2. Disclaimer
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 toand 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.any information or statement contained therein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever.
2
4. Refractory industry overview
Industry overview
What are refractories: Fireproof materials
consumed within various production processes,
providing heat, chemical and mechanical
resistance in industrial furnaces
Raw material: Minerals with high melting point,
Monolithic
1 ton of steel =
~10 kg of
refractories
1 ton of cement
Types of refractories Consumption (average)
Refractories are crucial consumables for manufacturing processes with high temperatures
Refractories are continuously consumed during steel production…
Electric Arc
Fumace Steel Refining
Facility
Iron Ore
STEEL LADLES
Volume: 70 tonnes
Life Expectancy: 1
month
…and cement production
Preheater Tower
CLINKER COOLER
Volume: 500 tonnes
Life Expectancy: 1 - 3 years
including magnesite, dolomite and alumina. Raw
material quality and assured supply are essential
Represents ~3% of COGS in steel manufacturing
and less than 1% in cement
Bricks
Pre castables,
valves and
slide gates
1 ton of cement
= ~0.6 Kg of
refractories
Fumace
Facility
Continuos Casting
Basic Oxygen
Furnace
Recycled Steel
Direct
Reduction
Coal Injection
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
Source: Company
Life Expectancy: 1 - 3 years
PREHEATER TOWER
Volume: 1,000 tonnes
Life Expectancy: 5 - 10 years
ROTARY KILN
Volume: 250 tonnes
Life Expectancy: 10 months
4
5. Refractory: USD25 billion global industry
Source: Freedonia.estimates 2011 Source: Company estimates .
Main consumers worldwide Fragmented industry – Global market share (in USD)
RHI ~ 9%
Steel
Non-ferrous
(aluminum, copper,
nickel, silver, zinc)
Nonmetallic
(cement, glass, lime)
Global players
Segment players
Vesuvius-~10%
Magnesita ~ 5%
~10%
Chinese
players
~37%~15%
~15%
Refratechnik
Magnesita is a global player with a unique business model in the industry
Steel (aluminum, copper,
nickel, silver, zinc)
Other
Regional players~10%
Shinagawa
Krosaki
ANH
Qinghua
Magnezit
~13%
~60%
~10%
Refratechnik
Saint Gobain
Calderys
Minteq
Small local
players
Manufacturing
Only
Mining
Refractory
manufacturing Services
Full (performance
-based)
Different business model across the value chain… …lead to different margins levels
Source: Bloomberg
~16%
Fully
Integrated
Only
CPP-Integrated
Higher margins; difficulty to replicate +-
Integrated
Manufacturing
Integrated
Services 25,7%
Vesuvius
30,4%
21,6%
RHI Shinagawa
17,7%
Magnesita
17,4%
Krosaki
5
Gross Margin (2012)
7. Company 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
Magnesita is a global leader in refractories solutions and industrial minerals
1st in the stainless steel industries in North America and Europe
Highest vertical integration level in the industry (~80%), fully self-sufficient in high-grade magnesite
Best, largest and lowest-cost magnesite mine in the world outside China.
