4 t10 eng

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