Earnings Release
2Q 2014
Jaraguá do Sul (SC), July 23, 2014: WEG S.A. (BM&F Bovespa: WEGE3, OTC: WEGZY), one of the world’s largest manufacturer of electric-electronic equipment,
working mainly in capital goods in five main product lines: Motors, Power, Transmission and Distribution, Automation and Coatings, announced today its results for the
second quarter of 2014 (2Q14). The following financial and operating data are presented in a consolidated basis, except when otherwise indicated, in thousands of
Brazilian Reais (R$) according to accounting practices adopted in Brazil, including Brazilian Corporate Law and the convergence to IFRS international norms. The
Growing rates and other comparisons are, except when otherwise indicated, made in relation to the same period of the previous year.
GROWTH IN A CHALLENGING QUARTER
NET OPERATING REVENUES GREW BY 7.2%
ƒ Net operating revenues in the second quarter of 2014 reached 1,821.5 million, for 7.2% growth over the 2Q13 and 2.1% growth over
the 1Q14;
EBITDA UNCHANGED
ƒ EBITDA reached R$ 311.5 million and EBITDA margin reached 17.1%. EBITDA was stable over the previous year and grew by 4.0%
over the previous quarter;
NET INCOME GREW BY 11.3%
ƒ Net income totaled R$ 228.0 million, with net margin of 12.5% and growth of 11.2% over the previous year and 11.3% over the
previous quarter;
INVESTIMENTS OF R$ 158.3 MILLION IN 2014
ƒ Investments in fixed assets totaled R$ 158.3 million in the first six months of 2014, being 80% in Brazilian units and 20% in expansion
projects abroad.
KEY FIGURES
Net Operating Revenue
Domestic Market
External Markets
External Markets in US$
Gross Operating Profit
Gross Margin
Net Income
Net Margin
EBITDA
EBITDA Margin
EPS (adjusted for splits)
Q2 2014
Q1 2014
%
Q2 2013
1.821.547
1.783.543
2,1%
1.699.639
900.348
921.198
413.147
577.325
31,7%
227.985
12,5%
311.500
17,1%
0,28265
895.446
888.097
375.677
570.421
32,0%
204.887
11,5%
299.643
16,8%
0,25403
0,5%
3,7%
10,0%
1,2%
11,3%
4,0%
11,3%
873.354
826.285
399.171
557.996
32,8%
204.968
12,1%
312.547
18,4%
0,25413
%
7,2%
3,1%
11,5%
3,5%
3,5%
11,2%
-0,3%
11,2%
06M14
06M13
%
3.605.090
1.795.794
1.809.295
788.825
1.147.746
31,8%
432.872
12,0%
611.143
17,0%
0,53667
3.177.216
1.646.289
1.530.927
752.247
1.021.600
32,2%
377.267
11,9%
561.445
17,7%
0,46776
13,5%
9,1%
18,2%
4,9%
12,3%
14,7%
8,9%
14,7%
Figures in R$ Thousands
CONFERENCE CALL (WITH SIMULTANEOUS TRANSLATION TO ENGLISH)
July 24, Thursday 11 a.m. (Brasília official time)
Dial–in in the US: +1 786 924-6977
Webcasting (simultaneous translation into English): www.ccall.com.br/weg/2q14.htm
PAGE 1
Earnings Release
2Q 2014
ECONOMIC ACTIVITY AND INDUSTRIAL PRODUCTION
In this second quarter of 2014, the gradual recovery of the economic and industrial activity conditions in mature economies was
accompanied by better conditions in China. The analysis of purchasing manager indexes (PMI) shows the continuation of the
expansion of industrial activity (PMI’s above 50 indicate expansion whereas below 50 indicate contraction of industrial activity), both
the USA and, to a lower intensity, Germany. China’s recovery is discreet, but June brought the first signal of expansion in this year.
June 2014
May 2014
April 2014
Manufacturing ISM Report on Business ® (USA)
55,3
55,4
54,9
Markit/BME Germany Manufacturing PMI®
52,0
52,3
54,1
HSBC China Manufacturing PMI™
50,7
49,4
48,1
This recovery did not reach Brazil, which continued showing contraction of industrial production. The available data indicates that until
May 2012, there was a contraction of 1.6% and, in the last 12 months, the expansion was of only 0.2%, showing further deterioration
compared to 2013 growth, of only 1.2%. The expectations of the financial market, collected by the Focus survey of the Brazilian
Central Bank, are of contraction of 0.7% in industrial production in 2014.
