2. Contents
• Company History
• Highlights
• Refractory Products
• Group Profile
• Mineral Reserves
• Production Process and Capacities
• Competition
Key Figures• Key Figures
• Competitive Advantages vs. Risks
2
• Stock Performance
3. Company History
2009
Capital Increase: In October,
the controlling shareholdres
approved a R$ 350 million
2007
Control Change: GP and Gavea
acquired control of Magnesita
approved a R$ 350 million
capital increase, of which
BNDES took part
1939
Foundation: Magnesita Ltda.
1969
Listing: Company IPO on the
São Paulo Stock Exchange
q g
S.A., held two tender offers
and purchased shares in the
market
2010
March: bond issue of US$ 400
MM denominated notes with
semiannually payble fixed
f 8 %
g
was established after the
discovery of a large amount
of magnesite in the
Brumado mines (Bahia
State)
(BOVESPA)
1990
CPP f ll i h ll f
2008
Novo Mercado* lisitng on April
September: LWB is acquired for
€ 657 MM
interest of 7.875% per annum
and maturity date in 2020
1944
Industrial operations started
CPP: following the collapse of
import tarriffs for refractories in
Brazil, Magnesita created a
revolutionary business model, CPP
– “Cost por Performance”
€ 657 MM
Over 70 years of experience in the refractories business
3
Over 70 years of experience in the refractories business
* Note: “Novo Mercado” is a listing segment of the São Paulo Stock Exchange designed for companies that voluntarily undertake to abide by
corporate governance and disclosure practices in addition to those already required by Brazilian Law and the CVM.
4. Highlights
Leading Market Position
1
Long Standing Relationships
2
Leading Market Position
Worldwide
38
Long Standing Relationships
with Blue-Chip Customer Base
Vertically Integrated
Business Model
Strong & Experienced
Management Team
47
Solution Based Business
Model
56
Up-to-date Technology
Long-Life of Mineral Reserves
with High Quality
5
Attractive Industry
Dynamics with Significant
Potential to Export the
CPP model
6
4
CPP model
6. Shareholders Composition Profile – 04/30/10
Invest. Funds
Brokers/Banks/
Distributors
4,6%
Others
1,6%
GP
38 5%Individuals
Invest. Funds
and clubs
12,6%
38,5%Individuals
12,8%
Rhrone
8 1%Gavea
Foreigners
18,2%
8,1%Gavea
3,6%
Controlling Group = 50.2%
TOTAL SHARES 257 954 378
Others = 49.8%
TOTAL SHARES = 257,954,378
7. Refractory Products
• Refractories are heat-resistant materials manufactured in a wide
i f i i d h di h i li ivariety of compositions and shapes according to their application.
Main Refractory
Consumers Worldwide
Processes
Chemical
Non-ferrous
5%
Others
5%
above
1,200º C
Steel
70%
Ceramic
5%
Glass
4%
Chemical
4%
Cement
7%
77 7
8. Refractory Products
How much refractory is needed to produce:
1 f 0 6 k1 t f t l 12 k 1 car = ~ 10 kg 1 aircraft = 1 1 tonnes1 tonne of cement = ~ 0.6 kg1 tonne of steel = ~ 12 kg 1 car = ~ 10 kg 1 aircraft = ~ 1.1 tonnes
9 000 t f t l 9,000 tonnes of steel
70,000 m³ of concrete
103,000 m² of glass
2 700 tonnes of aluminium
463,000 tonnes of steel
27 millions m³ of concrete
2,700 tonnes of aluminium
+ others
Burj Al Arab Hotel = ~200 tonnes
Three Gorges Dam Hydroletric= ~11,000 tonnes
88
j
9. Refractory – Main Families and Uses
