RHI Magnesita N.V. (RHIM) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the RHI Magnesita call. My name is Kayla, and I will be your coordinator today. [Operator Instructions] I will now hand over to your host, Stefan Borgas, to begin the call. Stefan, please go ahead.

Thank you, Kayla. And good morning from Vienna with a beautiful sunshine, but otherwise a very, very, very quiet city. I would like to present the 2019 RHI Magnesita results and then, of course, talk about where the future will bring our business. Maybe in a summary, 4 messages upfront. 2019, in a very difficult market, turned out to be -- to deliver quite resilient results for RHI Magnesita on -- especially on profitability and earnings per share and free cash flow. Second, this ended our company -- this delivered a strong balance sheet for our company with a lower leverage than before and a very high level of liquidity, which gives us a good basis for the future. Third, we have a clear strategy that despite all of the very short-term effects from corona, we will continue to pursue with approximately EUR 100 million of additional EBITA that we can deliver by 2022. And fourth, the uncertainty in which we are in the short term due to the corona outbreak all over the world is unprecedentedly high. We have, therefore, set 3 priorities for our business for the next months. The first one is the health of our employees and all of our business partners. Nothing goes above this, and we will not operate our company if health is in danger. The second priority is the viability of our customers' operation. That has priority above everything else other than health. And then the third priority is the liquidity for RHI Magnesita, where we have clear measures in place in order to be able to sustain even a longer period of downturn, should this happen to us. And it's not an announcement of a longer period of downturn, but we're just getting prepared for this. With those introductory words, let me go into the summary of what happened in 2019 before I turn over to Ian, our CFO, who will explain you the details. Let's go to Slide #4. 2019 was a year which delivered a little bit lower sales than 2018 in a year of quite difficult markets, especially for our steel customers in an environment of significant inventory adjustment at the steel companies. Our EBITA also shrank slightly, but our margin could be defended in this year, where also raw materials had a very significant negative impact on the business. Our earnings per share went up to EUR 5.57 per share, and our operating cash flow with an 88% cash conversion at EUR 359 million left us with a net debt to EBITDA of 1.2x and a available liquidity for the future of over EUR 1 billion, which helps us for the future. The safety record that we have and that you can see on Slide #5 is an indicator on how our -- all our operational excellence continues to improve in the company. Number of accidents continued to go down. This trend also continues in the first quarter of this year. And that's a clear indication that our operational grip on our plants, the excellence, the number of errors goes down and the number of mistakes go down and the costs come under control better and better. But it's led by the improved health and safety of our employees. Operational highlights on Slide 6. The refractory margins continued to improve with all of the mergers activities being delivered into the P&L. The raw material margin in our business that is -- that comes on top of the refractory margins is volatile, of course, because it depends on raw material pricing, but the refractory margins improved. 2019 was the year where we completed the integration between RHI and Magnesita. Our 2 divisions had different performances. The Steel division was quite a bit weaker because customers destocked significantly, but also were under significant margin pressure themselves, and in some of the regions, had some reduction in the steel production. Our Industrial division, however, continues to perform well. Here, we are linked into the investment cycle of glass, cement, nonferrous producers, and we had a good growth in this business. We continue to execute our strategy. As I said, our integration is now completed. Our price rise program during the course of the year had some very positive results, not equally in all regions and all businesses, but overall, we would clearly do this again. In our -- the revenue growth in China and India was satisfactory, although in India, it was weighed by the downturn of the industry in some -- in the second half of the year. Our working capital performance, especially in the second half of the year, started to turn. Our operations also here started to come under control much better after the 2 predecessor companies have been merged. And our production optimization plan and our sales strategy plan, which laid the foundation for our strategy for the next years also has been well-defined and started to be put into reality. On Slide 7, we have put out for you, for the first time, our sustainability targets that are now quantified and ready to be executed or in process of being executed. I want to point out a few of them here. For the first time in its history, RHI Magnesita has diversity and community development goals. We also, for the first time in our history, just published CO2 emission reduction goals. This, especially on the CO2 emissions, is not the end of the line. It cannot be the end of the line. We're not yet at a level where we can reach the Paris Climate targets. But we have made the first step here, and we have a number of very significant initiatives underway also in our R&D area in order to add additional objectives so that by 2030, we can have another very significant step-down in this area. With this, let me hand over to Ian so that he can walk you through the financial review of 2019. Ian?

