Quarterly Information - ITR
WEG S.A.
June 30, 2011
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Company Information
Composition of Capital
1
Cash Dividends
2
Individual Financial Statements
Balance Sheet – Assets
3
Balance Sheet – Liabilities
4
Income Statement
5
Statement of Comprehensive Income
6
Statement of Cash Flows
7
Statement of Changes in Shareholders’ Equity
DMPL - 01/01/2011 to 06/30/2011
8
DMPL - 01/01/2010 to 06/30/2010
9
Statement of Value Added
10
Consolidated Financial Statements
Balance Sheet – Assets
11
Balance Sheet – Liabilities
12
Income Statement
13
Statement of Comprehensive Income
14
Statement of Cash Flows
15
Statement of Changes in Shareholders’ Equity
DMPL - 01/01/2011 to 06/30/2011
16
DMPL - 01/01/2010 to 06/30/2010
17
Statement of Value Added
18
Comments on Performance
19
Notes to Financial Statements
33
Other Information that the Company Understands as Relevant
54
Opinions and Statements
Special Review Report – Unqualified
56
Opinion from Supervisory Board or Equivalent Body
58
Officers’ Statement on the Financial Statements
59
Officers’ Statement on Independent Auditors’ Report
60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Company Information / Composition of Capital Stock
Number of Shares
(Units)
Current Quarter
06/30/2011
Capital paid
Common Shares
620,405,029
Preferred Shares
Total
0
620,405,029
Treasury Stock
Common Shares
500,000
Preferred Shares
Total
0
500,000
Page 1 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Company Information / Cash Dividends
Event
Approval
Earning
First Payment
Share Type
Share Class
Earnings per Share
(R$ / Share)
Board of Directors’ Meeting
03/22/2011
Interest on equity capital
08/17/2011
Common
0.05800
Board of Directors’ Meeting
06/21/2011
Interest on equity capital
08/17/2011
Common
0.06500
Board of Directors’ Meeting
07/21/2011
Dividend
08/17/2011
Common
0.09700
Page 2 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Individual Financial Statements / Balance Sheet – Assets
(Thousands of reais)
Account
Account Description
Code
1
Total Assets
Current Quarter
Prior Year
06/30/2011
12/31/2010
3,608,301
3,535,994
1.01
Current Assets
553,442
752,552
1.01.01
Cash and Cash Equivalents
488,952
689,944
1.01.01.01
Cash and Banks
1.01.01.02
Financial Investments
1.01.06
Taxes Recoverable
6,349
6,125
1.01.06.01
Current Taxes Recoverable
6,349
6,125
127
9
488,825
689,935
1.01.08
Other Current Assets
58,141
56,483
1.01.08.03
Other
58,141
56,483
1.01.08.03.01
Dividends
1.01.08.03.02
Interest on Equity Capital
1.02
Noncurrent Assets
1.02.01
1.02.01.01
1.02.01.06
1.02.01.06.01
6,346
4,633
51,795
51,850
3,054,859
2,783,442
Noncurrent Receivables
227,148
923
Short-term Investments Stated at Fair Value
226,057
0
Deferred Taxes
626
602
Deferred Income Tax and Social Contribution
626
602
1.02.01.09
Other Noncurrent Assets
465
321
1.02.01.09.03
Judicial Deposits
465
321
1.02.02
Investments
2,815,614
2,770,286
1.02.02.01
Equity Interests
2,815,614
2,770,286
1.02.02.01.02
Investments in Subsidiaries
2,815,614
2,770,286
1.02.03
Fixed Assets
12,087
12,233
1.02.03.01
Fixed Assets in Operation
12,087
12,233
1.02.04
Intangible Assets
10
0
Page 3 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Individual Financial Statements / Balance Sheet – Liabilities
(Thousands of reais)
Account
Account Description
Code
2
Total Liabilities
2.01
Current Liabilities
Current Quarter
Prior
Year
06/30/2011
12/31/2010
3,608,301
3.535.994
84,521
71.158
2.01.01
Social and Labor Obligations
3,231
3.063
2.01.01.01
Social Obligations
3,231
3.063
2.01.03
Tax Obligations
2,110
5.330
2.01.03.01
Federal Tax Obligations
2,110
5.330
2.01.05
Other Obligations
79,180
62.765
2.01.05.02
Other
79,180
62.765
2.01.05.02.01
Dividends and Interest on Equity Capital Payable
78,782
62.214
2.01.05.02.04
Other
2.02
Noncurrent Liabilities
398
551
10,673
10.229
2.02.02
Other Obligations
5,142
4.783
2.02.02.01
Liabilities with Related Parties
5,142
4.783
2.02.02.01.02
Debts to Subsidiaries
5,142
4.783
2.02.03
Deferred Taxes
3,794
3.820
2.02.03.01
Deferred Income Tax and Social Contribution
3,794
3.820
2.02.04
Provisions
1,737
1.626
2.03
Shareholders’ Equity
3,513,107
3.454.607
2.03.01
Capital Paid
2,265,367
1.812.294
2.03.02
Capital Reserves
0
44.931
2.03.02.01
Premium on Issue of Shares
2.03.03
Revaluation Reserves
2.03.04
Profit Reserves
2.03.04.01
Legal Reserve
2.03.04.02
Statutory Reserve
2.03.04.08
Proposed Additional Dividend
2.03.04.09
0
44.931
3,859
3.884
441,449
900.676
0
53.409
391,325
746.059
60,179
101.208
Treasury Stock
-10,055
0
2.03.05
Retained Earnings /Accumulated Losses
152,000
0
2.03.06
Adjustment in Asset Value
650,432
692.822
2.03.06.01
Deemed Cost
732,871
758.715
2.03.06.02
Cumulative Translation Adjustment
-82,439
-65.893
Page 4 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Individual Financial Statements / Income Statement
(Thousands of reais)
Account
Account Description
Code
Current Quarter
Accrued – Current
Same Prior Year
Accrued - Prior
04/01/2011 to 06/30/2011
Year
01/01/2011 to
06/30/2011
Quarter
04/01/2010 to
06/30/2010
year
01/01/2010 to
06/30/2010
137,693
243,818
115,249
234,616
-765
-1,528
-770
-1,512
3.04
Operating Expenses/Revenues
3.04.02
General and Administrative Expenses
3.04.02.01
Management Fees
-425
-849
-404
-793
3.04.02.02
Other Administrative Expenses
-340
-679
-366
-719
3.04.04
Other Operating Revenues
83
85
1
109
3.04.05
Other Operating Expenses
-293
-509
-78
-274
3.04.06
Equity Income
138,668
245,770
116,096
236,293
3.05
Income Before Financial Income and Taxes
137,693
243,818
115,249
234,616
3.06
Financial Income
17,174
33,195
1,765
1,320
3.06.01
Financial Revenues
17,231
33,295
1,769
1,343
3.06.02
Financial Expenses
-57
-100
-4
-23
3.07
Income Before Income Taxes
154,867
277,013
117,014
235,936
3.08
Income Tax and Social Contribution
-310
-892
-492
231
3.08.01
Current
-364
-941
43
43
3.08.02
Deferred
54
49
-535
188
3.09
Net Income from Continuing Operations
154,557
276,121
116,522
236,167
3.11
Net Income for the Period
154,557
276,121
116,522
236,167
3.99
Earnings per Share - (Reais /Share)
0.24912
0.44506
0.18766
0.38036
0,24912
0,44506
0,18766
0,38036
3.99.01
Basic Earnings per Share
3.99.01.01
ON
3.99.02
Diluted Earnings per Share
3.99.02.01
ON
Page 5 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Individual Financial Statements / Statement of Comprehensive Income
(Thousands of reais)
Account
Code
4.01
Account Description
Net Income
Accrued – Current
Same Prior Year
Accrued – Prior
04/01/2011 to 06/30/2011
Year
01/01/2011 to
06/30/2011
Quarter
04/01/2010 to
06/30/2010
Year
01/01/2010 to
06/30/2010
154,557
276,121
116,522
236,167
Current Quarter
4.02
Other Comprehensive Income
-18,961
-16,548
-16,255
-18,446
4.02.01
Cumulative Translation Adjustment
-18,961
-16,548
-16,255
-18,446
4.03
Comprehensive Income for the Period
135,596
259,573
100,267
217,721
Page 6 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Individual Financial Statements / Statement of Cash Flows –
Indirect Method
(Thousands of reais)
Account
Account Description
Code
Accrued - Current
Year
6.01
Net Cash from Operating Activities
6.01.01
Cash Provided by Operations
6.01.01.01
Profit Before Taxes
6.01.01.02
Depreciation and Amortization
6.01.01.03
Equity
Accrued Prior
01/01/2011 to
06/30/2011
Year
01/01/2010
to
06/30/2010
23,607
-1,112
31,784
-170
277,013
235,936
145
72
-245,770
-236,293
6.01.01.04
Other
396
115
6.01.02
Changes in Assets and Liabilities
-8,177
-942
6.01.02.01
Increase /Decrease in Accounts Receivable
-4,103
-2,905
6.01.02.02
Increase /Decrease in Accounts Payable
-3,231
1,920
6.01.02.03
Income Tax and Social Contribution Paid
-843
43
6.02
Net Cash from Investing Activities
-53,005
312,411
6.02.01
Investments
-30
0
6.02.02
Payment of Dividends/Interest on Equity Capital
173,082
312,411
6.02.03
Long Term Financial Investments
-226,057
0
6.03
Net Cash from Financing Activities
-171,594
-161,342
6.03.01
Dividends/Interest on Equity Capital Paid
-161,539
-161,342
6.03.02
Treasury Stock
6.05
Increase (Decrease) in Cash and Cash Equivalents
-10,055
0
-200,992
149,957
6.05.01
Opening Balance of Cash and Cash Equivalents
689,944
90,989
6.05.02
Closing Balance of Cash and Cash Equivalents
488,952
240,946
Page 7 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Individual Financial Statements / Statement of Changes in Shareholders’ Equity / DMPL - 01/01/2011 to
06/30/2011
(Thousands of reais)
Capital Reserves,
Options
Retained Earnings/
Accumulated
Granted
Other
and Treasury
Losses Comprehensive
Stock Profit Reserves
Income
Account
Code
Account Description
5.01
Opening Balances
1,812,294
5.03
Adjusted Opening Balances
1,812,294
48,815
5.04
Capital Transactions with Shareholders
453,073
-54,985
Capital Paid
48,815
900,676
Shareholders’
Equity
0
692,822
3,454,607
900,676
0
692,822
3,454,607
-449,172
-149,989
0
-201,073
5.04.01
Capital Increase
453,073
-44,930
-408,143
0
0
0
5.04.04
Acquired Treasury Stock
0
-10,055
0
0
0
-10,055
5.04.06
Dividends
0
0
-41,029
-60,179
0
-101,208
5.04.07
Interest on Equity Capital
0
0
0
-89,810
0
-89,810
5.05
Total Comprehensive Income
0
0
0
301,963
-42,390
259,573
5.05.01
Net Income for the Period
0
0
0
276,121
0
276,121
5.05.02
Other Comprehensive Income
0
0
0
25,842
-42,390
-16,548
5.05.02.04
Translation Adjustment for the Period
0
0
0
0
-16,548
-16,548
5.05.02.06
Realization of Deemed Cost
0
0
0
25,842
-25,842
0
5.06
Internal Changes in Shareholders’ Equity
0
-26
0
26
0
0
5.06.02
Realization of Revaluation Reserve
0
-26
0
26
0
0
5.07
Closing Balance
2,265,367
-6,196
451,504
152,000
650,432
3,513,107
Page 8 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Individual Financial Statements / Statement of Changes in Shareholders’ Equity / DMPL - 01/01/2010
to 06/30/2010
(Thousands of reais)
Capital Reserves,
Options Granted
Capital
and Treasury
Paid
Stock
Profit
Reserves
Retained Earnings
Other
/ Accumulated Comprehensive
losses
Income
Shareholders’
Equity
Account
Code
Account Description
5.01
Opening Balances
1,812,294
48,866
660,797
0
777,782
3,299,739
5.03
Adjusted Opening Balances
1,812,294
48,866
660,797
0
777,782
3,299,739
5.04
Capital Transactions with Shareholders
0
0
0
-67,711
0
-67,711
5.04.07
Interest on Equity Capital
0
0
0
-67,934
0
-67,934
5.04.08
Reversal of Prescribed Dividends
0
0
0
223
0
223
5.05
Total Comprehensive Income
0
0
0
261,917
-44,196
217,721
5.05.01
Net Income for the Period
0
0
0
236,167
0
236,167
5.05.02
Other Comprehensive Income
0
0
0
25,750
-44,196
-18,446
5.05.02.04
Translation Adjustments for the Period
0
0
0
0
-18,446
-18,446
5.05.02.06
Realization of Deemed Cost
0
0
0
25,750
-25,750
0
5.06
Internal Changes in Shareholders
’Equity
0
-33
-127,285
33
0
-127,285
5.06.02
Realization of Revaluation Reserve
0
-33
0
33
0
0
5.06.04
Payment of Proposed Dividends
0
0
-127,285
0
0
-127,285
5.07
Closing Balance
1,812,294
48,833
533,512
194,239
733,586
3,322,464
Page 9 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Individual Financial Statements / Statement of Value Added
(Thousands of reais)
Account
Code
7.02
Account Description
Accrued - Current Year
01/01/2011 to
06/30/2011
Accrued – Prior
Year 01/01/2010 to
06/30/2010
-203
-297
-177
-355
-26
58
-203
-297
7.02.02
Inputs Purchased from Third Parties
Materials, Energy, Services of Third Parties and
Other
7.02.03
Loss/Recovery of Assets
7.03
Gross Value Added
7.04
Retentions
-145
-72
7.04.01
Depreciation, Amortization and Depletion
-145
-72
7.05
Net Value Added Produced
-348
-369
7.06
Value Added Received in Transfer
279,065
237,636
7.06.01
Equity Income
245,770
236,293
7.06.02
Financial Revenues
33,295
1,343
7.07
Total Value Added to be Distributed
278,717
237,267
7.08
Distribution of Value Added
278,717
237,267
7.08.01
Personnel
1,345
869
7.08.01.01
Direct Compensation
1,295
807
7.08.01.02
Benefits
27
38
7.08.01.03
F.G.T.S.
