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1
Earnings call – 2Q11
August 11,2011
2
Highlights
Strong growth in sales and volume, gaining market share
• R$ 583 million in net revenues, growing 9.3% in Refractory Solutions vs. 2Q10
• 13.8 % increase in refractory volume vs. 2Q10
• 17.4 % growth in sales to the industrial sector and 8.2% to the steel sector
Strong net income and cash generation
•R$ 30.8 million net profit, 41 % higher than 1Q11 and 22% over 2Q10
•R$ 103.2 million EBITDA with a margin of 17.7%
•R$ 85.8 million in operating cash flow
•R$ 91 million working capital reduction vs. 2Q10, R$ 15 million vs. 1Q11
Pressured gross margin due to raw material price increases as well as currency effects
• 31.4 % of gross margin (0.9 p.p. lower than the margin in 1Q11)
3
Strong growth driven by Refractory Solutions
Product line Quarter Change%
2Q11 (a) 1Q11 (b) 2Q10 (c) (a/b) (a/c)
Refractory solutions
Volume (t) 294,434 277,799 258,762 6.0 13.8
Revenues (R$ ‘000) 526,424 495,768 481,592 6.2 9.3
Minerals
Volume (t) 145,984 130,128 370,535 12.2 -60.6
Revenues (R$ ‘000) 19,844 34,474 25,496 -42.4 -22.2
Services
Revenues (R$ ‘000) 36,749 45,049 44,652 -18.4 -17.7
TOTAL
Revenues (R$ ‘000) 583,017 575,291 551,740 1.3 5.7
4
Strong growth in Refractory Solutions
11.5%
+9.3%
2Q11 -
constant
currency
536.9
2Q11
526.4
1Q11
495.8
2Q10
481.6
6.0%
+13.8%
2Q11
294.4
1Q11
277.8
2Q10
258.8
Steel production
Year-over-year
2.6% ex-China
5.5% global
Sequential
1.6% ex-China
2.4% global
Net revenue
R$ million
Refractory volume
‘000 tons
17.5% revenue growth vs.
2Q10 outside South America
5
Refractory solutions - growth both in steel and
in industrial
Net revenues - Steel sector
R$ million
Net revenues - Industrial sector
R$ million
+8.9%
+8.2%
2Q11
457.7
1Q11
420.4
2Q10
423.1
-8.9%
+17.4%
2Q11
68.7
1Q11
75.4
2Q10
58.5
6
Regions 1H11 Total
North America 1 14
Europe 1 8
Asia 1 4
South America - 33
TOTAL 3 59
New CPP contracts
Number of contracts
CPP contracts
Number of contracts
Refractory Solutions - CPP
31% of revenues
from the steel sector
595956
52
47
4240
36
31
272624
2Q10
1Q10
4Q09
3Q09
2Q09
1Q09
2008
Before
2008
2Q11
1Q11
4Q10
3Q10
59
24
16
2009
3
2010 Total2008
2
Before
2008
14
2Q11
0
1Q11
7
Gross profit and gross margin
R$ million, %
Minerals
Services
Refractory
Solutions
Gross profit and margin per product line
R$ million, %
Gross profit per product line
185.7
32.3
2Q10
199.2
36.1 31.4
2Q11
183.3
1Q11
166.0180.6
37.5 32.1
168.8
33.5
10.3
51.9
13.7
39.7
11.6
45.4
11.3
4.1
2Q111Q11
6.0
13.4
2Q10
7.0
15.7
8
Strong net income and cash flow generation
Net income
R$ million
+22%
+41%
2Q11
30.8
1Q11
21.8
2Q10
25.1
EBITDA
R$ million, %
Cash flow from Operations
R$ million
2Q11
85.8
1Q11
186.4
2Q10
-14%
+10%
2Q11
103.2
17.7
1Q11
93.8
16.3
2Q10
120.6
21.9
-0.3
9
44-day shorter cash conversion cycle
44 -day shorter cash convesion
cycle vs. 2Q10
Cash conversion
Days
Working capital
R$ million
R$ 91.3 million reduction
vs. 2Q10
(additional R$ 15 million
over 1Q11)
790.6
R$ 91
million
