presentations 4 q09
DESCRIPTION
TRANSCRIPT
11
Presentation to Investors
Presentation to Investors – 4Q09 Results
Contents
• Company History
• Highlights
• Refractory Products
• Group Profile
• Mineral Reserves
2
• Mineral Reserves
• Production Process and Capacities
• Competition
• Key Figures
• Competitive Advantages vs. Risks
• Stock Performance
Company History
1939
• Foundation –Magnesita Ltda. was established after the discovery of a large amount of magnesite in the Brumado mines
1969 1990 2007 2008 2009
• Listing –In 1969, Magnesita S.A. was listed on the São Paulo Stock Exchange (BOVESPA).
• CPP –Following the collapse of import tariffs for refractories in Brazil, Magnesita created a revolutionary
• Control Change –
GP and Gávea acquired Magnesita S.A.’s control, held two tender bids and purchased
• April. Novo Mercado –
After the merger of the controlled companies Magnesita S.A. and Partimag, there was a reverse split of Magnesita
• Oct. Capital Increase –
The controlling shareholders and BNDES approve a R$350 million capital
3
Brumado mines (Bahia State).
• Industrial operations began in 1944
revolutionary business model, CPP - “Cost per Performance”
and purchased shares in the market.
Magnesita Refratários S.A.’s (formerly Rpar Holding) shares, which have been traded under Novo Mercado rules since then.
• September. LWB Acquisition - On 09.08.08, Magnesita Refratários S.A. announced the acquisition of LWB Refractories and became the third largest refractory company worldwide.
capital increase.
3
Highlights
Leading Market Position Worldwide
Vertically Integrated Business Model
1
3
Strong & Experienced Management Team
8
Long Standing Relationships with Blue-Chip Customer Base
2
4
Long-Life of Mineral Reserves with High Quality
Solution Based Business Model
4
5Attractive Industry Dynamics with Significant Potential to Export the CPP model
6
Up-to-date Technology
7
Group Profile
York
Valenciennes
Flaumont
HildenOberhausenHagen
Kruft
ChizhouKaohsiung
Taiyuan
• 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 7,000 people and over300 clients worldwide;
• Two decades of expertise in the Cost per Performance model, in partnership with the topsteel companies worldwide. 5
Brumado
Coronel Fabriciano
Contagem
Ramalho (Arg) - RASA
Shareholders Composition Profile – 03/31/10
Controlling group
GP38.5%
INVESTMENT FUNDS AND CLUBS
12.4%
BROKERS/BANKS/ DISTRIBUTORS/ INSURANCE
4.7%
OTHERS1.4%
Controlling group = 50.4%
RHONE8.3%
GAVEA3.6%
FOREIGNERS18.2%
INDIVIDUAL12.9%
Refractory Products
• Refractories are heat-resistant materials manufactured in a widevariety of compositions and shapes according to their application.