23
24
7.08.02
Taxes, Charges and Contributions
1,224
227
7.08.02.01
Federal
1,224
227
7.08.03
Compensation of Third Party Capital
27
4
7.08.03.01
Interest
7.08.04
Compensation of Equity
27
4
276,121
236,167
7.08.04.01
Interest on Equity Capital
89,810
67,934
7.08.04.02
Dividends
60,179
66,437
7.08.04.03
Retained Profits / Loss for the Year
126,132
101,796
Page 10 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Consolidated Financial Statements / Balance Sheet – Assets
(Thousands of reais)
Account
Account Description
Code
Current Quarter
Prior Year
06/30/2011
12/31/2010
1
Total Assets
7,979,509
7,511,164
1.01
Current Assets
5,069,586
4,794,009
1.01.01
Cash and Cash Equivalents
2,674,637
2,552,996
1.01.01.01
Cash and Banks
60,694
53,971
1.01.01.02
Financial Investments
2,613,943
2,499,025
1.01.03
Accounts Receivable
1,095,847
1,044,712
1.01.03.01
Customers
1,095,847
1,044,712
1.01.04
Inventories
1,086,034
1,008,952
1.01.06
Taxes Recoverable
127,932
107,182
127,932
107,182
85,136
80,167
1.01.06.01
Current Taxes Recoverable
1.01.08
Other Current Assets
1.01.08.03
Other
1.02
Noncurrent Assets
1.02.01
1.02.01.01
1.02.01.06
Deferred Taxes
85,136
80,167
2,909,923
2,717,155
Noncurrent Receivables
358,414
136,984
Financial Investments Stated at Fair Value
226,057
0
1.02.01.06.01 Deferred Income Tax and Social Contribution
1.02.01.08
Receivables from Related Parties
1.02.01.09
Other Noncurrent Assets
89,776
78,810
89,776
78,810
2,909
0
39,672
58,174
1.02.01.09.03 Judicial Deposits
22,696
21,697
1.02.01.09.04 Taxes Recoverable
12,511
31,661
4,465
4,816
1.02.01.09.05 Other
1.02.02
Investments
931
601
1.02.02.01
Equity Interests
931
601
1.02.02.01.04 Other Equity Interests
931
601
1.02.03
Fixed Assets
2,375,903
2,395,575
1.02.03.01
Fixed Assets in Operation
2,375,903
2,395,575
1.02.04
Intangible Assets
174,675
183,995
1.02.04.01
Intangible Assets
37,678
43,870
1.02.04.02
Goodwill
136,997
140,125
Page 11 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Consolidated Financial Statements / Balance Sheet - Liabilities
(Thousands of reais)
Account
Account Description
Code
Current Quarter
Prior Year
06/30/2011
12/31/2010
2
Total Liabilities
7,979,509
7,511,164
2.01
Current Liabilities
2,179,394
1,938,803
2.01.01
Social and Labor Obligations
188,147
141,797
2.01.01.01
Social Obligations
188,147
141,797
2.01.02
Supplier
295,775
242,300
72,204
2.01.03
Tax Obligations
94,022
2.01.03.01
Federal Tax Obligations
94,022
72,204
2.01.03.01.01
Income Tax and Social Contribution Payable
53,979
41,718
2.01.03.01.02
Other
40,043
30,486
2.01.04
Loans and Financing
1,111,282
1,018,995
1,111,282
1,018,995
490,168
463,507
1,570
2.01.04.01
Loans and Financing
2.01.05
Other Obligations
2.01.05.01
Liabilities with Related Parties
1,621
2.01.05.01.04
Payables to Other Related Parties
1,621
1,570
2.01.05.02
Other
488,547
461,937
2.01.05.02.01
Dividends and Interest on Equity Capital Payable
2.01.05.02.04
Advances from Customers
2.01.05.02.05
Profit Sharing
2.01.05.02.06
Other
78,682
63,440
265,356
271,949
22,309
23,583
122,200
102,965
2.02
Noncurrent Liabilities
2,192,908
2,028,525
2.02.01
Loans and Financing
1,567,111
1,399,948
2.02.01.01
Loans and Financing
1,567,111
1,399,948
2.02.02
Other Obligations
86,317
86,875
2.02.02.02
Other
86,317
86,875
2.02.02.02.03
Tax Obligations
60,235
58,765
2.02.02.02.04
Other
26,082
28,110
2.02.03
Deferred Taxes
411,203
415,318
2.02.03.01
Deferred Income Tax and Social Contribution
411,203
415,318
2.02.04
Provisions
128,277
126,384
2.03
Consolidated Equity
3,607,207
3,543,836
2.03.01
Capital Paid
2,265,367
1,812,294
2.03.02
Capital Reserves
0
44,931
2.03.02.01
Premium on Issue of Shares
0
44,931
2.03.03
Revaluation Reserves
2.03.04
Profit Reserves
2.03.04.01
Legal Reserve
2.03.04.02
Statutory Reserve
3,859
3,884
441,449
900,676
0
53,409
391,325
746,059
60,179
101,208
2.03.04.08
Proposed Additional Dividend
2.03.04.09
Treasury Stock
-10,055
0
2.03.05
Retained Earnings /Accumulated Losses
152,000
0
2.03.06
Adjustment in Asset Value
650,432
692,822
2.03.06.01
Deemed Cost
732,871
758,715
2.03.06.02
Cumulative Translation Adjustment
-82,439
-65,893
Page 12 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 2.03.09
Interest of Noncontrolling Shareholders
94,100
89,229
Page 13 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Consolidated Financial Statements / Income Statement
(Thousands of reais)
Account
Code
Account Description
3.01
Revenue from Sale of Goods and/or Services
3.02
Cost of Goods and/or Services Sold
Current Quarter
04/01/2011 to
06/30/2011
Accrued – Current
Year 01/01/2011 to
06/30/2011
Same Prior Year
Quarter 04/01/2010
to 06/30/2010
Accrued – Prior Year
01/01/2010 to
06/30/2010
1,277,258
2,403,375
1,013,015
1,944,922
-895,821
-1,711,276
-703,203
-1,326,497
3.03
Gross Income
381,437
692,099
309,812
618,425
3.04
Operating Expenses /Revenues
-216,768
-405,393
-180,123
-349,132
3.04.01
Selling Expenses
-122,667
-238,686
-100,257
-193,312
-64,282
-122,772
-65,075
-122,936
-4,355
-8,401
-4,176
-8,077
-59,927
-114,371
-60,899
-114,859
3.04.02
General and Administrative Expenses
3.04.02.01
Management Fees
3.04.02.02
Other Administrative Expenses
3.04.04
Other Operating Revenues
1,995
10,666
2,116
10,631
3.04.05
Other Operating Expenses
-31,814
-54,601
-18,179
-44,719
3.04.06
Equity Income
3.05
Income Before Financial Income and Taxes
0
0
1,272
1,204
164,669
286,706
129,689
269,293
3.06
Financial Income
3.06.01
Financial Revenues
42,114
81,960
28,143
46,738
111,387
204,930
87,396
158,651
3.06.02
Financial Expenses
-69,273
-122,970
-59,253
-111,913
3.07
3.08
Income Before Income Taxes
206,783
368,666
157,832
316,031
Income Tax and Social Contribution
-47,991
-85,615
-40,876
3.08.01
-78,616
Current
-58,850
-98,954
-40,817
-66,289
3.08.02
Deferred
10,859
13,339
-59
-12,327
3.09
Net Income from Continuing Operations
158,792
283,051
116,956
237,415
3.11
Consolidated Profits /Loss for the Period
158,792
283,051
116,956
237,415
3.11.01
Attributed to Shareholders of the Parent Company
154,557
276,121
116,522
236,167
3.11.02
Attributed to Noncontrolling Shareholders
4,235
6,930
434
1,248
3.99
Earnings per share - (Reais / Share)
0.24912
0.44506
0.18766
0.38036
0.24912
0.44506
0.18766
0.38036
3.99.01
Basic Earnings per Share
3.99.01.01
ON
3.99.02
Diluted Earnings per Share
3.99.02.01
ON
Page 14 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Consolidated Financial Statements / Statement of Comprehensive Income
(Thousands of reais)
Account Code
Account Description
Current Quarter
04/01/2011 to
06/30/2011
Accrued - Current
Year 01/01/2011 to
06/30/2011
Same Prior Year
Quarter 04/01/2010 to
06/30/2010
Accrued – Prior Year
01/01/2010 to
06/30/2010
4.01
Consolidated Net Income for the Period
158,792
283,051
116,956
4.02
Other Comprehensive Income
-18,961
-16,548
-16,255
237,415
-18,446
4.02.01
Translation Adjustment for the Period
-18,961
-16,548
-16,255
-18,446
4.03
Consolidated Comprehensive Income for the Period
139,831
266,503
100,701
218,969
4.03.01
Attributed to Shareholders of the Parent Company
135,596
259,573
100,267
217,721
4.03.02
Attributed to Noncontrolling Shareholders
4,235
6,930
434
1,248
Page 15 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Consolidated Financial Statements / Statement of Cash Flows –
Indirect Method
(Thousands of reais)
Account
Code
Account Description
6.01
6.01.01
6.01.01.01
6.01.01.02
6.01.01.03
6.01.01.04
6.01.01.05
6.01.02
6.01.02.01
6.01.02.02
6.01.02.03
6.01.02.04
6.01.02.05
6.02
6.02.01
6.02.02
6.02.03
6.02.04
6.02.05
6.03
6.03.01
6.03.02
6.03.03
6.03.04
6.05
6.05.01
6.05.02
Net Cash from Operating Activities
Cash Provided by Operations
Profit Before Taxes
Depreciation and Amortization
Equity
Employee Profit Sharing
Other
Changes in Assets and Liabilities
Increase /Decrease in Accounts Receivable
Increase /Decrease in Accounts Payable
Increase/Decrease in Inventories
Income Tax and Social Contribution Paid
Employee Profit Sharing Paid
Net Cash from Investing Activities
Fixed Assets
Intangible Assets
Write-off of Permanent Assets
Cumulative Translation Adjustment
Long-term Financial Investments
Net Cash from Financing Activities
Working Capital Financing
Long-Term Financing
Dividends/Interest on Equity Capital Paid
Treasury Stock
Increase (Decrease) in Cash Equivalents
Opening Balance of Cash and Cash Equivalents
Closing Balance of Cash and Cash Equivalents
Accrued – Current
Year
01/01/2011 to
06/30/2011
356,648
504,687
368,666
93,239
0
43,493
-711
-148,039
-50,668
118,094
-79,154
-78,373
-57,938
-325,308
-74,938
-8,426
660
-16,547
-226,057
90,301
83,415
179,843
-162,902
-10,055
121,641
2,552,996
2,674,637
Accrued – Prior
Year
01/01/2010 to
06/30/2010
431,882
445,475
316,031
88,997
-1,204
35,409
6,242
-13,593
-78,336
421,453
-220,205
-92,862
-43,643
-247,717
-218,617
-12,676
2,022
-18,446
0
152,249
-139,120
453,712
-162,343
0
336,414
2,127,117
2,463,531
Page 16 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Consolidated Financial Statements / Statement of Changes in Shareholders’ Equity / DMPL –
01/01/2011 to 06/30/2011
(Thousands of reais)
Capital
Paid
Capital
Reserves,
Options
Granted
and
Treasury
Stock
Account
Code
Equity
Account Description
5.01
Opening Balances
1,812,294
5.03
Adjusted Opening Balances
Capital Transactions with
Shareholders
Capital Increase
1,812,294
5.04
5.04.01
Profit
Reserves
Retained
Earnings/
Accumulate
d Losses
Other
Comprehensiv
e Income
Shareholders’
Equity
Interest of
Noncontrollin
g
Shareholders
48,815
900,676
0
692,822
3,454,607
89,229
3,543,836
48,815
900,676
0
692,822
3,454,607
89,229
3,543,836
Consolidated
453,073
-54,985
-449,172
-149,989
0
-201,073
-2,059
-203,132
453,073
-44,930
-408,143
0
0
0
0
0
5.04.04
Acquired Treasury Stock
0
-10,055
0
0
0
-10,055
0
-10,055
5.04.06
Dividends
0
0
-41,029
-60,179
0
-101,208
0
-101,208
-89,810
5.04.07
Interest on Equity Capital
0
0
0
-89,810
0
-89,810
0
5.04.08
Other
0
0
0
0
0
0
-2,059
-2,059
5.05
Total Comprehensive Income
0
0
0
301,963
-42,390
259,573
6,930
266,503
5.05.01
Net Income for the Period
0
0
0
276,121
0
276,121
6,930
283,051
5.05.02
0
0
0
25,842
-42,390
-16,548
0
-16,548
0
0
0
0
-16,548
-16,548
0
-16,548
0
0
0
25,842
-25,842
0
0
0
0
-26
0
26
0
0
0
0
5.06.02
Other Comprehensive Income
Translation Adjustments for the
Period
Realization of Deemed Cost
Internal Changes in Shareholders
’Equity
Realization of Revaluation Reserve
5.07
Closing Balance
5.05.02.04
5.05.02.06
5.06
0
-26
0
26
0
0
0
0
2,265,367
-6,196
451,504
152,000
650,432
3,513,107
94,100
3,607,207
Page 17 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Consolidated Financial Statements / Statement of Changes in Shareholders’ Equity / DMPL –
01/01/2010 to 06/30/2010
(Thousands of reais)
Account
Code
5.01
5.03
5.04
5.04.07
Account Description
Opening Balances
Adjusted Opening Balances
Capital Transactions with
Shareholders
Interest on Equity Capital
Capital
Paid
1,812,294
Capital
Reserves,
Options
Granted
and
Treasury
Stock
48,866
Profit
Reserves
660,797
1,812,294
48,866
0
0
0
Retained
Earnings/
Accumulated
Losses
0
Other
Comprehensiv
e Income
777,782
Shareholders’
Equity
3,299,739
Interest of
Noncontrolling
Shareholders
27,547
660,797
0
777,782
3,299,739
27,547
3,327,286
0
-67,711
0
-67,711
51,975
-15,736
0
0
-67,934
0
-67,934
-14
-67,948
Consolidated
Shareholders
Equity
3,327,286
5.04.08
Reversal of Prescribed Dividends
0
0
0
223
0
223
0
223
5.04.09
Other
0
0
0
0
0
0
51,989
51,989
5.05
Total Comprehensive Income
0
0
0
261,917
-44,196
217,721
1,150
218,871
5.05.01
Net Income for the Period
0
0
0
236,167
0
236,167
1,165
237,332
5.05.02
0
0
0
25,750
-44,196
-18,446
-15
-18,461
0
0
0
0
-18,446
-18,446
-15
-18,461
0
0
0
25,750
-25,750
0
0
0
0
-33
-127,285
33
0
-127,285
0
-127,285
5.06.02
Other Comprehensive Income
Translation Adjustments for the
Period
Realization of Deemed Cost
Internal Changes in Shareholders’
Equity
Realization of Revaluation Reserve
0
-33
0
33
0
0
0
0
5.06.04
Payment of Proposed Dividends
0
0
-127,285
0
0
-127,285
0
-127,285
5.07
Closing Balance
1,812,294
48,833
533,512
194,239
733,586
3,322,464
80,672
3,403,136
5.05.02.04
5.05.02.06
5.06
Page 18 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Consolidated Financial Statements / Statement of Value Added
(Thousands of reais)
Account
Code
7.01
7.01.01
7.01.02
7.01.04
7.02
7.02.02
7.02.03
7.03
7.04
7.04.01
7.05
7.06
7.06.01
7.06.02
7.07
7.08
7.08.01
7.08.01.01
7.08.01.02
7.08.01.03
7.08.02
7.08.02.01
7.08.02.02
7.08.02.03
7.08.03
7.08.03.01
7.08.03.02
7.08.04
7.08.04.01
7.08.04.02
7.08.04.03
7.08.04.04
Accrued- Current
Year01/01/2011 to
Account Description
06/30/2011
Revenues
2,815,716
Sales of Goods, Products and Services
2,806,777
Other Revenues
8,520
Set up/Reversal of Allowance for Doubtful Accounts
419
Inputs Purchased from Third Parties
-1,578,296
Materials, Energy, Third Party Services and Other
-1,578,618
Loss /Recovery of Assets
322
Gross Value Added
1,237,420
Retentions
-93,239
Depreciation, Amortization and Depletion
-93,239
Net Value Added Produced
1,144,181
Value Added Received in Transfer
204,930
Equity Income
0
Financial Revenues
204,930
Total Value Added to be Distributed
1,349,111
Distribution of Value Added
1,349,111
Personnel
507,483
Direct Compensation
434,586
Benefits
47,867
F.G.T.S.
