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4 t10 eng

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4 t10 eng

  1. 1. 4Q10 Results Conference Call March 25, 2011
  2. 2. HighlightsHighlights • Global economic rebound, with positive impacts on the steel and industrial sectors • Magnesita robust operating results in 2010 2 • Adequate financial structure, with reduction in both debt and working capital • Important strategic steps towards growth
  3. 3. Crude steel, stainless and cement productionCrude steel, stainless and cement production Cement – world ex-ChinaCrude steel – world ex-China close to 2008 6% below 2008 Million tonnes 781781781781 659659659659 830830830830 769769769769 642642642642 768768768768 2525252526262626 31313131 2008200820082008 2009200920092009 2010201020102010 3 Source: International Stainless Steel, Brazilian Cement Industry Union (SNIC); preliminary results Cement - BrazilStainless steel – world 19% above 2008 14% above 2008 5252525252525252 59595959 2008200820082008 2009200920092009 2010-E2010-E2010-E2010-E 2008200820082008 2009200920092009 20102010201020102008200820082008 2009200920092009 2010201020102010
  4. 4. HighlightsHighlights • Global economic rebound, with positive impacts on the steel and industrial sectors • Magnesita robust operating results in 2010 4 • Adequate financial structure, with reduction in both debt and working capital • Important strategic steps towards growth
  5. 5. Robust results • Net revenues of R$ 2.3 billion, up 18.2% (up 27% without foreign exchange effect): - Up 43.1% in US Dollars - Up 20.4% in Euros • Services product line grew 61.9%, with revenues of R$ 159.1 million 2010 • Industrial sector grew 34.8% in 4Q10 (versus 4Q09) and 7.7% in 2010, increasing the diversification from steel • Operating cash flow of R$ 365.2 million – 3x that of 2009 • Net income of R$ 92.3 million • EBITDA of R$ 461.8 million in 2010, representing growth of over 28% versus 2009 5
  6. 6. Net Revenues of R$ 2.3 billionNet Revenues of R$ 2.3 billion Total net revenues R$ million 2,276.4 +18% 27% growth (excluding foreign exchange effect) 6 Revenue growth of 43.1% and of 20.4% in US Dollars and in Euros, respectively 1,926.8 2009 2010
  7. 7. Company RestructuringCompany Restructuring • “Truly global” Brazilian Leader Consolidation / transition Global Leader • Brazil • Family structure • Multi-region • Novo Mercado • Regional focus • Restructuring • “Truly global” • Focus by business line • Global VPs by business
  8. 8. 3 product lines3 product lines Minerals • Activities related to the extraction of minerals directed to third parties, such as magnesite, dolomite, and talc, among others, 8 Refractories Services • Activities related to the installation and recycling of refractories, and mechanical / electro-mechanical maintenance (with low employed capital) • Includes all products and services of the CPP value chain as well as conventional sales
  9. 9. 37.7 68.8 469.8 476.9 4Q09 4Q10 1,703.3 1,959.3 2009 2010 125.2 158.0 +26.2% +82.4% Growth in all product lines, particularlyGrowth in all product lines, particularly in services and mineralsin services and minerals Annual net revenues R$ million Quarterly net revenues R$ million Refractories +15.0 +1.5% 30.2 42.5 4Q09 4Q10 37.7 4Q09 4Q10 98.3 159.1 2009 2010 2009 2010 9 +61.9% +40.8% Minerals Services A Services Division was created to develop the business globally
  10. 10. 53.0 71.5 Industrial 15.0% Remarkable growth in the industrial sector in 4Q10Remarkable growth in the industrial sector in 4Q10 Quarterly revenues from the industrial sector R$ million +34.8% Revenue breakdown by sector - customer 100% = R$ 476.9 million 4Q10 In 2010, the industrial sector grew by7.7% 4Q09 4Q10 Steel 85.0% 15.0% Global commercial VP was created for the industrial sector to focus on global growth opportunities 10
  11. 11. Recovery in operating margin in 2010,Recovery in operating margin in 2010, and drop in gross margin in 4Q10and drop in gross margin in 4Q10 Gross profit and gross margin R$ million, % Gross profit and gross margin R$ million, % 183.3 196.2 199.2 194.9 187.4 34.1% 34.7% 36.1% 34.2% 31.9% 20% 30% 40% 50% 150 160 170 180 190 200 210 4Q09 1Q10 2Q10 3Q10 4Q10 Gross Profit (R$ million) Gross Margin (%) 626,9 777,7 32,5% 34,2% 20% 25% 30% 35% 40% 45% 50% 0 100 200 300 400 500 600 700 800 900 2009 2010 Gross Profit (R$ million) Gross Margin (%) 11 EBITDA and EBITDA Margin R$ million, % 50 55 60 65 70 75 80 85 90 95 100 200 250 300 350 400 450 500 550 600 EBITDA and EBITDA Margin R$ million, % 360.1 461.8 18.7% 20.3% 10% 15% 20% 25% 30% 35% 40% 200 250 300 350 400 450 500 550 600 2009 2010 EBITDA (R$ million) EBITDA Margin (%) Gross Profit (R$ million) Gross Margin (%) 133.9 123.1 119.5 108.6 110.5 24.9% 21.8% 21.7% 19.0% 18.8% 0% 10% 20% 30% 40% 50% 50 60 70 80 90 100 110 120 130 140 4Q09 1Q10 2Q10 3Q10 4Q10 EBITDA (R$ million) EBITDA Margin (%) Gross Profit (R$ million) Gross Margin (%)
