Earnings Release
3Q 2015
Jaraguá do Sul (SC), October 28, 2015: WEG S.A. (BM&F Bovespa: WEGE3, OTC: WEGZY), one of the world’s largest manufacturer of electric-electronic equipment,
working mainly in capital goods in five main product lines: Motors, Power, Transmission and Distribution, Automation and Coatings, announced today its results for the
third quarter of 2015 (3Q15). The following financial and operating data are presented in a consolidated basis, except when otherwise indicated, in thousands of Brazilian
Reais (R$) according to accounting practices adopted in Brazil, including Brazilian Corporate Law and the convergence to IFRS international norms. The Growing rates and
other comparisons are, except when otherwise indicated, made in relation to the same period of the previous year.
FLEXIBILITY AND RESILIENCE BOOSTS GROWTH
ƒ Net Operating Revenues in the third quarter of 2015 reached R$ 2,546.3 million, for 23.9% growth
over the 3Q14 and 8.4% growth over the 2Q15;
ƒ EBITDA reached R$ 395.1 million and EBITDA margin reached 15.5%. EBITDA grew by 12.7% to
3Q14 and by 12.2% to the previous quarter;
ƒ Net Income totaled R$ 265.4 million, with net margin of 10.4% and growth of 2.6% over the 3Q14
and of 1.7% over the 2Q15;
ƒ Capacity expansion and modernization investments totaled R$ 334.0 million in the first nine
months of 2015, being 49% in industrial plants in Brazil and 51% in expansion projects abroad.
ƒ On September 17, WEG S.A. announced the acquisition of Autrial S.L., a manufacturer of electrical
panels for industrial equipment and plants, headquartered in Valencia, Spain.
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$ Thousands)
Q3 2015
Q2 2015
%
2,546,349
1,087,388
1,458,962
411,211
724,802
28.5%
265,409
10.4%
395,093
15.5%
2,349,432
1,051,525
1,297,906
422,464
671,727
28.6%
260,881
11.1%
352,148
15.0%
8.4%
3.4%
12.4%
-2.7%
7.9%
0.16459
0.16170
1.8%
1.7%
12.2%
Q3 2014
%
2,055,972
994,061
1,061,912
466,737
638,533
31.1%
258,569
12.6%
350,699
17.1%
23.9%
9.4%
37.4%
-11.9%
13.5%
0.16028
2.7%
2.6%
12.7%
09M15
09M14
7,026,072
3,166,767
3,859,305
1,218,665
2,035,152
29.0%
772,149
11.0%
1,095,602
15.6%
5,661,062
2,789,855
2,871,207
1,255,423
1,786,279
31.6%
691,441
12.2%
961,842
17.0%
%
0.47869
0.42862
24.1%
13.5%
34.4%
-2.9%
13.9%
11.7%
13.9%
11.7%
CONFERENCE CALL (WITH SIMULTANEOUS TRANSLATION TO ENGLISH)
October 29, Thursday 11 a.m. (Brasília official time)
Dial---in in the US: +1 786 924-6977
Webcasting (simultaneous translation into English: www.ccall.com.br/weg/3q15.htm
PAGE 1
Earnings Release
3Q 2015
EGGON JOÃO DA SILVA
On September 13, Mr. Eggon João da Silva, one of the WEG’s founders, passed away.
Born on October 17, 1929, in what is now the municipality of Schroeder, north of Santa Catarina, Eggon João da Silva began to work
early, at 13 years old, in a registry in Jaragua do Sul. After 14 years working at the largest main bank in Santa Catarina and also
becoming a partner at the industrial company João Wiest & Cia. Ltda., Mr. Eggon founded WEG, alongside Werner Ricardo Voigt
and Geraldo Werninghaus, on April of 1961. Until 1989, Eggon was WEG’s CEO, leading the company to become one the largest in
the industry, with important market share both in the domestic and the international markets. From 1989 to 2004 he served as WEG’s
Chairman of the Board of Directors.
Eggon João da Silva trajectory is not linked solely to WEG. He was also Director on the Board of four large companies - Oxford, Tigre,
Marisol, and Perdigão, and in the latter, even became the CEO from 1994 to 95, guiding the company through a very tough financial
turnaround.
As a self-taught businessman, with long-term vision and extreme strategic planning capacity, Eggon João da Silva left a legacy for
the Brazilian and global industrial sector, helping to create a strong corporate culture that hinges on valuing people, efficiency and
productivity.
