021: €4.7 million) mainly include legal and consulting fees related to business development activities during the year. Miscellaneous expenses mainly consist of accounts receivables and inventory write downs arising from the Ukraine/Russia conflict.
9. 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 2022 and the previous year:
in € million | 2022 | 2021 |
Changes in inventories, own work capitalised | 64.3 | 259.0 |
Cost of materials | (1,365.0) | (1,205.1) |
Energy Costs | (285.7) | (187.2) |
Personnel costs | (627.8) | (547.6) |
Depreciation and amortisation charges | (144.5) | (131.1) |
Write-down expenses | 0.0 | (41.3) |
Other income | 27.1 | 41.2 |
Freight expenses | (285.3) | (222.4) |
Other expenses | (356.8) | (303.1) |
Total cost of sales, selling and marketing, administrative and restructuring expenses | (2,973.7) | (2,337.6) |
Cost of materials includes expenses for raw materials and supplies and purchased goods of €1,317.6 million (2021: €1,166.8 million) and expenses for services received amounting to €47.4 million (2021: €38.3 million).
Amortisation charges of intangible assets are largely recognised within cost of sales. Other expenses mainly include commissions, repairs and maintenance, travel costs, external consulting and information technology costs.
Research and development costs amounted to €41.9 million (2021: €36.7 million), of which €8.6 million (2021: €8.7 million) in development cost were capitalised. Amortisation and impairment of development costs recognised within cost of sales was €3.5 million (2021: €3.5 million).
Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised as an expense in the Statement of 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 2022 amount to €3.5 million (2021: €2.2 million).
Other income of €27.1 million (2021: €41.2 million) mainly includes: Mainzlar reversal of prior year non-current assets write-down of €5.3 million, see Note (6), income from research grants amounted to €4.3 million (2021: €4.0 million), profit on disposal of non-current assets, insurance reimbursements and amortization of grants related to assets.
10. Personnel costs
Personnel costs consist of the following components:
in € million | 2022 | 2021 |
Wages and salaries | (478.5) | (415.2) |
Pension and other post employment benefits | ||
Defined benefit plans | (4.8) | (5.6) |
Defined contribution plans | (11.4) | (6.2) |
Other expenses termination benefits | (5.2) | (7.8) |
Social security contribution | (99.2) | (86.6) |
Fringe benefits | (28.7) | (26.2) |
Personnel expenses (without interest expenses) | (627.8) | (547.6) |
Average employee numbers
The average number of employees of the RHI Magnesita Group based on full time equivalents amounts to:
2022 | 2021 | |
Salaried employees | 6,391 | 5,720 |
Waged workers | 7,119 | 6,564 |
Number of employees on annual average | 13,510 | 12,284 |
124 full time equivalents of salaried employees work in the Netherlands (2021: 108 employees). Total includes average employees of newly acquired businesses from the date of acquisition.
11. Interest income
Includes interest income on cash at banks and similar income amounting to €8.0 million (2021: €2.7 million) and on securities and shares amounting to €0.3 million (2021: €0.6 million). 2021 included interest income of €10.9 million relating to the successful judicial proceeding against tax authorities in Brazil, see Note (22).
12. Foreign exchange effects and related derivatives
The net (loss)/gain on foreign exchange effects and related derivatives consists of the following items:
in € million | 2022 | 2021 |
Foreign exchange losses | (10.0) | (2.0) |
Foreign exchange (losses)/gains from related derivative financial instruments | (13.3) | 4.8 |
Net (losses)/gains on foreign exchange effects and related derivatives | (23.3) | 2.8 |
13. Other net financial expenses
Other net financial expenses consist of the following items:
in € million | 2022 | 2021 |
Net interest expense relating to personnel provisions | (5.7) | (4.6) |
Unwinding of discount of provisions and payables | (8.5) | (5.6) |
Interest expense on non-controlling interest liabilities | (5.3) | (5.2) |
Interest expense on lease liabilities | (1.3) | (1.1) |
Income from the revaluation of NCI put options | 4.7 | 1.1 |
Other interest and similar expenses1) | (14.6) | (5.8) |
Other net financial expenses | (30.7) | (21.2) |
1) Includes mainly costs associated with the trade receivables factoring programme of €7.2 million (2021: €5.2 million).
14.
Taxation
Taxation
Income tax
Income tax consists of the following items:
in € million | 2022 | 2021 |
Current tax expense | (52.7) | (43.2) |
Deferred tax (expense)/income relating to | ||
temporary differences | (11.9) | (12.2) |
tax loss carryforwards | (39.1) | 16.0 |
(51.0) | 3.8 | |
Income tax | (103.7) | (39.4) |
The current tax expense includes favourable net income tax adjustments for previous periods of €2.3 million (2021: €8.4 million favourable).
In recognising deferred tax assets, the Group has considered the impacts of the global economic environment in which it operates. In this context, the relevant uncertainties and potential adverse effects of economic turmoil were taken into consideration when evaluating the recoverability of deferred tax assets, including accumulated tax losses. In arriving at its conclusions, the Group’s latest forecasts and assumptions, as used for goodwill impairment testing and viability statement assessment, were considered. The Group’s forecasted period is four years with the fifth year being the terminal year, consistent with goodwill impairment testing. In Brazil, however, a longer time frame is used due to the annual limitation for use of losses (30% of the taxable profits of the relevant year) which requires a longer-term prediction. Information on tax contingencies is provided under Note (39).
In addition to the income taxes recognised in the Consolidated Statement of Profit or Loss, a tax expense of €29.5 million (2021: €3.1 million, income), was recognised in Other Comprehensive Income mainly relating to cash flow hedges and measurement gains and losses on employee post-employment benefits.
A reconciliation of 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 is shown below:
in € million | 2022 | 2021 |
Profit before income tax | 270.5 | 289.1 |
Income tax expense calculated at 25% (2021: 25%) | 67.6 | 72.3 |
Different foreign tax rates | 5.9 | 5.1 |
Expenses not deductible for tax purposes, non-creditable taxes | 21.4 | 17.6 |
Non-taxable income and tax benefits | (25.7) | (17.4) |
Tax losses and temporary differences of the financial year not recognised | 2.3 | 7.8 |
Utilisation of previously unrecognised loss carryforwards and temporary differences | 0.0 | (4.0) |
Recognition of previously unrecognised loss carryforwards and temporary differences | (3.1) | (37.9) |
Change in write down of deferred tax assets | 3.0 | 1.4 |
Deferred tax expense due to tax rate changes | 2.7 | (0.2) |
Deferred tax assets derecognised | 23.6 | 0.0 |
Deferred income tax relating to prior periods | 5.2 | 2.6 |
Deferred income tax relating to foreign currency translation on non-monetary items | 2.8 | 0.2 |
Current income tax relating to prior periods | (2.3) | (8.4) |
Other | 0.3 | 0.3 |
Recognised tax expense | 103.7 | 39.4 |
Effective tax rate (in %) | 38.4% | 13.6% |
In 2022, expenses not deductible for tax purposes mainly includes: transfer pricing mismatches and adjustments of €3.4 million (2021: €2.6 million); tax impact of share based payment and other employee costs of €2.9 million (2021: €1.4 million); inflation, inventory and FX adjustments and exempt income in South America of €3.0 million (2021: €0.5 million); impact of thin capitalisation rules in Argentina of €2.0 million (2021: €1.2 million); non-creditable withholding taxes in Austria of €2.4 million (2021: €1.8 million); and non-deductible subsidiary recharged expenses of €1.2 million. Furthermore, other non-deductible expenses in 2021 included debt waiver costs of €1.6 million and certain technology costs recharged from subsidiaries of €1.8 million.
In 2022, non-taxable income and tax benefits mainly includes: tax incentives in Brazil of €7.4 million (2021: €1.6 million); additional tax depreciation in Austria of €7.5 million (€2021: €7.5 million) relating to historical acquisitions; non-taxable income from the write down of shares of €2.1 million in Austria; income of foreign permanent establishments in Austria of €1.0 million (2021: €1.8 million); and inflationary adjustments in Mexico of €3.1 million (2021: €0.8 million). Furthermore, other non-taxable income in 2021 includes income from restructuring of €1.3 million in Austria.
Deferred tax assets derecognised pursuant to a tax position reassessment in 2022, of €23.6 million including income adjustments following agreement with the tax authorities on the allocation of certain group functions and includes €8.7 million adjustment in relation to an intercompany debt waiver. These tax impacts are primarily non-cash in nature and had the effect of reducing previously recognised tax losses. The cash tax impact was €1.4 million and is included within current income tax relating to prior periods.
Deferred taxes expense relating to prior periods and change in write down of deferred tax assets, arises mainly from Mexico, of €2.5 million and €2.1 million respectively, following an internal review. Deferred income tax relating to foreign currency translation of local currency tax base is due to the devaluation of the Turkish Lira against the Euro of €2.8 million. In 2021, a deferred tax asset of €37.7 million was recognised resulting from a tax depreciation for future periods and the recognition of previously unrecognised temporary differences.
The change in the tax rate in Austria from 25% to 24% in 2023 and 23% in 2024, resulted in a €2.4 million increase in the expense from deferred taxes on taxable and deductible temporary differences.
The favourable current income tax adjustment relating to prior periods arose mainly from the Netherlands of €2.2 million and an additional charge of €1.4 million following the allocation of certain group functions and responsibilities to Austria mentioned above.
Due to the recognition of the €37.7 million of deferred tax asset in 2021, the Group’s effective tax rate was 13.6%. In 2022, the Group’s effective tax rate was 38.3%. Drivers for the 2022 effective tax rate were mainly the non-cash (€23.6 million) and cash (€1.4 million) tax impacts as mentioned above, deferred tax adjustments from Mexico of €4.6 million and the lower income tax rate in Austria of €2.7 million. The Group’s Adjusted effective tax rate, once the impacts of these one-off items are excluded reduced to around 25.3% (2021: 18.0%).
Deferred taxes
Deferred taxes are related to the following significant balance sheet items and tax loss carryforwards:
31.12.2022 | 2022 | 31.12.2021 | 2021 | |||
in € million | Deferred tax assets | Deferred tax liabilities | (Expense)/Income | Deferred tax assets | Deferred tax liabilities | (Expense)/Income |
Property, plant and equipment, intangible assets | 25.1 | 113.3 | (6.1) | 41.3 | 109.6 | 17.0 |
Inventories | 20.8 | 9.0 | 6.3 | 16.3 | 11.0 | (12.5) |
Trade receivables, other assets | 11.0 | 21.1 | (17.2) | 25.0 | 5.2 | (0.8) |
Pensions and other personnel provisions | 41.9 | 0.3 | (4.6) | 61.7 | 0.2 | (3.2) |
Other provisions | 27.4 | 0.6 | 0.2 | 25.5 | 0.3 | (1.4) |
Trade payables, other liabilities | 22.2 | 6.7 | 9.5 | 20.4 | 12.2 | (11.3) |
Tax loss carried forward | 68.8 | 0.0 | (39.1) | 102.3 | 0.0 | 16.0 |
Offsetting | (89.0) | (89.0) | 0.0 | (90.1) | (90.1) | 0.0 |
Deferred taxes | 128.2 | 62.0 | (51.0) | 202.4 | 48.4 | 3.8 |
Tax losses generated by subsidiaries in the current or the prior year, recognised net deferred tax assets on temporary differences and tax loss carryforwards of €1.9 million (2021: €160.8 million). Deferred tax assets have been recognised as sufficient taxable income is expected to be generated in the future.
Tax loss carryforwards totalled €345.0 million at 31 December 2022 (2021: €477.0 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 tax loss carryforwards in China expiring within the next five years. The annual utilisation of tax loss carryforwards is limited to 75% in Austria and 30% in Brazil of their respective taxable profits. Deferred tax assets were not recognised on tax losses of €116.5 million (2021: €118.7 million).
in € million | 31.12.2022 | 31.12.2021 |
Year of expiry | ||
2022 | 0.4 | 0.4 |
2023 | 0.2 | 9.3 |
2024 | 7.4 | 7.6 |
2025 | 1.8 | 1.9 |
2026 | 2.1 | 2.4 |
2027 | 11.9 | 0.2 |
2028 or later | 0.8 | 0.3 |
Not subject to expiration | 91.9 | 96.6 |
Total unrecognised tax losses | 116.5 | 118.7 |
No deferred tax assets were recognised on temporary differences totalling €209.0 million (2021: €216.0 million), which are expected to reverse by 2034.
Taxable temporary differences of €1,113.7 million (2021: €814.4 million) and temporary deductible differences of €7.2 million (2021: €116.8 million) were not recognised on shares in subsidiaries as the distributions of profit or the sale of the investments are controlled by the Group.
Income tax receivables
Income tax receivables amounting to €38.7 million (2021: €35.1 million) are mainly related to income tax receivables relating to prior periods, tax prepayments and deductible withholding taxes.
Income tax liabilities
Income tax liabilities amounting to €38.3 million (2021: €38.2 million) primarily include income taxes for the current year and previous years.
15. Earnings per share
Earnings per share is calculated by dividing the profit or loss attributable to the shareholders of the Group by the weighted average number of shares outstanding during the financial year.
2022 | 2021 | |
Profit after income tax attributable to RHI Magnesita N.V. shareholders (in € million) | 155.7 | 243.1 |
Weighted average number of shares for basic EPS | 47,000,708 | 47,629,647 |
Effects of dilution from share options | 793,302 | 519,546 |
Weighted average number of shares for dilutive EPS | 47,794,010 | 48,149,193 |
Earnings per share basic (in €) | 3.31 | 5.10 |
Earnings per share diluted (in €) | 3.26 | 5.05 |
16. Dividend payments and proposed dividend
The final proposed dividend is subject to the approval of the Annual General Meeting on 24 May 2023 and was not recognised as a liability in these Consolidated Financial Statements. The final proposed dividend for 2022 will amount to €1.10 per share (2021: € 1.00 per share).
In line with the Group’s dividend policy, the Board paid out an interim dividend in September 2022 of €0.50 per share for the first half of 2022 amounting to €24.0 million. The total dividend for 2022, which includes the proposed final dividend, yet to be approved, amounts to €1.60 per share (2021: €1.50 per share).
Based on a resolution adopted by the Annual General Meeting of RHI Magnesita N.V. on 25 May 2022, the final dividend for 2021 amounted to €1.00 per share and was paid out in June 2022, amounting to €47.0 million. The total dividend for 2021 amounted to €1.50 per share.
17. Goodwill
in € million | 2022 | 2021 |
Carrying amount at beginning of the year | 114.4 | 110.8 |
Newly acquired businesses | 20.6 | 0.0 |
Currency translation | 1.9 | 3.6 |
Carrying amount at year-end | 136.9 | 114.4 |
Impairment of goodwill
Goodwill is tested for impairment at least annually based on the CGU to which it is allocated. The Group’s goodwill is primarily within the Steel segment and assigned to the CGU as identified below.
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 economic developments, including energy and raw material prices. The Group is subject to environmental and other laws and regulations and has established environmental policies and procedures aimed at compliance with these laws. Impairment testing incorporated considerations for increased energy and raw material prices in its Budget and the Long-Term Plan and estimates the total increase in investments in research and development costs at approximately €36.0 million. Current technology used by the customer 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 net cash flows are discounted using a discount rate that is calculated taking into account the weighted average cost of capital of comparable companies; 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 7.9% and 10.6% in 2022 (2021: 7.7% and 9.8%).
The net cash flows used for impairment testing are based on the strategic business and financial planning model of the Group including the 2023 budget and the Long-Term Plan, as approved by the Board. The cash flows are 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 between the current and possible degree of asset capacity and utilisation.
The forecasts include cash flows from future maintenance investments while expansion investments are included 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 discounted cash flow model; this applies in particular to expansion investments that have been decided on but that have not begun. To forecast the CGUs’ cash flows, management predicts the growth rate using external sources for the development of the customer’s industries; regional growth rates of the steel production and output of the non-steel clients in combination with the development of the specific refractory consumption including technological improvements.
Working capital is included in the carrying amount of the CGUs; therefore, the recoverable amount only takes into account changes in working capital.
A summary of the key assumptions relating to goodwill testing is reflected in the table below:
2022 | 2021 | |||||
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 | 10.8% | 0.9% | 107.2 | 8.4% | 0.9% | 83.5 |
Steel Division - Flow Control | 11.1% | 0.9% | 28.5 | 8.7% | 0.9% | 29.6 |
As a sensitivity, the effect of an adverse change of 10% in the estimated discount rates at 31 December 2022 or an adverse change of 50% in the perpetual growth rate would not result in an impairment of goodwill.
18. Other intangible assets
2022 | |||||
in € million | Mining rights | Customer relationship | Internally generated intangible assets | Other intangible assets | Total |
Cost at 31.12.2021 | 139.3 | 99.2 | 70.9 | 145.4 | 454.8 |
Currency translation | 12.6 | 4.4 | 0.1 | 1.0 | 18.1 |
Additions | 0.0 | 0.0 | 8.7 | 7.2 | 15.9 |
Additions initial consolidation | 0.0 | 28.5 | 0.0 | 0.0 | 28.5 |
Retirements and disposals | 0.0 | 0.0 | (0.8) | (0.7) | (1.5) |
Reclassifications | 0.0 | 0.0 | (0.4) | 3.9 | 3.5 |
Cost at 31.12.2022 | 151.9 | 132.1 | 78.5 | 156.8 | 519.3 |
Accumulated amortisation 31.12.2021 | 11.1 | 35.3 | 44.8 | 81.0 | 172.2 |
Currency translation | 0.9 | 0.7 | 0.0 | 0.3 | 1.9 |
Amortisation charges | 2.5 | 9.4 | 4.0 | 13.0 | 28.9 |
Retirements and disposals | 0.0 | 0.0 | 0.0 | (0.7) | (0.7) |
Reclassifications | 0.0 | 0.0 | 0.0 | 0.4 | 0.4 |
Accumulated amortisation 31.12.2022 | 14.5 | 45.4 | 48.8 | 94.0 | 202.7 |
Carrying amounts at 31.12.2022 | 137.4 | 86.7 | 29.7 | 62.8 | 316.6 |
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 |
Internally generated intangible assets comprise capitalised software and product development costs.
The customer relations from the former Magnesita Group have a carrying amount of €61.1 million (2021: €63.6 million) and a remaining useful life between six to ten 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 €20.9 million (2021: €20.0 million) and a remaining useful life between 15 to 55 years.
