MAGONTEC LIMITED — Annual Report 2017

Feb 27, 2018

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Magontec Limited (ASX: MGL)

2017 Full Year Results 28 February 2018

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Disclaimer

This Presentation has been prepared by Magontec Limited (ABN 30 147 131 977) (Magontec or the Company). This Presentation contains summary information about Magontec and its activities current as at the date of this Presentation. The information in this Presentation is of a general background nature and does not purport to be complete or to comprise all the information that a shareholder or potential investor in Magontec may require in order to determine whether to deal in Magontec shares. It should be read in conjunction with Magontec’s other periodic and continuous disclosure announcements lodged with the Australian Securities Exchange (ASX), which are available at www.asx.com.au. This document is not a prospectus or a product disclosure statement under the Corporations Act (Cth) 2001 (Corporations Act) and has not been lodged with the Australian Securities and Investments Commission (ASIC).

Not investment or financial product advice

This Presentation is for information purposes only and is not financial product or investment advice or a recommendation to acquire Magontec shares and has been prepared without taking into account the objectives, financial situation or needs of individuals. Before making an investment decision, prospective investors should consider the appropriateness of the information having regard to their own objectives, financial situation and needs and seek financial, legal and taxation advice appropriate to their jurisdiction. Magontec is not licensed to provide financial product advice in respect of Magontec shares. Cooling off rights do not apply to the acquisition of Magontec shares.

Financial data

All dollar values are in Australian dollars (A$) unless stated otherwise and financial data is presented within the financial year end of 31 December 2016 unless stated otherwise. Any pro forma historical financial information included in this Presentation does not purport to be in compliance with Article 11 of Regulation S-X of the rules and regulations of the US Securities and Exchange Commission.

Past performance

Past performance information given in this Presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.

Future performance

This Presentation contains certain “forward-looking statements”. The words “expect”, “should”, “could”, “may”, “will, “predict”, “plan”, “scenario”, “forecasts”, “anticipates”, “outlook” and other similar expressions are intended to identify forward-looking statements. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements. Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. Forward-looking statements, opinions and estimates provided in this Presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Such forward-looking statements including projections, guidance on future earnings and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. There can be no assurance that actual outcomes will not differ materially from these forward-looking statements, and there are risks associated with the Company and the industry (including those set out below) which may affect the accuracy of the forward-looking statements. The Company does not undertake any obligation to release publicly any revisions to any forward looking statement to reflect events or circumstances after the date of this presentation, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.

Investment Risk and other risks

Investment in Magontec shares is subject to investment and other known and unknown risks, some of which are beyond the control of Magontec Limited, including risk factors associated with the industry in which Magontec operates and risks specific to Magontec, such as: construction, development and

operational risk associated with the Golmud Plant, fluctuations in magnesium alloy prices and exchange rates, risks associated with operating in China, financing risks, market price and demand risk and other risks generally relating to security investments.

Not an offer

This document may not be released or distributed in the United States. This Presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States. Securities in the Company have not been, and will not be, registered under the U.S. Securities Act of 1933 or the securities laws of any state or other jurisdiction of the United States, and may not be offered or sold in the United States unless the securities are registered under the Securities Act or pursuant to an exemption from, or in a transaction not subject to, registration.

To the maximum extent permitted by law, Magontec and its respective advisers and affiliates, directors, officers and employees:

Make no representation or warranty, express or implied, as to the accuracy, reliability or completeness of information in the presentation; and

Exclude and disclaim all liability, for any expenses, losses, damages or costs incurred by you as a result of your participation in the proposed offering and the information in this presentation being inaccurate or incomplete in any way for any reason, whether by negligence of otherwise.

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Magontec Limited – 2017 Full Year Results

Production commenced at Magontec Qinghai in 2017

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Key drivers of result - Gross profit (down $1.9m on pcp)

• Significant items (-$1.1m pre tax)

$2.3m positive underlying operating cash flow in 2017, down on prior period

Increased banking facility with Commerzbank Germany renewed until Sep 2020

FY 2017 Full Year Result Underlying NPAT* down on prior year due to Romanian labour issues and some significant items

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Underlying Net Profit after Tax ($m)
1,118
(248)
Includes $0.9m of
significant items
(1,177)
(pre tax $1.1m)
(1,997)
2014 2015 2016 2017
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• Excluding effects of unrealised foreign exchange

FY 2017 Full Year Result Reconciliation of significant items in earnings

FY 2017 Full Year Result Reconciliation of significant items in earnings
Reconciliation of significant items in earnings
	12 months to	12 months to
	31-Dec-17	31-Dec-16
	'$000	'$000
Net Profit Before Tax, unrealised FX and significant items	685	2,611
Significant items before tax
Less non-cash share issue expense (ESIP and LTI)	(191)	(325)
Less STI provision	-	(145)
Less start-up costs at Qinghai facility	(194)	-
Less Magontec US costs	(211)	-
Less one off historical real estate transfer tax	(102)	-
Less doubtful debts expense PRC	(63)	(202)
Less impact of fraudulent inventory loss	(292)	-
Net Profit Before Tax excluding unrealised FX	(368)	1,939
Less tax expense	(809)	(821)
Net Profit After Tax before unrealised FX (underlying NPAT*)	(1,177)	1,118
Add/(subtract) unrealised FX gains/(losses)	(437)	(498)
Reported Net Profit After Tax	(1,614)	620