His most famous phrase is as a lesson for future generations:’’ When you lack machines, you can buy them; if you do not have money,
you can borrow it; but you cannot buy or borrow people and people motivated by idea are the basis for success’’.
ECONOMIC ACTIVITY AND INDUSTRIAL PRODUCTION
Volatility continued to dominate the global economic environment in the third quarter, caused by the uncertainties on the Chinese
economy adjustment. From the industrial activity point of view, as measured by the purchasing managers indexes (PMI), China
continued to consistently post readings below 50 (that indicate deceleration), continuing the slowdown trend that has been clear since
the beginning of 2015. In the US the indexes reverted the brief summer of recovery, and although still show mild expansion, indicate
dynamism is dwindling. On the other hand, the German PMI showed consistency in the expansion that began at the end of 2014 and
which is slowly spreading to other European countries.
Manufacturing ISM Report on Business ® (USA)
Markit/BME Germany Manufacturing P M I ®
HSBC China Manufacturing P M I ™
September 2015
50.2
52.3
47.2
August 2015
51.1
53.3
47.3
July 2015
52.7
51.8
47.8
In Brazil, economic activity continued to decline, with no expectations of a short term turnaround. The estimates on Banco Central do
Brasil ‘‘Focus’’ survey point to gross domestic product (GDP) falling close to 3.0% in 2015 and an additional 1.2% in 2016. The
downturn continued the strongest in the industrial sector and industrial production, as measured by the Instituto Brasileiro de
Geografia e Estatística (IBGE), showed 6.9% drop until August and 5.7% drop over the previous 12 months. The expectations on the
‘‘Focus’’ survey is for industrial production to fall by 7% in 2015 and a further fall of 1% in 2016.
INDUSTRIAL INDICATORS IN BRAZIL ACCORDING TO LARGE ECONOMIC CATEGORIES
Change (%)
Categories of Use
Aug 15 / Jul 15* Aug 15 / Aug 14
Capital Goods
Intermediary Goods
Consumer Goods
Durable Goods
Semi-durable and non-durable
General Industry
-7.6
0.2
-0.9
-4.0
-0.3
-1.2
-33.2
-5.5
-9.1
-14.6
-7.6
-9.0
Acummulated
On Year
12 months
-22.4
-3.7
-8.8
-14.2
-7.2
-6.9
-18.4
-3.4
-6.5
-12.0
-4.8
-5.7
Source: IBGE, Research Office, Industry Coordination
(*) Series with seasonal adjustments
It is always important to remember that variations in industrial production are strongly influenced by the automobile industry
performance. Conditions in other industry sectors, although weak, are not necessarily as negative.
PAGE 2
Earnings Release
3Q 2015
NET OPERATING REVENUES
Net Operating Revenues totaled R$ 2,546.3 million in the third quarter of 2015 (3Q15), for 23.9% growth over the third quarter of
2014 (3Q14) and 8.4% growth over the second quarter of 2015 (2Q15). Adjusting net revenues for transactions occurred in the period,
organic growth was of 21.4% over 3Q14.
NET OPERATING REVENUES PER MARKET
(R$ MILLION)
Brazilian Market
External Market
1,784
1,822
2,546
2,349
2,056
2,180
2,130
52%
50%
52%
55%
57%
50%
51%
50%
49%
48%
50%
48%
45%
43%
Q1 14
Q2 14
Q3 14
Q4 14
Q1 15
Q2 15
Q3 15
There were no significant changes during the 3Q15 to the market trends that we observed in the first half of 2015. Net Operating
Revenue in 3Q15 breakdowns as follows:
ƒ Brazilian Market: R$ 1,087.4 million, representing 43% of Net Operating Revenue, with 9.4% growth over 3Q14 and 3.4% growth
over 2Q15. Organic growth in the Brazilian market, excluding the consolidation of the Efacec Energy Service Ltda. acquisition, was
of 9.2% over 3Q14;
ƒ External Markets: R$ 1,459.0 million, equivalent 57% of Net Operating Revenue. The external market growth has been strongly
influenced by changes in exchange rates in the markets in which we operate. For a better analysis, we believe it is necessary to
observe the growth from various points of view. Thus, the growth compared to 3Q14 was:
ƒ
Measured in Brazilian Reais: 37.4%
ƒ
Measured in Brazilian Reais, excluding the acquisitions (organic growth): 33.4%
ƒ
In local currencies, weighted by the revenues in each market: 7.4%
ƒ
Measured in average US dollar for the quarter: down by 11.9%
EVOLUTION OF NET REVENUE ACCORDING TO GEOGRAPHIC MARKET
Q3 2015
Net Operating Revenues
- Brazilian Market
- External Markets
- External Markets in US$
2,546.3
1,087.4
1,459.0
411.2
(R$ MILLION)
Q2 2015
2,349.4
1,051.5
1,297.9
422.5
%
Q3 2014
8.4%
3.4%
12.4%
-2.7%
2,056.0
994.1
1,061.9
466.7
%
23.9%
9.4%
37.4%
-11.9%
The devaluation of the Brazilian Real against the US dollar, comparing 3Q15 and 3Q14 average rates, reached 56%. Revenue abroad
grew at a slower pace, however, as our selling prices are not necessarily denominated in US dollars, but in the relevant currency in
each of the various markets. Thus, despite the drop in revenues in US dollars, we continue to grow in local currencies, consistently
executing our external market growth strategy, with two fronts: (i) geographic expansion of our presence, introducing our products
and building up our brand; and (ii) expand the product line the markets in which WEG brand is already established.
