Earnings Release
Jaraguá do Sul (SC), July 25th 2012: WEG S.A. (Bovespa: WEGE3, OTC WEGZY), one of the world’s largest manufacturer of electric-electronic equipment, with five main
product lines: Motors, Power, Transmission and Distribution, Automation and Coatings, announced today its results for the second quarter of 2012 (2Q12). The following
financial and operating data are presented in a consolidated basis, except when otherwise indicated, in thousands of Brazilian Reais (R$) according to the current Brazilian
generally accepted accounting principles, as put forward by the Brazilian applicable laws. All growth rates comparisons relate, except when otherwise indicated, to the same
period of the previous year.
Strong growth in external markets
Net revenues grew by 20% over 2Q11. External markets grew 44%
EBITDA reached R$ 260 million, 20.6% higher than 2Q11, margin of 17%
Net Income of R$ 139.8 million, net margin of 9.1%
Highlights
Key
Figures
Net operating revenue in the second quarter of 2012
totaled R$ 1,528.8 million, with 20% growth over
2Q11 and 12% over the previous quarter;
Net Income totaled R$ 139.8 million, with net margin of
9.1%. There was a 10% decrease in comparison to
2Q11 and of 6% in relation to 1Q12;
EBITDA reached R$ 260.0 million for a 17% margin,
21% growth in relation to the previous year and 25%
growth in relation the previous quarter;
Investments in fixed assets totaled R$ 114.2 million in the
first six months of 2012. In June we announced the
acquisition of Stardur (Brazil), in the paints and varnishes
segment.
Q2 2012
1,528,791
729,235
799,556
Q1 2012
1,369,762
714,268
655,494
406,915
370,825
9.7%
461,661
391,967
17.8%
30.2%
28.6%
Net Income
139,819
148,247
Net Margin
9.1%
10.8%
Net Operating Revenue
Domestic Market
External Markets
External Markets in US$
Gross Operating Profit
Gross Margin
EBITDA
260,028
208,638
EBITDA Margin
17.0%
15.2%
EPS
0.2254
0.2390
%
11.6%
2.1%
22.0%
Q2 2011
%
1,277,258 19.7%
723,348 0.8%
553,910 44.3%
347,886 17.0%
381,437 21.0%
29.9%
-5.7%
154,557 -9.5%
12.1%
24.6%
215,579 20.6%
-5.7%
06M11
2,403,375
1,383,670
1,019,705
%
20.6%
4.3%
42.7%
823,148
627,447
31.2%
853,628
692,099
23.3%
29.5%
28.8%
288,066
276,121
9.9%
11.5%
468,666
380,387
16.9%
16.2%
15.8%
0.2491 -9.5%
0.4643
Conference Call with simultaneous translation into English
July 26, Thursday 11 a.m. (Brasília official time)
Dial–in in the US: +1 888 700-0802
Webcasting (simultaneous translation into English): www.ccall.com.br/weg/2q12.htm
WEG S.A. | 2012 Second Quarter Results
06M12
2,898,553
1,443,503
1,455,050
4.3%
23.2%
0.4451
4.3%
Figures in R$ Thousand
Earnings Release
Comments from Laurence Beltrão Gomes,
WEG’s Finance and Investor Relations Officer.
The second quarter of 2012 showed strong revenue growth, driven again by the good sales performance in international markets. This
performance in external markets more than offset the slow growth observed in Brazil, showing once again the robustness of the WEG
business model. Even in an economic environment of great uncertainty, characterized by the sovereign debt crisis in the Euro zone and
the low level of investment in production capacity expansion in the Brazilian industry, we were able to find and exploit growth
opportunities in the markets we serve.
In the Brazilian market revenue growth was modest, given the environment of uncertainty regarding the Brazilian economy growth
perspectives, which has slowed industrial capacity expansion investments. Abroad, where our market share is relatively smaller, we have
been exploring the WEG brand reputation of reliable and technologically advanced product portfolio. We believe that we will continue to
be able to find opportunities, and thereby obtain significant growth rates, by executing our plans of expanding the product mix offered
abroad and entering new market niches. In Brazil, we continue to believe that measures to simulate the industry, introduced by the “Brasil
Maior” Plan, in conjunction to falling basic interest rates to record lows and the devaluation of the Brazilian Real will result in a better
business environment for the industrial segment.
