Magnesita Refratários S.A.
May, 2013
Disclaimer
The material that follows is a confidential presentation of general background information about Magnesita Refr...
Summary
Industry overview
Company overview
Financial Highlights
3
Refractory industry overview
Refractories are continuously consumed during steel production…
Electric Arc
Fumace Steel Ref...
Refractory: USD25 billion global industry
Source: Freedonia.estimates 2011 Source: Company estimates .
Main consumers worl...
Summary
Industry overview
Company overview
Financial Highlights
6
Company overview
70 years expertise in refractories and industrial minerals
3rd largest player in the refractory sector wo...
Business highlights
Net revenues
(2012)
R$ 148 million
(6% of the total revenues)
R$ 130 million
(5% of the total revenues...
Experienced management team
Octavio Pereira Lopes - CEO
Otto Levy Reis - VP Commercial
Peter Estermann - COO Global
Viníci...
Sales Office
Refractory production
Mines
Global scale, with local presence in key markets, with an integrated supply chain...
Oneglobalorganization
Vision:
Be the best provider of refractories
solutions and industrial minerals,
leveraging and devel...
I – Ensure leadership in our core markets
12
South America
Dolomitics in
North America
Dolomitics in
Western Europe
Long s...
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
Projects in development phase
Graph...
Sinterco Dolomite JV (Belgium)
31 million tonnes of reserves
Expected life: 30 years
Brumado (Bahia-Brazil)
830 million es...
17
DMR (manufacturing unit in China)
Low cost production base: The plant is located in the city of Dalian, northeast China...
18
Refractory assembly in rotary kiln
Reframec (51% of equity)
Ensure leadership in our core markets: The Reframec acquisi...
Summary
Industry overview
Company overview
Financial Highlights
19
Revenues EBITDA and EBITDA margin (excl. non-recurring)
2.464
2011
2.319
2010
2.276
2009
1.927
+6,2%
+8,5%
2012
Steady org...
1Q13 Results
21
Steel production in Magnesita’s core markets (mln tonnes)
-8%
-5%
1Q13
11,0
4Q12
11,6
1Q12
11,9
South Amer...
Debt and Leverage
Amortization Schedule (R$ million) Net Debt per currency
Total Excluding Perpetual Bond
1.0591.0581.0311...
Key messages
Strong management team and corporate governance practices
Global vertical integrated player with unique geogr...
24
Annex
Strong support from shareholders
Only common shares
2 independent board members
Free float 58.8% (minimum required is 25%)...
26
Investor Relations contacts:
Octavio Pereira Lopes
CEO and IRO
Eduardo Gotilla
Global Finance & IR Director
Daniel Domi...
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Magnesita institutional may2013_v_ndr_v2

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Magnesita institutional may2013_v_ndr_v2

  1. 1. Magnesita Refratários S.A. May, 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 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. 2
  3. 3. Summary Industry overview Company overview Financial Highlights 3
  4. 4. Refractory industry overview Refractories are continuously consumed during steel production… Electric Arc Fumace Steel Refining Facility Continuos Casting Basic Oxygen Furnace Recycled Steel Direct Reduction Coal Injection Iron Ore 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 STEEL LADLES Volume: 70 tonnes Life Expectancy: 1 month Source: Company …and cement production Preheater Tower CLINKER COOLER Volume: 500 tonnes 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 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, 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 Monolithic 1 ton of steel = ~10 kg of refractories 1 ton of cement = ~0.6 Kg of refractories Types of refractories Consumption (average) Refractories are crucial consumables for manufacturing processes with high temperatures 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) Other Global players Segment players Regional players Vesuvius-~10% Magnesita ~ 5% ~10% Shinagawa Krosaki ANH Qinghua Magnezit ~13% Chinese players ~37% ~60% ~15% ~15% ~10% Refratechnik Saint Gobain Calderys Minteq Small local players Magnesita is a global player with a unique business model in the industry Fully Integrated Manufacturing Only CPP-Integrated Higher margins; difficulty to replicate +- Integrated Manufacturing Integrated Services Mining Refractory manufacturing Services Full (performance -based) Different business model across the value chain… …lead to different margins levels Source: Bloomberg 25,7% Vesuvius 30,4% 21,6% RHI Shinagawa 17,7% Magnesita 17,4% Krosaki ~16% 5 Gross Margin (2012)