E X T E R N A L M A R K E T -- D I S T R I B U T I O N O F N E T R E V E N U E A C C O R D I N G T O G E O G R A P H I C M A R K E T
North America
South and Central America
Europe
Africa
Australasia
Q3 2015
Q2 2015
%
Q3 2014
38.2%
16.2%
24.6%
12.5%
8.5%
42.4%
15.9%
24.2%
8.4%
9.1%
-4,2 pp
0,3 pp
0,4 pp
4,1 pp
-0,6 pp
38.1%
14.2%
22.1%
14.0%
11.6%
%
0,1 pp
2,0 pp
2,5 pp
-1,5 pp
-3,1 pp
PAGE 3
Earnings Release
3Q 2015
BUSINESS AREAS
Industrial Electro-Electronic Equipment --- As we have observed in recent quarters, the highlight in this area was the good
performance in the external market. There are several factors influencing this performance, beyond the simple revenue conversion
effect of foreign currencies in weaker Brazilian Reais. The Brazilian currency devaluation creates favorable conditions for expansion
abroad, allowing for additional efforts in sales personnel, services and infrastructure, all of which are later converted into a structurally
stronger market position. We also continue to expand our capacity, with new plants in Mexico and China, which are increasing our
product line and allowing us to be more flexible in servicing our customers.
In Brazil, however, the industrial sector continues to suffer the impact of the economic recession, which discourages investment in
capacity expansion. Even the currency devaluation, which could provide additional competitiveness for the exports of our industrial
clients has had little material impact, mostly concentrated on sectors where investment in electrical equipment intensity is lower. Thus,
demand still depends on investments for maintenance of current installed capacity, which is resilient, but insufficient to foster market
growth.
Energy Generation, Transmission and Distribution (GTD) --- This is a business area where equipment are characteristically large,
with manufacturing lead times that may be several months long. Thus, revenue growth, which remained strong, is the result of
executing an order book that was built several months ago. Highlights have been, for a number of quarters, the wind power generation
systems. It is important to note that we began delivering wind systems around mid 3Q14, which means that the growth rate in GTD
is high partially because the relatively easy comparison base. This effect is expected to gradually taper off in coming quarters, with
the contribution of this business to growth converging to a more sustainable level.
In the transmission and distribution segment (T&D) we noticed that, in the Brazilian market, the low economic activity and the falling
electricity demand has decreased the demand for investments in expansion and postponing maintenance investment. This scenario
should not affect revenues in the short term, with the execution of the current order book, but the prospects for the coming years is
that growth tends to be increasingly concentrated abroad.
Motors for Domestic Use --- in this business area we also observe the impact of devaluation of the Brazilian currency on the growth
rate, with the strong growth of WEG Yatong operations in China. This is an appliances’ electric motor operation whose clients are in
mature markets like North America and Europe, and revenues are in hard currency. Although the second half of the year is seasonally
stronger, performance in the Brazilian market remained weak, as expected. Given the current disposable income and consumer credit
conditions, we do not expect rapid recovery in market performance.
Paints and Varnishes --- The business area continued to show the weak performance of the industrial and consumer goods markets
in Brazil. We have made adjustments to the cost structure and operating expenses and have sought new markets and application
segments for our products. Recently we started operating a new paints plant in Mauá, São Paulo, which will allow us additional
efficiency gains.
