MAGONTEC LIMITED — Interim / Quarterly Report 2020

Aug 27, 2020

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Magontec Limited (ASX: MGL) First Half 2020 - Interim Result August 2020

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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.

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.

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.

Financial data

Investment Risk and other risks

All dollar values are in Australian dollars (A$) unless stated otherwise and financial data is presented within the financial year end of 31 December 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

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.

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Magontec Limited – 2020 Half Year Result Reporting Highlights

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Underlying Operating Cashflow* of $2.4 m

• Increased market share, new product earnings contribution, new markets

• Positive impact of temporary salary and director fee reductions, government subsidies

Cash flow from underlying operations (A$)

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$ 3.4 m
$ 2.7 m
$ 2.4 m
$ 1.8 m
$ 1.6 m
$ 0.6 m
$ 0.3 m
1H17 2H17 1H18 2H18 1H19 2H19 1H20
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Cathodic Corrosion Protection (Anodes)

• Industry steady through 1H 2020. Magontec volumes above PCP

• 1H 2020 customer factory closures depressed profit in the period under review

PRC Primary Magnesium Alloys

• Magontec Qinghai operating at low levels of supply and production

• Business unit loss making in 1H 2020 and incurred depreciation of $520,000 in the period

Magnesium Alloy Recycling

• Germany and Romania both profitable at the gross profit line in 1H2020

• Total European volumes down 36% on PCP reflecting automotive volume declines

* Operating cashflow excluding working capital movements, interest and tax payments

2020 Half Year Result Financial Highlights

2020 Half Year Result Fl Hhlh
inancia igigts			1H 2020 Gross Profit of $5.92
			million
	6 months to 30-Jun-20	6 months to 30-Jun-19	Lower demand resulting from COVID-19
			Volumes recovering, although
			not at pre-COVID levels
Gross Profit	$5.92m	$7.96m
Gross Profit Margin	12.9%	11.8%	Underlying NPAT of ($0.044m)*
Net Profit Before Tax ex unrealised FX, significant items	($0.286m)	$1.533m	Includes $0.52 million of non- cash depreciation from the
			Magontec Qinghai facility
Reported Net Profit After Tax	($0.149m)	$0.254m
Underlying NPAT*	($0.044m)	$0.404m	Underlying operating cash flow
			remains resilient at $2.4m **
Underlying Operating Cashflow**	$2.4m	$2.7m
Net Debt to Net Debt + Equity	27.9%	21.9%
			Net Debt of $12.2 million, and
			net debt to net debt + equity rati
			of 279% as at 30 June 2020

Net Debt of $12.2 million, and net debt to net debt + equity ratio of 27.9% as at 30 June 2020

* Reported net profit/loss excluding the effects of unrealised foreign exchange

** Operating cashflow excluding working capital movements, interest and tax payments

2020 Half Year Result Reconciliation of significant items in earnings

Half Year Result ciliation of significant items in earnings
	6 months to	6 months to
	30-Jun-20	30-Jun-19
	'$000	'$000
Net Profit Before Tax, unrealised FX and significant items	(286)	1,533
Significant items before tax
Less non-cash equity expense	-	(65)
Less MAQ depreciation (non-cash)	(520)	(651)
Add COVID related government subsidies	362	-
Add COVID related temporary salary and director fee reductions	552	-
Net Profit Before Tax excluding unrealised FX	109	818
Less tax expense	(153)	(414)
Net Profit After Tax before unrealised FX (underlying NPAT*)	(44)	404

* Reported net profit/loss excluding the effects of unrealised foreign exchange

2020 Interim Year Result - Operations

Magnesium Anode Volumes (CCP) ahead of Previous Corresponding Period

Metal Volumes down due to COVID-19, but recovering into 2H 2020

3,000 Magnesium Anode Magnesium Alloy Sales Volumes (mt) 50,000 Metal Sales Volumes (mt) 40,000 2,000 2H 1H 30,000 2H 1H 20,000 1,000 10,000 - - FY16 FY17 FY18 FY19 1H20 FY16 FY17 FY18 FY19 1H20

Magontec Qinghai primary magnesium alloy production

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• Supply of liquid pure Mg from adjacent smelter halted since 1 April 2019

• Magontec Qinghai cast house metal production volumes constrained by temporary supply hiatus

Magontec Qinghai Production (mt)

6,000

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4,000
2,000
-
2H17 1H18 2H18 1H19 2H19 1H20
• Magnesium alloy ingot supply to customers
maintained throughout this period
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• QSLM expected to announce magnesium smelter restart before 2020 year-end

2020 Half Year Result Underlying Net Result* -$0.44m in 1H 2020 despite COVID impact

Underlying Net Profit After Tax * ($M)

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$0.404m

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1H19

($0.044m) 1H20

• Reported net profit/loss excluding the effects of unrealised foreign exchange

2020 Half Year Result Margin expansion from Specialist Metal sales and resilient Underlying Operating Cashflow despite headwinds

Gross Profit ($M) and GP margin Underlying Operating Cashflow ($M)*

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12.9%
11.8%
11.2% 11.1% $2.7
10.5%
$2.4 $2.4
$1.8
$1.6
$7.4 $7.3 $7.3 $8.0 $5.9
1H16 1H17 1H18 1H19 1H20 1H16 1H17 1H18 1H19 1H20
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• Operating cashflow excluding working capital movements, interest and tax payments

2020 Half Year Result EBITDA and Underlying NPAT trend relatively stable

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EBITDA, Underlying NPAT and Depreciation ($M)
EBITDA
Underlying NPAT
Depreciation $2.57
$2.08
$1.92 $1.91
$1.44
$1.60 $1.59
$1.35
$0.86
$0.81
$0.51
$0.40
$0.35
($0.04)
($0.14)
1H16 1H17 1H18 1H19 1H20
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Qinghai electrolytic magnesium smelter complex (Golmud)

Dehydration Reduction Cast house

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Magontec Qinghai

MGL operates a magnesium alloy cast house at Golmud in Qinghai Province PRC

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

Production

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

• Supply of pure magnesium from QSLM plant currently suspended. Cast house operations continue under interim supply arrangements

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Magontec Qinghai manufactures the World’s lowest CO2 magnesium alloys
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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
by-products
20
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 has recycling and manufacturing facilities in China, Germany and Romania

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Production
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Bottrop
Santana
Toronto Golmud
Tokyo
Rhode Is
Xi’an
Sydney
Melbourne
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Sales Office
Technology Centre
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Cast House Project
Headquarters
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Magontec’s corporate transformation creates an exceptional platform for growth

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Steady underlying Resilient earnings cash flow from stream from CCP operations businesses

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Growing profitability from Specialist Metals

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A commitment to
“Green”
magnesium
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ASX Listed

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

Industriestraße 61 46240 Bottrop Germany

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

Tel +61 2 8084 7813 Fax +61 2 9252 8960 corporate@magontec.com www.magontec.com

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

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

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Magontec Limited (ASX: MGL) First Half 2020 - Interim Result August 2020

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