Magnesita Refratarios : Reports its 3Q17 Results

MAGNESITA REPORTS ITS 3Q17 AND YEAR-TO-DATE RESULTS Contagem, Brazil - November 13th, 2017 - MAGNESITA REFRATÁRIOS S.A. ("Magnesita" or "Company") - (BM&FBOVESPA Novo Mercado: MAGG3) - announces today its 2017 third quarter results ("3Q17") and 2017 year-to-date ("9M17") results. Comparisons are made with 2016 third quarter ("3Q16"), 2017 second quarter ("2Q17") and 2016 year-to-date ("9M16") results. Operational and financial information of the Company, unless otherwise stated, were prepared according to International Financial Reporting Standards (IFRS), and should be read together with our Quarterly Financial Information (ITR) filed with the CVM. This Earnings Release presents the results in millions of U.S. Dollars ("US$"). Exchange Rates used to translate foreign currencies into U.S. Dollars are presented on page 13.

FINANCIAL SUMMARY

In $ million, unless otherwise indicated	Quarter			Var. %
	3Q17 (a)	2Q17 (b)	3Q16 (c)	a/b	a/c
Refractories volume ('000 tonnes)	236.8	252.5	209.4	-6.2%	13.1%
Net operating revenues	289.1	268.1	238.8	7.9%	21.1%
Gross profit	87.9	89.8	80.9	-2.1%	8.6%
Gross margin (%)	30.4%	33.5%	33.9%	-310 bp	-350 bps
EBIT	21.3	-13.7	20.8	-255.6%	2.6%
EBIT margin (%)	7.4%	-5.1%	8.7%	1250 bp	-130 bps
Adjusted EBIT¹	29.1	32.6	24.8	-10.7%	17.3%
Adjusted EBIT margin (%)	10.1%	12.2%	10.4%	-210 bp	-30 bps
EBITDA	36.8	0.5	31.3	7691.3%	17.7%
EBITDA margin (%)	12.7%	0.2%	13.1%	1260 bp	-40 bps
Adjusted EBITDA¹	43.3	45.7	35.3	-5.2%	22.5%
Adjusted EBITDA margin (%)	15.0%	17.0%	14.8%	-210 bp	20 bps
Net income	-7.2	-52.8	-5.2	-86.4%	37.5%
Net margin (%)	-2.5%	-19.7%	-2.2%	1720 bp	-30 bps
-0.14	-1.04	-0.10	-86.4%	43.0%

Year		Var. %
9M17 (d)	9M16 (e)	d/e
728.3	669.7	8.8%
841.4	725.6	15.9%
271.8	247.2	10.0%
32.3%	34.1%	-180 bps
36.0	76.7	-53.1%
4.3%	10.6%	-630 bps
97.0	84.1	15.3%
11.5%	11.6%	-10 bps
76.8	108.5	-29.3%
9.1%	15.0%	-580 bps
133.2	115.9	14.9%
15.8%	16.0%	-10 bps
-44.0	40.1	-209.6%
-5.2%	5.5%	-1080 bps
-0.87	0.77	-214.1%

Earnings per share (US$/share)²

¹Excluding other income and expenses

²EPS considers the weighted amount of shares in the period minus shares held in treasury

Earnings Conference Call: Monday, November 13th, 2017 In English, with simultaneous translation to Portuguese

2pm (Brasília time) - Phone: [phone] (Brazil)*

11am (New York time) - Phone: [phone] (USA)

4pm (London time) - Phone: [phone] (Other countries)

Password: Magnesita

*In the above dial-in, the participant will be directed automatically to the original audio in English. In case you would like to listen to the audio in Portuguese (simultaneous translation), please ask the operator.

Webcast (English): http://cast.comunique-se.com.br/Magnesita/3Q17

Webcast (Portuguese): http://cast.comunique-se.com.br/Magnesita/3T17

Investor Relations Contacts Eduardo Gotilla - Global CFO Daniel Domiciano - IR Manager

Phone: [phone] / 3241 / 3202

www.magnesita.com/ir

MESSAGE FROM THE MANAGEMENT

"I'd like to start by saying how delighted I am with the closing of the transaction combining Magnesita and RHI. Since October 27th, 2017, we are officially part of RHI Magnesita, a truly global player and the world leader in refractories. This was certainly the most important achievement since I joined the Company five and half years ago. The team and I are very excited about the value creation this combination will bring to all stakeholders, especially our customers and industry partners. We believe this transaction further accelerates our growth, resulting from the high complementary of the businesses, both in terms of geographic footprint and enhanced value-add solutions and technology. Additional value creation will be realized through synergies and the implementation of common proven standards of operational and commercial excellence.