In this quarter we continued to execute our strategy to capture non-organic growth opportunities with acquisition of Stardur Tintas, the
first acquisition of the Coatings business unit in the Brazilian market, which brought technology to complement our portfolio and market
access to automotive repainting market.
Economic Activity
and Industrial
Production
The pace of overall economic activity and of industrial activity in particular, remained weak in the second
quarter of 2012, continuing the downward trend in the pace of recovery, and some deterioration in
economic conditions could be seen in both emerging and mature markets.
The analysis of the purchasing manager indexes (or PMI indicators), which indicates the economic and
industrial activity situation in some of our major markets, demonstrates this clearly. Indexes above 50
indicate industrial expansion and below of 50 signal industrial contraction. In June 2012, indexes in virtually
all major industrial markets are under 50.
June 2012
May 2012
Manufacturing ISM Report on Business ®
USA
49.7
53.5
Markit/BME Germany Manufacturing PMI®
Germany
45.0
45.2
HSBC China Manufacturing PMI™
China
48.2
48.4
In Brazil, industrial activity accumulated a decrease of 3.4% in 2012 up to May in comparison the same
period of the previous year. The drop in production accumulated in the previous 12 months was of 1.8%.
This low industrial growth scenario is already embedded in financial market expectations, as captured by
the Central Bank of Brazil Focus report, which has been showing diminishing rates for industrial production
growth forecasts in 2012. In early July these expectations were of a modest expansion of 0.1%.
Industrial Indicators According to Categories of Use in Brazil
Change (%)
Categories of Use
Acummulated
May/Apr* May 12 / May 11
On Year
12 months
Capital Goods
-1.80
Intermediary Goods
0.20
Consumer Goods
-2.80
Durable Goods
-2.20
Semi-durable and non-durable
-2.10
General Industry
-0.90
Source: IBGE, Research office, Industry Coordination
(*) Series with seasonal adjustments
-12.20
-2.70
-4.30
-9.50
-2.70
-4.30
-12.00
-2.00
-2.50
-10.00
0.00
-3.40
-3.80
-1.10
-1.90
-7.10
-0.30
-1.80
Capital goods and durable goods production continued to be the negative highlights. The falls in these
categories should be analyzed carefully though, as there is a strong influence from the decreases in heavy
vehicles production in the automotive industry in the case of capital goods. Still, the situation of the Brazilian
industry as a whole is weaker today than was the perception in early 2012.
2 | WEG S.A. | 2012 Second Quarter Results
Earnings Release
Net Operating
Revenue
Net Operating Revenue reached R$ 1,528.8 million in the second quarter of 2012 (2Q12), corresponding to
an increase of 19.7% in relation to second quarter of 2011 (2Q11) and of 11.6% in relation to first quarter of
2012 (1Q12). IN this quarter there was no additional revenues impact due to the consolidation of
acquisitions. Only the assets and liabilities of Stardur, acquired last June, were consolidated in this 2Q12.
Adjusted by adding of R$ 72.2 million resulting from the consolidation of net revenues of Watt Drive
(Austria), Electric Machinery (USA), Pulverlux (Argentina) and of joint venture WEG-Cestari (Brazil), growth of
net revenue would have been 14% in 2Q12 in relation to the 2Q11.
Net Operating Revenue per Market (R$ million)
External Market
Domestic Market
1,469
1,317
1,277
1,529
1,370
1,126
52%
43%
44%
47%
59%
57%
56%
53%
52%
48%
Q1
Q2
Q3
Q4
Q1
Q2
41%
48%
2011
2012
Net operating revenue breakdown according to destination market is the following:
ƒ Domestic Market: R$ 729.2 million, representing 48% of Net Operating Revenues, with growth of 0.8%
over 2Q11 and of 2.1% compared to 1Q12; these figures incorporate the consolidation of revenues of
WEG-Cestari. Adjusted for this acquisition, there would be a decrease of 1.4% in revenues compared to
2Q11.
ƒ External Market: R$ 799.6 million, equivalent to 52% of Net Operating Revenues, with growth of 44.3%
over the same period of last year and of 22.0% over the previous quarter. Considering the average US
dollar/Brazilian Real exchange rate of quarter, net operating revenues from external market in US dollar
reached US$ 406.9 million, which represents growth of 17.0% over 2Q11 and of 9.7% over 1Q12.
