MAGONTEC LIMITED — Investor Presentation 2017

Feb 26, 2017

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Magontec Bottrop
Magontec Romania
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Magontec Limited (ASX: MGL)

2016 Annual Results Presentation

27[th] February 2017

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 30 June 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 – FY2016 Annual Report Highlights

2016 Highlights

Financial

• Underlying Net Profit After Tax up $1.37m on the previous corresponding period (+$1.12m v -$0.25m)

• Strong EBIT margin improvement in PRC primary Mg alloy production and EU Mg alloy recycling

• Mg anode (CCP) volumes + 7% in 2016 and + 40% in last 2 years driving higher EBIT margins in PRC and EU

• Cash flow from underlying operations up 40% to $4.9m versus $3.5m in the previous corresponding period

• Net Debt to Equity down to 23%

Operational

• Magontec Qinghai Magnesium Alloy Cast House now commissioned and ready for Start of Production

Magontec Limited – FY2016 Annual Report Highlights

2016 Highlights – Financials/Profit Analysis

AUD '000s	31-Dec-16	31-Dec-15	% Chg
EBITDA	$4,254	$3,297	29%
Depreciation & amortisation	($1,713)	($1,811)	-5%
EBIT	$2,541	$1,486	71%
Interest expense	($1,100)	($1,291)	-15%
EARNINGS BEFORE TAX	$1,440	$195	639%
Income tax expense	($821)	($150)	447%
PROFIT/(LOSS) - AFTER TAX	$620	$45	1283%
NPAT EX UNREALISED FX	$1,118	($248)	NA

• Underlying Net Profit After Tax up $1.37m on pcp

• Net Debt down by $2m reducing interest costs although likely to rise in 2017 when Qinghai comes on stream

• Including recovery of tax losses from 2015 brings tax paid to $85k

Magontec Limited – FY2016 Annual Report Highlights

2016 Highlights – Financials/GP

AUD '000s	31-Dec-16	31-Dec-15	% Chg
Sale of goods	$128,096	$139,758	-8%
Cost of sales	($113,670)	($126,824)	-10%
Gross Profit	$14,426	$12,934	12%
Gross margin (%)	11.3%	9.3%	22%

GP Margins driven by:

• Improved Mg alloy recycling manufacturing efficiencies in Germany and Romania (Romanian volumes +41%)

• On-going declines in primary Mg alloy conversion costs

Magontec Limited – FY2016 Annual Report Highlights

2016 Highlights – Financials/G&A

AUD '000s	31-Dec-16	31-Dec-15	% Chg
Other income	$844	$908	-7%
Impairment	($303)	($881)	-66%
Travel accommodation and meals	($682)	($697)	-2%
R&D	($418)	($301)	39%
Promotional activity	($67)	($45)	47%
Information technology	($332)	($340)	-2%
Personnel	($6,750)	($6,589)	2%
Office expenses	($333)	($282)	18%
Corporate & other	($3,226)	($3,493)	-8%

Overall G&A costs flat

• R&D costs include new programs in China and EU + on-going patent and R&D program costs in Australia

• Other Income includes R&D subsidies from research partner companies

Magontec Limited – FY2016 Annual Report Highlights

2016 Highlights – Financials/FX effects

AUD '000s	31-Dec-16	31-Dec-15	% Chg
FX gain/(loss)	($143)	$771	-119%
FX realised	$355	$478	-26%
FX unrealised	($498)	$293	-270%

Rising A$ v RMB key contribution to negative unrealised FX effect on profitability

• Average RMB/A$ for 2016 = ¥4.95 (2015 = ¥4.68)