2017 earnings reduced by $1.1m of pre-tax significant items

Improving operating trends in 4Q17 sets platform for profit recovery

Positive profit contribution from Magontec Qinghai requires higher production volumes

• Excluding effects of unrealised foreign exchange

FY 2017 Full Year Result – Gross Profit Romanian recycling and Chinese anodes dragged on overall performance

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Gross profit ($m) and Gross margin (%)
11.3%
9.6%
9.3%
6.4%
$ 8.5 m $ 12.9 m $ 14.4 m $ 12.5 m
2014 2015 2016 2017
Gross profit ($m) Gross margin (%)
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FY 2017 Full Year Result – Cash Flow Underlying operating cash flow positive, down on prior year

Underlying operating cashflow ($m)

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$ 4.9 m
$ 3.5 m
$ 2.3 m
$ 0.7 m
2014 2015 2016 2017
Underlying operating cashflow ($m)
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FY 2017 Full Year Result - EBITDA and EBIT Impacted by operational issues and significant items

EBITDA ($m) and EBIT ($m)

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$ 4.3 m
$ 3.3 m
$ 2.5 m
$ 1.8 m
$ 1.6 m
$ 1.5 m
$ 0.1 m
($0.3 m)
2014 2015 2016 2017
EBITDA EBIT
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Magontec Limited – a leading producer of magnesium alloys Magnesium alloy is sold to die-cast manufacturers, largely into the automotive industry

Magontec develops, manufactures and recycles magnesium alloys for end-user industries that place a high value on environmental performance and provenance Automotive Power tools Electronics

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Manufacturing processes Assembly
Magontec OEM & Tier 1
Pure Mg + Alloying Mg Alloy Mg alloy End user
Elements Ingots Die casting industries
40-70%
Recycled
Scrap
(end of life scrap return)
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Magontec has five recycling and manufacturing facilities in China, Germany and Romania and a global sales distribution network

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Bottrop
Santana Shanxi
Toronto Golmud
Tokyo
Rhode Island
Xi’an
Sydney
Melbourne
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Production
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Sales Office Technology Centre Cast House Project Headquarters

Qinghai electrolytic magnesium smelter complex (Golmud)

Dehydration Reduction Cast house

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Magontec Qinghai Magontec operates a new magnesium alloy cast house at Golmud in Qinghai Province, China

Agreements Supply of 56,000 mtpa Exclusive Mg alloy rights Fixed off-take price metrics Lease (10+10 years)

Production 4 x Mg alloy cast lines 85% renewable energy Future growth options

For more information on Magontec Qinghai go to www.magontec.com

Magontec Qinghai will triple production and make Magontec the world’s largest supplier of electrolytic Mg alloy

~10% Mg alloy market share 2015

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Largely high CO2
“Pidgeon process”
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Target > 20% Mg alloy market share

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Largely high CO2
“Pidgeon process”
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Magontec Qinghai will use the lowest CO2 Mg ever produced* Chart shows Kilograms of CO2 emissions per Kilogram of Magnesium produced

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45 Future Present Past
40
Qinghai 35
incl. credits for incl. use
30 use of waste gas of SF6
25
incl. credits for
20 Qinghai by-products
15 incl. credits for
by-products
10
5
0
Golmud 2017 Israel 2011 China 2011 Norway 1997
Electrolysis Pidgeon process
Kg CO2eq / kg Mg
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*German Aerospace Institute of Vehicle Concepts survey on CO2 emissions from magnesium smelters around the World

Magontec’s corporate transformation An exceptional platform for growth

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Target improving Primary Mg alloy operating outlook production volumes to triple

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“Green” Profit magnesium “inflexion” point

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ASX Listed Capitalisation $40m

Magontec Limited

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MAGONTEC MAGONTEC GmbH

MAGONTEC Xian Co., Ltd

Head Office, Sydney Suite 1.03 46A Macleay St Potts Point Sydney NSW AUSTRALIA 2011

Tel +61 2 8005 4109 Fax +61 2 9252 8960 corporate@magontec.com www.magontec.com

Industriestraße 61 46240 Bottrop Germany

Tel +49 (0) 20 41 / 99 07-0 Fax +49 (0) 20 41 / 99 07 99 europe@magontec.com www.magontec.com

No. 40, Feng Cheng 3 Road, Xian Economic and Development Zone Xian, China, 710021

Tel. +86 29 / 86 52 68 78 Fax +86 29 / 86 52 37 22 china@magontec.com www.magontec.com