Brazil-based Magnesita Refratarios saw its losses increase
48-fold to Brazilian real (R$) 902.5m ($236.29m*) for the third
quarter of 2015, compared to R$18.3m ($4.79m) the previous
year, due to write offs in its struggling Chinese and Brazilian
The company said that the total amount of impairments and
provisions that affected its Q3 results amounted to R$774m
($203m), of which only R$16.8m ($4.40m) has cash effect.
Magnesita shut down its Chizhou plant in China, which
produced dolomite-based refractories for the local market, in
October. As a consequence of this, Magnesita partially
wrote-off fixed assets.
Speaking about the Chizhou facility,
Magnesita’s CEO, Octavio Pereira Lopes, said:
"This plant, acquired along with the LWB assets [a German
refractories company] in 2008, has never posted adequate
profitability and, with the slowdown of the Chinese economy,
the outlook had deteriorated."
"With this backdrop, we had already lowered our exposure to
the Chinese market, where sales declined by 43% this year. The
shutdown in Chizhou should have positive impacts on our
EBITDA** and cash flow in 2016," he added.
Lopes explained that the group continued to maintain normal
operations for its other Chinese plant in Dalian, which
produces mag-carbon bricks for external markets.
Magnesita said that it also wrote off its failing Almenara
graphite project in Minas Gerais state in Brazil, because of
what it described as "the drop in graphite prices in the
international markets and the limited perspective on
Group revenues for the quarter increased by 24% year-on-year
(y-o-y) to R$886m ($232m), owing to improvements in operational
productivity, a focus on more profitable markets, higher sales
of deadburned magnesia (DBM) and a reduction in freight
Adjusted EBITDA increased by 33.9% y-o-y to R$141 ($37m),
due to the benefit of the real devaluation against the US
dollar and euro. Earnings also benefited from improved DBM
The company reported that revenues for its refractory
solutions segment increased by 22.5% y-o-y to R$778m ($204m),
which was helped currency exchange.
Steel production in Magnesita’s established
markets fell by 2.7% in the first nine months of the year,
especially in the US. This meant that sales volumes in Q3 2015
to the steel industry totalled 208,000 tonnes, down by 5.6%
compared to Q3 2014.
Mineral sales amounted to R$59m ($15m) for the quarter, up
52% from the corresponding period in 2014. The expansion was
driven by a 100% increase in sales of DBM to third parties,
reflecting productivity gains in Brumado, as well as lower
refractory sales, leading to higher production volumes and
Speaking about the company’s overall outlook,
Lopes said: "We believe 2016 should be another challenging
year, surrounded by many uncertainties."
*Conversion made November 2015
**Earnings before interest, taxes, depreciation and