2. 2
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.
Disclaimer
4. 4
What is a refractory?
Refractories are crucial for manufacturing processes with high temperatures
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 assured supply are essential
~US$ 25 billion industry globally
Represents ~3% of COGS in steel manufacturing *Source: Industrial Minerals Magazine, December 2010.
Others
5%
Steel
70%
Cement
7%
Glass
4%
Chemical
4%
Non-ferrous
5%
Ceramic
5%
Bricks
Valves and
slide gates
Monolithic
Magnesite
Application: steel, cement and other industrial sectors
Dolomite
Application: mini mills and stainless steel
Alumina
Application: steel, cement and other industrial sectors
1 ton of steel =
~10 kg of
refractories
1 ton of cement
= ~0.6 Kg of
refractories
Vesuvius
10.5%
RHI
9.2%
Magnesita
5.9%
Shinagawa;
5.0%
Krosaki +
Tata
4.8%Saint-
Gobain
3.4%
Others
61.2%
*Company estimates.
Main raw material families
Main consumers worldwide* Fragmented industry*Product overview
Types of refractories Consumption (average)
5. 5
Electric Arc Fumace
Steel Refining 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…
What is a refractory?
6. 6
… which Also Happens During Cement Production
Rotary Kiln
Preheater Tower
PREHEATER TOWER
Volume: 1,000 tonnes
Life Expectancy: 5 - 10 years
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
What is a refractory?
7. 7
Magnesita Overview
70 years expertise in refractories and industrial minerals
3rd largest player in the refractory sector worldwide, present in the main steel markets
1st in the steel and cement industries in Brazil and South America
1st in the stainless steel industries in North America and Europe
Highest vertical integration level in the industry (close to 80%)
Best, largest and lowest-cost magnesite mine in the world outside China.
Significant number of unexplored mineral rights in Brazil
Solid financial fundamentals
Magnesita is a global leader in refractories solutions and industrial minerals
Magnesita in numbers
Revenues of R$ 2.46 billion in 2012
Production in 4 continents, supplying globally to more than 850 clients worldwide
6,500 employees
28 industrial facilities with a nominal capacity of 1.6 million tons/year of refractories
8. 88
Business segments highlights
Net revenues
(2012)
R$ 148 million
(6% of the total revenues)
R$ 130 million
(5% of the total revenues)
Gross margin
(2012)
11%43%
Details/
description
Current: Talc, caustic magnesia
and magnesia sinter
Development: Graphite and
talc expansion
Assembly and installation of
refractories
Other adjacent services inside
steel mills, including spot
contracts
Refractory Solutions Services
Applications
Talc: Plastic, cosmetics,
pharmaceuticals, food, ceramics,
pulp and paper, etc
Caustic magnesia: Fertilizers,
abrasives, animal nutrition, etc
Sinter: refractories
Industrial Minerals
Magnesita leverages its competitive advantages throughout the whole value chain
Refractories with tailor made
formulations and shapes as
well as strong technical service
Two commercial models (CPP
and conventional)
R$ 2.186 million
(89% of the total revenues)
31%
Steel
Industrial (cement, non-
ferrous, non-metallic)
Steel
Industrial (cement, non-
ferrous, non-metallic)
Mining
UPSTREAM DOWNSTREAM
9. 9
Global scale, local presence
Products and services breadth and depth
Access to high-quality materials
Global scale, local presence
Products and services breadth and depth
Relationship with clients
Technology
Key drivers
Fully
Integrated
Manufacturing
Only
CPP-Integrated
Higher margins; difficulty to replicate +-
Access to high-quality materials
Integrated
Manufacturing
Technology, local presence
Integrated
Services
Mining Refractory
manufacturing
Services
Full TCO
(performance
-based)
*Source: Bloomberg
17,4%
ShinagawaKrosaki
17,7%
RHI
21,6%
Vesuvius
25,7%
Magnesita
30,4%
Gross margin in 2012* (%)
Business segments highlights
Magnesita’s unparalleled business model delivers higher margins than other players
10. 1010
Sales Office
Refractory production
Mines
Unique global footprint
28 industrial facilities in 4 continents, with a nominal
capacity of 1.6 million tons of refractories/year
Global scale, with local presence in key markets, with an integrated supply chain