There are no restrictions on the sale of intangible assets.
19. Property, plant and equipment
2022 | ||||||
in € million | Real estate, land and buildings | Technical equipment, machinery | Other plant, furniture and fixtures | Prepayments made and plant under construction1) | Right-of-use assets | Total |
Cost at 31.12.2021 | 670.3 | 1,143.6 | 379.4 | 209.7 | 87.1 | 2,490.1 |
Currency translation | 11.0 | 13.2 | 4.9 | 11.2 | 2.6 | 42.9 |
Additions 2) | 8.2 | 14.9 | 15.1 | 122.6 | 20.7 | 181.5 |
Additions initial consolidation | 6.0 | 2.9 | 0.6 | 0.3 | 7.0 | 16.8 |
Retirements and disposals | (10.8) | (85.0) | (34.5) | (0.5) | (5.0) | (135.8) |
Reclassifications | 27.5 | 53.5 | 27.2 | (111.7) | 0.0 | (3.5) |
Cost at 31.12.2022 | 712.2 | 1,143.1 | 392.7 | 231.6 | 112.4 | 2,592.0 |
Accumulated depreciation 31.12.2021 | 311.5 | 793.4 | 260.3 | 1.5 | 33.7 | 1,400.4 |
Currency translation | 0.3 | 5.7 | 1.1 | 0.1 | 1.2 | 8.4 |
Depreciation charges | 15.1 | 54.1 | 26.2 | 0.0 | 20.2 | 115.6 |
Reversal of impairment charges | (1.5) | (3.0) | (0.9) | (0.3) | (0.3) | (6.0) |
Retirements and disposals | (8.0) | (82.7) | (34.2) | 0.0 | (4.8) | (129.7) |
Reclassifications | 0.0 | 0.0 | (0.4) | 0.0 | 0.0 | (0.4) |
Accumulated depreciation 31.12.2022 | 317.4 | 767.5 | 252.1 | 1.3 | 50.0 | 1,388.3 |
Carrying amounts at 31.12.2022 | 394.8 | 375.6 | 140.6 | 230.3 | 62.4 | 1,203.7 |
1) Prepayments made and plant under construction include €10.2 million relating to intangible assets. €3.5 million was transferred to intangibles assets during the year.
2) Including €1.5 million capitalised borrowing costs within Additions.
2021 | ||||||
in € million | Real estate, land and buildings | Technical equipment, machinery | Other plant, furniture and fixtures | Prepayments made and plant under construction1) | Right-of-use assets | Total |
Cost at 31.12.2020 | 598.6 | 1,039.4 | 330.9 | 164.9 | 76.8 | 2,210.6 |
Currency translation | 18.5 | 32.7 | 8.3 | 4.0 | 2.5 | 66.0 |
Additions | 25.3 | 47.5 | 17.9 | 156.8 | 13.4 | 260.9 |
Retirements and disposals | (4.1) | (18.5) | (5.4) | 0.0 | (5.6) | (33.6) |
Reclassifications | 32.0 | 42.5 | 27.7 | (116.0) | 0.0 | (13.8) |
Cost at 31.12.2021 | 670.3 | 1,143.6 | 379.4 | 209.7 | 87.1 | 2,490.1 |
Accumulated depreciation 31.12.2020 | 277.1 | 720.5 | 230.9 | 1.1 | 22.4 | 1,252.0 |
Currency translation | 4.8 | 19.2 | 5.8 | 0.0 | 0.7 | 30.5 |
Depreciation charges | 12.8 | 56.3 | 23.4 | 0.0 | 16.0 | 108.5 |
Impairment charges | 18.3 | 14.6 | 4.3 | 0.4 | 0.0 | 37.6 |
Retirements and disposals | (1.2) | (16.7) | (4.9) | 0.0 | (5.4) | (28.2) |
Reclassifications | (0.3) | (0.5) | 0.8 | 0.0 | 0.0 | 0.0 |
Accumulated depreciation 31.12.2021 | 311.5 | 793.4 | 260.3 | 1.5 | 33.7 | 1,400.4 |
Carrying amounts at 31.12.2021 | 358.8 | 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.
Prepayments made and plant under construction includes €212.0 million (2021: €179.2 million) mainly relating to the expansion of a production plant in Austria and a magnesite plant in Brazil during 2022. The spend in 2021 mainly related to the expansion of a magnesite plant in Brazil.
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 2022:
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 31.12.2021 | 47.8 | 31.9 | 7.4 | 87.1 |
Currency translation | 1.0 | 1.5 | 0.1 | 2.6 |
Additions | 16.7 | 1.2 | 2.8 | 20.7 |
Additions initial consolidation | 5.1 | 0.1 | 1.8 | 7.0 |
Retirements and disposals | (1.8) | (1.7) | (1.5) | (5.0) |
Cost at 31.12.2022 | 68.8 | 33.0 | 10.6 | 112.4 |
Accumulated depreciation 31.12.2021 | 15.4 | 14.4 | 3.9 | 33.7 |
Currency translation | 0.4 | 0.6 | 0.2 | 1.2 |
Depreciation charges | 11.2 | 6.1 | 2.9 | 20.2 |
Reversal of impairment charges | 0.0 | (0.2) | (0.1) | (0.3) |
Retirements and disposals | (1.7) | (1.7) | (1.4) | (4.8) |
Accumulated depreciation 31.12.2022 | 25.3 | 19.2 | 5.5 | 50.0 |
Carrying amounts at 31.12.2022 | 43.5 | 13.8 | 5.1 | 62.4 |
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 | 8.7 | 1.6 | 3.1 | 13.4 |
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 average lease term is eight years for land and buildings, six 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. Detail on lease liabilities is in Note (28).
20. Other non-current assets
in € million | 31.12.2022 | 31.12.2021 |
Tax receivables | 18.7 | 27.1 |
Other non-current assets | 21.3 | 14.1 |
Other non-current assets | 40.0 | 41.2 |
Tax receivables relate to input tax credits, which are expected to be utilised in the medium term. Other non-current assets mainly include deferred mine stripping costs.
21. Inventories
in € million | 31.12.2022 | 31.12.2021 |
Raw materials and supplies | 303.3 | 300.2 |
Work in progress | 206.7 | 151.5 |
Finished products and goods | 526.3 | 512.4 |
Prepayments made | 12.8 | 12.4 |
Inventories | 1,049.1 | 976.5 |
Inventories include €8.4 million (2021: €6.9 million) carried at net realisable value. Net write-down expenses amount to €8.0 million (2021: €3.4 million).
There are no restrictions on the disposal of inventories.
22. Trade and other current receivables
in € million | 31.12.2022 | 31.12.2021 |
Trade receivables | 433.4 | 403.7 |
Contract assets | 3.5 | 3.6 |
Other tax receivables | 106.4 | 113.7 |
Dividend receivables | 0.0 | 8.7 |
Prepaid expenses | 5.9 | 3.9 |
Other current receivables | 29.7 | 34.6 |
Trade and other current receivables | 578.9 | 568.2 |
thereof financial assets | 433.9 | 414.4 |
thereof non-financial assets | 145.0 | 153.8 |
The Group enters into factoring agreements and sells trade receivables to financial institutions. Trade receivables sold at the end of the year was €245.1 million (2021: €178.1 million). These have been derecognised as substantially all risks and rewards as well as control have been transferred. Payments received from customers following the sale are recognised in current borrowings until repaid to the factorer.
Other tax receivables include VAT, receivables from energy tax refunds, research, education and apprentice subsidies. Other tax receivables at 31.12.2021 included €12.1 million receivable from the tax authorities in Brazil following a successful judicial proceeding relating to revenue-based taxes.
Other current receivables mainly relate to advances for insurance, IT services as well as custom and import-related services and costs.
23. Cash and cash equivalents
in € million | 31.12.2022 | 31.12.2021 |
Cash at banks and in hand | 471.8 | 565.4 |
Money market funds | 48.9 | 15.4 |
Cash and cash equivalents | 520.7 | 580.8 |
Cash and cash equivalents include restricted cash totalling €23.2 million at 31 December 2022 (2021: €5.7 million). Restricted cash is mainly related to cash and cash equivalents held in Argentina, which has restrictive foreign exchange control regulations and performance guarantees. In addition, €2.0 million (2021: €2.0 million) is held in escrow in Austria and not available for use by the Group. €28.5 million in cash and cash equivalents (2021: €17.3 million) are accounted for by subsidiaries with non-controlling interests or subsidiaries with put options to acquire the non-controlling shareholder.
24. Share capital
25. Group reserves
Treasury shares
At 31 December 2022, RHI Magnesita treasury shares amount to 2,460,010 (2021: 2,478,686).
Additional paid-in capital
At 31 December 2022, as well as at 31 December 2021, 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 financial instrument is designated as the hedging instrument in net investment hedge in a foreign operation.
26. Non-controlling interests
Non-controlling interests in RHI Magnesita India Limited (“RHIM India").
In the course of the merger of the two Indian subsidiaries RHI CLASIL Private Limited and RHI India Private Limited in June 2021, into RHI Orient Refractories Limited and renamed to RHI Magnesita India Limited the Group shareholding changed from 66,5% to 70,2% and the share of the non-controlling interests decreased from 33.5% to 29.8%. RHIM India, based in New Delhi, India is a listed company on the BSE Limited, Mumbai, India and NSE Limited, Mumbai, India. The company is included in the Steel segment. The current reporting period and the previous reporting period are not fully comparable as a consequence of the merger in 2021. The carrying amount of the non-controlling interests is determined as follows:
in € million | 31.12.2022 | 31.12.2021 |
Non-current assets | 50.4 | 51.1 |
Current assets | 168.3 | 153.9 |
Non-current liabilities | (2.5) | (2.8) |
Current liabilities | (71.7) | (80.9) |
Net assets before intragroup eliminations | 144.5 | 121.3 |
Intragroup eliminations | 0.1 | (0.5) |
Net assets | 144.6 | 120.8 |
Percentage of non-controlling interests | 29.8% | 29.8% |
Carrying amount of non-controlling interests | 43.1 | 36.0 |
The aggregate Statement of Profit or Loss and Statement of Comprehensive Income are shown below:
in € million | 2022 | 2021 |
Revenue | 294.6 | 167.4 |
Operating expenses, net finance costs and income tax | (257.4) | (146.9) |
Profit after income tax before intragroup eliminations | 37.2 | 20.5 |
Intragroup eliminations | 0.6 | 1.2 |
Profit after income tax | 37.8 | 21.7 |
thereof attributable to non-controlling interests of RHIM India | 11.3 | 6.6 |
in € million | 2022 | 2021 |
Profit after income tax | 37.8 | 21.7 |
Other comprehensive (expense)/income | (8.2) | 8.0 |
Total comprehensive income | 29.6 | 29.7 |
thereof attributable to non-controlling interests of RHIM India | 8.8 | 8.7 |
The following table shows the summarised Statement of Cash Flows of RHIM India:
in € million | 2022 | 2021 |
Net cash flow from operating activities | 21.5 | (1.4) |
Net cash flow from investing activities | (6.9) | (5.2) |
Net cash flow from financing activities | (6.4) | (3.6) |
Total cash flow | 8.2 | (10.2) |
Net cash flow from financing activities includes dividend payments to non-controlling interests amounting to €1.5 million (2021: €1.4 million).
Non-Controlling interest includes 10.6% in SÖRMAŞ, which was acquired on 1 September 2022, with a carrying amount of the non-controlling interest of €3.8 million at 31 December 2022. Further information relating to this acquisition is provided under Note (42). In line with the Group’s accounting policy, the carrying amount of non-controlling interest is reduced to nil and replaced with a financial liability where the Group has provided a written put option (usually together with a call option) to acquire the shares not controlled by the Group. The Group has in place a written put option with the 49.0% non-controlling interest in RHI Magnesita (Chongqing) Refractory Materials Co., Ltd., China, with the carrying value of the liability at 31 December 2022 of €21.3 million. The Group also has a written put option with the 49.0% non-controlling interest in Mireco, with the carrying value of the liability at 31 December 2022 of €8.4 million. Further detail on the written put options is provided under Note (28).
27. Borrowings
Borrowings include all interest-bearing liabilities due to financial institutions and other lenders.
Total | |||
in € million | 31.12.2022 | current | non-current |
Syndicated & Term Loan | 942.4 | 130.7 | 811.7 |
Bonded loans ("Schuldscheindarlehen") | 585.0 | 0.0 | 585.0 |
Other credit lines and other loans | 84.6 | 84.6 | 0.0 |
Total liabilities to financial institutions | 1,612.0 | 215.3 | 1,396.7 |
Other financial liabilities | 9.0 | 0.1 | 8.9 |
Capitalised transaction costs | (1.0) | (0.3) | (0.7) |
Borrowings | 1,620.0 | 215.1 | 1,404.9 |
Total | |||
in € million | 31.12.2021 | current | non-current |
Syndicated & Term Loan | 791.5 | 58.3 | 733.2 |
Bonded loans ("Schuldscheindarlehen") | 650.0 | 65.0 | 585.0 |
Other credit lines and other loans | 88.2 | 88.2 | 0.0 |
Total liabilities to financial institutions | 1,529.7 | 211.5 | 1,318.2 |
Other financial liabilities | 7.4 | 3.2 | 4.2 |
Capitalised transaction costs | (2.4) | (1.0) | (1.4) |
Borrowings | 1,534.7 | 213.7 | 1,321.0 |
On 5 May 2022, the Group amended and extended its €305.0 million OeKB Term Loan maturing in June 2023, of which €260.0 million was outstanding as at 31 December 2021, increasing the total loan amount outstanding to €350.0 million and extending the final maturity to May 2027. The margin payable on the OeKB Term Loan will be adjusted based on the Group's EcoVadis ESG rating performance and the variable interest rate is based on the EURIBOR. The interest payments are due on a quarterly basis.
On 29 July 2022, the Group refinanced its existing $200 million USD Term Loan maturing in August 2023 with a new €250 million EUR Term Loan with a maturity in July 2027. The margin payable on the EUR Term Loan is adjusted based on the Group's EcoVadis ESG rating performance and the variable interest rate is based on the EURIBOR. Interest payments are due on a quarterly basis.
In November 2022, the Group exercised its third and last extension option and thereby extended the maturity of the committed RCF (€600.0 million) by one year to 2028.
In December 2022, the Group entered into an INR 7.0 billion (around €78.8 million) bilateral term loan to finance the announced acquisition of Hi Tech at its Indian subsidiary, see Note (44) for further information.
Net debt excluding lease liabilities/Adjusted EBITDA is the key financial covenant of the loan agreements and is shown under Note (38). Compliance with the covenants is measured on a semi-annual basis. In line with the Covenant requirements, net debt excluding lease liabilities to Adjusted EBITDA cannot exceed 3.5x. Breach of covenants leads to an anticipated maturity of loans. During 2022 and 2021, the Group met all covenant requirements.
Considering interest swaps, 73% (2021: 70%) of the liabilities to financial institutions carry fixed interest and 27% (2021: 30%) 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 | Currency | 31.12.2022 Carrying amount in € million | Interest terms fixed until | Effective annual interest rate | Currency | 31.12.2021 Carrying amount in € million |
2023 | EURIBOR + margin | EUR | 372.3 | 2022 | EURIBOR + margin | EUR | 403.3 |
Variable rate + margin | EUR | 34.0 | 1.87% | EUR | 65.0 | ||
Various - Variable rate | Var. | 27.4 | |||||
0.25% | EUR | 115.0 | Variable rate + margin | EUR | 34.0 | ||
2024 | 3.10% | EUR | 35.0 | Various - Variable rate | Var. | 12.5 | |
2025 | 0.59% | EUR | 177.0 | 2023 | 0.79% | EUR | 374.7 |
2027 | 2.72% | EUR | 751.8 | 4.09% | USD | 176.8 | |
2028 | 0.92% | EUR | 86.5 | 2024 | 3.10% | EUR | 35.0 |
2029 | 1.52% | EUR | 8.0 | 2025 | 0.59% | EUR | 177.0 |
2031 | 1.28% | EUR | 5.0 | 2027 | 1.00% | EUR | 152.0 |
2028 | 0.92% | EUR | 86.5 | ||||
2029 | 1.52% | EUR | 8.0 | ||||
2031 | 1.28% | EUR | 5.0 | ||||
1,612.0 | 1,529.8 |
The table above shows how long the interest rates are fixed, rather than the maturity of the underlying instruments.
28. Other financial liabilities
Other financial liabilities include the negative fair value of derivative financial instruments as well as lease liabilities and fixed-term and puttable non-controlling interests payable in Group companies. Additional explanation on derivative financial instruments is provided under Note (36).