Industrial Indicators in Brazil According to Large Economic Categories
Change (%)
Categories of Use
Acummulated
May 14 / Apr 14* May 14 / May 13
Capital Goods
Intermediary Goods
Consumer Goods
Durable Goods
Semi-durable and non-durable
General Industry
-2,6
-0,9
-0,3
-3,6
1,0
-0,6
On Year
12 months
-5,8
-1,8
-0,1
-3,2
1,0
-1,6
4,1
-0,8
1,1
-0,4
1,5
0,2
-9,7
-2,8
-2,2
-11,2
0,8
-3,2
Source: IBGE, Research Office, Industry Cordination
(*) Series with seasonal adjustmentsr
We note that this deterioration has been widespread, with a negative performance in practically all economic categories, even those
that maintained positive performance over the previous year, like capital goods. In this case, there was a clear inflection, with the
accumulated indicator in 2014 showing a 5.8% drop, although still maintaining a 4.1% expansion over the previous 12 months.
NET OPERATING REVENUE
Net Operating Revenues totaled R$ 1,821.5 million in the second quarter of 2014 (2Q14), with 7.2% growth over the previous year
(2Q13), and 2.1% growth over the previous quarter (1Q14). Organic growth (adjusting net revenues for the transactions occurred in
the period) was of 6.0% over 2Q13.
Net Operating Revenue per Market (R$ million)
External Market
Brazilian Market
1.758
1.700
1.893
1.784
1.822
1.478
48%
52%
Q1
50%
52%
50%
51%
51%
50%
48%
50%
49%
Q2
Q3
Q4
Q1
Q2
49%
2013
2014
PAGE 2
Earnings Release
2Q 2014
The second quarter showed continuation of the gradual growth recovery in external markets and better performance in the long cycle
products related to energy infrastructure, especially in the Brazilian market. On the other hand, we noticed a clear loss of dynamism
in the domestic market for short cycle, serial products. These were the products that beneficiated the most from the more competitive
conditions brought by the appreciated exchange rate from 2013, with our domestic customers of these products recovering market
share over their foreign competitors. This was no longer a growth factor in this quarter, both because this market share driven growth
has reached its limitations in a market that is expanding a very low rate, as because the Brazilian Real has started to appreciate
against the US Dollar recently. Besides theses conditions, we also observed a clear preference of our Brazilian clients for reducing
exposure to inventories approaching the period of the FIFA World Cup play, avoiding the unfavorable seasonality and the negative
impacts of the various formal and informal holidays. Finally, the comparison of average rates of Real became less favorable during this
period, decreasing the contribution to revenue growth this 2Q14.
Net Operating Revenue in 2Q14 splits as follows:
ƒ
Brazilian Market: R$ 900.3 million, representing 49% of Net Operating Revenue, with 3.1% growth over 2Q13 and 0.5% growth
over 1Q14;
ƒ External Market: R$ 921.2 million, equivalent 51% of Net Operating Revenue. The comparison in Brazilian Reais shows growth of
11.5% over the same period last year and growth of 3.7% over the previous quarter. Considering the average US dollar,
comparison shows growth of 3.5% compared to 2Q13 and growth of 10.0% over the 1Q14. Organic growth (excluding the
transactions) in the external market was 9% over 2Q13.
