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3Q08 R l3Q08 Results Conference Call
Transaction with LWB Refractories
On November 5, 2008, the shareholders approved the operation.
LWB is a leader in the market of basic refractories and high added-value dolomite products.
Magnesita begins to operate directly in the North-American, European d A i kand Asian markets.
Thi i ill b i i d ill k i i fThis operation will bring synergy gains and will make it easier for Magnesita to replicate its business model to other customers in the steelmaking industry worldwide.
2
Market – Steel Industry
Raw Steel Productioni B il 103 t
The steel industry
R St l P d ti i
9,380
in Brazil - 103 tonsremained heated in 3Q08...
26 827
Raw Steel Production in Brazil – 103 tons
8,6778,806
25,004
26,827
6.5%
7.3%3Q07 2Q08 3Q08
8.1%
... surpassing the production of the previous
9M07 9M08
3
production of the previous periods.
Source: IBS – Brazilian Steel Institute
Market – Cement Producers
Public works and the real estate segment contribute to the growth of
Brazilian Cement Production – tonscontribute to the growth of
the cement market....
29,042,179
Production tonsJan-Jul
28,841,149
Cement Consumption (tons)Jan-Jul
25,572,907
24,734,380
13.6%
16.6% 2007 2008
... demand and production continue to2007 2008
4
production continue to grow.
Source: SNIC – Brazilian Cement Industry Union
Quartely Net Income – R$ million
The improvement in product mixThe improvement in product mix and the higher exchange rate
produced growth of net income by 19.9% (QoQ) and 13.7% (YoY).
125.1112.5
59.3Recovery in the gross margin and in
the EBITDA margin reflected persistent control of costs and expenses.
28.5
46.6
18 729.630.030.2
18.7
1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 1Q08 2Q08 3Q083Q08 results dot reflect the recent
price adjustment negotiations which will be entirely reflected in 4Q08.Pro-forma
Not considering -23.6
1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 1Q08 2Q08 3Q08
goodwill amortization
5
Sales Breakdown
Sales Volume Breakdown9M07
Sales Volume Breakdown9M07
Sales Volume Breakdown9M08
Sales Volume Breakdown9M089M079M07 9M089M08
Other Minerals
26%
Other Minerals(*)
26%
132 kt
297 kt
24%
313 kt
122 kt
Refractory60%Sinter
14%
297 kt
68 ktSinter14%
Refractory62%
313 kt
67 kt
497 kt 502 kt
14% 14% 62%
(*) not including the non-recurring sale of 210,000 metric tons of magnesium silicate in 2Q08
497 kt 502 kt
Sinter
9M08x9M07 = - 1.0%
Total
9M08x9M07 = + 0.9%
Refractory
9M08x9M07 = + 5.2%6
Net Revenues
Net Revenues– R$ millionNet Revenues– R$ million Net Revenues by Product- %Net Revenues by Product- %yy
312
374323 316 4 0%5.0% 5.0%
13.0% 12.0% ServicesOther Minerals
Local Revenues3Q07 -> 3Q08
Exports
312 323306 316 4.0% 4.0%5.0%Sinter
58 59 62 4285
3Q07 -> 3Q08+R$36MM (14,1%)
Domestic
78.0% 79.0% Refractory254 247 261 274 289
$
9M07 9M083Q07 4Q07 1Q08 2Q08 3Q08
Obs.: excludes non-recurring income from sale of 210 kt of magnesium silicate amounting to R$2.5 MM in 2Q08
R$ 892 MM R$ 1,012 MM
Growth of Brazilian steel industry leads to increasing revenues
7
Revenues Breakdown
Refractory Revenues Breakdown – 9M08Refractory Revenues Breakdown – 9M08 Refractory Revenues Breakdownfor the Steel Industry 9M08
