2016 Annual Report

Earnings indicators (in € million) Revenue EBITDA3) Operating EBIT EBIT Net finance costs Share of profit of joint ventures Profit before income tax Income tax Profit from continuing operations EBITDA % EBIT % Profit from continuing operations % Cash flow indicators (in € million) Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Free cash flow Balance sheet indicators (in € million) Balance sheet total Equity Equity ratio (in %) Net debt Gearing ratio (in %)4) Net debt / EBITDA Working capital5) Working capital % Capital employed6) Return on average capital employed (in %)7) Stock exchange indicators (in €) Number of shares (million units) Closing price (Vienna Stock Exchange) Market capitalization (in € million) Earnings per share Price-earnings ratio Dividend per share Dividend yield (in %) Key Figures 1) 2) 2016 2015 Delta 2014 2013 2012 2011 1,651.2 1,752.5 (5.8)% 1,721.2 1,754.7 1,835.7 1,758.6 189.1 140.0 35.1% 199.4 260.7 228.7 203.4 123.2 124.1 (0.7)% 141.9 126.8 164.4 148.6 116.1 37.5 209.6% 109.3 111.1 167.6 150.9 (21.2) (19.3) (9.8)% (32.7) (29.8) (21.3) (30.9) 10.9 9.2 18.5% 8.2 8.0 5.3 5.5 105.8 27.4 286.1% 84.8 89.3 151.6 125.5 (29.9) (9.8) (205.1)% (32.3) (26.6) (38.1) (4.7) 75.9 17.6 331.3% 52.5 62.7 113.5 120.8 11.5% 8.0% 3.5pp 11.6% 14.9% 12.5% 11.6% 7. 0 % 2.1% 4.9pp 6.4% 6.3% 9.1% 8.6% 4.6% 1. 0 % 3.6pp 3.1% 3.6% 6.2% 6.9% 1) 2) 2016 2015 Delta 2014 2013 2012 2011 162.7 175.4 (7.2)% 72.4 171.5 161.1 124.4 (52.9) (47.2) (12.1)% (61.1) (125.1) (165.9) (105.5) (80.7) (124.4) 35.1% 24.6 (112.8) 47.8 67.3 109.8 128.2 (14.4)% 11.3 46.4 (4.8) 18.9 1) 2) 2016 2015 Delta 2014 2013 2012 2011 1,792.2 1,804.5 (0.7)% 1,860.5 1,724.0 1,849.6 1,689.9 524.0 491.4 6.6% 493.9 485.5 482.1 438.9 29.2% 27.2% 2.0pp 26.5% 28.2% 26.1% 26.0% 332.8 397.9 (16.4)% 466.9 422.9 418.5 361.5 63.5% 81.0% (17.5)pp 94.5% 87.1% 86.8% 82.4% 1.8 2.8 (1.0) 2.3 1.6 1.8 1.8 465.1 532.6 (12.7)% 570.9 481.0 479.6 473.8 28.2% 30.4% (2.2)pp 33.2% 27.4% 26.1% 26.9% 1,095.8 1,176.5 (6.9)% 1,225.2 1,138.8 1,181.8 1,049.0 7. 6 % 2.3% 5.3pp 6.5% 7. 3 % 11.6% 14.5% 1) 2) 2016 2015 Delta 2014 2013 2012 2011 39.819 39.819 0.0% 39.819 39.819 39.819 39.819 24.25 18.01 34.6% 18.81 22.56 24.90 15.10 966 717 34.6% 749 898 991 601 1. 8 6 0.40 365% 1. 2 8 1. 5 5 2.85 3.03 13.0 45.0 (71.1)% 14.7 14.6 8.7 5.0 0.75 0.75 0.0% 0.75 0.75 0.75 0.75 3.1% 4.2% (1.1)pp 4.0% 3.3% 3.0% 5.0% 1) For details on reclassifications see annual report 2013, page 82 (other changes in comparative information) 2) For details on reclassifications see annual report 2012, page 72 f. (other changes in presentation) 3) Adjusted for income from the reversal of investment subsidies recognized as liabilities 4) Gearing ratio: net debt / equity 5) Working capital: inventories + trade receivables + receivables from long-term construction contracts – trade payables – prepayments received 6) Capital employed: property, plant and equipment + goodwill + other intangible assets + working capital 7) Return on average capital employed: (EBIT - taxes) / average capital employed Table of Contents Company Company Profile 1 To our Shareholders 2 Management Board 4 Strategy 6 Value Chain 8 Share 12 Corporate Governance 14 Consolidated Management Report 2016 27 Economic Environment 28 Earnings Position 30 Business Development 31 Steel Division 32 Industrial Division 39 Raw Materials Division 44 Financial and Assets Position 48 Investments, cash flow and liquidity 48 Net debt and financing 49 Balance sheet structure and equity development 50 Non-financial Performance Indicators 51 Employees 53 Innovation / Research & Development 60 Environment and Energy 64 Risk Management, Accounting & Internal Control System 69 Notes in accordance with § 243a UGB 74 Outlook 76 Material Events after the Reporting Date 78 Consolidated Financial Statements 2016 79 Consolidated Statement of Financial Position 80 Consolidated Statement of Profit or Loss 81 Consolidated Statement of Comprehensive Income 82 Consolidated Statement of Cash Flows 83 Consolidated Statement of Changes in Equity 84 Notes to the Consolidated Financial Statements 86 Auditor´s Report 164 Statement of the Management Board in accordance with § 82 (4) of the Austrian Stock Exchange Act 169 Report of the Supervisory Board 171 Global Reporting Initiative G4 Index 172 Imprint 176 A World Market Leader in Refractories RHI is a globally