Significant number of mineral rights in Brazil
Solid financial fundamentals
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
29 industrial facilities with a nominal capacity of 1.6 million tons/year of refractories
7
8. Business highlights
Enginering, assembly and
Refractory Solutions ServicesIndustrial Minerals
Magnesita leverages its competitive advantages throughout the whole value chain
Refractories with tailor made
UPSTREAM DOWNSTREAM
Details/
description
Current: Talc, caustic magnesia
and magnesia sinter
Development: Graphite and
talc expansion
Enginering, assembly and
installation of refractories
Value-added services, including
spot contracts
Applications
Talc: Plastic, cosmetics,
pharmaceuticals, food, ceramics,
pulp and paper, etc
Caustic magnesia: Fertilizers,
abrasives, animal nutrition, etc
Sinter: refractories
formulations and shapes as
well as strong technical service
Two commercial models (CPP
and conventional)
Steel
Industrial (cement, non-
ferrous, non-metallic)
Steel
Industrial (cement, non-
ferrous, non-metallic)
Mining
Net revenues
(2012)
R$ 148 million
(6% of the total revenues)
R$ 130 million
(5% of the total revenues)
Gross margin
(2012)
11%43%
R$ 2.186 million
(89% of the total revenues)
31%
8
9. Experienced management team
Octavio Pereira Lopes - CEO
Successful as CEO of Equatorial and as a
Managing Director at GP Investments
Previous
experience
Joined Magnesita in 2007 as board
member and became CEO in 2012
Industry experience
Over 70 years of combined experience in the industry
Otto Levy Reis - VP Commercial
Vinícius Silva - VP Minerals
José Roberto Beraldo - CFO
Felipe Sommer- VP People and MGMT
Luis Rodolfo Bittencourt - VP R&D
Functional Team
Operational Team
Solid financial background
Senior roles and extensive
experience in global companies
Over 70 years of combined
Industry Experience: +11 years
Joined Magnesita in 2008
Industry Experience: +27 years
27 years in Magnesita
Industry Experience: +3 years
Joined Magnesita in 2010
Joined Magnesita in 2012
Joined Magnesita in 2012
Peter Estermann - COO Global
Martin Bartmann - Global Supply Chain
Eduardo Moretti - COO China
Over 70 years of combined
experience in the industry
Close relationships with
key players and clients in the
industry
Industry Experience: +5 years
Joined Magnesita in 2008
Industry Experience: +17 years
Joined Magnesita in 2011
Industry Experience: +18 years
Joined Magnesita in 2009
Joined Magnesita in 2010
9
10. Global scale, with local presence in key markets, with an integrated supply chain
Valenciennes and Flaumont
units production (FRA)
Hagen-Halden, Oberhausen and Kruft
units production (DEU)
Chizhou unit production (CHN)
Taiyuan JV’s unit production (CHN)
Qingyang dolomite mine (CHN)
Sinterco Dolomite JV (BEL)
Unique global footprint
York unit production (USA)
Contagem
San Nicolás unit
production (ARG)
York Dolomite Mine (USA)
Magnesite mine (Brumado - BRA)
Chromite mine (BRA)
Talc mine (BRA)
Taiwan JV’s unit production (CHN)
DMR unit production (CHN)
Sales Office
Refractory production
Mines
Sales per region
2012
Contagem
units production (BRA)
Coronel Fabriciano
unit production (BRA)
Europe
Asia
NAM
22%
8%
18%
49% SAM
Others
2%
10
11. Vision:
Be the best provider of refractories
solutions and industrial minerals,
leveraging and developing our minerals base
Expand industrialEnsure leadership Maintain a global lowGrow selectively and
New strategic vision
Oneglobalorganization
Expand industrial
minerals base
Ensure leadership
in our core markets
Maintain a global low
cost production base
Grow selectively and
aggressively
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
▪Meritocracy
▪Ethics
▪Profit
▪Management and Method
▪Agility and Transparency
▪Respect for Safety, Environment and Communities
▪Customer
▪People
Our values
11
12. I – Ensure leadership in our core markets
Dolomitics in
North America
Dolomitics in
Western Europe
Our differentiated competitive position and leadership in core markets support our growth as they recover
~50% in stainless steel
Magnesita’s share* in core marketsMagnesita’s share* in core markets
Vertically integrated low-cost producer
Continuous investments in R&D and technology
Specialized technical assistance
Vertically integrated low-cost producer
Continuous investments in R&D and technology
Specialized technical assistance
Magnesita’s competitive advantages in its core marketsMagnesita’s competitive advantages in its core markets
~60% in stainless steel
South America
Long standing relationship with blue-chip customers