Evolution of Net Revenue according to Geographic Market (R$ Million)
Q2 2014
Net Operating Revenues
- Brazilian Market
- External Markets
- External Markets in US$
1.821,5
900,3
921,2
413,1
Q1 2014
1.783,5
895,4
888,1
375,7
Change
2,1%
0,5%
3,7%
10,0%
Q2 2013
1.699,6
873,4
826,3
399,2
Change
7,2%
3,1%
11,5%
3,5%
External Market – Distribution of Net Revenue according to Geographic Market
North America
South and Central America
Europe
Africa
Australasia
Q2 2014
Q1 2014
Change
Q2 2013
38,0%
15,2%
27,4%
10,5%
8,9%
36,0%
15,5%
26,5%
13,1%
8,9%
2 pp
-0,3 pp
0,9 pp
-2,6 pp
0 pp
32,1%
18,0%
25,8%
12,5%
11,6%
Change
5,9 pp
-2,8 pp
1,6 pp
-2 pp
-2,7 pp
Distribution of Net Revenue per Business Area
Q2 2014
Electro-electronic Industrial Equipments
Q1 2014
%
Q2 2013
%
61,7%
57,7%
3,9 pp
61,5%
0,2 pp
Brazilian Market
24,1%
23,0%
1,1 pp
25,7%
-1,6 pp
External Market
37,5%
34,7%
2,8 pp
35,8%
1,8 pp
25,3%
23,5%
1,8 pp
21,2%
4,1 pp
Brazilian Market
15,1%
12,8%
2,3 pp
12,3%
2,8 pp
External Market
10,2%
10,8%
-0,5 pp
8,9%
1,3 pp
7,0%
12,4%
-5,4 pp
10,9%
-3,9 pp
Brazilian Market
4,8%
8,8%
-4 pp
7,7%
-2,9 pp
External Market
2,2%
3,6%
-1,4 pp
3,2%
-1 pp
Energy Generation , Transmission and Distribution
Electric Motors for Domestic Use
Paints and Varnishes
6,1%
6,4%
-0,3 pp
6,5%
-0,4 pp
Brazilian Market
5,4%
5,6%
-0,2 pp
5,7%
-0,3 pp
External Market
0,6%
0,7%
-0,1 pp
0,8%
-0,1 pp
PAGE 3
Earnings Release
2Q 2014
BUSINESS AREAS
In the Industrial Electro-Electronic Equipment area, performance in the Brazilian market was characterized by de retraction of
industrial activity in anticipation of the FIFA World Cup hosting, mainly in serial, short-cycle products, which normally used in machinetools, with limited customization. As discussed above, we noticed that the recovery cycle created by the new level of the exchange
rate from 2013 onwards, which increase the competitiveness of local machinery manufacturers compared to the imported competitors
and allowed them to regain some market share back, has probably run its course. In the long-cycle products, which commonly
applied in large projects, such as process and infrastructure industries, the market continues to show limited activity and is
concentrated in few specific segments.
In the external market, the results were better, due to a more aggressive competitive positioning and the continued expansion of
products and applications. In some markets, these factors were compounded by improved macroeconomic conditions, with a gradual
recovery of activity providing some additional expansion opportunities, mainly in places like North America and Europe. In other cases,
such as China, we were able to maintain a good performance even without the additional macroeconomic push. Finally, in some
smaller markets, such as Africa, Australia, and South America, the relative importance of industries like mining, which are in a cyclical
slowdown, limits our growth.
In the Energy Generation, Transmission and Distribution (GTD) business area, we still observing a gradual improvement in
competitive conditions, with stronger demand combined with a gradual elimination of global production capacity excess, resulting in
positive impacts over prices and profitability. In Brazil, the weak rainy season and its impact on the generation capacity of hydroelectric
plants has resulted in growing the demand for wind generation and making viable energy sources such as small hydroelectric plants
(PCH) and biomass, as well as increasing the urgency of investments in T&D. We continue to observe a consistent expansion in this
quarter and positive trends for the coming quarters, when we should begin to see delivery of the orders captured over the recent
months and, thus, recognized as revenues.
On the other hand, the Motors for Domestic Use business area showed deceleration this quarter. This was a combination of
unfavorable seasonality, with the natural reduction of business, and of the anticipation of the FIFA World Cup, that typically causes a
shift in consumer demand, from the WEG electric motors’ bearing “white goods” towards TV sets. Furthermore, we also note in this
case the exhaustion of positive impact of the exchange rate on the competitiveness of local production and of the incentives for
Brazilian consumer.
Finally, in Paint and Varnishes business area, we also observe the effect of decrease in durable consumer goods activity and industrial
production in Brazil, which was counterbalanced by the diversity of market segments. We continue to explore business synergies with
other WEG business areas and expand the product portfolio, entering in new segments.
COST OF GOODS SOLD
Cost of Goods Sold (COGS) totaled R$ 1,244.2 million in 2Q14, 9.0% above 2Q13 and 2.6% above 1Q14. Gross margin reached
31.7%, with a reduction of 1.1 percentage points over 2Q13 and reduction of 0.3 percentage points over 1Q14.
The interruption of the consistent expansion trend of gross margin was mainly due to: (i) the difficulty of realign sales prices at the
necessary speed, especially under unfavorable domestic market conditions; (ii) lower than expected revenue growth. The positive
impacts of productivity gains from product and process engineering innovations and of the reduction of payroll taxes were not sufficient
to compensate the negative impacts mentioned above.
Average London Metal Exchange (LME) spot copper prices rose by 4.6% in the 2Q14 compared to the average of 2Q13 and fell by
5.1% compared to the average of 1Q14. Steel prices in the international markets rose by 7% over 2Q13 and fell by 1% over 1Q14. It
is important to note that these price variations are denominated in US dollar and are compounded by the exchange rate.
