Magnesita institutional outubro 13 eng


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Magnesita institutional outubro 13 eng

  1. 1. Magnesita Refratários S.A. October, 2013 MFRSY
  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 crucial consumables for manufacturing processes with high temperatures Main consumers worldwide Types of refractories Industry overview Source: Freedonia.estimates 2011 Refractories are fireproof materials consumed within various production processes, providing heat, chemical and mechanical resistance in industrial furnaces Monolithic ~15% Their raw material are minerals with high melting point, including magnesite, dolomite and alumina. Non-ferrous Bricks ~60% Refractories are continuously consumed during steel production… Coal Injection ELECTRIC ARC FURNACE Volume: 120 tonnes Life Expectancy: 1 month Basic Oxygen PREHEATER TOWER Volume: 1,000 tonnes Life Expectancy: 5 - 10 years Furnace Continuos Casting Limestone Blast Furnace Source: Company CLINKER COOLER Volume: 500 tonnes Life Expectancy: 1 - 3 years CONTINUOUS CASTING Volume: 25 tonnes Life Expectancy: 10 hours Recycled Steel Other Preheater Tower Steel Refining Facility Coal BLAST FURNACE Refractory Volume: 900 tonnes Life Expectancy: 15 years Coke Oven ~10% …and cement production STEEL LADLES Volume: 70 tonnes Life Expectancy: 1 month Natural Gas Direct Reduction nickel, silver, zinc) Pre castables, valves and slide gates Refractories are consumables: ~10Kg per ton of steel; ~0.6Kg per ton of cement Electric Arc Fumace ~15% (aluminum, copper, Steel Crucial, but represents ~3% of COGS in steel manufacturing and less than 1% in cement Iron Ore Nonmetallic (cement, glass, lime) CONVERTER Volume: 800 tonnes Life Expectancy: 6 months TORPEDO CAR Volume: 200 tonnes Life Expectancy: 2 years 4 ROTARY KILN Volume: 250 tonnes Life Expectancy: 10 months
  5. 5. Business highlights Magnesita’s unparalleled business model Mining Refractory manufacturing Full TCO (performance -based) Services Key drivers Manufacturing Only Technology Integrated Services Technology, local presence Integrated Manufacturing Access to high-quality materials Fully Integrated Global scale, local presence Products and services breadth and depth CPP-Integrated Access to high-quality materials Global scale, local presence Products and services breadth and depth Relationship with clients + - Gross Margin in 1H13* (%) 33,6% 27,2% 23,6% 16,5% *Source: Bloomberg (Krosaki and Shinagawa refer to 1Q13. Fiscal Year ends in march) Magnesita 5 Vesuvius RHI 16,3% Krosaki Shinagawa
  6. 6. Summary Industry overview Company overview Financial Highlights 6
  7. 7. Company overview Magnesita is a global leader in refractories solutions and industrial minerals More than 100 years of expertise in refractories and industrial minerals 3rd largest player in the refractory sector worldwide, present in the main steel markets #1 in the steel and cement industries in Brazil and South America #1 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 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 28 industrial facilities with more than 1 million tons/year of refractories produced in 2012 7
  8. 8. Business highlights Magnesita leverages its competitive advantages throughout the whole value chain UPSTREAM Industrial Minerals Details/ description Current: Talc, caustic magnesia (CCM), magnesia sinter (DBM), chromite and byproducts Development: Graphite and talc expansion DOWNSTREAM Refractory Solutions Services Refractories with tailor made Engineering, assembly and formulations and shapes as installation of refractories well as strong technical service Two commercial models (CPP Value-added services, including spot contracts and conventional) Applications Net revenues (2012) Gross margin (2012) Talc: Plastic, cosmetics, pharmaceuticals, food, ceramics, pulp and paper, etc CCM: Fertilizers, abrasives, animal nutrition, etc DBM: refractories Steel Steel Industrial (cement, non- Industrial (cement, nonferrous, non-metallic) ferrous, non-metallic) Mining R$ 130 million R$ 2.186 million R$ 148 million (5% of the total revenues) (89% of the total revenues) (6% of the total revenues) 31% 43% 8 11%