DISTRIBUTION OF NET REVENUE PER BUSINESS AREA
Electro-electronic Industrial Equipments
Q3 2015
Q2 2015
%
Q3 2014
%
52.8%
53.6%
-0.8 pp
58.3%
-5.5 pp
Domestic Market
16.4%
16.7%
-0.3 pp
22.4%
-6 pp
External Market
36.4%
36.9%
-0.5 pp
35.9%
0.5 pp
Energy Generation , Transmission and Distribution
30.3%
29.0%
1.3 pp
24.1%
6.2 pp
Domestic Market
17.9%
19.3%
-1.4 pp
13.9%
4 pp
External Market
12.4%
9.7%
2.7 pp
10.2%
2.2 pp
Electric Motors for Domestic Use
12.3%
12.4%
-0.1 pp
11.4%
0.9 pp
4.8%
4.6%
0.2 pp
6.6%
-1.8 pp
Domestic Market
External Market
7.5%
7.8%
-0.3 pp
4.8%
2.7 pp
Paints and Varnishes
4.4%
4.6%
-0.2 pp
5.7%
-1.3 pp
Domestic Market
3.5%
3.9%
-0.4 pp
5.2%
-1.7 pp
External Market
0.9%
0.7%
0.2 pp
0.5%
0.4 pp
PAGE 4
Earnings Release
3Q 2015
COST OF GOODS SOLD
Cost of Goods Sold (COGS) totaled R$ 1,821.5 million in 3Q15, 28.5% above 3Q14 and 8.6% above 2Q15. Gross margin reached
28.5%, with reduction of 2.6 percentage points over 3Q14, and almost at the same level of 2Q15.
The factors that influenced the gross margin were:
(i)
Additional provisioning: (a) labor claims for class actions discussing general working conditions, among others, (b)
receivables; and, (c) low turnover of inventories;
(ii)
The relative importance of wind power generation systems revenue, a new product in which we still in the production
learning curve and expect future efficiency gains. Moreover, wind generation integrates subsystems that are not
manufactured by WEG and thus, has lower than average operating margins;
(iii)
The difference in timing of implementing the necessary price increases to counter the cost increases on raw materials
denominated in or referenced to the US dollar, as a results of the continued devaluation of the Brazilian Real; and,
(iv)
The relative importance of revenues from recently acquired businesses, such as WEG Yatong, with an impact on the
product mix.
COGS BREAKDOWN
Labor
20.5%
Q3 15
Other Costs
Depreciation 8.7%
4.2%
Depreciation
4.2%
Other Costs
10.5%
Materials
64.8%
Q3 14
Labor
22.3%
Materials
64.8%
In the 3Q15 the average copper spot prices at the London Metal Exchange (LME) showed further drop of 12.8% over the previous
quarter and accumulated decrease of 24.6% compared to 3Q14. Steel prices also showed additional decrease of 20% compared to
3Q14, and decrease of 38.4% compared to 2Q15. As always, these are the variations of US dollars prices, which means that prices
in Brazilian Reais continued to rise, as they incorporate devaluation of 55.6% over 3Q14.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consolidated selling, general and administrative expenses (SG&A) totaled R$ 364.3 million in 3Q15, 20.2% growth over the 3Q14 and
5.8% growth over the previous quarter. As a percentage of Net Operating Revenue, operating expenses represented 14.3% in 3Q15,
0.4 percentage points lower than in 3Q14, and 0.3 percentage points lower than in 2Q15, highlighting the good work of control and
search for efficiency.
EBITDA AND EBITDA MARGIN
In the 3Q15, EBITDA (according to the Instruction CVM 527/2012) totaled R$ 395.1 million, 12.7% growth over the 3Q14 and 12.2%
growth over the 2Q15. EBITDA margin reached 15.5%, 1.5 percentage points lower than 3Q14, but 0.5 percentage point higher than
2Q15. The better control over operating expenses provided a smaller drop in EBITDA margin than that observed in gross margin.
PAGE 5
Earnings Release
3Q 2015
FIGURES IN R$ MILLION
Q3 2015
Net Operating Revenues
Net Income before Minorities
Net Margin
(+) Income taxes & Contributions
(+/-) Financial income (expenses)
(+) Depreciation & Amortization
EBITDA
EBITDA Margin
2,546.3
268.1
10.5%
15.9
28.7
82.4
395.1
15.5%
379.9
(388.5)
FX Impact on
Revenues
COGS (ex
depreciation,
including FX)
110.5
350.7
Volumes,
Prices &
Product Mix
Changes
EBITDA Q3 14
Q2 2015
%
Q3 2014
8.4%
2,349.4
1.9%
263.2
11.2%
64.9 -75.6%
n.a.
