Earnings Release
2Q 2015
Jaraguá do Sul (SC), July 29, 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 second
quarter of 2015 (2Q15). The following financial and operating data are presented in a consolidated basis, except when otherwise indicated, in thousands of Brazilian Reais
(R$) according to accounting practices adopted in Brazil, including Brazilian Corporate Law and the convergence to IFRS international norms. The Growing rates and other
comparisons are, except when otherwise indicated, made in relation to the same period of the previous year.
ACCELERATED GROWTH IN NEW ENVIRONMENT
NET OPERATING REVENUE GREW BY 29.0%
ƒ Net operating revenues in the second quarter of 2015 reached R$ 2,349.4 million, for 29.0% growth over the 2Q14 and 10.3% growth
over the 1Q15;
EBITDA GREW BY 13.0%
ƒ EBITDA reached R$ 352.1 million and EBITDA margin reached 15.0%. In relation to the same quarter last year EBITDA grew by 13.0%,
while compared to the previous quarter there was growth of 1.1%;
NET INCOME GREW BY 14.4%
ƒ Net income totaled R$ 260.9 million, with net margin of 11.1% and growth of 14.4% over the 2Q14 and growth of 6.1% over the
1Q15;
INVESTMENTS OF R$ 202.5 MILLION IN THE SEMESTER
ƒ Investments in fixed assets totaled R$ 202.5 million in the first half of 2015, being 59% in industrial plants in Brazil and 41% in expansion
projects abroad.
KEY FIGURES
Net Operating Revenue
Domestic Market
External Markets
External Markets in US$
Gross Operating Profit
Gross Margin
Net Income
Net Margin
EBITDA
EBITDA Margin
EPS (adjusted for splits)
(R$ Thousands)
Q2 2015
Q1 2015
2.349.432
1.051.525
1.297.906
422.464
671.727
28,6%
260.881
11,1%
352.148
15,0%
0,16170
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
%
10,3%
2,3%
17,7%
9,7%
5,2%
6,1%
1,1%
6,1%
Q2 2014
1.821.547
900.348
921.198
413.147
577.325
31,7%
227.985
12,5%
311.500
17,1%
0,14132
%
29,0%
16,8%
40,9%
2,3%
16,4%
14,4%
13,0%
14,4%
06M15
06M14
4.479.723
2.079.379
2.400.343
807.475
1.310.350
29,3%
506.740
11,3%
700.509
15,6%
0,31410
3.605.090
1.795.794
1.809.295
788.825
1.147.746
31,8%
432.872
12,0%
611.143
17,0%
0,26834
%
24,3%
15,8%
32,7%
2,4%
14,2%
17,1%
14,6%
17,1%
CONFERENCE CALL (WITH SIMULTANEOUS TRANSLATION TO ENGLISH)
July 30, Thursday 11 a.m. (Brasilia official time)
Dial---in in the US: +1 786 924-6977
Webcasting (simultaneous translation into English): www.ccall.com.br/weg/2q15.htm
PAGE 1
Earnings Release
2Q 2015
ECONOMIC ACTIVITY AND INDUSTRIAL PRODUCTION
The first half of 2015 showed few changes in global economic activity, which continued recovering at a gradual pace and with
significant differences in the various geographies. The purchasing managers indexes (PMI), used as industrial activity indicators,
showed recovery in the US, reverting the slowdown noticed during the northern hemisphere winter. Germany has consistently posted
PMI readings above 50, indicating activity expansion, since November 2014. China, on the other hand, confirmed this quarter the
activity slowdown and the slower economic expansion pace that had already been indicated at the beginning of 2015.
June 2015
53,5
51,9
49,4
Manufacturing ISM Report on Business ® (USA)
Markit/BME Germany Manufacturing P M I ®
HSBC China Manufacturing P M I ™
May 2015
52,8
51,1
49,2
April 2015
51,5
52,1
48,9
In Brazil, economic activity continued to deteriorate, with estimates of 1.5% decrease in gross domestic product in 2015. The industrial
sector is the most affected by the lower activity, with the industrial production showing 6.9% drop in the year and 5.3% drop over the
previous year, according the survey by the Instituto Brasileiro de Geografia e Estatística (IBGE). May showed the first positive reading
after three negative months. Nevertheless, in May 2015 the industrial production fell to levels similar to the end of 2006 and the
expectations of drop of 5% for 2015 show little space for recovery.
