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Magnesita Refratários S.A.Magnesita Refratários S.A.
JuneJune, 2013, 2013
Disclaimer
The material that follows is a confidential presentation of general background information about Magnesita Refr...
Summary
Industry overview
Company overview
Financial HighlightsFinancial Highlights
3
Refractory industry overview
Industry overview
What are refractories: Fireproof materials
consumed within various producti...
Refractory: USD25 billion global industry
Source: Freedonia.estimates 2011 Source: Company estimates .
Main consumers worl...
Summary
Industry overview
Company overview
Financial HighlightsFinancial Highlights
6
Company overview
70 years expertise in refractories and industrial minerals
3rd largest player in the refractory sector wo...
Business highlights
Enginering, assembly and
Refractory Solutions ServicesIndustrial Minerals
Magnesita leverages its comp...
Experienced management team
Octavio Pereira Lopes - CEO
Successful as CEO of Equatorial and as a
Managing Director at GP I...
Global scale, with local presence in key markets, with an integrated supply chain
Valenciennes and Flaumont
units producti...
Vision:
Be the best provider of refractories
solutions and industrial minerals,
leveraging and developing our minerals bas...
I – Ensure leadership in our core markets
Dolomitics in
North America
Dolomitics in
Western Europe
Our differentiated comp...
Pursue long term growth opportunities in select markets where we can deliver superior value
Access to high quality and low...
Unlocking our internal expertise and the industrial minerals opportunity in Brazil
→ Initial portfolio of attractive miner...
Our goal is to have at least one project moving to the next phase every 12 – 18 months
1.Preliminary
5 to 10 analysis
2.De...
Sinterco Dolomite JV (Belgium)
31 million tonnes of reserves
Expected life: 30 years
York Dolomite Mine (PA-USA)
25 millio...
DMR (manufacturing unit in China)
Low cost production base: The plant is located in the city of Dalian, northeast China,
r...
Reframec (51% of equity)
Ensure leadership in our core markets: The Reframec acquisition reinforces
Magnesita's leadership...
Summary
Industry overview
Company overview
Financial HighlightsFinancial Highlights
19
Revenues EBITDA and EBITDA margin (excl. non-recurring)
+6,2%
+8,5%
Steady organic growth
Proven resilience in adverse mar...
1Q13 Results
Steel production in Magnesita’s core markets (mln tonnes)
-8%
-5%
11,011,611,9
South America
-9%
3%
21,220,7
...
Debt and Leverage
Total Excluding Perpetual Bond
1.0591.058
2,6x
2,8x2,9x2,9x2,7x
Net debt / EbitdaEBITDA* LTMNet Debt
2,7...
Key messages
Global vertical integrated player with unique geographic
position
Opportunities for growth and diversificatio...
Annex
24
Strong support from shareholders
Only common shares
2 independent board members
Listed in the Novo Mercado segment, which ...
Investor Relations contacts:
Octavio Pereira Lopes
CEO and IRO
Eduardo Gotilla
Global Finance & IR Director
Daniel Domicia...
