2. Industry Overview
2
Refractories are heat-resistant materials manufactured in a wide variety of compositions
and shapes according to their application.
Raw Material Products Application
Main Consumers Worldwide
Steel
70%
Cement
7%
Ceramic
5%
Non-ferrous
5%
Glass
4%
Chemical
4% Others
5%
3. Steel industry: represents 85% of Magnesita s revenues
Industry Overview
BLAST FURNACE
Refractories: Alumina and Alumina-silicon
Refractory Volume: 900 tonnes
Life Expectancy: 15 years
CONVERTER
Refractories: Magnesia-carbon and Magnesia
Volume: 800 tonnes
Life Expectancy: 6 months
CONTINUOUS CASTING
Refractories: Alumina graphite tubes
and Magnesia
Volume: 25 tonnes
Life Expectancy: 10 hours
ELETRIC ARC FURNACE
Refractories: Magnesia and Dolomitic
Volume: 120 tonnes
Life Expectancy: 1 month
TORPEDO CAR
Refractories: Alumina-carbide-carbon
Volume: 200 tonnes
Life Expectancy: 2 years
STEEL LADLES
Refractories: Dolomitic, Magnesia-carbon
and Magnesia
Volume: 70 tonnes
Life Expectancy: 1 month
4. 4
Cement industry: represents 10% of Magnesita s revenues
Industry Overview
Rotary Kiln
Clinker
Cooler
Preheater
Tower
ROTARY KILN
Refractories: Magnesia-sipnel, Alumina and Alumina-silicon
Volume: 250 tonnes
Life Expectancy: 10 months
PREHEATER TOWER
Refractories: Alumina and
Alumina-silicon
Volume: 1,000 tonnes
Life Expectancy: 5 - 10 years
CLINKER COOLER
Refractories: Alumina and
Alumina-silicon
Volume: 500 tonnes
Life Expectancy: 1 - 3 years
5. Industry Overview Consumer Market
5
Source: Magnesita s Marketing Intelligence and World Steel Association
Steel Production
Cement Production
World Refractories Market: 23 MM tpy
Refractories for Steel Market: US$ 15.7 billion
Refractories for Cement Market: US$ 2.2 billion
1 tonne of Steel = 12 kg of Refractories
1 tonne of Cement = 0.6 kg of Refractories
Global Production
Total
China
World (Ex-China)
Crude Steel & Cement Production (million tonnes)
365 344
267
372 350 324
2007 2008 2009
Europe + CIS
761 771 776
2,047 2,119 2,207
2007 2008 2009
Asia
490 500 568
861 829
652
1,351 1,329
1,220
2007 2008 2009
Global Steel Production
6. Company Overview
Company s Highlights
Largest and purest magnesite reserves in the
world;
High level of self-suficiency in raw materials;
One of the lowest cost producer in the world;
3rd largest player in the refractory sector
worldwide with a 5.4% market share;
Exclusive and innovative cost per performance
business model (CPP);
International state of the art technology;
Strong management team and corporate
governance practices.
EBITDA Margin 18.9%
2009 Financial Highlights
EBITDA R$ 365.0 million
Net Revenues
Net Debt R$ 1,414.8 million
R$ 1,926.6 million
Shareholding Structure as of June 30, 2010
GP
38.5%
RHONE
8.1%
GAVEA
3.6%
FOREIGNERS
18.5%
INDIVIDUALS
13.1%
INVESTMENTS
FUNDS AND
CLUBS
11.9%
BROKERS/BANKS/
DISTRIBUTORS
4.6%
OTHERS
1.7%
Controlling Group = 50.2%
TOTAL SHARES = 258,211,934
Others = 49.8%
Market Cap. R$ 3.7 billion (as of Dec 31th, 2009)
6
7. Company Overview
Management Team Strong Corporate Governance Practices
7
Board of Directors Recent Management Achievements
Fersen Lamas Lambranho - President
Marcio Tabatchnik Trigueiro Director
Octavio Pereira Lopes Director
Robert Frank Agostinelli - Director
Thiago Emanuel Rodrigues - Director
Nelson Rozental - Director
Fabio Alperowitch - Independent Director
Bernardo Guimarães Rodarte - Independent Director
Reduction in workforce;
Aggressive reduction in fixed costs;
Accelaration of synergy processes;
Reduction in working capital;
Adoption of a meritocratic remuneration model.
Listed at Bovespa s Novo Mercado
Two independent board members
Independent board of auditors
High Disclosure Standards
Arbitration Panel for Corporate Conflicts
VP Finance
Flávio Barbosa
VP Commercial
Mauricio Pinho
VP Operations
David Gregory
Global Director
People & Target
Management
Otto Levy
VP Finance
Flavio Barbosa
VP Commercial
Mauricio Pinho
VP Operations
David Gregory
COO
South America
Wagner Sampaio
COO
North America
Jim Piraino
COO
Europe
Peter Estermann
COO
Asia
Deilson Tibo
Global Director
People & Target
Management
Otto Levy
Global Director
R & D
Luis Rodolfo
CEO
Ronaldo Iabrudi
8. 8
Company Overview
Magnesita has a global presence, with plants in four continents and a strong presence in
high-growth markets such as China and Latin America.