  6. 6. Summary Industry overview Company overview Financial 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 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 unexplored mineral rights in Brazil Solid financial fundamentals Magnesita is a global leader in refractories solutions and industrial minerals 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 Net revenues (2012) R$ 148 million (6% of the total revenues) R$ 130 million (5% of the total revenues) Gross margin (2012) 11%43% 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 Refractory Solutions Services Applications Talc: Plastic, cosmetics, pharmaceuticals, food, ceramics, pulp and paper, etc Caustic magnesia: Fertilizers, abrasives, animal nutrition, etc Sinter: refractories Industrial Minerals Magnesita leverages its competitive advantages throughout the whole value chain Refractories with tailor made formulations and shapes as well as strong technical service Two commercial models (CPP and conventional) R$ 2.186 million (89% of the total revenues) 31% Steel Industrial (cement, non- ferrous, non-metallic) Steel Industrial (cement, non- ferrous, non-metallic) Mining UPSTREAM DOWNSTREAM 8
  9. 9. Experienced management team Octavio Pereira Lopes - CEO Otto Levy Reis - VP Commercial Peter Estermann - COO Global Vinícius Silva - VP Minerals Martin Bartmann - Global Supply Chain Eduardo Moretti - COO China José Roberto Beraldo - CFO Felipe Sommer- VP People and MGMT Luis Rodolfo Bittencourt - VP R&D Functional Team Operational Team  Successful as CEO of Equatorial and as a Managing Director at GP Investments  Solid financial background  Senior roles and extensive experience in global companies  Over 70 years of combined experience in the industry  Close relationships with key players and clients in the industry Industry Experience: +11 years Joined Magnesita in 2008 Industry Experience: +27 years 27 years in Magnesita Industry Experience: +5 years Joined Magnesita in 2008 Industry Experience: +17 years Joined Magnesita in 2011 Industry Experience: +18 years Joined Magnesita in 2009 Industry Experience: +3 years Joined Magnesita in 2010 Previous experience Joined Magnesita in 2007 as board member and became CEO in 2012 Joined Magnesita in 2012 Joined Magnesita in 2012 Industry experience Over 70 years of combined experience in the industry 9
  10. 10. Sales Office Refractory production Mines Global scale, with local presence in key markets, with an integrated supply chain Sales per region 2012 York unit production (USA) Contagem units production (BRA) Coronel Fabriciano unit production (BRA) San Nicolás unit production (ARG) Valenciennes and Flaumont units production (FRA) Hagen-Halden, Oberhausen and Kruft units production (DEU) Chizhou unit production (CHN) Taiyuan JV’s unit production (CHN) York Dolomite Mine (USA) Qingyang dolomite mine (CHN) Sinterco Dolomite JV (BEL) Magnesite mine (Brumado - BRA) Chromite mine (BRA) Talc mine (BRA) Europe Asia NAM 22% 8% 18% 49% SAM Others 2% Taiwan JV’s unit production (CHN) Unique global footprint DMR unit production (CHN) 10
  11. 11. Oneglobalorganization Vision: Be the best provider of refractories solutions and industrial minerals, leveraging and developing our minerals base 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 New strategic vision
  12. 12. I – Ensure leadership in our core markets 12 South America Dolomitics in North America Dolomitics in Western Europe Long standing relationship with blue-chip customers Our differentiated competitive position and leadership in core markets support our growth as they recover ~50% in stainless steel ~20% in mini-mills Magnesita’s share* in core markets Vertically integrated low-cost producer Continuous investments in R&D and technology Specialized technical assistance Logistic advantages due to privileged locations Captive CPP contracts with long-term alignment of interests Brand recognition and historical leadership Magnesita’s competitive advantages in its core markets ~60% in stainless steel ~15% in mini-mills ~65% in steel ~60% in cement *Company estimates
  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 Historically low exposure in several important markets Source: ¹CRU and ²Company estimates Crude Steel Production¹ (mln ton) and Magnesita’s share² (%) Opportunities for diversification into non steel industries Magnesita refractory sales (2012) Refractories consumption - Global Market Opportunities for geographic diversification in steel Opportunities for geographic diversification in cement 138122118 80 2017(f)2013(f)2012 (e) 2009 16% 228204202 162 2017 (f) 2013 (f) 2012 (e) 2009 13111511298 2017(f)2013(f)2012 (e) 2009 9.6% 0.3% 605147 38 2017(f)2013(f)2012 (e) 2009 56 434034 2017 (f) 2013 (f) 2012 (e) 2009 363 305293 226 2013(f)2012 (e) 2009 2017(f) Industrial 40% Steel 60% Industrial 16% Steel 84% 65% 2.1% 1% North America Europe CIS 140130123115 2014 (f) 2013 (f) 2012 (e) 2011 345328317327 2014 (f) 2013 (f) 2012 (e) 2011 Central & South America MEA Asia ex-China 2014 (f) 3.093 2013 (f) 2.947 2012 (e) 2.781 2011 2.618 Cement Production¹ (mln ton) and Magnesita’s share² (%) 133124116108 2014 (f) 2013 (f) 2012 (e) 2011 338315295270 2014 (f) 2013 (f) 2012 (e) 2011 25% <5% <1% 60% <1% North America Europe Asia Central & South America Others Source: ¹CW Group and ²Company estimates II – Grow selectively and aggressively 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 → Brazil is fertile; very favorable geography → It has been historically unexplored → Viewed as a reliable source (vs China) The Brazilian opportunity Magnesita is very well positioned to occupy the “white space” in Brazil Magnesita’s strategic positioning → 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 III – Expand industrial minerals base 14