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Magnesita institutional june2013

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Transcript of "Magnesita institutional june2013"

  1. 1. Magnesita Refratários S.A.Magnesita Refratários S.A. JuneJune, 2013, 2013
  2. 2. Disclaimer The material that follows is a confidential presentation of general background information about Magnesita Refratários S.A. and its consolidated subsidiaries (“Magnesita" or the "Company") as of the date of the presentation. It is information in summary form and does not purport to be complete and is not intended to be relied upon as advice to potential investors. No representations or warranties, express or implied, are made as to, and no reliance should be placed on, the accuracy, fairness or completeness of the information presented or contained in this presentation. Neither the Company nor any of its affiliates, advisers or representatives, accepts any responsibility whatsoever for any loss or damage arising from any information presented or contained in this presentation. The information presented or contained in this presentation is current as of the date hereof and is subject to change without notice and its accuracy is not guaranteed. Neither the Company nor any of its affiliates, advisers or representatives make any undertaking toand is subject to change without notice and its accuracy is not guaranteed. Neither the Company nor any of its affiliates, advisers or representatives make any undertaking to update any such information subsequent to the date hereof. This presentation should not be construed as legal, tax, investment or other advice. [Data in this presentation was obtained from various external data sources, and the Company has not verified such data with independent sources. Accordingly, the Company makes no representations as to the accuracy or completeness of such data, and such data involves risks and uncertainties and is subject to change based on various factors]. This presentation contains forward-looking statements. Such statements are not statements of historical facts, and reflect the beliefs and expectations of Magnesita’s management. The words "anticipates", "wishes", "expects", "estimates", "intends", "forecasts", "plans", "predicts", "projects", "targets" and similar words are intended to identify these statements. Although the Company believes that expectations and assumptions reflected in the forward-looking statements are reasonable based on information currently available to the Company's management, the Company cannot guarantee future results or events. You are cautioned not to rely on forward-looking statements as actual results could differ materially from those expressed or implied in the forward-looking statements. This presentation does not constitute an offer, or invitation, or solicitation of an offer, to subscribe for or purchase any securities, and neither any part of this presentation nor any information or statement contained therein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever.any information or statement contained therein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. 2
  3. 3. Summary Industry overview Company overview Financial HighlightsFinancial Highlights 3
  4. 4. Refractory industry overview Industry overview What are refractories: Fireproof materials consumed within various production processes, providing heat, chemical and mechanical resistance in industrial furnaces Raw material: Minerals with high melting point, Monolithic 1 ton of steel = ~10 kg of refractories 1 ton of cement Types of refractories Consumption (average) Refractories are crucial consumables for manufacturing processes with high temperatures Refractories are continuously consumed during steel production… Electric Arc Fumace Steel Refining Facility Iron Ore STEEL LADLES Volume: 70 tonnes Life Expectancy: 1 month …and cement production Preheater Tower CLINKER COOLER Volume: 500 tonnes Life Expectancy: 1 - 3 years including magnesite, dolomite and alumina. Raw material quality and assured supply are essential Represents ~3% of COGS in steel manufacturing and less than 1% in cement Bricks Pre castables, valves and slide gates 1 ton of cement = ~0.6 Kg of refractories Fumace Facility Continuos Casting Basic Oxygen Furnace Recycled Steel Direct Reduction Coal Injection Coal Coke Oven Limestone Blast Furnace Natural Gas ELECTRIC ARC FURNACE Volume: 120 tonnes Life Expectancy: 1 month BLAST FURNACE Refractory Volume: 900 tonnes Life Expectancy: 15 years TORPEDO CAR Volume: 200 tonnes Life Expectancy: 2 years CONVERTER Volume: 800 tonnes Life Expectancy: 6 months CONTINUOUS CASTING Volume: 25 tonnes Life Expectancy: 10 hours Source: Company Life Expectancy: 1 - 3 years PREHEATER TOWER Volume: 1,000 tonnes Life Expectancy: 5 - 10 years ROTARY KILN Volume: 250 tonnes Life Expectancy: 10 months 4