SELLING, GENERAL AND ADMINISTRATIVES EXPENSES
Consolidated selling, general and administrative expenses (SG&A) represented 15.8% of net operating revenue in the 2Q14, 0.9
percentage points higher than the 14.9% of the 2Q13 and 0.2 percentage points lower than 16.0% of the 1Q14. In absolute terms,
operating expenses grew by 13.3% over 2Q13 and by 0.8% over the previous quarter.
EBITDA AND EBITDA MARGIN
As a result of aforementioned impacts, EBITDA in 2Q14, calculated according to the methodology defined by CVM in the Instruction
nº 527/2012, totaled R$ 311.5 million, nearly unchanged over 2Q13 and 4.0% above the 1Q14. EBITDA margin reached 17.1%, 1.3
percentage points lower than 2Q13 and 0.3 percentage points higher than 1Q14.
PAGE 4
Earnings Release
2Q 2014
Q2 2014
Net Operating Revenues
Consolidated Net Income for the Period
Net Margin
(+) Income taxes & Contributions
(+/-) Financial income (expenses)
(+) Depreciation & Amortization
EBITDA
EBITDA Margin
Q1 2014
%
Q2 2013
2,1%
1.783,5
207,3 10,0%
11,6%
62,0 -10,5%
-28,5 13,6%
2,5%
58,8
4,0%
299,6
16,8%
1.821,5
228,1
12,5%
55,5
-32,3
60,3
311,5
17,1%
1.699,6
204,8
12,0%
51,7
2,5
53,6
312,5
18,4%
%
7,2%
11,4%
7,4%
n.a.
12,4%
-0,3%
Figures in R$ Millions
66,0
(97,3)
55,9
(18,5)
FX Impact on
Revenues
312,5
Volumes,
Prices &
Product Mix
Changes
EBITDA Q2 13
COGS (ex
depreciation)
Selling
Expenses
(19,9)
(0,8)
13,5
General and
Administrative
Expenses
Profit Sharing
Program
Other
Expenses
311,5
EBITDA Q2 14
NET FINANCIAL RESULTS
In this quarter, net financial result was positive in R$ 32.3 million (negative result of R$ 2.5 million in 2Q13 and positive R$ 28.5 million
in 1Q14). Financial revenues totaled R$ 142.2 million in 2Q14 (R$ 145.6 million in 2Q13 and R$ 152.8 million in 1Q14). Financial
expenses totaled R$ 109.9 million (148.1 million in 2Q13 and R$ 124.4 million in 1Q14). Net financial result growth of 13.6% over the
previous quarter is a result of increase in interest rates obtained on financial instruments in the Brazilian market and reduced exchange
rate exposure in debt compared to 2013.
INCOME TAX
Income Tax and Social Contribution on Net Profit provision in 2Q14 reached R$ 53.1 million (R$ 59.6 million on 2Q13 and R$ 70.7
million on 1Q14). Additionally, R$ 2.4 million were recorded as “Deferred income tax / social contribution” debt (credit of R$ 7.9 million
in 2Q13 and R$ 8.7 million in 1Q14).
NET INCOME
As a result of aforementioned impacts, net income for 2Q14 was R$ 228.0 million, an increase of 11.2% over 2Q13 and 11.3% over
the previous quarter. The net margin of the quarter was 12.5%, 0.5 percentage points higher than 2Q13 and 1.0 percentage point
higher than the 1Q14.
PAGE 5
Earnings Release
2Q 2014
CASH FLOW
708,0
(454,4)
(341,5)
3.373,8
3.285,9
Investing
Operating
Financing
Cash June 2014
Cash December 2013
Cash flow from operating activities totaled R$ 708.0 million in the first half of 2014, an increase of 46% over the same period last year.
The expansion was due to the increase in cash generated from operations, mainly with increase in net income before depreciation,
besides the reduction of the working capital needs, especially the reduction of receivables, more than offsetting the higher
consumption of cash with payments of income tax and profit sharing, which reflect the results obtained in 2013.
Investing activities consumed R$ 454,4 million in the first half of 2014, reverting a cash flow situation observed in 2013. Highlights
were the acquisitions of WEG Balingen, in Germany, Sinya Group and CMM, and the acceleration of investments in expansion and
modernization of productive capacity program.