2Q111Q11
805.2
4Q10
832.6
3Q10
934.1
2Q10
882.0
145153161
193189
129129129
154158
6556484049
2Q111Q114Q103Q102Q10
Suppliers
Inventory
Cash cycle
10
Debt
R$ million
1.951
1.631 1.636
1.491
908 8543.1
2.1 2.1
2Q10 1Q11 2Q11
Net
Debt/EBITDA 2.8 x
56.8% lower financial
result vs. 2Q10
R$ 54 million reduction in net debt –
maintaining 2.1 x EBITDA
2.1 x 2.1 x
11
Financing Sept/11
Environmental License Concluded
Start-up Mar/12
(1) According to Industrial Minerals
Investment: R$ 220 million through 2012
Financing: 80% at attractive rates
Production: increase in capacity by 120 ktpa
Magnesite (Brumado-BA) Graphite (Almenara-MG)
Description
Stage Deadline
Timetable
Financing Dec/11
Environmental License Dec/11
Start-up Dec/12
Investment: R$ 80 million through 2012
Financing: 80% at attractive rates
Production : capacity of 40 ktpa
Description
Stage Deadline
Timetable
Verticalization projects remain “on track”
12
• Sale of land in São Caetano, R$ 19.8 million
• Impact on EBITDA, net income and cash in 3Q11
Sale of real estate
• Partner: Sudamin
• Annual steel production of 1.9 million tons
• Transfer of know-how, supply of raw materials
and technical assistance
Partnership in
Colombia
Sudamin
• Partner: Refratários Socialistas de Venezuela
• Annual steel production of 5.7 million
• Transfer of know-how, supply of raw materials
and technical assistance
Partnership in
Venezuela
RSV
Consolidation of
leadership in SA
Subsequent Events

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Magnesita presentation confcall_2_q11_eng

  • 1. 1 Earnings call – 2Q11 August 11,2011
  • 2. 2 Highlights Strong growth in sales and volume, gaining market share • R$ 583 million in net revenues, growing 9.3% in Refractory Solutions vs. 2Q10 • 13.8 % increase in refractory volume vs. 2Q10 • 17.4 % growth in sales to the industrial sector and 8.2% to the steel sector Strong net income and cash generation •R$ 30.8 million net profit, 41 % higher than 1Q11 and 22% over 2Q10 •R$ 103.2 million EBITDA with a margin of 17.7% •R$ 85.8 million in operating cash flow •R$ 91 million working capital reduction vs. 2Q10, R$ 15 million vs. 1Q11 Pressured gross margin due to raw material price increases as well as currency effects • 31.4 % of gross margin (0.9 p.p. lower than the margin in 1Q11)
  • 3. 3 Strong growth driven by Refractory Solutions Product line Quarter Change% 2Q11 (a) 1Q11 (b) 2Q10 (c) (a/b) (a/c) Refractory solutions Volume (t) 294,434 277,799 258,762 6.0 13.8 Revenues (R$ ‘000) 526,424 495,768 481,592 6.2 9.3 Minerals Volume (t) 145,984 130,128 370,535 12.2 -60.6 Revenues (R$ ‘000) 19,844 34,474 25,496 -42.4 -22.2 Services Revenues (R$ ‘000) 36,749 45,049 44,652 -18.4 -17.7 TOTAL Revenues (R$ ‘000) 583,017 575,291 551,740 1.3 5.7
  • 4. 4 Strong growth in Refractory Solutions 11.5% +9.3% 2Q11 - constant currency 536.9 2Q11 526.4 1Q11 495.8 2Q10 481.6 6.0% +13.8% 2Q11 294.4 1Q11 277.8 2Q10 258.8 Steel production Year-over-year 2.6% ex-China 5.5% global Sequential 1.6% ex-China 2.4% global Net revenue R$ million Refractory volume ‘000 tons 17.5% revenue growth vs. 2Q10 outside South America