Main Refractory Consumers Worldwide
77
Processes above
1,200º C
Steel70%
Cement7%
Ceramic5%
Glass4%
Chemical 4%
Non-ferrous5%
Others5%
7
1 tonne of cement = ~ 0.6 kg1 tonne of steel = ~ 12 kg 1 car = ~ 10 kg 1 aircraft = ~ 1.1 tonnes
How much refractory is needed to produce:
Refractory Products
8
1 tonne of cement = ~ 0.6 kg
8
1 tonne of steel = ~ 12 kg 1 car = ~ 10 kg 1 aircraft = ~ 1.1 tonnes
� 9,000 tonnes of steel
� 70,000 m³ of concrete
� 103,000 m² of glass
� 2,700 tonnes of aluminium
� + others
Burj Al Arab Hotel = ~200 tonnes
� 463,000 tonnes of steel
� 27 millions m³ of concrete
Three Gorges Dam Hydroletric= ~11,000 tonnes
Magnesian
Dolomitic
Steel production (FBI 2001=100)
• 34% of the net revenues in 2009• Composition: 63% of magnesite sinter• Main use: steel production
Carbon Steel
Specialty Steel
90
190
290
390
490
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
China World (Ex-China) World
200
Refractory – Main Families and Uses
Stainless steel production (FBI 2001=100)
99
Aluminous
• 35% of the net revenues in 2009• Composition: 60% of dolomite sinter• Main use: specialty steel production
• 21% of the net revenues in 2009• Composition: 54% of alumina• Main use: cement production
Cement
100
125
150
175
200
2001 2002 2003 2004 2005 2006 2007 2008
World Asia
100
150
200
250
300
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
China World (Ex-China) World 9
Cement production (FBI 2001=100)
75%
36%
After the LWB acquisition
The Cost per Performance Model
Before the LWB acquisition
Opportunity
25%
75%
Magnesita + LWB
64%
100%
Magnesita LWB
10
Opportunity
CPP
Volume
Rationale of The Cost per Performance Model
Raw Material
Monitoring Costumer Process
R&D Center
• High-grade raw material
M30 Magnesite sinter
Dolomite Sinter
• Equipment maintenance
• Engineering and process
management
• Logistics & Inventory Handling
• Product tests
• Continuous improvement
• Innovation
• Solutions for market
demands• High productivity
Profitability
demands
Final Price = Base Price + (∆ x steel produced)
• High productivity
• Cost reduction
• High refractory performance
11
Refractory – Life Expectancy (LE)
Blast Furnace
Torpedo Car
Ladle
Casting
• Amount of refractory: 900 tonnes• LE: 15 years
• Amount of refractory: 200 tonnes
• Amount of refractory: 70 tonnes• LE: 150 runs (1 month)
• Amount of refractory: 25 tonnes
12
Converter Rotary Kiln
• Amount of refractory: 200 tonnes• LE: 1,500 runs (2 years)
• Amount of refractory: 800 tonnes• LE: 5,500 runs (6 months)
• Amount of refractory: 25 tonnes• LE: 10 hours
• Amount of refractory:Burning: 250 tonnesHeating: 350 tonnes
• LE:Burning: 10 monthsHeating: 5 years
Note: Average values 12
Mineral Reserves
Magnesite 831 - - -Dolomite 51 25 31 18Talc (Magnesite) 2 - - -Chromite 2 - - -Clays 20 - - -Pyrophilite 1 - - -Graphite 36 - - -
Mineral reserves (million tonnes)
• On average, 3 tonnes of magnesite are needed to produce 1 tonne of M-30 sinter and 4 tonnes of magnesite are needed to produce 1 tonne of M-10 sinter;
• On average, 4 tonnes of dolomite are needed to produce 1 tonne of dolomite sinter.
Life(years)
5564
1508
759
185
13
Production Capacity (thousand tonnes/year)
sinter.
