Built-In Demand
Frequent refractory replacements, especially in steel, drive steady revenue, with low customer cost exposure allowing pricing flexibility.
An overview of the main reasons to invest and the key risks involved.
Frequent refractory replacements, especially in steel, drive steady revenue, with low customer cost exposure allowing pricing flexibility.
Vertical integration cuts costs and reduces raw material risks, while refractory margins hit record highs.
Resco acquisition enhances U.S. presence and margin potential.
M&A synergies take time to materialize and may face execution risks.
Market downturns can impact vertical integration benefits.
Steel and construction downturns may depress refractory demand.
RHI Magnesita is the world's leading supplier of high-grade refractory products, systems, and solutions, critical for industrial processes exceeding 1,200°C. The company serves steel, cement, non-ferrous metals, and glass industries, offering vertically integrated solutions from raw materials to performance-based services. With a global footprint spanning 65 production sites and a strong emphasis on recycling and innovation, RHI Magnesita plays a vital role in high-temperature industries.
As an investment, RHI Magnesita presents a resilient business model backed by operational efficiency, strategic M&A, and sustainability leadership. Despite weak market conditions, the company has maintained strong margins through cost discipline and M&A synergies. The recent acquisition of Resco expands its U.S. presence, fulfilling demand for local production. While near-term demand challenges persist, RHI Magnesita's strategic positioning ensures more capital for reinvestment in an industry ripe for consolidation.
Overview of buy and sell case of the business.
Key pieces of information about the business that you need to know about.
RHI Magnesita benefits from a recurring revenue model driven by the need for frequent refractory replacements. For example; in the steel industry, which makes up 70% of industry demand, the replacement cycle is ~1-2 months using 10-12kgs of refractory per ton of steel. Even better, refractories are just 0.5% - 2% of a customer's total cost, indicating scope for price increases.
RHI Magnesita maintains strong control over its supply chain through a vertically integrated “mine-to-market” model, reducing exposure to volatile raw material markets and ensuring cost advantages. While margins in raw materials have faced pressure, the company's refractory division has hit record highs, demonstrating the resilience and pricing power of its business model.
RHI Magnesita has aggressively expanded through acquisitions, consolidating its leadership. The €390mn Resco acquisition, its largest since 2017, enhances U.S. production capacity, shortens supply chains, and strengthens local-for-local production strategies. This positions the company well amid trade tariffs and geopolitical shifts
The key events that could drive investment opportunities and shift markets.
Resco Integration and Synergies
The recent €391 million acquisition of Resco is expected to bring significant synergies, particularly in North America, where demand for local refractory production is high. The consolidation of manufacturing footprints and operational efficiencies should enhance margins and improve customer service.
Network Optimization Initiatives
The company is actively restructuring its European and Brazilian operations following recent M&A activity. This includes plant closures and footprint adjustments that should drive €10 million in EBITA benefits in 2025, improving profitability even in a weak demand environment.
Growing Demand in Emerging Markets
RHI Magnesita is well-positioned to benefit from rising steel production in India, West Asia, and Africa, where demand for refractories is expected to grow significantly. As these regions ramp up industrial capacity, refractory consumption should increase, boosting sales.
Expansion of High-Margin Solutions Business
The company’s 4PRO service offering, which provides advanced technology solutions like automated lining repairs and performance-based contracts, is gaining traction. This shift towards value-added services can increase margins and deepen customer relationships.
Sustainability and Recycling Leadership
With a record recycling rate of 14.2% and ongoing investments in carbon capture and material reuse, RHI Magnesita is positioning itself as a sustainability leader in the refractory industry. Regulatory tailwinds and customer demand for greener solutions could create a competitive edge.
Digital Transformation and AI-Driven Optimization
The company’s investment in a new ERP system and digital process automation through Capgemini is expected to enhance efficiency, reduce costs, and improve decision-making. Over time, these digital tools could drive margin expansion and better operational performance.
Key pieces of information about the business risks that you need to know about.
Steel and industrial customers face sluggish demand, particularly due to China's export-driven strategy and lower CAPEX investments in industrial projects. This puts downward pressure on pricing, and unless demand rebounds, RHI Magnesita may have to rely on cost-cutting measures or restructuring initiatives to sustain profitability.
While the company has successfully reduced input costs, inflationary pressures on wages, logistics, and energy could compress margins if price adjustments lag. Additionally, prolonged inflation could force customers to delay capital-intensive projects, further weakening demand in key segments such as non-ferrous metals and glass.
The Resco acquisition is promising but requires seamless integration to realize projected synergies. Plant closures and network optimizations in Brazil and Europe present restructuring risks, and any missteps in execution could lead to prolonged inefficiencies, increased costs, or disruptions in service delivery to key customers.
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The global refractories market size is projected to hit around USD 51.46 billion by 2033 from USD 32.98 billion in 2023 with a CAGR of 4.60% from 2024 to 2033.
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Here are the questions that professional investors are asking before making an investment decision.
The key operating risk is raw material supply. The company sources ~50% of its raw materials from owned assets but could still experience considerable volatility or scarcity for the remaining 50%. Fluctuations in raw material prices, supply shortages, or geopolitical issues in sourcing regions (such as China) can significantly affect operating costs and margins. The other key input is energy and rising energy costs could impact margins.
Over the past two decades, most of the incremental steel demand has come from China and India. China has had a tendency to over produce and there is a fear that if the economic growth in the region slows then excess inventory could weigh on prices. Only 6% of RHI Magnesita’s sales go directly to China but if domestic demand in China fell, it would hurt prices globally.
RHI aims to grow through M&A expanding its geographic footprint, particularly in emerging markets like China and India. They are also investing in their current plants and innovation to increase their capacity and broaden their offering.
Geopolitical tensions, particularly trade restrictions and tariffs, pose risks to raw material sourcing and global supply chains. To mitigate this, RHI Magnesita has diversified its supply chain, localized production in key regions, and built strategic raw material reserves to reduce dependency on certain regions.
The industry has adopted the practice of making refractories from recycled raw materials which has the added benefit of reducing dependency on imports and saving 30% on cost.
LSE:RHIM
GBp2970.000.17%
GBp1.40b
11.54
21k
Pricing delayed 15 mins. Jul 1, 2025 12:00 PM
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