Earnings Release
1Q 2016
Jaraguá do Sul (SC), April 20, 2016: WEG S.A. (BM&F Bovespa: WEGE3, OTC: WEGZY), one of the world’s largest manufacturer of electric-electronic equipment, with
five main product lines: Motors, Energy, Transmission and Distribution, Automation and Coatings, announced today its results for the first quarter of 2016 (1Q16). We are
presenting the following financial and operating data on a consolidated basis, except when otherwise indicated, in thousands of Brazilian Reais (R$) according to accounting
practices adopted in Brazil, including Brazilian Corporate Law and the convergence to IFRS international norms. Except when otherwise indicated, growth rates and other
comparisons are made to the same period of the previous year.
MARGINS AND GROWTH RESILIENCE
ƒ Net Operating Revenues in the first quarter of 2016 reached R$ 2,416.3 million, with 13.4% growth
over the 1Q15 and decrease of 11.6% over the 4Q15;
ƒ EBITDA reached R$ 342.2 million, and EBITDA margin reached 14.2%, 2.2 percentage points lower
than the previous year and 0.2 percentage point higher than the previous quarter;
ƒ Net Income totaled R$ 282.4 million, with net margin of 11.7% and growth of 14.9% over the 1Q15
and decrease of 26.4% over the 4Q15;
ƒ Investments in capacity expansion and modernization totaled R$ 112.6 million, being 25% in
industrial plants in Brazil and 75% abroad. The highlights were the plants in Mexico and China.
ƒ On March 28, we announced the acquisition of Bluffton Motor Works, LLC., an electric motor
manufacturer with headquarters in Bluffton, Indiana, USA.
KEY FIGURES
Net Operating Revenue
Domestic Market
External Markets
External Markets in US$
Gross Operating Profit
Gross Margin
Net Income
Net Margin
EBITDA
EBITDA Margin
EPS (adjusted for splits)
(R$ Thousand)
Q1 2016
Q4 2015
2.416.344
994.805
1.421.539
363.565
672.753
27,8%
282.396
11,7%
342.231
14,2%
0,17506
2.734.251
1.060.519
1.673.732
435.575
730.436
26,7%
383.916
14,0%
382.001
14,0%
0,23800
%
-11,6%
-6,2%
-15,1%
-16,5%
-7,9%
-26,4%
-10,4%
-26,4%
Q1 2015
2.130.291
1.027.854
1.102.437
385.011
638.623
30,0%
245.859
11,5%
348.361
16,4%
0,15240
%
13,4%
-3,2%
28,9%
-5,6%
5,3%
14,9%
-1,8%
14,9%
CONFERENCE CALL (WITH SIMULTANEOUS TRANSLATION TO ENGLISH)
April 20, Wednesday 11 a.m. (Brasília official time)
Dial–in USA: +1 786 924-6977
Webcasting (simultaneous translation into English): www.ccall.com.br/weg/1q16.htm
PAGE 1
Earnings Release
1Q 2016
ECONOMIC ACTIVITY AND INDUSTRIAL PRODUCTION
Growth expectations for global economic activity in 2016 have remained very close to the levels that we have observed in recent
years. The most significant contribution is coming from developed economies, offsetting the lower emerging economies dynamism,
especially from China, which continues to adjust and pressure commodity prices worldwide. The recent data on industrial activity
seem to confirm the consistency of the mature economies activity, maintaining readings above 50 (indicating expansion) in Germany
and, after a few months, in the USA. In China, although the indicator still shows retraction, this appears to be decreasing in intensity.
March 2016
51,8
50,7
49,7
Manufacturing ISM Report on Business ® (USA)
Markit/BME Germany Manufacturing P M I ®
HSBC China Manufacturing P M I ™
February 2016
49,5
50,5
48,0
January 2016
48,2
52,3
48,4
In Brazil, industrial production showed a contraction of 2.5% in February over the previous month, and industrial production decreased
sequentially in almost all of the last 12 months. The drop in the annual readings is still significant, mostly from durable consumer goods
and capital goods numbers. With this result, the Brazilian industrial production is more than 20% below the highest level, reached in
mid-2013, and almost on the same level of the start of 2004.
The business environment remains weak, with the industry facing a situation that combines high inventories for a declining demand,
low consumer confidence levels, tax and energy prices increases, difficulties in access to financing and, in the case of the capital
goods sector, a rapid reduction in investments. This environment should continue until political and macroeconomic uncertainties
diminish.