Finally, financing activities consumed R$ 341.5 million in the first half of the year, also reverting the cash flow situation observed in the
previous year. We performed net amortizations of R$ 37.0 million (new debt issued of R$ 385.9 million and amortizations of R$ 423.0
million), which compares with net increase of R$372.2 million in new funding in 2013.
INVESTMENTS
Investments in fixed assets for capacity expansion and modernization totaled R$ 158.3 million in the first six months of 2014, being
80% of it destined to the industrial plants and other installations in Brazil and the remaining amount to production units and other
subsidiaries abroad. The consolidation of Sinya e CMM acquisition added approximately R$ 57.2 million in additional fixed assets.
Outside Brazil
Brazil
94,0
56,8
6,0
61,3
11,8
63,9
15,6
61,1
13,1
64,3
8,4
50,7
49,5
48,3
48,0
55,9
Q1
Q2
Q3
Q4
Q1
2013
23,5
70,6
Q2
2014
Our industrial production capacity expansion and modernization program for 2014 foresees investments of approximately R$ 592
million, the highlights being the first stages of new industrial plants in China and México, with expansion and verticalization of the
production capacity of industrial electric motors. In other less dynamic markets, investments are being reassessed so that execution
match effective demand expansion.
PAGE 6
Earnings Release
2Q 2014
DEBT AND CASH POSITION
On June 30, 2014 cash, cash equivalents and financial investments totaled R$ 3,363.8 million, mainly in short-term, invested in
Brazilian currency in first-tier banks, in fixed income instruments linked to the CDI. Gross financial debt totaled R$ 3,243.6 million,
being 22% in short-term and 78% in long-term.
June 2014
December 2013
June 2013
Cash & Financial instruments
3.363.850
3.376.029
3.036.107
- Current
- Long Term
3.362.435
1.415
3.373.799
2.230
3.034.080
2.027
Debt
3.243.553
100%
3.209.004
100%
3.048.764
100%
712.711
22%
912.796
28%
1.327.078
44%
- In Brazilian Reais
381.728
12%
462.336
14%
855.787
28%
- In other currencies
330.983
10%
450.460
14%
471.291
15%
- Current
- Long Term
- In Brazilian Reais
- In other currencies
Net Cash (Debt)
2.530.842
78%
2.296.208
72%
1.721.686
56%
1.936.275
60%
2.048.766
64%
1.454.531
48%
594.567
18%
247.442
8%
267.155
9%
120.297
167.025
(12.657)
At the end of the 2Q14 WEG had net cash of R$ 120.3 million (net debt of R$ 12.7 million in June 30, 2013). Over the quarter we
raised new funding on attractive terms of maturities and fees, increasing the duration and lengthening the debt total profile.
The characteristics of the debt are:
ƒ The total duration debt is 22.8 months and the long-term portion is 28.1 months. Duration portion denominated in Brazilian Reais
is 20.1 months and for the portion in foreign currencies is 29.6 months.
ƒ The weighted average cost of fixed-rate denominated in Brazilian Reais is approximately 6.1% per year. Floating rate contracts are
indexed mainly by the Brazilian long-term interest rate (TLJP).
DIVIDENDS
Over the first half of 2014, the Board of Directors approved the following compensation events to shareholders:
ƒ On March 25, as interest on stockholders’ equity (JCP), to shareholders on said date, in the gross amount of R$ 51.8 million;
ƒ On June 24, as interest on stockholders’ equity (JCP), to shareholders on said date, in the gross amount of R$ 56.9 million;
In addition, on July 22, the Board of Directors approved intermediate dividends related to the net income for the first half of 2014, in
the total amount of R$ 125.3 million to the shareholders on said date. These proceeds will be paid from August 13, 2014 onwards.
Amounts declared as remuneration to shareholders in the first half represent 54.1% of net income for the period.
Dividends
Interest on Stockholders' Equity
Gross Total
Net Earnings
Total Dividends / Net Earnings
1st Half
2014
125,3
108,8
234,1
432,9
54,1%
1st Half
%
2013
114,8
83,9
198,7 17,8%
377,3
52,7%
Our policy is to declare interest on stockholders equity quarterly and declare dividends based on profit earned each semester, thus,
we reported six different earnings each year, which is paid semiannually.
PAGE 7
Earnings Release
2Q 2014
WEGE3 SHARE PERFORMANCE
The common shares issued by WEG, traded under the code WEGE3 at BM&F Bovespa, ended the last trading session on June 2014
quoted at R$ 28.29, with nominal gain of 18.0% in the year. Considering the dividends and interest on stockholders equity declared
in the first half, the increase was of 19.7% in 2014.