Magnesian Steel production (FBI 2001=100)
• 34% of the net revenues in 2009
Carbon Steel
290
390
490
• Composition: 63% of magnesite sinter
• Main use: steel production
90
190
290
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Chi W ld (E Chi ) W ld
Dolomitic Specialty Steel
China World (Ex-China) World
200
Stainless steel production (FBI 2001=100)
• 35% of the net revenues in 2009
• Composition: 60% of dolomite sinter
• Main use: specialty steel production
100
125
150
175
Aluminous
2001 2002 2003 2004 2005 2006 2007 2008
World Asia
Cement production (FBI 2001=100)
Aluminous
• 21% of the net revenues in 2009
• Composition: 54% of alumina
• Main use: cement production
Cement
150
200
250
300
99
• Main use: cement production 100
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
China World (Ex-China) World 9
10. The Cost per Performance Model
After the LWB acquisitionBefore the LWB acquisition
69%
36%
tunity
31%
69%
64%
100%
Opport
31%
Magnesita + LWB
Magnesita LWB
CPP
Volume
10
Volume
11. Rationale of The Cost per Performance Model
Monitoring Costumer Process
Raw Material R&D Center
• High-grade raw material
M30 Magnesite sinter
• Equipment maintenance
• Engineering and process
management
• Product tests
• Continuous improvementM30 Magnesite sinter
Dolomite Sinter
management
• Logistics & Inventory Handling
• Continuous improvement
• Innovation
• Solutions for market
demands
• High productivity
demands
g p y
• Cost reduction
• High refractory performance
Profitability
Fi l P i B P i (Δ t l d d)Final Price = Base Price + (Δ x steel produced)
11
12. Refractory – Life Expectancy (LE)
Blast Furnace Ladle
• Amount of refractory: 900 tonnes
LE 15
• Amount of refractory: 70 tonnes
• LE: 150 runs (1 month)• LE: 15 years • LE: 150 runs (1 month)
Torpedo Car Casting
• Amount of refractory: 25 tonnes• Amount of refractory: 200 tonnes
• LE: 1,500 runs (2 years)
• Amount of refractory: 25 tonnes
• LE: 10 hours
Converter Rotary Kiln
• Amount of refractory: 800 tonnes
• LE: 5,500 runs (6 months)
• Amount of refractory:
Burning: 250 tonnes
Heating: 350 tonnes
• LE:
12
Burning: 10 months
Heating: 5 years
Note: Average values
12
13. Mineral Reserves
Mineral reserves (million tonnes)
• On average, 3 tonnes of magnesite are
Life
(years)
Magnesite 831 - - -
Dolomite 51 25 31 18
Talc (Magnesite) 2 - - -
Ch it 2
g , g
needed to produce 1 tonne of M-30
sinter and 4 tonnes of magnesite are
needed to produce 1 tonne of M-10
sinter;
(y )
8
7
59
185
Chromite 2 - - -
Clays 20 - - -
Pyrophilite 1 - - -
Graphite 36 - - -
;
• On average, 4 tonnes of dolomite are
needed to produce 1 tonne of dolomite
sinter.55
64
150
8
P d ti C it (th d t / )Production Capacity (thousand tonnes/year)
475
320
60 48
Dolomite
Sinter
Magnesite
Sinter
Magnesia
Oxide
Talc
13
15. Production Process – Burned Refractory
RAW MATERIAL’S
SILO
PRESS
SINTER’S
BAY
MIXER
PILE IN
BURN CARS
CRUSHER
WEIGHING
HOT AIR
DRYER
TUNNER KILN
MILL
UNLOAD PILE
TO PLATE
SELECTION AND
PACKING
CUT AND MILLING MACHINE
15
16. Production Capacity (1,000 tonnes/year)
200 256
Dolomite
Sinter
Refractories
127 180
337
Refractories Dolomite
Sinter
Refractories
USA
BELGIUM
FRANCE
GERMANY
CHINA
Sinter
65
120
CHINA
