Results presentation 4 q10
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Transcript of Results presentation 4 q10
4Q10 Results Conference Call
March 25, 2011
HighlightsHighlights
• Global economic rebound, with positive impacts on the steel and industrial sectors
• Magnesita robust operating results in 2010
2
• Adequate financial structure, with reduction in both debt and working capital
• Important strategic steps towards growth
Crude steel, stainless and cement productionCrude steel, stainless and cement production
Cement – world ex-ChinaCrude steel – world ex-China
close to 2008
6% below 2008
Million tonnes
781781781781
659659659659
830830830830769769769769
642642642642
768768768768
252525252626262631313131
2008200820082008 2009200920092009 20102010201020103
Source: International Stainless Steel, Brazilian Cement Industry Union (SNIC); preliminary results
Cement - BrazilStainless steel – world
19% above 2008
14% above 2008
525252525252525259595959
2008200820082008 2009200920092009 2010-E2010-E2010-E2010-E
2008200820082008 2009200920092009 20102010201020102008200820082008 2009200920092009 2010201020102010
HighlightsHighlights
• Global economic rebound, with positive impacts on the steel and industrial sectors
• Magnesita robust operating results in 2010
4
• Adequate financial structure, with reduction in both debt and working capital
• Important strategic steps towards growth
Robust results
• Net revenues of R$ 2.3 billion, up 18.2% (up 27% without foreign exchange effect):- Up 43.1% in US Dollars- Up 20.4% in Euros
• Services product line grew 61.9%, with revenues of R$ 159.1 million
2010
• Industrial sector grew 34.8% in 4Q10 (versus 4Q09) and 7.7% in 2010, increasing the diversification from steel
• Operating cash flow of R$ 365.2 million – 3x that of 2009
• Net income of R$ 92.3 million
• EBITDA of R$ 461.8 million in 2010, representing growth of over 28% versus 2009
5
Net Revenues of R$ 2.3 billionNet Revenues of R$ 2.3 billion
Total net revenues R$ million
2,276.4+18%
27% growth (excluding foreign exchange effect)
6
Revenue growth of43.1% and of 20.4%
in US Dollars and in Euros,respectively
1,926.8
2009 2010
Company RestructuringCompany Restructuring
• “Truly global”
Brazilian Leader Consolidation / transition Global Leader
• Brazil
• Family structure
• Multi-region
• Novo Mercado
• Regional focus
• Restructuring
• “Truly global”
• Focus by business line
• Global VPs by business
3 product lines3 product lines
Minerals• Activities related to the extraction of minerals directed to third parties, such as
magnesite, dolomite, and talc, among others,
8
Refractories
Services• Activities related to the installation and recycling of refractories, and mechanical /
electro-mechanical maintenance (with low employed capital)
• Includes all products and services of the CPP value chain as well as conventional sales
37.7
68.8
469.8476.9
4Q09 4Q10
1,703.3
1,959.3
2009 2010
125.2
158.0+26.2% +82.4%
Growth in all product lines, particularly Growth in all product lines, particularly in services and mineralsin services and minerals
Annual net revenues R$ million
Quarterly net revenuesR$ million
Refractories
+15.0+1.5%
30.2
42.5
4Q09 4Q10
37.7
4Q09 4Q10
98.3
159.1
2009 2010
2009 2010
9
+61.9%+40.8%
Minerals
Services
A Services Division was created to develop thebusiness globally
53.0
71.5
Industrial15.0%
Remarkable growth in the industrial sector in 4Q10Remarkable growth in the industrial sector in 4Q10
Quarterly revenues from the industrial sector
R$ million
+34.8%
Revenue breakdown by sector - customer
100% = R$ 476.9 million
4Q10 In 2010, the industrialsector grew by7.7%
4Q09 4Q10
Steel 85.0%
15.0%
Global commercial VP was created for the industrial sector to focus on global growth opportunities
10
Recovery in operating margin in 2010, Recovery in operating margin in 2010, and drop in gross margin in 4Q10and drop in gross margin in 4Q10
Gross profit and gross marginR$ million, %
Gross profit and gross marginR$ million, %
183.3
196.2 199.2194.9
187.4
34.1% 34.7% 36.1%34.2%
31.9%
20%
30%
40%
50%
150
160
170
180
190
200
210
4Q09 1Q10 2Q10 3Q10 4Q10
Gross Profit (R$ million) Gross Margin (%)
626,9
777,7
32,5% 34,2%
20%
25%
30%
35%
40%
45%
50%
0
100
200
300
400
500
600
700
800
900
2009 2010Gross Profit (R$ million) Gross Margin (%)
11
EBITDA and EBITDA MarginR$ million, %
50
55
60
65
70
75
80
85
90
95
100
200
250
300
350
400
450
500
550
600
EBITDA and EBITDA MarginR$ million, %
360.1
461.8
18.7%20.3%
10%
15%
20%
25%
30%
35%
40%
200
250
300
350
400
450
500
550
600
2009 2010
EBITDA (R$ million) EBITDA Margin (%)
Gross Profit (R$ million) Gross Margin (%)
133.9123.1 119.5
108.6 110.5
24.9%21.8% 21.7% 19.0% 18.8%