INDUSTRIAL INDICATORS IN BRAZIL ACCORDING TO LARGE ECONOMIC CATEGORIES
Change (%)
Categories of Use
Acummulated
Feb 16 / Jan 16* Feb 16 / Feb 15
Capital Goods
Intermediary Goods
Consumer Goods
Durable Goods
Semi-durable and non-durable
General Industry
0,3
-2,0
-3,2
-5,3
-0,6
-2,5
On Year
12 months
-30,8
-10,1
-10,1
-29,0
-4,5
-11,8
-27,1
-6,3
-9,4
-20,0
-6,4
-9,0
-25,8
-8,5
-8,1
-29,3
-2,0
-9,8
Source: IBGE, Research Office, Industry Coordination
(*) Series with seasonal adjustments
NET OPERATING REVENUES
The WEG’s performance in the first quarter of 2016 may be considered positive when placed in the context in which we are operating,
both in the domestic market, clearly unfavorable to investment, as in the global environment, characterized by slow economic
recovery.
Net Operating Revenues totaled R$ 2,416.3 million in the first quarter of 2016 (1Q16), with 13.4% growth over the first quarter of
2015 (1Q15) and a decrease of 11.6% over the fourth quarter of 2015 (4Q15). The adjusted growth of net revenues for the transactions
occurred in the period reached 12.1% over the 1Q15.
NET OPERATING REVENUES PER MARKET
Brazilian Market
External Market
2,349.4
2,130.3
2,546.3
(R$ MILLION)
2,734.3
2,416.3
57%
61%
45%
43%
39%
41%
Q2 15
Q3 15
Q4 15
Q1 16
52%
55%
48%
Q1 15
59%
PAGE 2
Earnings Release
1Q 2016
Net Operating Revenue in 1Q16 breakdowns as follows:
ƒ Brazilian Market: R$ 994.8 million, representing 41% of Net Operating Revenue, a decrease of 3.2% over 1Q15 and decrease of
6.2% over 4Q15;
ƒ External Markets: R$ 1,421.5 million, equivalent 59% of Net Operating Revenue. The strong appreciation of the US dollar observed
in 2015 continued to make the analysis the markets behavior difficult. The growth in the local currency market may be more than
offset by the depreciation of this currency against the dollar. Thus, we present the growth compared to 1Q15 from various points
of view:
ƒ
Measured in Brazilian Reais: 28.9%
ƒ
Measured in Brazilian Reais, excluding the acquisitions (organic growth): 26.3%
ƒ
Measured in local currencies, weighted by the revenues in each market: 10.3%
ƒ
Measured in average US dollar for the quarter: -5.6%
EVOLUTION OF NET REVENUE ACCORDING TO GEOGRAPHIC MARKET
Q1 2016
Net Operating Revenues
- Brazilian Market
- External Markets
- External Markets in US$
2.416,3
994,8
1.421,5
363,6
(R$ MILLION)
Q4 2015
2.734,3
1.060,5
1.673,7
435,6
%
Q1 2015
-11,6%
-6,2%
-15,1%
-16,5%
2.130,3
1.027,9
1.102,4
385,0
%
13,4%
-3,2%
28,9%
-5,6%
Our sales prices in the different markets are almost always denominated in the market’s local currency, reflecting the competitive
conditions and the strength of WEG’s brand in that market.
EXTERNAL MARKET – DISTRIBUTION OF NET REVENUE ACCORDING TO GEOGRAPHIC MARKET
North America
South and Central America
Europe
Africa
Australasia
Q1 2016
Q4 2015
%
Q1 2015
41,6%
13,0%
27,8%
8,6%
9,0%
42,5%
15,2%
23,3%
9,6%
9,4%
-0,9 pp
-2,2 pp
4,5 pp
-1,0 pp
-0,4 pp
35,8%
17,7%
24,7%
10,5%
11,3%
%
5,8 pp
-4,7 pp
3,1 pp
-1,9 pp
-2,3 pp
BUSINESS AREA
Industrial Electro-Electronic Equipment – The external markets remained the most dynamic part of the business. We continue
investing resources in expanding our presence in several global markets, with additional effort in staff, services, and sales
infrastructure. These actions strengthen WEG’s brand as a global manufacturer of electrical products, enhance our competitive
position and ultimately result in sales growth. Included in this effort are the capacity expansions in Mexico and China and the recent
acquisition of Bluffton, a commercial electric motors manufacturer with a strong presence in the North American market. The
consolidation of this brand in our portfolio will expand the product line and give even more flexibility in servicing the combined client
base of the two companies.