operating supplier of high-grade refractory products, systems and services, which are indispensable for industrial high-temperature processes exceeding 1,200 °C. [G4-3, G4-4] With roughly 7,500 employees, 30 production facilities and more than 70 sales offices, RHI serves more than 10,000 customers in the steel, cement, nonferrous metals, glass, energy and chemical industries in nearly all countries of the world. RHI produc- es more than 1.5 million tons of refractory products per year and supplies customized product and system solutions. [G4-6, G4-8, G4-9, G4-12] Refractory linings made by RHI ensure that a wide range of aggregates including steel ladles, cement rotary kilns, copper converters or glass furnaces withstand extreme thermal, mechanical and chemical stress. The production of refractories is resource-intensive. The naturally occurring raw materials magnesite and dolomite are used as basic materials. Roughly 70% of the global deposits are located in three countries: China, North Korea and Russia. RHI covers roughly 80% of its requirements from eight group-owned raw material sites and is therefore largely independent of raw material markets. The RHI Group attaches great importance to research. The innovative power, which has made RHI the global technology leader, is based on decades of research and development activities, which have given RHI a leading edge. The company invests more than € 20 million annually in this strategically important segment. Demand for refractory products is primarily driven by growing prosperity, the level of industrial production and infrastructure projects. Although refractory products account for less than 2% of the production costs of customer industries, they are crucial to the quality of the products manufactured. In the year 2016, RHI generated revenue of € 1,651.2 million. The charts below show revenue by segment and region. [G4-8, G4-9] 1 2016 RHI Group To our Shareholders Dear Shareholders, The year 2016 marks an important milestone in the history of our company. We reached an agreement with the controlling shareholders of Magnesita, GP and Rhône, regarding the combination of our two companies. Our Group is thus at a crossroads for future growth and has the unique opportunity to form a truly global player in the refractory industry together with Magnesita. RHI and Magnesita complement each other excellently in terms of both products and production sites, and markets. The combination of the two companies will consequently also lead to an improved competitive position in order to be prepared for the consolidation of the Chinese refractory industry pushed by the Chinese government. Based on the complementary product portfolio, the combined company will be able to offer our customers an even more comprehensive range of services, thus increasing its value contribution. In addition, there is significant value creation potential due to the realization of the intended syn- ergy effects and the implementation of additional operational and commercial improvements based on the combined know-how of the companies. The three most important conditions for the closing of the share purchasing agreement are the ap- proval by the relevant competition authorities, our shareholders’ consent to this project at an extraordinary general meeting of our Group and the listing of the shares on the London Stock Exchange. The objective of the listing on one of the world’s most important and significant financial centers is to increase our presence in the capital market and the value potential for our shareholders and to facilitate the access to capital through an international investor base. However, until then we still have a great deal of work ahead of us which we have to cope with together. At the same time, we have to keep focusing on our current business and the projects initiated by RHI. The global refractory industry has been confronted with a challenging market environment for several years, which is characterized by stagnating end markets, increased competitive pressure as our customers strongly focus on their operating costs, and significant excess capacities in global refractories production, especially in China. We responded to this situation by taking the appropriate countermeasures, which have been successfully initiated and implemented.

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