Magnesita institutional novembro 13 eng

Magnesita Refratários S.A.Magnesita Refratários S.A.

NovemberNovember, 2013, 2013

MFRSY

DisclaimerThe material that follows is a 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 to

update any such information subsequent to the date hereof. This presentation should not be construed as legal, tax, investment or other advice.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. All

statements related to minerals reserves and recovery estimates are projections based on available geological information and statistical geological models. Actual future

production of minerals may differs substantially from those estimates.

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.

Changes to Historical NumbersIn 3Q13, Magnesita adjusted its historical numbers due to the IFRS11 changes to the consolidation of KMR (Joint Venture) with retroactive effect to 1Q12 for thepurpose of comparison with the numbers in 2013.

Other changes in the information by segmentIn line with the new strategic plan, the Company has revised a few accounting processes and systems. As a result, in 3Q13 the Company made a fewadjustments in the segmentation of a few clients. Consequently, there were marginal changes in the historical data per segment.

2

Summary

Industry and company overview

Magnesita’s strategy

Financial HighlightsFinancial Highlights

3

Refractory industry overview

Industry overview

Refractories are fireproof materials consumed within

various production processes, providing heat, chemical

and mechanical resistance in industrial furnaces

Their raw material are minerals with high melting point,

including magnesite, dolomite and alumina. Bricks

Monolithic

Types of refractories Main consumers worldwide

Refractories are crucial consumables for manufacturing processes with high temperatures

Source: Freedonia.estimates 2011

SteelNon-ferrous

(aluminum, copper, nickel, silver, zinc)

Nonmetallic(cement, glass, lime)

~15%

~15%

Refractories are continuously consumed during steel production… …and other industrial processes

Crucial, but represents ~3% of COGS in steel

manufacturing and less than 1% in cement

Refractories are consumables: ~10Kg per ton of steel;

~0.6Kg per ton of cement

Pre castables, valves and slide gates

Steel (aluminum, copper, nickel, silver, zinc)

Other (pulp&paper,

petrochemical, ceramic, other)

~60%~10%

Integrated mill

Iron Ore

Blast Furnace Torpedo car BOF

1 ton of steel demands

~10-15 Kg of refractories

1 ton of cement demands

~1 Kg of refractories

4

Mini-mill

900 tonnes

~15 years

200 tonnes

~2 years

Steel ladles

800 tonnes

~6 months

70 tonnes

~1 month

Continuous casting

25 tonnes

~10 hours

Scrap120 tonnes

~1 month

EAF

1 ton of glass demands


1 ton of aluminum demands


1 ton of copper demands


Company overview

More than 100 years of expertise in refractories and industrial minerals

3rd largest player in the refractory sector worldwide, present in the main steel markets

#1 in the steel and cement industries in Brazil and South America

Magnesita is a global leader in refractories solutions and industrial minerals

#1 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 unexplored 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, in +70 countries

6,500 employees

28 industrial facilities with more than 1 million tons/year of refractories produced in 2012

5

Technology

Key drivers

ManufacturingOnly

Mining Refractorymanufacturing

Services Full performance based solution

Refractory business models

Magnesita’s unparalleled business model reaps value across the chain

Global scale, local presence

Products and services breadth and depth

Access to high-quality materials

Global scale, local presence

Fully Integrated

CPP-Integrated

Access to high-quality materialsIntegratedManufacturing

Technology, local presenceIntegratedServices

Products and services breadth and depth

Relationship with clients

CPP-Integrated

+-

*Source: Bloomberg (Krosaki and Shinagawa refer to 1Q13. Fiscal Year ends in march)

Gross Margin in 1H13* (%)

27,2%

Vesuvius

33,6%

23,6%

RHI Shinagawa

16,5%

Magnesita

16,3%

Krosaki

6

More than just a contract, but a true value creation partnership

Increased business process performance

Improved focus on core capabilities

Improved visibility and transparency

Enhanced reporting and decision making

Methodology

Global leader in cost per performance (CPP) solutions

Refractory consumption reduction

Improved conversion efficiency

Reduced downtime

Reduced consumption of other consumables

Cost

Increased asset availability

Refractory inventory reduction

Working Capital

Source: Magnesita

Refractory inventory reduction

Improved use of working capital

Improved quality

Enhanced safety of operations and personnel

Risk mitigation

Safety, Quality, Environment

7

Sinterco Dolomite JV (BEL)Hagen-Halden, Oberhausen andKruft Production Units (DEU)

