UPDATE 2-RHI aims to get a grip on Norway plant within two years

Tue Feb 25, 2014 9:27am EST

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By Alexandra Schwarz-Goerlich and Georgina Prodhan

VIENNA, Feb 25 (Reuters) - Austrian fireproof materials maker RHI is confident it can make profitable within two years a Norwegian plant whose troubles cut into the company's full-year results.

Chief Executive Franz Strutzl said on Tuesday the idea of shutting down the magnesia-fusion plant was now off the table, as major technical problems had been resolved, although work remained to be done to reduce production costs.

"We are sure that we will have solved the problems on the cost side within two years," he told a news conference after the company reported weaker than expected quarterly results.

RHI shares turned positive on this news and were trading 1.3 percent higher at 23.90 euros by 1402 GMT, outperforming a 1.5-percent weaker European basic resources index.

The company proposed keeping its 2013 dividend steady at 0.75 euro per share, and reiterated its 2014 guidance for a rise of about 3 percent in revenues and an operating margin of 8 to 9 percent.

The Norwegian plant, the first of its kind in Europe, was designed to wean RHI off its dependence on Chinese raw-materials producers, but suffered technical problems from the outset.

RHI wrote down the plant by 65 million euros ($89 million) last year and took a hit of more than 30 million euros to its operating result.

For the fourth quarter, RHI swung to a net loss of 38 million euros, worse than the average forecast loss of 31 million euros in a Reuters poll.

On top of the Norway impairment, it also booked restructuring charges of 25 million euros for closing a plant in Duisburg, Germany that produced magnesia-carbon bricks for the steel industry, from which RHI makes most of its sales.

RHI is experiencing weak demand from steelmakers, who are battling a European construction slump as governments cut back on spending. The company also reported low demand from the glass and environment, energy and chemicals sectors.

Quarterly sales slipped 1 percent to 457 million euros.

Strutzl forecast a slight improvement for the European steel industry. "I am cautiously optimistic. I don't expect any more capacity reductions but demand will stay level in 2014 and also in 2015," he said. ($1 = 0.7285 euros) (Editing by Mark Heinrich)

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