Adjusting for the consolidation of revenues of Watt Drive, Electric Machinery and Pulverlux, growth over
2Q11 would have been of 34.3% when measured in Brazilian Reais.
This was the first quarter in which net revenue of the external market exceeded that achieved in the
domestic market. The accelerated external market’s growth we have been experiencing over the previous
quarters was amplified by the 9.9% devaluation the Brazilian Real against the US dollar during the 2Q12.
Evolution of Net Revenues according to Geographic Market
(R$ Millions)
Q2 2012
Net Operating Revenues
- Domestic Market
- External Markets
- External Markets in US$
1,528.8
729.2
799.6
406.9
Q1 2012
1,369.8
714.3
655.5
370.8
Change
11.6%
2.1%
22.0%
9.7%
Q2 2011
1,277.3
723.3
553.9
347.9
Distribution of Net Revenues according to Geographic Market
Q2 2012
Q1 2012
Change
Q2 2011
North America
South and Central America
Europe
Africa
Australasia
29.8%
13.9%
27.8%
16.9%
11.6%
35.8%
14.6%
27.8%
12.7%
9.1%
-6 pp
-0.7 pp
0 pp
4.2 pp
2.5 pp
32.8%
17.1%
23.5%
16.9%
9.6%
Change
19.7%
0.8%
44.3%
17.0%
Change
-3 pp
-3.2 pp
4.3 pp
0 pp
2 pp
WEG S.A. | 2012 Second Quarter Results | 3
Earnings Release
Distribution of Net Revenues per Business Area
Electro-electronic Industrial Equipments
Domestic Market
External Market
Energy Generation , Transmission and Distribution
Domestic Market
External Market
Electric Motors for Domestic Use
Domestic Market
External Market
Paints and Varnishes
Domestic Market
External Market
Business Areas
Q2 2012
Q1 2012
%
Q2 2011
%
66.2%
25.0%
41.2%
20.6%
12.6%
8.1%
7.9%
5.5%
2.4%
5.2%
4.7%
0.6%
63.5%
28.8%
34.7%
22.8%
12.1%
10.7%
8.1%
6.2%
1.9%
5.6%
5.1%
0.5%
2.7 pp
-3.8 pp
6.5 pp
-2.2 pp
0.5 pp
-2.7 pp
-0.2 pp
-0.7 pp
0.5 pp
-0.3 pp
-0.5 pp
0.1 pp
62.4%
28.7%
33.8%
22.3%
15.2%
7.0%
9.8%
7.5%
2.4%
5.4%
5.3%
0.2%
3.8 pp
-3.7 pp
7.5 pp
-1.6 pp
-2.7 pp
1 pp
-1.9 pp
-2 pp
0 pp
-0.2 pp
-0.6 pp
0.4 pp
The excellent performance of sales in external markets, resulting from the consistent execution of our
differentiated business strategy, based on the expansion of our product portfolio abroad, can also be
observed when analyzing the performance of various business areas.
In the industrial electro-electronic equipments business, where we have, over the years, built a globally
recognized brand and strong presence in several markets, we continued to see strong growth both in
mature markets, like Europe and North America, and in emerging markets, such as Asia and Africa. In this
case we have benefited from the research and development effort focused on the innovative design and
high performance products. This portfolio of products, adapted to the trends that place strong preference
for equipments with greater energy efficiency, has allowed us to maximize returns on investments in
commercial structure made in recent years, resulting in strong sales expansion.
In the domestic market, although we observed some reduction in the rate of growth in this area during the
quarter, we continue to benefit from investments in specific segments such as oil and gas, shipbuilding,
mining and cement.
In the GTD business remained the same dynamics that we have seen in recent quarters. In the domestic
market we continued to see the divergent trends in the Generation (G) and Transmission and Distribution
(T&D) equipment markets. In generation, we continue to observe slow demand recovery, but greater
economic rationality, while in T&D, although demand remains relatively stronger, prices continued to be
under pressure. This pressure on the prices on the T&D equipment is actually a reflection of the
international environment in which, as we have described before, the industry is adjusting its excess
capacity. Our experience in similar situations shows that the strategy of maintaining service levels and
investment results, over time, in the strengthening of our market position and in business expansion. It is
what we have done in the North American market, with the transformer factory in México and the specific
U.S. commercial infrastructure.