  12. 12. 131.2 365.2 3x operating cash flow and over R$90 million net income3x operating cash flow and over R$90 million net income Operating cash flow (OCF)1 R$ million ~2.8 x Net Income R$ million 92.3 0 20 40 60 80 100 2009 2010 12 1 operating cash flow calculated from the last day of each year Operating cash flow nearly 3 X 2009 Net income of R$ 92.3 million OCF (%) 7% 16% -32.5-60 -40 -20 2009 2010
  13. 13. HighlightsHighlights • Global economic rebound, with positive impacts on the steel and industrial sectors • Magnesita robust operating results in 2010 13 • Adequate financial structure, with reduction in both debt and working capital • Important strategic steps towards growth
  14. 14. Working Capital significantly improvedWorking Capital significantly improved Cash conversion1 Days Working Capital1 R$ million 161 159 184 187 153 131 131 156 149 121 43 45 49 39 45 73 73 77 77 77 773.5 802.5 880.9 934.1 832.6 14 Reduction of 34 days in the cash conversion cycle 1 Cash conversion and working capital calculated from the last day of each year Reduction of over R$ 100 million in working capital in 4Q10 4Q09 1Q10 2Q10 3Q10 4Q10 Conversion Cycle Inventories Payables Receivables 4Q09 1Q10 2Q10 3Q10 4Q10
  15. 15. Strong evolution of capital structureStrong evolution of capital structure 5.6 x Net Debt/EBITDA 3.9 x R$ 350.0 million capital increase (Oct’09) US$ 400.0 million bond issue (Mar ’10) R$ 340.0 million (capital increase + Peak of the crisis Interest rate decrease + maturity extension 15 Dec/09 Mar/10 Dec/10 (Pro-forma) 3.2 x 2.1 x (capital increase + lawsuit proceeds) Jun/09 Net Debt WC 1,414.8 1,413.6 962.91,918.6 R$ million 826.6 773.5 802.5 832.6 Net Deb ~= WC
  16. 16. Indebtedness profileIndebtedness profile Amortization schedule of pro-forma debt R$ million Debt (pro forma) R$ million (669.5) 1,972.1 1,302.6 412,1 657,9 16 124.9 1,847.2 (340.0) Gross Debt Cash Net Debt Resources Net Debt (pro-forma) 1,302.6 962.6 124,9 22,5 148,7 285,7 2,2 2,2 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
  17. 17. HighlightsHighlights • Global economic rebound, with positive impacts on the steel and industrial sectors • Magnesita outstanding operating results in 2010 17 • Adequate financial structure, with reduction in both debt and working capital • Important strategic steps towards growth
  18. 18. Value creation strategyValue creation strategy Increase vertical integration (from 70% to 90%) Maximize the “hidden” value of mineral reserves 18 Expand the unique solution-based model (CPP) globally Pursue global growth opportunities
  19. 19. In 4Q10, raw materials prices continued to riseIn 4Q10, raw materials prices continued to rise Raw Material Prices IBF (March/2009 = 100) 233 303 250 300 350 FBI(mar/09=100) 19 233 128 155 100 150 200 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 FBI(mar/09=100) Graphite crystalline 90% White fused alumina Electrofused magnesia 98% Fused zirconia
  20. 20. R$ 300 million in vertical integrationR$ 300 million in vertical integration –– moving towards 90%moving towards 90% vertical integrationvertical integration Investment : ~R$220 million in 2 years Financing: 80% at low rates (development banks) Production: capacity increase of 120 ktpa Magnesite (Brumado - BA) Investment: ~R$ 80 million in 2 years Financing: 80% at low rates (development banks) Production: 40 ktpa ̶ 20 kpta to achieve 100% self-sufficiency ̶ 20 ktpa to be sold to non-refractory use Graphite (Almenara – MG) 20(1) According to Industrial Minerals Rationale: ̶ Keep self-sufficiency in M-30 sinter ̶ Structural changes in pricing dynamics ̶ Energy and environmental concerns (China has imposed 10.7% cut in export)1 ̶ 20 ktpa to be sold to non-refractory use Rationale: ̶ Achieve self-sufficiency in Graphite ̶ Structural changes in pricing dynamics (30% in 3 months, 14% p.a.) ̶ New demand driver (e.g. electric car battery) Both projects are on track
  21. 21. 24 26 27 31 36 40 42 47 52 57 Before 2008 2008 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 2 14 17 Before 2008 2008 2009 2010 Total 17 new CPP contracts in 2010 across all regions17 new CPP contracts in 2010 across all regions 24 57 New CPP contracts Number of contracts CPP contracts Number of contracts Revenues from steel refractories 21 Region 2010 Total North America 5 13 Europe 6 7 Asia 4 4 South America 2 33 TOTAL 17 57 Revenues from steel refractories % • Record year in new CPP contracts – 17 • 34% of revenues from CPP (towards goal of 65%) • Increasing traction in Europe • First-time contracts in Asia 25,0% 27,7% 34,2% 75,0% 72,3% 65,8% 2008 2009 2010 Volume CPP

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