Magnesita International Footprint
28 industrial facilities;
8,093 employees and contributors worldwide;
It owns one of the largest reserves of magnesite and
dolomite with the highest grade worldwide.
Production Capacity ( 000 tonnes per year)
Magnesite
Sinter
Dolomite
Sinter
Refractories
Brazil 320 30 550
Argentina - - 40
USA - 200 256
Belgium - 180 -
France - - 127
Germany - - 337
China - 65 108
Taiwan (**) - - 16
TOTAL 320 475 1,434
** considering JV with Envoy
9. Company History
9
Over 70 years of experience in the refractories business
* Note: Novo Mercado is a listing segment of the São Paulo Stock Exchange designed for companies that voluntarily undertake to abide by
corporate governance and disclosure practices in addition to those already required by Brazilian Law and the CVM.
1939
Foundation: Magnesita Ltda.
was established after the
discovery of a large amount
of magnesite in Brumado
(Bahia State)
1944
The beginning of industrial
operations
1969
Listing: Company IPO on the
São Paulo Stock Exchange
(BOVESPA)
1990
CPP: following the collapse of
import tarriffs for refractories in
Brazil, Magnesita created a
revolutionary business model, CPP
Cost per Performance
2007
Control Change: GP and Gavea
acquired control of Magnesita
S.A., held two tender offers
and purchased shares in the
market
2008
April: Novo Mercado* listing
September: LWB acquisition at a
value of 657 MM
2009
Capital Increase: In October, the
controlling shareholdres approved
a R$ 350 million-capital
increase, of which BNDES took part
2010
March: bond issue of US$ 400
MM denominated notes with
semiannually payble fixed
interest of 7.875% per annum
and maturity date in 2020
10. Company s Strategy
10
Leverage solution-based model
Maximize economic value of mineral reserves
Seek to further cost reduction
Pursue global growth opportunities
11. Maximize Economic Value of Mineral Reserves
11
BRUMADO MAGNESITE MINE
Magnesite Reserves
Dolomite Reserves
YORK DOLOMITE MINE
25 million tonnes of
reserves;
Expected life: 50 years
SINTERCO DOLOMITE JV
31 million tonnes of
reserves;
Expected life: 50 years
QINGYANG DOLOMITE MINE
18 million tonnes of
reserves;
Expected life: 50 years.
Port of Aratu
RAW MATERIALS HIGHLIGHTS
High quality reserves;
Geographically diversified
locations, with presence in 3
continents;
High level of self-suficiency in
raw materials;
Efficient infrastructure for
export to U.S. and European
markets;
Low raw material cash costs.
560 km
920 km
830 million tonnes of reserves;
Brumado s mine is the only one in the
world that allows the economical
production of98.3%-grade DBM;
Expected life: 200 years;
The mine is connected to the
port of Aratu by the FCA railway.
12. Leverage Solution Based Model (CPP)
The concept of the solution based model is that customers are not charged per tonne of refractory
consumed but by tonne of output in each equipment, aligning Magnesita s and customers interests.
Initial Issues CPP Activities Customers Results
Low equipment productivity due to
frequent stoppage for refractory
replacement;
High energy consumption;
High refractory costs.
Process monitoring, process engineering,
chemical and thermodynamics analysis
Post mortem analysis in the lab, technical
research, experiments, simulations, product
development
Projects, inventory
management, instalation,
refractory recycling
Improvement in the equipment
productivity:
ü Increase refractory life
ü Increase asset availability
and therefore the final output
Reduce energy loss:
ü Less equipment stoppages
for cooling and reheating
Reduce CapEx by reducing the need
to invest in new equipment and
inventory;
Magnesita s Benefits
Revenue growth: (i) revenues linked to customers productivity. (ii) full product portfolio;
High EBITDA margin: (i) longer refractory life. (ii) less refractory use;
Stronger barrier to competitors: ties with key customers.
12
13. Leverage Solution Based Model (CPP)
13
6
USA/Canada
Ecuador
China
1
2
1
UK
2
Germany
2
Brazil
Chile
Peru
1
4
1
4
Mexico
New contracts in 2Q10:
1.ELG Haniel Metals, UK
2.ThyssenKrupp Beeckerwerth, Germany
3.Customer´s name under confidentiality, Germany
4.TISCO, China
5.Jiaxing Eastern Special Steel, China
In 3Q10, the Company was chosen by four North American steel mills as a refractory supplier
under the CPP model.
23 new CPP contracts have been originated until June 2010 under the current Management.