  5. 5. Refractory: USD25 billion global industry Source: Freedonia.estimates 2011 Source: Company estimates . Main consumers worldwide Fragmented industry – Global market share (in USD) RHI ~ 9% Steel Non-ferrous (aluminum, copper, nickel, silver, zinc) Nonmetallic (cement, glass, lime) Global players Segment players Vesuvius-~10% Magnesita ~ 5% ~10% Chinese players ~37%~15% ~15% Refratechnik Magnesita is a global player with a unique business model in the industry Steel (aluminum, copper, nickel, silver, zinc) Other Regional players~10% Shinagawa Krosaki ANH Qinghua Magnezit ~13% ~60% ~10% Refratechnik Saint Gobain Calderys Minteq Small local players Manufacturing Only Mining Refractory manufacturing Services Full (performance -based) Different business model across the value chain… …lead to different margins levels Source: Bloomberg ~16% Fully Integrated Only CPP-Integrated Higher margins; difficulty to replicate +- Integrated Manufacturing Integrated Services 25,7% Vesuvius 30,4% 21,6% RHI Shinagawa 17,7% Magnesita 17,4% Krosaki 5 Gross Margin (2012)
  6. 6. Summary Industry overview Company overview Financial HighlightsFinancial Highlights 6
  7. 7. Company overview 70 years expertise in refractories and industrial minerals 3rd largest player in the refractory sector worldwide, present in the main steel markets 1st in the steel and cement industries in Brazil and South America Magnesita is a global leader in refractories solutions and industrial minerals 1st in the stainless steel industries in North America and Europe Highest vertical integration level in the industry (~80%), fully self-sufficient in high-grade magnesite Best, largest and lowest-cost magnesite mine in the world outside China. Significant number of mineral rights in Brazil Solid financial fundamentals Magnesita in numbers Revenues of R$ 2.46 billion in 2012 Production in 4 continents, supplying globally to more than 850 clients worldwide 6,500 employees 29 industrial facilities with a nominal capacity of 1.6 million tons/year of refractories 7
  8. 8. Business highlights Enginering, assembly and Refractory Solutions ServicesIndustrial Minerals Magnesita leverages its competitive advantages throughout the whole value chain Refractories with tailor made UPSTREAM DOWNSTREAM Details/ description Current: Talc, caustic magnesia and magnesia sinter Development: Graphite and talc expansion Enginering, assembly and installation of refractories Value-added services, including spot contracts Applications Talc: Plastic, cosmetics, pharmaceuticals, food, ceramics, pulp and paper, etc Caustic magnesia: Fertilizers, abrasives, animal nutrition, etc Sinter: refractories formulations and shapes as well as strong technical service Two commercial models (CPP and conventional) Steel Industrial (cement, non- ferrous, non-metallic) Steel Industrial (cement, non- ferrous, non-metallic) Mining Net revenues (2012) R$ 148 million (6% of the total revenues) R$ 130 million (5% of the total revenues) Gross margin (2012) 11%43% R$ 2.186 million (89% of the total revenues) 31% 8
  9. 9. Experienced management team Octavio Pereira Lopes - CEO Successful as CEO of Equatorial and as a Managing Director at GP Investments Previous experience Joined Magnesita in 2007 as board member and became CEO in 2012 Industry experience Over 70 years of combined experience in the industry Otto Levy Reis - VP Commercial Vinícius Silva - VP Minerals José Roberto Beraldo - CFO Felipe Sommer- VP People and MGMT Luis Rodolfo Bittencourt - VP R&D Functional Team Operational Team Solid financial background Senior roles and extensive experience in global companies Over 70 years of combined Industry Experience: +11 years Joined Magnesita in 2008 Industry Experience: +27 years 27 years in Magnesita Industry Experience: +3 years Joined Magnesita in 2010 Joined Magnesita in 2012 Joined Magnesita in 2012 Peter Estermann - COO Global Martin Bartmann - Global Supply Chain Eduardo Moretti - COO China Over 70 years of combined experience in the industry Close relationships with key players and clients in the industry Industry Experience: +5 years Joined Magnesita in 2008 Industry Experience: +17 years Joined Magnesita in 2011 Industry Experience: +18 years Joined Magnesita in 2009 Joined Magnesita in 2010 9