31.12.2022 | 31.12.2021 | |||||
in € million | Current | Non-current | Total | Current | Non-current | Total |
Forward exchange contracts | 0.6 | 0.0 | 0.6 | 0.0 | 0.0 | 0.0 |
Interest rate swaps | 0.0 | 0.0 | 0.0 | 0.0 | 9.6 | 9.6 |
Commodity swaps | 0.9 | 0.2 | 1.1 | 0.0 | 0.0 | 0.0 |
Derivatives in open orders | 9.5 | 0.0 | 9.5 | 0.1 | 0.0 | 0.1 |
Derivative financial liabilities | 11.0 | 0.2 | 11.2 | 0.1 | 9.6 | 9.7 |
Lease liabilities | 17.5 | 46.4 | 63.9 | 16.1 | 39.4 | 55.5 |
Fixed-term or puttable non-controlling interests | 21.6 | 46.2 | 67.8 | 3.0 | 57.0 | 60.0 |
Other financial liabilities | 50.1 | 92.8 | 142.9 | 19.2 | 106.0 | 125.2 |
Fixed terms or puttable non-controlling interest reflects amounts payable to non-controlling interest where the Group has entered into agreements to purchase the shares not already controlled. The purchase agreements generally provide for a call and written option at a fixed price or based on earnings multiple, such as EBITDA and capped subject to contractual limits, if any, to be exercised in the future. The carrying amount represents the discounted value of the expected settlement for the following non-controlling interest:
31.12.2022 | 31.12.2021 | ||
in € million | |||
Horn & Co. Minerals Recovery GmbH & Co.KG | 49.00% | 8.4 | 0.0 |
RHI Magnesita (Chongqing) Refractory Materials Co., Ltd. | 49.00% | 21.3 | 23.5 |
Liaoning RHI Jinding Magnesia Co., Ltd. | 16.67% | 26.4 | 23.5 |
RHI Refractories Liaoning Co., Ltd. | 34.00% | 11.7 | 13.0 |
Other financial liabilities | 67.8 | 60.0 |
During the period, €5.3 million (2021: €5.2 million) was recognised as an interest expense on the liability and €4.7 million income (2021: €1.1 million income) was recognised within other net financial expenses as an adjustment to the amount payable where the written put option price is based on earnings multiple or is affected by a change in the discount rate. See Note (13)
29. Provisions for pensions
The net liability from pension obligations in the Consolidated Statement of Financial Position is as follows:
in € million | 31.12.2022 | 31.12.2021 |
Present value of pension obligations | 395.5 | 495.0 |
Fair value of plan assets | (186.6) | (255.5) |
Deficit of funded plans | 208.9 | 239.5 |
Asset ceiling | 3.8 | 28.6 |
Net liability from pension obligations | 212.7 | 268.1 |
Overfunded pension plans | 2.0 | 0.9 |
Other pension plans | 214.7 | 269.0 |
The present value of pension obligations by beneficiary groups is as follows:
in € million | 31.12.2022 | 31.12.2021 |
Active beneficiaries | 64.2 | 88.4 |
Vested terminated beneficiaries | 43.4 | 68.4 |
Retirees | 287.9 | 338.2 |
Present value of pension obligations | 395.5 | 495.0 |
The pension obligations are measured using the following actuarial assumptions for the key countries in which the Group operates:
in % | 31.12.2022 | 31.12.2021 |
Interest rate | ||
Austria and Germany | 3.8% | 0.9% |
Brazil | 10.5% | 8.4% |
United Kingdom | 4.8% | 1.8% |
USA | 5.0% | 2.8% |
Future salary increase | ||
Austria | 4.5% | 3.3% |
Germany | 2.5% | 2.5% |
Brazil | 4.3% | 3.0% |
United Kingdom | 3.3% | 3.5% |
USA | 3.3% | 3.3% |
Future pension increase |
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 Eurozone countries 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 €81.2 million (2021: €100.5 million) of the present value of pension obligations and for €18.1 million (2021: €20.6 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 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 €107.7 million (2021: €146.3 million) of the present value of pension obligations and for €0.7 million (2021: €0.7 million) of the 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 €71.6 million (2021: €86.8 million) of the present value of pension obligations and for €63.3 million (2021: €79.0 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 €39.0 million (2021: €67.1 million) of the present value of pension obligations and holds €41.2 million (2021: €95.7 million) of assets, although only €39.0 million (2021: €67.1 million) of the plan assets are reflected on the balance sheet due to the application of International Financial Reporting Interpretations Committee 14 (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. During 2022, the Board of Trustees agreed to a buy-in of the defined benefit obligation with a third party insurer in the United Kingdom. In terms of the buy-in, the insurer assumed the obligations relating to the plan from July 2022 while the plan assets were liquidated and transferred to the Insurer at a value of around €61.7 million. Until the defined benefit scheme is wound up (the buy-out), the Group will continue to recognise the pension obligation and the value of the insurance policy as a plan asset equal to the pension obligation. The surplus plan assets of €2.2 million, at 31 December 2022 are not recognised due to the application of the IFRIC 14 and the asset ceiling requirements. It is expected that the plan will be wound up during 2023 with the remaining surplus, net of adjustments, tax payments and other minor expenses will be refunded to the Group. The decrease in the value of the plan assets between 31 December 2021 and its liquidation arose mainly from adverse market movements in early 2022.
The pension liabilities of the Brazilian group company Magnesita Refratários S.A. account for €49.9 million (2021: €44.1 million) of the present value of pension obligations and for €29.1 million (2021: €24.6 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 | 2022 | 2021 |
Net liability from pension obligations at beginning of year | 268.1 | 303.6 |
Currency translation | 4.5 | 2.5 |
Pension cost | 8.8 | 8.5 |
Remeasurement (gains)/losses | (48.1) | (26.0) |
Benefits paid | (17.3) | (17.6) |
Employers' contributions to external funds | (3.3) | (2.9) |
Net liability from pension obligations at year-end | 212.7 | 268.1 |
The present value of pension obligations developed as follows:
in € million | 2022 | 2021 |
Present value of pension obligations at beginning of year | 495.0 | 523.3 |
Currency translation | 11.7 | 15.4 |
Current service cost | 3.4 | 4.2 |
Interest cost | 11.8 | 8.9 |
Remeasurement (gains)/losses | ||
from changes in demographic assumptions | 0.0 | (3.7) |
from changes in financial assumptions | (107.5) | (24.1) |
due to experience adjustments | 13.5 | 6.0 |
Benefits paid | (33.0) | (34.4) |
Employee contributions to external funds | 0.6 | 0.5 |
Disposal due to settlement | 0.0 | (1.1) |
Present value of pension obligations at year-end | 395.5 | 495.0 |
The movement in plan assets is shown in the table below:
in € million | 2022 | 2021 |
Fair value of plan assets at beginning of year | 255.5 | 240.2 |
Currency translation | 6.2 | 14.5 |
Interest income | 6.8 | 5.1 |
Administrative costs (paid from plan assets) | (0.4) | (0.2) |
(Loss)/Income on plan assets less interest income | (69.7) | 10.4 |
Benefits paid | (15.7) | (16.8) |
Employers' contributions to external funds | 3.3 | 2.9 |
Employee contributions to external funds | 0.6 | 0.5 |
Disposal due to settlement | 0.0 | (1.1) |
Fair value of plan assets at year-end | 186.6 | 255.5 |
The changes in the asset ceiling are shown below:
in € million | 2022 | 2021 |
Asset ceiling at beginning of year | 28.6 | 20.4 |
Currency translation | (0.9) | 1.6 |
Interest expense | 0.0 | 0.4 |
(Losses)/gains from changes in asset ceiling less interest expense | (23.9) | 6.2 |
Asset ceiling at year-end | 3.8 | 28.6 |
At 31 December 2022, the weighted average duration of pension obligations amounts to 10.5 years (2021: 12 years).
The following amounts were recorded in the Consolidated Statement of Profit or Loss:
in € million | 2022 | 2021 |
Current service cost | 3.4 | 4.2 |
Interest cost | 11.8 | 8.9 |
Interest income | (6.8) | (5.1) |
Interest expense from asset ceiling | 0.0 | 0.4 |
Administrative costs (paid from plan assets) | 0.4 | 0.2 |
Pension expense recognised in profit or loss | 8.8 | 8.6 |
The remeasurement results recognised in other comprehensive income are shown in the table below:
in € million | 2022 | 2021 |
Accumulated remeasurement losses at beginning of year | 143.6 | 170.0 |
Remeasurement gains on present value of pension obligations | (94.0) | (21.8) |
Losses/(gains) on plan assets less interest income | 69.7 | (10.4) |
(Losses)/gains from changes in asset ceiling less interest expense | (23.9) | 6.2 |
Reclassification to other reserves | 0.0 | (0.4) |
Accumulated remeasurement losses at year-end | 95.4 | 143.6 |
The present value of plan assets is distributed to the following classes of investments:
31.12.2022 | 31.12.2021 | |||||
in € million | Active market | No active market | Total | Active market | No active market | Total |
Insurances | 0.0 | 82.1 | 82.1 | 0.0 | 43.8 | 43.8 |
Equity instruments | 34.4 | 0.0 | 34.4 | 48.8 | 0.0 | 48.8 |
Debt instruments | 22.0 | 2.5 | 24.5 | 97.0 | 3.3 | 100.3 |
Cash and cash equivalents | 11.8 | 0.7 | 12.5 | 11.2 | 0.1 | 11.3 |
Other assets | 32.0 | 1.1 | 33.1 | 49.9 | 1.4 | 51.3 |
Fair value of plan assets | 100.2 | 86.4 | 186.6 | 206.9 | 48.6 | 255.5 |
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 or assets utilised by the 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 2023, RHI Magnesita expects employer contributions to external plan assets to amount to €3.1 million and direct payments to entitled beneficiaries to €16.2 million. In the previous year, employer contributions of €3.0 million and direct pension payments of €19.2 million had been expected for the financial year 2022.
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).
31.12.2022 | 31.12.2021 | ||||
in € million | Change of assumption in percentage points or years | Pension plans | Termination benefits | Pension plans | Termination benefits |
Present value of the obligations | 395.5 | 31.5 | 495.0 | 44.1 | |
Interest rate | +0.25 | (9.7) | (1.4) | (14.8) | (1.4) |
(0.25) | 10.1 | 0.5 | 15.6 | 1.5 | |
Salary increase | +0.25 | 0.3 | 0.5 | 0.7 | 1.4 |
(0.25) | (0.3) | (1.4) | (0.7) | (1.4) | |
Pension increase | +0.25 | 8.0 | - | 11.3 | - |
(0.25) | (7.4) | - | (10.9) | - | |
Life expectancy | +1 year | 9.1 | - | 19.8 | - |
(1) year | (8.1) | - | (20.6) | - | |
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.
30. Other personnel provisions
in € million | 31.12.2022 | 31.12.2021 |
Termination benefits | 31.5 | 44.1 |
Service anniversary bonuses | 17.9 | 21.4 |
Semi-retirements | 2.3 | 3.2 |
Other personnel provisions | 51.7 | 68.7 |
Provisions for termination benefits
The provision for termination benefits relates mainly to employees that joined an Austrian company before 31 December 2022 and are subject to a one-off lump-sum termination benefit under Austrian legislation. This is regarded as a post-employment benefit and accounted for consistently with pensions benefits described above.
Provision for the Austrian termination benefits, which accounts for over 90% of the balance (2021: 94%) were based on the following measurement assumptions:
in % | 31.12.2022 | 31.12.2021 |
Interest rate | 3.8% | 0.9% |
Future salary increase | 3.9% | 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 € million | 2022 | 2021 |
Provisions for termination benefits at beginning of year | 44.1 | 46.4 |
Currency translation | 0.1 | 0.0 |
Additions initial consolidation | 0.4 | 0.0 |
Current service cost | 1.0 | 1.2 |
Interest cost | 0.5 | 0.4 |
Remeasurement (gains)/losses | ||
from changes in financial assumptions | (11.0) | (1.8) |
from changes in demographic assumptions | 0.0 | 1.9 |
due to experience adjustments | 1.1 | 0.5 |
Benefits paid | (4.7) | (4.8) |
Loss / (Gain) on settlement | 0.0 | 0.3 |
Provisions for termination benefits at year-end | 31.5 | 44.1 |
Payments for termination benefits are expected to amount to €1.3 million in the year 2023. In the previous year, the payments for termination benefits expected for 2022 amounted to €2.3million.
The following remeasurement gains and losses were recognised in other comprehensive income:
in € million | 2022 | 2021 |
Accumulated remeasurement losses at beginning of year | 27.7 | 27.6 |
Remeasurement (gains)/losses | (9.9) | 0.6 |
Reclassification to other reserves | 0.0 | (0.5) |
Accumulated remeasurement losses at year-end | 17.8 | 27.7 |
At 31 December 2022 the duration of Austrian termination benefit obligations amounts to 12.6 years (2021: 14 years).
Provisions for service anniversary bonuses
The measurement of provisions for service anniversary bonuses relating to employees in Austria and Germany is based on an interest rate of 3.8% (2021: 0.8%) and considers salary increases of 5.6% (2021: 4.6%) in Austria and 2.5% in Germany (2021: 2.5%).
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 | 31.12.2022 | 31.12.2021 |
Present value of semi-retirement obligations | 5.8 | 7.6 |
Fair value of plan assets | (3.4) | (4.4) |
Provisions for semi-retirement obligations | 2.4 | 3.2 |
External plan assets are ring-fenced from all creditors and exclusively serve to meet semi-retirement obligations.
31. Other Provisions
The development of provisions is shown in the table below:
in € million | Onerous/unfavourable contracts | Labour and civil contingencies | Demolition/disposal costs, environmental damages | Restructuring costs | Other | Total |
31.12.2021 | 53.9 | 7.1 | 19.5 | 33.5 | 4.6 | 118.6 |
Currency translation | 5.8 | 0.9 | 0.5 | 0.0 | (0.1) | 7.1 |
Reversals | (2.6) | (2.4) | (0.4) | (10.5) | 0.0 | (15.9) |
Additions | 9.4 | 5.8 | 4.3 | 3.5 | 1.4 | 24.4 |
Additions interest | 6.0 | 1.0 | 1.4 | 0.0 | 0.1 | 8.5 |
Use | (10.2) | (5.2) | (2.5) | (14.2) | (1.7) | (33.8) |
Reclassifications | 0.0 | 1.2 | 0.4 | (0.3) | (0.1) | 1.2 |
31.12.2022 | 62.3 | 8.4 | 23.2 | 12.0 | 4.2 | 110.1 |
non-current | 49.9 | 8.4 | 21.7 | 0.0 | 0.0 | 80.0 |
current | 12.4 | 0.0 | 1.5 | 12.0 | 4.2 | 30.1 |
In November 2017, the Group sold a plant located in Oberhausen, Germany, in order to satisfy the conditions imposed by the European Commission in their approval of the Acquisition of Control of Magnesita. Under the terms, the Group remains obligated to provide raw materials at cost and recognised a provision for unfavourable contracts as part of the purchase price allocation to reflect the foregone profit margin and is reflected within Onerous/unfavourable contracts. The non-current portion of this contract obligation amounts to €49.9 million as of 31.12.2022 (2021: €43.1 million) and the current portion to €10.7 million (2021: €8.0 million). The unwinding of the discount led to a credit of €6.0 million in 2022 (2021: €7.5 million). In addition, current provisions for other unfavourable contracts amount to €1.7 million (2021: €2.9 million).
The provision for labour and civil contingencies primarily comprises labour litigation amounting to €3.6 million (2021: €4.9 million) arising mainly in Brazil.
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 €4.7 million (2021: €2.9 million) and various sites in the USA amounting to €7.2 million (2021: €6.0 million).
Provisions for restructuring costs amounting to €12.0 million at 31 December 2022 (2021: €33.5 million) primarily consist of estimated benefit obligations to employees due to termination of employment and dismantling costs. €6.2 million (2021: €14.9 million) relate to the remaining redundancy costs at Mainzlar, Germany for employees not subject to the restart of operations, €3.5 million (2021: €4.5 million) to the plant closure in Trieben, Austria, €0.8 million (2021: €4.6 million) to the plant closure in Kruft, Germany. Following the decision to restart operations at Mainzlar, €4.5 million of severance provisions were reversed and €3.2 million was paid while €1.0 million in plant closure costs were reversed.
Other consists mainly of provisions for claims arising from warranties and other similar obligations from the sale of refractory products.
32.
Trade payables and other current liabilities
Trade payables and other current liabilities
in € million | 31.12.2022 | 31.12.2021 |
Trade payables | 506.5 | 649.2 |
Contract liabilities | 61.8 | 57.9 |
Liabilities to employees | 97.2 | 80.9 |
Taxes other than income tax | 35.0 | 29.3 |
Capital expenditure payable | 43.1 | 24.3 |
Payables from commissions | 7.7 | 7.3 |
Other current liabilities | 29.0 | 34.3 |
Trade payables and other current liabilities | 780.3 | 883.2 |
thereof financial liabilities | 566.4 | 692.9 |
thereof non-financial liabilities | 213.9 | 190.3 |
Trade payables include an amount of €68.8 million (2021: €142.0 million) for raw material purchases subject to supply chain finance arrangements.
Contract liabilities mainly consist of prepayments received on orders. In 2022 €57.9 million revenue was recognised related to contract liabilities recognised as of 31 December 2021.
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.
33. Cash generated from/(used in) operations
in € million | 2022 | 2021 | |
Profit after income tax | 166.8 | 249.7 | |
Adjustments for | |||
income tax | 103.7 | 39.4 | |
depreciation | 115.6 | 108.7 | |
amortisation | 28.9 | 22.4 | |
(write-up)/write-down of property, plant and equipment and intangible assets | (6.0) | 41.3 | |
income from the reversal of investment subsidies | (0.7) | (0.9) | |
impairment losses/loss from sale/(write-ups) on securities | 1.5 | (0.2) | |
losses/(gains) from the disposal of property, plant and equipment | 2.4 | (6.3) | |
losses/(gains) from the disposal of subsidiaries | 1.1 | (5.2) | |
net interest expense and derivatives | 47.3 | 24.4 | |
result from joint ventures and associates | (0.2) | (100.2) | |
other non-cash changes | 26.1 | (12.7) | |
Changes in working capital | |||
inventories | (30.0) | (474.3) | |
trade receivables | (12.5) | (132.6) | |
contract assets | 0.0 | (1.6) | |
trade payables | (156.8) | 314.8 | |
contract liabilities | 4.5 | 10.7 | |
Changes in other assets and liabilities | |||
other receivables and assets | 25.7 | (56.9) | |
provisions | (49.4) | (49.0) | |
other liabilities | 19.5 | (24.8) | |
Cash generated from/(used in) operations | 287.5 | (53.3) |
34. 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 | 31.12.2021 | Changes in foreign exchange rates | Interest and other fair value changes | Reclassifications | Additions from initial consolidation | Additions and modifications of leases (IFRS 16) | 31.12.2022 | |
Borrowings1) | (1,539.1) | (52.5) | (19.4) | (1.3) | 0.0 | (12.0) | 0.0 | (1,624.3) |
Lease liabilities | (55.5) | 20.6 | (1.3) | 0.0 | 0.0 | (7.0) | (20.7) | (63.9) |
Cash and cash equivalents | 580.8 | (49.8) | (10.3) | 0.0 | 0.0 | 0.0 | 0.0 | 520.7 |
Net debt | (1,013.8) | (81.7) | (31.0) | (1.3) | 0.0 | (19.0) | (20.7) | (1,167.5) |
Liabilities to fixed-term or puttable non-controlling interests | (60.0) | 2.1 | 1.6 | (0.6) | 0.0 | (10.9) | 0.0 | (67.8) |
1) Included within Borrowings is interest payable of €4.3 million at 31.12.2022 and €4.4 million at 31.12.2021. Interest payable is reflected within Trade payables and other current liabilities on the Consolidated Statement of Financial Position.
