RHI Magnesita Faces Challenges Amid Weak Market Conditions

RHI Magnesita updates on Q1 2025 trading: sales drop, rising risks. Despite cost-saving hopes, global trade tensions loom large.

Date: 07-05-2025

AI Rating: 5

RHI Magnesita N.V.'s recent trading performance report for Q1 2025 indicates several concerning trends that could adversely affect its stock price in the near term. The company's update reveals challenges in lower sales volumes and deteriorating conditions primarily in the glass and non-ferrous metals sectors. The ongoing pricing pressures in cement and steel markets, particularly in India and the Middle East, are also compounding these challenges.

EBITA Margins and Profitability Concerns
For the first quarter, the EBITA margins declined as anticipated, pressured by reduced high-margin project business and weaker pricing for finished goods. These factors negatively impact not just profits but also indicate potential difficulties in sustaining operational efficiency. The company has already responded with strategic decisions like reducing plant capacity utilization and closing its Wetro plant in Germany to align costs with changing market conditions.

Net Debt Impact
Furthermore, RHI Magnesita's net debt has increased to €1.6 billion following an acquisition, which poses risks to its financial stability by potentially constraining future growth opportunities and increases financial obligations. The modest increase in working capital in expectation of a sales rise in Q2 suggests cautious optimism but also highlights reliance on an uncertain recovery.

Global Trade and Economic Variables
The report emphasizes that macroeconomic volatility and global supply chain instability add significant risk to projected demand, suggesting that future earnings will likely remain under pressure. The weaker U.S. dollar is poised to compound these issues with a projected €15 million negative impact on Adjusted EBITA.

Despite the guidance indicating expectations of modestly improved Adjusted EBITA for 2025, the company's outlook suggests that substantial improvements in profitability need to be realized in the latter half of the year to meet forecasts, further adding to the uncertainty investors face.

Stocks: RHIM.L