Dolomite
Sinter
Refractories
590
CAPACITY
Refractories:1.43 million tonnes
Magnesite Sinter: 320 thousand tonnes
Dolomite Sinter: 475 thousand tonnes30
320SOUTH AMERICA
Dolomite Sinter: 475 thousand tonnes30
Dolomite
Sinter
RefractoriesMagnesite
Sinter 16
17. Steel Production (million tonnes)
133 125
81
240 229
168
North America
Europe
Asia81
2007 2008 2009E 2007 2008 2009E
749 782
842
Asia
2007 2008 2009E
48 48 38
1,351 1,329
1,204
South America
World
861 829
629
490 500
575
2007 2008 2009E
172007 2008 2009E
World (Ex-China) China
Source: World Steel Association
18. Cement Production (million tonnes)
372 350 324
North America
Europe + CIS
Asia
93 84 75
2007 2008 2009E
2007 2008 2009E
2,047 2,119 2,207
Asia
2007 2008 2009E
1,360 1,400 1,470
93 100 100
2,923 2,971 3,021
South America
World
1,563 1,571 1,551
1,360 1,400 ,
2007 2008 2009E
Source: Marketing Intelligence - Magnesita
2007 2008 2009E
World (Ex-China) China 18
19. Competition
1,597RHI
Net Revenues 2008 (€ million) - Generalists
Global
594
896
Krosaki
Magnesita
Asia/Japan
Global
Vesuvius 12%
Market Share Based on
Revenues
390
580
ANH
Shinagawa
North America
Asia/Japan
RHI 12%
Net Revenues 2008 (€ million) - Specialists
1 730Vesuvius Global
Magnesita 7%
Shinagawa+
JFE 7%
KROSAKI 6%
Others 53%
300
575
1,730
Refratechnic
Saint-Gobain
Vesuvius Global
Global
Global
KROSAKI 6%
ANH 3%
300Minteq Global
19
Note: Revenue figures, except those for Magnesita and RHI, were estimated by Industrial Minerals
20. Key figures – 1Q10
Revenue by:
Operating Location vs Costumer Location
Revenue by
ProductOperating Location vs. Costumer Location Product
53,5% 52,1%
17,9%
24,2%
16 0%
19,8%
Services;
5,5%
Other
products;,
4,4%
16,0%
10,0%
2,1%
South America North America Europe Asia Others
Refractories
89,5%
products;
3,2%
Sinter; 1,8%
South America North America Europe Asia Others
Production Destination
R$ 565.9 million
2020
21. Key Figures – Last 12 Months
Net Revenues (R$ million)Refractories Sales (1,000 tonnes)
41% 39% 40% 46% 47%
59% 61% 60% 54% 53%
180 7
190.9
219.9
238.7 451.0 454.2 483.6 537.7
565.9
41% 39% 40%
1Q09 2Q09 3Q09 4Q09 1Q10
Domestic Market Export Market
203.8
180.7
1Q09 2Q09 3Q09 4Q09 1Q10
0,3
1Q09 2Q09 3Q09 4Q09 1Q10
EBITDA Net Debt (R$ million)
110,1
138,8
123,39,9%
15,8%
22,8%
25,8%
21,8%
0,1
0,2
0,3
2,104
1,918
1,434 1,414 1,414
44,4
71,6
-0,1
0
,
03.31.09 06.30.09 09.30.09 12.31.09 03.31.10
1Q09 2Q09 3Q09 4Q09 1Q10
R$ million Margin %
21* Note: Pro-forma data include the figures for the subsidiary LWB, for the purpose of comparison
22. Key Figures
24 4 20 1
Net Income 1Q10 (R$ million)Net Income (R$ millions)
33,6
-12,2
24,4 20,1 14,6
1Q09 2Q09 3Q09 4Q09 1Q10
33,6
-61,9
12,2
(19,0)
South America Other Units
• Due to changes in accounting practices in late 2008, the goodwill paid on the purchase of shares
for expected future profitability was reclassified to Intangible Assets Thus expenses on goodwillfor expected future profitability was reclassified to Intangible Assets. Thus, expenses on goodwill
amortization are no longer recorded on the Income Statement.
• Increased sales volume and anti-crisis measures and adjustments improved performance and
indicate a positive trend.