0%
10%
20%
30%
40%
50%
50
60
70
80
90
100
110
120
130
140
4Q09 1Q10 2Q10 3Q10 4Q10
EBITDA (R$ million) EBITDA Margin (%)
Gross Profit (R$ million) Gross Margin (%)
131.2
365.2
3x operating cash flow and over R$90 million net income3x operating cash flow and over R$90 million net income
Operating cash flow (OCF)1
R$ million
~2.8 x
Net IncomeR$ million
92.3
0
20
40
60
80
100
2009 2010
121 operating cash flow calculated from the last day of each year
Operating cash flow nearly 3 X 2009
Net income of R$ 92.3 million
OCF (%) 7% 16%
-32.5-60
-40
-20
2009 2010
HighlightsHighlights
• Global economic rebound, with positive impacts on the steel and industrial sectors
• Magnesita robust operating results in 2010
13
• Adequate financial structure, with reduction in both debt and working capital
• Important strategic steps towards growth
Working Capital significantly improvedWorking Capital significantly improved
Cash conversion1
Days
Working Capital1
R$ million
161 159184 187
153
131 131156 149
121
43 45 49 39 4573 73 77 77 77 773.5
802.5
880.9
934.1
832.6
14
Reduction of 34 days in the cash conversion cycle
1 Cash conversion and working capital calculated from the last day of each year
Reduction of over R$ 100 million in working capital
in 4Q10
4Q09 1Q10 2Q10 3Q10 4Q10
Conversion Cycle Inventories
Payables Receivables
4Q09 1Q10 2Q10 3Q10 4Q10
Strong evolution of capital structureStrong evolution of capital structure
5.6 x
Net Debt/EBITDA
3.9 x
R$ 350.0 million capital increase
(Oct’09)
US$ 400.0 million bond issue (Mar
’10)
R$ 340.0 million (capital increase +
Peak of the crisisInterest rate decrease + maturity extension
15
Dec/09 Mar/10 Dec/10 (Pro-forma)
3.2 x
2.1 x
(capital increase + lawsuit proceeds)
Jun/09
Net Debt
WC
1,414.8 1,413.6 962.91,918.6
R$ million
826.6 773.5 802.5 832.6
Net Deb ~=WC
Indebtedness profileIndebtedness profile
Amortization schedule of pro-forma debtR$ million
Debt (pro forma)R$ million
(669.5)
1,972.1
1,302.6
412,1
657,9
16
124.9
1,847.2(340.0)
Gross Debt Cash Net Debt Resources Net Debt (pro-forma)
1,302.6
962.6
124,922,5
148,7
285,7
2,2 2,2
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
HighlightsHighlights
• Global economic rebound, with positive impacts on the steel and industrial sectors
• Magnesita outstanding operating results in 2010
17
• Adequate financial structure, with reduction in both debt and working capital
• Important strategic steps towards growth
Value creation strategyValue creation strategy
Increase vertical integration (from 70% to 90%)
Maximize the “hidden” value of mineral reserves
18
Expand the unique solution-based model (CPP) globally
Pursue global growth opportunities
In 4Q10, raw materials prices continued to riseIn 4Q10, raw materials prices continued to rise
Raw Material PricesIBF (March/2009 = 100)
233
303
250
300
350FBI (mar/09 = 100)
19
233
128155
100
150
200
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
FBI (mar/09 = 100)
Graphite crystalline 90% White fused alumina
Electrofused magnesia 98% Fused zirconia
R$ 300 million in vertical integration R$ 300 million in vertical integration –– moving towards 90% moving towards 90% vertical integrationvertical integration
Investment : ~R$220 million in 2 years
Financing : 80% at low rates (development banks)
Production : capacity increase of 120 ktpa
Magnesite (Brumado - BA)
Investment : ~R$ 80 million in 2 years
Financing : 80% at low rates (development banks)
Production : 40 ktpa
20 kpta to achieve 100% self-sufficiency
20 ktpa to be sold to non-refractory use
Graphite (Almenara – MG)
20(1) According to Industrial Minerals
Rationale :
Keep self-sufficiency in M-30 sinter
Structural changes in pricing dynamics
Energy and environmental concerns (China
has imposed 10.7% cut in export)1
20 ktpa to be sold to non-refractory use
Rationale :
Achieve self-sufficiency in Graphite
Structural changes in pricing dynamics (30%
in 3 months, 14% p.a.)
New demand driver (e.g. electric car battery)
Both projects are on track
24 26 27 31 3640 42 47 52 57
Before 2008
2008 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
214
17
Before 2008
2008 2009 2010 Total
17 new CPP contracts in 2010 across all regions17 new CPP contracts in 2010 across all regions
24
57
New CPP contractsNumber of contracts
CPP contractsNumber of contracts
Revenues from steel refractories
21
Region 2010 Total
North America 5 13
Europe 6 7
Asia 4 4
South America 2 33
TOTAL 17 57
Revenues from steel refractories%
• Record year in new CPP contracts – 17
• 34% of revenues from CPP (towards goal of 65%)
• Increasing traction in Europe
• First-time contracts in Asia
25,0% 27,7% 34,2%
75,0% 72,3% 65,8%
2008 2009 2010
Volume
CPP