3.500
30,00
Shares Traded (thousands)
3.000
2.500
20,00
2.000
15,00
1.500
Traded shares (thousands)
WEGE3 share prices
25,00
WEGE3
10,00
1.000
5,00
0,00
500
0
The average daily traded volume in 2Q14 was R$ 15.6 million (R$ 16.3 million in 2Q13). Throughout the quarter 133,501 stock trades
were carried out (134,061 stock trades in 2Q13), involving 35.3 million shares and moving R$ 938.6 million (R$ 1,027.8 million in
2Q13).
CAPITAL INCREASE WITH SHARES
The Extraordinary Shareholders’ Meeting, held on April 23, 2014, approved the Company’s capital increase, in the amount of R$
815,532,131.00, increasing it from R$ 2,718,440,437.00 to R$ 3,533,972,568.00, with a 30% stock bonus (three new ordinary
shares for each 10 ordinary shares held)
The shareholders registered in the Company’s book on April 23, 2014 were benefited. The bonus shares were included in the
shareholders’ positions on April 28, 2014, and they were available on April 29, 2014.
After a period in which shareholders could, if they wished to, transfer fractions of shares resulting from the stock bonus, these
fractions were grouped and sold at auction on June 13, 2014, at BM&FBOVESPA. In this auction, were sold 1.458 ordinary shares,
without par value. The values obtained with the sale of shares in the auction (R$ 28.391083676 per share) were paid to
shareholders, pro rata to the fractions held by them before the auction, on June 26, 2014.
PAGE 8
Earnings Release
2Q 2014
RESULTS CONFERENCE CALL
WEG Will hold, on July 24, 2014 (Thursday), conference call and webcast to discuss the results. The call will be conducted in
Portuguese with simultaneous translation in English, following scheduled time:
11 a.m.
10 a.m.
3 p.m.
– Brasíiia time
– New York (EDT)
– London (BST)
Connecting phone numbers:
Dial–in for connecting from Brazil:
Dial–in for connecting from USA:
Toll-free for connecting from USA:
Code:
(11) 3193-1001 / (11) 2820-4001
+1 786 924-6977
+1 888 700-0802
WEG
Acess to the webcast:
Slides and Portuguese audio:
Slides and English translation:
www.ccall.com.br/weg/2t14.htm
www.ccall.com.br/weg/2q14.htm
The presentation Will be available in Investor Relations page of WEG website (www.weg.net/ri). Please, call approximately 10 minutes
before the call is scheluded to start.
PAGE 9
Earnings Release
2Q 2014
BUSINESS AREA
Industrial Electro-Electronic Equipment
The industrial electrical-electronic equipment area includes low and medium voltage electric motors, drives & controls, industrial
automation equipment and services, and maintenance services and parts. We compete in all major markets with our products and
solutions. Electric motors and other related equipment find applications in practically all industrial segments, in equipment such as
compressors, pumps and fans, for example.
Energy Generation, Transmission and Distribution (GTD)
Products and services included in this area are electric generators for hydraulic and thermal power plants (biomass), hydro turbines
(small hydroelectric plants or PCH), wind turbines, transformers, substations, control panels and system integration services. In the
GTD area in general and specifically in power generation, investment maturing terms are longer, with slower investment decisions and
longer project and manufacturing lead times. As such, new orders are recorded as revenue after a few months, upon effective delivery
to buyers.
Motors for Domestic Use
In this business area, our operations have traditionally focused in Brazil, where we hold a significant share in the market of singlephase
motors for durable consumer goods, such as washing machines, air conditioners, water pumps, among others. This is a short cycle
business and variations in consumer demand are rapidly transferred to the industry, with almost immediate impacts on
production and revenue.
Paints and Varnishes
In this area, including liquid paints, powder paints and electro-insulating varnishes, we have very clear focus on industrial applications
in Brazil, and are expanding to Latin America. Our strategy in this area is cross selling to customers from other operating areas. The
target markets ranging from shipbuilding industry to the manufacturers of white line home appliances. We seek to maximize the scale
of production and efforts to developed new products and new segments of production and efforts to developed new products and
new segments.
The information contained in this report relating to WEG’s business perspectives, the projections and results and to the company’s
growth potential should be considered as only estimates and were based on the management expectations relating to the future of
the company. These expectations are highly influenced by the market conditions and the general economic performance of the
country and of the foreign markets which may be subject to sudden change.
