1
Earnings call – 3Q11November 10,2011
2
Highlights
Growth in refractory solutions• YTD, refractory volume grew 8.1% while ex-China steel market grew 6.2%• Minerals recovered vs. 2Q11 but still below potential when compared to 3Q10 • Services was flat vs. 2Q11 but below 3Q10 due to completion of spot contract
Record high operating cash flow generation•R$ 461 million YTD operating cash flow•R$ 118.7 million EBITDA with a margin of 21.1% vs. 17.7% in 2Q11 and 19.0% in 3Q10•R$ 148 million working capital reduction vs. 3Q10 (47-day shorter cash conversion cycle)
Gross margin trending up• 31.7 % of gross margin vs. 31.4% in 2Q11• 32.2% vs. 31.1% in refractory solutions (performance improvement while pressured by raw materials)
Vertical integration projects on track• Brumado - in progress, financing postponed until november, start-up in 1Q12• Graphite – acquisition of surface rights, enviromental license expected by 1Q12, start-up in 4Q12
3
Net revenues and refractory volume
R$ '000Quarter % Year-to-date %
3Q11 2Q11 3Q10 QoQ YoY 9M11 9M10
Refractory solutions
Volume (t) 262,891 294,434 255,940 (10.7) 2.7 835,124 772,888 8.1
Revenues 496,708 526,424 494,111 (5.6) 0.5 1,518,900 1,482,393 2.5
Minerals
Volume (t) 172,235 145,984 180,746 18.0 (4.7) 448,347 721,012 (37.8)
Revenues 28,157 19,844 35,876 41.9 (21.5) 82,475 89,206 (7.5)
Services
Revenues 36,604 36,749 40,550 (0.4) (9.7) 118,402 116,593 1.6
TOTAL
Revenues 561,469 583,017 570,537 (3.7) (1.6) 1,719,777 1,688,192 1.9
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Refractory solutions by sector
Net revenue by sectorR$ million
+4.1%
3Q11
434.3
2Q11
457.7
3Q10
417.2
2Q11
68.7
3Q10
62.4
76.9-18.9%
3Q11
9M10
+3.7%
9M11
1,312.51,265.8
9M11
-4.7%
206.4
9M10
216.6
Steel
Industrial
5
Regions 1M11 Total
North America 1 14
Europe 1 8
Asia 1 4
South America 1 34
TOTAL 4 60
New CPP contractsNumber of contracts
CPP contractsNumber of contracts
Refractory Solutions - CPP
35% of revenues from the steel sector
60595959565247
42403631272624
4Q
11
3Q
11
2Q
11
1Q
11
4Q
10
3Q
10
2Q
10
1Q
10
4Q
09
3Q
09
2Q
09
1Q
09
20
08
Bef
ore
20
08
60
24
Tota
l
4Q
11
1
3Q
11
0
2Q
11
01
Q1
13
20
10
16
20
09
14
20
08
2
Bef
ore
20
08
6
Gross margin by product line
Gross margin%
Quarter YTD
3Q11 2Q11 3Q10 9M11 9M10
Refractory solutions 32.2 32.1 35.6 32.6 36.3
Minerals 50.6 51.9 38.5 46.3 40.2
Services 10.4 11.3 13.8 11.8 15.2
TOTAL 31.7 31.4 34.2 31.8 35.0
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Cash generation and net income
Net incomeR$ million
EBITDAR$ million, %
Cash flow from OperationsR$ million
+9%
+12%
3Q11
34.4
2Q11
30.8
3Q10
31.6
2.2 x
4.6 x
3Q11
188.4
2Q11
85.8
3Q10
41.3
+9%
+15%
3Q11
118.7
21.1
2Q11
103.2
17.7
3Q10
108.5
19.0
R$ 461 million YTD
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Working capital and cash conversion cycle
47 -day shorter cash convesion cycle vs. 3Q10
Cash conversionDays
Working capitalR$ million
R$ 148 million reduction vs. 3Q10 (additional R$ 43 millionover 2Q11 at constant currency)
747.7
-16%
3Q11 adj
3Q11
787.7
2Q11
790.6
1Q11
805.2
4Q10
832.6
3Q10
935.4
139146146153161
193
135145
129129129154
697665564840
3Q11 adj3Q112Q111Q114Q103Q10
Suppliers
Inventories
Cash conversion cycle
9
IndebtednessR$ million
NetDebt/EBITDA 3.0 x
Indebtedness
2.1 x 2.1 x
1,894
1,636 1,757
1,444
854 900
3Q10 2Q11 3Q11
10
Financing Nov/11
Environmental License Concluded
Start-up Mar/12
(1) According to Industrial Minerals
Investment: R$ 220 million through 2012
Financing: 80% at attractive rates
Production: increase in capacity by 120 ktpa
Magnesite (Brumado-BA) Graphite (Almenara-MG)
Description
Milestone Deadline
Timetable
Financing Jun/12
Environmental License Mar/12
Start-up Dec/12
Investment: R$ 80 million through 2012
Financing: 80% at attractive rates
Production : capacity of 40 ktpa
Description
Milestone Deadline
Timetable
Verticalization projects remain “on track”