In motors for domestic use, the stimulus measures announced in December 2011 began to impact
consumer behavior, but these impacts have not been fully felt through the production chain. Additional
measures to produce competitive equilibrium, including specific import tax and IPI increases for some
imported products, may give increase momentum during the seasonally important second half of the year.
In the paints and varnishes business, Stardur, whose acquisition was announced last June, will only have its
consolidated revenues from the third quarter of 2012 onwards. Anyway, the area was able to show growth
in both the Brazilian market and abroad.
4 | WEG S.A. | 2012 Second Quarter Results
Earnings Release
Q2 2012
Net Operating Revenues
Cost of Goods Sold
Gross Operating Profit
Q1 2012
1,528.8
(1,067.1)
461.7
1,369.8
(977.8)
392.0
Gross Margin
30.2%
28.6%
(-) Selling Expenses
(-) General & Administrative
(-) Profit Sharing
Result from Activities
(+) Depreciation & Amortization
EBITDA
(155.1)
(76.0)
(22.6)
207.9
52.2
260.0
(142.2)
(67.8)
(22.9)
159.1
49.6
208.6
EBITDA Margin
17.0%
15.2%
%
Q2 2011
11.6%
9.1%
17.8%
1,277.3
(895.8)
381.4
9.1%
12.2%
-1.4%
30.7%
5.2%
24.6%
(122.7)
(64.3)
(24.6)
169.8
45.7
215.6
%
19.7%
19.1%
21.0%
29.9%
26.5%
18.3%
-8.2%
22.4%
14.0%
20.6%
16.9%
Figures in R$ thousands
Cost of Goods
Sold
Cost of Goods Sold (COGS) totaled R$ 1,067.1 million in 2Q12, increasing 19.1% over 2Q11 and 9.1%
over 1Q12. Gross margin reached 30.2%, 0.3 percentage point higher than in the 2Q11 and 1.6
percentage point higher than in the 1Q12.
Gross Margin
The gross margin expansion is due to, among other effects: (i) growth in sales and revenues; (ii) the positive
effect of devaluation of the Real on the revenues in external market; (iii) stability of costs, mainly of raw
material; and (iv) expansion of activities and consequent greater dilution of manufacturing costs, important
when we remember that the greenfield production units in India and Linhares (ES) have yet to reach their
optimal utilization levels.
Cost of Raw
Materials
Average spot copper prices on the London Metal Exchange (LME) fell by 14% in the 2Q12 compared to the
average of 2Q11 and 5% compared to the average of 1Q12. Steel prices in the international markets have
continued to drop by 9% over 2Q11 and showed stability in comparison to the previous quarter, according
to the CRUspiGlobal index.
This relative stability of raw materials (steel and copper) prices is beneficial to our business. These prices are
international or, at least, follow similar trends in the various global markets. Thus, the cost conditions are
very similar to the various competitors, regardless of the location of its manufacturing operations. The
selling prices for most of our products are recalculated according to the characteristics of each application,
and tend to reflect current market conditions, incorporating costs increases naturally and gradually.
Selling, General
and
Administrative
Expenses
Consolidated selling, general and administrative expenses (SG&A) represented 15.1% of net operating
revenues in the 2Q12, well within the usual behavior for these accounts (14.6% of operating revenues in
2Q11 and 15.3% of operating revenues in 1Q12) and in line with the constant efforts to rationalize and
increased productivity.
EBITDA and
EBITDA Margin
As a result of the aforementioned effects, the EBITDA in 2Q12 (calculated according to the methodology
defined by CVM Ofício Circular 01/07) totaled R$ 260.0 million, an increase of 20.6% over 2Q11 and of
24.6% over the previous quarter. EBITDA margin reached 17.0%, 0.1 percentage point higher compared to
the 2Q11 and 1.8 percentage point higher compared to the 1Q12.
WEG S.A. | 2012 Second Quarter Results | 5
Earnings Release
Main impacts on EBITDA
79,4
165,8
172,2
FX Impact
on
Revenues
32,0
COGS (ex
depreciation)
215,6
Volumes,
Prices &
Product Mix
Changes
EBITDA Q2 11
Net Financial
Results
11,3
Selling
Expenses
General and
Administrative
Expenses
2,0
260,0
Profit Sharing
Program
EBITDA Q2 12
Financial revenues totaled R$ 134.5 million in 2Q12 (R$ 111.4 million in 2Q11 and R$ 127.8 million in
1Q12). Financial expenses totaled R$ 148.0 million (R$ 69.3 million in 2Q11 and R$ 81.9 million in 1Q12). In
this quarter, net financial income was negative in R$ 13.5 million (positive in R$ 42.1 million in 2Q11 and
positive in R$ 45.9 million in 1Q12).