Thank you, Stefan, and good morning, ladies and gentlemen. As Stefan has highlighted, against the backdrop of more challenging market conditions, the group delivered a resilient performance in 2019. It was a year of 2 halves. We had a strong first half, continuing the momentum and themes of 2018. The second half was, however, much weaker, impacted by the slowdown in the steel industry and deteriorating raw material prices. Revenue for the full year was $2.9 billion, down 6.5% year-on-year in constant currency terms, with continued growth in the Industrial business, up 3.6%. This was offset by a weaker performance in Steel, with Steel revenue down 10.4%, impacted by weak end market and customer destocking. EBITA was down 8.9% year-on-year to $408 million, with a still robust EBITA margin of 14%. Here, the benefits of further synergies and improved price and mix were more than offset by lower steel sales volume, together with reduced fixed cost absorption as a result of lower production volumes. Profit after tax was up 6%, EUR 284 million, benefiting from both lower finance costs and lower foreign exchange effects following the refinancing of high-cost legacy debt and increasing the proportion of euro-denominated debt in our portfolio. Moving to Slide 10. Revenue was down 6.5% to EUR 2.9 billion in 2019. The reduction was primarily attributable to EUR 264 million of lower sales volumes, almost all in steel as well as the EUR 35 million impact from exiting the Iranian market. This was partially offset by the benefit of price and mix improvements, which contributed EUR 143 million. Turning to Slide 11. 2019 EBITA of EUR 408 million benefited from the delivery of synergies of EUR 20 million, alongside the recovery from the 2018 operational issues of EUR 15 million and higher margins from improved prices and mix, which added EUR 94 million. These were more than offset by lower sales volumes of EUR 94 million, lower fixed-cost absorption of EUR 67 million as well as higher SG&A spend on strategic initiatives, in particular the cost of setting up the Rotterdam supply chain and procurement hub in 2018. Moving to Slide 12. Working capital management was the key area of focus in the second half of 2019, and we successfully released almost EUR 100 million of cash from working capital reduction in H2. This was supported by the rollout of our Tactical Network Optimisation tool in supply chain. This tool optimizes our raw material and refractory plant loading to best meet our customers' needs and for best value for the company. We ended 2019 with working capital of EUR 523 million and working capital intensity of 18.3%. This is an increase from the intensity in 2018 of 15.4% as a result of 3 things: firstly, lower purchasing levels as production was slowed to align with softer steel demand; secondly, lower prepayments due to the cessation of sales into Iran, which was a prepayment business; and thirdly, lower working capital financing. There is, however, more that we can do, and we continue to target working capital intensity of 15% to 18% over the medium term. Turning to cash flow on Slide 13. We reported operating cash flow of EUR 359 million, with cash conversion of 88%. Free cash flow after tax and net financial expenses was EUR 249 million. Moving to Slide 14. We finished 2019 with net debt, including IFRS 16 leases, of EUR 650 million and net debt to EBITDA of 1.2x. In 2019, we largely completed the process of refinancing legacy high-cost debt and extended the debt maturity profile. The group has robust liquidity of EUR 1.1 billion, comprising both cash of EUR 467 million and undrawn committed facilities of EUR 600 million. We have 1 debt covenant, which is at net debt excluding IFRS 16 leases to EBITDA, measured at the 30th of June and the 31st of December, is less than 3.5x. At the end of 2019, it was 1.1x. This places the group in a strong position to weather the uncertainties of the current market environment, and in time, a strong platform from which to execute our capital-allocation priorities. As you know, these priorities are to support organic growth, strategic consolidation in our target markets and a progressive increase in returns to shareholders. Turning to CapEx on Slide 15. 