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RHI Magnesita: Bringing The Heat

The Global Backbone of High-Heat Industries with a Sustainable Edge

LON:RHIM
GBp2970.00+0.17%
Updated: May 02, 2025
Industrials
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Bull & Bear Case

An overview of the main reasons to invest and the key risks involved.

Bull Case

Built-In Demand

Frequent refractory replacements, especially in steel, drive steady revenue, with low customer cost exposure allowing pricing flexibility.

Supply Chain Control

Vertical integration cuts costs and reduces raw material risks, while refractory margins hit record highs.

M&A

Resco acquisition enhances U.S. presence and margin potential.

Bear Case

Integration Challenges

M&A synergies take time to materialize and may face execution risks.

Raw Material Price Volatility

Market downturns can impact vertical integration benefits.

Cyclical Industry Risks

Steel and construction downturns may depress refractory demand.

Executive Summary

A Global Leader In Critical Refractory Products

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.

Investment Thesis

Overview of buy and sell case of the business.

Why Invest?

Key pieces of information about the business that you need to know about.

Recurring Revenue

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.

Resilient Supply Chain Advantage

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.

Strategic M&A and Network Expansion

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

Catalysts

The key events that could drive investment opportunities and shift markets.

Near term

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.

Medium term

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.

Long term

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 Risks

Key pieces of information about the business risks that you need to know about.

End Market Weakness

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.

Cost Inflation and Margin Pressure

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.

Execution Risks in M&A Integration

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.

Follow the Experts

Quickly navigate key insights from industry experts and leverage their knowledge and market intelligence.

S&P Global Commodity Insights profile

S&P Global Commodity Insights

Metal Markets news

150k audience

Expert Insights

article
“There are very few new copper, nickel or aluminum plants under construction…and RHI Magnesita expects its nonferrous business to weaken considerably in 2025.”
SOIC Research profile

SOIC Research

Indian Equity Research

1.2K audience

Expert Insights

article
”They form a very minimal part of the total cost being around 0.5-2% but the dependency on this product is extremely high, and many industries cannot produce their product without refractories.”
World Cement profile

World Cement

Cement Industry News

30k audience

Expert Insights

article
“The addition of Resco Group to the Company’s North American operations will significantly increase local-for-local production, improving supply chain security for critical industries that underpin the economy of the continent.”
Niveshaay Investment Advisors profile

Niveshaay Investment Advisors

Investment Advisor

12.5K audience

Expert Insights

article
"What led us to research this industry? A revival in Indian Capex Cycle expected (Govt+Pvt) with favorable Govt. policies & reforms like PLI, NIP, Import Substitution, AMP, reduced corporate tax rate"

Investor Materials

Access the most recent investor updates published by the company.

Key Documents

Investor Presentation March 2025

PDF

External Insights

A curated collection of third-party content relevant to the company and sector to help inform your investment decision.

Global Steel Markets

Refractories Market Size to Hit USD 51.46 Bn By 2033

Article

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.

Team

Meet the experienced professionals leading our organization

Stegan Borgas - undefined

Stegan Borgas

Ian Botha - undefined

Ian Botha

Rajah Jayendran - undefined

Rajah Jayendran

Gustavo Franco - undefined

Gustavo Franco

What the Pro's Are Asking

Here are the questions that professional investors are asking before making an investment decision.

What are the key operating risks?

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.

How reliant is the Industry on China?

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.

What is RHI Magnesita's growth strategy?

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.

How are geopolitical tensions and global supply chain disruptions impacting the business?

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.

What are their environmental initiatives?

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.