Operating conditions continued weak in Brazil. Industrial investment remains soft and almost entirely focused on the only replenishing
capital depreciation. We did not see a fast recovery following the traditional slowdown in activity at the end, and most important
investment projects are still on hold, awaiting greater political and economic scenario visibility. The decrease in volumes sold has been
only partially offset by sales price adjustments, aligning them to higher material costs affected by the weaker exchange rate.
Energy Generation, Transmission and Distribution (GTD) – The GTD business is characteristically long cycle, that is, we work to
fulfil a relatively long backlog of orders. This characteristic makes the business slower to react to changes in the business environment.
In Brazil, we continue to see the wind power generation segment as the highlight, as this is where the backlog is longer. We have
moved further along the operational learning curve, with significant productivity gains in the manufacturing process and logistics.
Future performance will hinge on the results the results of the next energy auctions. In any case, we began exploring opportunities in
electricity generation in other markets, especially in Latin America, where we can take advantage of the technological solutions we
have developed for the Brazilian conditions.
In transmission and distribution (T&D) we carried out an intensive engineering effort in our products to regain competitiveness after
significant material cost increases occurred in 2015. This effort allowed us to win new orders and recompose the medium-term
backlog. Despite the slow economic activity and the decreasing demand for energy in Brazil, with postponements of investments in
expansion and maintenance, our competitiveness has allowed us to perform better the market.
PAGE 3
Earnings Release
1Q 2016
Motors for Domestic Use – The Brazilian market performance in this business area showed no recovery. Given current conditions
for consumer disposable income and credit availability, we expect volumes to continue weak and only partially offset by price
increases. Operations abroad in this business area are concentrated in WEG Yatong, China. This operation manufactures electric
motors for appliances for our customers in North America and Europe, with revenues in hard currency, which has shown consistent
performance.
Paints and Varnishes – With the weak performance of industrial and consumer goods markets in Brazil, the alternative in this business
area has been the search for new markets and applications for our products. We benefited from the better performance in Argentina
market, where our significant presence has partially offset the weak performance in Brazil.
DISTRIBUTION OF NET REVENUE PER BUSINESS AREA
Q1 2016
Q4 2015
%
Q1 2015
%
Electro-electronic Industrial Equipments
53,2%
51,4%
1,8 pp
52,0%
1,2 pp
Domestic Market
14,9%
12,5%
2,4 pp
18,5%
-3,6 pp
External Market
38,3%
38,9%
-0,6 pp
33,5%
4,8 pp
Energy Generation , Transmission and Distribution
30,7%
32,0%
-1,3 pp
28,9%
1,8 pp
Domestic Market
17,3%
17,9%
-0,6 pp
18,4%
-1,1 pp
External Market
13,4%
14,1%
-0,7 pp
10,5%
2,9 pp
Electric Motors for Domestic Use
11,0%
11,9%
-0,9 pp
13,7%
-2,7 pp
Domestic Market
4,8%
4,7%
0,1 pp
6,7%
-1,9 pp
External Market
6,2%
7,2%
-1 pp
7,0%
-0,8 pp
Paints and Varnishes
4,7%
4,4%
0,3 pp
5,2%
-0,5 pp
Domestic Market
4,0%
3,5%
0,5 pp
4,6%
-0,6 pp
External Market
0,7%
0,9%
-0,2 pp
0,6%
0,1 pp
COST OF GOODS SOLD
The Cost of Goods Sold (COGS) totaled R$ 1,743.6 million in 1Q16, 16.9% above 1Q15 and 13.0% below 4Q15. Gross margin
reached 27.8%, 2.2 percentage points lower than in 1Q15, and 1.1 percentage points higher than in 4Q15.
