The driving force of the refractory industry Analyst presentation November 2017 RHI Magnesita Analyst Presentation
Disclaimer The consolidated financial statements to subscribe for or purchase any securities, presented here are consistent with the and neither any part of this presentation nor criteria of international accounting standards any information or statement contained - IFRS issued by the International herein shall form the basis of or be relied Accounting Standards Board – IASB, based upon in connection with any contract or on audited financial information. Non- commitment whatsoever. Under no financial information contained herein, as circumstances, neither the Company nor its well as other operational information, were subsidiaries, directors, officers, agents or not audited by independent auditors and employees be liable to third parties may include forward-looking statements and (including investors) for any investment reflects the current views and perspectives decision based on information and of the management on the evolution of statements in this presentation, or for any macro-economic environment, conditions of damages resulting therefrom, corresponding the mining and refractories industries, or specific. company performance and financial results. The information presented or contained in Any statements, projections, expectations, this presentation is current as of the date estimates and plans contained in this hereof and is subject to change without document that do not describe historical notice. RHI Magnesita has no obligation to facts, and the factors or trends affecting update it or revise it in light of new financial condition, liquidity or results of information and / or in face of future events, operations, are forward-looking statements safeguard the current regulations which we and involve several risks and uncertainties. are submitted to. This presentation and its This presentation should not be construed contents are proprietary information of the as legal, tax, investment or other advice. Company and may not be reproduced or This presentation does not constitute an circulated, partially or completely, without the offer, or invitation, or solicitation of an offer, prior written consent of the Company. RHI Magnesita Analyst Presentation 2
Agenda 9:30 Introduction 12:00 Q&A Refractory industry overview —— RHI Magnesita overview 12:30 Lunch Building a global leader in refractories —— 10:30 Q&A —— 10:45 Coffee break —— 11:00 Strategy Financials —— RHI Magnesita Analyst Presentation 3
Compelling investment case Best market position with 15% market share, clear leadership in Americas, Europe 1 Solid strategy and and Middle East with broadest value-added solution offering competitive Opportunity to develop and leverage technology across regions and portfolio advantages Highest level of vertical integration in the industry with unique mineral sources and 50%+ self-sufficiency in all raw materials Strong cash flows from operating business supported by synergies and organic 2 Rapid deleveraging growth opportunities and strong cash Cash usage priority on deleveraging within 2 years to reach investment grade rating conversion 3 At least € 70m EBITA synergies in SG&A, procurement and production network Significant synergy Additional “below the line” opportunities in working capital, capex, financing and tax potential under intensive evolution RHI Magnesita Analyst Presentation 4
Today’s presenters Name and position Professional background Stefan Borgas Mr. Borgas was appointed CEO at RHI on December, 2016 and currently acts as CEO of RHI Magnesita and member of the Executive Management team CEO From 2012 to 2016, he was president and CEO at Israel Chemicals Ltd. Between 2004 and 2012, he was the CEO at Lonza Group. From 1998 to 2004, he worked at BASF Group, where he held various management positions Mr. Borgas has a business administration degree from Saarbrücken University and an MBA from the University of St.Gallen-HSG. Mr. Lopes currently acts as CFO of RHI Magnesita and member of the Exec. Management Team Octavio Lopes CFO Mr. Lopes was Magnesita Refratarios ’ CEO from June 2012 to July 2016 and Magnesita International Ltd.’s CEO from August 2016 to October 2017. He has been Chairman of the Board of Magnesita Refratarios since August 2016 Mr. Lopes held several executive positions at GP Investments, including managing director and partner, between 1997 and 2012 He previously served as CEO of Equatorial and as