-53.5
6.3%
77.5
352.1 12.2%
15.0%
%
2,056.0 23.9%
2.1%
262.6
12.8%
66.1 -76.0%
n.a.
-41.6
63.6 29.6%
350.7 12.7%
17.1%
(37.8)
Selling
Expenses
(20.2)
(4.9)
5.4
General and
Administrative
Expenses
Profit Sharing
Program
Other
Expenses
395.1
EBITDA Q3 15
NET FINANCIAL RESULTS
Net financial result was negative in R$ 28.7 million in 3Q15 (positive in R$ 41.6 million and R$ 53.5 million in 3Q14 and 2Q15,
respectively). Financial revenues totaled R$ 522.0 million in 3Q15 (R$ 208.2 million and R$ 18.2 million, respectively), with strong
expansion in absolute value compared to the previous quarter as a result of changes on exchange rate. Financial expenses totaled
R$ 550.7 million (R$ 166.6 million in 3Q14 and positive in R$ 35.3 million in 2Q15).
The negative net financial result is mainly due to the mark-to-market of derivative transactions used to protect the foreign currency
debt. We have approximately US$ 345 million in exchange swaps earning CDI (Brazilian base interest rate) and these instruments are
priced using the exchange rate, the DI interest rate and the so-called ‘‘exchange coupon’’, the US dollar denominated interest rate in
Brazil. With the downgrade of the Brazilian sovereign rating, there was a strong increase in foreign exchange coupon, which negatively
affected the market value of these swaps and prevented the exchange rate of the loans in US$ were fully protected. Importantly, this
is an accounting impact and that there is no actual cash outflow until the transactions are settled. Brought to maturity, this debt has
quite attractive conditions.
INCOME TAX
In the 3Q15 the provision for ‘‘Income Tax and Social Contribution on Net Profit’’ reached R$ 99.7 million (R$ 77.7 million and R$
48.5 million in 3Q14 and 2Q15, respectively). Additionally, a credit of R$ 83.8 million was recorded as ‘‘Deferred Income Tax / social
contribution’’ (credit of R$ 11.6 million and debt of R$ 16.4 million, respectively). The decrease in the effective tax rate on income is
due to differences in tax rates on results abroad.
NET INCOME
As a result of aforementioned impacts, net income for 3Q15 was R$ 265.4 million, an increase of 2.6% over 3Q14 and increase of
1.7% over the previous quarter. Net margin for the quarter was 10.4%, 2.2 percentage points lower than in 3Q14 and 0.7 percentage
points lower than the previous quarter.
CASH FLOW
In the first nine months of 2015, operating activities consumed R$ 17.6 million, mainly from the impact of exchange rate changes over
working capital accounts (inventories, receivables and suppliers). The cash generated from operations was not sufficient to completely
compensate for this impact.
Investing activities were also impacted by exchange rate changes, mainly on the ‘‘Accumulated Conversion Adjustment’’ account,
which accounts for the impacts of FX on fixed assets abroad. As such, despite the continuous execution of the investment program,
with emphasis on the capacity expansion in new plants in China and Mexico, investment activities generated R$ 89.7 million.
PAGE 6
Earnings Release
3Q 2015
Finally, financing activities generated R$ 55.4 million in the period, with R$ 1,346.3 million in new financing raised and R$ 580.6 million
in amortizations (net increase of R$ 765.7 million) in addition to the payment of interest on loans and dividends and interest on
stockholders’ capital referring to the second half of 2014.
Cash from
Operations
1,590.5
Accumulated
Conversion
Adjustment
575.2
Operating
(17.6)
3,284.3
Investing
Net Debt
Issuance
765.6
Financing
Working
Capital
(1,608.1)
3,411.8
55.4
89.7
Interest and
Dividends
Paid
(710.2)
Typical
Investments
(485.5)
Cash September 2015
Cash December 2014
INVESTMENTS
Total investments in fixed assets in the first nine months of 2015 reached R$ 352.9 million, of which the organic investments in
capacity expansion and modernization totaled R$ 334.0 million. The balance refers to fixed assets added as result of the consolidation
of acquisitions. Investment program highlights are the new electric motors industrial plants in Mexico, which is already operating, and
China, which should start production soon. Investments in production units outside Brazil, including new industrial plants in Mexico
and China, among others, consumed 51% of total investments.