  15. 15. Our goal is to have at least one project moving to the next phase every 12 – 18 months Projects in development phase 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 1.Preliminary 5 to 10 analysis per year 2.Development Graphite Talc expansion 3.Installation 4.Operational 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 III – Expand industrial minerals base 15
  16. 16. Sinterco Dolomite JV (Belgium) 31 million tonnes of reserves Expected life: 30 years Brumado (Bahia-Brazil) 830 million estimated tonnes of reserves (549 million measured) Only mine to allow the economical production of 98.3%-grade DBM Expected life: ~200 years The mine is connected to the port of Aratu by the FCA railway York Dolomite Mine (PA-USA) 25 million tonnes of reserves Expected life: 45 years Qingyang Dolomite Mine (China) 18 million tonnes of reserves Expected life: 50 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) South American facilities (MG-Brazil and Argentina) Asian facility (Chizhou-China) Raw material flow Finished product flow Brumado has the highest quality of raw material in the world with more than 200 years of reserves DMR facility (Dalian-China) 16
  17. 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 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. Recent aquisitions DMR external view China CHINA Maintain a global low cost production base Grow selectively and aggressively
  18. 18. 18 Refractory assembly in rotary kiln 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 for refractories used in cement production in Brazil Closing: ~60 days. Post-close, Reframec will continue to operate independently Recent aquisitions Ensure leadership in our core markets
  19. 19. Summary Industry overview Company overview Financial Highlights 19
  20. 20. Revenues EBITDA and EBITDA margin (excl. non-recurring) 2.464 2011 2.319 2010 2.276 2009 1.927 +6,2% +8,5% 2012 Steady organic growth Proven resilience in adverse market conditions CAPEX funded comfortably with operational cash flow 373337 425 340 2011 14,5% 2010 18,7% 2009 17,7% +10,7% 2012 15,1% 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% 48,7% 26,0% 34,2% Magnesita¹CSNGerdauUsiminas Operational Cash Flow and Capex 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 OCF CAPEX Brumado expansion Financial highlights (BRL mln) 20 Gross margin Magnesita vs clients
  21. 21. 1Q13 Results 21 Steel production in Magnesita’s core markets (mln tonnes) -8% -5% 1Q13 11,0 4Q12 11,6 1Q12 11,9 South America -9% 3% 4Q13 21,2 4Q12 20,7 1Q12 23,2 United States 4% -6% 41,4 1Q134Q12 39,7 1Q12 43,9 EU-27 +2% +1% 1Q13 617,9 4Q12 611,1 1Q12 606,9 116 8388 1Q13 18,8% 4Q12 13,5% 1Q12 14,4% Revenues (BRL mln) Despite the challenging scenario, results have improved in 1Q13 401 373358352337 4Q12 14,6% 1Q12 14,3% 1Q134Q12 16,2% 15,1% 1Q13 14,6% Ebitda margin Ebitda LTMEBITDAEBITDA margin *EBITDAexcludingnonrecurring EBITDA (BRL mln) EBITDA LTM (BRL mln)
  22. 22. Debt and Leverage Amortization Schedule (R$ million) Net Debt per currency Total Excluding Perpetual Bond 1.0591.0581.0311.002 907 401373357350334 2,6x 2,8x2,9x2,9x2,7x 1Q134Q123Q122Q121Q12 Net debt / EbitdaEBITDA* LTMNet Debt 22 *EBITDA excluding non recurring *EBITDA excluding non recurring 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 566536513486 907 401373357350334 1,4x1,4x1,4x 2,7x 1,4x 1Q12 1Q132Q12 4Q123Q12 Net debt / EbitdaEBITDA* LTMNet Debt Solid balance with no refinancing risk
  23. 23. Key messages Strong management team and corporate governance practices Global vertical integrated player with unique geographic position Opportunities for growth and diversification into selected markets and industries Unique solution-based model (CPP) and performance-based applied R&D Focused on delivering superior returns to shareholders Significant value of mineral reserves with opportunities to expand industrial minerals base Solid financial fundamentals 23
  24. 24. 24 Annex
  25. 25. Strong support from shareholders Only common shares 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) Listed in the Novo Mercado segment, which correspond to the best practices of corporate governance Ownership structure Corporate Governance 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 58,8% 34,0% 7,2% Free Float Rhône GP Controlling Group 25
  26. 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 ri@magnesita.com www.magnesita.com

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