INDUSTRIAL INDICATORS IN BRAZIL ACCORDING TO LARGE ECONOMIC CATEGORIES
Change (%)
Categories of Use
May 15 / Apr 15* May 15 / May 14
Capital Goods
Intermediary Goods
Consumer Goods
Durable Goods
Semi-durable and non-durable
General Industry
0,2
-0,5
1,4
-0,1
1,2
0,6
-26,3
-4,9
-12,0
-17,8
-10,4
-8,8
Acummulated
On Year
12 months
-20,6
-3,4
-9,6
-16,4
-7,5
-6,9
-15,8
-3,2
-6,2
-14,5
-3,5
-5,3
Source: IBGE, Research Office, Industry Coordination
(*) Series with seasonal adjustments
The drop in industrial production was strongly influenced by trucks and autos, which has shown significant decreases in the light and
heavy vehicles production. Conditions in other industrial sectors are not necessarily as negative as in the auto industry.
NET OPERATING REVENUES
Net Operating Revenues totaled R$ 2,349.4 million in the second quarter of 2015 (2Q15), for 29.0% growth over the second quarter
of 2014 (2Q14) and 10.3% growth over the first quarter of 2015 (1Q15). Adjusting net revenues for transactions occurred in the period,
organic growth was of 22.3% over 2Q14.
NET OPERATING REVENUES PER MARKET
Brazilian Market
External Market
2.056
(R$ MILLION)
2.180
2.130
50%
52%
2.349
1.784
1.822
50%
51%
50%
49%
48%
50%
48%
45%
Q1 14
Q2 14
Q3 14
Q4 14
Q1 15
Q2 15
52%
55%
In the second quarter we noted the intensification of the same trends observed in the previous quarter. In the Brazilian market, growth
in the equipment for energy generation, transmission and distribution sector, mainly in wind power generation systems, more than
offset the drop in investments in industrial capacity expansion and in consumption. In the external market, the devaluation Brazilian
currency, in excess of 37% when comparing 2T15 and 2T14 averages, enhanced the positive impacts of geographical diversification
and the product line expansion, resulting in strong growth in net operating revenues. These results reaffirm one of the most important
PAGE 2
Earnings Release
2Q 2015
characteristics of our business model, the ability to find and exploit growth opportunities, even in unfavorable macroeconomic
scenarios.
Net Operating Revenue in 2Q15 breakdowns as follows:
ƒ Brazilian Market: R$ 1,051.5 million, representing 45% of Net Operating Revenue, with 16.8% growth over 2Q14 and 2.3% growth
over 1Q15. Organic growth in the Brazilian market, excluding the acquisitions in the last 12 months, was 16.6% over 2Q14;
ƒ External Markets: R$ 1,297.9 million, equivalent 55% of Net Operating Revenue. The comparison in Brazilian Reais shows growth
of 40.9% over the same period last year and of 17.7% over the previous quarter. Considering the average US dollar for the quarter,
comparison shows growth of 2.3% over the 2Q14 and considering the local currencies of each market, the comparison shows
growth of 14.8% over 2Q14. Organic growth in Brazilian Reais in the external markets was 27.8% over 2Q14.
