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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.
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- 2. 2 The material thatfollows 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. Disclaimer
- 3. Index Magnesita Overview Refractory Sector Company’sStrategy Growth and Opportunities Drivers Financial Highlights
- 4. Company History Over 70years of experience in refractory and mining business Magnesita’s fundation after the discovery of a large amount of magnesite in Brumado (BA) 1939 Beginning of magnesite sinter production in Brumado Beginning of refractories production in Contagem (MG) 40’s Company’s IPO 1973 Expansion of operations in Brazil and export beginning to South America 60’s Foundation of the Center of Research and Development in Contagem (MG) Beginning of service segment 70’s Refratec acquisition Beggining of slide gates production 80’s Beginning of CPP model (Cost per Performance) Initiation in the cement sector 90’s GP Investments acquire control of Magnesita S.A. 2007 LWB acquisition, becoming the 3rd largest company in the sector Novo Mercado listing 2008 New strategy view 2012 Investments approval to increase verticalization 2010
- 5. Magnesita Overview Magnesita isa leading global refractory and industrial mining company 3rd largest player in the refractory sector worldwide Revenues of R$ 2.3 billion in 2011 (R$1.9 billion 9M12) 7,000 employees, 28 industrial facilities with a nominal capacity of 1.6 million tons/year of refractories Presence in 4 continents, supplying more than 850 clients worldwide Leader in the steel and cement industries in Brazil and South America Leader in the stainless steel industry in North America and Europe High-quality raw materials: Better, largest and lowest cost magnesita mine in the world outside China. Significant number of unexplored mineral rights
- 6. Magnesita: 3 BusinessesAcross the Value Chain Net revenues (2011) R$ 2,034.1 million (87.7% of the total revenues) R$ 152.6 million (6.6% of the total revenues) R$ 132.2 million (5.7% of the total revenues) Gross margin (2011) 32.1% 11.3% 45.8% Details/ description Refractories with tailor made formulations and shapes as well as strong technical service Two commercial models (CPP and conventional) Industrial minerals primarily talc and caustic magnesia Excess minerals not utilized for internal production of refractories primarily magnesia sinter Assembly and installation of refractories Other adjacent services inside the mill, including spot contracts Businessline ServicesRefractories Solutions Industrial Minerals Applications Steel, cement, non-ferrous (aluminum, nickel, copper, etc.) and non-metallic (glass, petrochemical, pulp and paper) Steel, cement and mining Talc: Plastic industry, cosmetics, pharmaceuticals, food, ceramics, pulp and paper, etc.. Caustic magnesia: Fertilizers, abrasives, animal nutrition, etc.. Sinter: refractories industry
- 7. USA Germany China Brazil Headquarter Sales Office Raw materialand refractory production Port (BA) Raw Material Flow Final Product Flow Global scale , presence in the main markets Global Presence Sales in 2012 (9M12) By Segment By Region Refractory Solutions - Steel 75,0% Refractory Solutions - Industrial 14,2% Services 6,0% Industrial Minerals 4,8% South America 49,6% North America 20,2% Europe 21,2% Asia 9,0% 28 industrial facilities in 4 continents, with a nominal capacity of 1.6 million tons of refractories/year
- 8. Great availability ofhigh quality minerals Magnesite Mine in Brumado (BA) • Reserve estimated of 830 mln tons •Expected life: over 200 years • The mine is connected to the port of Aratu by the FCA railway Dolomite Mine in York (USA) • Reserve of 25 mln tons • Expected life: 50 years Dolomite Mine Sinterco (JV - Belgium) • Reserve of 31 mln tons • Expected life: 30 years Dolomite Mine in Qingyang (China) • Reserve of 18 mln tons • Expected life: 50 years Graphite Mine in Almenara (MG) * Still under geological study Other reserves • Talc •Chromite • Clays • Pirofilite 78 active mineral concessions in Brazil (several of which unexplored)
