1 q11 results presentation
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1Q11 Results Conference Call May 17, 2011
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Transcript of 1 q11 results presentation
1Q11 Results Conference Call
May 17, 2011
Agenda
2
• Quarterly performance of Magnesita’s key client sectors
• 1Q11 results
• Evolution of company’s indebtedness
• Strategic steps towards growth
• Subsequent events
Quarterly performance - Steel and Cement
3Source: World Steel Association, Sindicato Nacional da Indústria do Cimento (SNIC); resultados preliminares
8.6
7.98.0
1Q114Q101Q10
14.4
15.4
12.9
1Q114Q101Q10
Crude steel production - Brazil
Million tonnes
Cement production - Brazil
Million tonnes
28.9
27.7
27.2
1Q114Q101Q10
Crude steel production – North America
Million tonnes
Crude steel production – EU-27
Million tonnes
45.6
43.142.5
1Q114Q101Q10
+7.8%
+4.3%
+5.8%-6.5%
Agenda
4
• Quarterly performance of Magnesita’s key client sectors
• 1Q11 results
• Evolution of company’s indebtedness
• Strategic steps towards growth
• Subsequent events
Highlights
5
• Net revenues of R$ 575 million driven by Refractory Solutions and Services
• Gross margin recovery in Refractory Solutions - 33.5% vs. 31.2%
1Q11
• 43.5% year-over-year growth in Services
• Net income of R$ 21.8 million - 44% increase over 1Q10
• Operating cash flow of R$ 186.4 million - 80% increase over 1Q10
• R$ 27 million decrease in working capital
Net revenues of R$ 575 million driven by Refractory Solutions and Services
6
575.3588.2
565.9
1Q114Q101Q10
495.8
476.9
506.7
1Q114Q101Q10
Minerals
Services
Refractorysolutions
34.5
68.8
27.8
1Q114Q101Q10
45.042.5
31.4
1Q114Q101Q10
Net revenues
R$ millions
Net revenues
R$ millions
43.5% increaseover 1Q10
Refractory Solutions – growth in steel and in industrials
7
420.4
405.4
425.4
1Q114Q101Q10
3.7% increase over 4Q10,
1.2% decrease over 1Q10
Steel
75.4
71.5
81.2
1Q114Q101Q10
5.4% increase over 4Q10,
7.2% decrease over 1Q10
Industrial
Net revenues
R$ millions
8
Raw material prices remained under pressure
Raw material prices
IBF (mar/09=100)Raw material prices
IBF (mar/09=100)
184
80
100
120
140
160
180
200
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
Graphite crystalline 94-97%
108
80
90
100
110
120
130
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
Magnesite sinter 97.5%
303
70
100
130
160
190
220
250
280
310
340
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
Electrofused magnesia 98%
128
171
107
70
100
130
160
190
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
White fused alumina Fused zirconia
Brown fused alumina
9
Gross margin recovery in Refractory Solutions driving relatively stable consolidated margin
166.0
148.6
181.1
35.7
31.2
33.5
30
32
34
36
38
40
42
44
120,0
130,0
140,0
150,0
160,0
170,0
180,0
190,0
200,0
210,0
220,0
1Q114Q101Q10Gross profit Margin %
185.7187.4
196.6
34.7
31.9 32.3
30
32
34
36
38
40
42
44
160,0
170,0
180,0
190,0
200,0
210,0
220,0
1Q114Q101Q10
Gross profit Margin %
Gross profit and gross marginR$ million, %
Minerals
Services
Refractorysolutions
Gross profit and gross margin by product lineR$ million, %
13.7
30.7
10.4
37.5
44.6
39.7
37
42
47
52
57
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
1Q114Q101Q10
Gross profit Margin %
6.0
8.1
5.1
16.219.1
13.4
10
15
20
25
30
35
40
45
50
55
60
0,0
2,0
4,0
6,0
8,0
10,0
12,0
14,0
1Q114Q101Q10
Gross profit Margin %
10
Robust operating results
Ebtida e ebitda marginR$ million, %
Operating cash flowR$ million
Net profitR$ million
21.822.1
15.1
1Q114Q101Q10
186.4
220.5
103.7
1Q114Q101Q10
93.8
110.5123.7
16.318.8
21.9
50,0
70,0
90,0
110,0
130,0
150,0
170,0
190,0
1Q114Q101Q10
Ebitda Margin %
175189 193
161 153144158 154
129 129
50 49 40 48 5681 80 79 80 80
1Q10 2Q10 3Q10 4Q10 1Q11
Financial cycle Inventories
Payables Receivables
805.2832.6
934.1
880.9
802.5
1Q114Q103Q102Q101Q10
Further $ 27 million reduction in working capital
11
Reduction of 8 days in the cash conversion cycle
Cash conversion
DaysWorking capital1
R$ millions
1 Working capital calculetd with last 12M results
Reduction of over R$ 27 million
in working capital in 1Q11
Agenda
12
• Quarterly performance of Magnesita’s key client sectors
• 1Q11 results
• Evolution of company’s indebtedness
• Strategic steps towards growth
• Subsequent events
13
R$ 400 million decrease in net debt
IndebtednessR$ million
908.4
1,302.6
54.2
340.0
Net debt - 1Q11CashPre-payment loanNet debt - 4Q10
Net Debt/EBITDA
2.8 x
56.8% decrease in net financial
results over 1Q10
2,1 x
Agenda
14
• Quarterly performance of Magnesita’s key client sectors
• 1T11 results
• Evolution of company’s indebtedness
• Strategic steps towards growth
• Subsequent events
Status of vertical integration projects
15(1) According to Industrial Minerals
Financing Jun/11
Environmental license Jun/11
Start-up Mar/12
CAPEX: R$ 220 million until 2012
Financing: 80% at attractive rates
Production: capacity increase of 120 ktpa
Magnesite (Brumado/BA) Graphite (Almenara/MG)
Summary
Milestones Expected timeframe
Schedule
Financing Dec/11
Environmental license Dec/11
Start-up Dec/12
CAPEX: R$ 80 million until 2012
Financing: 80% at attractive rates
Production: greenfield of 40 ktpa
Summary
Milestones Expected timeframe
Schedule
2
14
16
3
Before 2008
2008 2009 2010 1Q11 Total
3 new CPP contracts signed in 1Q11
16
24
59
Regions 1Q11 Total
North America 1 14
Europe 1 8
Asia 1 4
South America - 33
TOTAL 3 59
New CPP contracts
Number of contracts
CPP contracts
Number of contracts
Revenues from steel refractories
%
24 26 2731
3640
4247
5256 59
Before 2008
2008 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
30.6% 37.0% 33.0%
69.4% 63.0% 67.0%
1Q10 4Q10 1Q11
CPP Volume
Subsequent events
17
• Acquisition of two presses (30 ktpa of refractories)
• Freeing up capacity in Brazil to meet demand globally
• Start-up at the beginning of 2012
• Relatively low marginal CAPEX
Refractory
capacity
expansion
• Increase in market share to more than 50%
• Positioned for additional growth – still ramping up capacity
Increase in
participation at
CSA in Brazil
• Supply of refractory solutions to 3 plants in Germany
• 2-year-term
• Participation at each plant between 50% and 70%
3 contracts with
Thyssenkrupp
in Germany