Cash changes | Non-cash changes | |||||||
in € million | 31.12.2020 | Changes in foreign exchange rates | Interest and other fair value changes | Additions | Reclassifications | Additions and modifications of leases (IFRS 16) | 31.12.2021 | |
Borrowings1) | (1,114.5) | (408.9) | (15.3) | (0.4) | 0.0 | 0.0 | 0.0 | (1,539.1) |
Lease liabilities | (56.8) | 16.3 | (1.6) | 0.0 | 0.0 | 0.0 | (13.4) | (55.5) |
Cash and cash equivalents | 589.2 | (23.0) | 14.6 | 0.0 | 0.0 | 0.0 | 0.0 | 580.8 |
Net debt | (582.1) | (415.6) | (2.3) | (0.4) | 0.0 | 0.0 | (13.4) | (1,013.8) |
Liabilities to fixed-term or puttable non-controlling interests | (38.8) | 1.3 | (3.7) | (4.2) | (23.4) | 8.8 | 0.0 | (60.0) |
1) Included within Borrowings is interest payable of €4.4 million at 31.12.2021 and €4.4 million at 31.12.2020. Interest payable is reflected within Trade payables and other current liabilities on the Consolidated Statement of Financial Position.
35.
Additional disclosures on financial instruments
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 addition, carrying amounts are shown aggregated according to measurement category.
31.12.2022 | 31.12.2021 | ||||||||
in € million | Measurement category IFRS 91) | Level | Carrying amount | Fair value | Carrying amount | Fair value | |||
Other non-current financial assets | |||||||||
Marketable securities | FVPL | 1 | 9.0 | 9.0 | 13.2 | 13.2 | |||
Shares | FVPL | 3 | 0.5 | 0.5 | 0.5 | 0.5 | |||
Interest derivatives designated as cash flow hedges | - | 2 | 42.4 | 42.4 | 0.0 | 0.0 | |||
Other non-current financial assets | AC | - | 3.2 | 0.9 | - | ||||
Trade and other current receivables | AC | - | 433.9 | 414.4 | - | ||||
Other current financial assets | |||||||||
Derivatives | FVPL | 2 | 1.1 | 1.1 | 2.5 | 2.5 | |||
Other current financial receivables | AC | - | 0.2 | 0.4 | - | ||||
Cash and cash equivalents3) | AC | - | 520.7 | 580.8 | - | ||||
Financial assets | 1,011.0 | 1,012.7 | |||||||
Non-current and current borrowings | |||||||||
Liabilities to financial institutions | AC | 2 | 1,612.0 | 1,578.1 | 1,529.7 | 1,547.1 | |||
Other financial liabilities | AC | 2 | 8.0 | 5.0 | - | ||||
Non-current and current other financial liabilities | |||||||||
Lease liabilities | AC | 2 | 63.9 | 55.5 | - | ||||
Derivatives | FVPL | 2 | 9.5 | 9.5 | 0.1 | 0.1 | |||
Interest derivatives designated as cash flow hedges | - | 2 | 0.0 | 9.6 | 9.6 | ||||
Forward exchange contracts | FVPL | 2 | 0.6 | 0.6 | 0.0 | 0.0 | |||
Commodity swaps designated as cash flow hedges | - | 2 | 1.1 | 1.1 | 0.0 | 0.0 | |||
Liabilities to fixed-term or puttable non-controlling interests2) | AC | 2/3 | 67.8 | 67.8 | 60.0 | 60.0 | |||
Trade payables and other current liabilities | AC | - | 566.4 | 692.9 | - | ||||
Financial liabilities | 2,329.3 | 2,352.8 | |||||||
Aggregated according to measurement category | |||||||||
Financial assets measured at FVPL | 10.6 | 16.2 | |||||||
Financial assets measured at amortised cost | 958.0 | 996.5 | |||||||
Financial liabilities measured at amortised cost | 2,318.1 | 2,343.1 | |||||||
Financial liabilities measured at FVPL | 10.1 | 0.1 | |||||||
1)FVPL: Financial assets/financial liabilities measured at fair value through profit or loss.
AC: Financial assets/financial liabilities measured at amortised cost.
2) Including the put option of the acquired Mireco amounting to €8.4 million, see Note (42).
3) Thereof €3.6 million related to cash in Russia.
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. 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, 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. RHI Magnesita recognised a put option liability related to the newly acquired group company Mireco in May 2022 amounting to €10.9 million, see Note (42). The fair value is based on the present value of performance-related contractual cashflows with a maturity in 2032 for Mireco. 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 2022 and 31 December 2021.
Net results by measurement category in accordance with IFRS 9
The effect of financial instruments on the income and expenses recognised in 2022 and 2021 is shown in the following table, classified according to the measurement categories defined in IFRS 9:
in € million | 2022 | 2021 |
Net loss from financial assets and liabilities measured at fair value through profit or loss | (14.6) | 7.2 |
Net loss from financial assets and liabilities measured at amortised cost | 4.6 | 0.5 |
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 ‘Financial Instruments’ and interest income from securities.
The net loss from financial assets and liabilities measured at amortised cost includes changes in valuation allowances, losses on derecognition and fair value gains and losses on the measurement of non-controlling interest put options. Net finance costs include interest income amounting to €8.3 million (2021: €14.2 million) and interest expenses of €47.5 million (2021: € 33.0 million), which result from financial assets and liabilities measured at amortised cost.
Other non-current financial assets
Other non-current financial assets consist of the following items:
in € million | 31.12.2022 | 31.12.2021 |
Interests in subsidiaries not consolidated | 3.0 | 0.6 |
Marketable securities and shares | 9.5 | 13.7 |
Interest rate swaps | 42.4 | 0.0 |
Other non-current financial receivables | 0.2 | 0.3 |
Other non-current financial assets | 55.1 | 14.6 |
Accumulated impairments on investments, securities and shares amount to €4.3 million (2021: €3.6 million).
Other current financial assets
This item of the Consolidated Statement of Financial Position consists of the following components:
in € million | 31.12.2022 | 31.12.2021 |
Derivatives in open orders | 1.0 | 2.4 |
Forward exchange contracts | 0.1 | 0.1 |
Current portion of non-current loans | 0.2 | 0.4 |
Other current financial assets | 1.3 | 2.9 |
36. Derivative financial instruments
Interest rate swaps
The Group has concluded interest rate swaps to hedge the cash flow risk associated to financial liabilities carrying variable interest rates into fixed 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 are balanced out by the cash flow changes of the interest rate swaps. Potential hedge ineffectiveness could arise 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 as only international banks with high credit ratings are the counterparties to the interest rate swap.
Following the refinancing of the OeKB Euro and USD term loans, see Note (27), the associated interest rate swaps were closed out which resulted in a pre-tax gain of €1.0 million (2021: €0.0 million) recognised in the income statement through other comprehensive income. The Group entered into new interest swap instruments on both refinanced borrowings to fix the interest rate. These interest rate swaps are treated as cash flow hedges for accounting purposes. At 31 December 2022, the fair value of these interest rate swaps was €28.9 million.
The fair value of all interest rate swaps was €42.4 million at the reporting date (2021: €-9.6 million) and is shown in other non-current financial assets (liabilities) in the Consolidated Statement of Financial Position. For the reporting period of 2022, €59.1 million (2021: €8.7 million) has been recognised in other comprehensive income as fair value movements of the hedging instrument and €7.2 million (2021: €0.0 million) has been reclassified from Other Comprehensive Income to profit or loss and recognised within other net financial expenses reflecting the settlement of the hedging instrument when interest on the underlying debt is paid. No ineffectiveness has been recognised in profit or loss.
The financial effect of the hedged item and the hedging instrument for the year 2022 and 2021 is shown as follows:
in € million | Carrying amount | Statement of Financial Position | Change in fair value recognised in Other Comprehensive Income | Nominal amount |
2022 | 42.4 | Other non-current financial assets | 59.1 | USD 0.0 million EUR 709.2million |
2021 | (9.6) | Other non-current financial liabilities | 8.7 | USD 200 million EUR 369.2 million |
in € million | Cash flow hedge reserve within Other comprehensive income | Balance net of deferred tax |
2022 | 42.4 | 32.7 |
2021 | (9.6) | (7.2) |
Forward exchange contracts
Foreign exchange forward contracts are entered into to reduce the Group’s exposure to currency movements based on the internal risk assessment and analysis conducted.
The nominal value and fair value of forward exchange contracts as of 31 December 2022 are shown in the table below:
31.12.2022 | ||||
Purchase | Sale | Nominal value in million | Fair value in € million | |
EUR | USD | EUR | 25.0 | 0.1 |
USD | INR | USD | 8.5 | 0.0 |
INR | EUR | INR | 4,000.0 | (0.6) |
Forward exchange contracts | (0.5) | |||
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 | |||
37. 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 €1,011.0 million (2021: €1,012.7 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 and letters of credit, is shown by customer segment in the following table:
in € million | 31.12.2022 | 31.12.2021 |
Steel | 284.6 | 300.4 |
Industrial | 148.8 | 103.3 |
Trade receivables | 433.4 | 403.7 |
Credit insurance and letters of credit | (214.5) | (206.2) |
Net credit exposure | 218.9 | 197.5 |
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 | 2022 | 2021 | ||
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 | 23.2 | 0.6 | 30.0 | 0.6 |
Currency translation | 0.8 | - | 0.3 | - |
Addition | 7.3 | 0.3 | 3.5 | - |
Use | (1.3) | - | (5.2) | - |
Reversal | (0.6) | - | (5.4) | - |
Accumulated valuation allowance at year-end | 29.4 | 0.9 | 23.2 | 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 | |||
31.12.2022 | Not past due | less than 30 days | more than 31 days | Total |
Expected credit loss rate in % | 0,02-0,34% | 0,07-0,81% | 0,31-49,48% | |
Gross carrying amount invoiced | 385.6 | 10.8 | 3.0 | 399.4 |
Lifetime expected credit loss | (0.5) | (0.1) | (0.4) | (1.0) |
in € million | Trade receivables - days past due | |||
31.12.2021 | Not past due | less than 30 days | more than 31 days | Total |
Expected credit loss rate in % | 0.03-0.37% | 0.06-0.86% | 0.25-50.55% | |
Gross carrying amount invoiced | 351.9 | 26.3 | 7.2 | 385.4 |
Lifetime expected credit loss | (0.4) | (0.1) | (0.5) | (1.0) |
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 2022, RHI Magnesita has a committed Revolving Credit Facility (RCF) of €600.0 million, which was unutilised (2021: committed RCF was €600.0 million and was also unutilised). The RCF is a syndicated facility with multiple international banks and matures in 2028. The liquidity of the Group’s subsidiaries is managed regionally, while 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 31.12.2022 | Cash outflows | up to 1 year | 2 to 5 years | over 5 years |
Borrowings | |||||
fixed interest | 469.0 | 481.4 | 118.5 | 274.3 | 88.6 |
variable interest | 1,143.1 | 1,284.7 | 132.9 | 1129.1 | 22.7 |
Other financial liabilities | 8.0 | 8.1 | (0.2) | 8.3 | 0.0 |
Lease liabilities | 63.9 | 70.2 | 18.5 | 33.6 | 18.1 |
Liabilities to fixed-term or puttable non-controlling interests | 67.8 | 182.8 | 21.6 | 15.7 | 145.5 |
Trade payables and other current liabilities | 506.5 | 506.5 | 506.5 | 0.0 | 0.0 |
Non-derivative financial liabilities | 2,258.3 | 2,533.7 | 797.8 | 1461.0 | 274.9 |
Remaining term | |||||
in € million | Carrying amount 31.12.2021 | Cash outflows | up to 1 year | 2 to 5 years | over 5 years |
Borrowings | |||||
fixed interest | 534.0 | 551.4 | 69.9 | 337.3 | 144.2 |
variable interest | 995.7 | 1,022.9 | 154.3 | 706.7 | 161.9 |
Other financial liabilities | 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 | 692.9 | 688.5 | 688.5 | 0.0 | 0.0 |
Non-derivative financial liabilities | 2,343.1 | 2,526.0 | 934.9 | 1096.7 | 494.4 |
Derivative financial instruments
The remaining terms of derivative financial instruments based on expected undiscounted cash flow as of 31 December 2022 and 31 December 2021 are shown in the table below:
Remaining term | |||||
in € million | Carrying amount 31.12.2022 | Cash flows | up to 1 year | 2 to 5 years | over 5 years |
Receivables from derivatives with net settlement | |||||
Interest rate swaps | 42.4 | 42.4 | 0.0 | 40.6 | 1.8 |
Forward exchange contracts | 0.1 | 0.1 | 0.1 | 0.0 | 0.0 |
Derivatives in open orders | 1.0 | 1.0 | 1.0 | 0.0 | 0.0 |
Liabilities from derivatives with net settlement | |||||
Derivatives in open orders | 9.5 | 9.5 | 9.5 | 0.0 | 0.0 |
Commodity swaps | 1.1 | 1.1 | 0.9 | 0.2 | 0.0 |
Forward exchange contracts | 0.6 | 0.6 | 0.6 | 0.0 | 0.0 |
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 |
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 arise in financial instruments which are denominated in a currency other than the functional currency and are monetary in nature. These 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 ‘Financial Instruments: Disclosures’.
The majority of foreign currency financial instruments in the Group result from operating activities and intragroup financing transactions. The Group may designate intragroup balances as part of a net investment hedge in accordance with IAS 21 'The Effects of Changes in Foreign Exchange Rates' with the effective portion of exchange gains and losses recognised in equity. 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 2022:
in € million | USD | EUR | GBP | INR | Other | Total |
Financial assets | 813.3 | 69.5 | 11.2 | 5.2 | 60.3 | 959.5 |
Financial liabilities, provisions | (664.5) | (100.7) | (15.4) | (0.4) | (28.7) | (809.7) |
Net foreign currency position | 148.8 | (31.2) | (4.2) | 4.8 | 31.6 | 149.8 |
The foreign currency positions as of 31 December 2021 are structured as follows:
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 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 2022 would have had the following effect on profit or loss and equity (both excluding income tax):
Appreciation of 10% | Devaluation of 10% | |||
in € million | (Loss)/gain | Equity | Gain/(loss) | Equity |
US Dollar | (12.9) | (12.9) | 15.8 | 15.8 |
Euro | 1.3 | 5.9 | (1.6) | (7.2) |
Indian Rupee | (0.4) | (0.4) | 0.5 | 0.5 |
Other currencies | (2.5) | (2.5) | 3.0 | 3.0 |
The effect in equity also includes the exchange effects recorded directly in Other comprehensive income in line with the Group’s policy.
The hypothetical effect on profit or loss at 31 December 2021 can be summarised as follows:
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 effect in equity also includes the exchange effects recorded directly in Other comprehensive income in line with the Group’s policy.
Net investment hedge
On 29 July 2022, RHIMGMBH refinanced its USD 200 million loan with a new ESG-linked EUR 250 million loan. Further information is provided under Note (27). As a result, the Group’s exposure to the USD foreign exchange risk on these investments ceased to exist. The cumulative translation effect of € 20.1 million (loss) before tax (2022: €15.1 million post tax; 2021: €10.6 million) is presented in the translation difference reserve within equity.
The impact of the net investment hedge is shown as follows:
in € million | Carrying amount | Statement of Financial Position | Recognised in Other Comprehensive Income | Nominal amount |
July 2022 | 196.9 | Non-current borrowings | (20.1) | USD 200 million |
2021 | 176.8 | Non-current borrowings | (14.1) | USD 200 million |
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 2022, interest rate hedges amounting to a nominal value of €709.2 million (2021: €369.2 million) and a nominal value of USD 0.0 million (2021: 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 (36).
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 2022 had been 25 basis points higher or lower, equity would have been €1.1 million (2021: €1.1 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 2022 had been 25 basis points higher or lower, the interest result would have been €0.1 million (2021: €0.3 million) lower or higher.
Commodity forward
Commodity price risk
The Group manages its exposure to commodity prices, namely gas and electricity purchases in Europe, by entering into forward fixed price take or pay contracts with various suppliers to mitigate and reduce the impact of price volatility and secure the energy supply for its production process. These contracts are accounted for as executory contracts as the commodities purchases are for own use purposes. The Group’s Energy Risk policy sets out thresholds for fixing quantities based on the expected usage which is usually over a five-year period with lower levels of forward purchases in the outer years.
In line with the above strategy, the Group may also enter into financial commodity swap contracts to fix prices for expected purchases not covered by the fixed price take or pay contracts within the overall defined thresholds. These commodity swaps (the hedging instrument) are treated as cash flow hedges for accounting purposes to hedge the underlying price of the commodity (hedged item) used in the production process. The settlement of the commodity swaps is aligned with expected gas deliveries to reduce the risk of hedge ineffectiveness. Additionally, the counterparties to the hedging instruments are financial institutions with a high investment grade credit rating to reduce the credit risk exposure and any hedge ineffectiveness that may arise.
In the second half of 2022, the Group entered into commodity swap contracts for small volumes as part of the above strategy. At the end of the year, the fair value of the commodity swaps was €1.1 million and is reflected within liabilities. The loss was recognised within equity. The notional quantities of gas hedged using these instruments were 186.000 MwH.
Other market price risk
RHI Magnesita holds certificates in an investment fund amounting to €9.0 million (2021: €13.2 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.
38. 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.
31.12.2022 | 31.12.2021 | |
Net debt (in € million)1) | 1,167.5 | 1,013.8 |
Net gearing ratio (in %) | 111.3% | 123.3% |
Net debt to Adjusted EBITDA | 2.34x | 2.61x |
1) Further information is provided under Note (34).
Net debt, which reflects borrowings and lease liabilities net of cash and cash equivalents and short-term marketable securities held for trading, 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 | 31.12.2022 | 31.12.2021 |
EBIT | 343.6 | 213.8 |
Amortisation | 28.9 | 22.4 |
Restructuring and write-down expenses | (6.8) | 58.8 |
Other operating income and expenses | 18.2 | (14.6) |
Adjusted EBITA | 383.9 | 280.4 |
Depreciation | 115.6 | 108.7 |
Adjusted EBITDA | 499.5 | 389.1 |
Total debt | 1,624.3 | 1,539.1 |
Lease liabilities | 63.9 | 55.5 |
Less: Cash and cash equivalents | 520.7 | 580.8 |
Net debt | 1,167.5 | 1,013.8 |
Net debt excluding IFRS 16 lease liabilities | 1,103.6 | 958.3 |
Net debt to Adjusted EBITDA | 2.34x | 2.61x |
Net debt to Adjusted EBITDA excluding IFRS 16 lease liabilities | 2.21x | 2.46x |
In both 2022 and 2021, all externally imposed capital requirements were met. The Group has sufficient liquidity headroom within its committed debt facilities.