EVOLUTION OF NET REVENUE ACCORDING TO GEOGRAPHIC MARKET
Q2 2015
Net Operating Revenues
- Brazilian Market
- External Markets
- External Markets in US$
2.349,4
1.051,5
1.297,9
422,5
(R$ MILLION)
Q1 2015
2.130,3
1.027,9
1.102,4
385,0
%
Q2 2014
10,3%
2,3%
17,7%
9,7%
1.821,5
900,3
921,2
413,1
%
29,0%
16,8%
40,9%
2,3%
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
Q2 2015
Q1 2015
%
Q2 2014
42,4%
15,9%
24,2%
8,4%
9,1%
35,8%
17,7%
24,7%
10,5%
11,3%
6,6 pp
-1,8 pp
-0,5 pp
-2,1 pp
-2,2 pp
38,0%
15,2%
27,4%
10,5%
8,9%
%
4,4 pp
0,7 pp
-3,2 pp
-2,1 pp
0,2 pp
DISTRIBUTION OF NET REVENUE PER BUSINESS AREA
Q2 2015
Q1 2015
%
Q2 2014
%
Electro-electronic Industrial Equipments
53,6%
52,0%
1,6 pp
61,6%
-8 pp
Domestic Market
16,7%
18,5%
-1,8 pp
24,1%
-7,4 pp
External Market
36,9%
33,5%
3,4 pp
37,5%
-0,6 pp
Energy Generation , Transmission and Distribution
29,0%
28,9%
0,1 pp
25,2%
3,8 pp
Domestic Market
19,3%
18,4%
0,9 pp
15,0%
4,3 pp
External Market
9,7%
10,5%
-0,8 pp
10,2%
-0,5 pp
12,4%
13,7%
-1,3 pp
6,8%
5,6 pp
4,6%
6,7%
-2,1 pp
4,7%
-0,1 pp
Electric Motors for Domestic Use
Domestic Market
External Market
7,8%
7,0%
0,8 pp
2,1%
5,7 pp
Paints and Varnishes
4,6%
5,2%
-0,6 pp
6,0%
-1,4 pp
Domestic Market
3,9%
4,6%
-0,7 pp
5,4%
-1,5 pp
External Market
0,7%
0,6%
0,1 pp
0,6%
0,1 pp
BUSINESS AREAS
The performance of the external markets was highlight in the Industrial Electro-Electronic Equipment area and ensured net operating
revenue growth. Industrial investments in domestic market showed further slowdown, with maintenance of installed capacity remaining
the primary demand driver. The investments in capacity expansion continue to be concentrated in a few specific segments and the
impact of devaluation of the Brazilian Real over the competitiveness of value added manufactured products is limited.
For WEG, the recent devaluation of the Brazilian currency creates more favorable conditions for the implementation of our expansion
strategy abroad, both with the expansion of production capacity, with new plants in Mexico and China, as with additional effort in
staff, services and sales infrastructure in international markets. In doing so we are using the short-term competitiveness boost provided
by the weaker Brazilian Real to build a structurally stronger position.
Growth in Energy Generation, Transmission and Distribution (GTD) business area continued strong. We have highlighted the
improvement in conditions in the regulated energy auctions, with impacts on the demand and the attractiveness of electricity
generation systems, especially in renewable sources. Additionally, we successfully launched a new product, the wind power
generation systems, with a strong impact on the revenue growth rate over this first half of 2015. In transmission and distribution (T&D)
PAGE 3
Earnings Release
2Q 2015
demand conditions in Brazil showed some cooling off due to the lower economic activity. The outlook, however, remains positive,
with the current order backlog execution and the prospect of winning new business with the completion of energy auctions in the
second half.
In the Motors for Domestic Use area we continued to see strong growth due to the consolidation of the SINYA/CMM acquisition in
China, which allowed us to complete our product portfolio and advance in our internationalization in this segment. On the other hand,
the Brazilian market performance continued weak, with demand being affected by the worsening of consumer credit and disposable
income conditions and increases of regulated tariffs. We do not expect a rapid turnaround in this scenario.
Another area that showed weaker performance was the Paints and Varnishes, which continued affected by the slowdown in industrial
production and consumption. In this area we have adjusted the cost and operating expenses structures and have sought new markets
and application segments for our products.
COST OF GOODS SOLD
Cost of Goods Sold (COGS) totaled R$ 1,677.7 million in 2Q15, 34.8% above 2Q14 and 12.5% above 1Q15. Gross margin reached
28.6%, with reduction of 3.1 percentage points over 2Q14 and of 1.4 percentage points over 1Q15.
The impacts on gross margin were:
(i)
cost increases on raw materials denominated in or referenced to the US dollar, occurring at faster rate than our ability
to adjust selling prices;
(ii)
Relative growth of revenues in the wind power generation systems, incorporating subsystems that are not manufactured
by WEG and therefore has lower operating margins. From the perspective of return on capital, these lower margins are
offset by lower capital intensity. It is important to remember that this is a new product for WEG, and we're still climbing
the learning curve of the production process;
(iii)
Higher relative importance of some recently acquired businesses, with different margin profiles;
(iv)
Constitution of additional labor, receivables and inventories provisions.