  10. 10. Global scale, with local presence in key markets, with an integrated supply chain Valenciennes and Flaumont units production (FRA) Hagen-Halden, Oberhausen and Kruft units production (DEU) Chizhou unit production (CHN) Taiyuan JV’s unit production (CHN) Qingyang dolomite mine (CHN) Sinterco Dolomite JV (BEL) Unique global footprint York unit production (USA) Contagem San Nicolás unit production (ARG) York Dolomite Mine (USA) Magnesite mine (Brumado - BRA) Chromite mine (BRA) Talc mine (BRA) Taiwan JV’s unit production (CHN) DMR unit production (CHN) Sales Office Refractory production Mines Sales per region 2012 Contagem units production (BRA) Coronel Fabriciano unit production (BRA) Europe Asia NAM 22% 8% 18% 49% SAM Others 2% 10
  11. 11. Vision: Be the best provider of refractories solutions and industrial minerals, leveraging and developing our minerals base Expand industrialEnsure leadership Maintain a global lowGrow selectively and New strategic vision Oneglobalorganization Expand industrial minerals base Ensure leadership in our core markets Maintain a global low cost production base Grow selectively and aggressively Continue to develop high quality, low cost raw material sources to support our current businesses as well as new businesses where we can have a sustainable competitive advantage Strive to keep offering high quality and innovative products, unrivaled services and cost performance Optimize production globally to improve efficiency and support growth Develop global supply chain management Pursue long term growth opportunities in selected markets where we can deliver superior value to our customers and shareholders ▪Meritocracy ▪Ethics ▪Profit ▪Management and Method ▪Agility and Transparency ▪Respect for Safety, Environment and Communities ▪Customer ▪People Our values 11
  12. 12. I – Ensure leadership in our core markets Dolomitics in North America Dolomitics in Western Europe Our differentiated competitive position and leadership in core markets support our growth as they recover ~50% in stainless steel Magnesita’s share* in core marketsMagnesita’s share* in core markets Vertically integrated low-cost producer Continuous investments in R&D and technology Specialized technical assistance Vertically integrated low-cost producer Continuous investments in R&D and technology Specialized technical assistance Magnesita’s competitive advantages in its core marketsMagnesita’s competitive advantages in its core markets ~60% in stainless steel South America Long standing relationship with blue-chip customers ~50% in stainless steel ~20% in mini-mills Logistic advantages due to privileged locations Captive CPP contracts with long-term alignment of interests Brand recognition and historical leadership Logistic advantages due to privileged locations Captive CPP contracts with long-term alignment of interests Brand recognition and historical leadership ~60% in stainless steel ~15% in mini-mills ~65% in steel ~60% in cement *Company estimates 12
  13. 13. Pursue long term growth opportunities in select markets where we can deliver superior value Access to high quality and low cost raw materials Exposure to emerging markets Global scale with an integrated supply chain Best-in-class technical and R&D capabilities Increasing reach of our sales force Opportunities for diversification into non steel industries Magnesita refractory sales (2012) Refractories consumption - Global Market Industrial 40% Steel 60% Industrial 16% 84% II – Grow selectively and aggressively Increasing reach of our sales force Historically low exposure in several important markets Crude Steel Production¹ (mln ton) and Magnesita’s share² (%) Opportunities for geographic diversification in steel Opportunities for geographic diversification in cement 138122118 80 16% 228204202 162 9.6% 363 305293 226 Steel Steel 84% 1% North America Europe 140130123115 345328317327 Asia ex-China 3.0932.9472.7812.618 Cement Production¹ (mln ton) and Magnesita’s share² (%) 25% <5% <1% North America Europe Asia Source: ¹CRU and ²Company estimates 2017(f)2013(f)2012 (e) 2009 2017 (f) 2013 (f) 2012 (e) 2009 13111511298 2017(f)2013(f)2012 (e) 2009 0.3% 605147 38 2017(f)2013(f)2012 (e) 2009 56 434034 2017 (f) 2013 (f) 2012 (e) 2009 2013(f)2012 (e) 2009 2017(f) 65% 2.1% CIS 2014 (f) 2013 (f) 2012 (e) 2011 2014 (f) 2013 (f) 2012 (e) 2011 Central & South America MEA 2014 (f) 2013 (f) 2012 (e) 2011 133124116108 2014 (f) 2013 (f) 2012 (e) 2011 338315295270 2014 (f) 2013 (f) 2012 (e) 2011 <2% <1% Central & South America Others Source: ¹CW Group and ²Company estimates 13
