apres padrao mrsa_1_q10_eng

Presentation to Investors Presentation to Investors 1st quarter 2010

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

Company History

2009Capital Increase: In October, the controlling shareholdres approved a R$ 350 million

2007Control Change: GP and Gavea acquired control of Magnesita

approved a R$ 350 million capital increase, of which BNDES took part

1939Foundation: Magnesita Ltda.

1969Listing: Company IPO on the São Paulo Stock Exchange

q gS.A., held two tender offers and purchased shares in the market

2010March: 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)

1990CPP f ll i h ll f

2008Novo Mercado* lisitng on April

September: LWB is acquired for € 657 MM

interest of 7.875% per annum and maturity date in 2020

1944Industrial 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.

Highlights

Leading Market Position

1

Long Standing 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

5Attractive Industry Dynamics with Significant Potential to Export the CPP model

6

4

CPP model

Group Profile

York

Valenciennes

Flaumont

HildenOberhausen

HagenKruft

Taiyuan

Chizhou Kaohsiung

Brumado

Coronel Fabriciano

Contagem

Ramalho (Arg) - RASA

• The only fully integrated magnesian and dolomitic refractory producer worldwide, offeringrefractory 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 p300 clients worldwide;

• Two decades of expertise in the Cost per Performance model, in partnership with the topsteel companies worldwide. 5

Shareholders Composition Profile – 04/30/10

Invest. Funds

Brokers/Banks/Distributors

4,6% Others1,6%

GP38 5%Individuals

Invest. Funds and clubs12,6%

38,5%Individuals12,8%

Rhrone8 1%Gavea

Foreigners18,2%

8,1%Gavea3,6%

Controlling Group = 50.2%

TOTAL SHARES 257 954 378

Others = 49.8%

TOTAL SHARES = 257,954,378

Refractory Products

• Refractories are heat-resistant materials manufactured in a widei 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-ferrous5%

Others5%

above 1,200º C

Steel70%

Ceramic5%

Glass4%

Chemical 4%

Cement7%

77 7

Refractory Products

How much refractory 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 tonnesThree Gorges Dam Hydroletric= ~11,000 tonnes

88

j

Refractory – Main Families 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

200Stainless steel production (FBI 2001=100)

• 35% of the net revenues in 2009• Composition: 60% of dolomite sinter• Main use: specialty steel production

100125150175

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 10020

01

2002

2003

2004

2005

2006

2007

2008

2009

2010

China World (Ex-China) World 9

The Cost per Performance Model

After the LWB acquisitionBefore the LWB acquisition

69%36%

tuni

ty

31%

69%

64%

100%

Opp

ort

31%

Magnesita + LWBMagnesita LWB

CPP

Volume

10

Volume

Rationale of The Cost per Performance Model

Monitoring Costumer ProcessRaw 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 demandsg 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

Refractory – Life Expectancy (LE)

Blast Furnace Ladle

• Amount of refractory: 900 tonnesLE 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 tonnesHeating: 350 tonnes

• LE:

12

Burning: 10 monthsHeating: 5 years

Note: Average values 12

Mineral Reserves

Mineral reserves (million tonnes)

• On average, 3 tonnes of magnesite are Life

(years)Magnesite 831 - - -Dolomite 51 25 31 18Talc (Magnesite) 2 - - -Ch it 2

g , gneeded to produce 1 tonne of M-30 sinter and 4 tonnes of magnesite are needed to produce 1 tonne of M-10 sinter;

(y )

87

59185

Chromite 2 - - -Clays 20 - - -Pyrophilite 1 - - -Graphite 36 - - -

;

• On average, 4 tonnes of dolomite are needed to produce 1 tonne of dolomite sinter. 55

64150

8

P d ti C it (th d t / )Production Capacity (thousand tonnes/year)

475320

60 48

Dolomite Sinter

Magnesite Sinter

Magnesia Oxide

Talc

13

Production Process – Magnesite Sinter

14

Production Process – Burned Refractory

RAW MATERIAL’SSILO

PRESSSINTER’S

BAY

MIXER

PILE IN

BURN CARS

CRUSHER

WEIGHING

HOT AIR DRYER

TUNNER KILN

MILL

UNLOAD PILE

TO PLATESELECTION AND

PACKING

CUT AND MILLING MACHINE

15

Production Capacity (1,000 tonnes/year)