COGS BREAKDOWN
Labor
21,1%
Q2 15
Other Costs
Depreciation 8,8%
4,3%
Depreciation
4,3%
Other Costs
10,3%
Q2 14
Labor
23,0%
Materials
64,2%
Materials
63,8%
The average copper spot prices at the London Metal Exchange (LME) continued to show decline compared to 2014, falling by 11.0%
in 2Q15 compared to the 2Q14 average, but increasing by 3.4% over the average of 1Q15. Steel prices have also continued to fall,
22% lower compared to 2Q14 and stable in relation to 1Q15. These are the variations of US dollars prices, which means that prices
in Brazilian Reais continued to rise, as they incorporate devaluations to the US dollar of 38% over 2Q14 and 7% over 1Q15.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consolidated selling, general and administrative expenses (SG&A) totaled R$ 344.2 million in 2Q15, 19.6% growth over the 2Q14 and
9.9% growth over the previous quarter. As a percentage of Net Operating Revenue, operating expenses represented 14.7% in 2Q15,
1.1 percentage points lower than in 2Q14, remaining at the same level as in 1Q15.
EBITDA AND EBITDA MARGIN
PAGE 4
Earnings Release
2Q 2015
In the 2Q15, EBITDA (according to the Instruction CVM 527/2012) totaled R$ 352.1 million, 13.0% growth over the 2Q14 and 1.1%
growth over the 1Q15. EBITDA margin reached 15.0%, 2.1 percentage points lower than 2Q14 and 1.4 percentage points lower than
1Q15. The EBITDA margin decrease was lower than the decrease of gross margin due to better control over operating expenses.
IN R$ MILLION
Q2 2015
Net Operating Revenues
Net Income before Minorities
Net Margin
(+) Income taxes & Contributions
(+/-) Financial income (expenses)
(+) Depreciation & Amortization
EBITDA
EBITDA Margin
Q1 2015
2.349,4
263,2
11,2%
64,9
-53,5
77,5
352,1
15,0%
355,9
2.130,3
250,8
11,8%
64,9
-41,7
74,3
348,4
16,4%
%
Q2 2014
10,3%
5,0%
1.821,5
228,1
12,5%
55,5
-32,3
60,3
311,5
17,1%
-0,1%
28,3%
4,3%
1,1%
%
29,0%
15,4%
16,9%
65,3%
28,6%
13,0%
(417,1)
172,0
FX Impact on
Revenues
311,5
Volumes,
Prices &
Product Mix
Changes
EBITDA Q2 14
(44,6)
COGS (ex
depreciation)
Selling
Expenses
(11,0)
(12,6)
(1,9)
General and
Administrative
Expenses
Profit Sharing
Program
Other
Expenses
352,1
EBITDA Q2 15
NET FINANCIAL RESULTS
In this quarter, net financial result was positive in R$ 53.5 million (R$ 32.3 million and R$ 41.7 million in 2Q14 and 1Q15, respectively).
Financial revenues totaled R$ 18.2 million in 2Q15 (R$ 142.2 million and R$ 519.6 million, respectively), with a decrease in absolute
terms compared to 1Q15 as a result of the impact of the changes on exchange rates. The impact of changes on exchange rate on
debt were positive financial expenses, i.e. increasing the the results in R$ 35.3 (negative R$ 109.9 million and R$ 477.9 million in
2Q14 and 1Q15, respectively). This peculiar result was caused by exchange rate changes on the portion of the debt that is
denominated in other currencies than the Braszilian Real, used to finance our transactions outside Brazil (trade finance). The net
impact of was a 65.3% growth of net financial result over the previous year, a result of higher interest rates earned of liquid resources
and the attractive financing costs.
INCOME TAX
Income Tax and Social Contribution on Net Profit provision in 2Q15 reached R$ 48.5 million (R$ 53.1 million and R$ 76.3 million in
2Q14 and 1Q15, respectively). Additionally, R$ 16.4 million were recorded as ‘‘Deferred Income Tax / social contribution’’ debt (debt
of R$ 2.4 million and credit of R$ 11.3 million, respectively). The effective tax rate on income remained within the usual standards.
NET INCOME
As a result of aforementioned impacts, net income for 2Q15 was R$ 260.9 million, an increase of 14.4% over 2Q14 and increase of
6.1% over the previous quarter. Net margin for the quarter was 11.1%, 1.4 percentage points lower than in 2Q14 and 0.4 percentage
points lower than the previous quarter.
CASH FLOW
In the first half of 2015, cash flow of operating activities was positive in R$ 321.6 million, reversing the cash consumption observed in
the first three months of 2015. The impact of exchange rate changes on working capital (inventories, accounts payable and receivable)
remained relevant, but it was offset by increased operating cash generation.