Outside Brazil
132,3
Brazil
94,0
64,3
8,4
23,5
55,9
70,6
Q1 14
Q2 14
60,5
134,1
131,5
120,1
47,9
34,3
82,4
86,6
49,6
71,8
Q3 14
86,2
Q4 14
85,8
Q1 15
32,8
44,9
Q2 15
Q3 15
Our program for 2015 foresees investments of R$ 477.6 million in capacity expansion and modernization, but we have flexibility in
implementing these investments, always in search of maximizing capacity utilization and return on invested capital. We are following
carefully the market conditions evolution, especially in Brazil, and we can make timely adjustments to expenditures on production
plants to prevent that production capacity expands ahead of effective demand.
PAGE 7
Earnings Release
3Q 2015
DEBT AND CASH POSITION
On September 30, 2015 cash, cash equivalents and financial investments totaled R$ 4,630.4 million, almost entirely invested in fixed
income instruments linked to the CDI, in the short-term and in Brazilian currency, with first-tier banks. Gross financial debt totaled R$
5,095.9 million, being 41% in short-term and 59% in long-term.
FIGURES IN R$ THOUSANDS
September 2015
December 2014
September 2014
4,630,389
4,194,224
3,452,955
4,316,136
4,158,203
3,439,837
314,253
36,021
13,118
5,095,869 100% 4,092,150 100% 3,472,489 100%
2,110,136
41% 1,466,752
36%
918,380
26%
1,144,511
779,146
573,337
965,625
687,606
345,043
2,985,733
59% 2,625,398
64% 2,554,109
74%
1,219,314
1,701,408
1,914,286
1,766,419
923,990
639,823
(465,480)
102,074
(19,534)
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)
At the end of the 3Q15, WEG had R$ 465.5 million net debt. The increase of gross debt and, consequently, the net debt is a result
of changes on exchange rate on foreign currency denominated debt. This impact will be offset in future as working capital accounts
(inventories and customers), also affected by exchange rate, are realized.
The current characteristics of the debt are:
ƒ The total debt duration is of 22.8 months and for the long-term portion is of 37.3 months. Duration for portion denominated in
Brazilian Reais is of 17.0 months and for the portion in foreign currencies is of 30.1 months. These values are almost the same as
those of the 2Q15, demonstrating the continuing availability of attractive financing lines.
ƒ The weighted average cost of fixed-rate Brazilian Reais denominated debt is approximately 6.4% per year. Floating rate contracts
are indexed mainly by Brazilian long-term interest rate (TJLP).
The two main lines of funding are:
ƒ NCE Compulsory --- obtained from commercial banks in Brazil, in Brazilian Reais, at fixed rates, with maturities up to three years.
ƒ Export Prepayments (PPE) --- obtained from commercial banks in Brazil in US$, with a LIBOR spread plus interest. According to
internal policies, we usually swap to CDI to hedge against changes on exchange rate.
DIVIDENDS
As August 12, 2015, payments declared during the first half of 2015 were made to shareholders, as below:
ƒ On March 24, as interest on stockholders’ equity (JCP), to shareholders on said date, in the gross amount of R$ 67.4 million
ƒ On June 23, as interest on stockholders’ equity (JCP), to shareholders on said date, in the gross amount of R$ 78.8 million
ƒ On July 28, as dividends referring to profit recorded in the first half of 2015, in the total amount of R$ 133.9 million
ƒ In addition, On September 22, the Board of Directors approved interest on stockholders’ equity (JCP), to shareholders of recorded
on said date, in the gross amount of R$ 87.3 million. This JCP will be paid from March 16, 2016
Event
Board Meeting
Date
Gross amount per
share
Interest on Stockholders’ Equity
24/03/2015
0,083529412
Interest on Stockholders’ Equity
23/06/2015
0,048825190
Dividends
28/07/2015
0,082999282
Interest on Stockholders’ Equity
22/09/2015
0,054117647
Total
0,269471531
PAGE 8
Earnings Release
3Q 2015
Our policy is to declare interest on stockholders equity quarterly and declare dividends based on profit earned each semester, thus,
we reported six different earnings each year, which is paid semiannually.
WEGE3 SHARE PERFORMANCE
The common shares issued by WEG, traded under the code WEGE3 at BM&F Bovespa, ended the last trading session of September
2015 quoted at R$ 15.45, with a nominal gain 1.0% in the year and of 2.2% considering the dividends and interest on stockholders
equity declared in the period. These percentages are already adjusted for the stock split approved at the Ordinary and Extraordinary
General Shareholders Meeting held on March 31. The stock split at the ratio of two common shares for each existing share, and were
ex-split on April 1st.