Valenciennes and FlaumontProduction Units (FRA)

Global scale, with local presence in key markets, with an integrated supply chain

Unique global footprint

Aratu Port

York Dolomite Mine (USA)

Talc Mine (Brumado - BRA)

Magnesite Mine(Brumado – BRA)

Qingyang Dolomite Mine (CHN)

Contagem Production Unit (BRA)

Coronel Fabriciano Production Unit(BRA)

York Production Unit (USA)

Dalian Production Unit (CHN)

Chizhou Production Unit (CHN)

Taiwan JV’sProduction Unit (CHN)

Chromite Mine (Santa Luz - BRA)

Clay Mine (Uberaba – BRA)

Sales Offices and Sales Representative

Production Units

Mines

Headquarters

Aratu Port

(BRA)

San Nicolás Production Unit

Revenues per region - 9M13 (BRL)

19%

22% 10%

36%

13%

8

Europe

North America

South America ex-Brazil

Brazil

Other

Experienced management team

Octavio Pereira Lopes - CEO

Functional Team

� Successful as CEO of Equatorial. Previous

Managing Director at GP Investments

Previous

experience

Joined Magnesita in 2007 as board

member and became CEO in 2012

Industry experience

Unique combination of solid financial & strategic background with tenured industry experience

Otto Levy Reis – COO

Pedro Gutemberg - VP Minerals (interim)

José Roberto Beraldo - CFO

Felipe Sommer- VP People and Mngmt

Luis Rodolfo Bittencourt - VP R&D

Operational Team

� Solid financial background

� Senior roles and extensive

experience in global companies

� Over 100 years of

combined experience in the

industry

Industry Experience: +11 years

Joined Magnesita in 2008


27 years in Magnesita





Martin Bartmann - Global Supply Chain

industry

� Close relationships with

key players and clients in the

industry



9

Rick Gladfelter – Head of Operations

Jim Pirano – Commercial Head of Industrial





Summary




10

Vision:Be the best provider of refractoriessolutions and industrial minerals,

leveraging and developing our minerals base

III-Expand industrial I-Ensure leadership II-Grow selectively

New strategic visionO

ne

glo

ba

l o

rga

niz

ati

on

III-Expand industrial minerals base

I-Ensure leadership in our core markets

IV-Maintain a global low cost production base

II-Grow selectivelyand 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

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 marketsMagnesita’s competitive advantages in its core marketsMagnesita’s competitive advantages in its core markets


Vertically integrated low-cost producer

Continuous investments in R&D and technology

Specialized technical assistance

South America

Long standing relationship with blue-chip customers


~20% in mini-mills

~25% in cement


~15% in mini-mills

~65% in steel

~60% in cement

*Company estimates

Specialized technical assistance

Logistic advantages in strategic locations

Captive CPP contracts with long-term alignment of interests

Brand recognition and historical leadeship

12

Opportunities for growth in a fragmented global industry

II – Grow selectively and aggressively

Global market share (in USD)

9%

5%

10%

Regional players

Segment players

Global players

~10%

Chineseplayers

~35%

Pursue long term growth opportunities in select markets where we can deliver superior value

Magnesita is poised to grow at above market rates

Market growth where penetration is at sustainable levels

Low exposure in several important markets and industrial sectors

Opportunities for share gains in attractive markets where

underrepresented and competitive advantage exists

Source: Company estimates

~10%~35%

~13%

Small local players

~16%

Opportunities for diversification into industrial segmentsOpportunities for diversification into new geographies

% of refractory sales (in BRL) per region

9M12 9M13

20%

Refractory sales (BRL mln) to industrial

sectors and % of refractory business

CAGR

Global Refractories

consumption²

underrepresented and competitive advantage exists

Increasing reach of our refractory solutions through investments

in sales force and technical assistance

14%

21%

23%

42%

14%

20%

22%

44%276

17.3%

9M11

212

13.9%

20%

9M13

306

18.0%

9M12

40%

Industrial

60%Steel

2 Freedonia

Europe

OtherNorth America

South America

13

III – Expand industrial minerals base

� 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

Magnesita’s

strategic

positioning

Unlocking our internal expertise and the industrial minerals opportunity in Brazil

� Knowledge of local stakeholders management

� Dedicated team to prospect, analyze and develop business

� Brazil is fertile and has very favorable geography

� Historically unexplored

� Viewed as a reliable source (vs China)