2019 CapEx was EUR 156 million, comprising EUR 110 million of maintenance capital and EUR 46 million of project capital. In addition, EUR 18 million of severance costs were recognized for the 2020 closure of Hagen and downsizing of Trieben. As part of our measures to preserve cash, given the corona uncertainty, 2020 capital spend has been reduced from previous guidance of EUR 195 million to EUR 150 million. This is being achieved by reducing discretionary spend on small fast payback projects by EUR 30 million to EUR 10 million as these projects are delayed into future periods. Maintenance capital has also been reduced by EUR 15 million to EUR 85 million as we realized further efficiencies from our smaller production footprint and as we cut our expectations on 2020 production. We believe the sustainable maintenance capital spend over the medium term is EUR 95 million a year. As guided at the Capital Markets Day in November, additional capital will be spent until 2022 to support the company's strategy for the production optimization plan and sales strategies. These figures have not been cut. And in 2020, we continue to expect to spend EUR 45 million on the production optimization plan and EUR 10 million on the sales strategies. Moving to Slide 16. The merger of RHI and Magnesita has been a great success. In 2019, we delivered an incremental EUR 20 million of synergies, bringing the cumulative merger synergies to EUR 90 million. We had expected a further tranche of synergies in 2020. These were predicated largely on procurement savings. However, given the much lower raw material pricing, the weaker macroeconomic backdrop and the resulting low levels of activity, we no longer expect to realize these synergies. All of our operational strategic plans are currently on track, including the Hagen closure in the first half of 2020 and the Trieben downsizing in the second half. We do not see any corona impacts on the forecast 2020 EBITA benefit of EUR 20 million. Our sales strategies are currently on track, and this includes successful pilot testing of our digital offering. Corona will, however, delay broader rollout and likely reduce some of the EUR 20 million EBITA delivery from the sales initiatives this year. We have the right production and sales strategies and remain confident in their longer-term value potential. Turning to Slide 17. We were pleased to have made continued progress in 2019 on improving the EBITA margin from our refractories business from 8.4% in 2018 to 9% in 2019, representing EUR 264 million of EBITA. This increase comes from the delivery of integration synergies, from improved refractory pricing and growth in India and China. Over time, we expect our self-help measures to drive further growth in the refractory margin. In addition, we continued to benefit from our backward integration, although this contribution reduced markedly as a result of raw material price falls in 2019, as I'll touch on in the next slide. In 2019, backward integration contributed EUR 145 million of EBITA, down from EUR 185 million in 2018. It represented 5 percentage points of margin in 2019, comprising a 5.7% margin in the first half and a 4.1% margin in the second half. With the significant raw material falls in November and December, at today's pricing levels, backward integration contributes 2.5 percentage points to the 2020 EBITA margin. Moving to Slide 18. Prices of our key raw materials fell significantly through the course of 2019, including high-grade DBM, which was down 60% in 2019. This supply of magnesia-based raw materials in China increased and weak demand from end market exerted further downward pressure on prices. Prices are now back to historic levels pre the 2017 increases. Nevertheless, as I highlighted on the previous slide, our high-quality, largely low-cost raw material plants continued to contribute a meaningful margin to our business. Turning to capital allocation on Slide 19. Despite the group's strong financial position and only due to the uncertainty relating to corona, we have decided not to recommend the payment of a final dividend for 2019. This decision will be reviewed later in 2020 once the outlook has become clearer. We believe that this is a prudent measure, and alongside the other operational measures we have already implemented, seeks to preserve the company's strong liquidity, cash flow and the financial position through these uncertain times. Thank you. And I'll now hand you back to Stefan.