- 9. Controlling Group % Rhone 7,2% Raising standards ofcorporate governance Novo Mercado Member since 2008, Novo Mercado correspond to the best practices of corporate governance, ensuring and improving the transparency of companies with its shareholders 2 independent Board members Financial statements in English in accordance with International Financing Report Standards (IFRS) Stocks are included in the IGC (Index of Differentiated Corporate Governance) and ITAG (Index of Differentiated Tag Along) Controlling Group GP - Latin America leadership in Private Equity - Culture of promotion by merit - Proven track record Rhône: Prior LWB controllers group Free Float 58,8% GP 34,0%
- 10. Continuous effort inCorporate Social Responsibility Environmental Responsibility Project of logistic reverse: 100% of refractories residues recycling Certifications: ISO 14001 (environmental), ISO 9001 (quality) e OHSAS 18001 (health and safety) Social Responsibility Project “Citizen of the Future”: Sports and musical activities for more than 200 children in Brumado (BA) Project of Social inclusion in Magnesita (PRISMA): Inclusion of deaf people as Magnesita’s employees Withdraw of refractories residues after clients use Residues are sent to the recycling units Processing and transformation in raw material Use of the raw material in our industrial facilities
- 11. Index Magnesita Overview Refractory Sector Company’sStrategy Growth and Opportunities Drivers Financial Highlights
- 12. 12 What is aRefractory? Refractories are crucial for manufacturing processes with high temperatures Product Overview Main Consumers Worldwide Fireproof materials consumed within various production processes, retaining physical and chemical characteristics when exposed to extreme conditions Provides heat, chemical and mechanical resistance in industrial furnaces and other equipments in iron and steel production and kilns in cement and lime production Raw material quality and ensure supply are essential ~US$ 25 billion industry globally Represents only ~3% of the production costs in steel manufacturing Source: Industrial Minerals Magazine, December 2010. Others 5% Steel 70% Cement 7% Glass 4% Chemical 4% Non-ferrous 5% Ceramic 5% Types of refractories Bricks Valves and slide gates Monolithics Main raw material families Magnesite Application: steel and cement Dolomite Application: mini mills and stainless steel Alumina Application: steel and cement Consumption (average) 1 tonne of steel = ~10 Kg 1 ton of cement = ~0.6 Kg
- 13. 13 Electric Arc Fumace SteelRefining 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 Steel industry: represents approximately 85% of Magnesita’s refractories revenues Refractories are Continuously Consumed During Steel Production…
- 14. 14 Rotary Kiln Preheater Tower PREHEATERTOWER Volume: 1,000 tonnes Life Expectancy: 5 - 10 years … which Also Happens During Cement Production ROTARY KILN Volume: 250 tonnes Life Expectancy: 10 months CLINKER COOLER Volume: 500 tonnes Life Expectancy: 1 - 3 years Cement industry: represents approximately 10% of Magnesita’s refractories sales Clinker Cooler Source: Company
- 15. Magnesita: Integration inthe refractory supply chain Mine Magnesite sinter Raw material Refractory Solutions Bricks Valves and slide gates Services Installation of refractories Technical Assistance Magnesite Mine in Brumado (BA) Furnace (HW) of sinter production Monolithics
- 16. Index Magnesita Overview Refractory Sector Company’sStrategy Growth and Opportunities Drivers Financial Highlights
- 17. The new visionand the 4 strategy pillars Vision: Be the best provider of refractories solutions and industrial minerals, leveraging and developing our minerals base Continue to develop high quality, low cost raw material sources to support our current busi-nesses 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 Expand industrial minerals base Ensure leadership in our core markets Maintain a global low cost production base Grow selectively and aggressively ▪ Meritocracy ▪ Ethics ▪ Profit ▪ Management and Method ▪ Customer ▪ People ▪ Agility and Transparency ▪ Respect for Safety, Environment and Communities Our values Oneglobalorganization
- 18. Industrial Minerals Initial portfolioof attractive mineral rights Very favorable geography for industrial minerals in Brazil Possibility to occupy a “white space” in the market and become most important (if not sole) player in it 0 1 2 3 Magnesita’s strategic positioning Privileged access to deal flow and other unique resources: ▪ Geological and research skills ▪ knowledge of local licensing requirements ▪ Knowledge of local stake-holder management