  14. 14. Unlocking our internal expertise and the industrial minerals opportunity in Brazil → Initial portfolio of attractive mineral rights → 70 years of mining experience in Brazil (DBM, CCM, talc, etc) → Expertise in geology, research and environmental requirements → Knowledge of local stakeholders management → Dedicated team to prospect, analyze and develop business Magnesita’s strategic positioning III – Expand industrial minerals base → Dedicated team to prospect, analyze and develop business → Brazil is fertile; very favorable geography → It has been historically unexplored → Viewed as a reliable source (vs China) The Brazilian opportunity → Attractive due to global unbalance of supply and demand → Minerals out of big players’ radar → Logistic is not predominant → Commercial development is necessary → US$2bi – US$10bi global markets Focused 0pportunity set Magnesita is very well positioned to occupy the “white space” in Brazil → US$2bi – US$10bi global markets 14
  15. 15. Our goal is to have at least one project moving to the next phase every 12 – 18 months 1.Preliminary 5 to 10 analysis 2.Development Graphite 3.Installation 4.Operational DBM, Talc, CCM III – Expand industrial minerals base Projects in development phase Graphite project Talc expansion 5 to 10 analysis per year Graphite Talc expansion DBM, Talc, CCM • Preliminary geological work • Market analyses • Low capex; high risk • Complete geological work and reserve certification •Environmental license • Industrial project •Commercial development • Medium capex; medium risk • Investment in the industrial plant •High capex; low risk •Cash flow generation • Maintenance capex Graphite project Become self sufficient supplying our refractory business Surplus to supply third parties, focusing on high end users Positive outlook and growing demand from new applications Restrictions from Chinese exports (~80% of global production) Environmental license granted in March 2013 Talc expansion Leader in Brazil, producing ~40kton/y ~50% gross margin Low environmental license and geological risk Commercial development underway Project should double capacityover next 2 years 15
  16. 16. Sinterco Dolomite JV (Belgium) 31 million tonnes of reserves Expected life: 30 years York Dolomite Mine (PA-USA) 25 million tonnes of reserves Expected life: 45 years IV - Maintain a global low cost production base Opportunities for further industrial and supply chain optimization North American facility (PA-USA) European facilities (3 in Germany and 2 in France) DMR facility (Dalian-China) Brumado (Bahia-Brazil) 830 million estimated tonnes of reserves (549 million measured) Only mine to allow the economical production of 98.3%-grade DBM Qingyang Dolomite Mine (China) 18 million tonnes of reserves Expected life: 50 years South American facilities Asian facility (Chizhou-China) production of 98.3%-grade DBM Expected life: ~200 years The mine is connected to the port of Aratu by the FCA railway South American facilities (MG-Brazil and Argentina) Raw material flow Finished product flow Brumado has the highest quality of raw material in the world with more than 200 years of reserves 16
  17. 17. DMR (manufacturing unit in China) Low cost production base: The plant is located in the city of Dalian, northeast China, region which owns around 20% of world’s reserves of magnesite, making it a highly strategic location for refractory production New markets: This new plant will allow us to better serve geographies Recent aquisitions Maintain a global low cost production base Grow selectively and aggressively New markets: This new plant will allow us to better serve geographies and segments where Magnesita has a marginal presence today and where we want to expand sales in a selective way Location: Dalian is an important export hub in China with excellent logistics Capacity: 50.000 tons/year Closing: Expected to occur in ~60 days, after approval of the Economic and Trade Bureau of Dalian Development Area, in the People´s Republic of China. 17 in the People´s Republic of China. DMR external view China CHINA