Thank you very much, Ian. Ladies and gentlemen, let me provide you with a review of our strategy, where we stand and then try to give you an outlook as best as possible. On Slide 21, we have summarized the benefits that the merger between RHI and Magnesita has delivered for our company. You can see that we have delivered a significant improvement of the financial situation of both legacy companies by merging them together, and this is the foundation for the future. With the EUR 90 million of synergies that we believe are defendable in the long run and with the completion of the cultural integration, we have now, at the end of 2019, closed this chapter and are firmly looking into the future. Before I do that with you, I want to briefly review the business that we have seen in our 2 divisions. On Slide 22, you can see the things that happened in our Steel business in 2019. Refractory volume usage in Steel was proportionately lower than in the previous year because the inventory that was built up in our industrial supply chain, the inventory of refractories was reduced again and has now come back mostly to a normal level. The resulting lower fixed-cost absorption has led to higher production costs, especially in our European plants, and that led to a weaker performance of the Steel Division. In our Industrial Division, on Slide 23, you can see that almost the opposite has happened. We have seen a continuous strength in our Cement & Lime business and a very robust performance in our Project business. In both of them, we are more linked to a capital investment cycle because of the sustaining strong pricing of metals, especially nonferrous metals, the investment behavior with our customers is -- continues to be solid and that has led to a very good performance in 2019 in the Industrial business. On Slide 24, you can now see what the focus is in the near future, let's say, in the last 2 -- next 2 to 3 years. This is the same message that we have provided to you in detail at our Capital Markets Day in November last year. We are focusing on 3 areas. We will continue to reduce cost in our operational network. Ian has outlined the CapEx that we are prepared to spend for this, and this is a good part of the value delivery of around EUR 100 million until 2022 that we will deliver. We have not put anything on the halt here despite the corona impact. This will also help us to continue to improve our working capital, especially our inventories because our supply chain will be more focused on regional supplies. So transportation chains are going to be shortened. And we're adapting to the new realities of trade policies at the same time. The second leg of our strategy is the expansion of our business model. For this, we have a number of sales strategies that we are putting in place. We are expanding our product portfolio from the traditional materials, ceramic materials, focused towards digital products and new services. We are very much focused on recycling solutions. This is not only important for our profitability, but also for our CO2 footprint as one of the major levers that we have to improve. The third leg of our strategy is the growth in new markets, especially in India and China. China, also in 2020, is looking to deliver a continued very good growth. On Slide 25, we have tried to put together the response to the COVID-19 challenge that we are facing like so many businesses. Ladies and gentlemen, this is a really very fast-moving and very uncertain environment in which we are. If we take China as a footprint, then the impact for RHI Magnesita could be very mild. In China, our plants have all continued to operate during the corona crisis in the country over there. We have not been impacted by shutdowns. Our customers have continued to operate mostly, and our plants have been operating at the regular high level. Order book has continued to be strong. And we are now through the downturn and back in very operational levels. Our sales force and some of our production force is still impacted by travel restrictions, but business is back to a very orderly level. The outlook for China 2020 is positive. But in the rest of the world, in Europe, where now the shutdowns are in the eye of the storm, and in the Americas, where we are maybe a few weeks behind, we believe out of prudence that the situation will maybe last a little bit longer and that the impact could be a little bit bigger because the governments are not as coordinated as the Chinese government has been. At least, this is the early indication. Therefore, we are preparing for a more significant impact in our business in these parts of the regions. We have not shut down any production plants yet. We have all of our office workers working from home. We have not had any significant -- we have not had any impact on infections in any of our plants. But the demand outlook that we see is very, very volatile and changing on a daily basis. Depends on the region, maybe sometimes even more than once per day. We are prepared for a continued longer-term downturn with a very strong balance sheet, as Ian has explained to you. We have started to prepare further cost-saving initiatives, working capital saving initiatives and CapEx reductions of about EUR 45 million compared to our original plan for this year. So we are prepared to execute this in order to be prudent and careful at this time. In summary, ladies and gentlemen, integration is completed. We continue to execute our strategy on the way forward. We are looking confidently into the near-term future. But 2020 will be characterized by a very high level of uncertainty due to the corona crisis. Our business model, on Slide 27, is resilient. We have a clear strategy forward. Nothing has changed in our strategy despite of COVID-19. Maybe the one or the other area could even be delivered faster because we're learning now how to execute some things under pressure quicker than otherwise. I want to repeat the 4 messages that I gave to you before going -- at the beginning of this presentation before going to the Q&A. 2019 has been a year of resilient performance with an EBITA of EUR 408 million, free cash flow of almost EUR 360 million and an earnings per share increased to EUR 5.57 per share. Second, this left us with a strong balance sheet that prepares us for all the uncertainties of the future with a leverage of 1.1x, if we exclude IFRS 16, and EUR 1.1 billion of liquidity. Third, we have a very clear strategy in place that can deliver around EUR 100 million additional EBITA by 2022, which consists out of operational improvements of our network, sales strategies that bring us into new market segments and regional growth that make us stronger in those countries in which we are weak. And fourth, the uncertainty due to the corona breakout around the world give us very high level of volatility in 2020. We have 3 priorities for this: the health of our employees and our business partners; the operational viability of our customers; and third, the liquidity of our companies. Clear measures are in place in order to navigate through this environment of uncertainty. With this, Ian and I are very happy to answer your questions.