Sales per region
2012
York unit production (USA)
Contagem
units production (BRA)
Coronel Fabriciano
unit production (BRA)
San Nicolás unit
production (ARG)
Valenciennes and Flaumont
units production (FRA)
Hagen-Halden, Oberhausen and Kruft
units production (DEU)
Chizhou unit production (CHN)
Taiyuan JV’s unit production (CHN)
York Dolomite Mine (USA)
Qingyang dolomite mine (CHN)
Sinterco Dolomite JV (BEL)
Magnesite mine (Brumado - BRA)
Chromite mine (BRA)
Talc mine (BRA)
Europe
Asia
NAM
22%
8%
18%
49% SAM
Others
2%
Taiwan JV’s unit production (CHN)
11. 11
Ownership structure and corporate governance practices
Only common shares
2 independent board members
Free float 58.8% (minimum required is 25%)
Tag-along rights to all shareholders
Quarterly results in English in accordance with
International Financing Report Standards (IFRS)
Shares included in the IGC (Index of Differentiated
Corporate Governance) and ITAG (Index of Tag Along)
Listed in the Novo Mercado segment, which correspond to the best practices of corporate governance
Ownership structure Corporate Governance
Latin America and worldwide leadership in Private Equity
Active management
Culture of promotion by merit
Proven track record in the Brazilian and global capital markets,
with various success cases
58,8%
34,0%
7,2%
Free Float
Rhône
GP
Controlling Group
13. 1313
Our strategy
A new strategic vision sustained by four 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 businesses 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
III-Expand industrial
minerals base
I-Ensure leadership in
our core markets
IV-Maintain a global low
cost production base
II-Grow selectively and
aggressively
▪ Meritocracy
▪ Ethics
▪ Profit
▪ Management and Method
▪ Customer
▪ People
▪ Agility and Transparency
▪ Respect for Safety, Environment and Communities
Our values
Oneglobalorganization
14. 1414
I - Ensure leadership in our core markets
Vertical integrated low-cost producer
Continuous investments in R&D and technology
Specialized technical assistance
Logistic advantages due to privileged locations
Captive CPP contracts with long-term alignment of interests
Brand recognition and historical leadership
South America
Dolomitics in
North America
Dolomitics in
Western Europe
Long standing relationship with blue-chip customers
Our differentiated competitive position and leadership in core markets support our growth as they recover
~50% in stainless steel
~20% in mini-mills
Magnesita’s share* in core marketsMagnesita’s competitive advantages in its core markets
~60% in stainless steel
~15% in mini-mills
~65% in steel
~60% in cement
*Company estimates
15. 1515
II - Grow selectively and aggressively
Pursue long term growth opportunities in select markets where we can deliver superior value
Access to high quality and low cost raw materials
Exposure to emerging markets
Global scale with a integrated supply chain
Best-in-class technical and R&D capabilities
Increasing reach of our sales force
Historically low exposure in several important markets
Source: ¹CRU and ²Company estimates
Crude Steel Production¹ (mln ton) and Magnesita’s share² (%)
Opportunities for diversification into non steel industries
Magnesita refractory
sales (2012)
Refractories consumption
- Global Market
Opportunities for geographic diversification in steel Opportunities for geographic diversification in cement
138122118
80
2017(f)2013(f)2012(e)2009
16%
228204202
162
2012(e)2009 2017(f)2013(f)
131
11511298
2009 2017(f)2012(e) 2013(f)
9.6%
0.3%
605147
38
2017(f)2013(f)2012(e)2009
56
434034
2013(f) 2017(f)2012(e)2009
363
305293
226
2012(e)2009 2017(f)2013(f)
70%
Steel
30%
Industrial Industrial
16%
84%
Steel
65% 2.1%
1%
North America Europe
CIS
140130123115
2012(e)2011 2014(f)2013(f)
345328317327
2014(f)2012(e) 2013(f)2011
Central & South
America
MEA
Asia ex-China
2014(f)
3.093
2013(f)
2.947
2012(e)
2.781
2011
2.618
Cement Production¹ (mln ton) and Magnesita’s share² (%)
133124116108
2012(e)2011 2014(f)2013(f)
338315295270
2014(f)2012(e) 2013(f)2011
25% <5% <1%
60% <1%
North America Europe Asia
Central & South
America
Others
Source: ¹CW Group and ²Company estimates
16. 16
III - Expand industrial minerals base