22
* Note: Pro-forma data include the figures for the subsidiary LWB, for the purpose of comparison
23. Key Figures – By Region
1Q10 Net Revenues (R$ million)
119,1
77 0
1Q10 Gross Profit
77,0
39,3%
29,3%
South America Other Units
R$ million Margin %
Workforce in 03.31.101Q10 EBITDA
Asia; 5,7%
North
America;
5 8%
84,5
38,6
South
America;
82,3%
5,8%
Europe; 6,2%27,9%
14,7%
South America Other Units
23
South America Other Units
R$ million
TOTAL = 7,499
24. Key Figures - Costs
COGS Breakdown – 1Q10
28 7% 31 8% 35 1% 34 1% 34 7%
COGS vs. Gross Margin
Energy Others
321,6 309,9 313,9
354,1 369,7
28,7% 31,8% 35,1% 34,1% 34,7%
Raw material
39,7%Maintainence
4,7%
gy
3,4% 16,4%
1Q09 2Q09 3Q09 4Q09 1Q10
R$ million Gross Margin
Labor
18,4%
Fuel
10,6%
Depreciation
6,7%
SG&A Expenses (R$ million) Direct Costs (Estimated**)
By Type By Currency
18,4%10,6%
115,2 115,2
Variable
67%
By Type
Foreign
65%
By Currency
,
98,0 96,4 102,5
,
Fixed
33%
Local
35%
24
** Considering the historical data of the product mix and capacity use
* Note: Pro-forma data include the figures for the subsidiary LWB, for the purpose of comparison
25. Net Debt
691,7
Amortization schedule after the bond issue (R$ million)
322,1 315,2 318,1
41,4
3,6 15,1
2010 2011 2012 2013 2014 2015 20202010 2011 2012 2013 2014 2015 2020
By Currency
* Pro-forma amortizations calculated after the debt renegotiation with Itau in April 2010 and not including
the debts from advances for foreign exchange contracts
• With the US$ 400 million bond issue, Magnesita
is in a more comfortable position regarding
debt;
By Currency
debt;
• Apart from advanced contract exports (ACC’s),
there is no significant disbursements until 2013 .
Local
52,5%
Foreign
47,5%
2525
26. Competitive Advantage vs. Business Risks
• Global Presence;• Global Presence; • High concentration of costumers:• High concentration of costumers:
Advantages Risks
• Global Presence;
• Fully integrated in dolomite and magnesite sinter;
• Great availability of high grade raw materials;
• Global Presence;
• Fully integrated in dolomite and magnesite sinter;
• Great availability of high grade raw materials;
• High concentration of costumers:
o Steel: 10 groups account for 50% of revenues
o Cement: 7 groups account for 55% of revenues
• High concentration of costumers:
o Steel: 10 groups account for 50% of revenues
o Cement: 7 groups account for 55% of revenues• Great availability of high-grade raw materials;
• Solution-based business model;
• Strategic partnerships with technology providers;
• Great availability of high-grade raw materials;
• Solution-based business model;
• Strategic partnerships with technology providers;
o Cement: 7 groups account for 55% of revenues
• Heavy dependence on the steel market.
o Cement: 7 groups account for 55% of revenues
• Heavy dependence on the steel market.
• Strategic partnerships with technology providers;
• Development of technologies through a modern
Research & Development Center;
• Strategic partnerships with technology providers;
• Development of technologies through a modern
Research & Development Center; 90
100
9000
10000
Steel Production x Refractories Sales
(10³ tonnes)
• Aggressive cost management model.• Aggressive cost management model.
60
70
80
6000
7000
8000
40
50
4000
5000
1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
SteelProduction in Brazil Refractories ‐ SA Units
26
Steel Production in Brazil Refractories ‐ SA Units
28. Thanks for your Attention!
Flavio Rezende Barbosa
y
Chief Financial and Investor Relations Officer
Adriana Fernandes Lana
I t R l ti M gInvestor Relations Manager
Phone: (+55 31) 3368-1069
Lucas Lima Ferreira
Investor Relations Analyst
Phone: (+55 31) 3368-1068
ri@magnesita.com.br www.magnesita.com.br
2828
