Conference Call
4Q15
Revenue and Profit Growth
in Unfavorable
Environment
Disclaimer
This is a support document for Standards and criteria applied in the WEG S.A. 2015 annual and the preparation of information
fourth quarter results conference The financial statements presented in this
call. document has been prepared in
Any forecasts contained in this document
or statements that may eventually be
made during this conference call relating
to WEG’s business perspectives,
projections and operating and financial
goals and to WEG’s potential future
growth are management beliefs and
expectations, as well as information that
are currently available.
These statements involve risks,
uncertainties and the use of assumptions,
as they relate to future events and, as
such, depend on circumstances that may
or may not be present. Investors should
understand that the general economic
conditions, conditions of the industry
and other operating factors may affect
WEG’s future performance and lead to
results that may differ materially from
those expressed in such future
considerations.
accordance with IFRS (International
Financial Reporting Standards). The
financial information relating to WEG
correspond to the company’s
consolidation information.
In addition, the financial and operating
information included in this results
discussion are subject to rounding
adjustments and, as a result, the total
value presented in the tables and graphs
may differ from the direct figures that
precede them.
The information denominated EBITDA –
Earnings Before Interest, Taxes on
Income and Social Contribution on Net
Income, Depreciation and Amortization;
EBIT – Earnings Before Interest and
Income Taxes and Social Contribution on
Net Income are presented in accordance
with Instruction No.527 issued by CVM
on October 4, 2012.
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Highlights
Fourth Quarter
01
Net Operating Revenues growth, even in difficult conditions in Brazil, our largest market
02
Despite operational difficulties, high profitability 03
Organic investments and acquisitions and discipline on cash use Capacity expansion and
modernization investments in 2015
totaled R$ 468.1 million, being 41%
EBITDA of R$ 382.0 million, with
margin of 14.0%, -0.3% over the
4Q14 and -3.3% over the 3Q15;
in industrial plants in Brazil and 59%
Net Operating Revenues of
Net Income of R$ 383.9 million, with
R$ 2,734.3 million, for 25.4%
of R$ 982.4 million in 2015
net margin of 14.0% and growth of
growth over the 4Q14 and 7.4%
and R$ 276.5 million in 4Q15,
45.8% over the 4Q14 and of 44.7%
growth over the 3Q15;
despite the impact of the devaluation
over the 3Q15.
currency in working capital.
in expansion projects abroad.
Operating Cash Generation
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Net Operating
Revenues
Quarterly Evolution
Net Operating Revenues R$ 2,734.3 million, for 25.4% growth over the 4Q14 and 7.4% growth over the 3Q15
Brazilian Market
External Market
1.784
1.822
2.056
2.349
2.180
2.130
50%
52%
55%
50%
51%
52%
50%
49%
48%
50%
48%
45%
Q1 14
Q2 14
Q3 14
Q4 14
Q1 15
Q2 15
2.546
2.734
57%
61%
43%
39%
Q3 15
Q4 15
In R$ million
Brazilian Market: R$ 1,060.5 million, 39% of NOR
• Total growth of -2.4% over the 4Q14
• Organic growth of -2.7%
External Markets: R$ 1,673.8 million, 61% of NOR
• Measured in Brazilian Reais: 53.2% over the 4Q14
• Measured in Brazilian Reais, organic growth: 48.5%
• In local currencies, weighted by the revenues in each market: 9.6%
• Measured in average US dollar for the quarter: 1.5%
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Net Operating
Revenues
Annual Evolution
9.760
Brazilian Market
External Market
6.174
6.829
57%
51%
5.189
44%
7.841
51%
50%
56%
49%
50%
49%
2011
2012
2013
2014
43%
2015
In R$ million
Net Operating Revenues R$ 9,760.3 million, for 24.5% growth over 2014. Organic growth of 21.1% .
Brazilian Market: R$ 4,227.3 M (43%)
• Total growth of 9.0% over 2014
• Organic growth of 8.8%
External Markets: R$ 5,533.0 M (57%)
• Measured in Brazilian Reais: 39.6% over 2014
• Measured in Brazilian Reais, organic growth: 32.5%
• In local currencies, weighted by the revenues in each market: 11.5%
• Measured in average US dollar: -1.8%
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Business Area
Performance
Industrial Electro-Electronic
Equipment. The industrial
investment performance in Brazil has
disappointed even considering the
low expectations. There was a
slowdown in activity at the end of the
year.
In external markets, we continue to
execute our capacity expansion plan
in Mexico and China. With lower
currencies volatility, growth in local
currencies becomes growth in hard
currency.
Engineered products with demand
falling, affecting volumes and prices
Motors for Domestic Use. Every
revenue growth in external markets,
with good performance in China,
while the Brazilian Market continued
to decline.
Energy Generation, Transmission
and Distribution (GTD). In Brazil, we
continue performing deliveries of
wind generation portfolio, with
productivity gains as we go through
the learning curve. The longest
portfolio enables cross time of
contraction in activity.
Already in transmission and
distribution (T&D), the downturn
already decreased demand and order
intake. External markets are the
alternative to maintain growth.
Manufacturing operations abroad
with good performance, especially in
Mexico.
Demand in 4Q15 showed the impacts
of the end of consumer incentives,
the contraction of credit and
disposable income. White goods
manufacturers are adjusting
inventories.
Paints and Varnishes. Greater
exposure to Brazilian industry, with
poor performance. Look for new
markets and applications to mitigate
weak demand.