PAGE 5
Earnings Release
2Q 2015
Investing activities demanded cash to the amount of R$ 229.5 million in the first half, also reverting the position observed at the end
of the first quarter, with the exchange rate changes effect on the account "Cumulative translation adjustment". The highlight continued
to be the expansion investment in the new plants in China and Mexico.
Finally, financing activities generated R$ 351.4 million in the period, with R$ 1,031.4 million in financing raised at attractive terms and
interest rates, and R$ 333.4 million in amortization (net debt increase of R$ 698.1 million), and the payment of interest on loans and
dividends and interest on stockholders’ capital reffering to the second half of 2014.
351,4
321,6
(229,5)
Operating
Investing
3.771,5
3.328,0
Financing
Cash June 2015
Cash December 2014
INVESTMENTS
Outside Brazil
132,3
Brazil
94,0
64,3
8,4
60,5
134,1
120,1
47,9
34,3
86,2
85,8
82,4
23,5
49,6
55,9
70,6
Q1 14
Q2 14
71,8
32,8
Q3 14
Q4 14
Q1 15
Q2 15
In the first half of 2015, we highlight the exectution of investment program for expansion and modernization of production capacity
abroad, which consumed 41% of the R$ 202.5 million invested in the first six months of the year. The two main projects are the new
electric motors production industrial plants in Mexico, which is already operational, and in China, which should start production in the
second half of the year. Investments in industrial plants in Brazil are being implemented with an eye to adjust the production capacity
and effective demand.
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.
PAGE 6
Earnings Release
2Q 2015
DEBT AND CASH POSITION
On June 30, 2015 cash, cash equivalents and financial investments totaled R$ 4,710.4 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$ 4,756.1
million, being 43% in short-term and 57% in long-term.
IN R$ THOUSANDS
June 2015
December 2014
June 2014
Cash & Financial instruments
4.710.361
4.194.224
3.363.850
- Current
- Long Term
4.710.361
-
4.193.177
1.047
3.362.435
1.415
Debt
4.756.054
100%
4.092.150
100%
3.243.553
100%
2.026.159
43%
1.466.752
36%
712.711
22%
- Current
- In Brazilian Reais
1.182.534
- In other currencies
779.146
843.625
- Long Term
2.729.895
- In Brazilian Reais
1.335.896
- In other currencies
Net Cash (Debt)
381.728
687.606
57%
2.625.398
330.983
64%
2.530.842
1.701.408
1.936.275
1.393.998
923.990
594.567
(45.693)
102.074
120.297
78%
At the end of the 2Q15, WEG had R$ 45.7 million net debt. We continue to find financing opportunities at attractive conditions both
in costs and in maturity. The current characteristics of the debt are:
ƒ The total debt duration is of 23.2 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 1Q15, 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).
DIVIDENDS
Over the first half of 2015, the Board of Directors approved, ad referendum of a future Annual Shareholders Meeting, the following
events as dividends:
ƒ On March 24, as interest on stockholders’ equity (JCP), to shareholders on said date, to the gross amount of R$ 67.4 million
ƒ On June 23, as interest on stockholders’ equity (JCP) to shareholders on said date, to the gross amount of R$ 78.8 million
In addition, on July 28, the Board of Directors approved intermediate dividends related to the net income for the first half of 2015, to
the total amount of R$ 133.9 million to the shareholders on said date. The proceeds will be paid from August 12, 2015 ownwards.
Amounts declared as remuneration to shareholders in the first half represented 55.3% of net income for the period.
Dividends
Interest on Stockholders' Equity
Gross Total
Net Earnings
Total Dividends / Net Earnings
1st Half
2015
133,9
146,1
280,1
506,7
55,3%
1st Half
%
2014
125,3
108,8
234,1 19,6%
432,9
54,1%
Our policy is to declare interest on stockholders equity quarterly and declare dividends based on profit earned each semestre, i.e.,
we report six events per year, which are paid semiannualy.
PAGE 7
Earnings Release
2Q 2015
WEGE3 SHARE PERFORMANCE
The comon shares issued by WEG, traded under the code WEGE3 at BM&F Bovespa, ended the last trading sessin of June 2015
quoted at R$ 19.05, with a nominal gain of 24.5% in the year and of 26.0% 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 .
25,00
3.500
Shares Traded (thousands)
WEG E3
3.000
20,00
WEGE3 share prices
15,00
10,00
2.000
1.500
Traded shares (thousands)
2.500
1.000
5,00
500
0,00
0
The average daily traded volume in 2Q15 was R$ 22.5 million, (R$ 21.1 million in 2Q14). Throughout the quarter 265,379 stock trades
were carried out (176,040 stock trades in 2Q14), involving 80.0 million shares and moving R$ 1,374.9 million (R$ 1,370.1 million in
2Q14).