The industrial minerals opportunity in Brazil
→ Initial portfolio of attractive mineral rights
→ 70 years of mining experience in Brazil (DBM, CCM, talc, etc)
→ Expertise in geology, research and environmental requirements
→ Knowledge of local stakeholders management
→ Dedicated team to prospect, analyze and develop business
→ Brazil is fertile; very favorable geography
→ It has been historically unexplored
→ Viewed as a reliable source (vs China)
Brazil’s opportunity
Magnesita is very well positioned to occupy the “white space” in Brazil
Magnesita’s strategic
positioning
→ Attractive due to global unbalance of supply and demand
→ Minerals out of big players’ radar
→ Logistic is not predominant
→ Commercial development is necessary
→ US$2bi – US$10bi global markets
Focused 0pportunity set
17. 1717
1.Preliminary
5 to 10 analysis
per year
2.Development
Graphite
Talc expansion
3.Installation 4.Operational
DBM, Talc, CCM
III - Industrial minerals strategy
Our goal is to have at least one project per year moving to the next phase
• Preliminary geological
work
• Market analyses
• Low capex; high risk
• Complete geological work
and reserve certification
•Environmental license
• Industrial project
•Commercial development
• Medium capex; medium risk
• Investment in the
industrial plant
•High capex; low risk
•Cash flow generation
• Maintenance capex
Projects in development phase
Graphite
Become self sufficient supplying our refractory business
Surplus to supply third parties, focusing on high end users
Positive outlook and growing demand from new applications
Restrictions from Chinese exports (~80% of global production)
Environmental license granted in March 2013
Talc expansion
Leader in Brazil, producing ~40kton/y
~50% gross margin
Low environmental license and geological risk
Commercial development underway
18. 1818
Sinterco Dolomite JV (Belgium)
31 million tonnes of reserves
Expected life: 30 years
Brumado (Bahia-Brazil)
830 million estimated tonnes
of reserves (549 million measured)
Only mine to allow the economical
production of 98.3%-grade DBM
Expected life: ~200 years
The mine is connected to the port
of Aratu by the FCA railway
York Dolomite Mine (PA-USA)
25 million tonnes of reserves
Expected life: 45 years
Qingyang Dolomite Mine (China)
18 million tonnes of reserves
Expected life: 50 years
IV - Maintain a global low cost production base
Opportunities for further industrial and supply chain optimization
North American facility
(PA-USA)
European facilities (3 in
Germany and 2 in France)
South American facilities
(MG-Brazil and Argentina)
Asian facility (Chizhou-China)
Raw material flow
Finished product flow
Brumado has the highest quality of raw material in the world with more than 200 years of reserves
21. 2121
1.0581.0311.002
907957
373357350334336
4Q2012
2,8x
3Q2012
2,9x
2Q2012
2,9x
1Q2012
2,7x
4Q2011
2,9x
Indebtedness and Leverage (BRL mln)
Net debt / EbitdaEbitda LTM*Net Debt
957
373357350334336
1,4x1,4x
2,7x2,9x
4Q2012
536
3Q2012
513
2Q2012
486
1,4x
1Q2012
907
4Q2011
Net debt / EbitdaEbitda LTM*Net Debt
19,0%
Others
0,9%
EUR
16,4%
USD
63,7%
BRL
852
820
7879101
16
234
510
201620152014 2018+
1.362
20172013Dec/12
Cash position
Perpetual bond
Solid balance sheet with no refinancing risk
*EBITDA excl. non-recurring *EBITDA excl. non-recurring
Net debt & leverage Net debt excluding Perpetual Bond & leverage
Amortization schedule Debt per currency
22. 22
Strong management team and corporate governance practices
Global vertical integrated player with unique geographic
position
Opportunities for growth and diversification into selected
markets and industries
Unique solution-based model (CPP) and performance-based
applied R&D
Key Messages
Focused on delivering superior returns to shareholders
Significant value of mineral reserves with opportunities to
expand industrial minerals base
Solid financial fundamentals
23. 23
Investor Relations contacts:
Octavio Pereira Lopes
CEO and IRO
Eduardo Gotilla
Global Finance & IR Director
Daniel Domiciano Silva
Investor Relations Manager
Phone: +55 11 3152-3202/3241
ri@magnesita.com
www.magnesita.com
![2
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.
Disclaimer](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)