  9. 9. Unique global footprint Global scale, with local presence in key markets, with an integrated supply chain Sinterco Dolomite JV (BEL) Hagen-Halden, Oberhausen and Kruft production units (DEU) Valenciennes and Flaumont production units (FRA) DMR production unit (CHN) York production unit (USA) York Dolomite Mine (USA) Taiwan JV’s production unit (CHN) Qingyang dolomite mine (CHN) Chizhou production unit (CHN) Magnesite mine (Brumado - BRA) Talc mine (BRA) Chromite mine (BRA) Contagem production units (BRA) San Nicolás production unit (ARG) Sales per region 1H13 Coronel Fabriciano production unit (BRA) 8% Brazil . Sales Office Refractory production 22% 39% . South America North America Mines 13% 9 19% Europe Other
  10. 10. Experienced management team Over 100 years of combined experience in the industry Industry experience Octavio Pereira Lopes - CEO Joined Magnesita in 2007 as board member and became CEO in 2012 Previous experience  Successful as CEO of Equatorial. Previous Managing Director at GP Investments Functional Team José Roberto Beraldo - CFO Joined Magnesita in 2012  Solid financial background  Senior roles and extensive Felipe Sommer- VP People and Mngmt Otto Levy Reis – COO Joined Magnesita in 2012 experience in global companies Industry Experience: +11 years Joined Magnesita in 2008 Vinícius Silva - VP Minerals Industry Experience: +3 years Joined Magnesita in 2010 Luis Rodolfo Bittencourt - VP R&D Industry Experience: +27 years 27 years in Magnesita Jim Pirano – Commercial Head of Industrial Industry Experience: +6 years 7 years in Magnesita Rick Gladfelter – Head of Operations Industry Experience: +36 years 36 years in Magnesita Martin Bartmann - Global Supply Chain Industry Experience: +17 years Joined Magnesita in 2011 Operational Team  Over 100 years of combined experience in the industry  Close relationships with key players and clients in the industry 10
  11. 11. New strategic vision Vision: Be the best provider of refractories solutions and industrial minerals, leveraging and developing our minerals base II-Grow selectively and aggressively One global organization I-Ensure leadership in our core markets Strive to keep offering high quality and innovative products, unrivaled services and cost performance III-Expand industrial minerals base Pursue long term growth opportunities in selected markets where we can deliver superior value to our customers and shareholders 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 IV-Maintain a global low cost production base Optimize production globally to improve efficiency and support growth Develop global supply chain management Our values ▪ Customer ▪ People ▪ Meritocracy ▪ Ethics ▪ Profit ▪ Management and Method 11 ▪ Agility and Transparency ▪ Respect for Safety, Environment and Communities
  12. 12. I – Ensure leadership in our core markets Our differentiated competitive position and leadership in core markets support our growth as they recover Magnesita’s competitive advantages in its core markets Magnesita’s share* in core markets Vertically integrated low-cost producer Dolomitics in North America Continuous investments in R&D and technology ~50% in stainless steel ~20% in mini-mills Specialized technical assistance Logistic advantages due to privileged locations Captive CPP contracts with long-term alignment of interests South America ~65% in steel ~60% in cement Brand recognition and historical leadeship *Company estimates Long standing relationship with blue-chip customers 12 Dolomitics in Western Europe ~60% in stainless steel ~15% in mini-mills
