October 27, 2017 / 1:33 PM / in a year

UPDATE 1-Fireproof materials firm RHI Magnesita to build up China business

(Adds details, CEO quotes, shares, background)

VIENNA, Oct 27 (Reuters) - London-listed fireproof materials maker RHI Magnesita will introduce new products for European and American markets and restructure its China operations to build its business there, its chief executive said on Friday.

RHI Magnesita, which began trading on the London Stock Exchange on Friday, was formed in a $500 million deal involving RHI’s takeover of its Brazilian rival. The move helped consolidate a fragmented 20 billion euro ($23 billion) industry.

RHI Magnesita, which owns 50 percent plus one share in Magnesita, aimed to make a mandatory offer for remaining shares in Magnesita in coming weeks and then delist it from Brazil’s bourse in the next nine months, Chief Executive Stefan Borgas told reporters on a call.

“We have had a weak second quarter, but we have said that the third quarter would more than compensate for this and that’s what happened,” he said in remarks on the firm’s performance.

Shares started trading at 3226 pence in London and were at 3230 pence at 1225 GMT, slightly above RHI’s last price in Vienna at 35.90 euros (31.91 pounds).

RHI’s shares gained 50 percent in value in Vienna since announcing the merger in October 2016.

RHI and Magnesita had both supplied the steel, cement and glass industries with fireproof refractory materials.

RHI derived 40 percent of its sales from slow-growing developed economies, including Western Europe, while Magnesita focused on North and South America.

As well as developing new products and cutting costs in the European and American markets, the CEO said the firm would “put particular emphasis on China over the next two years.”

Experienced staff would restructure the China unit and push organic growth next year, Borgas said, adding that acquisitions in the region were an option within 18 to 24 months.

RHI Magnesita’s net debt would be “significantly below” 3.5 times EBITDA once the merge was complete, the CEO said, citing a debt level typically considered manageable. The ratio should sink to below two times EBITDA within two years, he added.

Some analysts had voiced concern about the company’s high debt pile when RHI first announced the planned takeover.

The combined company had pro forma adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of 338 million euros on 2.5 billion euros in revenues in 2016, according to its website.

RHI Magnesita is due to give a trading update for the combined business on Nov. 13.

$1 = 0.8623 euros Reporting by Kirsti Knolle; Editing by Francois Murphy and Edmund Blair

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