Throughout 2015, several factors negatively influence the gross margin, and we have worked to eliminate or reduce the intensity of
these adverse impacts. Thus, the gross margin behavior is explained by:
(i)
In the Brazilian market, we have passed on to sales prices the increased costs of some raw materials caused by the Brazilian
Real devaluation that occurred in 2015. Given the unfavorable market conditions, these price increases were made in
installments, and in the coming quarters we will notice the full impact on revenues;
(ii)
We have not made, in this quarter, any additional provisions for slow moving inventories abroad, such as in 2015. Other
provisions continued to be recorded as usual;
(iii)
We also noticed a much weaker dilutive impact on margins from two new business, wind power and motors for domestic use
produced in China. In both cases, the comparison basis in this 1Q16 was more relevant. In addition, in wind generation, we are
moving up along the prices, volumes, and productivity curves, with positive effects on margins.
On the other hand, new pressures continued to prevent a faster recovery of the gross margin. We highlight the impact of the slower
pace of business in the domestic market over the manufacturing costs and on the dilution of fixed costs.
COGS COMPOSITION
Labor
21,3%
Q1 16
Depreciation
4,4%
Other Costs
9,0%
Materials
65,3%
Other Costs
Depreciation 9,2%
4,5%
Q1 15
Labor
21,4%
Materials
64,9%
PAGE 4
Earnings Release
1Q 2016
In the 1Q16, average copper spot prices at the London Metal Exchange (LME) continue to decline, both compared to the previous
year ( a drop of 19.8% over the 1Q15) as compared to the previous quarter (-4.3%). Steel prices also continue to decline, 35.8%
compared to 1Q15, and a decrease of 10.2% compared to 4Q15. These negative variations, although partially offset by currency
depreciation, also contributed to lower cost pressure.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consolidated selling, general and administrative expenses (SG&A) totaled R$ 361.0 million in 1Q16, 15.3% growth over the 1Q15 and
decrease of 6.8% over the previous quarter. As a percentage of Net Operating Revenue, operating expenses represented 14.9% in
1Q16, 0.2 percentage points higher than in 1Q15, and 0.7 percentage points higher than in 4Q15. Considering the characteristic of
lower seasonal activity in the first quarter, this was a positive performance, showing effective operating expenses control.
EBITDA AND EBITDA MARGIN
In the 1Q16, EBITDA (according to the Instruction CVM 527/2012) totaled R$ 342.2 million, a decrease of 1.8% over the 1Q15 and
decrease of 10.4% over the 4Q15. EBITDA margin reached 14.2%, 2.2 percentage points lower than 1Q15, and 0.2 percentage
points higher than 4Q15.
FIGURES IN R$ MILLION
Q1 2016
Net Operating Revenues
Net Income before Minorities
Net Margin
(+) Income taxes & Contributions
(+/-) Financial income (expenses)
(+) Depreciation & Amortization
EBITDA
EBITDA Margin
2.416,3
287,3
11,9%
30,4
-60,5
85,2
342,2
14,2%
380,5
Q4 2015
%
2.734,3
383,7
14,0%
-7,8
-79,0
85,1
382,0
14,0%
Q1 2015
-11,6%
-25,1%
n.a.
-23,4%
0,0%
-10,4%
%
2.130,3 13,4%
250,8 14,5%
11,8%
64,9 -53,3%
-41,7 45,3%
74,3 14,6%
348,4 -1,8%
16,4%
(242,4)
(35,1)
348,4
(94,5)
COGS (ex
depreciation)
Volumes,
Prices &
Product Mix
Changes
EBITDA Q1 15
FX Impact on
Revenues
Selling
Expenses
(11,5)
(7,6)
4,4
General and
Administrative
Expenses
Profit Sharing
Program
Other Income
342,2
EBITDA Q1 16
NET FINANCIAL RESULTS
Net financial result was positive in R$ 60.5 million in 1Q16 (positive in R$ 41.7 million in the 1Q15 and positive in R$ 79.0 million in
the 4Q15). The net financial results were positive mainly due to the mark-to-market of derivative transactions used to hedge the foreign
currency debt, with additional reductions in interest rates in US dollar in Brazil (coupom cambial) as a result of decreased perception
of risk Brazil.
We stress that this is an accounting impact and that there is no actual cash outflow until the transactions are settled. In any case, we
continue to find competitive financial costs on the market.