[Operator Instructions] The first question for today comes from Mark Davies Jones from Stifel.

Can I ask you about the steel side and what your customers are saying to you at the moment? Obviously, it's a wildly volatile situation. But are they looking at closing their own plants for a period? If they do, can you multiple your facilities for a period? If you have to close plants, are you eligible, do you believe, for some of the government support schemes to help with the payment of the staff burden over that period? Are we looking at sort of rolling shutdowns across parts of the network as we go through 2020, do you think?

Okay. So our steel customers behave a little bit differently depending on where they are. So I think we really have to differentiate region by region and technology by technology. In general, EAF plants are shutting down much faster than EOF plants. If we now go across the world, in China, pretty much the steel industry has continued to operate throughout the entire crisis. They built up massive amounts of inventory, which is now starting to reduce. We monitor this very closely. So I think we're mostly through here. Our plants will also continue to stay open. Europe is now in the eye of the storm. In Southern Europe, most EAF plants -- these are mostly Electric Arc Furnace plants. They have mostly already shut down. We believe this will take months, not weeks. Our own plants have not yet been affected by this, but we expect this to come in April, May and June. We will not -- we are prepared to shut down our own plants in order not to, of course, produce inventory and put cash into products, but we want to preserve the liquidity. We are prepared for this, especially in Austria, France and Germany. We have really good alignment with our works councils and the local governments in order to go into short-term work outages, which are supported by local governments, plant by plant, production line by production line. This is set up, and we're ready to react as soon as these orders are not needed anymore. Germany is a little bit different because it's mostly a country where -- with integrated steel plants, with blast furnaces, and here, the steel plants are still operating to a reasonably good level and same in Scandinavia. Stainless steel producers actually have pretty good order books because a lot of this stainless steel goes into medical equipment that is direly needed right now. So we are keeping that part of the supply chain very strongly open. North America, very much also driven by Electric Arc furnaces, is in the process of shutting down. Here, this affects mostly our plant in Brazil, where -- anyway we are very, very flexible to adapt because from Brazil, we export a lot to North America, but it also affects our plant in York, in Pennsylvania. We were threatened by the local government to have to shut down. Thank God, this has been able to be prevented. I want to point you to the World Refractory Association's website. There, we've made an announcement that explains the essential character of our industry because without us, steel plants have to shut down because they're going to be out of operations within days actually. This has been prevented. So in York, we're still operating for the time being, but that could change depending on how severe the entire country will shut down over the course of the next weeks. I think the U.S. is behind a few weeks ago. And last but not least, India. India has gone into a pretty brutal shutdown about 10 days ago, where everything stopped from almost overnight from one day to the other. This is starting to come into a little bit better balance because, of course, some of the steel industry is continuing. And if we don't start up within the next days, then they will be in big trouble. And of course, India is a big -- it's also a bit of an export hub for some of our business that is not so affected. Our Industrial business actually looks very stable, very different to the Steel business because here, we are in the repair cycle. And actually, we don't expect any downturn or any significant downturn until the end of the third quarter and then the fourth quarter when -- where then this will hit.