39. Contingent liabilities
At 31 December 2022, warranties, performance guarantees and other guarantees amount to €61.9 million (2021: €52.5 million). Contingent liabilities have a remaining term of between two months and three years. Based on past experience, the probability that contingent liabilities are realised is considered to be low.
Individual administrative proceedings and lawsuits which result from ordinary activities are pending as of 31 December 2022 or can potentially be exercised against RHI Magnesita in the future. The related risks were analysed with a view to their probability of occurrence.
Taxation contingencies
The calculation of income taxes is based on the tax laws applicable in the individual countries in which the Group operates. Due to their complexity, the tax items presented in the Consolidated Financial Statements may be subject to different interpretations by local finance authorities. In this context it should be noted that a tax provision is generally recognised when the Group has a present obligation as a result of a past event, and when it is considered probable that there will be a future outflow of funds.
The Group is continually adapting its global presence to improve customer service and maintain its competitive advantage, and leads open discussions with tax authorities about, e.g., transfer of functions and related profit between related parties and exit taxation. 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, management’s judgements are based on a likely outcome approach, taking into consideration advise from 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 €243.0 million (2021: €200.8 million). These tax proceedings are as follows:
Income Tax relating to historical corporate transactions
There are three proceedings in which Brazilian Federal Tax Authorities issued tax assessments which rejected the deduction of goodwill generated in two corporate transactions that where undertaken 2007 and 2008, for Corporate Income Taxes. The tax authorities issued assessments arguing that such transactions cannot generate deductions as they do not fulfill the requirements provided by law. Although the Group has been broadly successful, the tax authorities have appealed those outcomes. The final outcome of these proceedings is expected within one and three years. The exposure of €157.0 million (2021: €130.6 million) is limited to the fiscal tax years ended 2018 at which stage all available goodwill tax deductions had been made.
Royalties
The Group is party to 38 proceedings where the Brazilian Mining Authorities (“ANM”) challenged the criteria used for calculating and paying the Financial Compensation for Exploration of Mineral Resources (“CFEM”), which are mining royalties payable by every mining company. The authorities have mainly disputed the basis of production costs estimates used in the determination of the royalties that are payable. The claims relate to fiscal years up to 2017, following which the legislation for royalties was changed. The Group, together with its technical and legal advisors continues to challenge ANM assessments. Most of the procedures are ongoing within the ANM administrative courts. Final decisions of the first cases are expected within four to five years. As of 31.12.2022, the potential risk amounts to €28.2 million, including interest and penalties (2021: €23.6 million).
Corporate income and other taxes
There are several tax assessments in Brazil mainly relating to: offsetting federal tax payables and receivables, social security contributions, offsetting certain federal tax debts with corporate income tax credits. The potential risks of these tax assessments amount €57.8 million (2021: €46 million).
Civil litigation contingencies
Magnesita Refratários S.A., Contagem, Brazil, is party to a public civil action for damages allegedly caused by overloaded trucks in contravention to Brazilian traffic legislation. In 2017, a decision was rendered in favour of Magnesita in the trial court. The decision is being appealed by the Public Ministry of Minas Gerais. The final decision is expected in ten years. The potential loss from this proceeding amounts to € 15.5 million as of 31 December 2022 (2021: €11.6 million).
A class action against a Brazilian subsidiary relates to the working conditions of existing and former employees based at a customer’s plant. A technical expertise appointed by the court indicated the exposure of approximately 900 current and employees to unhealthy conditions. The Company is currently assessing the number of current and former employees that may be entitled to compensation (‘adicional de insalubridade’). In parallel, an external advisor has been engaged to determine the potential exposure should an unfavourable decision arise. Initial estimates are expected by the end of first quarter in 2023. The expected timing of court judgement is unknown. Management is unable to quantify the potential risk exposure as at 31 December 2022.
Other minor proceedings and lawsuits in which subsidiaries are involved have no significant impact on the financial position and performance of the Group.
40. Other financial commitments
Capital commitments amount to €20.4 million at 31 December 2022 (2021: €35.5 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 €399.7 million at the reporting date (2021: €410.8 million). 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.
41. Independent Auditor’s remuneration
in € million | 2022 | 2021 |
Fees in respect of the audit of the Consolidated and Parent Company Financial Statements1) | (1.1) | (1.0) |
Other audit fees, in respect of subsidiaries to PwC network firms | (1.8) | (1.6) |
Total audit fees | (2.9) | (2.6) |
Other non-audit services - Interim review1) | (0.2) | (0.2) |
Total fees | (3.1) | (2.8) |
1)Total fees to PricewaterhouseCoopers Accountants N.V. (Netherlands) totalled €1.3 million (2021: €1.2 million).
42. Business Combinations
Acquisition of Horn & Co Minerals Recovery Group
On 3 May 2022, RHI Magnesita Group acquired a 51% ownership stake in Horn & Co Minerals Recovery Group (“Mireco”), a company focused on the recycling of various refractory products. Mireco was acquired for a cash consideration of €13.3 million in order to accelerate the Group's use of secondary raw materials in its refractory production. In the short term, the arrangement will give RHI Magnesita access to additional quantities of secondary raw material and improve productivity in the recycling process. In the longer term the new business will make high quality green raw materials available to the entire refractory industry in Europe. New technologies for the automation of sorting, for new cleaning purposes and for process automation are being developed with research partners and at RHI Magnesita’s own technology centre in Leoben, Austria.
The fair values of the assets and liabilities recognised 'based on the preliminary purchase price allocation' as a result of the acquisition are presented as follows:
in € million | preliminary fair values |
Property plant and equipment | 13.2 |
Intangible assets: Customer relationships | 12.1 |
Other non-current financial assets | 2.3 |
Inventories | 5.3 |
Trade and other receivables | 1.4 |
Cash and cash equivalents | 0.2 |
Total assets acquired | 34.5 |
Trade and other liabilities | 2.7 |
Other employee obligations | 0.8 |
Income Taxes payable | 0.3 |
Other liabilities | 0.1 |
Current Borrowings | 4.3 |
Right of use liabilities | 7.0 |
Deferred tax liabilities | 3.9 |
Non-current borrowings | 2.8 |
Total liabilities assumed | 21.9 |
Net identifiable assets acquired | 12.6 |
Less: Non-controlling interests | (6.1) |
Goodwill | 6.8 |
Consideration paid | 13.3 |
Consideration paid, net of cash acquired for purposes of the Statement of Cash Flows | 13.1 |
The fair value step-up that was identified in the course of the preliminary purchase price allocation amounts to €13.1 million. €1.1 million relate to land and €12.1 million relate to customer relationships. Additionally, right-of-use assets and corresponding liabilities of €7.0 million were also recognised. The deferred tax liability recognised on these preliminary fair value uplifts was €3.9 million.
The goodwill of the preliminary purchase price allocation is attributable to the improved productivity in recycling and an enlarged product portfolio. The goodwill is fully deductible for tax purposes. The fair values attributed to assets and liabilities and the resulting goodwill are preliminary and subject to adjustment for a period of one year from the acquisition as allowed under the accounting standards. On finalisation of the fair values, adjustments, including tax impacts, if any, will be reflected against goodwill. The fair values of the acquired assets and liabilities including initial purchase price allocations are expected to be finalised within the first half of 2023. The business of Mireco is included within the Group’s Steel Operating segment.
The Group recognises non-controlling interests in an acquired entity at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets.
The non-controlling interests have the option to sell their remaining equity stake to RHI Magnesita at any time by 2032. The Group initially recognised the non-controlling interests of €6.1 million within equity. The put option liability of €10.9 million was initially recognised against the non-controlling interest, reducing it to zero and the difference was reflected against the Group’s Retained income. The put option liability is recognised as a financial liability. Further information on the fair value of the put option is provided under Note (28).
Direct costs relating to the acquisition of Mireco and expensed in the Consolidated Statement of Profit or Loss amounted to €0.5 million.
Revenue and net profit after tax attributed to the Mireco acquisition from date of control and included in the Consolidated Statement of Profit or Loss was €18.8 million and €0.9 million, respectively. Its contribution to Adjusted EBITA was €1.6 million.
Had it been acquired from 1 January 2022, Group revenue and net profit after tax would have been higher by €29.7 million and €0.6 million, respectively.
Acquisition of SÖRMAŞ
On 1 September 2022, the Group completed the acquisition of 86,8% ownership stake in Söğüt Refrakter Malzemeleri Anonim Şirketi (“SÖRMAŞ”), a producer of refractories for the cement, steel, glass and other industries in Turkiye, for a consideration of €46.4 million in cash.
in € million | preliminary fair values |
Property plant and equipment | 3.6 |
Intangible assets: Customer relationships | 10.5 |
Intangible assets: Order backlogs | 5.9 |
Inventories | 14.1 |
Trade and other receivables | 14.7 |
Cash and cash equivalents | 1.5 |
Total assets acquired | 50.3 |
Trade and other liabilities | 2.9 |
Other employee obligations | 0.4 |
Income Taxes payable | 0.7 |
Current Borrowings | 4.9 |
Deferred tax liabilities | 3.8 |
Total liabilities assumed | 12.7 |
Net identifiable assets acquired | 37.6 |
Less: Non-controlling interests | (5.0) |
Goodwill | 13.8 |
Consideration paid | 46.4 |
Consideration paid, net of cash acquired for purposes of the Statement of Cash Flows | 44.9 |
The fair value step-up that was identified in the course of the preliminary purchase price allocation amounts to €16.4 million. €10.5 million relate to customer relationships allocated to the Steel operating segment and €5.9 million to customer order backlogs. The deferred tax liability recognised on these preliminary fair value uplifts was €3.8 million.
The fair values attributed to assets and liabilities and the resulting goodwill are preliminary and subject to adjustment for a period of one year from the acquisition as allowed under the accounting standards. On finalisation of the fair values, adjustments, including tax impacts, if any, will be reflected against goodwill. The fair values of the acquired assets and liabilities including initial purchase price allocation are expected to be finalised by the third quarter of 2023. The business of SÖRMAŞ is mainly attributed to the Industrial division with the resulting goodwill allocated to Cement/Lime business.
Direct costs relating to the acquisition of SÖRMAŞ and expensed in the Consolidated Statement of Profit or Loss amounted to €0.7 million.
Revenue and net loss after tax attributed to the SÖRMAŞ acquisition from date of control and included in the Consolidated Statement of Profit or Loss was €12.0 million and €1.0 million, respectively. Its contribution to Adjusted EBITA was €2.6 million.
Had it been acquired from 1 January 2022, Group revenue and net profit after tax would have been higher by €36.6 million and €3.3 million, respectively.
Following the acquisition in September 2022, the Group acquired an additional 2.58% of the outstanding share capital for a total consideration of €1.4 million. This transaction has no impact on the Consolidated Statement of Profit or Loss and no adjustment to goodwill. The consideration paid is reflected within financing activities in the Consolidated statement of Cash Flows.
43. Transactions with related parties
Related companies include subsidiaries that are not 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 `Related Party Disclosures`, the personnel welfare foundation of Stopinc AG, Switzerland, and Chestnut Beteiligungs GmbH, Germany (shareholder of the Group, which is related to a director) are 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. Key management personnel comprise of members of the Board of Directors of RHI Magnesita N.V. and the Executive Management Team.
Related companies
In 2022 and 2021, the Group conducted the following transaction with its related companies:
Joint ventures | Associates | |||
in € million | 2022 | 2021 | 2022 | 2021 |
Revenue from the sale of goods and services | 0.7 | 1.0 | 0.0 | 0.0 |
Purchase of raw materials | 4.0 | 5.0 | 0.0 | 14.4 |
Interest income | 0.0 | 0.1 | 0.7 | 0.2 |
Loans | 0.0 | 0.0 | 0.0 | 0.8 |
Trade liabilities | 0.5 | 0.0 | 0.0 | 1.3 |
Dividends received | 0.0 | 6.8 | 0.0 | 0.0 |
In 2021, the Group charged electricity and stock management costs to the joint venture MAGNIFIN Magnesiaprodukte GmbH & Co KG, St. Jakob, Austria, and purchased raw materials. The 50% stake in Magnifin was sold as of 30 December 2021 and final disposal proceeds of € 8.7 million were received in 2022. In 2021, the associate Sinterco S.A., Nameche, Belgium, sold sintered doloma to the RHI Magnesita Group. The Group financing receivable (2021: €0.8 million) from a loan agreement with Sinterco is received.
In 2022 and 2021, 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 (29). At 31 December 2022, no current accounts receivable existed (2021: €0.0 million). In the past reporting period, employer contributions amounting to €0.6 million (2021: €0.6 million) were made to the personnel welfare foundation. At 31 December 2022, a net asset from overfunded pension plans of €1.7 million (2021: €0.8million) is recognised.
Related persons
Remuneration of key management personnel of the Group, which is subject to disclosure in accordance with IAS 24 ‘Related Party Disclosures’, comprises the remuneration of the active Board of Directors and the Executive Management Team (EMT).
in € million | 2022 | 2021 |
Executive Directors and EMT | ||
Salaries and short-term incentive schemes | 6.6 | 5.5 |
Share based remuneration | 4.6 | 3.9 |
Other | 1.3 | 1.0 |
Total | 12.5 | 10.4 |
Non- Executive Directors1) | 1.1 | 1.2 |
Employee Representatives2) | 0.3 | 0.4 |
(1) Compensation paid to Non-Executive Directors reflects short-term employee benefits, mainly fees for services as Directors.
(2) Employee representatives acting as Non-Executive Directors do not receive additional compensation for these services. The compensation relates to the expense as employees.
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 132 to 157 of the Annual Report of the RHI Magnesita Group.
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.
44. Material events after the reporting date
Acquisition of Dalmia OCL Limited (”DOCL”)
On 21 November 2022, the Group announced the acquisition of DOCL. DOCL is a refractory business located in India. It has five manufacturing facilities spread across the east, south, central and western region of India with a total annual production capacity of about 300,000 tonnes and around 1,200 employees.
The acquisition completed on 5 January 2023. The Group acquired 100% of DOCL through the issue of 27 million shares in its subsidiary RHI Magnesita India Limited (“RHIM India”) which is listed on the Bombay Stock Exchange of India. The market share price of RHIM India closed at around 877 INR (Indian Rupees) on the day of the exchange (around €10/share). Following the share swap, the Group settled a related party payable in DOCL of INR 3.9 billion (around €45 million), to the previous shareholders. This was settled through a new external debt facility in DOCL of INR 6.3 billion (around €72 million) maturing in January 2024. The remaining facility will be used for working capital purposes.
Following the issue of shares in RHIM India, the Group’s interest in this subsidiary decreased from 70.2% to 60.1%. The Group continues to exercise control and will continue to consolidate RHIM India.
Acquisition of Jinan New Emei (“Jinan”)
In January 2023, the Group entered into an agreement to acquire a 65.0% shareholding in Jinan New Emei Industries Co. Ltd, a company registered in China. Jinan is a leading producer of refractory slide gate plates and systems, nozzles and mixes for use in steel flow control, employing over 1,300 people and headquartered in Shandong province, China.
Under the terms of the acquisition, the Group will acquire the initial 65.0% shareholding for a total cash consideration of €40 million (CNY 293 million), of which 80% is payable on closing with the remaining 20% deferred to one year after closing. The Group has also agreed to acquire the remaining 35.0% in 2026 with the consideration calculated at an agreed average annual multiple of EBITDA and subject to a cap of €137 million (CNY 1 billion).
The acquisition is subject to competition authority clearance and is expected to complete within 2023.
Acquisition of Hi Tech.
On 31 January 2023, the Group completed the acquisition of the refractory business of Hi-Tech Chemicals Limited (“Hi-Tech”). It operates a state-of-the-art fully automated facility in the city of Jamshedpur, Jharkhand, manufacturing high-qualitative flow control products largely for the steel industry.
The business was acquired by the Group’s subsidiary RHIM India. Total consideration paid for the acquisition amounts to around INR 7.3 billion (around €83 million) and is subject to final working capital adjustments. The acquisition was mainly funded through utilising INR 6.2 billion (around €69 million) from the INR 7.0 billion term loan with a maturity in December 2023 through RHIM India.
Statement of the Board of Directors
Statement pursuant to Article 5:25c, paragraph 2, subsection c. of the Dutch Financial Markets Supervision Act (“Wet op het financieel toezicht”).
The Consolidated Financial Statements for the year ended 31 December 2022, have been prepared on a going concern basis and in accordance with IFRSs, as issued by the IASB and interpretations issued by the IFRIC, and as endorsed by the European Union (EU).
To our knowledge,
- • the Consolidated Financial Statements referred to above give a true and fair view of the assets, liabilities, financial position, and profit of RHI Magnesita N.V. and the undertakings included in the consolidation as a whole; and
- • the Annual Report for RHI Magnesita Group (comprising RHI Magnesita NV and its affiliated companies whose details are included in its Financial Statements) for the year ended 31 December 2022 gives a true and fair view of the state of affairs as of the balance sheet date, the development and course of business during the financial year, and that the Annual Report describes the material risks that the RHI Magnesita Group faces.
Vienna, 26 February 2023
Executive Directors | |
Stefan Borgas | Ian Botha |
Non-Executive Directors | |||
Herbert Cordt Janet Ashdown Stanislaus Prinz zu Sayn-Wittgenstein Karl Sevelda Sigalia Heifetz | John Ramsay David Schlaff Janice “Jann” Brown Marie-Hélène Ametsreiter Wolfgang Ruttenstorfer | ||
Employee Representative Directors | |||
Karin Garcia Michael Schwarz | Martin Kowatsch | ||
Company Financial Statements of RHI Magnesita N.V.