� Attractive due to global unbalance of supply and demand

� Minerals out of big players’ radar

� Logistic is not predominant

The Brazilian

opportunity

Focused

Opportunity � Logistic is not predominant

� Commercial development is necessary

� US$2bi - US$10bi global markets

Magnesita is very well positioned to occupy the “white space” in Brazil

Opportunity

set

14

III – Expand industrial minerals baseOur goal is to have at least one project moving to the next phase every 12 – 18 months

1.Preliminary5 to 10 analysis

per year

2.DevelopmentGraphite

3.InstallationTalc expansion

4.OperationalDBM, Talc, CCM

�Complete geological work

and reserve certification

�Environmental license

� Industrial project

�Commercial development

�Medium capex; medium risk

per year

�Preliminary geological

work

�Market analyses

�Low capex; high risk

�Investment in the

industrial plant

�High capex; low risk

� Cash flow generation

� Maintenance capex

Graphite project Talc expansion

Become self sufficient supplying our refractory business

Surplus to supply third parties, focusing on high end users

Growing demand from new applications

Restrictions from Chinese exports (~80% of global production)

Environmental license granted in March 2013

Increase capacity from 44k ton/year to 60kton/year in 2015

Capex of up to R$ 20 million

Plans to double the talc business in the next 3 to 5 years

15

IV - Maintain a global low cost production baseA sustainable low cost production base is key to support growth and value creation

Opportunities for further industrial and supply chain optimization

York OberhausenValenciennes

Flaumont

KruftHagen

Sinterco (JV)

Dalian

QingyangChizhou

Finished product flow

Magnesita mine – Brumado, Brazil (+200 years of reserve)

Cost control through vertical integration in raw materials

With ~80% of its raw material needs coming from its own mines, Magnesita is the most integrated company in the industry

BrumadoContagem

MinesProduction unit

Finished product flow

Raw material flow

Magnesita mine – Brumado, Brazil (+200 years of reserve)

Open pit

Best quality in the world (+98.5% DBM grade)

Dolomite mine – York, USA (+45 years of reserve)

Open pit; intergrated with the refractory plant

Only refractory grade dolomite mine in the US

Dolomite mine (JV) – Belgium (+30 years of reserve)

Dolomite mine – Qingyang, China (+50 years of reserve)

Chromite mine – Bahia, Brazil (+28 years of reserve)

Other reserves in Brazil: dolomite, clays, pyrophyllite, kyanite

Graphite project in Brazil will increase vertical integration level

16

Summary




17

Net RevenuesNet Revenues EBITDA and EBITDA margin (excl. non-recurring)EBITDA and EBITDA margin (excl. non-recurring)

Financial highlights (BRL mln)

+4%

+9%

1,899

2,4642,3192,2761,927

15.5%15.5%15.1%14.5%18.7%17.7%

Steady organic growth and proven resilience in adverse market conditions

45%

36%38%

49%

Magnesita¹CSNGerdauUsiminas

CAPEXCAPEX Gross margin Magnesita vs clientsGross margin Magnesita vs clients

9M13

1,899

9M12

1,829

2012201120102009

1,927

+4%+3%

9M13

294

9M12

283

2012

373

2011

337

2010

425

2009

340

257

CAPEXBrumado expansion

26%

11%

13%

31%

30%

24%

12%

-3%

30%

33%

14%

1%

34%

18%

14%

33%

36%

17%

11%

38%

26%

34%

2008 2009 2010 2011 2012 9M13

Source: Companies report (only parent company for Usiminas and CSN)¹Magnesita in 2011 was adjusted due to accounting reallocation

18

2012

257

88

165

179

2011

171

120

9M12

92

91

12151

9M132010

78

2009

37

Debt and Leverage

LeverageLeverage Leverage excluding Perpetual BondLeverage excluding Perpetual Bond

3.6x3.0x2.8x2.9x

Net debt / EbitdaEBITDA* LTMNet Debt

2.1x1.6x1.4x1.4x

Net debt / EbitdaEBITDA* LTMNet Debt

Solid balance sheet with no refinancing risk

Amortization Schedule (R$ million)Amortization Schedule (R$ million) Net Debt per currencyNet Debt per currency