INCOME TAX
In the 1Q16, the provision for “Income Tax and Social Contribution on Net Profit” reached R$ 50.2 million (R$ 76.3 million and R$ 9.6
million in 1Q15 and 4Q15, respectively). Additionally, a credit of R$ 19.8 million was recorded as ‘‘Deferred Income Tax / social
contribution’’ (credit of R$ 11.4 million and credit of R$ 17.4 million, respectively). Despite the temporary impact in the first two months
of the year (limitations cash dividends (interest on stockholders’ equity) and suspension of the "Lei do Bem" incentives for innovation),
there was no significant increase in the effective rate of income tax, which continued influenced by the difference in income tax rates
abroad.
PAGE 5
Earnings Release
1Q 2016
NET INCOME
As a result of previously mentioned impacts, net income for 1Q16 was R$ 282.4 million, an increase of 14.9% over 1Q15 and decrease
of 26.4% compared to the previous quarter. Net margin for the quarter was 11.7%, practically the same level of 1Q15 and 2.3
percentage points lower than the previous quarter.
CASH FLOW
Cash generation from operating activities was of R$ 383.3 million in the first quarter of 2016, with efficiency gains in the management
of inventories and accounts receivables. The slowdown in the Brazilian market, however, with an impact on accounts payable and
advances from customers, prevented an even clearer improvement.
We continued to execute the investment program, with emphasis on the expansion in new plants in China and Mexico. Moreover, at
the end of March, we announced the acquisition of Bluffton. As a result, investing activities consumed R$ 506.8 million in the quarter.
Finally, financing activities consumed R$ 647.8 million in the period, with R$ 139.5 million in new debt raised and R$ 414.4 million in
debt amortization (a net decrease of R$ 274.9 million), and the net payments of R$ 376.2 million in interest on loans and dividends
and interest on stockholders’ equity.
383,3
(506,8)
3.277,1
(647,8)
Operating
(28,7)
Investing
Financing
2.477,2
Exchange Rate
variation on Cash
Cash December 2015
Cash March 2016
INVESTMENTS
The new electric motors industrial plants in Mexico and China continued representing the most significant portion of the investment
program for capacity expansion and modernization. The two industrial facilities had started production in 2015 and will continue
modular expansion over the coming years.
131,5
120,1
34,3
134,1
112,6
82,4
86,6
97,7
85,0
49,6
85,8
32,8
Q1 15
Q2 15
Brazil
44,9
36,4
Q3 15
Q4 15
Outside Brazil
27,6
Q1 16
In the first quarter 2016, we invested R$ 112.6 million in capacity expansion and modernization, with 75% allocated to industrial plants
and other subsidiaries abroad and 25% for the industrial plants in Brazil.
The 2016 capex program foresees investments of R$ 470.0 million, always maintaining the modular characteristic of the capacity
increases, carried out according to effective demand and seeking to maximize the return on invested capital.
We also invested R$ 74.5 million in research, development and innovation in this quarter, a fundamental part of our business model,
which allows us to be competitive in industrial electrical products on a global scale. These expenditures represent approximately 3.1%
of our net operating revenue in 1Q16.
PAGE 6
Earnings Release
1Q 2016
DEBT AND CASH POSITION
On March 31, 2016, cash, cash equivalents and financial investments totaled R$ 4,007.2 million, invested in first-tier banks and
denominated in Brazilian currency, while the gross financial debt totaled R$ 4,706.7 million, being 22% in short-term and 78% in longterm, resulting in net debt of R$ 699.5 million.
FIGURES IN R$ THOUSAND
Cash & Financial instruments
- Current
- Long Term
Debt
- Current
- In Brazilian Reais
- In other currencies
- Long Term
- In Brazilian Reais
- In other currencies
Net Cash (Debt)
March 2016
4.007.150
3.744.894
262.256
4.706.697 100%
1.031.906
22%
449.736
582.170
3.674.791
78%
1.733.908
1.940.883
(699.547)
December 2015
4.813.700
4.442.278
371.422
5.170.654 100%
1.286.071
25%
638.990
647.081
3.884.583
75%
1.751.352
2.133.231
(356.954)
March 2015
4.672.310
4.671.192
1.118
4.809.092 100%
1.998.692
42%
1.181.347
817.345
2.810.400
58%
1.342.978
1.467.422
(136.782)
The current characteristics of the debt are:
ƒ The total debt duration of 26.8 months and for the long-term portion is of 33.8 months. In December 2015, these durations were
27,7 months and 36.0 months, respectively.
ƒ The duration for portion denominated in Brazilian Reais is 23.2 months and for the portion in foreign currencies is 29.9 months. In
December 2015, these durations were 23.2 months and 31.6 months, respectively.