25,030
Taxes, Charges and Contributions
420,206
Federal
371,934
State
45,646
Municipal
2,626
Compensation of Third Party Capital
138,371
Interest
129,286
Rentals
9,085
Compensation of Equity
283,051
Interest on Equity Capital
89,810
Dividends
60,179
Retained Profits / Loss for the Period
126,132
Interest of non-controlling shareholders in
6,930
retained profits
Accrued - Prior
Year 01/01/2010
to 06/30/2010
2,318,548
2,317,809
3,980
-3,241
-1,255,207
-1,253,714
-1,493
1,063,341
-88,997
-88,997
974,344
159,855
1,204
158,651
1,134,199
1,134,199
414,864
349,919
43,049
21,896
363,461
325,087
34,956
3,418
119,707
112,593
7,114
236,167
67,934
66,437
100,548
1,248
Page 19 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
2Q11 Highlights
• Net Operating Revenue in the second quarter of 2011 was R$ 1,277.3 million, 26%
higher than that achieved in 2Q10;
• EBITDA reached R$ 215.6 million, up 23.9% in relation to prior year and up 30.8% in
relation to prior quarter. EBITDA was 16.9%, evidencing recovery in relation to 1Q11.
• Net income totaled R$ 154.6 million, with net margin of 12.1%, up 27.1% as compared
to 1Q11 and up 32.6% as compared to 2Q10.
• Investments in fixed assets totaled R$ 74.9 million in the first half of 2011.
• In May 2011, we communicated acquisition of the controlling interest in Pulverlux S.A.,
a company specialized in the production and sale of powder coatings in Argentina. We
also communicated opening of a new paint production plant in Mauá (São Paulo state)
and a paint distribution unit in Cabo de Santo Agostinho (Pernambuco state).
Gross Operating Revenue
Domestic Market
External Markets
External Markets in US$
Net Operating Revenue
Gross Operating Profit
Gross Margin
Quarterly Net Income
Net Margin
EBITDA
EBITDA Margin
Q2 2011
1,510,276
936,061
574,215
360,639
1,277,258
381,437
Q1 2010 Growth % Q2 2010 Growth % 06M11
1,343,137 12.4% 1,227,421 23.0% 2,853,413
862,863
831,210 12.6%
1,798,924
8.5%
480,274 19.6%
396,211 44.9%
1,054,489
288,211 25.1%
221,100 63.1%
648,850
1,126,117 13.4% 1,013,015 26.1% 2,403,375
310,662 22.8%
309,812 23.1%
692,099
29.9%
27.6%
154,557
121,564
12.1%
10.8%
215,579
164,808
16.9%
14.6%
30.6%
27.1%
116,522
32.6%
11.5%
30.8%
174,015
17.2%
23.9%
06M10
Growth %
2,358,967
21.0%
1,632,509
10.2%
726,458
45.2%
402,270 61.3%
1,944,922
23.6%
618,425
11.9%
28.8%
31.8%
276,121
236,167
11.5%
12.1%
380,387
355,765
15.8%
18.3%
16.9%
6.9%
Figures in R$ Thousands
Comments by Laurence Beltrão Gomes, Investor Relations Officer at WEG
In the 2Q11, we attained high revenue growth rates, together with recovery in operating margins
in relation to 1Q11. The highlight continued to be the robust growth in the external market, i.e. of
63% in the comparison in US dollars and 45% in Brazilian Reais, as compared to the same prior
year period.
The evident good fundamentals and growth prospects of Brazilian economy have attracted
financing and productive capital. This situation brings new challenges for WEG, with the
continuous appreciation of the Brazilian real and the increase in competition in Brazil. We have
succeeded in dealing with these challenges with intensive cost and expense management and
the permanent search for operating efficiency and higher industrial productivity. Concurrently, we
continue to pass through the recent cost increases to sales prices.
From a more strategic perspective, we continue to look for new markets and expand our product
portfolio, both through own technological innovation initiatives, as well as the acquisition of
companies or the establishment of strategic partnerships. We identified certain macro-trends that
will benefit those companies that, like WEG, are committed to the development of complete and
innovative solutions for efficient energy generation and management. In this respect, the recent
Page 20 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
publication of ISO 50.001 standard, which regulates energy management, confirms the
adequacy of our investments and brings ample business opportunities for the near future.
Economic Activity and Industrial Production
In the 2Q11, we noted economic activity stabilization in Brazil that, after the marked
recovery in 2010, has continued at relatively high levels. In the foreign markets in which
we operate, we continue facing different situations in various markets. In some of these
markets, we identified situations similar to those prevailing in Brazil, with relatively high
economic activity levels. Even so, inflationary pressures, mainly of basic products, such as
metal commodities, for instance, are being gradually neutralized.
At the same time there are building uncertainties about certain more developed
economies, which are still seeking to resolve the imbalances and excess indebtedness
accumulated in the last years of the last decade. In these cases, economic recovery has
been more difficult and our growth is through increase in our market share.
Analysis of the purchasing manager indexes (PMI) provides certain indication about
industrial production solidity in certain selected markets. The monthly Manufacturing ISM
index in the USA for June 2011 increase for the twenty-third time in a row. The expansion
in the 2Q11, however, was lower than that in the 1Q11, both for production and new
orders.
The Markit/BME Germany Purchasing Managers’ Index (PMI) has shown decrease in
manufacturing activity expansion pace. Although the seasonal decrease is normal, latest
data evidence a decrease in inflationary pressures and stabilization at a lower expansion
pace
In China, figures from HSBC China Manufacturing PMI™ for June presented the lowest
levels in 11 months, and almost unaltered production level.
In Brazil, industrial activity also showed the trend of expansion decrease, after a stronger
quarter. The growth in Brazilian industrial production accumulated through to May 2011
was 1.8% in relation to 2010. According to the Brazilian Central Bank survey, expected
industrial production growth in 2011 was 3.5% at the end of June, thus below the expected
expansion of 4.0% at the end of the 1Q11.
Industrial Indicators According to Categories of Use - May/2011
Page 21 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
Change (%)
Categories of Use
Month/Month Monthly
Capital Goods
1,7
Intermediary Goods
1,5
Consumer Goods
1,0
Durable Goods
2,7
Semi-durable and non-durable
0,0
General Industry
1,3
Source: IBGE, Research office, Industry Coordination
(*) Series with seasonal adjustments
7,1
2,4
2,1
2,3
2,0
2,7
Acummulated
On Year
12 months
6,4
11,5
1,4
4,7
0,9
2,3
2,3
2,4
0,5
2,3
1,8
4,5
The expansion of production of capital goods continued to be prominent, as in recent
months, with an increase of 6.4% accumulated in 2011 and accumulated increase of
11.5% in the past twelve months, again confirming the movement of investment in
production capacity expansion.
The Brazilian Association of Electrical and Electronic Industries (ABINEE) released its
cyclical survey conducted in May 2011, which also indicates a stabilization of growth in
orders and sales. Most of the companies surveyed indicated growth of sales in relation to
the previous year, but considered pace of business as below expectations. It is important
to consider the methodological limitations of this type of survey.
Appreciation of Brazilian Real continued in this quarter, with 11.1% appreciation in the
average exchange rate of Brazilian currency to U.S. dollar in relation to the average
exchange rate for the 2Q10. Over the past few years, we have developed management
practices to minimize the negative effects of currency appreciation on our business. This
includes active policy of import of raw materials and production abroad. These strategies,
however, do not offer perfect protection and, as such we are exposed to exchange
variation within short-term.
Additionally, even when we manage to minimize the direct effects of currency
appreciation, we can observe indirect effects, such as the reduced competitiveness of our
industrial customers in Brazil.
Gross Operating Revenue
In the second quarter of 2011 (2Q11) Gross Operating Revenue reached R$ 1,510.3
million, an increase of 23.0% compared to the second quarter of 2010 (2Q10) and of
12.4% in relation to the first quarter of 2011 (1Q11).
The growth of 23% was the result of general growth in business volume and increase of
prices of products sold, as well as the consolidation of revenues from businesses acquired
during 2010. Again, growth was hampered by the appreciation of Brazilian currency. The
average exchange rate of Brazilian Real accumulated appreciation of 11.1% against the
U.S. dollar in the 2Q11.
Page 22 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
In the 2Q11 Gross Operating Revenues are divided as follows:
•
Domestic Market: R$ 936.1 million, representing 62% of Gross Revenues, with
growth of 12.6% over 2Q10 and 8.5% compared to 1Q11;
•
External Markets: R$ 574.2 million, equivalent to 38% of Gross Revenues. The
comparison of figures in Reais shows growth of 44.9% over the same period last
year and of 19.6% over the previous quarter. Considering the average quotation of
US dollar, the comparison shows growth of 63.1% compared to 2Q10 and of
25.1% compared to 1Q11.
Gross Sales per Market (R$ million)
External Market
Domestic Market
1.131,5
1.227,4
29%
32%
71%
68%
Q1
Q2
1.510,3
1.504,6
1.419,2
1.343,1
36%
36%
64%
64%
64%
62%
Q3
Q4
Q1
Q2
38%
36%
2011
2010
Evolution and Distribution of Consolidated Gross Revenue per Geographic
Market (R$ Million)
Gross Operating Revenues
- Domestic Market
- External Markets
In US$
North America
South and Central America
Europe
Africa
Australasia
Q2 2011
1,510.3
936.1
574.2
Q1 2011
1,343.1
862.9
480.3
Change
12.4%
8.5%
19.6%
Q2 2010
1,227.4
831.2
396.2
Change
23.0%
12.6%
44.9%
360.6
288.2
25.1%
221.1
63.1%
33%
17%
24%
17%
10%
35%
14%
25%
16%
10%
-2 pp
3 pp
-1 pp
1 pp
0 pp
39%
17%
24%
8%
11%
-6 pp
0 pp
-1 pp
9 pp
-1 pp
Distribution of Consolidated Gross Revenue per Operating Area
Page 23 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
ingles
Electro-electronic Industrial Equipments
Energy Generation , Transmission and Distribution
Electric Motors for Domestic Use
Paints and Varnishes
Q2 2011 Q1 2011
60.1%
56.7%
22.8%
23.7%
10.7%
12.9%
6.4%
6.7%
%
Q2 2010
%
51.5%
3.5 pp
8.7 pp
-0.8 pp 24.5% -1.7 pp
-2.2 pp 17.1% -6.5 pp
-0.5 pp -0.4 pp 6.9%
Industrial Electrical and 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 the major world 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.
As mentioned heretofore, Brazilian industrial production has shown growth stabilization.
The incentives provided by the Investment Support Program (PSI) of the Brazilian
Development Bank (BNDES), fostering investments and production capacity increase,
have been important for this result.
In line with our expansion strategy in foreign markets, we continue seeking to extend
aggressively our presence. In relation to regional markets, our expansion encompasses
two drives:
•
Actions aiming at expansion in fast growing markets in which our presence is still
relatively small, such as in Asia. These actions have moderate short-term impacts,
but promising prospects within medium and long term;
•
Secure of additional share in markets in which we are already established and our
brand is already recognized.
As regards products, this expansion takes place as follows:
•
Introduction of new lines and models of electric motors, which are traditionally our
products with greater penetration in external markets. This move takes advantage
of the trend of increasing importance of energy efficiency, with the regulation of
minimum levels of efficiency in various countries and the introduction in late June
2011, of ISO 50001 standard specific for energy management;
•
Similarly, we have advanced in several markets with the expansion of the
product line, adding to the electric motors. We have invested in regional service
teams and in the introduction of local product customization capabilities, with
assembly of electrical panels for industrial automation. This is more common in
markets where the WEG brand is already recognized.