5.000
25,00
WEGE3
20,00
4.000
15,00
3.000
10,00
2.000
5,00
1.000
0,00
0
Traded shares (thousands)
WEGE3 share prices
Shares Traded (thousands)
The average daily traded volume in 3Q15 was R$ 31.9 million, (R$ 22.9 million in 3Q14). Throughout the quarter 442,081 stock trades
were carried out (176,040 stock trades in 3Q14), involving 115.6 million shares and moving R$ 2,042.5 million (R$ 1,370.1 million in
3Q14).
AUTRIAL S.L. ACQUISITION, IN SPAIN
On September 17, WEG S.A. announced the acquisition of Autrial S.L., a manufacturer of electrical panels for industrial equipment
and plants, headquartered in Valencia, Spain.
Autrial was founded in 1977 as a family owned business, and has extensive experience in manufacturing of electrical panels for switch,
control and protection of electric motors, distribution panels, panels for generator sets, panels for photovoltaic systems, among others.
The manufacturing plant occupies an area of 10,000 square meters, employing around 122 people. Net revenues in 2014 were of
approximately €14 million.
WEG SELECTED FOR DOW JONES SUSTAINABILITY INDICES
On September 10, we were selected again to compose the Dow Jones Sustainability Indices (DJSI). The WEGE3 shares continued
to integrate the Dow Jones Sustainability Emerging Markets Index portfolio (DJSI-EM) which became effective from September 21,
2015.
DJSI, developed by Dow Jones and the RobecoSAM Group, was the first global index to assess corporate sustainability considering
the economic, environmental and social development aspects. In 2015, DJSI considered a universe of 3,400 companies worldwide,
including the 800 largest companies in Emerging Markets, among which 86 companies with more sustainable practices were selected.
PAGE 9
Earnings Release
3Q 2015
RESULTS CONFERENCE CALL
WEG will hold, on October 29, 2015 (Thursday), conference call and webcast to discuss the results. The call will be conducted in
Portuguese with simultaneous translation in English, following scheduled time:
11 a.m.
9 a.m.
1 p.m.
--- Brasília time
--- New York (EDT)
--- London (GMT)
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/3t15.htm
www.ccall.com.br/weg/3q15.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 10
Earnings Release
3Q 2015
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 11
Earnings Release
3Q 2015
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
3rd Quarter
2015
R$
VA%
janeiro-00
#N/D
2nd Quarter
2015
R$
VA%
janeiro-00
#N/D
3rd Quarter
2014
R$
VA%
Changes %
Q3 2015
Q3 2015
Q2 2015
Q3 2014
2.546.349
(1.821.547)
724.802
(245.007)
(119.326)
522.019
(550.732)
14.393
(62.175)
283.974
(99.702)
83.849
2.712
265.409
100%
-72%
28%
-10%
-5%
21%
-22%
1%
-2%
11%
-4%
3%
0%
10%
2.349.432
(1.677.705)
671.727
(236.201)
(108.028)
18.198
35.274
2.940
(55.801)
328.109
(48.468)
(16.423)
2.337
260.881
100%
-71%
29%
-10%
-5%
1%
2%
0%
-2%
14%
-2%
-1%
0%
11%
2.055.972
(1.417.439)
638.533
(205.555)
(97.548)
208.182
(166.599)
2.072
(50.404)
328.681
(77.674)
11.589
4.027
258.569
100%
-69%
31%
-10%
-5%
10%
-8%
0%
-2%
16%
-4%
1%
0%
13%
n.m
n.m
389,6%
11,4%
-13,5%
105,7%
n.m
16,0%
1,7%
23,9%
28,5%
13,5%
19,2%
22,3%
150,8%
230,6%
n.m
23,4%
-13,6%
28,4%
n.m
-32,7%
2,6%
EBITDA
395.093
15,5%
352.148
15,0%
350.699
17,1%
12,2%
12,7%
EPS (adjusted for splits)
0,16459
1,8%
2,7%
0,16170
0,16028
8,4%
8,6%
7,9%
3,7%
10,5%
PAGE 12
Earnings Release
3Q 2015
Annex II
Consolidated Income Statement
janeiro-00
#N/D
9 Months
2015
R$
VA%
janeiro-00
Figures in R$ Thousands
#N/D
9 Months
2014
R$
VA%
%
2015
2014
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
7,026,072
(4,990,920)
2,035,152
(688,043)
(333,695)
1,059,845
(993,407)
20,844
(172,872)
927,824
(224,492)
78,804
9,987
772,149
100%
-71%
29%
-10%
-5%
15%
-14%
0%
-2%
13%
-3%
1%
0%
11%
5,661,062
(3,874,783)
1,786,279
(593,516)
(282,669)
503,266
(400,855)
5,657
(136,576)
881,586
(201,431)
17,867
6,581
691,441
100%
-68%
32%
-10%
-5%
9%
-7%
0%
-2%
16%
-4%
0%
0%
12%
24%
29%
14%
16%
18%
111%
148%
268%
27%
5%
11%
341%
52%
12%
EBITDA
1,095,602
15.6%
961,842
17.0%
14%
EPS (adjusted for splits)
0.47869
0.42862
12%
PAGE 13
Earnings Release
3Q 2015
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
September 2015
December 2014
September 2014
(A)
(B)
(C)
R$
%
R$
%
R$
%
#REF!