  13. 13. II – Grow selectively and aggressively Pursue long term growth opportunities in select markets where we can deliver superior value Access to high quality and low cost raw materials, specially good for industrial customers Global footprint, global scale with an integrated supply chain Best-in-class technical and R&D capabilities with brand recognition Increasing reach of our sales force with a new commercial structure Historically low exposure in several important markets Opportunities for growth in a fragmented global industry Opportunities for diversification into non steel industries Magnesita refractory sales (1H13)¹ Global market share (in USD) Vesuvius-~10% RHI ~ 9% Chinese players ~10% Small local players Global players Segment players Regional players Industrial Magnesita ~ 5% ~37% ~13% Refractories consumption Global Market² ~16% Refratechnik Saint Gobain Calderys Minteq Industrial 17% 40% 60% 83% Shinagawa Krosaki ANH Qinghua Magnezit Steel Source: ¹Company figures and ²Freedonia. Source: Company estimates . 13 Steel
  14. 14. III – Expand industrial minerals base Unlocking our internal expertise and the industrial minerals opportunity in Brazil Magnesita’s strategic positioning The Brazilian opportunity Focused Opportunity set      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)      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 Magnesita is very well positioned to occupy the “white space” in Brazil 14
  15. 15. III – Expand industrial minerals base Our goal is to have at least one project moving to the next phase every 12 – 18 months 1.Preliminary 2.Development Graphite Talc expansion 5 to 10 analysis per year  Complete geological work and reserve certification  Preliminary geological work  Market analyses  Low capex; high risk  Environmental license 3.Installation  Investment in the industrial plant  High capex; low risk  Industrial project 4.Operational DBM, Talc, CCM  Cash flow generation  Maintenance capex  Commercial development  Medium capex; medium risk Talc expansion Graphite project Become self sufficient supplying our refractory business Leader in Brazil, producing ~40kton/y Surplus to supply third parties, focusing on high end users ~50% gross margin Positive outlook and growing demand from new applications Low environmental license and geological risk Restrictions from Chinese exports (~80% of global production) Commercial development underway Environmental license granted in March 2013 Project should double capacity over next 2 years 15
  16. 16. IV - Maintain a global low cost production base Opportunities for further industrial and supply chain optimization Sinterco Dolomite JV (Belgium) North American facility (PA-USA) 31 million tonnes of reserves Expected life: 30 years European facilities (3 in Germany and 2 in France) DMR facility (Dalian-China) York Dolomite Mine (PA-USA) Asian facility (ChizhouChina) 25 million tonnes of reserves Expected life: 45 years Qingyang Dolomite Mine (China) 18 million tonnes of reserves Expected life: 50 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 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. Summary Industry overview Company overview Financial Highlights 17
  18. 18. Financial highlights (BRL mln) Steady organic growth Proven resilience in adverse market conditions CAPEX funded comfortably with operational cash flow Net Revenues EBITDA and EBITDA margin (excl. non-recurring) +8,5% 2.276 17,7% 2.319 18,7% 14,5% 2.464 1.927 15,5% 17,2% +3,1% +1,3% 1.244 15,1% 1.261 425 340 +12,7% 373 337 193 2009 2010 2011 2012 1H12 2009 1H13 2011 2012 1H12 1H13 Gross margin Magnesita vs clients CAPEX Brumado expansion 2010 217 Usiminas CAPEX Gerdau CSN Magnesita¹ 49% 45% 257 171 26% 33% 17% 165 74 11% 60 34% 33% 34% 18% 118 120 37 36% 34% 92 51 78 38% 30% 14% 30% 24% 25% 12% 12% 14% 1% 3% -3% 44 2008 2009 2010 2011 2012 1H12 1H13 2009 2010 2011 2012 1H13 Source: Companies report (only parent company for Usiminas and CSN) ¹Magnesita in 2011 was adjusted due to accounting reallocation 18