Argentina, the largest external
market, has good prospects for 2016.
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310,3
Main impacts on
EBITDA
(507,4)
244,2
FX Impact on
Revenues
(35,6)
383,0
Volumes,
Prices &
Product Mix
Changes
COGS (ex
depreciation)
Selling
Expenses
(19,0)
(7,6)
14,1
General and
Administrative
Expenses
Profit Sharing
Program
Other Income
382,0
EBITDA Q4 15
EBITDA Q4 14
Em R$ milhões
EBITDA of R$ 382.0 million, with margin of 14.0%, ‐0.3% over the 4Q14 and ‐3.3% over the 3Q15.
Domestic environment continued to
deteriorate, hampering the margins
recovery effort.
Gross margin of 26.7%, with an
impact of further increases in
material costs. Increasing prices to
pass through higher costs is difficult
under the current economic
environment. The conclusion of this
process depends on lower exchange
rate oscillations.
Other impacts that affect us
throughout the year are still present,
such as the increasing importance of
revenues from wind power in Brazil
and from the recent acquisitions
abroad that still operate with lower
than average margins.
On the other hand, there was a
relative decrease in the impact of
additional provisions that we have
done this year.
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Financial Income
Financial Expenses
Main impacts on Net
Financial Results
89,1
(4,2 )
(17,5 )
PVA Suppliers
(22,5 )
Derivatives
27,3
(28,7 )
25,3
31,2
79,0
Other
expenses
(1,1 )
(8,3 )
(5,8 )
(5,2 )
PROEX
Investment Active
PVA exchange Customers PIS/COFINS Derivatives
yield
variation
Other
income
(0,6 )
Interest
due
Passive
exchange
variation
Net
Financial
4Q15
Net
Financial
4Q14
In R$ million
Access to competitive financing lines both in terms of cost and maturity.
Financial results showed effect
reversal of the market-to-market of
debt hedges in the quarter, with the
favorable behavior of the exchange
rate US$/R$, the DI interest and
exchange coupon, variables used in
the pricing of swaps.
We continue maintaining privileged
access to credit lines. This quarter we
renewed NCE Compulsory credit
lines.
WEG has access to credit lines in US$
on very attractive conditions, with
maturities up to five years. We do
hedge the exchange rate, contracting
swaps of US$ to floating rate in
Brazilian Reais at still very
competitive costs.
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Cash from
operations
2.184,6
Main impacts on
Cash Flow
Operating
Investing
982,4
(904,0)
Financing
(157,6)
Net Debt
Issuance
636,8
3.284,3
3.205,2
Working
Capital
(1.202,1)
Cash December 2014
Interest and
Dividends
paid
(794,4)
Cash December 2015
In R$ million
Healthy cash generation and access to financing allows to maintain investing activities. As of this quarter, the cash flows
statement started to eliminate the
devaluation effect produced in the
balance sheets consolidation of our
subsidiaries. The impact of exchange
rate changes on each account,
naturally, continued.
We have worked to improve
efficiency in investments in working
capital, with results already apparent
mainly in inventories. On the other
hand, accounts payable and advances
from customers have contributed
less.
We can see that there was cash
generation of R$ 982.4 million from
operating activities in 2015, despite
an increase in investments in working
capital.
The operating cash flow and access
to credit lines allowed us to maintain
investment activities without undue
pressure on cash position.
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Capex Program
Quarterly Evolution
Outside Brazil
132,3
Brazil
94,0
64,3
8,4
23,5
55,9
70,6
60,5
134,1
120,1
47,9
34,3
82,4
131,5
134,1
86,6
97,7
44,9
36,4
49,6
71,8
86,2
85,8
32,8
Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15
In 2015, the investment budget was fulfilled. Investments in expansion of R$ 470 million in 2016.
Investments in expansion and
modernization totaled R$ 468.1
million in 2015, in line with our
budget.
Considering the industrial plants in
Brazil and abroad, capacity expansion
and modernization investments
should reach R$ 470 million in 2016.
Highlight were the new electric
motors industrial plants in Mexico
and China, both already in
production. Both units will be further
expanded over the coming years.
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Outlook
2016 challenging
The year began at a slow pace in
Brazil, with further activity
deceleration becoming apparent,
higher than typically observed in the
first quarter. This scenario reinforces
the need to find alternative markets
and accelerate external expansion.
There are, however, opportunities for
growth.
Some of our most important markets
are going through adjustments and
the search for alternatives will be
even more important to maintain
continuous and sustainable growth.
In Brazil, while there is no recovery of
economic activity, opportunities
remain concentrated in renewable
energy generation, transmission and
distribution.
The weak economic performance in
Brazil limits our ability to recover
operating margins. However, there is
some gradual reduction of some of
the pressures that we faced in 2015
(costs increases pass through,
provisions, etc.).
We will continue to execute our WEG
strategic planning, expanding our
presence in new markets and
expanding the product line, both
organically by investing in research,
development and innovation, as with
acquisitions and strategic
partnerships.
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Contacts
IR WEG
Paulo Polezi
Luis Fernando Oliveira
Finance and Investor Relations Officer
Investor Relations Manager
+55 (47) 3276-6354
ppolezi@weg.net
+55 (47) 3276-6367
luisfernando@weg.net
https://www.facebook.com/ri.weg
twitter.com/weg_ir
www.linkedin.com/company/weg-investor-relations
www.weg.net/ir
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