The increase in financial expenses in this second quarter was due to the effect of devaluation of the
Brazilian Real on the portion of debt denominated in foreign currencies. This debt in other currencies is
used exclusively for export financing and cash flow protection. It is always import remember that this is an
accounting impact. Considering cash flows, these trade finance loans will be amortized over the coming
months as receivables from exports also denominated in foreign currencies come due.
Income Tax and
Social
Contribution
The Income Tax and Social Contribution Tax on Net Profit provision in 2Q12 reached R$ 56.2 million (R$
58.8 million in 2Q11 and R$ 48.5 million in 1Q12). Additionally, R$ 9.7 million were recorded as “Deferred
income tax / social contribution” (R$ 10.9 million in 2Q11 and R$ 5.2 million in 1Q12).
Net Income
As a result of the previously discussed impacts, mainly from the accounting effect of the Brazilian Real
devaluation on financial expenses, net income for 2Q12 was R$ 139.8 million, a decline of 9.5% over 2Q11
and of 5,7% over the previous quarter. The net margin of the quarter was 9.1%, 3.0 percentage point lower
compared to the 2Q11 and 1.7 percentage point lower compared to the 1Q12.
Operating cash
flow
Cash flow from operating activities in the first half of 2012 totaled R$ 291.7 million, a decrease of 18% over
the same period of 2011. The expansion of activities increased operating cash flow, which was offset by
increased working capital needs, due either to the increase of R$ 99.5 million in inventory and of R$ 171.1
million in accounts receivable, partially offset by increased R$ 149.7 million in accounts payable.
Capex
Investments in expansion and modernization of production capacity amounted to R$ 114.2 million in the
first six months of 2012, being 92% directed to industrial units and other facilities in Brazil and the remaining
to production units and other subsidiaries abroad.
As previously announced, we observe a gradual acceleration in our investment program over 2011. It is
expected that investments in 2012 will reach approximately R$ 300 million.
6 | WEG S.A. | 2012 Second Quarter Results
Earnings Release
Investments in Fixed Assets (R$ million)
Outside Brazil
Brazil
63,1
33,8
8,2
49,9
41,1
1,0
5,0
3,7
62,1
53,7
51,9
Q4
Q1
Q2
7,3
2,4
25,6
38,8
42,6
Q1
Q2
Q3
55,5
58,7
2011
2012
Acquisition of
Stardur
In June 19, we announced the acquisition of Stardur Tintas Especiais Ltda., a company specialized in
manufacturing and marketing of coatings such as high and low solids, engineered plastics, water soluble,
coil coating and automotive repainting segment, complementing WEG’s coatings business unit product
portfolio. With 250 employees and 10,000 square meters area in Indaiatuba, State of São Paulo, Stardur
recorded net revenues of approximately R$ 78 million in 2011.
Cash flow from
investing
activities
Investing activities consumed R$ 227.3 million in the first half of 2012. We highlight, among the main
changes, that there was a re-acceleration of investments in expansion and modernization of productive
capacity in relation to the same period of 2011, which reached R$ 114.2 million. In addition, there was an
increase of R$ 207.3 million in the accounts of fixed and intangible assets and goodwill arising from capital
transactions and joint ventures acquired, such as the second tranche of ZEST, WEG-Cestari and Stardur.
Debt and Cash
Position
Debt and Cash Position (R$ Thousand)
June 2012
December 2011
June 2011
Cash & Financial instruments
- Current
- Long Term
2,879,132
2,878,475
657
3,212,250
2,931,615
280,635
2,900,694
2,674,637
226,057
Debt
- Current
3,260,988
1,935,177
3,457,728
1,701,435
2,678,393
1,111,282
- In Brazilian Reais
- In other currencies
- Long Term
998,122
937,055
1,325,811
585,687
1,115,748
1,756,293
500,774
610,508
1,567,111
- In Brazilian Reais
- In other currencies
Net Cash (Debt)
1,090,936
234,875
(381,856)
1,560,712
195,581
(245,478)
1,436,267
130,843
222,301
As of June 30, 2012, cash (cash, cash equivalents and short and long term financial investments) totaled
R$ 2,879.1 million and gross financial debt totaled R$ 3,261.0 million, resulting in a net debt position of R$
381.9 million (net cash of R$ 222.3 million in June 30, 2011 and net debt of R$ 245.5 million in December
31, 2011). Cash is invested mainly in Brazilian currency denominated financial instruments referenced to the
Interbank Deposit Certificate (CDI), in first-tier banks.