475
320
60 48
Dolomite Sinter
Magnesite Sinter
Magnesia Oxide
Talc
Production Process – Magnesite Sinter
14
RAW MATERIAL’SSILO
MIXER
PRESS
PILE IN
BURN CARS
SINTER’SBAY
CRUSHER
Production Process – Burned Refractory
WEIGHING
HOT AIR DRYER
TUNNER KILN
UNLOAD PILE
TO PLATE
CUT AND MILLING MACHINE
SELECTION AND PACKING
MILL
15
Production Capacity (1,000 tonnes/year)
200 256
USA
BELGIUM
FRANCEGERMANY
CHINA
DolomiteSinter
Refractories
127 180
337
Refractories DolomiteSinter
Refractories
65120
CAPACITYRefractories:1.43 million tonnes
Magnesite Sinter: 320 thousand tonnesDolomite Sinter: 475 thousand tonnes30
320
590
SOUTH AMERICA
CHINADolomiteSinter
Refractories
DolomiteSinter
RefractoriesMagnesiteSinter 16
Steel Production (million tonnes)
133 125 81
2007 2008 2009E
240 229 168
2007 2008 2009E
749 782 842
North AmericaEurope
Asia
17
2007 2008 2009E
861 829 629
490 500575
2007 2008 2009E
World (Ex-China) China
48 48 38
2007 2008 2009E
Source: World Steel Association
1,351 1,3291,204
South America
World
Cement Production (million tonnes)
93 84 75
2007 2008 2009E
372 350 324
2007 2008 2009E
2,047 2,119 2,207
North America
Europe + CIS
Asia
Source: Marketing Intelligence - Magnesita
2007 2008 2009E
1,563 1,571 1,551
1,360 1,400 1,470
2007 2008 2009E
World (Ex-China) China
93 100 100
2007 2008 2009E
18
2,923 2,971 3,021South America
World
390
580
594
896
1,597
ANH
Shinagawa
Krosaki
Magnesita
RHI
Competition
Net Revenues 2008 (€ million) - Generalists
Global
Asia/Japan
North America
Global
Asia/JapanVesuvius 12%
RHI 12%
Others 53%
Market Share Based on Revenues
19
Net Revenues 2008 (€ million) - Specialists
300
300
575
1,730
Minteq
Refratechnic
Saint-Gobain
Vesuvius
Note: Revenue figures, except those for Magnesita and RHI, were estimated by Industrial Minerals
Global
Global
Global
Global
Magnesita 7%
Shinagawa+ JFE 7%
KROSAKI 6%
ANH 3%
Others 53%
Revenue by:
Operating Location vs. Costumer Location
Revenue by
Product
Key figures – 4Q09
58.0%
23.9%
54.8%
20.9%
Services
5.6%
Other Minerals
3.4% Sinter
3.7%
2020
R$ 537.7 million
14.5%
23.9%
3.7%
11.0%
20.9%
11.1%
2.1%
South America North America Europe Asia Others
Production Destination
Refractories
87.4%
41% 39% 40% 46% 47%
59%
61% 60%54%
53%
4Q08* 1Q09 2Q09 3Q09 4Q09
Domestic Market Export Market
Key Figures – Last 12 Months
203.8
180.7190.9
219.9
238.7
4Q08* 1Q09 2Q09 3Q09 4Q09
Net Revenues (R$ million)
565.0
451.0 454.2 483.6537.7
Refractories Sales (1,000 tonnes)
Domestic Market Export Market
6.2%9.9%
15.8%
22.8%25.8%
35.1 44.471.6
110.1138.8
-0,1
0
0,1
0,2
0,3
0
50
100
150
200
250
300
4Q08* 1Q09 2Q09 3Q09 4Q09
R$ million Margin %
21
2,059 2,1041,918
1,434 1,414
12.31.08 03.31.09 06.30.09 09.30.09 12.31.09
* Note: Pro-forma data include the figures for the subsidiary LWB, for the purpose of comparison
EBITDA Net Debt (R$ million)
-132.2
-61.9
-12.2
24.4 20.1
4Q08* 1Q09 2Q09 3Q09 4Q09
Key Figures
Net Income 2009 (R$ million)Net Income (R$ millions)
35.1
- 64.8
South America Other Units
22
• 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 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.