Company Balance Sheet as at 31 December 2022
(before appropriation of result)
in € million | Note | 31.12.2022 | 31.12.2021 |
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 0.2 | 0.5 | |
Non-current financial assets | (A) | 943.3 | 644.8 |
Securities | 0.5 | 0.5 | |
Deferred tax assets | 10.8 | 32.5 | |
Total non-current assets | 954.8 | 678.3 | |
Current assets | |||
Receivables from group companies | 52.2 | 138.1 | |
Other current receivables | 0.4 | 0.4 | |
Cash and cash equivalents | (B) | 1.6 | 0.6 |
Total current assets | 54.2 | 139.1 | |
Total assets | 1,009.0 | 817.4 | |
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) | 86.3 | 84.3 |
Other reserves | 464.5 | 164.7 | |
Treasury shares | (F) | (116.1) | (117.0) |
Result for the period | (L) | 155.7 | 243.1 |
Shareholders' Equity | 1,001.2 | 785.9 | |
Non-current liabilities | |||
Non-current liabilities | (G) | 0.2 | 2.0 |
Current liabilities | |||
Other current liabilities | (H) | 7.6 | 29.5 |
Total liabilities | 7.8 | 31.5 | |
Total equity and liabilities | 1,009.0 | 817.4 |
Company Statement of Profit or Loss for the period 1 January 2022 to 31 December 2022
in € million | Note | 2022 | 2021 |
General and administrative expenses | (I) | (22.0) | (25.5) |
Result before taxation | (22.0) | (25.5) | |
Net financial result | (J) | 0.0 | 0.1 |
Profit before income tax | (22.0) | (25.4) | |
Income tax | (18.8) | 29.3 | |
Net result from investments | (K) | 196.5 | 239.2 |
Net result for the period | (L) | 155.7 | 243.1 |
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 | ||||||
31.12.2021 | 49.5 | (117.0) | 361.3 | (7.1) | (197.3) | 288.7 | 164.7 | 243.1 | 785.9 | ||||||
Appropriation of prior year result | 243.1 | (243.1) | - | ||||||||||||
Net result | 155.7 | 155.7 | |||||||||||||
Share transfer / Vested LTIP | 0.9 | (0.9) | 0.0 | ||||||||||||
Share-based expenses | 8.3 | 8.3 | |||||||||||||
Dividends | (70.5) | (70.5) | |||||||||||||
Net income / (expense) recognised directly in equity | 38.9 | 48.7 | 34.2 | 121.8 | |||||||||||
31.12.2022 | 49.5 | (116.1) | 361.3 | 31.8 | (148.6) | 288.7 | 378.9 | 155.7 | 1,001.2 | ||||||
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 | |
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 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. The Company holds a secondary listing on the Vienna Stock Exchange (Wiener Börse).
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.
The Company has issued a declaration of joint and several liability as referred to in section 403, Book 2 of the Dutch Civil Code in respect of one of its consolidated participations, namely Trading B.V.
Fiscal Unity
For corporate income 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
According to the group and tax compensation agreement, which forms a legal requirement for the Austrian corporate tax group, tax compensation payments within the corporate tax group are calculated based on the stand-alone method, without charging negative tax compensations. In case of a taxable profit, the respective tax group member has to pay a tax compensation to RHI Magnesita N.V. as the head of the corporate tax group amounting to the legally applicable corporate tax rate (25.0% for 2022). In case of a taxable loss, the respective tax group member does not receive a negative tax compensation by RHI Magnesita N.V., but rather the taxable loss is carried forward internally and reduces the calculation base for any future tax compensation payment by the respective tax group member to RHI Magnesita N.V. (group internal carry forward of losses). Any tax compensation payment by tax group members to RHI Magnesita N.V. is reduced by withholding taxes paid by the respective group member, which RHI Magnesita N.V. could credit against any corporate income tax due in Austria. For cases of termination of the corporate tax group or cases in which a tax group member leaves the corporate tax group, the group and tax compensation agreement foresees a final tax compensation true-up.
The corporate income tax rate for the Company is 25% (2021: 25%). The effective tax rate is 86.0% (2021: 115.3%) with an income tax expense of €18.8 million (2021: €29.4 million income) on a loss before income tax of €22.0 million (2021: €25.4 million loss). The higher effective income tax rate is mainly attributable to deferred tax asset revaluations on transfer pricing adjustments and intercompany debt waiver losses of €17.5 million in 2022, non-deductible expenses and non-taxable income of €0.9 million (2021: € 1.6 million) and the tax effect of subsidiaries included within the fiscal unity without a corresponding impact on losses before income tax.
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 receivables are measured at fair value and are subsequently measured at amortised 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:
31.12.2022 | 31.12.2021 | ||
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 |
The investments have developed as follows:
in € million | 2022 | 2021 |
At beginning of year | 644.8 | 480.6 |
Transactions with non-controlling interests without change of control | (5.2) | (21.7) |
Capital contributions | 0.0 | 70.0 |
Changes from currency translation and cash flow hedges | 87.7 | 58.6 |
Changes from defined benefit plans | 39.5 | 20.2 |
Equity settled transaction | 0.0 | (2.1) |
Dividend distribution | (20.0) | (200.0) |
Net result from investments | 196.5 | 239.2 |
Balance at year-end | 943.3 | 644.8 |
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%:
31.12.2022 | 31.12.2021 | ||||
Ser. no. | Name and registered office of the company | Share- holder | Share in % | Share- holder | Share in % |
1. | RHI Magnesita N.V., Arnhem, Netherlands | ||||
2. | Agellis Group AB, Lund, Sweden | 46. | 100.0 | 46. | 100.0 |
3. | Baker Refractories Holding Company, Delaware, USA | 35. | 100.0 | 35. | 100.0 |
4. | Baker Refractories I.C., Inc., Delaware, USA | 3. | 100.0 | 3. | 100.0 |
5. | D.S.I.P.C.-Didier Société Industrielle de Production et de Constructions, Valenciennes, France | 7. | 100.0 | 7. | 100.0 |
6. | RHI Magnesita Belgium N.V., Evergem, Belgium | 60.,94. | 100.0 | 60.,94. | 100.0 |
7. | RHI Magnesita Deutschland AG, Wiesbaden, Germany | 1.,46. | 100.0 | 1.,46. | 100.0 |
8. | Dutch Brasil Holding B.V., Arnhem, Netherlands | 100. | 100.0 | 100. | 100.0 |
9. | Dutch MAS B.V., Arnhem, Netherlands | 7. | 100.0 | 7. | 100.0 |
10. | Dutch US Holding B.V., Arnhem, Netherlands | 100. | 100.0 | 100. | 100.0 |
11. | FE "VERA", Dnipro, Ukraine | 46. | 100.0 | 46. | 100.0 |
12. | Feuerfestwerk Bad Hönningen GmbH, Wiesbaden, Germany | 105. | 100.0 | 105. | 100.0 |
13. | GIX International Limited, Dinnington, United Kingdom | 106. | 100.0 | 106. | 100.0 |
14. | Horn & Co. Minerals Recovery GmbH, Siegen, Germany | 62. | 51.0 | - | 0.0 |
15. | INDRESCO U.K. Ltd., Dinnington, United Kingdom | 13. | 100.0 | 13. | 100.0 |
16. | Intermetal Engineers Private Limited, Mumbai, India | 44. | 99.9 | 44. | 99.9 |
17. | Liaoning RHI Jinding Magnesia Co., Ltd., Dashiqiao City, PR China 1) | 46. | 83.3 | 46. | 83.3 |
18. | LLC "RHI Wostok Service", Moscow, Russia | 46.,62. | 100.0 | 46.,62. | 100.0 |
19. | LLC "RHI Wostok", Moscow, Russia | 46.,62. | 100.0 | 46.,62. | 100.0 |
20. | Lokalbahn Mixnitz-St. Erhard GmbH, Vienna, Austria | 85. | 100.0 | 85. | 100.0 |
21. | LWB Holding Company, Delaware, USA | - | 0.0 | 47. | 100.0 |
22. | LWB Refractories Belgium S.A., Liège, Belgium | 37.,105. | 100.0 | 37.,105. | 100.0 |
23. | LWB Refractories Beteiligungs GmbH & Co. KG, Wiesbaden, Germany | - | 0.0 | 47. | 100.0 |
24. | LWB Refractories Hagen GmbH, Wiesbaden, Germany | 105. | 100.0 | 105. | 100.0 |
25. | LWB Refractories Holding France S.A.S., Valenciennes, France | 105. | 100.0 | 105. | 100.0 |
26. | RHI Magnesita Turkey Refractories, Eskisehir, Turkey 2) | 46. | 100.0 | 46. | 100.0 |
27. | Magnesita Asia Refractory Holding Ltd, Hong Kong, PR China | 25. | 100.0 | 25. | 100.0 |
28. | Magnesita Finance S.A., Luxembourg, Luxembourg | 8. | 100.0 | 8. | 100.0 |
29. | Magnesita International Limited, London, United Kingdom | - | 0.0 | 42. | 100.0 |
30. | Magnesita Malta Finance Ltd., St. Julians, Malta | 31.,105. | 100.0 | 31.,105. | 100.0 |
31. | Magnesita Malta Holding Ltd., St. Julians, Malta | 37.,105. | 100.0 | 37.,105. | 100.0 |
32. | Magnesita Mineração S.A., Brumado, Brazil | 42. | 100.0 | 42. | 100.0 |
33. | Magnesita Refractories (Canada) Inc., Montreal, Canada | 3. | 100.0 | 3. | 100.0 |
34. | Magnesita Refractories (Dalian) Co. Ltd., Dalian, PR China | 28. | 100.0 | 28. | 100.0 |
35. | Magnesita Refractories Company, York, USA | 21. | 100.0 | 21. | 100.0 |
36. | Magnesita Refractories Mexico S.A. de C.V., Monterrey, Mexico | 3.,4. | 100.0 | 3.,4. | 100.0 |
37. | Magnesita Refractories GmbH, Wiesbaden, Germany | 105. | 100.0 | 105. | 100.0 |
38. | Magnesita Refractories Ltd., Dinnington, United Kingdom | 3. | 100.0 | 3. | 100.0 |
39. | Magnesita Refractories Middle East FZE, Dubai, United Arab Emirates | 28. | 100.0 | 28. | 100.0 |
40. | Magnesita Refractories S.C.S., Valenciennes, France | 25.,105. | 100.0 | 25.,105. | 100.0 |
41. | Magnesita Refractories S.R.L., Milano, Italy | 105. | 100.0 | 105. | 100.0 |
42. | Magnesita Refratários S.A., Contagem, Brazil | 8. | 100.0 | 8. | 100.0 |
43. | Magnesita Resource (Anhui) Company. Ltd., Chizhou, PR China | 63. | 100.0 | 63. | 100.0 |
44. | RHI Magnesita India Limited | 8.,10.,106. | 70.2 | 8.,10.,106. | 70.2 |
31.12.2022 | 31.12.2021 | ||||
Ser. no. | Name and registered office of the company | Share- holder | Share in % | Share- holder | Share in % |
45. | Producción RHI México, S. de R.L. de C.V., Ramos Arizpe, Mexico | 93.,106. | 100.0 | 93.,106. | 100.0 |
46. | Radex Vertriebsgesellschaft m.b.H., Leoben, Austria | 102. | 100.0 | 102. | 100.0 |
47. | Rearden G Holdings Eins GmbH, Wiesbaden, Germany | 28. | 100.0 | 28. | 100.0 |
48. | Refractarios Argentinos S.A.I.C.M., San Nicolás, Argentina | 8.,50. | 100.0 | 8.,50. | 100.0 |
49. | Refractarios Magnesita Chile S/A, Santiago, Chile | - | 0.0 | 42.,48. | 100.0 |
50. | Refractarios Magnesita Colombia S/A, Sogamoso, Colombia | 8. | 100.0 | 8. | 100.0 |
51. | Refractarios Magnesita del Perú S.A.C., Lima, Peru | 8.,50. | 100.0 | 8.,50. | 100.0 |
52. | Refractory Intellectual Property GmbH & Co KG, Vienna, Austria | 53.,62. | 100.0 | 53.,62. | 100.0 |
53. | Refractory Intellectual Property GmbH, Vienna, Austria | 62. | 100.0 | 62. | 100.0 |
54. | Reframec Manutenção e Montagens de Refratários S.A., Contagem, Brazil | - | 0.0 | 42. | 100.0 |
55. | RHI Argentina S.R.L., Buenos Aires, Argentina | - | 0.0 | 10.,106. | 100.0 |
56. | RHI Canada Inc., Burlington, Canada | 106. | 100.0 | 106. | 100.0 |
57. | RHI Chile S.A., Santiago, Chile | 13.,106. | 100.0 | 13.,106. | 100.0 |
58. | RHI Dinaris GmbH, Wiesbaden, Germany | - | 0.0 | 94. | 100.0 |
59. | RHI Finance A/S, Hellerup, Denmark | 62. | 100.0 | 62. | 100.0 |
60. | RHI GLAS GmbH, Wiesbaden, Germany | 94. | 100.0 | 94. | 100.0 |
61. | RHI ITALIA S.R.L., Brescia, Italy | 62. | 100.0 | 62. | 100.0 |
62. | RHI Magnesita GmbH, Vienna, Austria | 1. | 100.0 | 1. | 100.0 |
63. | RHI Magnesita China Ltd., Shanghai, China | 46. | 100.0 | 46. | 100.0 |
64. | RHI Magnesita (Chongqing) Refractory Materials Co., Ltd. | 63. | 51.0 | 63. | 51.0 |
65. | RHI Magnesita Distribution B.V., Rotterdam, Netherlands | - | 0.0 | 67. | 100.0 |
66. | RHI Magnesita Re Limited, Guernsey, United Kingdom | 46. | 100.0 | - | 0.0 |
67. | RHI Magnesita Trading B.V., Rotterdam, Netherlands | 62. | 100.0 | 62. | 100.0 |
68. | RHI Magnesita Vietnam Company Limited, Ho Chi Minh City, Vietnam | 78. | 100.0 | 78. | 100.0 |
69. | RHI Magnesita Services Europe Gerbstedt GmbH, Gerbstedt/Hübitz, Germany | - | 0.0 | 70. | 100.0 |
70. | RHI Magnesita Services Europe GmbH, Kerpen, Germany | - | 0.0 | 7. | 100.0 |
71. | RHI MARVO S.R.L., Bucharest, Romania | 46.,100. | 100.0 | 46.,100. | 100.0 |
72. | RHI Magnesita Properties MO, LLC, Missouri, USA | - | 0.0 | 101. | 100.0 |
73. | RHIM Mireco Mitterdorf GmbH, St.Barbara im Mürztal, Austria | 14. | 100.0 | - | 0.0 |
74. | RHI Refractories (Dalian) Co., Ltd., Dalian, PR China | 46. | 100.0 | 46. | 100.0 |
75. | RHI Refractories (Site Services) Ltd., Dinnington, United Kingdom | 15. | 100.0 | 15. | 100.0 |
76. | RHI Refractories Africa (Pty) Ltd., Sandton, South Africa | 46. | 100.0 | 46. | 100.0 |
77. | RHI Refractories Andino C.A., Puerto Ordaz, Venezuela | 106. | 100.0 | 106. | 100.0 |
78. | RHI Refractories Asia Pacific Pte. Ltd., Singapore | 62. | 100.0 | 62. | 100.0 |
79. | RHI Refractories Egypt LLC., Cairo, Egypt | - | 0.0 | 46.,100. | 100.0 |
80. | RHI Refractories France SA, Valenciennes, France 3) | 97. | 100.0 | 97. | 100.0 |
81. | RHI Refractories Ibérica, S.L., Oviedo, Spain | 97. | 100.0 | 97. | 100.0 |
82. | RHI Refractories Liaoning Co., Ltd., Bayuquan, PR China 1) | 46. | 66.0 | 46. | 66.0 |
83. | RHI Refractories Mercosul Ltda., Sao Paulo, Brazil | - | 0.0 | 100.,106. | 100.0 |
84. | RHI Refractories Nord AB, Stockholm, Sweden | 97. | 100.0 | 97. | 100.0 |
85. | RHI Refractories Raw Material GmbH, Vienna, Austria | 1.,46.,62. | 100.0 | 1.,46.,62. | 100.0 |
86. | RHI Refractories Site Services GmbH, Wiesbaden, Germany | 7. | 100.0 | 7. | 100.0 |
87. | RHI Refractories UK Limited, Bonnybridge, United Kingdom | 7. | 100.0 | 7. | 100.0 |
88. | RHI Refratários Brasil Ltda, Contagem, Brazil; i.l. | 10.,42. | 100.0 | 10.,42. | 100.0 |
31.12.2022 | 31.12.2021 | ||||
Ser. no. | Name and registered office of the company | Share- holder | Share in % | Share- holder | Share in % |
89. | RHI Sales Europe West GmbH, Urmitz, Germany | - | 0.0 | 7.,94. | 100.0 |
90. | RHI Trading (Dalian) Co., Ltd., Dalian, PR China | 46. | 100.0 | 46. | 100.0 |
91. | RHI Ukraina LLC, Dnepropetrovsk, Ukraine | 46.,100. | 100.0 | 46.,100. | 100.0 |
92. | RHI United Offices America, S.A. de C.V., Monterrey, Mexico | 67.,93. | 100.0 | 67.,93. | 100.0 |
93. | RHI Refractories España, S.L., Lugones, Spain | 7.,9. | 100.0 | 7.,9. | 100.0 |
94. | RHI Urmitz AG & Co. KG, Mülheim-Kärlich, Germany | 7.,86. | 100.0 | 7.,86. | 100.0 |
95. | RHI US Ltd., Delaware, USA | 10. | 100.0 | 10. | 100.0 |
96. | RHI-Refmex, S.A. de C.V., Ramos Arizpe, Mexico | 93.,106. | 100.0 | 93.,106. | 100.0 |
97. | SAPREF AG für feuerfestes Material, Basel, Switzerland | 106. | 100.0 | 106. | 100.0 |
98. | SÖRMAŞ SÖĞÜT REFRAKTER MALZEMELERİ ANONİM ŞİRKETİ (Sörmas), Söğüt / Bilecik, Turkiye | 46. | 89.2 | - | 0.0 |
99. | RHI Magnesita Interstop AG, Hünenberg, Switzerland | 7.,46. | 100.0 | 7.,46. | 100.0 |
100. | Veitscher Vertriebsgesellschaft m.b.H., Vienna, Austria | 62. | 100.0 | 62. | 100.0 |
101. | Veitsch-Radex America LLC., Delaware, USA | 95. | 100.0 | 95. | 100.0 |
102. | Veitsch-Radex GmbH & Co OG, Vienna, Austria | 62.,103. | 100.0 | 62.,103. | 100.0 |
103. | Veitsch-Radex GmbH, Vienna, Austria | 62. | 100.0 | 62. | 100.0 |
104. | Veitsch-Radex Vertriebsgesellschaft m.b.H., Vienna, Austria | 62. | 100.0 | 62. | 100.0 |
105. | Vierte LWB Refractories Holding GmbH, Wiesbaden, Germany | 47. | 100.0 | 23.,47. | 100.0 |
106. | VRD Americas B.V., Arnhem, Netherlands | 46.,62. | 100.0 | 46.,62. | 100.0 |
107. | Zimmermann & Jansen GmbH, Wiesbaden, Germany | 7. | 100.0 | 7. | 100.0 |
108. | Dr.-Ing. Petri & Co. Unterstützungsgesellschaft m.b.H., Wiesbaden, Germany | 7. | 100.0 | 7. | 100.0 |
109. | Horn & Co Minerals Recovery Verwaltungs GmbH, Siegen, Germany | 14. | 100.0 | - | 0.0 |
110. | Horn & Co. Polska sp. z o.o., Poland | 14. | 100.0 | - | 0.0 |
111. | Magnesita Refractories A.B., Stocksund, Sweden; i.l. | 105. | 100.0 | 105. | 100.0 |
112. | Magnesita Refractories PVT Ltd, Mumbai, India | 47.,105. | 100.0 | 47.,105. | 100.0 |
113. | Magnesita Refractories S.A. (Pty) Ltd., Sandton, South Africa | 37. | 100.0 | 37. | 100.0 |
114. | MAG-Tec Participações Ltda. Ltda., Contagem, Brazil; i.l. | 42. | 98.7 | 42. | 98.7 |
115. | Minerals and Metals Recovering - Mireco Aktiebolag, Fagersta, Sweden | 14. | 100.0 | - | 0.0 |
116. | Mireco SARL, Entzheim, France | 14. | 100.0 | - | 0.0 |
117. | Mireco SH.P.K, Kosovo | 14. | 100.0 | - | 0.0 |
118. | Refractarios Especiales Y Moliendas S.A., Buenos Aires, Argentina | - | 0.0 | 48. | 100.0 |
119. | Refractarios Magnesita Uruguay S/A, Montevideo, Uruguay | - | 0.0 | 42. | 100.0 |
120. | RHI Réfractaires Algérie E.U.R.L., Sidi Amar, Algeria | 80. | 100.0 | 80. | 100.0 |
121. | Rudgruvans Industrier AB, Fagersta, Sweden | 14. | 100.0 | - | 0.0 |
Equity-accounted joint ventures and associated companies | . | . | |||
122. | Chongqing Boliang Refractory Materials Co. Ltd, Chongqing, China | 63. | 51.0 | 63. | 51.0 |
123. | Magnesita Envoy Asia Ltd., Kaohsiung, Taiwan | 3. | 50.0 | 3. | 50.0 |
124. | Sinterco S.A., Nameche, Belgium | 47. | 70.0 | 47. | 70.0 |
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 GmbH and Veitscher Vertriebsgesellschaft mbH.