The main sources of funding are:
ƒ In local currency - loans from BNDES, FINEP and other development agencies;
ƒ In other currencies - trade finance transactions and working capital financing of subsidiaries abroad,
denominated in the respective currencies of each country.
The characteristics of the debt are:
ƒ The duration of the long-term portion is 27.6 months.
ƒ The duration of the Brazilian Reais denominated portion is 16.7 months and of the foreign currencies
WEG S.A. | 2012 Second Quarter Results | 7
Earnings Release
denominated portion is 10.1 months.
ƒ The weighted average cost of fixed-rate debt denominated in Reais is approximately 6.7% per year.
Floating rate contracts are indexed mainly by to the Brazilian long-term interest rate (TLJP).
Dividends
In the first half of 2012, the Board of Directors approved the following compensation to shareholders:
ƒ On March 20, as interest on stockholders’ equity (JCP), to shareholders on said date, in the gross
amount of R$ 47.4 million;
ƒ On June 26, as interest on stockholders’ equity (JCP), to shareholders on said date, in the gross amount
of R$ 47.4 million;
In addition, on July 24, the Board of Directors approved intermediate dividends related the net income for
the first half of 2012, in the total amount of R$ 62.0 million to the shareholders of record on said date.
These proceeds will be paid from August 15, 2012 onwards.
Event
Dividends
Interest on Stockholders’ Equity
Interest on Stockholders’ Equity
Board Meeting
Date
24/07/2012
26/06/2012
20/03/2012
Payment Date
15/08/2012
15/08/2012
15/08/2012
Gross amount per
share
R$ 0.10000000
R$ 0.07647059
R$ 0.07647059
Net amount per
share
R$ 0.10000000
R$ 0.06500000
R$ 0.06500000
R$ 0.25294118
R$ 0.23000000
Total
We maintain the policy of declaring quarterly interest on stockholders’ equity, in addition to semiannual
dividends, based on profits for the period. Amounts declared as remuneration to shareholders in the first
half of 2012 represent 54,5% of net income for the period.
1st Half
2012
62.0
94.9
156.9
0.2529
288.1
54.5%
Dividends
Interest on Stockholders' Equity
Gross Total
Per Share
Net Earnings
Total Dividends / Net Earnings
1st Half
2011
60.2
89.8
150.0
0.2417
276.1
54.3%
%
4.6%
4.6%
Cash flow from
financing
activities
Financing activities consumed R$ 369.1 million in the first half of 2012, continuing decrease in the
movement of gross debt, with payment of loans and financing. In the first half of 2012 we conducted a net
reduction of R$ 106.2 million of funding (new funding of R$ 577.0 million and amortization of R$ 683.2
million).
Cash flow
The total cash, as presented in the Statement of Cash Flows, of R$ 2,626.9 million, does not include R$
251.5 million in financial investments with maturities less than twelve months, but without immediate
liquidity. If considered “cash”, “cash equivalents” and “Short-term financial investments”, total short term
cash and financial instruments reach R$ 2,878.5 million.
Cash flow
291,7
227,3
2.931,6
Operating
369,1
2.626,9
Investing
Financing
Cash 4Q11
8 | WEG S.A. | 2012 Second Quarter Results
Cash 2Q12
Earnings Release
WEGE3 Share
Performance
At the end of the last trading day of June 2012, the common shares issued by WEG, traded under the code
WEGE3 at BM&F Bovespa, were quoted at R$ 19.49 with a nominal increase of 3.8% in the year.
Considering the dividends and interest on stockholders equity declared in the first half of 2012, the total
return for the shareholders was of 5.4% in 2012.
The average daily volume traded in 2Q12 was R$ 4.9 million, 40.6% lower than 2Q11. Throughout the
quarter 39,940 stock trades were carried out (50,032 stock trades in 2Q11), involving 15.5 million shares
(27.6 million shares in 2Q11) and totaling R$ 306.3 million (R$ 515.3 million in 2Q11).