~50% in stainless steel
~20% in mini-mills
Logistic advantages due to privileged locations
Captive CPP contracts with long-term alignment of
interests
Brand recognition and historical leadership
Logistic advantages due to privileged locations
Captive CPP contracts with long-term alignment of
interests
Brand recognition and historical leadership
~60% in stainless steel
~15% in mini-mills
~65% in steel
~60% in cement
*Company estimates
12
13. 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 an integrated supply chain
Best-in-class technical and R&D capabilities
Increasing reach of our sales force
Opportunities for diversification into non steel industries
Magnesita refractory
sales (2012)
Refractories consumption
- Global Market
Industrial
40%
Steel
60%
Industrial
16%
84%
II – Grow selectively and aggressively
Increasing reach of our sales force
Historically low exposure in several important markets
Crude Steel Production¹ (mln ton) and Magnesita’s share² (%)
Opportunities for geographic diversification in steel Opportunities for geographic diversification in cement
138122118
80
16%
228204202
162
9.6%
363
305293
226
Steel
Steel
84%
1%
North America Europe
140130123115
345328317327
Asia ex-China
3.0932.9472.7812.618
Cement Production¹ (mln ton) and Magnesita’s share² (%)
25% <5% <1%
North America Europe Asia
Source: ¹CRU and ²Company estimates
2017(f)2013(f)2012
(e)
2009 2017
(f)
2013
(f)
2012
(e)
2009
13111511298
2017(f)2013(f)2012
(e)
2009
0.3%
605147
38
2017(f)2013(f)2012
(e)
2009
56
434034
2017
(f)
2013
(f)
2012
(e)
2009
2013(f)2012
(e)
2009 2017(f)
65% 2.1%
CIS
2014
(f)
2013
(f)
2012
(e)
2011 2014
(f)
2013
(f)
2012
(e)
2011
Central & South
America
MEA
2014
(f)
2013
(f)
2012
(e)
2011
133124116108
2014
(f)
2013
(f)
2012
(e)
2011
338315295270
2014
(f)
2013
(f)
2012
(e)
2011
<2% <1%
Central & South
America
Others
Source: ¹CW Group and ²Company estimates
13
14. Unlocking our internal expertise and 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
Magnesita’s strategic
positioning
III – Expand industrial minerals base
→ 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)
The Brazilian opportunity
→ 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
Magnesita is very well positioned to occupy the “white space” in Brazil
→ US$2bi – US$10bi global markets
14
15. Our goal is to have at least one project moving to the next phase every 12 – 18 months
1.Preliminary
5 to 10 analysis
2.Development
Graphite
3.Installation 4.Operational
DBM, Talc, CCM
III – Expand industrial minerals base
Projects in development phase
Graphite project Talc expansion
5 to 10 analysis
per year
Graphite
Talc expansion
DBM, Talc, CCM
• 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
Graphite project
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
Project should double capacityover next 2 years
15
16. Sinterco Dolomite JV (Belgium)
31 million tonnes of reserves
Expected life: 30 years
York Dolomite Mine (PA-USA)
25 million tonnes of reserves
Expected life: 45 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) DMR facility (Dalian-China)
Brumado (Bahia-Brazil)
830 million estimated tonnes
of reserves (549 million measured)
Only mine to allow the economical
production of 98.3%-grade DBM
Qingyang Dolomite Mine (China)
18 million tonnes of reserves
Expected life: 50 years
South American facilities
Asian facility (Chizhou-China)
production of 98.3%-grade DBM
Expected life: ~200 years
The mine is connected to the port
of Aratu by the FCA railway
South American facilities
(MG-Brazil and Argentina)
Raw material flow
Finished product flow
Brumado has the highest quality of raw material in the world with more than 200 years of reserves
16
17. DMR (manufacturing unit in China)
Low cost production base: The plant is located in the city of Dalian, northeast China,
region which owns around 20% of world’s reserves of magnesite, making it
a highly strategic location for refractory production
New markets: This new plant will allow us to better serve geographies
Recent aquisitions Maintain a
global low
cost
production
base
Grow
selectively
and
aggressively
New markets: This new plant will allow us to better serve geographies
and segments where Magnesita has a marginal presence today
and where we want to expand sales in a selective way
Location: Dalian is an important export hub in China with
excellent logistics
Capacity: 50.000 tons/year
Closing: Expected to occur in ~60 days, after approval
of the Economic and Trade Bureau of Dalian Development Area,
in the People´s Republic of China.
