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VIENNA, Nov 5 (Reuters) - Austrian fireproof-materials maker RHI said on Thursday it was becoming increasingly difficult to meet its already reduced full-year operating profit margin target as customers faced a difficult economic environment.
RHI, which makes refractory products that insulate equipment such as furnaces and incinerators, cited the knock-on effect of an aggressive export strategy by Chinese steel producers putting pressure on prices, and the devaluation of Brazil’s currency as developments that negatively affected its earnings.
“The difficult economic framework conditions in many customer industries lead to uncertainties regarding the delivery of refractory products and the completion of customer projects by the end of the year,” RHI said in a statement.
RHI said third-quarter earnings before interest and tax (EBIT) fell 33 percent from the previous quarter to 22.8 million euros. Analysts’ average EBIT forecast was 31.7 million euros in a Reuters poll.
“Reaching an operating EBIT margin of roughly 8 percent is becoming increasingly challenging,” RHI said, referring to a measure of EBIT that strips out items such as impairment and restructuring expenses. It had already cut that target from 9 percent due to price pressure in the steel market.
RHI said the reason for that increased difficulty was negative exchange rate effects related to the valuation of balance sheet items, adding that the Brazilian real’s devaluation was mainly to blame.
The operating EBIT margin was 5.6 percent in the third quarter and 7.0 percent in the first nine months of the year. (Reporting by Francois Murphy; editing by Michael Shields)