Share Price Performance and Traded Volume
3.000
24,00
WEGE3
Ações Negociadas (mil)
22,00
Cotações WEGE3
2.000
18,00
16,00
1.000
14,00
Ações Negociadas (mil)
20,00
12,00
10,00
0
Dividend adjusted performance (dividend and interest on stockholders equity)
Results
Conference Call
WEG will hold, on July 26, 2012 (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 am – Brasília (BRT)
10 am - New York (EDT)
03 pm – London (BST)
Connecting phone numbers:
Dial–in for connecting from Brazil:
Dial–in for connecting from the USA:
Toll-free for connecting from the USA:
Code:
+55 11 4688-6361
+1 786 924-6977
+1 888 700-0802
WEG
Acess to the webcast:
Slides and Portuguese audio:
Slides and English translation:
www.ccall.com.br/weg/2t12.htm
www.ccall.com.br/weg/2q12.htm
The presentation will be available in the Investor Relations page of WEG website (www.weg.net/ri). Please
call approximately 10 minutes before the call is scheduled to star.
WEG S.A. | 2012 Second Quarter Results | 9
Earnings Release
Industrial ElectroElectronic
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 only recognized as revenue after a few months, upon
effective delivery to buyers.
Motors for
Domestic Use
In this business area, our operations are mainly focused in Brazil, where we hold a significant share in the
market of single-phase Motors for durable consumer goods, such as washing machines, air conditioners,
water pumps, among others. This 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.
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.
10 | WEG S.A. | 2012 Second Quarter Results
Earnings Release
Annex I
Consolidated Income Statement - Quarterly
Figures in R$ Thousands
2T12
33
2nd Quarter
2012
R$
AV%
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
1T12
31
1st Quarter
2012
R$
AV%
2T11
24
2nd Quarter
2011
R$
AV%
1,528,791
(1,067,130)
461,661
(155,143)
(76,017)
134,525
(148,006)
8,236
(36,923)
188,333
(56,193)
9,695
(2,016)
139,819
100%
-70%
30%
-10%
-5%
9%
-10%
1%
-2%
12%
-4%
1%
0%
9.1%
1,369,762
(977,795)
391,967
(142,191)
(67,767)
127,801
(81,916)
4,958
(38,289)
194,563
(48,453)
5,165
3,028
148,247
100%
-71%
29%
-10%
-5%
9%
-6%
0%
-3%
14%
-4%
0%
0%
11%
1,277,258
(895,821)
381,437
(122,667)
(64,282)
111,387
(69,273)
1,995
(31,814)
206,783
(58,850)
10,859
4,235
154,557
100%
-70%
30%
-10%
-5%
9%
-5%
0%
-2%
16%
-5%
1%
0%
12%
EBITDA
260,028
17%
208,638
15%
215,579
17%
EPS
0.22537
0.23895
0.24912
Changes %
Q2 12
Q2 12
Q1 12
Q2 11
12%
9%
18%
9%
12%
5%
81%
66%
-4%
-3%
16%
88%
-6%
20%
19%
21%
26%
18%
21%
114%
313%
16%
-9%
-5%
-11%
n.m
-10%
24.6%
20.6%
-5.7%
-9.5%
n.m
11 | WEG S.A. | 2012 Second Quarter Results
Earnings Release
Annex II
Consolidated Income Statement
06M12
33
6 Months
2012
R$
AV%
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
06M11
Figures in R$ Thousands
24
6 Months
2011
R$
AV%
2,898,553
(2,044,925)
853,628
(297,334)
(143,784)
262,326
(229,922)
13,194
(75,212)
382,896
(104,646)
14,860
(5,044)
288,066
100%
-71%
29%
-10%
-5%
9%
-8%
0%
-3%
13%
-4%
1%
0%
10%
2,403,375
(1,711,276)
692,099
(238,686)
(122,772)
204,930
(122,970)
10,666
(54,601)
368,666
(98,954)
13,339
6,930
276,121
100%
-71%
29%
-10%
-5%
9%
-5%
0%
-2%
15%
-4%
1%
0%
11%
EBITDA
468,666
16%
380,387
16%
EPS
0.46432