17
in the People´s Republic of China.
DMR external view
China
CHINA
18. Reframec (51% of equity)
Ensure leadership in our core markets: The Reframec acquisition reinforces
Magnesita's leadership in its core industrial markets in South America, as it
expands its services beyond the steel industry
Reframec: Leader in engineering, installation and repair services
Recent aquisitions Ensure
leadership
in our core
markets
Reframec: Leader in engineering, installation and repair services
for refractories used in cement production in Brazil
Closing: ~60 days. Post-close, Reframec will continue to operate
independently
18
Refractory assembly in rotary kiln
21. 1Q13 Results
Steel production in Magnesita’s core markets (mln tonnes)
-8%
-5%
11,011,611,9
South America
-9%
3%
21,220,7
23,2
United States
4%
-6%
41,439,7
43,9
EU-27
Despite the challenging scenario, results have improved in 1Q13
1Q134Q121Q12 4Q134Q121Q12 1Q134Q121Q12
+2%
+1%
18,8%
Revenues (BRL mln)
16,2%
Ebitda margin Ebitda LTMEBITDAEBITDA margin
EBITDA (BRL mln) EBITDA LTM (BRL mln)
21
+1%
1Q13
617,9
4Q12
611,1
1Q12
606,9
116
8388
1Q134Q12
13,5%
1Q12
14,4%
401
373358352337
4Q12
14,6%
1Q12
14,3%
1Q134Q12
16,2%
15,1%
1Q13
14,6%
*EBITDAexcludingnonrecurring
22. Debt and Leverage
Total Excluding Perpetual Bond
1.0591.058
2,6x
2,8x2,9x2,9x2,7x
Net debt / EbitdaEBITDA* LTMNet Debt
2,7x
Net debt / EbitdaEBITDA* LTMNet Debt
Solid balance with no refinancing risk
Amortization Schedule (R$ million) Net Debt per currency
1.0591.0581.0311.002
907
401373357350334
1Q134Q123Q122Q121Q12
*EBITDA excluding non recurring *EBITDA excluding non recurring
Perpetual Bond -14%
BRL
566536513486
907
401373357350334
1,4x1,4x1,4x1,4x
1Q12 1Q132Q12 4Q123Q12
22
678
7880621530
964
508
1.472
2018+20172014 2015 20162013Mar-13
Perpetual Bond
Cash
Amortization 2%
80%
-14%
BRL
USD
104%
13%
19%
Others
EUR
-3%
-2%
Dec-12
Mar-13
23. Key messages
Global vertical integrated player with unique geographic
position
Opportunities for growth and diversification into selected
markets and industries
Focused on delivering superior returns to shareholders
markets and industries
Unique solution-based model (CPP) and performance-based
applied R&D
Significant value of mineral reserves with opportunities to
expand industrial minerals base
Strong management team and corporate governance practices
Solid financial fundamentals
23
25. Strong support from shareholders
Only common shares
2 independent board members
Listed in the Novo Mercado segment, which correspond to the best practices of corporate governance
Ownership structure Corporate Governance
GP 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)
58,8%
34,0%
7,2%
Free Float
Rhône
GP
Controlling Group
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
25
26. Investor Relations contacts:
Octavio Pereira Lopes
CEO and IRO
Eduardo Gotilla
Global Finance & IR Director
Daniel Domiciano Silva
Investor Relations
Phone: 55 11 3152-3203/3241
26
Phone: 55 11 3152-3203/3241
ri@magnesita.com
www.magnesita.com