3)Further shareholders are RHI Magnesita Deutschland AG and RHI GLAS GmbH.
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
(C) Share capital
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 2022, RHI Magnesita N.V.’s issued and fully paid-in share capital consists of 47,017,695 ordinary shares (2021: 46,999,019 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 (36) and Note (37) 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.
Legal and mandatory reserve
The articles of association stipulate a mandatory reserve of €288,699,230.59 which was created in connection with the merger of RHI Refractories and Magnesita in 2017.
No distributions, allocations or additions may be made, and no losses of the Company may be allocated to the mandatory reserve.
Legal and mandatory reserves represent legal and statutory reserves in line with Chapter 7 ‘Decree on financial statements formats’ of the Dutch Civil Code.
(F) Treasury shares
As at 31 December 2022, RHI Magnesita treasury shares amount to 2,460,010 (2021: 2,478,686).
Non-Current liabilities
(G) Other non-current liabilities
in € million | 31.12.2022 | 31.12.2021 |
Personnel provisions | 0.1 | 1.7 |
Provisions for pensions | 0.1 | 0.0 |
Other non-current financial liabilities | 0.0 | 0.3 |
Total non-current liabilities | 0.2 | 2.0 |
Current liabilities
(H) Other current liabilities
in € million | 31.12.2022 | 31.12.2021 |
Trade payables | 1.2 | 1.6 |
Payables to group companies | 0.4 | 21.5 |
Accrued liabilities | 6.0 | 6.4 |
Total current liabilities | 7.6 | 29.5 |
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.
(I) General and administrative expenses
in € million | 2022 | 2021 |
External services/consulting expenses | (2.0) | (2.6) |
Cost for principal services Austria | 0.0 | 3.0 |
Personnel expenses | (18.4) | (22.9) |
Other expenses | (1.6) | (3.0) |
Total general and administrative expenses | (22.0) | (25.5) |
in € million | 2022 | 2021 |
Wages and salaries | (16.5) | (19.7) |
Social security charges | (1.1) | (2.0) |
Pension contributions | (0.4) | (0.5) |
Other employee costs | (0.4) | (0.7) |
Total wages and salaries | (18.4) | (22.9) |
(J) Net financial result
The 2022 net financial result amounts to €0.0 million (2021: €0.1 million).
(K) Net results from investments
In year 2022, the full year results of the investments amount to a profit of €196.5 million (2021: €239.2 million) and are recognised in the Company Statement of Profit or Loss.
(L) Net result for the period
In 2022, 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 | 2022 |
Profit attributable to shareholders | 155.7 |
In accordance with Article 27 clause 1 to be transferred to reserves | 0.0 |
At the disposal of the General Meeting of Shareholders | 155.7 |
For 2022, the Board of Directors will propose a dividend of €1.10 per share for the shareholders of RHI Magnesita N.V. The proposed dividend is subject to the approval by the Annual General Meeting on 24 May 2023.
Other notes
Number of employees
The average number of employees of RHI Magnesita N.V. during 2022 amounts to 8 (2021: 67).
Off balance sheet commitments
RHI Magnesita N.V. as an ultimate parent company provided a corporate guarantee of €1,549.4 million (2021: €1,530.3 million) for the borrowings of the Group. The Borrowings are as disclosed in Note (27). Additionally €20.1 million (2021: €79.2 million) of corporate guarantees are issued in favour of customers and suppliers of the Group.
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 (41), (10) and (43) 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 (44) of the Consolidated Financial Statements.
Vienna, 26 February 2023
Board of Directors
Executive Directors | |
Stefan Borgas | Ian Botha |
Non-Executive Directors | |
Herbert Cordt Janet Ashdown Stanislaus Prinz zu Sayn-Wittgenstein Karl Sevelda Sigalia Heifetz | John Ramsay David Schlaff Janice “Jann” Brown Marie-Hélène Ametsreiter Wolfgang Ruttenstorfer |
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 2022
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 2022 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 2022 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 2022 of RHI Magnesita N.V., Arnhem. The financial statements comprise 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 2022;
- the following consolidated statements for the year 2022: 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 2022;
- the company statement of profit or loss for the period 1 January 2022 to 31 December 2022; and
- the notes, comprising a summary of 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 with respect to the key audit matters, fraud and going concern, and the matters resulting from that, in the context of our audit of the financial statements as a whole and in forming our opinion thereon. The information in support of our opinion, like our findings and observations related to 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 and supplier of refractory products, systems and solutions. The Group is comprised 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, as set out below.
During 2022, the Company executed price increases resulting in increased revenues compared to prior year and offsetting the impact from cost inflation from energy, raw materials and labour. Profit before tax adjusted for exceptional items increased to €318 million. Management considered these developments when preparing its financial statements. This affected the determination of materiality, the scope of our group audit and our audit procedures as described in the section ‘Materiality’, ‘The scope of our audit’ and ‘Key audit matters’.
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. In these considerations, we paid attention to, amongst others, the assumptions underlying the physical and transition risk related to climate change. In note 3 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 and the related higher inherent risks of material misstatement in the impairment assessment of goodwill and other intangible assets and the recognition and valuation of tax positions, we considered these matters as key audit matters as set out in the section ‘Key audit matters’ of this report.
Apart from key audit matters and the impact from the climate change on our audit, as described below, other areas of focus in our audit were the asset impairment considerations on construction projects and the purchase price allocation for acquisitions made in 2022. In addition, we performed audit procedures on the items marked ‘audited’ in the remuneration report.
RHI Magnesita N.V. assessed the possible effects of climate change and its plans to meet a zero-waste product life cycle strategy on its financial position, refer to the sections ‘Principal risks’ and ‘Sustainability’ 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 due to the increasing regulatory complexity in various countries and stakeholders’ expectations. The potential reputational risk remains high and financial impact of this risk was further assessed during 2022.
Climate change initiatives and commitments impact the preparation of the Group’s financial statements in a variety of ways, all with inherent uncertainties. In the reporting period management further expanded its analysis of the impact of climate related risks (physical and transitional) on major assumptions incorporated in forecasts and disclosures in the financial statements. The Company assessed specific financial risks and opportunities from initiatives on carbon pricing, the Carbon Border Adjustment Mechanism (CBAM) as well as the opportunities from recycling and other initiatives to lower carbon emissions for its customers.
In note 4 of the financial statements, management highlighted that it incorporated considerations around climate change and the energy transition in its financial planning assumptions. The most important transitional risk impact is expected to be higher operating costs due to an increase in the level or scope of carbon pricing. Management also sees opportunities in increased demand for products that can support customers reducing carbon emissions. Within the financial statements management acknowledged the impact of climate risks on the valuation of goodwill and property, plant and equipment, restoration provisions, and deferred tax assets. Due to the high degree of estimation uncertainty the impact of the effects of climate risk on the financial statements will be assessed by management on an ongoing basis.
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 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.
We ensured that the audit teams at both Group and component level included the appropriate skills and competences which are needed for the audit of an international industrial products company. We therefore included in our team experts and specialists in the areas of valuations, employee benefits, IT and corporate income taxes.
The outline of our audit approach was as follows:
 | Materiality
|
Audit scope
| |
Key audit matters
|
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 | €14.0 million (2021: €12.6 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, certain items included in other income and expenses and financial expenses and amortization of intangible assets) as the primary benchmark, a generally accepted auditing practice, based on our analysis of the common information needs of the users of the financial statements. On this basis, we believe that profit before tax adjusted for exceptional items is the most relevant metric for the financial performance of the Group. |
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 €1.2 million and €12 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 any misstatement identified during our audit above €0.8 million (2021: €0.7 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.
Our audit primarily focused on the significant components of the Group: RHI Magnesita GmbH (Austria), RHI US Ltd (USA), and Magnesita Refratários S.A. (Brazil). We subjected those three components to audits of their complete financial information, as they are individually financially significant to the Group. Additionally, we selected nine components for audit procedures to achieve appropriate coverage on financial line items in the consolidated financial statements. Those additional components also cover entities that include significant or higher risk areas defined during the risk assessment process.
In total, in performing these procedures, we achieved the following coverage on the financial line items:
Revenue | 83% |
Total assets | 84% |
Profit before tax | 72% |
None of the remaining components individually represented more than 3% 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 the scope of the work. We explained to the component audit teams the structure of the Group, the main developments that were 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, both 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 of their procedures and other matters that could be of relevance for the consolidated financial statements.
The group engagement team visits the component teams and local management on a rotational basis. In the current year, the group audit team visited the RHI Magnesita finance functions in Austria, Brazil and India given the size of these operating locations. We also visited the Integrated Business Services location office in Spain. During our visits we met with local management and component auditors, discussed significant business developments, accounting matters and the areas of significant risks. Furthermore, we reviewed selected working papers of the component auditors in the Netherlands, Austria, Brazil, China, India, Türkiye, 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 audit work over the headquarter-related activities in Vienna. This includes the audit of IT systems, 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 outlined above at the components, combined with additional procedures exercised at group level, we have been able to obtain sufficient and appropriate audit evidence on the Group’s financial information, to provide a basis for our opinion on the financial statements.
Audit approach to 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 internal control system. This included management’s risk assessment process, management’s process for responding to the risks of fraud and monitoring the internal control system and how the board of directors exercised 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 evaluated the design and relevant aspects of the internal control system and in particular the fraud risk assessment, as well as the code of conduct, whistle blower procedures and incident registration process, among other things.
As part of our process of identifying fraud risks, we, together with our forensic specialists, 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 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 chief audit executive about fraud cases identified throughout the year and reviewed the reports of the 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 executives and sales managers, 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.
We identified the following fraud risks and performed the following specific procedures:
Identified fraud risks | Our audit work and observations | |
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 manual controls, such as those related to journal entries, related party transactions, significant accounting estimates, etc. Adjusted EBITDA and adjusted EBITA are key financial measures that the executive management and Directors use to assess the performance of the Group. Adjusted EBITA and adjusted operating cash flow are also a key financial target for executive management. Focus on meeting financial targets could provide to management an incentive for bypassing of controls. |
| 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 paid specific attention to non-routine transactions and areas of significant management judgement. We also paid specific attention to the access safeguards in the IT system, possibility of functional segregation and together with management followed up on business rationale for conflicting user rights granted within the IT environment. We considered the outcome of our audit procedures over the estimates and significant accounting areas and assessed whether control deficiencies and misstatements identified could be indicative of fraud. Where necessary, we planned and performed additional auditing procedures to ensure that fraud risks are sufficiently addressed in our audit. We evaluated key accounting estimates and judgements used in accounting areas where management judgement is applied (e.g., timing of acquisition of group companies, valuation of provisions) for biases, including retrospective reviews of prior year’s estimates where available. We performed data analysis focused on journal entries related to the fraud risk factors identified during our fraud risk assessment. Where we identified instances of unexpected journal entries, we performed audit procedures. We evaluated whether the business rationale (or lack thereof) of the significant transactions concluded in 2022 suggests that the Group may have entered into those 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 audit procedures. We performed substantive testing procedures over the consolidation entries. Our audit procedures did not identify indications of specific fraud or suspicions of fraud with respect to management override of controls. |
Risk of fraud in revenue recognition As part of our risk assessment and based on a presumption that there are risks of fraud in revenue recognition, we considered the risk of fraud in revenue recognition. This relates to the presumed management incentive that exists to overstate revenue in order to meet financial targets, guidance provided to the market or shareholder expectations. In this context, we consider this as a risk of fraud focused to overstate revenue through the recording of non-existent transactions. | We discussed and inquired with the audit committee and executive management about their views on overall fraud risks within the Group, their perspectives on the Group’s mitigating controls addressing the risk of fraud in revenue and whether they have any knowledge of (suspected) fraud. Where relevant to our audit, we have evaluated the design of the internal control measures that are intended to mitigate the risk of fraud and error in revenue recognition and assessed the effectiveness of those measures. We also paid specific attention to the processes surrounding the relevant IT systems. Through data analysis, we tested both expected and unexpected journal entries and performed relevant testing on revenue transactions throughout the year and the receivable balances at year end. We did not identify specific indications of fraud or suspicion of fraud in respect of revenue recognition. |
We reviewed lawyer’s letters and correspondence with regulators. During the audit we remained alert to indications of fraud. We also considered the outcome of our other audit procedures and evaluated whether any findings were indicative of fraud or non-compliance of laws and regulations. Whenever we identify any indications of fraud, we re-evaluate our fraud risk assessment and its impact on our audit procedures.
Audit approach going concern
As disclosed in section ‘Principles and methods’ in the financial statements, management prepared the financial statements on the assumption that the entity is a going concern and that it will continue all its operations for at least 12 months from the date of preparation of the financial statements. Our procedures to evaluate the board of directors’ going-concern assessment included, amongst others:
- Review of management’s going-concern assessment and sensitivity analysis. We corroborated management’s analysis with the approved budget 2023 and 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 the 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 at 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 judgements 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.
Key audit matter | Our audit work and observations | |
Recognition and valuation of tax positions Refer to note 3, 4, 14 and 39 of the consolidated financial statements The Group recorded deferred tax assets for tax losses carried forward for the amount of €68.8 million. Reference is made to note 14 of the financial statements. Deferred tax assets are capitalised based on the assumption that sufficient taxable income will be generated against which losses carried forward 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. As described in Note 39 of the financial statements the Group is also a party to several tax proceedings in Brazil which involve estimated contingent liabilities amounting to € 243.0 million. Given that the tax legislation in Brazil is complex and unpredictable this could give rise to significant uncertainties and the Company’s estimate of tax liabilities may differ from interpretations by the relevant tax authorities as to how regulations should be applied to actual transactions. Judgement is therefore required by management to determine whether it is probable that an uncertain tax position should be recognised and or will not be sustained. Judgement is required by management in determining the degree of probability of an unfavourable outcome for non-income tax claims and the ability of management to make a reasonable estimate of the amount of loss. Due to the inherent level of uncertainty, significant judgement involved, potential limitations in the recoverability of deferred tax assets and uncertain tax positions, we considered the valuation of tax positions to be a key audit matter for our audit. | • | With regard to recognition and valuation of deferred tax assets we have requested and obtained evidence for the existence and accuracy of the tax losses carried forward and assessed the expiration dates per jurisdiction. Where there was uncertainty around the acceptance of losses by the tax authorities, we requested, received and read tax opinions from the Group’s tax advisors. 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. With regard to recognition and valuation of uncertain tax positions we have requested and obtained management’s valuation of tax positions, reviewed correspondence with the tax authorities, independent legal and tax opinions and latest available tax filings. We also corroborated tax assessment with the group management and local auditors. We analysed the outcomes of resolution of tax disputes within territory (Brazil) where uncertain tax positions were identified. Where significant management estimates and judgements involved are susceptible to management bias, we have critically reviewed the underlying facts to assess recognition and assessed the recoverability of the deferred tax assets and uncertain tax positions. Based on the audit procedures performed, we found the Group’s estimates and judgement used in the recognition and valuation of tax positions to be supported by the available evidence. We assessed and corroborated the adequacy and appropriateness of the disclosures made in the consolidated financial statements. |
Valuation of goodwill and other intangible assets Refer to note 3, 4, and 17 of the consolidated financial statements The Group capitalised goodwill of €136.9 million, mainly related to the acquisition of the Magnesita Group in 2017 with new acquisitions in 2022 increasing goodwill by €20.6 million. In addition, the Company capitalised other intangible assets of €316.6 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 of 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 analysis are carried out regarding any accounting effects. The assessment did not result in an impairment. As disclosed in note 4 of the financial statements, the Group has considered the long-term impact of climate change, in particular by considering a long-term growth rate in the estimation of the terminal value in line with the change in steel and cement demand based on the specific characteristics of the businesses involved. Management also considered the potential impact of the CBAM regulation on its assets located within Europe and is currently assessing the strategy and options to maximise the opportunities and minimise the impact of this regulation. In the ‘Principal risks’ section of the annual report, management acknowledges the potential impact of climate related risks on its business strategy and committed €9 million investments in the next three-year R&D program to pilot new sustainable production technologies. This is not expected to have a material impact on the impairment assessment of goodwill. We identified the impairment assessment as a key audit matter due to significant estimates and assumptions about the discount rates, profitability and 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, recalculate the recoverable amount, test for impairment, recalculate 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 are 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 analysis to assess the reasonableness of forecasted revenues and margins and obtained further explanations when considered necessary. We also compared the forecast to prior year’s forecast and actuals. We compared the long-term growth rates used in determining the terminal value with economic and industry forecasts. We have reperformed 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 the 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; and
- 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 marked ‘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 is 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 the shareholders and now represents a total period of uninterrupted engagement of six 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 on 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 41 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, 26 February 2023
PricewaterhouseCoopers Accountants N.V.