Generation, Transmission and Distribution of Power (GTD)
This business area includes the following products and services: generators for hydro and
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Release: 1 Notes to financial statements
thermal (biomass) power plants, water turbines (small hydro or PCH), transformers,
substations, control panels, and system integration services. We have made investments
in production capacity, as our new units of transformers in Mexico and high voltage motors
in India, to expand our presence beyond the Brazilian market, where we have strong
significant presence.
It is always important to note that in the GTD area in general and specifically in power
generation, investment maturing terms are longer, with slower investment decisions and
longer project and manufacture lead times. In view of this, new orders are only recognized
as revenue after a few months. Thus, the gradual improvement in new orders (sales),
which we have more clearly noted in 2011, will be converted into a gradual increase in
revenues as these orders are delivered.
We have developed over the years a strong expertise in the Brazilian power generation
market with renewable distributed energy. We have mastered power generation
technology for thermal biomass and small hydroelectric power plants. In 1Q11, we
announced the agreement with the Spanish company M. Torres for the transfer of
technology and creation of a joint venture to manufacture wind turbines in Jaraguá do Sul.
We are working to start production of the first units soon, with first deliveries planned for
2012.
We have promising prospects for investments in power generation in connection with the
energy auctions scheduled for August 2011, which should define important price
parameters and competitiveness for investors in power generation. These auctions will
include traditional renewable energy sources for delivery from 2014 onwards. Some 582
projects were present for the auctions, representing 27,567 MW. The highlights are the
wind energy projects (40% of total), natural gas (39%), biomass (16%), small hydroelectric
(3%) and large hydroelectric plants (2%).
The business of Transmission & Distribution (T & D), however, has maintained good sales
performance, resulting from greater diversity of clients and markets, especially businesses
with power substations for both industrial customers and for utilities and power generators.
Motors for Domestic Use
In this business area, our operations are mainly focused in Brazil, where we hold a
significant share in the market of single-phase motors for durable consumer goods, such
as washing machines, air conditioners, water pumps, among others.
This business area has a shorter business cycle, i.e., changes in consumer demand are
quickly transferred by the chain of production, with almost immediate impacts on
production and revenue.
This quarter we noted a certain slowdown in this segment as a result of restrictive credit
(macro prudential) measures implemented by the Brazilian Central Bank. Despite this
reduction, business production pace continued relatively high.
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Release: 1 Notes to financial statements
We believe, however, that economic conditions in the medium and long terms will remain
favorable, with the expansion in employment, disposable income and consumer credit
availability. After the current cycle of monetary tightening, the trend is that demand for
durable goods using our motors (washing machines, for example) will once again
increase, since there is ample room for increase in penetration of these goods in Brazil.
Paints and Varnishs
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.
In this area, we operate with the strategy of cross selling to customers from other
operating areas, always with high value added products. 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 develop new products and new segments.
In this sense, we announced in this quarter the acquisition of Pulverlux, an Argentine
manufacturer of powder coatings, which will increase our presence in that market,
expanding the product line and improving the production scale. We also announced a
manufacturing unit in Maua (SP) and one product distribution unit in Cabo de Santo
Agostinho (PE), to improve the logistics services in Brazil.
Operating Results (R$ Thousand)
(EBITDA according to the methodology of Circular Letter 01/07 issued by the
Brazilian Securities and Exchange Commission (CVM)
Net Operating Revenues
Cost of Goods Sold
Gross Operating Profit
Q2 2011
1,277.3
(895.8)
381.4
Q1 2011
1,126.1
(815.5)
310.7
EBITDA Margin
29.9%
27.6%
(-) Selling Expenses
(-) General & Administrative
(-) Profit Sharing
Result from Activities
(+) Depreciation & Amortization
EBITDA
(122.7)
(64.3)
(24.6)
169.8
45.7
215.6
(116.0)
(58.5)
(18.8)
117.3
47.5
164.8
EBITDA Margin
16.9%
14.6%
Change
13.4%
9.9%
22.8%
Q2 2010
1,013.0
(703.2)
309.8
Change
26.1%
27.4%
23.1%
30.6%
5.7%
9.9%
30.8%
44.8%
-3.7%
30.8%
(100.3)
(65.1)
(15.3)
129.2
44.8
174.0
17.2%
22.4%
-1.2%
60.9%
31.5%
2.0%
23.9%
Cost of Goods Sold
The Cost of Goods Sold (COGS) totaled R$ 895.8 million in 2Q11, up 27.4% over 2Q10
and 9.9% over 1Q11. Gross margin was 29.9%, down 0.7 percentage point compared to
2Q10, but with recovery of 2.3 percentage points in relation to 1Q11.
Gross Margin
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Release: 1 Notes to financial statements
After the high volatility in costs, mainly related to the prices of major raw materials like
copper and steel, we have been able to manage the pass through of these cost increases
into sales prices. This led to a reasonable gross margin expansion over the previous
quarter.
In comparison with the 2Q10, the decrease in gross margin is explained by the continuity
of the following negative factors: (i) lower dilution of processing costs due to the startup of
green field units (India, Linhares and transformers in Mexico), (ii) negative impacts of
currency appreciation, and (iii) the mix of products sold, with the still slow recovery of
energy generation business.
Costs of Raw Materials
In the 2Q11, average prices of copper on the spot market on the London Metal Exchange
(LME) rose 31% over the average in 2Q10, however down 5% compared to the average in
1Q11. According to the CRUspiGlobal index, steel prices in the international market rose
7.4% over 2Q10 and remained almost stable compared to 1Q11.
Much of our product line is comprised of customized products, whose sales prices are
constantly recalculated. Likewise, prices of raw materials like steel and especially copper,
are international or at least follow similar trends in different markets.
As such, the pass through of cost increases of these inputs into sales prices takes place
naturally and at a gradual pace in all the markets and high cost volatility, such as in the
previous quarter, is particularly negative.
The pass through to price of cost increases that started to be made in 1Q11 has already
generated positive impacts on gross margin, which is expected to continue in the next
quarters.
Selling, General and Administrative Expenses
The consolidated selling, general and administrative expenses (SG&A) represent 14.6% of
Net Operating Revenue in 2Q11, a decrease of 1.7 percentage point compared to 2Q10
and of 0.9 percentage point over 1Q11. In absolute value, operating expenses showed
growth of 13.1% over 2Q10 and 7.1% over the previous quarter.
Main impacts on EBITDA
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Release: 1 Notes to financial statements
326,1
43,3
18,6
FX Impact
on Gross
Revenues
190,3
Deduction
on Gross
Revenues
21,7
1,4
COGS
Selling
Expenses
174,0
Volumes,
Prices &
Product Mix
Changes
EBITDA Q2 10
General and
Administrative
Expenses
9,3
215,6
Profit Sharing
Program
EBITDA Q2 11
EBITDA and EBITDA Margin
As a result of the aforementioned effects, EBITDA in 2Q11 (calculated according to the
methodology defined by CVM Oficio Circular 01/07) totaled R$ 215.6 million, an increase
of 23.9% over 2Q10 and of 30.8% compared to prior quarter. EBITDA margin was 16.9%,
up 2.3 percentage points compared to 1Q11 and almost unaltered in relation to 2Q10.
Net Financial Income
Financial revenues totaled R$ 111.4 million in 2Q11(R$ 93.5 million in 1Q11 and R$ 87.4
million in 2Q10). Financial expenses totaled R$ 69.3 million (R$ 53.7 million in 1Q11 and
R$ 59.3 million in 2Q10).
In this quarter, net financial income was positive of R$ 42,1 million (positive of R$ 39.8
million in 1Q11 and positive of R$ 28.1 million in 2Q10).
Income Tax and Social Contribution
The provision for Income Tax and Social Contribution Tax on Net Profit in 2Q11 was R$
58.9 million (R$ 40.1 million in 1Q11 and R$ 40.8 million in 2Q10). Additionally, there was
credit accounting of R$ 10.9 million in Deferred Income Tax.
Net Income
As a result of the effects discussed above, net income for 2Q11 was R$ 154.6 million, an
increase of 27.1% compared to 1Q11 and of 32.6% over the prior year. The net margin of
the quarter was 12.1%, an increase of 1.3 percentage point compared to 1Q11 and of 0.6
percentage point over 2Q10.
Operating Cash Flow
Cash flow from operating activities was R$ 356.6 million in the first half of 2011, a
decrease of 17.4% over the first half of 2010, due to higher need of working capital for
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Release: 1 Notes to financial statements
continuous expansion of activities. The smaller amounts paid as income tax and CSLL and
the increase in profit sharing have also contributed.
Cash flow from investing activities
The investment activities consumed R$ 325.3 million in the first half of 2011, with an
emphasis on investments in long-term securities. The amount is 31.3% higher than that for
the first half of 2010. Investments in fixed assets will probably be lower in 2011 than in
2010, since we will focus on use of the capacity of the new production units (India and
Linhares) and on additional investments for the production of wind turbines in Jaraguá do
Sul.
Cash flow from financing activities
Financing activities generated R$ 90,3 million, a decrease of 40% compared to the first
half of 2010, with new raising of short and long term debts and payment of dividends and
interest on equity capital declared during the second half of 2010.
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Release: 1 Notes to financial statements
Cash Flows
356,6
2.553,0
Operating
325,3
90,3
Investing
Financing
Cash 4Q10
2.674,6
Cash 2Q11
Investments
Investments in fixed assets for expansion and modernization of production capacity
amounted to R$ 74.9 million in the first half of 2011, and 86% are going to industrial and
other facilities in Brazil and the rest of the production units and other subsidiaries abroad.
With the recent start-up of two new production units, the high and medium voltage motors
and generators plant in Hosur, in India, as well as of commercial motors plant in Linhares
(ES), we estimate that investments in fixed assets in 2011 will be lower than the usual
level. We expect that investments in modernization and expansion of production fixed
assets will total R$ 193 million in 2011.
Investments in Fixed Assets (R$ million)
Outside Brazil
Brazil
61,4
34,2
73,8
43,7
53,7
44,1
13,0
2,0
27,2
30,1
40,7
42,1
Q1
Q2
Q3
Q4
2010
41,1
33,8
2,4
8,2
38,8
25,6
Q1
Q2
2011
Page 30 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
Debt and Cash Position (R$ Thousand)
CASH & EQUIVALENT
- Current
- Long Term
DEBT
- Current
- Long Term
NET CASH (DEBT)
Junho 2011
June 2011
2,900,694
2,674,637
226,057
2,678,393
1,111,282
1,567,111
222,301
Dezembro 2010
December 2010
2,552,996
2,552,996
0
2,418,943
1,018,995
1,399,948
134,053
Junho 2010
June 2011
2,463,531
2,463,531
0
2,187,124
741,233
1,445,891
276,407
Net Cash
At June 30, 2011, cash (cash and short and long term financial investments) totaled R$
2,900.7 million and gross financial debt totaled R$ 2,678.4 million, resulting in a net cash
position of R$ 222.3 million (net cash of R$ 276.4 million at June 30, 2010). Cash is
invested mainly in Brazilian currency denominated financial instruments referenced to the
Interbank Deposit Certificate (CDI), in first-tier banks.
According to the maturity, gross debt is divided between:
•
Short-term debt, totaling R$ 1,111.3 million (41% of total), represented by shortterm portion of loans from BNDES and other development agencies, mostly in local
currency, and trade finance related transactions denominated in foreign currencies
and for working capital financing of subsidiaries abroad, denominated in the
respective currencies of each country.
•
Long-term debt, totaling R$ 1,567.1 million (59% of total), mainly represented by
financing from BNDES and other development agencies, mostly in local currency,
and, to a smaller extent, by working capital financing of subsidiaries abroad in
respective currency of each country. The duration of the long-term portion is 27.4
months.
According to the reference currencies, the total debt can be divided into:
•
Denominated in Reais, totaling R$ 1,937.0 million (72% of total), mainly
represented by financing from BNDES and other development agencies. The
weighted average cost of debt denominated in Reais is approximately 6.0% p.a.
Floating rate contracts are indexed mainly by the Long-Term Interest Rate (TLJP).
The duration of the portion denominated in Reais is 20.9 months.
•
Denominated in US dollars, Euros and other currencies, totaling R$ 741.4 million
(28% of total), represented by working capital loans contracted by subsidiaries
abroad in local currencies and trade finance transactions (advances on foreign
exchange contracts or ACC), in Brazil. The duration of the portion in foreign
currencies is 13.1 months.
Page 31 of 60
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Release: 1 Notes to financial statements
Stock Performance WEGE3
The common shares issued by WEG, traded on BM&F Bovespa under the code WEGE3,
ended the last trading day of June 2011 quoted at R$ 17.80 with a nominal fall of 18.3% in
the year. Considering the dividends and interest on equity capital declared in the period,
the total return in the first half of 2011 was -17.1%.
The average daily volume traded in 2Q11 was R$ 8.3 million, 93% higher than in 2Q10.
Throughout the quarter 50,032 stock trades were carried out (25,976 stock trades in
2Q10), involving 27.6 million shares (15.3 million shares in 2Q10) and totaling R$ 515.3
million (R$ 266.4 million in 2Q10).
Evolution of Quotations and Quantities Traded
30,00
3.000
Ações Negociadas (mil)
WEGE3
25,00
Cotação WEGE3
15,00
10,00
1.000
Ações Negociadas (mil)
2.000
20,00
5,00
0
0,00
Performance adjusted by dividends and interest on equity
Dividends
In the first half of 2011, the Board of Directors approved the following compensation to
shareholders:
•
On March 22, as interest on stockholders’ equity (JCP), to shareholders on said
date, in the gross amount of R$ 42.4 million;
•
On June 21, as interest on stockholders’ equity (JCP), to shareholders on said
date, in the gross amount of R$ 47.4 million;
In addition, on July 21, the Board of Directors approved dividends related the net income
for the first half of 2011, in the total amount of R$ 60.2 million to the shareholders of record
on said date. These proceeds will be paid as from August 17, 2011.
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Release: 1 Notes to financial statements
Event
Interest on Stockholders’ Equity
Interest on Stockholders’ Equity
Dividends
Total
Board Meeting
Gross amount per
Date
Payment Date
share
22/03/2011
17/08/2011
R$ 0.06823529
21/06/2011
17/08/2011
R$ 0.07647059
21/07/2011
17/08/2011
R$ 0.09700000
R$ 0.24170588
Net amount per
share
R$ 0.05800000
R$ 0.06500000
R$ 0.09700000
R$ 0.22000000
We maintain the policy of declaring quarterly interest on equity, in addition to twiceannually declared dividends, based on profits for the period. Amounts declared as
remuneration to shareholders in the first half of 2011 represent 54.3% of net income for
the period.