  18. 18. Reframec (51% of equity) Ensure leadership in our core markets: The Reframec acquisition reinforces Magnesita's leadership in its core industrial markets in South America, as it expands its services beyond the steel industry Reframec: Leader in engineering, installation and repair services Recent aquisitions Ensure leadership in our core markets Reframec: Leader in engineering, installation and repair services for refractories used in cement production in Brazil Closing: ~60 days. Post-close, Reframec will continue to operate independently 18 Refractory assembly in rotary kiln
  19. 19. Summary Industry overview Company overview Financial HighlightsFinancial Highlights 19
  20. 20. Revenues EBITDA and EBITDA margin (excl. non-recurring) +6,2% +8,5% Steady organic growth Proven resilience in adverse market conditions CAPEX funded comfortably with operational cash flow 14,5% 18,7%17,7% 15,1% Financial highlights (BRL mln) 2.464 2011 2.319 2010 2.276 2009 1.927 +6,2% 2012 373337 425 340 2011 14,5% 20102009 +10,7% 2012 15,1% 44,6% 48,7% Magnesita¹CSNGerdauUsiminas Operational Cash Flow and Capex 552 OCF CAPEX Brumado expansion Gross margin Magnesita vs clients 2008 2009 2010 2011 2012 30,4% 22,6% 12,5% -3,0% 30,0% 32,5% 14,4% 0,7% 34,2% 44,6% 17,6% 14,2% 32,5% 35,5% 16,7% 11,5% 37,5% 26,0% 34,2% Source: Companies report (only parent company for Usiminas and CSN) ¹Magnesita in 2011 was adjusted due to accounting reallocation 257 165 92 2012 342 171 120 51 2011 552 78 2010 365 37 2009 131 20
  21. 21. 1Q13 Results Steel production in Magnesita’s core markets (mln tonnes) -8% -5% 11,011,611,9 South America -9% 3% 21,220,7 23,2 United States 4% -6% 41,439,7 43,9 EU-27 Despite the challenging scenario, results have improved in 1Q13 1Q134Q121Q12 4Q134Q121Q12 1Q134Q121Q12 +2% +1% 18,8% Revenues (BRL mln) 16,2% Ebitda margin Ebitda LTMEBITDAEBITDA margin EBITDA (BRL mln) EBITDA LTM (BRL mln) 21 +1% 1Q13 617,9 4Q12 611,1 1Q12 606,9 116 8388 1Q134Q12 13,5% 1Q12 14,4% 401 373358352337 4Q12 14,6% 1Q12 14,3% 1Q134Q12 16,2% 15,1% 1Q13 14,6% *EBITDAexcludingnonrecurring
  22. 22. Debt and Leverage Total Excluding Perpetual Bond 1.0591.058 2,6x 2,8x2,9x2,9x2,7x Net debt / EbitdaEBITDA* LTMNet Debt 2,7x Net debt / EbitdaEBITDA* LTMNet Debt Solid balance with no refinancing risk Amortization Schedule (R$ million) Net Debt per currency 1.0591.0581.0311.002 907 401373357350334 1Q134Q123Q122Q121Q12 *EBITDA excluding non recurring *EBITDA excluding non recurring Perpetual Bond -14% BRL 566536513486 907 401373357350334 1,4x1,4x1,4x1,4x 1Q12 1Q132Q12 4Q123Q12 22 678 7880621530 964 508 1.472 2018+20172014 2015 20162013Mar-13 Perpetual Bond Cash Amortization 2% 80% -14% BRL USD 104% 13% 19% Others EUR -3% -2% Dec-12 Mar-13
  23. 23. Key messages Global vertical integrated player with unique geographic position Opportunities for growth and diversification into selected markets and industries Focused on delivering superior returns to shareholders markets and industries Unique solution-based model (CPP) and performance-based applied R&D Significant value of mineral reserves with opportunities to expand industrial minerals base Strong management team and corporate governance practices Solid financial fundamentals 23
  24. 24. Annex 24
  25. 25. Strong support from shareholders Only common shares 2 independent board members Listed in the Novo Mercado segment, which correspond to the best practices of corporate governance Ownership structure Corporate Governance GP 2 independent board members Free float 58.8% (minimum required is 25%) Tag-along rights to all shareholders Quarterly results in English in accordance with International Financing Report Standards (IFRS) Shares included in the IGC (Index of Differentiated Corporate Governance) and ITAG (Index of Tag Along) 58,8% 34,0% 7,2% Free Float Rhône GP Controlling Group Latin America and worldwide leadership in Private Equity Active management Culture of promotion by merit Proven track record in the Brazilian and global capital markets, with various success cases 25
  26. 26. Investor Relations contacts: Octavio Pereira Lopes CEO and IRO Eduardo Gotilla Global Finance & IR Director Daniel Domiciano Silva Investor Relations Phone: 55 11 3152-3203/3241 26 Phone: 55 11 3152-3203/3241 ri@magnesita.com www.magnesita.com
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