12 | WEG S.A. | 2012 Second Quarter Results
0.44507
%
2012
2011
21%
19%
23%
25%
17%
28%
87%
24%
38%
4%
6%
11%
n.m
4%
23%
4%
Earnings Release
Annex III
Consolidated Balance Sheet
Figures in R$ Thousands
June 2012
R$
27
AV%
December 2011
R$
AV%
22
June 2011
R$
18
AV%
CURRENT ASSETS
6,020,120
66%
5,867,061
64%
5,069,586
64%
Cash & cash equivalents
Receivables
Inventories
Other current assets
LONG TERM ASSETS
Long term securities
Deferred taxes
Other assets with related parties
Other non-current assets
FIXED ASSETS
2,878,475
1,350,250
1,459,793
331,602
81,920
657
35,441
143
45,679
3,007,665
32%
15%
16%
4%
1%
0%
0%
0%
1%
33%
2,931,615
1,307,692
1,362,314
265,440
432,469
280,635
111,488
40,346
2,806,331
32%
14%
15%
3%
5%
3%
1%
0%
0%
31%
2,674,637
1,095,847
1,086,034
213,068
358,414
226,057
89,776
42,581
2,551,509
34%
14%
14%
3%
4%
3%
1%
0%
1%
32%
349
0%
349
0%
931
0%
2,513,061
28%
2,445,760
27%
2,375,903
30%
Intangibles
TOTAL ASSETS
494,255
9,109,705
5%
100%
360,222
9,105,861
4%
100%
174,675
7,979,509
2%
100%
CURRENT LIABILITIES
Investment in Subs
Property, Plant & Equipment
3,230,080
35%
2,752,960
30%
2,179,394
27%
Social and Labor Liabilities
226,231
2%
161,436
2%
188,147
2%
Suppliers
349,350
4%
298,195
3%
295,775
4%
85,137
1%
88,473
1%
94,022
1%
1,935,177
21%
1,701,435
19%
1,111,282
14%
84,507
325,175
20,485
204,018
1,965,957
1%
4%
0%
2%
22%
2,804
285,843
26,314
188,459
2,446,312
0%
3%
0%
2%
27%
78,682
265,356
22,309
123,821
2,192,908
1%
3%
0%
2%
27%
1,325,811
15%
1,756,293
19%
1,567,111
20%
Other Long Term Liabilities
142,261
2%
122,485
1%
86,317
1%
Deferred Taxes
331,370
4%
421,918
5%
411,203
5%
Contingencies Provisions
166,515
2%
145,616
2%
128,277
2%
84,185
1%
106,477
1%
94,100
1%
STOCKHOLDERS' EQUITY
3,829,483
42%
3,800,112
42%
3,513,107
44%
TOTAL LIABILITIES
9,109,705
100%
9,105,861
100%
7,979,509
100%
Fiscal and Tax Liabilities
Short Term Debt
Dividends Payable
Advances from Clients
Profit Sharring
Other Short Term Liabilities
LONG TERM LIABILITIES
Long Term Debt
MINORITIES
13 | WEG S.A. | 2012 Second Quarter Results
Earnings Release
Annex IV
Consolidated Cash Flow Statement
Figures in R$ Thousands
06M12
06M11
6 Months
2012
15
6 Months
2011
11
Operating Activities
Net Earnings before Taxes
Depreciation and Amortization
Provisions:
Changes in Assets & Liabilities
382,896
101,731
84,043
(277,013)
368,666
93,239
42,782
(148,039)
Cash Flow from Operating Activities
291,657
356,648
Investment Activities
Fixed Assets
Intagible Assets
Goodwill in Capital Transactions
Asset Write Downs
Accumulated Conversion Adjustment
Long term securities bought
(138,226)
(131,484)
(51,788)
4,533
61,243
28,439
(74,938)
(8,426)
660
(16,547)
(226,057)
Cash Flow From Investment Activities
(227,283)
(325,308)
Financing Activities
Treasury Shares
Working Capital Financing
Long Term Financing
Interest paid on loans and financing
Dividends & Intesrest on Stockholders Equity Paid
576,971
(683,207)
(90,504)
(172,314)
(10,055)
755,498
(426,616)
(65,624)
(162,902)
Cash Flow From Financing Activities
(369,054)
90,301
Change in Cash Position
Cash & Cash Equivalents
Beginning of Period
End of Period
(304,680)
121,641
2,931,615
2,626,935
2,552,996
2,674,637
14 | WEG S.A. | 2012 Second Quarter Results