1H11
Dividends
Interest on Stockholders' Equity
Gross Total
Per Share
Net Earnings
Total Dividends / Net Earnings
60.2
89.8
150.0
0.2417
276.1
54.3%
1H10
66.4
67.9
134.4
0.2164
236.2
56.9%
%
11.6%
11.7%
Pulverlux Acquisition and new WEG Tintas plants
On May 11, we announced the acquisition of control of Pulverlux SA, a company
specializing in the manufacture and sale of powder coatings in Argentina. Additionally, we
announced the opening of a new manufacturing unit in Mauá (SP) and a distribution unit in
Cabo de Santo Agostinho (PE), units already included in previously announced and
approved capital budget.
Pulverlux operates in the architectural, aluminum profiles, electrical panels, electrical
home appliances, auto parts, machinery and equipment segments for over 10 years. With
42 employees and manufacturing area of 10,000 square meters in Buenos Aires, the
company had annual revenues around U$ 7 million.
At the same time, the new coatings manufacturing unit in Mauá (SP) seeks, in response to
increased investment in exploration of oil reserves in the pre-salt layer, to improve
services logistics in the Southeast region as well as to increase the liquid coatings
production capacity. The unit of Cabo de Santo Agostinho (PE), located 25 km from the
port of Suape and 17 km from Recife, will facilitate distribution in the North and Northeast
of Brazil.
These investments, in addition to increasing the production capacity, aim at improving
distribution in Brazil and expanding our operations in Latin America. WEG Tintas, a leader
in the national market for powder coatings, has manufactured and traded liquid, industrial,
anticorrosive and marine coatings for different market segments since 1983. With
headquarters in Guaramirim (SC), the unit has more than 600 employees in Brazil.
Page 33 of 60
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Release: 1 Notes to financial statements
Notes to financial statements (individual and consolidated)
At June 30, 2011
(In thousands of reais, except if otherwise indicated)
1. Company Information
WEG S.A. (the “Company”) is a publicly traded company with main place of business
in Jaraguá do Sul - SC, Brazil, holding company member of the WEG Group, and its
business purpose is the production, manufacture, marketing, export and import of: (i)
industrial, electromechanical and electronic systems, electric rotating machines,
machinery and equipment in general, appliances for production, distribution and
conversion of electrical energy, electrical material, programmable controllers, parts
and components of machinery, appliances and equipment in general, hydraulic
turbines of all types and capacities, and (ii) resins in general, dyeing materials,
substances and products of plant and chemistry origin. The operations are performed
through manufacturing facilities located in Brazil, Argentina, Mexico, Portugal, South
Africa, China and India.
The Company has shares traded on BM&F Bovespa under the code “WEGE3” and
has been listed since June 2007 in the special segment of corporate governance
called New Market.
The Company has American Depositary Receipts “ADRs” that are traded on over-thecounter (OTC) market, in the United States under the symbol WEGZY.
2. Accounting policies
The financial statements have been prepared assuming the historical cost as the
basis of value, except where otherwise indicated.
Preparation of financial statements requires the use of certain accounting estimates
and judgment by the Company’s management, the most relevant of which is
disclosed in Note 3.
The authorization to complete the preparation of these financial statements occurred
in the executive committee meeting held on July 11, 2011.
There were no changes in the policies of these financial statements in relation to the
December 31, 2010 financial statements.
3. Estimates and Assumptions
Preparation of the financial statements involves the use of estimates. These
estimates took into account the experience of past and current events, assumptions
relating to future events and other objective and subjective factors. Significant items
that are subject to such estimates and assumptions include:
a) review of the economic useful lives of fixed assets and their recovery in
operations;
b) credit risk analysis to determine the allowance for doubtful accounts;
c) measurement of fair value of financial instruments;
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Release: 1 Notes to financial statements
d) commitments to post-employment benefits for employees; and
e) deferred income tax asset on income and social contribution tax losses, as
well as the analysis of other risks in determining other provisions, including for
contingencies arising out of administrative and judicial proceedings and other
assets and liabilities at balance sheet date.
The settlement of transactions involving these estimates may result in amounts
different from those recorded in the financial statements due to the uncertainties
inherent to the estimate process. These estimates and assumptions are reviewed
periodically.
4. Cash and Cash Equivalents
a) Cash and Banks
b) Financial investments
In Local Currency:
Bank Deposit Certificate (CDB)
Financial Bills (LF)
In Foreign Currency:
Certificates of Deposits Abroad
Other balances held abroad
TOTAL
Short-term
Long-term
Parent company
06/30/11
12/31/10
127
9
714,882
689,935
714,882
689,965
488,825
689,935
226,057
715,009
689,944
488,952
689,944
226,057
-
Consolidated
06/30/11
12/31/10
60,694
53,971
2,840,000
2,499,025
2,803,194
2,454,302
2,577,137
2,454,302
226,057
36,806
44,723
23,283
29,685
13,523
15,038
2,900,694
2,552,996
2,674,637
2,552,996
226,057
-
Investments in Brazil
• At June 30, 2011, CDBs and LFs are remunerated at the rates of 100% to 107.5%
of CDI (100% to 106% of CDI at December 31, 2010).
Investments Abroad
•
In Euro with interest of 1.1% to 1.7% p.a. in deposit certificates issued by
foreign financial institutions in the original amount of EUR 8,501, whose
balance at June 30, 2011 was R$ 19,270.
•
In US dollars plus interest from 0.02% to 0.3% p.a., in deposit certificates
issued by foreign financial institutions in the original amount of US$ 2,540,
whose balance at June 30, 2011 was R$ 4,013.
•
In the original currency with interest from 3.9% to 5.1% p.a. whose balance at
June 30, 2011 was R$ 13,523.
Except for investments in financial bills that mature after 365 days, other investments
are readily redeemable.
5. Accounts receivable from customers
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Release: 1 Notes to financial statements
Consolidated
06/30/11
12/31/10
a) Balance breakdown:
Domestic market
639,518
627,619
Foreign market
481,475
431,978
1,120,993
1,059,597
SUBTOTAL
Advances on Export Contracts - ACE
Present value adjustment
Allowance for doubtful accounts
TOTAL
b) Effective losses on accounts receivable from customers for the period
(10,908)
-
(3,103)
(1,571)
(11,135)
(13,314)
1,095,847
1,044,712
52
1,974
c) Trade notes maturity:
1,019,260
902,185
Overdue: For up to 30 days
Falling due
42,960
58,207
For more than 30 days
58,773
99,205
1,120,993
1,059,597
TOTAL
6. Inventories
Consolidated
06/30/11
12/31/10
Finished products
240,607
192,354
Products in progress
256,158
215,166
Raw materials and others
195,179
193,385
Imports in transit
24,496
33,118
Provision for obsolescence
(9,352)
(9,200)
Total inventories in domestic market
707,088
624,823
Finished products
302,910
292,649
Products in progress
26,608
39,430
Raw materials and other
61,881
62,827
Provision for obsolescence
(12,453)
(10,777)
Total inventories in foreign market
378,946
384,129
1,086,034
1,008,952
TOTAL
Changes in the provision for obsolescence:
Balance at 12/31/10
Inventories written off permanently
Constitution of provision
Balance at 06/30/11
(19,977)
3,671
(5,499)
(21,805)
Inventories are insured and their coverage is determined by the values and level of
risk involved. During the periods ended June 30, 2011 and June 30, 2010 the
amounts of R$ 1,711,276 and R$ 1,326,497, respectively were recognized as cost of
products sold. At June 30, 2011 cost of sales includes the amounts of R$ 3,671,
related to inventory written off permanently and R$ 5,499 related to the constitution of
provision for obsolescence.
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7. Taxes recoverable
State VAT on fixed asset purchases
Value Added Tax (IVA) from subsidiaries abroad
PIS/COFINS on purchases of fixed assets
ICMS
IPI
IRPJ/CSLL for offset
PIS/COFINS
Other
TOTAL
Short-term
Long-term
Parent company
06/30/11
12/31/10
6,349
6,125
6,349
6,125
6,349
6,125
-
Consolidated
06/30/11
12/31/10
24,745
29,743
37,722
39,919
18,447
26,630
18,425
20,150
13,943
9,031
9,152
3,123
13,540
4,077
4,469
6,170
140,443
138,843
127,932
107,182
12,511
31,661
Credits will be realized by the Company and its subsidiaries through refund and/or
offset against taxes and contributions.
8. Related parties
The commercial transactions for the purchase and sale of products, raw materials
and hiring of services, as well as loans among group companies and compensation of
management were carried out as under:
Parent company
06/30/11 12/31/10
Balance sheet accounts
Noncurrent Assets
Management of financial resources
Hidráulica Industrial S.A - HISA
Equisul S.A.
Current liabilities
Contracts with managers
Noncurrent liabilities
Management of financial resources
WEG Equipamentos Elétricos S.A.
RF Reflorestadora S.A.
Consolidated
06/30/11
12/31/10
-
-
2,909
-
-
-
2,670
239
-
-
-
1,621
1,621
1,570
1,570
5,142
4,783
5,003
139
4,644
139
-
-
Page 37 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
Parent company
06/30/11
06/30/10
Consolidated
06/30/11
06/30/10
Income statement accounts
Management compensation:
a) Fixed (fees)
Board of Directors
Executive Committee
849
561
288
793
529
264
8,401
801
7,600
8,077
829
7,248
b) Variable (profit sharing)
Board of Directors
Executive Committee
398
263
135
224
150
74
2,326
368
1,958
1,167
227
940
Additional information:
a) Commercial operations
The transactions of purchase and sale of inputs and products are carried out under
the same conditions with unrelated third parties, prevailing cash sales.
b) Management of financial resources
The financial and commercial operations between Group companies are recorded as
book account, complying with the requirements of the Group’s convention, without
compensation.
The credit/debt contracts entered into with managers are recorded in book account
bearing from 95% to 100% of CDI variation.
c) Provision of services and other covenants
WEG Equipamentos Elétricos S.A. entered into an agreement for “Guarantees and
Other Covenants” with Hidráulica Industrial S.A Ind. e Com - HISA, for WEG to be
guarantor in credit operations and provide guarantee to customers (Performance
Bond, guarantee insurance, etc.).
d) Guaranties and sureties
WEG S.A. provided guarantee and surety to foreign subsidiaries, in the amount of
US$ 183.7 million (US$ 142.0 million at December 31, 2010).
e) Management compensation
Members of the Board of Directors were paid the amount of R$ 801 and the
Executive Committee the amount of R$ 7,600, for their services, representing the
total amount of R$ 8,401.
Provided that the result of activity on capital invested is at least 10%, it is expected
that interest from 0% to 2.5% of net income will be distributed to managers. The
provision is recognized in the income statement for the period in the amount of R$
2,326, in other operating expenses account. The Directors and Officers receive
additional corporate benefits, such as medical and dental assistance, life insurance,
Page 38 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
supplementary pension benefits, among others.
9. Deferred taxes - IRPJ/CSLL
Deferred tax credits and debits of Income Tax and Social Contribution were
determined in accordance with the pronouncement of the Brazilian Institute of
Independent Auditors (IBRACON), approved by CVM Rule No. 371/02 and CVM Rule
No. 599/09, which approved Technical Pronouncement CPC 32, which addresses
taxes on profit.
a) Balance breakdown
Parent company
06/30/11
Noncurrent assets
Consolidated
12/31/10
06/30/11
12/31/10
626
602
89,776
78,810
IRPJ tax losses
-
-
4,980
4,580
CSLL tax losses
-
-
704
986
Temporary differences:
Provision for contingencies
-
-
24,345
24,239
512
475
8,720
9,482
Losses on receivables from customers
-
-
1,956
1,814
Losses on slow-moving inventories
-
-
4,789
3,128
Indemnification for labor and other contract termination
-
-
8,801
6,259
Freight and sales commissions
Accounts payable (electric energy, technical assistance and
other)
-
-
4,527
2,772
-
-
11,199
7,052
Employee profit sharing
-
-
7,173
5,412
114
127
12,582
13,086
3,794
3,820
411,203
415,318
Taxes questioned in court
Other temporary additions
Noncurrent liabilities
Incentive accelerated depreciation - Law No. 11196/05
Fixed assets deemed cost
Transition tax regime adjustment
Other temporary exclusions
-
-
3,035
2,835
3,760
3,797
358,872
371,463
34
23
47,902
38,880
-
-
1,394
2,140
b) Estimated realization term
Management estimates that deferred assets arising from temporary differences will
be realized in proportion to realization of contingencies, losses and projected
obligations.
In relation to deferred tax credits calculated on income and social contribution tax
losses, management estimates that they will be realized within the next 3 years.
Page 39 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
10. Investments
10.1. Investments in subsidiaries
Adjusted
Shareholders’
Equity
Net
income for the
period
Ownership interest ( %)
Direct
WEG Equipamentos Elétricos S.A.
RF Reflorestadora S.A
WEG Tintas Ltda.
WEG Amazônia S.A.
WEG Administradora de Bens Ltda.
WEG Logística Ltda.
WEG Linhares Equips Elétricos S.A.
WEG Drivers e Controls Ltda
WEG Partner Aerogeradores Ltda
Hidráulica Indl.S.A. Ind. e Com.
Agro Trafo S.A.
Sensores Eletrônicos Instrutech Ltda.
Logotech Sensores Eletrônicos Ltda.
Equisul Indústria e Comércio Ltda
WEG Equipamientos Electricos S.A.
WEG Chile S.A.
WEG Colômbia Ltda.
WEG Eletric Corp.
WEG Service CO.
WEG Overseas S.A.
WEG México S.A. de C.V.
WEG Transformadores México S.A. de C.V.
Voltran S.A de C.V.
WEG Indústrias Venezuela C.A.
Zest Electric Motors (Pty) Ltd.
WEG Nantong Electric Motors
Manufacturing CO Ltd.
WEG Middle East Fze.
WEG Industries (India) Private Ltd.
WEG Electric (India) Private Limited
WEG Electric Motors Japan CO. Ltd.