Original has been signed by A. F. Westerman RA
Appendix to our auditor’s report on the financial statements 2022 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.
241RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS
OTHER INFORMATIONGOVERNANCESTRATEGIC REPORT
Definitions of APMs used by the Group are
set out below, including the purpose and
usefulness of each APM and a reconciliation
to the nearest IFRS equivalent measure,
or a reference to a reconciliation appearing
elsewhere in this document. In general,
APMs are presented externally to meet investor
and analyst requirements for clarity and
transparency of the Group’s underlying financial
performance. APMs are also used internally in
the management of the Group’s business
performance, budgeting and forecasting.
APMs are non-IFRS measures which enable
investors and other readers to review alternative
measurements of financial performance but
they should not be used in isolation from the
main financial statements. Commentary within
the Annual Report, including the Financial
Review, as well as the Consolidated Financial
Statements and the accompanying notes,
should be referred to in order to fully appreciate
all the factors and context affecting the Group’s
financial performance. Readers are strongly
encouraged not to rely on any single financial
measure and to carefully review the Group’s
reporting in its entirety.
Performance APMs
Adjusted EBITDA
Adjusted EBITDA is a key non-IFRS measure
that the CEO, EMT and Directors use internally
to assess the underlying financial performance
of the Group and is viewed as relevant to capital
intensive industries. The ratio of Net Debt to
Adjusted EBITDA is used as a measure of
financial gearing.
Adjusted EBITDA is defined as EBIT, as
presented in the Consolidated Statement of
Profit or Loss, before amortisation, depreciation,
and Excluded items (see definition below).
Adjusted EBITA
Adjusted EBITA is a key non-IFRS measure
that the CEO, EMT and Directors use internally
to assess the underlying performance of
the Group.
It is determined consistently with Adjusted
EBITDA, but includes depreciation expense of
property, plant and equipment to reflect the
wear and tear cost and future replacement of
productive assets on the Group.
Adjusted EPS
Adjusted EPS is a key non-IFRS measure and
one of the Group’s KPIs (as reflected on pages
26 and 27). It is used to assess the Group’s
underlying operational performance,
post-tax and non-controlling interests on
a per share basis.
This measure is based on Adjusted EBITA after
finance income and expenses, taxes, share of
profit or loss from associates and joint ventures
and non-controlling interest. Share of profit
or loss from associates and joint ventures is
adjusted to exclude impairments and gains
or losses recognised on disposals.
It excludes finance income and expenses,
including foreign exchange, that are not
directly related to operational performance.
This includes the non-cash present value
adjustments for the unfavourable contract that
was required to satisfy EU remedies put in place
at the time of the RHI and Magnesita merger
in 2017.
Taxes are adjusted to remove the impacts of
items already excluded as well as certain tax
impacts that do not affect the underlying
performance of the business.
Excluded items
Items that are excluded (Excluded items) in
arriving at the Group’s Adjusted measures of
Adjusted EBITA, EBITDA and EPS include:
Other income, other expenses and
Restructuring expenses as reflected on the
Statement of Consolidated Profit and Loss as
well as gains and losses within Interest income,
interest expenses and other net financial
expenses that are regarded as not reflective of
the underlying operational performance of the
business. Excluded items includes impairments
of property, plant and equipment, goodwill,
intangibles and investments in equity
accounted units, restructuring related
provisions, gains/losses from the disposal
of assets, subsidiaries, associates and joint
ventures. The tax impacts of the above Excluded
Items as well as one-off tax income/expenses
not affecting pre-tax profit, such as the
accounting one-off impacts of changes
in tax rates, are also adjusted for.
Cash flow performance measures
Operating Cash flow and Free cash flow
Adjusted operating cash flow is a key non-IFRS
measure used by management and the directors
to reflect the operational cash generation
capacity of the Group before the cash impacts
of Excluded Items (see definition above).
It is defined as Adjusted EBITDA adjusted for
working capital items, changes in other assets
and liabilities and capital expenditure and other
non-cash items, such as share based payments.
This APM is reconciled to Net Cash flow from
operating activities as follows:
€m 2022 2021
Adjusted operating cash flow
(APM)
154.7 (254.4)
Add: Capital expenditure
1
156.7 252.1
Less: Income Taxes paid
1
(53.7) (38.6)
Other income/expenses and
restructuring items
1
(23.8) (51.0)
Net cash flow from operating
activities
¹
233.9 (91.9)
1. As reflected in the Consolidated Statement of Cash Flows.
Free cash flow is a key non-IFRS measure used
by management and the Directors to reflect
the cash flow generated by the business that
is available for debt repayments, dividend
distributions, share buy-backs and investments
and excludes cash flows from the acquisition or
disposal of businesses.
Free cash flow is determined from the IFRS
measures of Net cash flow from operating
activities, net cash used In investing activities
and net cash (used in)/provided by financing
activities and excludes the cash impacts of
purchases and disposals of business and
subsidiaries, dividends paid to equity
shareholders of the Group, share capital
transactions with shareholders, proceeds
and repayment of borrowings and current
borrowings and repayment of leases.
Free cash flow is reconciled to Cash changes
in net debt (page 204; note 34) and then
to Change in cash and cash equivalents,
in the Net Debt APM on page 204.
Alternative performance
measures (“APMs”)
242 RHI MAGNESITA ANNUAL REPORT 2022
Balance sheet
Liquidity
Liquidity comprises cash and cash equivalents,
short term marketable securities and undrawn
committed credit facilities.
€m 2022 2021
Cash and cash equivalents
1
520.7 580.8
Add: Revolving credit facility
(RCF) 600.0 600.0
Liquidity (APM) 1,120.7 1,180.8
1. As reflected in the Consolidated Statement of Financial
Position.
Net Debt
Net debt is the excess of current and non-
current borrowings, associated debt derivatives
for which hedge accounting is applied and
lease liabilities over cash and cash equivalents
and short-term marketable securities. The Board
uses this measure for the purposes of capital
management. A reconciliation of net debt is
included in note 34 to the Consolidated
Financial Statements on page 204.
€m 2022 2021
Cash changes in net debt (81.7) (415.5)
Proceeds from borrowings
1
344.4 516.1
Repayment of borrowings
1
(278.0) (112.7)
Change in current
borrowings
1
(13.9) 5.5
Repayment of lease
obligations
1
(20.6) (16.3)
Change in cash and cash
equivalents
1
(49.8) (22.9)
1. As reflected in the Consolidated Statement of Cash Flows.
Working capital
Working capital intensity provides a measure
of how efficient the Company is in managing
operating cash conversion cycles. It is measured as
the percentage of working capital to the last three
months annualised revenues. Working capital
consists of inventories, trade receivables, trade
payables and other receivables and payables.
€m 2022 2021
Inventories (Note 21) 1,049.2 976.5
Trade receivables (Note 22) 433.4 403.7
Contract assets (Note 22) 3.5 3.6
Contract liabilities (Note 32) (61.8) (57.9)
Accounts receivables 375.0 349.4
Trade payables (Note 32) (506.5) (649.2)
Total working capital 917.7 676.7
Return on invested capital (ROIC)
ROIC reflects the annualised return on invested
capital of the Group. It is calculated as NOPAT
(net operating profit after tax) divided by total
invested capital at the balance sheet date.
€m 2022 2021
Revenue
1
3,317.2 2,551.4
Cost of sales
1
(2,553.8) (1,967.9)
Selling and marketing
expenses
1
(131.3) (108.1)
General and administrative
expenses
1
(277.2) (217.4)
Income taxes paid
2
(53.7) (38.5)
NOPAT 301.2 219.5
1. As reflected in the Consolidated Statement of Profit and Loss.
2. As reflected in the Consolidated Statement of Cash Flows.
Invested Capital €m 2022 2021
Goodwill
3
136.9 114.4
Other intangible assets
3
316.6 282.6
Property, plant and
equipment
3
1,203.7 1,089.7
Investments in joint ventures
and associates
3
5.7 5.7
Other non-current assets
3
40.0 41.2
Deferred tax assets
3
128.2 202.4
Inventories
3
1,049.1 976.5
Trade and other receivables
3
578.9 568.2
Income tax receivables
3
38.7 35.1
Deferred tax liabilities
3
(62.0) (48.4)
Trade and other current
liabilities
3
(780.3) (883.2)
Income tax liabilities
3
(38.3) (38.2)
Current provisions
3
(30.1) (55.0)
Invested Capital 2,587.1 2,291.0
Return on invested capital 11.6% 9.6%
3. As reflected in the Consolidated Statement of Financial
Position.
Alternative performance
measures (“APMs”) continued
243RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS
OTHER INFORMATIONGOVERNANCESTRATEGIC REPORT
AC Audit & Compliance Committee
AFM Dutch Authority for the Financial Markets
AGM Annual General Meeting
AI Artificial Intelligence
APM Alternative Performance Measures
APO Automated Process Optimisation
ARO Automated Refractory Optimisation
ANKRAL LC RHI Magnesita low-carbon product series, which is
designed to support customers as they reduce emissions
in their supply chain
ANKRAL X RHI Magnesita product series, which combines clinker
melt resistance with flexibility
BF Blast Furnace
BOF Basic Oxygen Furnace
BST Broadband Spectral Thermometer
CAE Chief Audit Executive
CAGR Compound Annual Growth Rate
capex Capital Expenditure
CBAM European Carbon Border Adjustment Mechanism
CCO Chief Customer Officer
CCUS Carbon Capture, Utilisation & Storage
CDC Centers for Disease Control and Prevention
CDP Global disclosure system for investors, companies, cities,
states and regions to manage their environmental impacts
CEO Chief Executive Officer
CERO Continuous Economic Recycling Optimisation
CETAS Centro de Triagem de Animais Silvestres (Wild Animal
Triage Centre)
CFO Chief Financial Officer
CIA Certified Internal Audit
CMS Compact Membrane Systems
CO Carbon monoxide
CO
2
Carbon dioxide
CoGS Cost of Goods Sold
COP 27 The 2022 United Nations Climate Change Conference
COVID-19 Coronavirus disease 2019
CSC Corporate Sustainability Committee
CIS Commonwealth of Independent States
CREST Certificateless Registry for Electronic Share Transfer
CRMA Certified Risk Management Assurance
CRU A business intelligence company with focues on mining,
metals and fertilizers markets.
CSC Corporate Sustainability Committee
CSR Corporate Social Responsibility
CSRD Corporate Sustainability Reporting Directive
CTO Chief Technology Officer
DACH Three Central European countries of Germany (D),
Austria (A), and Switzerland (CH)
DBM Dead Burned Magnesia
DBRL Dalmia Bharat Refractories Limited
DCGC Dutch Corporate Governance Code 2016
DNSH Do-No-Significant-Harm criteria
DRI Direct Reduced Iron
DTR Disclosure & Transparency Rules (UK)
EAF Electric Arc Furnace
EBIT Earnings Before Interest and Taxes
EBITA Earnings Before Interest, Taxes and Amortisation
EBITDA Earnings Before Interest, Taxes, Depreciation
and Amortisation
EEC Environment, Energy and Chemicals
ED Executive Director
EMLI Electromagnetic Level Indicator
EMT Executive Management Team
EPS Earnings Per Share
ERD Employee Representative Director
ERP Enterprise Resource Planning system
ESG Environmental Social Governance
ETR Effective Tax Rate
ETS Emissions Trading Schemes
EUETS EU Emissions Trading Schemes
EU European Union
EXW Ex Works.
FRC UK Financial Reporting Council
FTSE Financial Times Stock Exchange
FX Foreign Exchange Market
GAAP Generally Accepted Accounting Principles
GHG Greenhouse Gas Protocol
GRI Global Reporting Initiative
HSMS Health & Safety Management System
IAS International Accounting Standards
IEA International Energy Agency
IFRS International Financial Reporting Standards
Glossary
244 RHI MAGNESITA ANNUAL REPORT 2022
IMS Integrated Management System
IPCC Intergovernmental Panel on Climate Change
IPO Initial Public Offering
ISO Isostatically pressed
ISSB International Sustainability Standards Board
Ktpa Thousand tonnes per annum
KPI Key Performance Indicator
LES Lining Evaluation Scan
LPG Liquefied Petroleum Gas
LTIFR Lost Time Injury Frequency rate
LTIP Long-Term Incentive Plan
MAR Market Abuse Regulations
M&A Mergers and Acquisitions
MES Manufacturing Execution Systems
MIRECO Horn & Co. RHIM Minerals Recovery GmbH
MOE Molten Oxide Electrolysis
MOF4AIR A H2020 project gathering 14 partners from 8 countries to
develop and demonstrate the performances of MOF-
based CO
2
capture technologies
MSCI Morgan Stanley Capital International
MSS Minimum Social Safeguards
NACE the statistical classification of economic activities in the
European Community
NAM one of the RHIM strategic regions including North America
and Central America
NCI Non-Controlling Interest
NED Non-Executive Directors
NFM Non-Ferrous Metals
NG Natural Gas
NGO Non-governmental Organisation
NMEA Near Middle East and Africa
NOx Nitrogen oxides
NOPAT Net Operating Profit After Tax
NPS Net Promoter Score
OCF Operating Cash Flow
OeKB Oesterreichische Kontrollbank AG
OIE Other Income and Expenses
OMV Austrian petroleum company – OMV AG
ONS UK office for National Statistics
OT Operations Technology
PCF Product Carbon Footprint
PET Polyethylene terephthalate
PIFOT Process In Full On Time
PPE Property Plants & Equipment / Personal Protective
Equipment
PROIL A digital solution offered by RHIM that optimises steel or
metal flow to reduce scrap rate and achieve higher quality,
improve energy and CO
2
efficiency
PVA Present Value Adjustment
R&D Research & Development
RD&I Research Development & Innovation
RCF Revolving Credit Facility
RCP Representative Concentration Pathway
ROIC Return On Invested Capital
RFID Radio Frequency Identification
SAM One of the RHIM strategic regions: South America
SAR+ Refractory Application System
SDGs United Nations Sustainable Development Goals
SFDR Sustainable Finance Disclosure Regulation
SG&A Selling, General and Administrative Expenses
SMART SMART maintenance is a concept proposed by RHIM
whereby maintenance can be fully automated and
centralised into a global system
SOx Sulphur oxides
SÖRMAŞ Söğüt Refrakter Malzemeleri Anonim Şirketi
SRM Secondary Raw Materials
SSP Shared Socio-economic Pathway
STEM Science, Technology, Engineering and Mathematics
TCFD Task Force on Climate-related Financial Disclosures
TRACE A leading anti-bribery standard-setting organisation.
TRIF Total Recordable Injury Frequency
TRL Technology Readiness Level
TSR Total Shareholder Return
UK United Kingdom
UKCGC UK Corporate Governance Code 2018
UN United Nations
US / USA United States of America
VISIR A digital solution offered by RHIM that measures residual
thickness of ladle working lining.
WHO World Health Organization
WRA World Refractories Association
WSA World Steel Association
Glossary continued
245RHI MAGNESITA ANNUAL REPORT 2022
FINANCIAL
STATEMENTS
OTHER INFORMATIONGOVERNANCESTRATEGIC REPORT
RHI Magnesita N.V. is a public company
with limited liability under Dutch law and
was incorporated on 20 June 2017.
It has its corporate seat in Arnhem, the Netherlands, its administrative
seat in Vienna, Austria and its registered office at Kranichberggasse 6,
1120 Vienna, Austria.
The telephone number of the Issuer is +43 50 2136200.
The Company shares, represented by depository interests, of RHI
Magnesita 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 secondary listing on the Prime Segment of the Vienna Stock
Exchange (Wiener Börse).
Ticker symbol: RHIM
ISIN Code: NL 0012650360
Investor information
The Company’s website www.rhimagnesita.com provides information for
shareholders and should be the first port of call for general queries. The
Investors section here contains details. contains details on the current
and historical share price, analyst presentations, shareholder meetings as
well as a “Shareholders Information” section. Annual and Interim Reports
can also be downloaded from this section.
You can also subscribe to an “Investors mail alert service” to automatically
receive an email when significant announcements are made.
Shareholding information
Please contact our Registrar, Computershare for all administrative
enquiries about your shareholding, such as dividend payments, or
a change of address:
Computershare Investor Services PLC
The Pavilions,
Bridgwater Road
Bristol BS99 6ZZ
United Kingdom
www.computershare.com/uk
T: +44 (0) 370 702 0003
Financial calendar
Q1 Trading Update 5 May 2023
Annual General Meeting 24 May 2023
Half Year Results 26 July 2023
Investor Relations department
Kranichberggasse 6,
1120 Vienna,
Austria
T: +43 699 1870 6493
Email: investor.relations@rhimagnesita.com
Corporate brokers
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
United Kingdom
T: +44 20 7418 8900
www.peelhunt.com
Barclays Bank PLC
5 The North Colonnade
Canary Wharf
London E14 4BB
United Kingdom
T: +44 20 7623 2323
www.barclays.com
Auditor
PricewaterhouseCoopers Accountants N.V,
Thomas R. Malthusstraat 5
1066 JR Amsterdam
P.O. Box 90357
T: +31 88 792 00 20
www.pwc.nl
Follow us
Shareholder information
rhimagnesita.com