* Note: Pro-forma data include the figures for the subsidiary LWB, for the purpose of comparison
Key Figures – By Region
1,048.0
878.6
South America Other Units
2009 Net Revenues (R$ million)
38,6%
25,3%
404.8
222.1
-1,3%
3,7%
8,7%
13,7%
18,7%
23,7%
28,7%
33,7%
38,7%
100,0
150,0
200,0
250,0
300,0
350,0
400,0
450,0
500,0
South America Other Units
R$ million Margin %
2009 Gross Profit
South America81%
Asia6%
North America
6%
Europe7%
23
Workforce in 12.31.09
299.8
65.2
28.6%
7,.%
-10,0%-9,2%-8,4%-7,6%-6,8%-6,0%-5,2%-4,4%-3,6%-2,8%-2,0%-1,2%-0,4%0,4%1,2%2,0%2,8%3,6%4,4%5,2%6,0%6,8%7,6%8,4%9,2%10,0%10,8%11,6%12,4%13,2%14,0%14,8%15,6%16,4%17,2%18,0%18,8%19,6%20,4%21,2%22,0%22,8%23,6%24,4%25,2%26,0%26,8%27,6%28,4%29,2%30,0%
0,030,060,090,0120,0150,0180,0210,0240,0270,0300,0330,0360,0390,0420,0450,0
South America Other Units
R$ million Margin %
2009 EBITDA
TOTAL = 6,938
COGS Breakdown – 2009
31.7%28.7%
31.8%35.1% 34.1%
385.7
321.6 309.9 313.9
354.1
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
35,0%
40,0%
200
250
300
350
400
450
500
550
4Q08* 1Q09 2Q09 3Q09 4Q09
R$ million Gross Margin
COGS vs. Gross Margin
Key Figures - Costs
24
R$ million Gross Margin
60.3 52.1 47.6 49.1 50.5
72.363.1
50.4 47.3 52.0
4Q08* 1Q09 2Q09 3Q09 4Q09
Selling expenses General and administrative expenses
SG&A Expenses (R$ million) Direct Costs (Estimated**)
102.5
132.6115.2
98.0 96.4
Fixed33%
Variable67%
By Type
** Considering the historical data of the product mix and capacity use
Local35%
Foreign65%
By Currency
* Note: Pro-forma data include the figures for the subsidiary LWB, for the purpose of comparison
227
16 5
315 315 315
696
Net Debt
Amortization schedule after the bond issue (R$ million)
2010 2011 2012 2013 2014 2015 2020
2525
• With the US$ 400 million bond issue, Magnesitais in a more comfortable position regarding debt;
• Apart from advanced contract exports (ACC’s), there is no significant disbursements until 2013 .
Local48%Foreign
52%
By Currency
Competitive Advantage vs. Business Risks
• Global Presence;
• Fully integrated in dolomite and magnesite sinter;
• Great availability of high-grade raw materials;
• Solution-based business model;
• Strategic partnerships with technology providers;
• Global Presence;
• Fully integrated in dolomite and magnesite sinter;
• Great availability of high-grade raw materials;
• Solution-based business model;
• Strategic partnerships with technology providers;
• High concentration of costumers:
o Steel: 10 groups account for 50% of revenues
o Cement: 7 groups account for 55% of revenues
• Heavy dependence on the steel market.
• High concentration of costumers:
o Steel: 10 groups account for 50% of revenues
o Cement: 7 groups account for 55% of revenues
• Heavy dependence on the steel market.
Advantages Risks
26
• Strategic partnerships with technology providers;
• Development of technologies through a modern Research & Development Center;
• Aggressive cost management model.
• Strategic partnerships with technology providers;
• Development of technologies through a modern Research & Development Center;
• Aggressive cost management model.0
20
40
60
80
100
0
2.000
4.000
6.000
8.000
10.000
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
Steel Production - Brazil
Refractory Sales - SA
Stock Performance
01/02/09 = 100
R$ million
20
25
30
35
15
0
20
0
25
0
2727
01/02/09 = 100
R$
0
5
10
15
0
50
10
0
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Fina
nc
ial Vo
lum
e (in
R$
millio
n)
MA
GG
3IB
OV
ESP
A
Flavio Rezende BarbosaChief Financial and Investor Relations Officer
Adriana Fernandes LanaInvestor Relations Manager
2828
Investor Relations Manager
Phone: (+55 31) 3368-1069
Lucas Lima FerreiraInvestor Relations Analyst
Phone: (+55 31) 3368-1068
[email protected] www.magnesita.com.br
Thanks for your Attention