board member of several companies including Magnesita, BHG, Tempo, Equatorial, CEMAR, Allis, Gafisa and Submarino Mr. Lopes holds a bachelor’s degree in economics from the University of São Paulo and an MBA from the Wharton School at the University of Pennsylvania Eduardo Gotilla Mr. Gotilla currently leads Corporate Finance & Investor Relations at RHI Magnesita Mr. Gotilla was Magnesita’s CFO from September 2014 until October 2017, having joined Magnesita as Global Finance Corporate Finance Director on February 2013 & Investor Relations From 2014 – 2017 he served on the Board of BB PREVIDÊNCIA - Fundo de Pensão do Banco do Brasil , a ₤1.3 billion pension fund. His 15+ years of experience in Finance includes positions at Opus, Banco Pactual, Merrill Lynch, GP Investments and San Antonio Internacional. Holds a bachelor’s degree in Economics from IBMEC -RJ RHI Magnesita Analyst Presentation 5
Refractory industry overview RHI Magnesita Analyst Presentation
Refractory Industry Overview Refractories are critical to all high-temperature industrial processes Refractories are critical consumable or Main end markets investment goods for high-temperature € 20 billion worldwide industry manufacturing processes Fireproof materials consumed whilst Steel 7% protecting clients’ production processes, 8% Energy, chemicals retaining physical and chemical Nonferrous metals 10% characteristics when exposed to extreme Cement conditions Glass 60% 15% Critical, yet represent less than 3% of COGS in steel manufacturing and less than 1% in other applications Source: Company estimates Global refractory industry 14% RHI Magnesita 4-6 segment companies 37% 10-20 regional companies 20% 100-200 small local companies 1000+ Chinese companies 16% 13% Source: Company estimates of market share in US$ RHI Magnesita Analyst Presentation 7
Refractory Industry Overview Refractories are continuously consumed during finished goods production Key industries Applications Replacement Costs Refractory characteristics Steel Basic oxygen-, 20 minutes to ~3.0% Consumable product electric arc furnace 2 months Systems and solutions for casting ladles complete refractory management Demand correlated to output Cement/Lime Rotary Kiln Annually ~0.5% Investment goods Longer replacement cycles Nonferrous metals Copper-converter 1 – 10 years ~0.2% Customized solutions based on the specific requirements of various industrial production processes Complete lining concepts Glass furnace Up to 10 years ~1.0% Glass including refractory engineering Wide areas of application Mostly project driven Secondary reformer 5 – 10 years ~1.5% Energy/ demand cycles Environmental/ Chemicals Ongoing demand for repairs RHI Magnesita Analyst Presentation 8
Refractory Industry Overview A complex range of tailored refractory products are required for each application Bricks Example of refractory application for steel ladle 2 3 Permanent lining Non-basic, Basic, ex. 1 2 3 ex. Alumina Mag-Carbon 4 1 Monolothics and pre casts 5 6 8 Mixes Pre Castables 5 4 7 Functional products 9 Slide Gates Nozzles Purge Plugs 6 7 8 9 ISO +Systems and machinery RHI Magnesita Analyst Presentation 9
RHI Magnesita overview RHI Magnesita Analyst Presentation
RHI Magnesita Overview Providing everything, for everyone, everywhere € 2.5bn 10,000 14,000 2016 pro-forma revenue Customers served globally Employees spread over 37 countries 35 180 Main production sites across Countries shipped worldwide 16 countries 13 € 25m Raw material sites Annual investment in Research in 4 continents RHI Magnesita Analyst Presentation 11
RHI Magnesita Overview Adding value through a full suite of products and services Iron Ore Steel Refining Facility Flow Technology Control Solutions Coal Natural Electric Arc Injection Gas Furnace Direct Reduction Coal Scrap Continuous Basic Oxygen Casting Furnace Blast Furnace Coke Oven Full Line Linings Service Limestone RHI Magnesita Analyst Presentation 12
RHI Magnesita Overview Serving blue chip clients in every industry Steel Cement Glass Metals Serving 1376 Serving 800 Serving 650 Serving 1060 of 1250 plants 1 of 1537plants 1 of 900 plants 1 of 2000 plants 1 1 ex-China RHI Magnesita Analyst Presentation 13
RHI Magnesita Overview Optimally positioned to reach clients everywhere Europe 28% North America 22% APAC 17% MEA-CIS 13% South America 20% Production facilities + More than 70 sales Raw material sites offices worldwide % revenues RHI Magnesita Analyst Presentation 14
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