TRANSFORMADORES SUNTEC ACQUISITION, IN COLOMBIA
On May 07, WEG S.A. announced the acquisition of Transformadores Suntec S.A.S. (‘‘Suntec’’), company founded in 1979, with
wide experience in manufacturing oil and dry transformers. The company’s manufacturing plant occupies around 5,000 square meters
and currently employs 140 people. Revenues in 2014 were of approximately US$ 18 million.
TRANSFORMERS BUSINESS ACQUISITION IN SOUTH AFRICA
On April 22, WEG S.A. announced the acquisition of the high voltage transformers, mini substations, switchgear manufacturing
business and related services from TSS Transformers (Pty) Ltd ("TSS"), a company based in Heidelberg (Gauteng), South Africa.
Founded in 1994, TSS initially performed transformers maintenance and repair services, later evolving into manufacturing power
transformers up to 40 MVA - 145 kV, mini substations and switchgear. The company manufacturing assets are located near
Johannesburg, with 45,000 square meters total area.
This is WEG’s second acquisition in the South African transformer market. In 2013, WEG acquired the transformers mini substations
manufacturing business from Hawker Siddeley Electric Africa (Pty) Ltd. ("HST"), creating the WEG Transformers Africa (Pty) Ltd.
Subsidiary.
The transaction is subject to certain conditions and to the approval by the South African authorities.
PAGE 8
Earnings Release
2Q 2015
RESULTS CONFERENCE CALL
WEG will hold, on July 30, 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.
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/2t15.htm
www.ccall.com.br/weg/2q15.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
2Q 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 10
Earnings Release
2Q 2015
Annex I
Consolidated Income Statement - Quarterly
Figures in R$ Thousands
2nd Quarter
2015
R$
VA%
Net Operating Revenues
Cost of Goods Sold
Gross Profit
Sales Expenses
Administrative Expenses
Financial Revenues
Financial Expenses
Other Operating Income
Other Operating Expenses
EARNINGS BEFORE TAXES
Income Taxes & Contributions
Deferred Taxes
Minorities
NET EARNINGS
1st Quarter
2015
R$
VA%
2nd Quarter
2014
R$
VA%
Changes %
Q2 2015
Q2 2015
Q1 2015
Q2 2014
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%
2,130,291
(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%
1,821,547
(1,244,222)
577,325
(191,300)
(96,418)
142,242
(109,893)
1,739
(40,107)
283,588
(53,088)
(2,405)
110
227,985
100%
-68%
32%
-11%
-5%
8%
-6%
0%
-2%
16%
-3%
0%
0%
13%
10.3%
12.5%
5.2%
14.2%
1.6%
-96.5%
n.m
-16.3%
1.6%
3.9%
-36.5%
n.m
-52.7%
6.1%
29.0%
34.8%
16.4%
23.5%
12.0%
-87.2%
n.m
69.1%
39.1%
15.7%
-8.7%
n.m
n.m
14.4%
EBITDA
352,148
15.0%
348,361
16.4%
311,500
17.1%
1.1%
13.0%
EPS (adjusted for splits)
0.16170
6.1%
14.4%
0.15240
0.14132
PAGE 11
Earnings Release
2Q 2015
Annex II
Consolidated Income Statement
Figures in R$ Thousands
6 Months
2015
R$
VA%
Net Operating Revenues
Cost of Goods Sold
Gross Profit
Sales Expenses
Administrative Expenses
Financial Revenues
Financial Expenses
Other Operating Income
Other Operating Expenses
EARNINGS BEFORE TAXES
Income Taxes & Contributions
Deferred Taxes
Minorities
NET EARNINGS
6 Months
2014
R$
VA%
4,479,723
(3,169,373)
1,310,350
(443,036)
(214,369)
537,826