CPP Contracts since 2008
14. Fragmented market;
High value creation in raw material synergies in
consolidation opportunity;
Leverage its mineral reserves;
Replicate its unique and innovate solutions based
model into new markets;
Diversification into other industrials segments:
glass, non-ferrous, petrochemical, paper, etc.
Pursue Global Growth Opportunities
14
Magnesita s Market Share by Region
(based on revenues)
Refractory Market Share
(based on 2009 revenues)
Source: Magnesita Estimates.
Growing Organically Consolidation Opportunities
Expose to high growth markets (China and
Brazil);
Gain market share in mature markets (North
America and Europe):
ü Compete with a different business model
ü Leverage its low raw material cost
ü Joint ventures with strategic players
67%
13%
7%
0.3%
56%
19%
6%
0.5%
South America North America Europe + Middle
East
Asia
Steel Cement
Source: Magnesita Estimates
RHI
9.5%
Vesuvius
9.4%
Magnesita
5.4%
Shinagawa
5.0%
Krosaki
3.7%
Saint-Gobain
3.4%
Others
63.6%
15. Seek to Further Cost Reduction
Reduce SG&A Costs
Achieve 90% of self-
sufficiency in raw
materials (alumina and
graphite);
Management model with
high cost discipline;
Variable remunerations
linked to the goals of cost
reduction.
Reduce Manufacture Costs Peers Revenues and EBITDA Margin
Reduction in workforce;
Streamline corporate
structure;
Agressive reduction in fixed
costs;
2009
REVENUES
USD MM
2009 EBITDA
Margin %
MARKET CAP.
(as of 12/31/09)
USD BI
RHI 1,717 9.3 0.9
Vesuvius 1,687 8.7 1.9
Magnesita 966 18.9 2.1
Krosaki 664 7.6 0.4
15
* The size of the balls indicate Market Cap. as of Dec 31, 2009
0
500
1000
1500
2000
2500
3000
0% 5% 10% 15% 20% 25%
2009Revenues-USDmillion
2009 EBITDA Margin %
RHI
Vesuvius
Magnesita
Krosaki
17. Indebtedness
Net Debt R$ millionDebt Profile R$ million
Debt Amortization Schedule R$ million Financial Indicators
ST 15.3% ST 11.8%
LT 84.7%
LT 88.5%
1,491.0
459.8
Gross Debt
06-30-2009
Gross Debt
06-30-2010
Cash Net Debt
2,174.5
1,950.8 1,919
1,434 1,415 1,413
1,491
6/30/2009 9/30/2009 12/31/2009 3/31/2010 06/30/10
223.8
20.9 29.2
331.0 323.1 321.5
701.3
2010 2011 2012 2013 2014 2015 2020
5.6 5.5
3.9
3.2 3.0
4.3
2.6
1.8
1.4
1.8
2Q09 3Q09 4Q09 1Q10 2Q10
Net debt/EBITDA
EBITDA/Finacial expenses + Monetary/Exchange
Variations/Forex Liabilities
* EBITDA in the last 12 months
17
18. 18
Investments in Brumado
Investments of R$ 220 million are planned to increase capacity in the Brumado mines over the
next 3 years, aimed at securing the Company's future demand for magnesite sinter.
This project is part of a multi-annual investment
plan designed to increase the magnesite sinter
(M30) production capacity in two phases of 60,000
metric tons/year, totaling 120,000 metric
tons/year in 3 years.
Our current M30 sinter production capacity is 180,000 metric tons per year.
This investment will allow the Company to grow along with the Brazilian market, while keeping high
service levels.
Capital Expenditures
19. Stock Performance
19
Coverage of major banks: Itau, Credit Suisse, BTG Pactual, Merrill Lynch, Santander, Barclays,
Deutsche Bank and Safra.
Share Performance (Last 12 months)
31%
18%
95
115
135
155
175
195
Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Mar-10 Apr-10 May-10 Jun-10
June30th,2009=100
MAGG3 IBOVESPA
20. Strategic Highlights
20
Strong management
team and corporate
governance practices
Fast global growth
platform
Low cost producer -
High level of self-
sufficiency in raw
materials
High margin integrated
business model
Unique innovate
solution based model
21. Flávio Rezende Barbosa
Chief Financial and Investor Relations Officer
Adriana Fernandes Lana
Investor Relations Manager
Phone: (+55 31) 3368-1069
Lucas Lima Ferreira
Investor Relations Analyst
Phone: (+55 31) 3368-1068
ri@magnesita.com www.magnesita.com/ri
21
24. Production Process
RAW MATERIAL S
SILO
WEIGHING
MIXER
PRESS
PILE IN
BURN CARS
HOT AIR
DRYER
TUNNER KILN
UNLOAD PILE
TO PLATE
CUT AND MILLING MACHINE
SELECTION AND
PACKING
MILL
SINTER S
BAY
CRUSHER