  19. 19. Debt and Leverage Solid balance with no refinancing risk Total Net Debt Excluding Perpetual Bond EBITDA* LTM 2,9x 2,9x Net debt / Ebitda Net Debt 3,0x 2,8x EBITDA* LTM Net debt / Ebitda 2,9x 1.205 1.058 1.002 971 4Q11 2Q12 4Q12 1,4x 352 338 2Q13 4Q11 2Q12 Amortization Schedule (R$ million) Perpetual bond Amortization Cash position BRL 1.485 931 Jun-13 2013 2014 2015 2016 2Q13 12% 104% 73% 13% 19% EUR 78 4Q12 -14% USD 633 112 397 373 Net Debt per currency 554 33 639 *EBITDA excluding non recurring *EBITDA excluding non recurring 38 1,6x 1,4x 536 490 397 373 352 338 971 77 8 Others 8 2017 2018 2019 2020+ 19 -3% -4% Dec-12 Jun-13
  20. 20. Key messages Focused on delivering superior returns to shareholders Global vertical integrated player with unique geographic position Opportunities for growth and diversification into selected markets and industries Significant value of mineral reserves with opportunities to expand industrial minerals base Unique solution-based model (CPP) and performance-based applied R&D Strong management team and corporate governance practices Solid financial fundamentals 20
  21. 21. Annex 21
  22. 22. Strong support from shareholders Listed in the Novo Mercado segment (Ticker: MAGG3), which correspond to the best practices of corporate governance Ownership structure Corporate Governance Only common shares 2 independent board members GP 34,2% Free float 58.6% (minimum required is 25%) Controlling Group Free Float Tag-along rights to all shareholders 58,6% 7,2% Quarterly results in English in accordance with Rhône International Financing Report Standards (IFRS) Shares included in the IGC (Index of Differentiated Corporate Governance) and ITAG (Index of Tag Along) Latin America and worldwide leadership in Private Equity ADR Level I (Ticker: MFRSY) Active management OTC: Over- the-counter market Culture of promotion by merit Program established in 2010 Proven track record in the Brazilian and global capital markets, 1 ADR = 2 ordinary shares with various success cases MFRSY 22
  23. 23. Results 1H13 In spite of the poor performance of its core markets, Magnesita has improved its results in 2013 Performance of Magnesita’s core markets (mln tonnes) Steel production South America Steel production EU-27 Steel production USA -5% -6% -5% 46 24 23 1H12 1H13 Volume* (Kton) 84 1H13 1H12 557 1.244 33 34 1H13 1H12 1H13 Gross profit (R$ mln) Net revenues (R$ mln) +1,3% -2,6% +2% 89 43 1H12 Cement sales Brazil 30,8% 33,6% 15,5% 1.261 542 383 EBITDA (R$ mln) 17,2% 424 193 1H12 1H13 1H12 1H12 1H13 *Refractory volume (do not include industrial minerals) 23 1H13 217 1H12 1H13
  24. 24. Market growth forecast and Magnesita’s share % Magnesita’s share % Mkt growth (CAGR) Crude steel production¹ (mln ton) and Magnesita’s market share² (%) South & Central America CIS MEA Europe North America +4% +2% +3% +4% 38 48 50 120 59 138 206 +7% 162 42 35 9.6% 16% 2012 2013(f) 2017(f) (e) 2009 2012 2013(f) 2017(f) (e) 2009 365 +3% 229 82 65% 2009 118 209 Asia ex-China 45 98 58 2009 2012 (e) 128 2013 (f) 2017 (f) 2009 2012 (e) 308 238 0.3% 2.1% 2012 2013(f) 2017(f) (e) 114 111 300 1% 2013 2017(f) (f) 2009 2012 2013(f) 2017(f) (e) Source: ¹CRU (Report May/2013) and ²Company estimates Cement production¹ (mln ton) and Magnesita’s market share² (%) South & Central America Europe North America Others Asia +5% +7% +7% 108 116 124 133 115 60% 2011 2012 2013(f) 2014(f) (e) 123 130 140 327 25% 2011 2.947 3.093 2.618 2.781 +4% 2012 2013(f) 2014(f) (e) 317 328 345 270 2012 2013(f) 2014(f) (e) Source: ¹CW Group (Report Feb/2013) and ²Company estimates 24 2011 2012 (e) 295 315 338 <1% <1% <5% 2011 +7% 2013 2014(f) (f) 2011 2012 2013(f) 2014(f) (e)
  25. 25. Recent aquisitions Grow selectively and aggressively 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 The acquisition was concluded on July 31, 2013 CHINA DMR external view 25 China Maintain a global low cost production base
  26. 26. Recent aquisitions Ensure leadership in our core markets 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 The acquisition of 51% of Reframec was completed on June 28, 2013 Refractory assembly in rotary kiln 26
  27. 27. Investor Relations contacts: Octavio Pereira Lopes CEO Eduardo Gotilla Global Finance & IRO Daniel Domiciano Silva Investor Relations Phone: 55 11 3152-3203/3241 MFRSY 27