ƒ The weighted average cost of fixed-rate Brazilian Reais denominated debt is approximately 7.9% per year (7.6% per year in
December 2015). Floating rate contracts indexed mainly to the Brazilian long-term interest rate TJLP.
An important part of cash consumption was due to the payment of the acquisition of Bluffton, concluded on March 28.
DIVIDENDS
On March 22, 2016, the Board of Directors approved the payment to shareholders, as interest on stockholders’ equity (JCP), totaling
R$ 89.2 million before income tax withholding, payable on August 17, 2016.
Our policy is to declare interest on stockholders' equity quarterly and declare dividends based on profit earned each semester, i.e.,
we declare six different events each year and pay them semiannually.
WEGE3 SHARE PERFORMANCE
The common shares issued by WEG, traded under the code WEGE3 at BM&F Bovespa, ended the last trading session of March
2016 quoted at R$ 14.01, with a nominal loss of 6.3% in the year and loss of 5.4% considering the dividends and interest on
stockholders' equity declared in the period.
PAGE 7
Earnings Release
1Q 2016
25,00
7.000
Shares Traded (thousands)
WEGE3
6.000
20,00
WEGE3 share prices
15,00
10,00
4.000
3.000
Traded shares (thousands)
5.000
2.000
5,00
1.000
0,00
0
The average daily traded volume in 1Q16 was R$ 38.1 million, (R$ 21.8 million in 1Q15). Throughout the quarter 664.919 stock trades
were carried out (167,244 stock trades in 1Q15), involving 132.9 million shares (42.1 million in 1Q15, even before the split effected in
the OGM at the end of March 2015) and moving R$ 2,285.0 million (R$ 1,330.5 million in 1Q15).
AQUISITION OF BLUFFTON MOTOR WORKS (USA)
On March 28, WEG S.A. announced the acquisition of Bluffton Motor Works, LLC. (“Bluffton”), an electric motor manufacturer with
headquarters in Bluffton, Indiana, USA.
Founded in 1944, Bluffton specializes in manufacturing fractional electric motors up to 5 HP, offering a wide range of customized
products to customers in the United States. Market segments served include food & beverage processing, industrial and commercial
equipment manufacturers, pumps and ventilation, among others. Bluffton headquarters occupies approximately 400,000 square feet,
and the company employs over 400 people. Net revenue in 2015 was approximately $64 million.
PAGE 8
Earnings Release
1Q 2016
RESULTS CONFERENCE CALL
WEG will hold, on April 20, 2016 (Wednesday), conference call and webcast to discuss the results. The call will be conducted in
Portuguese with simultaneous translation in English, following scheduled time:
11 a.m.
10 a.m.
3 p.m.
– Brasília time
– New York (EDT)
– London (BST)
Connecting phone numbers:
Dial–in for connecting from Brazil:
Dial–in for connecting from USA:
Toll-free for connecting from USA:
Code:
(11) 3193-1001 / (11) 2820-4001
+1 786 924-6977
+1 888 700-0802
WEG
Access to the webcast:
Slides and Portuguese audio:
Slides and English translation:
www.ccall.com.br/weg/1t16.htm
www.ccall.com.br/weg/1q16.htm
The presentation will be available in Investor Relations page of WEG website (www.weg.net/ri). Please, call approximately 10 minutes
before the call is scheduled to start.
PAGE 9
Earnings Release
1Q 2016
BUSINESS AREA
Industrial Electro-Electronic Equipment
The industrial electrical-electronic equipment area includes low and medium voltage electric motors, drives & controls, industrial
automation equipment and services, and maintenance services and parts. We compete in all major markets with our products and
solutions. Electric motors and other related equipment find applications in practically all industrial segments, in equipment such as
compressors, pumps and fans, for example.
Energy Generation, Transmission and Distribution (GTD)
Products and services included in this area are electric generators for hydraulic and thermal power plants (biomass), hydro turbines
(small hydroelectric plants or PCH), wind turbines, transformers, substations, control panels and system integration services. In the
GTD area in general and specifically in power generation, investment maturing terms are longer, with slower investment decisions and
longer project and manufacturing lead times. As such, new orders are recorded as revenue after a few months, upon effective delivery
to buyers.