WEG Singapore Pte. Ldt.
WEG Germany Gmb.
WEG Benelux S.A.
WEG Ibéria S.L.
WEG France S.A.S
WEG Electric Motors (UK) Ltd.
WEG Itália S.R.L.
WEG Euro Ind. Electrica S.A.
WEG Germany NN.
WEG Scandinavia AB.
WEG Austrália Pty Ltd.
Pulverlux S.A.
EPRIS Argentina S.R.L.
TOTAL
(*) Equity pickup adjusted by unearned income.
06/30/11
Indirect
Direct
Equity Pickup
12/31/10
Indirect
06/30/11
06/30/10
Investment book value
06/30/11
12/31/10
2,512,206
237,161
60,468
41,388
10,557
103
40,370
10
10
50,388
262
912
340
6,916
33,336
17,211
7,452
67,984
(117)
20
72,282
28,747
38,376
2,426
90,144
230,703
6,958
9,547
2,764
3,481
(3,369)
2,474
(20)
382
60
(1,200)
4,722
1,224
959
9,007
(250)
(40)
339
(1,644)
(2,381)
(1,513)
15,937
99,95
99,95
99,91
0,02
99,00
0,01
0,10
0,12
10,44
8,00
1,00
0,79
100,00
0,00
-
0,09
99,98
100,00
100,00
99,99
1,00
99,90
61,92
99,99
99,99
99,90
99,88
89,55
92,00
99,00
99,21
100,00
99,99
60,00
60,00
99,99
50,68
99,95
99,95
99,91
0,02
0,01
0,10
10,44
8,00
0,99
0,79
100,00
-
0,04
99,98
100,00
100,00
99,99
60,94
99,99
99,99
99,90
89,55
92,00
99,00
99,21
100,00
99,99
60,00
60,00
99,99
50,68
228,642
6,955
9,511
1
(2)
441
98
9
72
(40)
-
(*) 218,504
16,951
1
479
212
9
48
(7)
-
2,511,054
237,041
60,412
7
1
10
9
3,481
1,377
74
536
20
-
2,459,328
247,730
56,062
6
3,324
1,562
65
499
61
1
-
15,078
25
93,494
305
343
(361)
30,138
20,914
626,671
4,486
6,507
6,353
27,393
402
2,333
19,266
1,053
421
(2,877)
(417)
(5,497)
(21)
28
(207)
2,281
3,513
21,941
1,606
619
(380)
1,566
488
(819)
2,305
-
4,99
0,00
0,07
5,74
-
100,00
100,00
99,99
94,99
100,00
100,00
100,00
99,99
100,00
100,00
100,00
99,93
94,26
100,00
100,00
100,00
100,00
100,00
4,99
0,07
5,74
-
100,00
100,00
99,99
94,99
100,00
100,00
100,00
99,99
100,00
100,00
100,00
99,93
94,26
100,00
100,00
100,00
-
(5)
88
245,770
(2)
98
236,293
15
4
1,573
2,815,614
21
5
1,622
2,770,286
Page 40 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
10.2. Acquisitions
On May 5, 2011, the Company, through its subsidiary WEG Tintas Ltda, acquired
controlling interest in Pulverlux S.A. and EPRIS Argentina S.R.L, companies
specialized in the production and sale of powder coatings in Argentina.
10.3. Other investments
Refers to other investments recorded at cost of acquisition in the amount of R$ 931 at
June 30, 2011 (R$ 601 at December 31, 2010).
11. Fixed assets
The Company capitalized in the first half of 2011, borrowing costs in the amount of
R$ 595 (R$ 285 at December 31, 2010) related to construction in progress, in
accordance with CVM Rule No. 577/09. The costs are capitalized until the moment of
transfer of construction in progress to fixed assets in use account.
Land, construction and facilities
Equipment
Furniture and fixtures
Hardware
Construction in progress
Reforestation
Other
Subtotal
Accumulated
depreciation/depletion
Construction and facilities
Equipment
Furniture and fixtures
Hardware
Reforestation
Other
TOTAL
Parent company
06/30/11
12/31/10
15,972
15,973
15,973
15,973
Annual deprec.
rate (%)
02 to 03
05 to 20
07 a 10
20 a 50
-
(3,886)
12,087
(3,740)
12,233
Consolidated
06/30/11
12/31/10
1,034,090
993,110
2,346,823
2,304,279
60,153
60,199
65,717
60,125
57,555
52,011
47,969
47,552
43,734
84,500
3,656,041
3,601,776
(159,280)
(1,023,043)
(27,067)
(50,027)
(6,849)
(13,872)
2,375,903
(150,504)
(964,644)
(26,863)
(45,634)
(5,911)
(12,645)
2,395,575
a) Summary of Changes in Fixed Assets
Class of Fixed Assets
Land, construction and
facilities
Equipment
Furniture and fixtures
Hardware
Construction in progress
Reforestation
Other
TOTAL
Transfer
Deprec.
between
and
Exchange
12/31/2010 classes Acquisition Write-off Depletion Effect
06/30/11
842,606
1,339,635
33,336
14,491
52,011
41,641
71,855
2,395,575
38,121
16,733
(1,807)
1,790
(18,605)
(36,232)
-
1,939
35,011
6,906
622
26,146
416
3,898
74,938
(61)
(373)
(23)
(20)
(183)
(660)
(9,250)
(61,303)
(3,627)
(1,650)
(937)
(4,961)
(81,728)
874,810
1,455
(5,923) 1,323,780
33,086
(1,699)
15,690
457
57,555
(1,997)
41,120
29,862
(4,515)
(12,222) 2,375,903
b) Amounts provided as collateral – fixed assets were provided as collateral for loans,
financing and labor and tax suits in the amount of R$ 14,319 – consolidated at
June 30, 2011 (R$ 14,810 at December 31, 2010).
Page 41 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
12. Intangible assets - Consolidated
Amortization/#
of years
Projects:
- Development of products and
processes
Information technology
Software license
Other
Subtotal
Goodwill on the acquisition of
subsidiaries
TOTAL
Cost
Accumulated
Amortization
06/30/11
12/31/10
5
5
5
5
69,506
79,441
51,002
27,081
227,030
(66,316)
(65,658)
(40,519)
(16,859)
(189,352)
3,190
13,783
10,483
10,222
37,678
6,379
19,239
8,164
10,088
43,870
-
158,383
385,413
(21,386)
(210,738)
136,997
174,675
140,125
183,995
a) Summary changes in intangible assets:
Projects:
- Development of products and processes
- Information technology
Software license
Other
Subtotal
Goodwill on acquisition of subsidiaries
TOTAL
12/31/10
Additions
Amort.
Other (*)
06/30/11
6,379
19,239
8,164
10,088
43,870
140,125
183,995
3,941
1,378
5,319
4,095
9,414
(3,189)
(5,456)
(1,622)
(1,244)
(11,511)
(11,511)
(7,223)
(7,223)
3,190
13,783
10,483
10,222
37,678
136,997
174,675
(*) Reclassification of credit right on the acquisition of subsidiary ZEST Electric Motors (Pty) Ltd., formerly recognized
as goodwill.
b) Schedule of amortization of intangible assets (except goodwill):
2011
2012
2013
2014
2015/2016
TOTAL
11,502
13,078
3,824
2,754
6,520
37,678
c) Goodwill on acquisition of subsidiaries is no longer amortized for accounting
purposes but only for tax purposes. In view of this, deferred income tax liability was
recognized by the Company (Note 9).
13. Loans and financing
On June 30, 2011, financing raised in foreign currency comprises the Advances on
Exchange Contracts (ACC’s) in the amount of R$ 289.6 million and BNDES-FINEM in
currency basket in the amount of R$ 0.2 million in the short-term and R$ 0.2 million in
the long-term and BNDES-FINEM in dollar in the amount of R$ 9.7 million in shortterm and R$ 50.0 million in the long term.
Page 42 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
The financing taken by subsidiaries abroad, for working capital, is in US dollars
and/or in the currency of each country, amounting to R$ 310.9 million in the shortterm (R$ 258.6 million at December 31, 2010) and R$ 41.6 million in long-term (R$
88.3 million at December 31, 2010), equivalent to US$ 225.8 million (US$ 208.0
million at December 31, 2010).
Financing is secured by sureties and chattel mortgage.
Type
Annual Charges
Consolidated
06/30/11
12/31/10
IN BRAZIL
SHORT-TERM
Working capital (ACC's) Interest of 0.9% to 3.1% p.a. (+) FX variation
800,366
289,647
760,349
276,411
Working capital
TJLP (+) 1.4% to 5.0% p.a.
412,222
388,700
Working capital
Working capital
Currency basket (+) 0.8% to 2.5% p.a.
Interest of 4.5% to 7.0% p.a.
182
83,393
2,470
82,560
Working capital
Working capital
Fixed assets
LONG-TERM
Working capital
Fixed assets
Working capital
Working capital
US dollar (+) 1.4% to 1.8% p.a.
US$ (+) Libor (+) 3.25% p.a.
TJLP (+) 1.0% a 5.0% p.a.
9,705
58
5,159
1,525,493
502,969
49,105
241
868,767
4,801
67
5,340
1,311,643
488,272
41,500
424
662,216
Fixed assets
Working capital
Working capital
TJLP (+) 1.0% to 5.0% p.a.
US dollar (+) 1,4% to 1,8% p.a.
US$ (+) Libor (+) 3.25% p.a.
15,427
49,956
39,028
17,700
59,876
41,655
310,916
55,705
78,645
44,302
24,709
2,324
105,231
41,618
13,937
332
27,335
14
258,646
40,524
72,358
8,059
18,277
14,058
105,370
88,305
51,079
302
32,338
4,586
1,111,282
1,567,111
1,018,995
1,399,948
06/30/11
396,525
637,466
329,529
118,597
84,994
1,567,111
12/31/10
637,061
429,750
159,226
96,443
77,468
1,399,948
ABROAD
SHORT-TERM
Working capital
Working capital
Working capital
Working capital
Working capital
Working capital
LONG-TERM
Working capital
Working capital
Working capital
Working capital
TJLP (+) 1.4% to 5.3% p.a.
UFIR (+) 1.0% to 4.0% p.a.
Currency basket (+) 0.8% to 2.5% p.a.
Interest of 4.5% to 9.0% p.a.
EURIBOR (+) 1.2% to 1.6% p.a.
LIBOR (+) 1.1% to 2.5% p.a.
90% of PBOC (4.5% to 5.0%) p.a.
BBSY (+) 2.3% p.a.
JIBAR (+) 3.5% p.a.
Interest of 0.8% to 10,5% p.a.
90% of PBOC (4.5% to 5.0%) p.a.
BBSY (+) 2.3% p.a.
JIBAR (+) 3.5% p.a.
Interest of 5.0% to 11.7% p.a.
TOTAL SHORT-TERM
TOTAL LONG-TERM
Maturity of financing and long-term loans:
2012
2013
2014
2015
2016 onwards
TOTAL
Page 43 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
14. Provisions
The Company and its subsidiaries are parties to administrative and judicial
proceedings of labor, civil and tax nature arising from normal activities of their
business. The respective allowances were constituted for proceedings whose
chances of loss were considered “probable” based on the estimate of value in risk
determined by the Company’s legal counsel. The Company's management estimates
that the provision for contingencies constituted is sufficient to cover any losses from
the proceedings in progress.
a) Balance of the provision for contingencies:
(i) Tax:
- IRPJ and CSLL
- INSS
- Other
(ii) Labor
(iii) Civil
(iv) Other
TOTAL
(i.1)
(i.2)
(v) Related judicial deposits
- Tax
- Other
Parent company
06/30/11
12/31/10
1,508
1,397
1,508
1,397
229
229
Consolidated
06/30/11
12/31/10
36,760
37,018
10,049
10,049
21,722
21,007
4,989
5,962
31,166
29,189
57,800
58,182
2,551
1,995
1,737
1,626
128,277
126,384
465
465
-
321
321
-
21,535
17,664
3,871
20,575
16,755
3,820
b) Statement of changes in the period - consolidated
a) Tax
b) Labor
c) Civil
d) Other
TOTAL
12/31/10
37,018
29,189
58,182
1,995
126,384
Additions
5,096
2,407
7,327
956
15,786
Interest
304
224
528
Write-off
(5,354)
(3,342)
(400)
(9,096)
Reversals
(734)
(4,591)
(5,325)
06/30/11
36,760
31,166
57,800
2,551
128,277
c) The provisions constituted mainly refer to:
(i) Tax contingencies
(i.1) The Company maintains a provision for the proceeding referring to IPC
difference (51.82%) of January 1989 – Summer Plan. The decision is
favorable to the limit of the index of 35.58%.
(i.2) It refers to the Contributions due to the Social Security. The litigation
refers to social security charges levied on the pension fund, profit
sharing, education funding tax and others.
Page 44 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
(ii) Labor contingencies
The Company and its subsidiaries are defendants in labor claims primarily
involving discussion about health and risk exposure, among others.
Based on payment history and legal counsel opinion, the provision of
R$ 31,166 at June 30, 2011 (R$ 29,189 at December 31, 2010) is deemed
sufficient to cover probable losses.
(iii) Civil contingencies
They correspond primarily to civil lawsuits, including pain and suffering,
aesthetic damage, occupational diseases and indemnities arising out of
occupational accidents. The Company’s Management, based on payment
history and legal counsel opinion, has constituted a provision of R$ 57,800 at
June 30, 2011 (R$ 58,182 at December 31, 2010) which is deemed sufficient
to cover probable losses.
(iv) Restricted judicial deposits
IRPJ/CSLL – summer plan
Other
TOTAL DEPOSITS BOUND
- Judicial deposits not bound
TOTAL JUDICIAL DEPOSITS
Parent company
06/30/11
12/31/10
465
321
465
321
465
321
Consolidated
06/30/11
12/31/10
13,195
13,195
8,340
7,380
21,535
20,575
1,161
1,122
22,696
21,697
The judicial deposits not bound to the contingencies are awaiting a decree
allowing withdrawal thereof.
At June 30, 2011, the Company and its subsidiaries are parties to other
litigation, whose chances of loss were considered “possible”, and for which no
provision was constituted for contingencies. The estimated amount of such
litigation relates to the tax proceedings totaling R$ 2,115 (R$ 2,258 at
December 31, 2010).
