2. 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
3. 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
4. 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
5
Attractive Industry
Dynamics with Significant
Potential to Export the
CPP model
6
Up-to-date Technology
7
5. Group Profile
York
Valenciennes
Flaumont
Hilden
Oberhausen
Hagen
Kruft
Chizhou
Kaohsiung
Taiyuan
• The only fully integrated magnesian and dolomitic refractory producer worldwide, offering
refractory solutions for steel, cement and glass production, among others;
• 28 manufacturing and mining facilities in four continents, with 7,000 people and over
300 clients worldwide;
• Two decades of expertise in the Cost per Performance model, in partnership with the top
steel companies worldwide. 5
Brumado
Coronel Fabriciano
Contagem
Ramalho (Arg) - RASA
6. Shareholders Composition Profile – 03/31/10
Controlling group
GP
38.5%
INVESTMENT FUNDS
AND CLUBS
12.4%
BROKERS/BANKS/
DISTRIBUTORS/
INSURANCE
4.7%
OTHERS
1.4%
Controlling group
= 50.4%
RHONE
8.3%
GAVEA
3.6%
FOREIGNERS
18.2%
INDIVIDUAL
12.9%
7. Refractory Products
• Refractories are heat-resistant materials manufactured in a wide
variety of compositions and shapes according to their application.
Main Refractory
Consumers Worldwide
77
Processes
above
1,200º C
Steel
70%
Cement
7%
Ceramic
5%
Glass
4%
Chemical
4%
Non-ferrous
5%
Others
5%
7
8. 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
9. 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)
10. 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
11. 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
12. 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 tonnes
Heating: 350 tonnes
• LE:
Burning: 10 months
Heating: 5 years
Note: Average values
12
13. Mineral Reserves
Magnesite 831 - - -
Dolomite 51 25 31 18
Talc (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)
55
64
150
8
7
59
185
13
Production Capacity (thousand tonnes/year)
sinter.
475
320
60 48
Dolomite
Sinter
Magnesite
Sinter
Magnesia
Oxide
Talc
15. RAW MATERIAL’S
SILO
MIXER
PRESS
PILE IN
BURN CARS
SINTER’S
BAY
CRUSHER
Production Process – Burned Refractory
WEIGHING
HOT AIR
DRYER
TUNNER KILN
UNLOAD PILE
TO PLATE
CUT AND MILLING MACHINE
SELECTION AND
PACKING
MILL
15
16. Production Capacity (1,000 tonnes/year)
200 256
USA
BELGIUM
FRANCE
GERMANY
CHINA
Dolomite
Sinter
Refractories
127 180
337
Refractories Dolomite
Sinter
Refractories
65
120
CAPACITY
Refractories:1.43 million tonnes
Magnesite Sinter: 320 thousand tonnes
Dolomite Sinter: 475 thousand tonnes30
320
590
SOUTH AMERICA
CHINA
Dolomite
Sinter
Refractories
Dolomite
Sinter
RefractoriesMagnesite
Sinter 16
17. Steel Production (million tonnes)
133 125
81
2007 2008 2009E
240 229
168
2007 2008 2009E
749 782
842
North America
Europe
Asia
17
2007 2008 2009E
861 829
629
490 500
575
2007 2008 2009E
World (Ex-China) China
48 48 38
2007 2008 2009E
Source: World Steel Association
1,351 1,329
1,204
South America
World
18. 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 3,021
South America
World
19. 390
580
594
896
1,597
ANH
Shinagawa
Krosaki
Magnesita
RHI
Competition
Net Revenues 2008 (€ million) - Generalists
Global
Asia/Japan
North America
Global
Asia/Japan
Vesuvius 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%
20. 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%
21. 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
180.7
190.9
219.9
238.7
4Q08* 1Q09 2Q09 3Q09 4Q09
Net Revenues (R$ million)
565.0
451.0 454.2 483.6
537.7
Refractories Sales (1,000 tonnes)
Domestic Market Export Market
6.2%
9.9%
15.8%
22.8%
25.8%
35.1 44.4
71.6
110.1
138.8
-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 2,104
1,918
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)
22. -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
23. 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
America
81%
Asia
6%
North
America
6%
Europe
7%
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%
0,0
30,0
60,0
90,0
120,0
150,0
180,0
210,0
240,0
270,0
300,0
330,0
360,0
390,0
420,0
450,0
South America Other Units
R$ million Margin %
2009 EBITDA
TOTAL = 6,938
24. 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
72.3
63.1
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
132.6
115.2
98.0 96.4
Fixed
33%
Variable
67%
By Type
** Considering the historical data of the product mix and capacity use
Local
35%
Foreign
65%
By Currency
* Note: Pro-forma data include the figures for the subsidiary LWB, for the purpose of comparison
25. 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, Magnesita
is in a more comfortable position regarding
debt;
• Apart from advanced contract exports (ACC’s),
there is no significant disbursements until 2013 .
Local
48%Foreign
52%
By Currency
26. 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