General economic conditions

As in the overall economic environment, also the conditions for the refractory market must be considered as rather gloomy. In this respect, there have not been any considerable changes in comparison to the previous quarter. Only few industries still give positive signals. Even though new investments are again being considered, actual investment decisions are rare or considerably delayed as the economic recovery and the capacity utilization of the industrial businesses are still not sustainable enough.

Organization

To further simplify the organizational structure, Inerta-Keramik GmbH, the real estate company of the production site in Bennewitz (Germany) was merged with the operative German Rath GmbH. Thus, the Rath Group now also has one single subsidiary in Germany.

Business development

The corporate gross turnover of the first three quarters decreased by 14.3% from EUR 65.1 million to EUR 55.8 million. Thus, the change of turnover already somewhat stabilized in comparison to the respective quarters of the previous year (first quarter: +4.1%; second quarter: -29.0%; third quarter: -16.7%). The turnover of the 3rd quarter with EUR 16.8 million is higher than the turnover of the 2nd quarter with EUR 16.4 million.

Due to the low demand, the struggle for market shares causes an increased pressure on prices. For Rath, this circumstance and the constant depreciations produced an EBIT of EUR -65,000 in comparison to the EBIT of the half-year of EUR 197,000. The permanent reduction of variable and fixed costs was not able to compensate for the above negative effects.

It was possible to further lower the number of employees by 30th September to 573 (prev. year: 660). In the first half-year, there had been an average of 577 employees.

The result from ordinary operations (EBT) of the first three quarters currently amounts to EUR -0.9 million (prev. year: EUR +1.2 million) and will improve until the end of the year.

As positive development, it must be noted that the operating cash flow increased to EUR 6.1 million (previous year: EUR 4.2 million). This is particularly due to the improved working capital management which is of special importance in times of financial crisis.

Prospects

As already predicted in the first quarter and confirmed the semi-annual financial report, we expect a decrease in turnover of at least 15% for the overall year (the entire refractory industry expects a decrease of about 30%). The turnover expected for Rath is based on the orders on hand for the 4th quarter.
2010 will also be a rather difficult year. At present, we are still unable to detect any increase in the investment activity of our customers. The economic recovery will therefore only arrive in the refractory industry later than in the general economy.

Georg Rath       Matthias Rath
       The Management Board
                          

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Business calendar

30th April 2010                 Annual financial report 2009
12th May 2010                  First-quarter report 2010
17th June 2010                Annual general meeting
31st August 2010            Semi-annual financial report 2010
11th November 2010      Third-quarter report 2010