PAGE 10
Earnings Release
2Q 2014
Annex I
Consolidated Income Statement - Quarterly
Figures in R$ Thousands
2T14
51
2nd Quarter
2014
R$
VA%
Net Operating Revenues
Cost of Goods Sold
Gross Profit
Sales Expenses
Administrative Expenses
Financial Revenues
Financial Expenses
Other Operating Income
Other Operating Expenses
EARNINGS BEFORE TAXES
Income Taxes & Contributions
Deferred Taxes
Minorities
NET EARNINGS
1T14
49
1st Quarter
2014
R$
VA%
2T13
42
2nd Quarter
2013
R$
VA%
Changes %
Q2 2014
Q2 2014
Q1 2014
Q2 2013
1.821.547
(1.244.222)
577.325
(191.300)
(96.418)
142.242
(109.893)
1.739
(40.107)
283.588
(53.088)
(2.405)
110
227.985
100%
-68%
32%
-11%
-5%
8%
-6%
0%
-2%
16%
-3%
0%
0%
13%
1.783.543
(1.213.122)
570.421
(196.661)
(88.703)
152.842
(124.363)
1.846
(46.065)
269.317
(70.669)
8.683
2.444
204.887
100%
-68%
32%
-11%
-5%
9%
-7%
0%
-3%
15%
-4%
0%
0%
11%
1.699.639
(1.141.643)
557.996
(174.312)
(79.701)
145.637
(148.120)
4.991
(50.038)
256.453
(59.551)
7.860
(206)
204.968
100%
-67%
33%
-10%
-5%
9%
-9%
0%
-3%
15%
-4%
0%
0%
12%
2,1%
2,6%
1,2%
-2,7%
8,7%
-6,9%
-11,6%
-5,8%
-12,9%
5,3%
-24,9%
n.m
-95,5%
11,3%
7,2%
9,0%
3,5%
9,7%
21,0%
-2,3%
-25,8%
-65,2%
-19,8%
10,6%
-10,9%
n.m
n.m
11,2%
EBITDA
311.500
17,1%
299.643
16,8%
312.547
18,4%
4,0%
-0,3%
EPS (adjusted for splits)
0,28265
11,3%
11,2%
0,25403
0,25413
PAGE 11
Earnings Release
2Q 2014
Annex II
Consolidated Income Statement
06M14
51
6 Months
2014
R$
VA%
Net Operating Revenues
Cost of Goods Sold
Gross Profit
Sales Expenses
Administrative Expenses
Financial Revenues
Financial Expenses
Other Operating Income
Other Operating Expenses
EARNINGS BEFORE TAXES
Income Taxes & Contributions
Deferred Taxes
Minorities
NET EARNINGS
06M13
Figures in R$ Thousands
42
6 Months
2013
R$
VA%
%
2014
2013
3.605.090
(2.457.344)
1.147.746
(387.961)
(185.121)
295.084
(234.256)
3.585
(86.172)
552.905
(123.757)
6.278
2.554
432.872
100%
-68%
32%
-11%
-5%
8%
-6%
0%
-2%
15%
-3%
0%
0%
12%
3.177.216
(2.155.616)
1.021.600
(331.341)
(152.974)
268.673
(246.505)
10.559
(92.146)
477.866
(110.856)
10.823
566
377.267
100%
-68%
32%
-10%
-5%
8%
-8%
0%
-3%
15%
-3%
0%
0%
12%
13%
14%
12%
17%
21%
10%
-5%
-66%
-6%
16%
12%
-42%
351%
15%
EBITDA
611.143
17,0%
561.445
17,7%
9%
EPS (adjusted for splits)
0,53668
0,60809
-12%
PAGE 12
Earnings Release
2Q 2014
Annex III
Consolidated Balance Sheet
Figures in R$ Thousands
June 2014
(A)
R$
%
CURRENT ASSETS
December 2013
(B)
R$
%
June 2013
(C)
R$
%
(A)/(B) (A)/(C)
6.886.608
66%
6.851.787
68%
6.339.494
66%
1%
9%
3.362.435
32%
3.373.799
33%
3.034.080
32%
0%
11%
Receivables
1.637.568
16%
1.658.806
16%
1.554.042
16%
-1%
5%
Inventories
1.541.091
15%
1.445.927
14%
1.368.012
14%
7%
13%
Other current assets
345.514
3%
373.255
4%
383.360
4%
-7%
-10%
LONG TERM ASSETS
Long term securities
Deferred taxes
124.207
1.415
58.767
1%
0%
1%
123.866
2.230
60.376
1%
0%
1%
98.741
2.027
40.762
1%
0% 0%
0%
-3%
26%
-30%
44%
64.025
1%
61.260
1%
55.952
1%
5%
14%
3.351.857
32%
3.165.640
31%
3.104.687