200 256

DolomiteSinter

Refractories

127 180337

Refractories DolomiteSinter

Refractories

USA

BELGIUM

FRANCEGERMANY

CHINA

Sinter

65 120

CHINADolomite

SinterRefractories

590

CAPACITYRefractories:1.43 million tonnes

Magnesite Sinter: 320 thousand tonnesDolomite Sinter: 475 thousand tonnes30

320SOUTH AMERICA

Dolomite Sinter: 475 thousand tonnes30

DolomiteSinter

RefractoriesMagnesiteSinter 16

Steel Production (million tonnes)

133 125 81

240 229 168

North AmericaEurope

Asia81

2007 2008 2009E 2007 2008 2009E

749 782 842 Asia

2007 2008 2009E

48 48 38

1,351 1,3291,204

South AmericaWorld

861 829 629

490 500575

2007 2008 2009E

172007 2008 2009EWorld (Ex-China) China

Source: World Steel Association

Cement Production (million tonnes)

372 350 324 North America

Europe + CIS

Asia93 84 75

2007 2008 2009E2007 2008 2009E

2,047 2,119 2,207

Asia

2007 2008 2009E

1,360 1,400 1,47093 100 100

2,923 2,971 3,021South America

World

1,563 1,571 1,551

1,360 1,400 ,

2007 2008 2009E

Source: Marketing Intelligence - Magnesita

2007 2008 2009EWorld (Ex-China) China 18

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

19Note: Revenue figures, except those for Magnesita and RHI, were estimated by Industrial Minerals

Key figures – 1Q10

Revenue by:Operating Location vs Costumer Location

Revenue byProductOperating 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

Refractories89,5%

products; 3,2%

Sinter; 1,8%

South America North America Europe Asia Others

Production Destination

R$ 565.9 million

2020

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

190.9219.9

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)

110,1138,8 123,39,9%

15,8%22,8%

25,8%21,8%

0,1

0,2

0,32,104 1,918

1,434 1,414 1,414

44,471,6

-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

Key Figures

24 4 20 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 goodwill for 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

Key Figures – By Region

1Q10 Net Revenues (R$ million)119,1

77 0

1Q10 Gross Profit

77,039,3%

29,3%


R$ million Margin %

Workforce in 03.31.101Q10 EBITDA

Asia; 5,7%

North America;

5 8%

84,5

38,6South

America; 82,3%

5,8%

Europe; 6,2%27,9%

14,7%


23

South America Other UnitsR$ million

TOTAL = 7,499

Key Figures - Costs

COGS Breakdown – 1Q10

28 7% 31 8% 35 1% 34 1% 34 7%

COGS vs. Gross Margin

Energy Others

321,6 309,9 313,9 354,1 369,728,7% 31,8% 35,1% 34,1% 34,7%

Raw material39,7%Maintainence

4,7%

gy3,4% 16,4%

1Q09 2Q09 3Q09 4Q09 1Q10

R$ million Gross Margin Labor18,4%

Fuel10,6%

Depreciation6,7%

SG&A Expenses (R$ million) Direct Costs (Estimated**)

By Type By Currency

18,4%10,6%

115,2 115,2

Variable67%

By Type

Foreign65%

By Currency,98,0 96,4 102,5

,

Fixed33%

Local35%

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

Net Debt

691,7

Amortization schedule after the bond issue (R$ million)

322,1 315,2 318,1

41,43,6 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 includingthe debts from advances for foreign exchange contracts

• With the US$ 400 million bond issue, Magnesitais in a more comfortable position regarding debt;

By Currency

debt;

• Apart from advanced contract exports (ACC’s), there is no significant disbursements until 2013 .

Local52,5%

Foreign47,5%

2525

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;



• Heavy dependence on the steel market.


• Heavy dependence on the steel market.


• Development of technologies through a modern Research & Development Center;


• 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

Steel Production in Brazil Refractories ‐ SA Units

26

Steel Production in Brazil Refractories ‐ SA Units

Stock Performance

250,000

300.00

350.00

ousand

)

sis 10

0)

9 =

100

150,000

200,000

200.00

250.00

300.00

olum

e (R$

tho

Evolution (ba

s

03/3

1/09

50,000

100,000

100.00

150.00

age T

rading

Vo

Share P

rice E

‐0.00

50.00

Avera

Volume MAGG3 Ibovespa

2727

Thanks for your Attention!

Flavio Rezende Barbosa

y

Chief Financial and Investor Relations Officer

Adriana Fernandes LanaI t R l ti M gInvestor Relations ManagerPhone: (+55 31) 3368-1069

Lucas Lima FerreiraInvestor Relations AnalystPhone: (+55 31) 3368-1068

[email protected] www.magnesita.com.br

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