#REF!
#REF!
9.679.358
68% 8.063.213
68% 7.273.013
67%
4.288.962
30%
4.149.437
35%
3.437.845
32%
2.576.676
18%
1.867.864
16%
1.747.503
16%
2.248.834
16%
1.704.919
14%
1.672.573
15%
564.886
4%
340.993
3%
415.092
4%
569.135
4%
161.644
1%
139.456
1%
0%
1.047
0%
907
0%
108.749
1%
55.864
0%
59.208
1%
460.386
3%
104.733
1%
79.341
1%
4.041.424
28% 3.557.773
30% 3.490.341
32%
1.463
0%
8.224
0%
8.222
0%
3.255.878
23%
2.877.942
24%
2.794.224
26%
784.083
5%
671.607
6%
687.895
6%
14.289.917 100% 11.782.630 100% 10.902.810 100%
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
4.597.696
313.073
671.967
151.490
2.107.029
92.809
578.720
84.861
3.107
594.640
3.702.273
2.972.924
168.922
230.914
329.513
128.400
5.861.548
14.289.917
32% 3.379.017
2%
173.382
5%
445.577
1%
148.335
15%
1.462.493
1%
111.707
4%
590.815
1%
111.173
0%
2.461
4%
333.074
26% 3.264.350
21%
2.615.049
1%
107.463
2%
282.989
2%
258.849
1%
82.878
41% 5.056.385
100% 11.782.630
29% 2.840.667
1%
271.371
4%
512.394
1%
120.509
12%
916.734
1%
81.661
5%
520.966
1%
64.432
0%
1.646
3%
350.954
28% 3.185.051
22%
2.544.530
1%
116.729
2%
278.955
2%
244.837
1%
83.372
43% 4.793.720
100% 10.902.810
(A)/(B) (A)/(C)
<===== Não A
20%
33%
3%
25%
38%
47%
32%
34%
66%
36%
252% 308%
-100%
95%
84%
340% 480%
14%
16%
-82% -82%
13%
17%
17%
14%
21%
31%
26% 36%
2% 81%
5% 51%
1%
2%
8% 44%
1% -17%
5% -2%
1% -24%
0% 26%
3% 79%
29% 13%
23% 14%
1% 57%
3% -18%
2% 27%
1% 55%
44% 16%
100% 21%
62%
15%
31%
26%
130%
14%
11%
32%
89%
69%
16%
17%
45%
-17%
35%
54%
22%
31%
PAGE 14
Earnings Release
3Q 2015
Annex IV
Consolidated Cash Flow Statement
Figures in R$ Thousands
9 Months
2015
9 Months
2014
janeiro-00
janeiro-00
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
927,824
234,216
428,438
(1,608,124)
(1,285,098)
624,587
(552,594)
(235,308)
(159,711)
(17,646)
881,586
182,667
272,698
(444,952)
(122,894)
249,930
(205,126)
(218,669)
(148,193)
891,999
Investment Activities
Fixed Assets
Intagible Assets
Results of sales of fixed assets
Accumulated Conversion Adjustment
Long term securities bought
Goodwill in Capital Transactions
Acquisition of Stakes of non-controlling shareholders
Aquisition of Subsidiaries
Cash Flow From Investment Activities
(352,913)
(23,001)
13,202
575,220
(10,948)
(115,552)
89,737
(290,635)
(35,926)
4,641
(35)
(227,108)
(2,699)
(5,947)
(136,528)
(679,315)
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
1,346,271
(580,619)
(182,272)
(8,814)
(519,127)
55,439
780,347
(590,725)
(129,286)
956
(436,692)
(375,400)
Change in Cash Position
127,530
(162,716)
Cash & Cash Equivalents
Beginning of Period
End of Period
3,284,275
3,411,805
3,372,130
3,209,414
PAGE 15