Magnesita continued to deliver positive results in 2017. Consolidated revenue year-to- date was US$841 million, up 16% over 2016, supported by the growth in steel production across our underlying markets, combined with our commercial initiatives to expand in new geographies. Our profitability is in line with the high standards we set out to achieve this year. EBITDA¹ margin reached 15.8% year-to-date, with EBITDA¹ expanding by 15% over last year. Our balance sheet remains strong, with US$ 300 million in liquidity at quarter-end and working capital levels at historic and industry lows. Finally, net leverage decreased to 3.0x, from 3.2x in the previous quarter.

October 27th, 2017 also marks the beginning of the challenge to successfully integrate both companies and to deliver the value creation that is the hallmark of this transaction. The team is eager to execute on RHI Magnesita's strategy and drive further innovation and deliver best-in-class solutions for our customers. Together, we are the driving force of the refractory industry!"

Octavio Pereira Lopes

Chairman

¹ EBITDA adjusted

Segment	Quarter			Var. %
	3Q17 (a)	2Q17 (b)	3Q16 (c)	a/b	a/c
Refractory Solutions
Volume ('000 tonnes)	236.8	252.5	209.4	-6.2%	13.1%
Revenues (US$ million)	245.7	233.9	208.2	5.1%	18.0%
Industrial Minerals
Revenues (US$ million)	22.5	16.0	14.4	40.3%	56.8%
Services
Revenues (US$ million)	20.9	18.2	16.4	15.0%	27.3%
TOTAL
Revenues (US$ million)	289.1	268.1	238.9	7.9%	21.0%

Year		Var. %
9M17 (d)	9M16 (e)	d/e
728.3	669.7	8.8%
731.0	638.3	14.5%
54.5	41.7	30.8%
55.8	45.6	22.3%
841.4	725.6	15.9%

OPERATIONAL AND FINANCIAL PERFORMANCE REVENUE AND VOLUME

Revenue by segment

9M17

9M16

6.5%

6.6%

86.9%

5.7%

6.3%

88.0%

Refractories Minerals Services

REVENUE AND GROSS MARGIN

Refractory Solutions

Refractory Solutions	Quarter			Var. %
	3Q17 (a)	2Q17 (b)	3Q16 (c)	a/b	a/c
Volume ('000 tonnes)	236.8	252.5	209.4	-6.2%	13.1%
Revenues (US$ million)	245.7	233.9	208.2	5.1%	18.0%
Refractory Solutions - Steel	Quarter			Var. %
	3Q17 (a)	2Q17 (b)	3Q16 (c)	a/b	a/c
Volume ('000 tonnes)	206.4	224.2	180.5	-8.0%	14.3%
Revenues (US$ million)	209.6	207.0	178.2	1.3%	17.6%
Refractory Solutions - Industrial	Quarter			Var. %
	3Q17 (a)	2Q17 (b)	3Q16 (c)	a/b	a/c
Volume ('000 tonnes)	30.4	28.3	28.9	7.6%	5.2%
Revenues (US$ million)	36.1	26.9	30.0	34.5%	20.4%

Year		Var. %
9M17 (d)	9M16 (e)	d/e
728.3	669.7	8.8%
731.0	638.3	14.5%
Year		Var. %
9M17 (d)	9M16 (e)	d/e
631.0	565.5	11.6%
621.5	534.2	16.3%
Year		Var. %
9M17 (d)	9M16 (e)	d/e
97.3	104.1	-6.6%
109.5	104.1	5.2%

Revenue from the refractory segment amounted to US$731.0 million in the 9M17, 14.5% above the previous year, driven by higher deliveries to the steel industry and the currency effect on sales in Brazilian real. Year-over-year, consolidated refractory volume reached 728,300 tonnes, an 8.8% increase versus the previous year, as an 11.6% increase in sales to the steel industry offset a 6.6% decrease on deliveries to the industrial segment.

South America accounted for 39% of revenue from refractory sales in the 9M17, compared to 36% in the previous year. The increase was supported by higher deliveries in the region, especially in Brazil, as well as the effect from the appreciation of the Real against the US Dollar.

Refractory sales per region (in US$)

7%

15%

9M17

9%

30%

39%

6%

18%

9M16

8%

32%

36%

South America

Europe

Asia Pacific

North America MEA - CIS

The outperformance of the steel segment versus the industrial segment in the 9M17 led to a slight change on the relative participation of each segment on the consolidated refractory revenue, as follows:

Refractories sales by segment (US$)

9M17 9M16

15.0%

16.3%

85.0%

Steel Industrial

83.7%