15. Shareholders’ Equity
a) Capital
The Common and Special Shareholders’ Meeting of April 26, 2011 approved
Company capital increase from R$ 1,812,294 to R$ 2,265,367, without change in the
number of shares, using the following reserves:
- Legal reserve - Goodwill reserve - Capital budget reserve -
R$
R$
R$
53,409
44,930
354,734
Page 45 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
Company capital at June 30, 2011 consists of 620,905,029 common, book-entry and
registered shares, with no par value, all with voting rights, including 500,000 treasury
shares, as mentioned in Note 16.
b) Compensation to shareholders
b.1) Interim interest on equity capital
In the first half of 2011, the Company declared interest on equity capital of R$
89,811 before mandatory retention of withholding income tax at source (R$
76,339 net) corresponding to R$ 0.145 per share (R$ 0.123 net) according to the
following approvals from the Board of Directors:
I. On March 22, 2011, the gross amount of R$ 42,368 (R$ 36,012 net)
corresponding to R$ 0.058 per share, after deducting withholding income tax
at 15%, on the terms of paragraph 2, article 9, of Law No. 9249/95, except for
corporate shareholders that are dispensed with such taxation;
II. On June 21, 2011, in the gross amount of R$ 47,443 (R$ 40,326 net)
corresponding to R$ 0.065 per share, after deducting withholding income tax
at 15%, on the terms of paragraph 2, article 9, of Law No. 9249/95, except for
corporate shareholders that are dispensed with such taxation;
b.2) Interim Dividends
The Board of Directors approved payment of interim dividends calculated on the
results computed for the first half, in the amount of R$ 60,179 (R$ 0.097 per
share).
Interest on equity capital, on the terms of article 37 of the Company’s charter and
article 9 of Law No. 9249/95 is included in mandatory dividends and will be paid in
relation to 620,405,029 shares as from August 17, 2011.
The total amount of net interim dividends and interest on equity capital payable
aggregates R$ 136.5 million, R$ 0.22 per share, equivalent to a 49.4% of net
income for the period.
16. Treasury Stock
As per the minutes of the Company’s Board of Directors’ meeting held on April 26,
2011 and with the objective of supporting its Stock Option Plan, it was authorized to
acquire up to 500,000 common shares issued by the Company. Up to June 30, 2011,
500,000 common shares were acquired, in the amount of R$ 10,055, at average cost
of R$ 20.11 per share.
Shares acquired will be maintained in treasury for use in connection with exercise of
share purchase options by beneficiaries of the Company’s stock options plan or
subsequent cancellation or disposal.
Page 46 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
17. Operating Revenue
CATEGORY OF GROSS REVENUE
Sale of products
Sale of services
Present value adjustment
Other sales
Total gross revenue
Consolidated
06/30/11
06/30/10
2,783,703
2,323,843
84,273
(24,111)
9,548
2,853,413
44,830
(22,525)
12,819
2,358,967
COMPOSITION OF NET REVENUE
Gross operating revenue
Domestic market
Foreign market
Deductions (Taxes and returns)
Consolidated
06/30/11
06/30/10
2,853,413
2,358,967
1,798,924
1,632,512
1,054,489
726,455
(450,038)
(414,045)
Net operating revenue
2,403,375
1,944,922
18. Operating expenses by nature
The Company has chosen to present the consolidated statement of income by
function. As required by IFRS, it presents below the detailed consolidated statement
of income by nature:
Consolidated
06/30/11
06/30/10
NATURE OF EXPENSE
Depreciation and amortization
Personnel expenses
Raw materials and use and consumption materials
Freight and insurance
Other expenses
(2,116,669)
(93,239)
(553,276)
(1,108,000)
(55,308)
(306,846)
(1,675,629)
(88,997)
(467,686)
(807,788)
(42,378)
(268,780)
FUNCTION OF THE EXEPENSE
Cost of products and services sold
Selling expenses
General and administrative expenses
Management fees
Other operating expenses
Equity income
(2,116,669)
(1,711,276)
(238,686)
(114,371)
(8,401)
(43,935)
-
(1,675,629)
(1,326,497)
(193,312)
(114,859)
(8,077)
(34,088)
1,204
Page 47 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
19. Other operating revenues /expenses
The amounts recorded refer to share of net income, reversal /(set up) of provision for
tax and other proceedings, as shown below:
Consolidated
06/30/11
06/30/10
10,666
10,631
10,666
10,631
(54,601)
(44,719)
(41,151)
(32,838)
(2,342)
(2,571)
(2,326)
(1,167)
1,946
(2,462)
(2,126)
(928)
(1,196)
(7,674)
(4,485)
(43,935)
(34,088)
OTHER OPERATING REVENUES
- Other
OTHER OPERATING EXPENSES
- Share of income – employees
- Share of income – subsidiaries abroad
- Interest of managers
- Set up/ reversal of provision for tax proceedings
- Tax debts - REFIS IV
- Tax incentives of Rouanet law
- Other
TOTAL NET
20. Net financial income
Company
06/30/11
06/30/10
FINANCIAL REVENUES
Yield from financial investments
Exchange variation
Present value adjustment – customers
Pis/Cofins on interest on equity capital
Other revenues
FINANCIAL EXPENSES
Interest on loans and financing
Exchange variation
Present value adjustment – suppliers
Other expenses
NET FINANCIAL INCOME
Consolidated
06/30/11
06/30/10
33,295
38,840
(5,637)
92
1,343
7,158
(6,048)
233
204,930
137,756
39,691
20,007
(5,637)
13,113
158,651
87,295
38,990
25,397
(6,048)
13,017
(100)
(100)
(23)
(23)
(122,970)
(65,624)
(29,795)
(9,072)
(18,479)
(111,913)
(54,712)
(37,784)
(6,195)
(13,222)
81,960
46,738
33,195
1,320
21. Provision for income tax and social contribution
The parent company and its subsidiaries in Brazil determine income tax and social
contribution under the taxable income regime, except for WEG Administradora de
Bens S.A. and Agro Trafo Administradora de Bens S.A. which determine taxable
income as a percentage of gross revenue (“lucro presumido”). The provision for
income tax was established at the rate of 15%, plus a 10% surtax, and the social
contribution at the rate of 9%, according to legislation in force. Provision for taxes of
companies abroad is set up according to the legislation of each country.
Page 48 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
Reconciliation of income tax and social contribution:
Company
06/30/11
06/30/10
Profit before taxes and interest
Nominal tax rate
IRPJ and CSLL calculated at nominal tax rate
Adjustments for calculation of effective income and
social contribution tax:
Result of investments in subsidiaries
Difference in tax rates on results abroad
Tax incentives
Interest on equity capital
Other adjustments
IRPJ and CSLL as per the statement of income
Current tax
Deferred tax
Consolidated
06/30/11
06/30/10
277,013
34%
(94,184)
236,936
34%
(80,218)
368,666
34%
(125,346)
313,031
34%
(106,431)
83,562
9,817
87
80,340
867
(758)
(525)
(2,268)
13,969
30,545
(1,190)
111
(2,305)
10,241
23,108
(3,340)
(85,615)
(98,954)
13,339
(78,616)
(66,289)
(12,327)
(892)
(941)
49
231
43
188
22. Benefits Plan
The Company and its subsidiaries are sponsors of WEG Seguridade Social - Welfare
Plan, which aims mainly at supplementing pension benefits provided by the official
social security system.
This plan, administered by WEG Seguridade Social, includes the benefits of monthly
income, supplementation of sickness allowance, supplementation of retirement due to
disability, annuity benefit due to disability, pension payment due to death, annuity due
to death, deferred proportional benefit and self-sponsorship.
The number of participants at June 30, 2011 is 19,586 (17,423 at June 30, 2010).
The Company and its subsidiaries made contributions amounting to R$ 9,051 in the
first half of 2011 (R$ 8,037 in the first half of 2010). Based on actuarial calculations
carried out by independent actuaries in accordance with procedures established by
CVM Rule No. 371/2000, no significant net actuarial liability was identified.
23. Insurance coverage
WEG Group continually works with identification, analysis and management of risks,
both in Brazil and its subsidiaries abroad, checking the best way to manage the
transfer, absorption or sharing of risk in the insurance and reinsurance market.
One of the tools used in this process of risk analysis is risk inspection conducted
annually in all production units and some sales offices of WEG Group. When
necessary, WEG is supported by external consulting firms in identifying and
managing risk.
The business unit in Brazil is responsible for managing the insurance portfolio of
WEG Group in Brazil and abroad, and it constitutes continuously, together with
executive committee, risk policies for WEG Group in order to protect its assets.
Page 49 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
The assumptions of risk analysis adopted, given their nature, are not part of the audit
scope and therefore they were not audited by our independent auditors.
In 2010, a process of implementing Worldwide Insurance Program - WIP was started,
whereby the local insurance policies will be replaced by worldwide policies in
accordance with the laws and rules of each country. Currently we highlight some
worldwide insurance policies that were successfully implemented for WEG Group,
such as: transportation risk (Export, Import and Domestic), Products Liability,
Managers’ Liability (D&O) and Performance Bond.
The program above will be completed by mid-2012 when all local policies will be
replaced by worldwide policies, and risk management of the Group will in line and in
accordance with risk management policy outlined by the executive committee of WEG
Group.
The insurance policies are issued only by first tier international insurance companies
that can serve WEG Group in the countries where we operate. The financial strength
and sustainability of these insurers are continually monitored by the business unit in
Brazil.
Below we highlight some of our policies and their amounts:
•
Operating Risks (Assets), R$ 70 million
•
Loss of Profits: R$ 20 million
•
Civil Liability: R$ 15 million
•
Products Liability: US$ 100 million
•
Transportation: US$ 4 million per shipment (Export and Import) and R$ 6
million (Domestic)
24. Financial instruments
In compliance with CVM Rule No. 604 of November 19, 2009, which approved the
Technical Pronouncements CPC 38, CPC 39 and CPC40 and OCPC 03, of
November 19, 2009, which revoked CVM Rule No. 566 of December 17, 2008, the
Company and its subsidiaries carried out an assessment of their financial
instruments, including derivatives, recorded in the financial statements at June 30,
2011, presenting the following book and market values:
Cash and banks
Financial investments:
- In local currency
- In foreign currency
Accounts receivable from customers
Suppliers
Loans and financing:
- In local currency
- In foreign currency
Non Deliverable Forwards - NDF
Book value
06/30/11
12/31/10
60,694
53,971
Market value
06/30/11
12/31/10
60,694
53,971
2,803,194
36,806
1,095,847
295,775
2,454,303
44,722
1,044,712
242,300
2,803,194
36,806
1,095,847
295,775
2,454,303
44,722
1,044,712
242,300
1,937,042
741,351
1,002
1,686,288
732,655
2,367
1,937,042
741,351
1,002
1,686,288
732,655
2,367
Page 50 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
Risk factors of the financial instruments are primarily related to:
(i) Financial risks
Foreign currency risks
To mitigate exchange risks, the Company exports in various currencies and also
monitors the financial exposure, trying to balance its financial assets and liabilities
within limits set by management.
As defined by the Board of Directors of the Company, the protection of short-term
cash flow shall be limited to the equivalent of three months of revenues in foreign
currencies.
The Company carried out exports amounting to US$ 388.0 million in the first half of
2011, representing a natural hedge (US$ 267.0 million in the first half of 2010).
Risk of debt charges
These risks are derived from the possibility of subsidiaries incurring losses due to
fluctuations in interest rates or other debt indices, which increase the financial
expenses related to loans and financing in the market, or decrease the financial
revenue related to financial investments of subsidiaries. The Company continuously
monitors market interest rates in order to evaluate the possible need of hedge against
the risk of volatility in these rates.
Derivative Financial Instruments
The Company has only operations with derivative financial instruments of the type
NDF - Non-Deliverable Forwards, in the notional amount of US$ 18.0 million at June
30, 2011, held by its subsidiary abroad Zest Electric Motors (Proprietary) Limited, in
order to protect its operations of product import against the risks of fluctuations in
exchange rates.
Management of the Company and its subsidiaries maintains ongoing monitoring of
derivatives financial instruments contracted through their internal controls.
The table of sensitivity analysis should be read in conjunction with other financial
assets and liabilities denominated in foreign currencies existing at June 30, 2011,
because the effect of the estimated impacts of exchange rates on NDFs given below
will be offset if implemented, in whole or in part, against devaluation of all assets and
liabilities.
In preparing the table below, management determined that, for the probable scenario
(market value) the exchange rates used for marking to market of financial
instruments, prevailing at June 30, 2011 must be considered. These rates represent
the best estimate of future prices and represent the value for which the positions
could be settled at maturity.
The unrealized gains and losses on operations with derivatives are recorded (if loss)
as loans and financing, or (if gain) as financial investments, the contra entry being to
revenues (expenses) from exchange variation in the income statement.
Page 51 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
The table below shows the “cash and expense” effects of the results of financial
instruments in each of the scenarios in reais.
Risk
Fall of
US$
Counterparty
First National
Bank
Notional
value
US$ 18.0
million
Market value at 06/30/11
Average
Value in
Quotation
R$
US$ / ZAR
6.8759
1,044
Possible Scenario - 25%
Remote Scenario - 50%
Average
Average
Quotation Value in R$ Quotation Value in R$
US$ / ZAR
US$ / ZAR
5,1569
3,4379
(7,408)
(14,816)
We have carried out the accounting record based on market price at June 30, 2011
on an accrual basis. These operations had net positive impact, in the first half of
2011, of R$ 1,460 which were recognized as financial revenue.
The Company has no margins provided as guarantee for derivative financial
instruments outstanding at June 30, 2011.
(ii) Operating risks
Credit risk
It arises from the possibility of Company’s subsidiaries not receiving amounts arising
from sales operations and credits held with financial institutions generated by
financial investments. To mitigate the risk arising out of sales operations, the
Company’s subsidiaries adopt as practice the analysis of the financial position of their
customers, establish a credit limit and constantly monitor their debt balances. With
respect to financial investments, the Company and its subsidiaries only invest in
institutions with low credit risk.
25. Government subsidies and assistance
The Company, through its subsidiary WEG Amazônia S.A., holds the following
subsidies arising out of tax incentive:
I.