Motors for Domestic Use
In this business area, our operations have traditionally focused in Brazil, where we hold a significant share in the market of single
phase motors for durable consumer goods, such as washing machines, air conditioners, water pumps, among others. In 2014 we
started the internationalization of this area, with an acquisition in China. This is a short cycle business and variations in consumer
demand are rapidly transferred to the industry, with almost immediate impacts on production and revenue.
Paints and Varnishes
In this area, including liquid paints, powder paints and electro-insulating varnishes, we have very clear focus on industrial applications
in Brazil, and are expanding to Latin America. Our strategy in this area is cross selling to customers from other operating areas. The
target markets ranging from shipbuilding industry to the manufacturers of white line home appliances. We seek to maximize the scale
of production and efforts to developed new products and new segments of production and efforts to developed new products and
new segments.
The information contained in this report relating to WEG’s business perspectives, the projections and results and to the company’s
growth potential should be considered as only estimates and were based on the management expectations relating to the future of
the company. These expectations are highly influenced by the market conditions and the general economic performance of the
country and of the foreign markets which may be subject to sudden change.
PAGE 10
Earnings Release
1Q 2016
Annex I
Consolidated Income Statement - Quarterly
Figures in R$ Thousands
janeiro-00
Trimestre
Trimestre
Net Operating Revenues
Cost of Goods Sold
Gross Profit
Sales Expenses
Administrative Expenses
Financial Revenues
Financial Expenses
Other Operating Income
Other Operating Expenses
EARNINGS BEFORE TAXES
Income Taxes & Contributions
Deferred Taxes
Minorities
NET EARNINGS
#N/D
1st Quarter
2016
R$
VA%
janeiro-00
#N/D
4th Quarter
2015
R$
VA%
janeiro-00
#N/D
1st Quarter
2015
R$
VA%
Changes %
Q1 2016
Q1 2016
Q4 2015
Q1 2015
2,416,344
(1,743,591)
672,753
(242,051)
(118,924)
163,631
(103,087)
4,468
(59,172)
317,618
(50,175)
19,815
4,862
282,396
100%
-72%
28%
-10%
-5%
7%
-4%
0%
-2%
13%
-2%
1%
0%
12%
2,734,251
(2,003,815)
730,436
(262,209)
(125,258)
285,788
(206,743)
7,507
(53,617)
375,904
(9,624)
17,394
(242)
383,916
100%
-73%
27%
-10%
-5%
10%
-8%
0%
-2%
14%
0%
1%
0%
14%
2,130,291
(1,491,668)
638,623
(206,835)
(106,341)
519,628
(477,949)
3,511
(54,896)
315,741
(76,322)
11,378
4,938
245,859
100%
-70%
30%
-10%
-5%
24%
-22%
0%
-3%
15%
-4%
1%
0%
12%
-11.6%
-13.0%
-7.9%
-7.7%
-5.1%
-42.7%
-50.1%
-40.5%
10.4%
-15.5%
421.4%
13.9%
n.m
-26.4%
13.4%
16.9%
5.3%
17.0%
11.8%
-68.5%
-78.4%
27.3%
7.8%
0.6%
-34.3%
74.2%
-1.5%
14.9%
EBITDA
342,231
14.2%
382,001
14.0%
348,361
16.4%
-10.4%
-1.8%
EPS (adjusted for splits)
0.17506
-26.4%
14.9%
0.23800
0.15240
PAGE 11
Earnings Release
1Q 2016
Annex II
Consolidated Balance Sheet
Figures in R$ Thousands
CURRENT ASSETS
Cash & cash equivalents
Receivables
Inventories
Other current assets
LONG TERM ASSETS
Long term securities
Deferred taxes
Other non-current assets
FIXED ASSETS
Investment in Subs
Property, Plant & Equipment
Intangibles
TOTAL ASSETS
March 2016
December 2015
March 2015
(A)
(B)
(C)
R$
%
R$
%
R$
%
(A)/(B) (A)/(C)
<===== Não Ap
#REF!
#REF!
#REF!