[Operator Instructions] The next question comes from James Zaremba from Barclays.

I was wondering if you could comment a bit more about the commentary on the margin impact from raw material prices going from, I guess, 2019 to 2020. And then, I guess, bring that in the context of the self-help programs in place. And so I suppose you may be ignoring everything around COVID, where we assume margin goes in the medium term if it were 14% today.

Yes. So maybe I can point back to Slide #17, where we have tried to split the margins from the refractory business and the margins from the raw material business. Think about it as the refractory margins being actually relatively stable, and those are the ones that are going to be affected -- positively affected by the strategy execution on the production network side because the cost reduction are almost entirely here in this area and by the sales programs, which, of course, will increase the utilization of the network. So over the next 2 or 3 years, these margins that are at 9% now could continuously expand further step by step by absorbing most of this EUR 100 million that will come into our business. The raw material margins are more volatile because they depend on raw material pricing. And we -- in the boom times, they could be 5 points. In the bad times, they could be 2 points. In any case, they are beneficial for the company because even at 2 margin points, the profitability we make here very comfortably returns a pretty decent return on invested capital. So it makes a lot of sense financially, technically. Anyway, this is very helpful to support the refractory business. So these raw material margins, they come as an upside. You can value them as a raw material business. But the refractory margins are actually very, very stable and they will mostly be benefiting from the execution of the strategy. Was that your question?

Yes. Those were very clear, sir.

Great.

Next, we have Harry Philips from Peel Hunt.

Just a, I think, a straightforward question. Just around your scenario analysis, what do you -- how extreme have you gone? Have you gone for a complete sort of North America, European shutdown, say, for 3 months? And just if you were to take that extreme scenario, liquidity-wise, would -- clearly, you're confident that, that would still see you through pretty comfortably against that pretty bleak backdrop. Is that a sort of sensible conclusion?

So Harry, in our viability statement in the integrated annual report, we've detailed the 3 scenarios that have been considered. Scenario C, the deepest of the 3 before sensitivity, looks at a 1/3 reduction in activity in our volumes from March through to December, including a 70% reduction for 3 months together with an 80% reduction in the benefits of our sales strategies. And in that scenario, what we see is that we retain our robust liquidity, and that with mitigation, we are below our debt covenant of 3.5x. Clearly, what you do see is a reduction in EBITA and you do see an increase in net debt that we retain very robust liquidity, and we are below our debt covenant.

So in none of these scenarios, Harry, we are -- we run into any kind of liquidity issues. If things get very, very tough, we get closer to our covenant. But even in this Scenario C that we've outlined that you can read up in detail, we are not breaching it.

And just to be clear, the scenarios you've outlined, are they the statement you've issued today or will they be in the account...

They're in the annual report. We can send them...

They should be on our website in the viability statement and in the integrated annual report, which is on our website. Harry, if you have any difficulty, obviously, please just reach out to us.

[Operator Instructions] Next question comes from Henrietta Seligman from Somerset Capital.

I just wanted to ask a question about the acquisition that you've been considering in Turkey, Kumas, because it looks as though you've received some regulatory clearances. Is there any update on that, please?

Yes. So we have received regulatory approval in Austria and the U.K., but not yet in Turkey. Here, the antitrust investigation is still running. We expect this to run for at least another couple of months. But we're also -- in light of the uncertainty, we don't have a very high appetite to do a transaction right at this moment in time until we have clarity how this corona situation proceeds. We are in good contacts with the seller. Of course, they understand the situation. But we have to wait for 2 things now. One is the regulatory approval. But the other one also is clarity on how the business continues.

Next, we have a question through the webcast from [ Christian Dietel ]. How do you currently expect COVID-19 to impact 2020 earnings and balance sheet?