  • 5. 5 Refractory solutions - growth both in steel and in industrial Net revenues - Steel sector R$ million Net revenues - Industrial sector R$ million +8.9% +8.2% 2Q11 457.7 1Q11 420.4 2Q10 423.1 -8.9% +17.4% 2Q11 68.7 1Q11 75.4 2Q10 58.5
  • 6. 6 Regions 1H11 Total North America 1 14 Europe 1 8 Asia 1 4 South America - 33 TOTAL 3 59 New CPP contracts Number of contracts CPP contracts Number of contracts Refractory Solutions - CPP 31% of revenues from the steel sector 595956 52 47 4240 36 31 272624 2Q10 1Q10 4Q09 3Q09 2Q09 1Q09 2008 Before 2008 2Q11 1Q11 4Q10 3Q10 59 24 16 2009 3 2010 Total2008 2 Before 2008 14 2Q11 0 1Q11
  • 7. 7 Gross profit and gross margin R$ million, % Minerals Services Refractory Solutions Gross profit and margin per product line R$ million, % Gross profit per product line 185.7 32.3 2Q10 199.2 36.1 31.4 2Q11 183.3 1Q11 166.0180.6 37.5 32.1 168.8 33.5 10.3 51.9 13.7 39.7 11.6 45.4 11.3 4.1 2Q111Q11 6.0 13.4 2Q10 7.0 15.7
  • 8. 8 Strong net income and cash flow generation Net income R$ million +22% +41% 2Q11 30.8 1Q11 21.8 2Q10 25.1 EBITDA R$ million, % Cash flow from Operations R$ million 2Q11 85.8 1Q11 186.4 2Q10 -14% +10% 2Q11 103.2 17.7 1Q11 93.8 16.3 2Q10 120.6 21.9 -0.3
  • 9. 9 44-day shorter cash conversion cycle 44 -day shorter cash convesion cycle vs. 2Q10 Cash conversion Days Working capital R$ million R$ 91.3 million reduction vs. 2Q10 (additional R$ 15 million over 1Q11) 790.6 R$ 91 million 2Q111Q11 805.2 4Q10 832.6 3Q10 934.1 2Q10 882.0 145153161 193189 129129129 154158 6556484049 2Q111Q114Q103Q102Q10 Suppliers Inventory Cash cycle
  • 10. 10 Debt R$ million 1.951 1.631 1.636 1.491 908 8543.1 2.1 2.1 2Q10 1Q11 2Q11 Net Debt/EBITDA 2.8 x 56.8% lower financial result vs. 2Q10 R$ 54 million reduction in net debt – maintaining 2.1 x EBITDA 2.1 x 2.1 x
  • 11. 11 Financing Sept/11 Environmental License Concluded Start-up Mar/12 (1) According to Industrial Minerals Investment: R$ 220 million through 2012 Financing: 80% at attractive rates Production: increase in capacity by 120 ktpa Magnesite (Brumado-BA) Graphite (Almenara-MG) Description Stage Deadline Timetable Financing Dec/11 Environmental License Dec/11 Start-up Dec/12 Investment: R$ 80 million through 2012 Financing: 80% at attractive rates Production : capacity of 40 ktpa Description Stage Deadline Timetable Verticalization projects remain “on track”
  • 12. 12 • Sale of land in São Caetano, R$ 19.8 million • Impact on EBITDA, net income and cash in 3Q11 Sale of real estate • Partner: Sudamin • Annual steel production of 1.9 million tons • Transfer of know-how, supply of raw materials and technical assistance Partnership in Colombia Sudamin • Partner: Refratários Socialistas de Venezuela • Annual steel production of 5.7 million • Transfer of know-how, supply of raw materials and technical assistance Partnership in Venezuela RSV Consolidation of leadership in SA Subsequent Events