ICMS incentive credit 90.25% amounting to R$ 788, recognized in income.
II.
Reduction of 75% of IRPJ in the amount of R$ 320 recognized in income.
26. Segment information
Management has defined operating and geographic segments of the Company based
on reports used internally to strategic decision making in business. The Company's
management is structured and systematized with information on operations,
considering the segments of industry, energy, abroad and consolidated.
Page 52 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Notes to financial statements
Brazil
Industry
06/30/10 06/30/10
Revenue from
sale of goods
and/or services 1,478,167 1,218,148
Income before
income taxes
386,536
334,474
Depreciation /
Amortization /
Depletion
58,672
56,395
06/30/11
Identifiable
assets
Identifiable
liabilities
12/31/10
Abroad
06/30/11
06/30/10
592,923
537,632
890,727
549,920
(558,442)
(360,778)
2,403,375
1,944,922
119,390
135,889
39,512
17,508
(176,772)
(171,840)
368,666
316,031
20,142
23,782
14,425
8,820
-
-
93,239
88,997
06/30/11
12/31/10
06/30/11
12/31/10
06/30/11
12/31/10
2,566,776 2,514,308 1,174,662
541,400
515,647
Eliminations and
Adjustments
06/30/11
06/30/10
Energy
06/30/11 06/30/10
370,619
1,210,811
324,043
1,224,090 1,171,664
293,222
275,180
06/30/11
Consolidated
06/30/11
06/30/10
12/31/10
(144,487)
(184,664)
4,821,041
4,712,119
(129,494)
(171,627)
1,075,747
943,243
Industry: three phase and single phase motors, industrial electrical and electronic
equipment, such as industrial electric motors of low and medium voltage, paints and
varnishes.
Energy: generators for hydroelectric, thermal and wind plants, transformers,
substations, control panels and automation services for energy.
Abroad: it consists of the operations conducted through subsidiaries located in
several countries.
The column of eliminations and adjustments includes the elimination applicable to the
Company in the context of consolidated financial statements under IFRS.
All operating assets and liabilities are presented as identifiable assets and liabilities.
27. Earnings per share – Basic and Diluted
The Company presents the same value of basic and diluted profit since it does not
have potentially diluting common shares:
Profit attributable to Company shareholders
Weighted average of common shares held by shareholders (shares /thousand)
Basic and diluted earnings per share - R$
06/30/11
276,121
620,405
0.44506
06/30/10
236,167
620,905
0.38036
28. Statement of Comprehensive Income
The Company presents as other comprehensive income the cumulative translation
adjustment. This amount is not subject to taxation.
The presentation of the statement of comprehensive income is required by CPC 26 Presentation of Financial Statements and it includes other comprehensive income
that correspond to revenue and expense items that are not recognized in the income
statement as required or permitted by the pronouncements, interpretations and
guidance issued by Brazilian FASB (CPC).
Page 53 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Other Information that the Company Understands as Relevant
1. Shareholding structure at 06/30/2011
WEG S.A.
Shareholders
Controlling Shareholders
- WEG Participações e Serviços S.A.
- Founders’ families
Managers
- Board of Directors
- Executive Committee
Supervisory Board
Treasury Stock
Other
Total
Common Shares
406,119,820
316,328,027
89,791,793
3,938,860
3,205,790
733,070
1,319,877
500,000
209,026,472
620,905,029
%
65.41
50.95
14.46
0.64
0.52
0.12
0.21
0.08
33.66
100.00
Total
406,119,820
316,328,027
89,791,793
3,938,860
3,205,790
733,070
1,319,877
500,000
209,026,472
620,905,029
%
65.41
50.95
14.46
0.64
0.52
0.12
0.21
0.08
33.66
100.00
2. Outstanding shares of Weg S.A. at 06/30/2011
Shareholders
WEG Participações S.A. and Founders’
Families
Management
Treasury stock
Outstanding shares
TOTAL
Common Shares
%
406,119,820
3,938,860
500,000
210,346,349
620,905,029
65.41
0.64
0.08
33.87
100.00
Total
406,119,820
3,938,860
500,000
210,346,349
620,905,029
%
65.41
0.64
0.08
33.87
100.00
3. Composition of shareholders with shareholding interest of more
than 5% in weg S.A.
3.1. WEG S.A.
Shareholders
Weg Particip. e Serviços S/A
Treasury stock
Other
Total
3.2.
Common shares
316,328,027
500,000
304,077,002
620,905,029
%
50.95
0.08
48.97
100.00
WEG PARTICIPAÇÕES E SERVIÇOS S.A.
Shareholders
Eggon João da Silva Adm. Ltda.
Dabliuve Adm. Ltda.
G. Weninghaus Adm. Ltda.
TOTAL
Common shares
31,615,379
31,615,379
31,615,379
94,846,137
%
33.33
33.33
33.33
100.00
Page 54 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Other Information that the Company Understands as Relevant
3.2.1 Eggon João da Silva Adm Ltda.
Members
- Décio da Silva Adm. Ltda.
- Zaira Zimmermann da Silva
- Joana Zimmermann da Silva
Units
52,813,901
26,100,338
26,100,338
%
20.00
- Kátia da Silva Bartsch Adm. Ltda.
-Bruna da Silva Bartsch.
- Ricardo Barstsch Filho
52,813,901
26,100,338
26,100,338
20.00
- Tânia Marisa da Silva Adm. Ltda.
- Alberto da Silva Geffert
- Henrique da Silva Geffert
- Julia da Silva Geffert de Oliveira
52,813,901
17,400,226
17,400,226
17,400,226
20.00
-Solange da Silva Janssen Adm. Ltda.
-Renata da Silva Janssen
-Paula da Silva Janssen
52,813,901
26,100,338
26,100,338
20.00
52,813,901
17,400,226
17,400,226
17,400,226
10
264,069,515
20.00
-Márcia da Silva Petry Adm. Ltda.
-Márcia da Silva Petry
-Ana Flavia da Silva Petry
-Helena Marina da Silva Petry
- Other
TOTAL
0.00
100.00
3.2.2. DABLIUVE ADM. LTDA.
Members
- Valsi Voigt Adm. Ltda.
- Dora Voigt de Assis
- Livia Voigt
- Miriam Voigt Schwartz Adm. Ltda.
- Mariana Voigt Schwartz
- Eduardo Voigt Schwartz
- Cladis Voigt Trejes Adm. Ltda.
- Cladis Voigt Trejes
- Other
-Other
TOTAL
Units
79,302,024
39,724,828
39,724,828
%
32.90
79,302,024
39,724,828
39,724,828
32.90
79,302,024
79,302,024
2
3,134,298
241,040,370
32.90
1.30
100.00
3.2.3. G. WERNINGHAUS ADM. LTDA.
Members
- Diether Werninghaus Adm. Ltda.
- Anne Marie Werninghaus
- Other
- Martin Werninghaus Adm. Ltda.
-Ricardo Werninghaus
-Mariana Werninghaus
- Heide Behnike Adm. Ltda.
- Davi Ricardo Behnike
- Daniel Ricardo Behnike
- Eduardo &Luisa Werninghaus Adm. Ltda.
-Eduardo Werninghaus
-Luisa Werninghaus Bernoldi
-Other
TOTAL
Units
58,380,742
58,458,160
1
58,380,742
29,229,081
29,229,081
58,380,742
29,229,081
29,229,081
58,380,742
29,229,081
29,229,081
2,534,918
236,057,886
%
24.73
24.73
24.73
24.73
1.08
100.00
The Company, its shareholders, managers and members of the Supervisory Board
Page 55 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Other Information that the Company Understands as Relevant
undertake to resolve, by arbitration, under the Arbitration Rules of BOVESPA Market
Arbitration Panel, any and all dispute or controversy that may arise between them,
related or arising, in particular, out of the validity, effectiveness, interpretation, breach
and its effects of the provisions contained in the Corporation Law, Company’s Articles
of Incorporation, rules issued by the National Monetary Council, Central Bank of
Brazil and CVM, as well as other rules applicable to the operation of capital markets
in general, in addition to those contained in the Novo Mercado Listing Rules, Novo
Mercado Participation Agreement and Rules of the Market Arbitration Panel.
Page 56 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Opinions and Statements / Report on the Special Review – Unqualified
To Management and Shareholders
WEG S.A.
Jaraguá do Sul, SC
Introduction
We have reviewed the interim, individual and consolidated financial information of
WEG SA, contained in the Quarterly Information Form - ITR for the quarter ended
June 30, 2011, which comprises the balance sheet and related statements of income,
comprehensive income, of changes in shareholders’ equity and cash flows for the
quarter and six-month period then ended, including summary of the main policies and
other notes.
Management is responsible for the preparation of interim and individual financial
information in accordance with CPC 21 - Interim Financial Reporting and
consolidated interim financial information in accordance with CPC 21 and IAS 34 Interim Financial Reporting, issued by the International Accounting Standards Board IASB, as well as the presentation of this financial information in a consistent manner
with standards established by the Brazilian Securities and Exchange Commission
applicable to the preparation of Quarterly Information - ITR. Our responsibility is to
express a conclusion on this interim financial information based on our review.
Scope of review
We conducted our review in accordance with Brazilian and international standards of
interim financial information review (NBC TR 2410 - Review of Interim Financial
Information Performed by the Auditor of the Entity and ISRE 2410 - Review of Interim
Financial Information Performed by the Independent Auditor of the Entity,
respectively) A review of interim financial information consists of making inquiries,
primarily of persons responsible for financial and accounting matters and applying
analytical procedures and other review procedures. The scope of a review is
significantly less than that of an audit conducted in accordance with auditing
standards and therefore it does not allow us to obtain assurance that we became
aware of all significant matters that could be identified in an audit. Therefore, we do
not express an audit opinion.
Conclusion on the individual interim financial information
Based on our review, we are not aware of any fact that would lead us to believe that
the individual interim financial information included in the quarterly information
referred to above was not prepared, in all material respects, in accordance with CPC
21 applicable to the preparation of Quarterly Information – ITR and presented in a
consistent manner with standards issued by the Brazilian Securities and Exchange
Commission.
Conclusion on the consolidated interim financial information
Based on our review, we are not aware of any fact that would lead us to believe that
the consolidated interim financial information included in the quarterly information
referred to above was not prepared, in all material respects, in accordance with CPC
21 and IAS 34 applicable to the preparation of Quarterly Information – ITR and
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ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Opinions and Statements / Report on the Special Review – Unqualified
presented in a consistent manner with standards issued by the Brazilian Securities
and Exchange Commission.
Other matters
Interim statements of value added
We also reviewed the individual and consolidated interim statements of value added
(DVA) for the quarter and six-month period ended June 30, 2011, whose presentation
in the interim information is required under the standards issued by the Brazilian
Securities and Exchange Commission- CVM applicable to the preparation of
Quarterly Information - ITR and considered as complementary information by IFRS,
which do not require DVA presentation. These statements were submitted to the
same review procedures described above and, based on our review, we are not
aware of any facts that would lead us to believe that they are not presented fairly in
all material respects, in relation to the individual and consolidated interim financial
information taken as a whole.
Blumenau (SC), July 12, 2011.
ERNST & YOUNG TERCO
Auditores Independentes S.S.
CRC-2SP015199/O-6 F- SC
Marcos Antonio Quintanilha
Accountant CRC-1-SP132776/O - 3 -T - SC
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ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Opinions and Statements / Opinion from Supervisory Board or Equivalent Body
The Supervisory Board meeting where the Quarterly Information - ITR as at June 30,
2011 will be reviewed, including issuance of the Opinion, is scheduled for July 19,
2001.
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ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Opinions and Statements / Officers’ Statement on Financial Statements
By this instrument, the Chief Executive Officer and other Officers of WEG S.A., a
publicly traded company, with main place of business at Avenida Prefeito Waldemar
Grubba, No. 3300, registered with Corporate Taxpayer’s Roll (“CNPJ”) under #
84.429.695/0001-11, for the purposes provided in sections V and VI of Article 25 of
CVM Rule No. 480, of December 7, 2009, declare that they reviewed, discussed and
agreed with the Quarterly Information - ITR of WEG S.A. and Consolidated for the
period ended June 30, 2011.
Jaraguá do Sul, July 21, 2011.
Harry Schmelzer Junior - Chief Executive Officer
Sérgio Luiz Silva Schwartz - Deputy Chief Executive Officer
Laurence Beltrão Gomes - Financial and Investor Relations Officer
Antonio Cesar da Silva - Marketing Officer
Carlos Diether Prinz - Officer - Transmission and Distribution
Luis Angelo Noronha Figueiredo - Human Resources Officer
Robert Bauer - International Area Officer
Siegfried Kreutzfeld - Officer - Motors
Sinésio Tenfen - Officer - Energy
Umberto Gobbato - Officer - Automation
Wilson José Watzko - Controller Officer
Page 60 of 60
ITR – Quarterly Information – 06/30/2011 - WEG SA
Release: 1 Opinions and Statements / Officers’ Statement on Independent Auditors’ Report
By this instrument, the Chief Executive Officer and other Officers of WEG S.A., a
publicly traded company, with main place of business at Avenida Prefeito Waldemar
Grubba, No. 3300, registered with Corporate Taxpayer’s Roll (“CNPJ”) under #
84.429.695/0001-11, for the purposes provided in sections V and VI of Article 25 of
CVM Rule # 480, of December 7, 2009, declare that they reviewed, discussed and
agreed with the opinions expressed in the report on the special review of Ernst &
Young Auditores Independentes S.S., dated April 15, 2011, related to the Quarterly
Information - ITR of WEG S.A. and Consolidated for the period ended June 30, 2011.
Jaraguá do Sul, July 21, 2011.
Harry Schmelzer Junior - Chief Executive Officer
Sérgio Luiz Silva Schwartz - Deputy Chief Executive Officer
Laurence Beltrão Gomes - Financial and Investor Relations Officer
Antonio Cesar da Silva - Marketing Officer
Carlos Diether Prinz - Officer - Transmission and Distribution
Luis Angelo Noronha Figueiredo - Human Resources Officer
Robert Bauer - International Area Officer
Siegfried Kreutzfeld - Officer - Motors
Sinésio Tenfen - Officer - Energy
Umberto Gobbato - Officer - Automation
Wilson José Watzko - Controller Officer
Page 61 of 60