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Investing.com -- London listed shares of RHI Magnesita NV (VIE:RHIM) tumbled by 6.2% on Wednesday following a trading update that highlighted more challenging conditions in the first quarter, leading to lower sales volumes and profits.
The company, which specializes in refractory products, experienced a decline in project business and faced lower pricing in cement and steel markets, resulting in decreased EBITA margins for the quarter, as anticipated.
The trading statement released today also noted a sequential decline in capacity utilization compared to the fourth quarter of 2024.
Despite ongoing footprint optimization efforts and additional cost-saving measures in the pipeline, management’s intent to implement price increases is being met with resistance due to a tough pricing environment influenced by China exports and strong competition both domestically and internationally, particularly affecting markets in India and West Asia.
The outlook for the fiscal year has been clouded by downside risks and an anticipated foreign exchange headwind of approximately €15 million. The company expects a heavier second-half weighting for the fiscal year’s EBITA, projecting only 35-40% to be realized in the first half.
Analysts have weighed in on the implications of the trading update. "With the share having bounced back to its pre-tariff announcement levels the tougher outlook commentary would appear to be a negative risk." RBC analysts commented.
They also noted that while RHIM continues to appear undervalued compared to peers, concerns remain over its high debt levels and limited free float of around 36%.
RBC maintained a Sector Perform rating with a price target of 3,200p.