• Further strengthening of A$ since 1 Jan 2017

Magontec Limited – FY2016 Annual Report Highlights

2016 Highlights

Gross Profit

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$ 16.0m
$ 14.4m
$ 14.0m $ 12.9m
$ 12.0m
$ 10.0m $ 8.5m
$ 8.0m
$ 6.0m
$ 4.0m
$ 2.0m
-
2014 2015 2016
Gross Profit Margin
12.0% 11.3%
10.0% 9.3%
8.0%
6.4%
6.0%
4.0%
2.0%
-
2014 2015 2016
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 12% increase in Gross Profit and overall GP margin now 11.3%

 GP improvements driven by rising volumes and production efficiency gains

 New higher margin products expected to contribute further GP improvement in 2017

Magontec Limited – FY2016 Annual Report Highlights

2016 Highlights

EBITDA

$ 5.0m $ 4.3m $ 4.5m $ 4.0m $ 3.3m $ 3.5m $ 3.0m $ 2.5m $ 2.0m $ 1.6m $ 1.5m $ 1.0m $ 0.5m - 2014 2015 2016

$ 4.3m

 29% lift in EBITDA to $4.3 million reflecting strong improvement in earnings leverage on flat G&A costs

 Underlying NPAT up $1.37 million over pcp

Underlying NPAT*

$1.5m $1.1m $1.0m $0.5m - ($0.5m) ($0.2m) ($1.0m) ($1.5m) ($2.0m) ($2.0m) ($2.5m) 2014 2015 2016

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$1.1m
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*Underlying NPAT is defined as reported net profit after tax excluding unrealised FX gains and losses.

Magontec Limited – FY2016 Annual Report Highlights

2016 Highlights

Cash flow from underlying operations

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$6.0m
$ 4.9m
$5.0m
$4.0m $ 3.5m
$3.0m
$2.0m
$1.0m $ 0.7m
-
2014 2015 2016
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Net debt to Net Debt + Equity

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30.0% 27.3%
25.5%
25.0% 22.8%
20.0%
15.0%
10.0%
5.0%
-
2014 2015 2016
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 Cash flow from underlying operations up 40% to $4.9m

 Capital expenditure requirements in 2017 expected to be ~$3m

 Rising cash flow and debt repayment drove lower net debt

 Net debt in 2016 fell $2m to $10m although likely to rise again in 2017 as Qinghai comes on stream given increased working capital requirements.

Magontec Limited – FY2016 Annual Report Highlights

2016 Highlights

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MGL worldwide Mg alloy metal sales
(Suzhou recycling plant closed in 2015)
40,000
35,000
30,000
25,000
20,000
15,000
10,000
2014 2015 2016
Total metal sales ex Suzhou Suzhou recycling
Metric tonnes
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MGL worldwide Mg anode volumes and
revenues
2,500 $23m $23m
2,000 $18m
1,500
1,000
500
-
2014 2015 2016
Revenue ($) Volumes (mt)
Volume (mt)
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 Metal volumes steady overall although continued rising trend in EU recycling

 Mg anode volumes higher but revenues flat

 Return On Invested Capital up to 5.4%

Return on invested capital

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6.0% 5.4%
5.0%
4.0%
3.2%
3.0%
2.0%
1.0%
-
(1.0%)
(0.7%)
2014 2015 2016
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Magontec Limited – FY2016 Annual Report Highlights

2017 Outlook

• Start of Production at Qinghai remains some months away

• Impact of Qinghai metal sales likely to be material only after some months of production

• European recycling and PRC primary Mg alloy volumes remain robust

• Mg anode (CCP) volumes likely to benefit from additional sales and marketing coverage in N America

• Further manufacturing and process improvements in Mg alloys and Mg anodes expected to positively impact COGS in 2017

MAGONTEC GROUP

Magontec Limited

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

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

Magontec GmbH

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

Magontec Xi’an Co., Ltd

Magontec SRL

No 40, Feng Cheng 3 Road Hammerer No 3, P.C. 317280 Xi’an Economic and Santana, Arad Technological Development ROMANIA Zone Xi’an, 710021 CHINA

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

Tel: +40 257 708 170 europe@magontec.com www.magontec.com