33%
6%
8%
8.223
0%
7.264
0%
7.585
0%
13%
8%
2.680.579
26%
2.614.556
26%
2.570.042
27%
3%
4%
Cash & cash equivalents
Other non-current assets
FIXED ASSETS
Investment in Subs
Property, Plant & Equipment
Intangibles
TOTAL ASSETS
CURRENT LIABILITIES
663.055
6%
543.820
5%
527.060
6%
22%
26%
10.362.672
100%
10.141.293
100%
9.542.922
100%
2%
9%
-13%
2.484.307
24%
2.578.048
25%
2.840.488
30%
-4%
Social and Labor Liabilities
245.082
2%
216.553
2%
244.200
3%
13%
0%
Suppliers
420.498
4%
420.250
4%
362.605
4%
0%
16%
Fiscal and Tax Liabilities
102.357
1%
139.570
1%
113.854
1%
-27%
-10%
Short Term Debt
712.711
7%
912.796
9%
1.327.078
14%
-22%
-46%
Dividends Payable
121.897
1%
87.723
1%
89.310
1%
39%
36%
Advances from Clients
485.371
5%
459.130
5%
395.904
4%
6%
23%
73.952
1%
34.191
0%
24.450
0%
116%
202%
Profit Sharring
Other Short Term Liabilities
322.439
3%
307.835
3%
283.087
3%
5%
14%
LONG TERM LIABILITIES
3.170.626
31%
2.920.978
29%
2.380.354
25%
9%
33%
Long Term Debt
2.530.842
24%
2.296.208
23%
1.721.686
18%
10%
47%
Other Long Term Liabilities
106.603
1%
95.031
1%
113.323
1%
12%
-6%
Deferred Taxes
290.117
3%
294.405
3%
310.429
3%
-1%
-7%
Contingencies Provisions
243.064
2%
235.334
2%
234.916
2%
3%
3%
75.866
1%
84.495
1%
81.513
1%
-10%
-7%
MINORITIES
STOCKHOLDERS' EQUITY
TOTAL LIABILITIES
4.631.873
45%
4.557.772
45%
4.240.567
44%
2%
9%
10.362.672
100%
10.141.293
100%
9.542.922
100%
2%
9%
PAGE 13
Earnings Release
2Q 2014
Annex IV
Consolidated Cash Flow Statement
Figures in R$ Thousands
06M14
06M13
6 Months
2014
Operating Activities
Net Earnings before Taxes
Depreciation and Amortization
Provisions:
Changes in Assets & Liabilities
(Increase) / Reduction of Accounts Receivable
Increase / (Reduction) of Accounts Payable
(Increase) / Reduction of Investories
Income Tax and Social Contribution on Net Earnings
Profit Sharing Paid
Cash Flow from Operating Activities
Investment Activities
Fixed Assets
Intagible Assets
Results of sales of fixed assets
Accumulated Conversion Adjustment
Long term securities bought
Goodwill in Capital Transactions
Acquisition of Stakes of non-controlling shareholders
6 Months
2013
552.905
119.066
167.308
(131.280)
110.039
78.717
(68.663)
(156.338)
(95.035)
477.866
105.747
184.987
(282.634)
(163.450)
142.807
(64.721)
(128.334)
(68.936)
707.999
485.966
(158.315)
(8.708)
4.195
(85.559)
(75.755)
(2.699)
(118.040)
(1.483)
1.125
33.812
261.119
(5.169)
(5.947)
(6.268)
Aquisition of Subsidiaries
(136.528)
Cash Flow From Investment Activities
(454.394)
165.096
Financing Activities
Working Capital Financing
Long Term Financing
Interest paid on loans and financing
Treasury Shares
Dividends & Intesrest on Stockholders Equity Paid
385.963
(422.998)
(83.101)
323
(221.726)
1.109.750
(736.534)
(88.114)
(204.467)
Cash Flow From Financing Activities
(341.539)
80.635
(87.934)
731.697
Beginning of Period
3.373.799
2.302.256
End of Period
3.285.865
3.033.953
Change in Cash Position
-
Cash & Cash Equivalents
PAGE 14