- 19. Magnesita 2017 Industrial Minerals New refractories markets Core refractories Markets Integratedproduct offer: •Raw materials •Refractory Solutions •Services • Largest magnesite mine ex-China • Low-cost/high quality source for a relevant refractories raw materials • Portfolio of industrials minerals in Brazil •Leadership in South America and dolomite products • Sustainable position in selected markets with focus in growth and industrial applications
- 20. Index Magnesita Overview Refractory Sector Company’sStrategy Growth and Opportunities Drivers Financial Highlights
- 21. 11,.% 2.5% 7.4% 8,.% 3.1% 1.0% 1.3% 46.9% 18.0% 0.4% EuropeanUnion(27) OtherEurope C.I.S.(6) NorthAmerica SouthAmerica Africa Middle East China Asia(ex-China) Oceania Refractories Solutions- Opportunities Strategic Focus Ensure our leadership in key markets and follow its growth Increase presence in markets where our participation is low or nil, with geographic and industry diversity Competitive advantages Global player, with local presence in key markets High raw materials verticalization and low cost production High technology and specialized technical assistance Long term relationship with clients Experienced management Refractories comsumption - Global Market Magnesita – Refractories Solutions by segment (9M12) Global Steel Production by region (2012 until oct.) Magnesita – Refractories Solutions by region (9M12) 70.0% 30.0% Steel Industrial 84.0% 16.0% Steel Industrial 49.6% 202% 21.2% 9.0% SouthAmerica NorthAmerica Europe Asia
- 22. Services - Opportunities StrategicFocus Focus on segments with higher added value : Service contracts related to the maintenance, assembly and installation of refractories Longer and bigger spot contracts Expand to other segments such as mining and cement Geographic expansion Competitive advantages Expertise High qualified technical staff Ensure that the quality of installation is adding value to our clients, besides offering a better package solutions for them Assembly of refractories
- 23. Minerals - Opportunities StrategicFocus Development of Graphite Project Expand Talc business New minerals Competitive advantages 70 years of mining experience in Brazil Dedicated team to prospect, analyze and develop business 78 active mineral concessions
- 24. Index Magnesita Overview Refractory Sector Company’sStrategy Growth and Opportunities Drivers Financial Highlights
- 25. Financial Highlights (R$mln) Revenues 1.389 1.688 1.720 1.853 9M09 9M10 9M11 9M12 Gross Profit and margin 443 591 547 569 31,9% 35,0% 31,8% 30,7% 9M09 9M10 9M11 9M12 EBITDA and margin EBITDA* and margin* -49 72 87 76 9M09 9M10 9M11 9M12 Net Income (R$ mln) Net Income 226,2 352,8 315,7 277,0 16,3% 20,9% 18,4% 15,0% 9M09 9M10 9M11 9M12 229,4 328,8 269,2 292,2 16,5% 19,5% 15,7% 15,8% 9M09 9M10 9M11 9M12 *not considering one-off revenues/expenses
- 26. Performance by segment RefractorySolution Services 1.518 1.652 494 519 32,6% 31,4% 9M11 9M12 Revenues Gross Profit Gross Margin 496 525 497 516 550 567 535 166 168 160 158 170 184 166 33,5% 32,1% 32,2% 30,6% 30,8% 32,4% 31,0% 1T11 2T11 3T11 4T11 1T12 2T12 3T12 Revenues Gross Profit Gross Margin Industrial Minerals 84 89 39 39 46,2% 43,5% 9M11 9M12 Revenues Gross Profit Gross Margin 34 21 28 49 25 34 30 14 11 14 22 10 15 14 39,7% 51,2% 50,6% 44,9% 41,4% 43,7% 45,0% 1T11 2T11 3T11 4T11 1T12 2T12 3T12 Revenues Gross Profit Gross Margin 45 37 37 34 31 37 43 6 4 4 3 2 3 6 13,4% 11,3% 10,4% 9,7% 5,5% 8,6% 13,9% 1T11 2T11 3T11 4T11 1T12 2T12 3T12 Revenues Gross Profit Gross Margin 118 111 14 11 11,8% 9,8% 9M11 9M12 Revenues Gross Profit Gross Margin
- 27. Cash flow fromoperations, CAPEX and Cash cycle Cash flow and CAPEX R$ million Cash conversion cycle Days 146 138 143 143 145 76 79 67 69 68 144 138 131 131 136 78 80 79 82 78 3Q11 4Q11 1Q12 2Q12 3Q12 Cash conversion cycle (days)¹ Cash conversion cycle Suppliers Inventories Clients 188,4 96,9 90,0 39,4 62,4 61,7 3Q11 (c) 2Q12 (b) 3Q12 (a) FCO CAPEX 460,6 250,6 86,8 179,9 9M11 9M12 FCO CAPEX
- 28. 900.2 957.3 968.0 1,060.0 1,074.4 787.7761.2 791.8 819.1 834.7 2.11x 2.24x 2.30x 2.51x 2.76x 3Q11 4Q11 1Q12 2Q12 3Q12 Net Debt Workingcapital Net Debt/EBITDA Debt and leverage Net debt and leverage R$ million Debt profile 6.8% 93.2% Short term Long term 16.9% 83.1% Local currency (BRL) Foreign currencies
- 29. Investor Relations Contacts OctavioPereira Lopes CEO and IRO Daniel Domiciano Silva Investor Relations Phone: 55 11 3152-3202/3241 ri@magnesita.com www.magnesita.com Thank you!
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