Refractory Revenues Breakdownfor the Steel Industry 9M08yy for the Steel Industry – 9M08for the Steel Industry – 9M08
Cement R$ 124 MM
Volume36.5%
Steel R$ 605 MM
76.3%
15.6%
Cast Steel63 5%Others
R$ 65 MM8.1%
63.5%
8
EBITDA / EBITDA Margin
EBITDA – R$ millionEBITDA – R$ million EBITDA Margin – %EBITDA Margin – %gg
297 8
187.8
297.8
109.3
29.1%21.7%
29.2%29.8%
94.8
55.6
67.79.4%2Q
3Q
64.5 93.7
2007 2008
3Q07 4Q07 1Q08 2Q08 3Q081Q
2007 2008
9
Costs
COGS - 9M08COGS - 9M08 Operating ExpensesOperating Expensesp g pp g p
92Other
Accounts
5664
51 52
Raw Materials34%
Industrial Maintenance
Eletric Energy4%
13%
62
Administratives & OthersDepreciation
6%
Maintenance4% 33
31 26 25
SalesFuel13%
Labor26%
31 30 25 25 27
3Q07 4Q07 1Q08 2T08 3T08
2008 Administrative Expenses increased because of non
3Q07 4Q07 1Q08 2T08 3T08
2008 Administrative Expenses increased because of non recurring costs due to the process of merger and
restructuring of the Group’s companies. Year to date, these costs already total R$ 16.9 million.10
Debt
Net Debt/EBITDANet Debt/EBITDA
The Company’s debt, with over 85% on the long term, minus cash balance of R$ 728
384 397
246long term, minus cash balance of R$ 728
million, corresponds to 1,0 x the annualized EBITDA
10730/9/2007 30/9/2008
-107Dívida Líquida Ebitda
NOTE: 09.30.08 – annualized EBITDA was considered
11
Indicators - Magnesita and LWB
Ebitda Margin Ebitda Margin reaches 23,7% 23,7% Net Debt x Ebitda (*)Net Debt x Ebitda (*)
Magnesita = 1.0
1 872
considering the results of the 2 Companies until Sep/08.
g .LWB = 6.6
Magnesita + LWB = 2.8
LWB 858
1,872
1,168
1,670
Magnesita1,014
597
571 287
146 194
1,286 704
444591
g 597 417 298 397 384
Net Revenues Costs Gross Profit Ebitda (9M08) AnnualizedEbitda
Net Debt
Obs.: LWB data were converted into real from euro quotation of 09/30/2008 (R$2.6031), without BRGAAP adjustments
Ebitda
12
LWB Sales
Refractory Sales Volume Breakdown9M08
Refractory Sales Volume Breakdown9M08
Refractory Revenues Breakdown9M08
Refractory Revenues Breakdown9M089M089M08 9M089M08
Tempered Dolomite
25%
Others12% Others
19%
Tempered Dolomite
17%25%Magnesia/Mag-
Carbon14%
19% 17%
Dolomite Burned Dolomite
31%
Magnesia/Mag-Carbon
20%
523 2 kt
Burned Dolomite
32%
Monolithics17%
R$ 773 2 MM
31%Dolomite
Monolithics13%
523.2 kt R$ 773.2 MM
Obs.: considering 09/30/2008 euro quotation (R$2.6031)
13
Stock Performance
50 000240
Stock Performance
30,000 35,000 40,000 45,000 50,000
160180200220240
g vo
lum
e R
$
8 =
100
5 00010,000 15,000 20,000 25,000
80100120140160
vera
ge tr
adin
g
02.0
4.20
08
-5,000
6080
2/4/2008 2/5/2008 2/6/2008 2/7/2008 2/8/2008 2/9/2008
Av
Volume R$ MAGG3 Ibovespa
MAGG3 – 1.2%Ibovespa – 21.8%
Average daily trading volume R$ 9.6 million14
Perspectives
CHALLENGES OPPORTUNITIES
• Slowing down world’s economic growth;
•Environment surrounded by uncertainties;
• Decreasing raw steel production;
• New exchange rate level = major international competitiveness;
• New businesses and new markets;• Decreasing raw steel production;
• Clients’ expansion projects postponed;
• Increasing raw material costs.
• LWB synergies;
• Privileged plant locations;
• Clients portfolio diversification;
• The crisis boosts the process of implementation of changes.
15