Well, like we have said before, it's absolutely impossible to give any kind of guidance here. We're looking at different scenarios of different severity. Please look at the viability statement in our annual report, which is on our website. There, you see the different scenarios we're looking at. But how this will end up is anybody's guess. We have very positive example of how this could end if we look at China. The rest of the world behaves similarly, actually, then the impact will be relatively mild for us. But if you listen to some of the Dooms Day forecasts from some of the economists, it could also be very tough. That's why we are in a scenario environment. We have put in place local crisis teams that do actually a fantastic job managing this day-to-day across borders in each plants. Our blue collar workers are coming to the plants every day and working despite all of the national excitement that happens country by country, but we can't give any outlook.

Just to add to that, as you've heard from Stefan and myself, we have a strong balance sheet with net debt to EBITDA of 1.2x. We have robust liquidity of EUR 1.1 billion. We have very little debt that is maturing before 2023. We're sitting with an interest cover of over 37x. And we are currently well below our debt covenant of 3.5.

Next, we have Mark Fielding from RBC.

Is there any potential impact in terms of raw material supply chain from COVID-19? I suppose, what policies do you or plans do you have in place, say, if there was an outbreak of the virus in one of your main raw material like mining sites, et cetera? And how tightly do you think the industry could react to that? Are there any issues that could come up from that side?

So right now, there's more supply than demand for raw materials because everybody is very, very careful to put cash into the supply chain. And of course, the order books are going down really, really fast at least in the western world where these raw materials are not produced but purchased. Second, a large part of the raw materials come from China. Again, this is reestablished, and China is back in business. So there's no probability now that they would be impacted. Third, when it comes to our own raw materials, we have very detailed, very intricate, very meticulous health measures in all of our plants, including our raw material plants, we have not had any cases. Whenever somebody could be infected, they stay at home. The people are incredibly responsible and very forward coming with information. We have health control at the gate of each one of our plants each morning. Everybody goes through a health check. The people stay separated from each other at work so that there is no possibility of transinfection. This has worked outstandingly well. People are responding very well to this. So we haven't had even a glimpse of a problem. We -- about 2 weeks ago, we had an issue or we thought we had an issue. We had a threat with transportation capacity, especially in Europe from our European raw material sites. In the meantime, this has been solved. There was a problem of border crossing for a while, but this has been solved now. So this is moving again. So I think at the moment, we're in good shape. What we have done, very early when this outbreak happened in China, we have moved as much raw material as we could from our raw material plants into our finished goods plants so that we can survive several weeks in the finished good plants without having to get new raw materials immediately. So I think we're in good shape.

Next, we have a question from the webcast. Question comes from [ Hussain Birkenstein ]. Could you please elaborate on the development of the wage bill 2019 versus forecast 2020, given actual situation and the corona measures taken by the company?

I'm not sure I understand the question correctly, but it goes to -- can you read it again to wage bills?

Could you please elaborate on the development of the wage bill 2019 versus forecast 2020?

Okay. So our wage bill is -- yes, our wage bill is forecasted to be very similar from 2019 to 2020. We have about a EUR 470 million cost of labor around the world. Of course, we're able to reduce this in the short term with the help of plants reduction. Some of this will be -- can be taken over if the crisis lasts 2 or 3 months by local governments. We are coordinating this with local governments, especially in Europe, quite well. In other geographies, there are less -- there's less help available, but we have the ability to react very, very quickly by letting people go and then hiring them back later. So I think in terms of managing through the crisis, this should work well.

We have no further questions on the webcast or on the phone line. So Stefan, I will hand this call back to you now.

Thank you very much for dialing into this, for being interested in RHI Magnesita in these uncertain times. I hope that we can -- could give you the reassurance that our business, for sure, is not in danger, but we are managing through this and then continue to execute the strategy of our company, which, believe, still entails a lot of value for its stakeholders. Thank you very much for listening, and looking forward to talking to you over the course of the next days and weeks. Goodbye from Vienna.

Ladies and gentlemen, this concludes today's call. Thank you very much for joining us. You may disconnect your lines now.