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Apres padrao mrsa_1_q10_eng
- 1. Presentation to InvestorsPresentationto Investors 1st quarter 2010
- 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 LongStanding 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
- 5. Group Profile York Valenciennes Flaumont Hilden Oberhausen Hagen Kruft Taiyuan Chizhou Kaohsiung Brumado Coronel Fabriciano Contagem Ramalho(Arg) - RASA • The only fully integrated magnesian and dolomitic refractory producer worldwide, offering refractory solutions for steel, cement and glass production, among others; • 28 manufacturing and mining facilities in four continents, with 7,499 people and overg g p p 300 clients worldwide; • Two decades of expertise in the Cost per Performance model, in partnership with the top steel companies worldwide. 5
- 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 • Refractoriesare 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 muchrefractory 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 – MainFamilies 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 perPerformance 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 TheCost 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 – LifeExpectancy (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
- 14. Production Process –Magnesite Sinter 14
- 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 (1,000tonnes/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 (milliontonnes) 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 (milliontonnes) 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 24 420 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 scheduleafter 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
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- 28. Thanks for yourAttention! 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