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Presentations 3 q08
- 1. 3Q08 R l3Q08Results Conference Call
- 2. Transaction with LWBRefractories On November 5, 2008, the shareholders approved the operation. LWB is a leader in the market of basic refractories and high added-value dolomite products. Magnesita begins to operate directly in the North-American, European d A i kand Asian markets. Thi i ill b i i d ill k i i fThis operation will bring synergy gains and will make it easier for Magnesita to replicate its business model to other customers in the steelmaking industry worldwide. 2
- 3. Market – SteelIndustry Raw Steel Production i B il 103 t The steel industry R St l P d ti i 9,380 in Brazil - 103 tonsremained heated in 3Q08... 26 827 Raw Steel Production in Brazil – 103 tons 8,677 8,806 25,004 26,827 6.5% 7.3% 3Q07 2Q08 3Q08 8.1% ... surpassing the production of the previous 9M07 9M08 3 production of the previous periods. Source: IBS – Brazilian Steel Institute
- 4. Market – CementProducers Public works and the real estate segment contribute to the growth of Brazilian Cement Production – tonscontribute to the growth of the cement market.... 29,042,179 Production tons Jan-Jul 28,841,149 Cement Consumption (tons) Jan-Jul 25,572,907 24,734,380 13.6% 16.6% 2007 2008 ... demand and production continue to2007 2008 4 production continue to grow. Source: SNIC – Brazilian Cement Industry Union
- 5. Quartely Net Income– R$ million The improvement in product mixThe improvement in product mix and the higher exchange rate produced growth of net income by 19.9% (QoQ) and 13.7% (YoY). 125.1 112.5 59.3 Recovery in the gross margin and in the EBITDA margin reflected persistent control of costs and expenses. 28.5 46.6 18 7 29.630.030.2 18.7 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 1Q08 2Q08 3Q08 3Q08 results dot reflect the recent price adjustment negotiations which will be entirely reflected in 4Q08.Pro-forma Not considering -23.6 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 1Q08 2Q08 3Q08 goodwill amortization 5
- 6. Sales Breakdown Sales VolumeBreakdown 9M07 Sales Volume Breakdown 9M07 Sales Volume Breakdown 9M08 Sales Volume Breakdown 9M089M079M07 9M089M08 Other Minerals 26% Other Minerals(*) 26% 132 kt 297 kt 24% 313 kt 122 kt Refractory 60%Sinter 14% 297 kt 68 kt Sinter 14% Refractory 62% 313 kt 67 kt 497 kt 502 kt 14% 14% 62% (*) not including the non-recurring sale of 210,000 metric tons of magnesium silicate in 2Q08 497 kt 502 kt Sinter 9M08x9M07 = - 1.0% Total 9M08x9M07 = + 0.9% Refractory 9M08x9M07 = + 5.2% 6
- 7. Net Revenues Net Revenues–R$ millionNet Revenues– R$ million Net Revenues by Product- %Net Revenues by Product- %yy 312 374 323 316 4 0% 5.0% 5.0% 13.0% 12.0% Services Other Minerals Local Revenues 3Q07 -> 3Q08 Exports 312 323 306 316 4.0% 4.0% 5.0% Sinter 58 59 62 42 85 3Q07 -> 3Q08 +R$36MM (14,1%) Domestic 78.0% 79.0% Refractory 254 247 261 274 289 $ 9M07 9M083Q07 4Q07 1Q08 2Q08 3Q08 Obs.: excludes non-recurring income from sale of 210 kt of magnesium silicate amounting to R$2.5 MM in 2Q08 R$ 892 MM R$ 1,012 MM Growth of Brazilian steel industry leads to increasing revenues 7