(442,675)
6,451
(110,697)
643,850
(124,790)
(5,045)
7,275
506,740
100%
-71%
29%
-10%
-5%
12%
-10%
0%
-2%
14%
-3%
0%
0%
11%
3,605,090
(2,457,344)
1,147,746
(387,961)
(185,121)
295,084
(234,256)
3,585
(86,172)
552,905
(123,757)
6,278
2,554
432,872
100%
-68%
32%
-11%
-5%
8%
-6%
0%
-2%
15%
-3%
0%
0%
12%
EBITDA
700,509
15.6%
611,143
17.0%
EPS (adjusted for splits)
0.31410
0.26834
%
2015
2014
24%
29%
14%
14%
16%
82%
89%
80%
28%
16%
1%
n.m
185%
17%
15%
17%
PAGE 12
Earnings Release
2Q 2015
Annex III
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
CURRENT LIABILITIES
Social and Labor Liabilities
Suppliers
Fiscal and Tax Liabilities
Short Term Debt
Dividends Payable
Advances from Clients
Profit Sharring
Other Short Term Liabilities
LONG TERM LIABILITIES
Long Term Debt
Other Long Term Liabilities
Deferred Taxes
Contingencies Provisions
MINORITIES
STOCKHOLDERS' EQUITY
TOTAL LIABILITIES
June 2015
December 2014
June 2014
(A)
(B)
(C)
R$
%
R$
%
R$
%
fevereiro-00
fevereiro-00
fevereiro-00
9,157,900
70% 8,098,187
69% 6,886,608
66%
4,710,361
36% 4,193,177
36% 3,362,435
32%
2,050,968
16% 1,867,864
16% 1,637,568
16%
1,954,542
15% 1,704,919
14% 1,541,091
15%
442,029
3%
332,227
3%
345,514
3%
186,772
1%
126,670
1%
124,207
1%
0%
1,047
0%
1,415
0%
77,962
1%
55,864
0%
58,767
1%
108,810
1%
69,759
1%
64,025
1%
3,776,618
29% 3,557,773
30% 3,351,857
32%
1,379
0%
8,224
0%
8,223
0%
3,030,429
23% 2,877,942
24% 2,680,579
26%
744,810
6%
671,607
6%
663,055
6%
13,121,290
100% 11,782,630
100% 10,362,672
100%
4,135,593
269,395
549,136
120,338
2,026,159
143,964
493,456
91,738
441,407
3,446,018
2,729,895
124,982
298,680
292,461
111,488
5,428,191
13,121,290
32% 3,380,459
2%
173,382
4%
445,577
1%
148,335
15% 1,466,752
1%
111,351
4%
590,815
1%
111,173
3%
333,074
26% 3,262,552
21% 2,625,398
1%
95,316
2%
282,989
2%
258,849
1%
83,234
41% 5,056,385
100% 11,782,630
29% 2,484,307
1%
245,082
4%
420,498
1%
102,357
12%
712,711
1%
121,897
5%
485,371
1%
73,952
3%
322,439
28% 3,170,626
22% 2,530,842
1%
106,603
2%
290,117
2%
243,064
1%
75,866
43% 4,631,873
100% 10,362,672
(A)/(B) (A)/(C)
<===== Não A
13%
33%
12%
40%
10%
25%
15%
27%
33%
28%
47%
50%
-100%
40%
33%
56%
70%
6%
13%
-83% -83%
5%
13%
11%
12%
11%
27%
24% 22%
2% 55%
4% 23%
1% -19%
7% 38%
1% 29%
5% -16%
1% -17%
3% 33%
31%
6%
24%
4%
1% 31%
3%
6%
2% 13%
1% 34%
45%
7%
100% 11%
66%
10%
31%
18%
184%
18%
2%
24%
37%
9%
8%
17%
3%
20%
47%
17%
27%
PAGE 13
Earnings Release
2Q 2015
Annex IV
Consolidated Cash Flow Statement
Figures in R$ Thousands
6 Months
2015
6 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
643,850
151,811
258,340
(732,397)
(415,788)
192,853
(238,457)
(166,823)
(104,182)
321,604
552,905
119,066
167,308
(131,280)
110,039
78,717
(68,663)
(156,338)
(95,035)
707,999
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
(221,396)
(17,344)
11,823
163,853
(72,657)
(97,500)
(229,492)
(158,315)
(8,708)
4,195
(85,559)
(75,755)
(2,699)
(5,947)
(136,528)
(454,394)
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
1,031,414
(333,351)
(120,516)
(307)
(225,873)
351,367
385,963
(422,998)
(83,101)
323
(221,726)
(341,539)
Change in Cash Position
443,479
(87,934)
Cash & Cash Equivalents
Beginning of Period
End of Period
3,328,015
3,771,494
3,373,799
3,285,865
PAGE 14