8.713.628
65% 9.589.344
67% 9.046.596
70%
-9%
-4%
3.741.188
28%
4.434.759
31%
4.671.192
36%
-16% -20%
2.490.042
19%
2.545.927
18%
2.054.676
16%
-2%
21%
1.868.740
14%
2.009.254
14%
1.909.593
15%
-7%
-2%
613.658
5%
599.404
4%
411.135
3%
2%
49%
519.234
4%
619.206
4%
155.231
1% -16% 234%
203
0%
214
0%
1.118
0%
-5% -82%
128.315
1%
131.327
1%
68.602
1%
-2%
87%
390.716
3%
487.665
3%
85.511
1%
-20% 357%
4.225.992
31% 4.052.991
28% 3.749.478
29%
4%
13%
1.395
0%
1.379
0%
8.222
0%
1% -83%
3.247.118
24%
3.264.898
23%
3.037.608
23%
-1%
7%
977.479
7%
786.714
6%
703.648
5%
24%
39%
13.458.854 100% 14.261.541 100% 12.951.305 100%
-6%
4%
CURRENT LIABILITIES
Social and Labor Liabilities
Suppliers
Fiscal and Tax Liabilities
Short Term Debt
Dividends Payable
Advances from Clients
Profit Sharring
Derivatives
Other Short Term Liabilities
LONG TERM LIABILITIES
Long Term Debt
Other Long Term Liabilities
Deferred Taxes
Contingencies Provisions
MINORITIES
STOCKHOLDERS' EQUITY
TOTAL LIABILITIES
3.057.697
261.940
502.294
120.842
1.017.473
94.263
434.562
52.901
14.434
558.988
4.394.119
3.636.054
181.225
224.250
352.590
123.451
5.883.587
13.458.854
23% 3.494.850
2%
191.077
4%
566.769
1%
121.461
8%
1.284.633
1%
172.484
3%
486.225
0%
143.897
0%
1.438
4%
526.866
33% 4.610.631
27%
3.868.335
1%
159.632
2%
242.696
3%
339.968
1%
126.680
44% 6.029.380
100% 14.261.541
25% 4.085.760
1%
231.686
4%
594.308
1%
163.946
9%
1.998.692
1%
69.707
3%
564.522
1%
55.185
0%
4%
407.714
32% 3.467.515
27%
2.810.400
1%
109.262
2%
275.698
2%
272.155
1%
95.369
42% 5.302.661
100% 12.951.305
32%
2%
5%
1%
15%
1%
4%
0%
0%
3%
27%
22%
1%
2%
2%
1%
41%
100%
-13%
37%
-11%
-1%
-21%
-45%
-11%
-63%
904%
6%
-5%
-6%
14%
-8%
4%
-3%
-2%
-6%
-25%
13%
-15%
-26%
-49%
35%
-23%
-4%
37%
27%
29%
66%
-19%
30%
29%
11%
4%
PAGE 12
Earnings Release
1Q 2016
Annex III
Consolidated Cash Flow Statement
Figures in R$ Thousands
3 Months
2016
Operating Activities
Net Earnings before Taxes
Depreciation and Amortization
Provisions:
Changes in Assets & Liabilities
(Increase) / Reduction of Accounts Receivable
Increase / (Reduction) of Accounts Payable
(Increase) / Reduction of Investories
Income Tax and Social Contribution on Net Earnings
Profit Sharing Paid
Cash Flow from Operating Activities
3 Months
2015
317,618
85,157
33,595
(53,031)
(29,435)
46,959
124,924
(56,995)
(138,484)
383,339
315,741
74,298
218,942
(353,455)
(233,777)
166,965
(120,339)
(72,419)
(93,885)
255,526
Investment Activities
Fixed Assets
Intagible Assets
Results of sales of fixed assets
Asset Rightdowns
Long term securities bought
Aquisition of Subsidiaries
Cash Aquired from Subsidiaries
Cash Flow From Investment Activities
(114,454)
(508)
6,329
(106,323)
(291,830)
(506,786)
(120,293)
(9,098)
11,306
(18,494)
(34,576)
3,389
(167,766)
Financing Activities
Working Capital Financing
Long Term Financing
Interest paid on loans and financing
Treasury Shares
Dividends & Intesrest on Stockholders Equity Paid
Cash Flow From Financing Activities
139,478
(414,423)
(91,375)
3,396
(284,856)
(647,780)
689,164
(187,469)
(48,565)
30
(267,247)
185,913
Change in Cash Position
(28,678)
30,681
Change in Cash Position
(799,905)
304,354
Cash & Cash Equivalents
Beginning of Period
End of Period
3,277,115
2,477,210
3,284,275
3,588,629
PAGE 13