- 8. Revenues Breakdown Refractory RevenuesBreakdown – 9M08Refractory Revenues Breakdown – 9M08 Refractory Revenues Breakdown for the Steel Industry 9M08 Refractory Revenues Breakdown for the Steel Industry 9M08 yy for the Steel Industry – 9M08for the Steel Industry – 9M08 Cement R$ 124 MM Volume 36.5% Steel R$ 605 MM 76.3% 15.6% Cast Steel 63 5%Others R$ 65 MM 8.1% 63.5% 8
- 9. EBITDA / EBITDAMargin EBITDA – R$ millionEBITDA – R$ million EBITDA Margin – %EBITDA Margin – %gg 297 8 187.8 297.8 109.3 29.1% 21.7% 29.2%29.8% 94.8 55.6 67.7 9.4%2Q 3Q 64.5 93.7 2007 2008 3Q07 4Q07 1Q08 2Q08 3Q081Q 2007 2008 9
- 10. Costs COGS - 9M08COGS- 9M08 Operating ExpensesOperating Expensesp g pp g p 92 Other Accounts 56 64 51 52 Raw Materials 34% Industrial Maintenance Eletric Energy 4% 13% 62 Administratives & OthersDepreciation 6% Maintenance 4% 33 31 26 25 SalesFuel 13% Labor 26% 31 30 25 25 27 3Q07 4Q07 1Q08 2T08 3T08 2008 Administrative Expenses increased because of non 3Q07 4Q07 1Q08 2T08 3T08 2008 Administrative Expenses increased because of non recurring costs due to the process of merger and restructuring of the Group’s companies. Year to date, these costs already total R$ 16.9 million.10
- 11. Debt Net Debt/EBITDANet Debt/EBITDA TheCompany’s debt, with over 85% on the long term, minus cash balance of R$ 728 384 397 246 long term, minus cash balance of R$ 728 million, corresponds to 1,0 x the annualized EBITDA 107 30/9/2007 30/9/2008 -107 Dívida Líquida Ebitda NOTE: 09.30.08 – annualized EBITDA was considered 11
- 12. Indicators - Magnesitaand LWB Ebitda MarginEbitda Margin reaches 23,7%23,7% Net Debt x Ebitda (*)Net Debt x Ebitda (*) Magnesita = 1.0 1 872 considering the results of the 2 Companies until Sep/08. g . LWB = 6.6 Magnesita + LWB = 2.8 LWB 858 1,872 1,168 1,670 Magnesita 1,014 597 571 287 146 194 1,286 704 444 591 g 597 417 298 397 384 Net Revenues Costs Gross Profit Ebitda (9M08) Annualized Ebitda Net Debt Obs.: LWB data were converted into real from euro quotation of 09/30/2008 (R$2.6031), without BRGAAP adjustments Ebitda 12
- 13. LWB Sales Refractory SalesVolume Breakdown 9M08 Refractory Sales Volume Breakdown 9M08 Refractory Revenues Breakdown 9M08 Refractory Revenues Breakdown 9M089M089M08 9M089M08 Tempered Dolomite 25% Others 12% Others 19% Tempered Dolomite 17%25% Magnesia/Mag- Carbon 14% 19% 17% Dolomite Burned Dolomite 31% Magnesia/Mag- Carbon 20% 523 2 kt Burned Dolomite 32% Monolithics 17% R$ 773 2 MM 31% Dolomite Monolithics 13% 523.2 kt R$ 773.2 MM Obs.: considering 09/30/2008 euro quotation (R$2.6031) 13
- 14. Stock Performance 50 000240 StockPerformance 30,000 35,000 40,000 45,000 50,000 160 180 200 220 240 gvolumeR$ 8=100 5 000 10,000 15,000 20,000 25,000 80 100 120 140 160 veragetrading 02.04.2008 - 5,000 60 80 2/4/2008 2/5/2008 2/6/2008 2/7/2008 2/8/2008 2/9/2008 Av Volume R$ MAGG3 Ibovespa MAGG3 – 1.2% Ibovespa – 21.8% Average daily trading volume R$ 9.6 million 14
- 15. Perspectives CHALLENGES OPPORTUNITIES • Slowingdown world’s economic growth; •Environment surrounded by uncertainties; • Decreasing raw steel production; • New exchange rate level = major international competitiveness; • New businesses and new markets; • Decreasing raw steel production; • Clients’ expansion projects postponed; • Increasing raw material costs. • LWB synergies; • Privileged plant locations; • Clients portfolio diversification; • The crisis boosts the process of implementation of changes. 15