3Q13

382

1,369

2Q13

397

1,205

4Q12

373

1,058

2Q12

352

1,002

*EBITDA excluding non recurring *EBITDA excluding non recurring

3Q13

382

803

2Q13

397

639

4Q12

373536

1.4x

2Q12

352490

1.4x

1.454Cash positionPerpetual bond-14% Dec-12

2020+

1.454

884

570

2017

80

2016

82

2015

128

2014

37

2013

20

Sep-13

456

2018

12

2019

12

Amortization

Others0%

-3%

EUR20%

13%

USD52%

104%

BRL28%

-14%

Sep-13¹

Dec-12

19

¹ Considering swap contracted in October, 2013

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

20

Annex

21

Strong support from shareholders

Only common shares

2 independent board members

High free float: 58.6% (minimum required is 25%)

Listed in the Novo Mercado segment which corresponds to the best practices of corporate governance

Ownership structure Corporate Governance

34,2%GP

Controlling GroupHigh free float: 58.6% (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)

Latin America and worldwide leadership in Private Equity

Active management

58,6%

7,2%

Free Float

Rhône

Controlling Group

ADR Level I (Ticker: MFRSY)Active management

Culture of promotion by merit

Proven track record in the Brazilian and global capital markets,

with various success cases

OTC: Over- the-counter market

Program established in 2010

1 ADR = 2 ordinary shares

MFRSY

22

Results 9M13

In spite of the poor performance of its core markets…

-5%

124130

-4%

8993-1%

3535

+2%

5251

Steel production¹ (M ton)South America

Steel production¹ (M ton)South America

Steel production¹ (M ton)North America

Steel production¹ (M ton)North America

Steel production¹ (M ton)EU-27

Steel production¹ (M ton)EU-27

Cement sales² (M ton)Brazil

Cement sales² (M ton)Brazil

9M139M129M139M129M139M12

33.1%31.9%

9M139M12

Volume* (Kton)Volume* (Kton) Revenues (R$ M)Revenues (R$ M) Gross Profit (R$ M)Gross Profit (R$ M) EBITDA(R$ M)EBITDA(R$ M)

…Magnesita has presented stable volumes and increasing gross margin

Sources: ¹ World Steel Association; ² Sindicato Nacional da Indústria de Cimento

9M13

562

9M12

509

31.9%

+10%

6%

9M13

1,698

9M12

1,597

9M13

294

15.5%

9M12

283

15.5%

+4%

*Refractory volume without LTR both in 2012 and 2013

23

-1%

9M13

758

9M12

762

Crude steel production¹ (mln ton) and Magnesita’s market share² (%)

+3%

138118120

+2%

227206208

168

+2%

125112111

+3% +7% 237

+4%

363308300

North America Europe CISSouth & Central America

Middle East Asia ex-China

Market growth forecast and Magnesita’s share %

%

Magnesita’s share

Mkt growth (CAGR)

+5%

Africa

Source: ¹CRU (Report Sep/2013) and ²Company estimates

2017(f)

2013(f)

118

2012(e)

120

2009

82

16%

2017(f)

2013(f)

2012(e)

2009

168

2017(f)

125

2013(f)

112

2012(e)

111

2009

98

9.6% <1%

2017(f)

56

2013(f)

48

2012(e)

48

2009

38

2017(f)

38

2013(f)

28

2012(e)

26

2009

20

237

2017(f)

2013(f)

2012(e)

2009

65% ~1% <1%

+5%

North America Europe Asia Others

Cement production¹ (mln ton) and Magnesita’s market share² (%)

South & Central America

+5%

2017(f)

20

2013(f)

16

2012(e)

16

2009

15

~1%

+7%

2014(f)

140

2013(f)

130

2012(e)

123

2011

115

+4%

2014(f)

345

2013(f)

328

2012(e)

317

2011

327

+5%

2014(f)

3.093

2013(f)

2.947

2012(e)

2.781

2011

2.618

2011

108

+7%

2014(f)

133

2013(f)

124

2012(e)

116

+7%

2014(f)

338

2013(f)

315

2012(e)

295

2011

270

25% <5% <1%60% <1%

Source: ¹CW Group (Report Feb/2013) and ²Company estimates

24

Investor Relations contacts:Investor Relations contacts:

Octavio Pereira Lopes CEO

Eduardo Gotilla Global Finance & IRO

Daniel Domiciano SilvaInvestor Relations

Phone: 55 11 3152-3203/[email protected]

www.magnesita.com/riwww.magnesita.com/ir

MFRSY

25

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Magnesita institutional novembro 13 eng

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