WEG S.A.
1st Quarter 2012 Earnings Results Conference Call
April 26, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English CORPORATE PARTICIPANTS
Mr. Sérgio
President
Schwartz
–
Executive
Disclaimer
Vice
Mr. Laurence Beltrão Gomes – Finance and
Investor Relations Officer
Mr. Luís Fernando Oliveira – Investor Relations
Manager
The statements that may eventually be made during this conference call
relating to WEG’s business perspectives, projections and operating and
financial goals and to WEG’s potential future growth are management
beliefs and expectations, as well as information that are currently available.
These statements involve risks, uncertainties and the use of assumptions,
as they relate to future events and, as such, depend on circumstances
that may or may not be present.
Investors should understand that the general economic conditions,
conditions of the industry and other operating factors may affect WEG’s
future performance and lead to results that may differ materially from those
expressed in such future considerations.
1Q12 Conference Call
PRESENTATION
Operator: Good morning and welcome to WEG’s
conference call on the results of 1Q12.
1Q12 Conference Call
April 26th, 2012
We would like to remind you that this conference is
being recorded and at this time all participants are in
listen-only mode. Later on we are going to start our
Q&A session when further instructions will be
provided. If you should require assistance during the
call please reach the operator by pressing star zero.
To obtain the quarterly results press release or the
presentation that will be used during this conference
please go to WEG’s investor relations webpage at
www.weg.net/ir.
Page 2
April 26, 2012
Before we move on we would like to let you know
that any statements that are made during this
conference call relative to WEG’s business outlook,
projections and operating and financial goals as well
as WEG’s potential growth or management beliefs
and expectations and rely on information that is
currently available. Forward-looking statements
involve risks, uncertainties and assumptions since
they relate to future events and depend on
circumstances that may or not happen.
Investors should understand that general economic
conditions, industry conditions and other operating
factors may affect WEG’s future performance and
lead to results that may materially differ from those in
such forward-looking statements. We would like to
remind you that this conference call will be
conducted in Portuguese with simultaneous
translation to English.
With us today in Jaraguá do Sul or Mr. Sérgio
Schwartz, Executive Vice President; Mr. Laurence
Beltrão Gomes, Financial and Investor Relations
Officer and Luís Fernando Oliveira, Investor Relations
Manager.
Please Mr. Sérgio Schwartz you may go on.
Page 1 WEG S.A.
1st Quarter 2012 Earnings Results Conference Call
April 26, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English Highlights
Quarterly Figures
Net Operating Revenue
Domestic Market
in R$ million
Net Operating Revenue
Domestic Market
External Markets
External Markets in US$
Gross Operating Profit
Gross Margin
Q1 2012
1.369.762
714.268
655.494
Q4 2011
1.468.551
781.938
686.613
%
-6,7%
-8,7%
-4,5%
370.825
380.772
-2,6%
279.522 32,7%
391.967
445.686
-12,1%
310.662
-5,1%
121.564
28,6%
30,3%
Net Income
148.247
156.248
Net Margin
10,8%
10,6%
EBITDA
208.638
258.210
EBITDA Margin
15,2%
17,6%
EPS
0,2390
0,2518
1Q12 Conference Call
Q1 2011
1.126.117
660.322
465.795
%
21,6%
8,2%
40,7%
26,2%
27,6%
21,9%
10,8%
-19,2%
164.808
26,6%
14,6%
-5,1%
_________________________________________
Mr. Sérgio
President
Schwartz
–
562
595
615
660
714
Q1 2008
Q1 2009
Q1 2010
Q1 2011
Q1 2012
0,1958 22,0%
Figures in R$ Thousands
April 26, 2012
Page 3
8%
7%
3%
6%
Executive
Vice
Well good morning everyone. It is a pleasure to have
you for this conference call on the results of WEG for
1Q12. We are going to start giving you details on the
company's growth and revenues and then Laurence
Beltrão Gomes is going to give you some details on
costs, expenses, Ebitda, cash flow and investments
and we will try to do that briefly so that we are going
to open for Q&A very soon.
So we are going to start with slide number 3 with the
highlights of 1Q12. To us a highlight is the strong
growth that the company experienced. We can see
growth in almost all items: we had the growth of
21.6% in net operating revenue, 40.7% of which in
the external market; growth was even better in gross
profits that reached 26.2%, similar to the growth in
our Ebitda; finally we had growth of 22% of our net
earnings.
It is very important that we have a context where all
this has happened. You know that the Brazilian
industrial production was not growing and there
were lots of uncertainties in the foreign markets
especially in developed countries and therefore the
results of this quarter show that our business model
is robust and that we are finding opportunities for
growth even in challenging times.
1Q12 Conference Call
April 26, 2012
Page 4
On slide 4 we have the comparison of our net
operating revenues in the domestic market in 1Q of
the past five years. Revenues in the domestic
market accounted for 52% of consolidated net
operating revenues this quarter with a growth of
8.2% compared to 1Q11. Approximately 5.3% or
two thirds of this growth was organic growth and
2.9% based on the consolidation of WEG’s Cestari
businesses.
As we told you the activity in the industry in general,
industrial production particularly, showed a
sequential deceleration along 2011 and started
2012 at a low pace with the industrial production of
capital goods showing a decrease of 14.6% in the
two first months of the year. Despite this scenario
we were able to keep our growth in the domestic
market in equipment, electro-electronic and industrial
GTD and pains & varnishes.
Only in engines for domestic use, a segment of
incentives of tax reductions are not still yielding the
expected results, we experienced some drop
compared to the previous year.
Net Operating Revenue
External Market
in US$ million
External Market in US$
2,3117
1,7354
1,8229
Quarterly Average FX
1,6664
1,7677
33%
61%
5%
-11%
371
We should then take a look at other aspects of
these numbers on the next slides.
280
188
196
174
Q1 2008
Q1 2009
Q1 2010
1Q12 Conference Call
Page 5
Q1 2011
Q1 2012
April 26, 2012
Page 2 WEG S.A.
1st Quarter 2012 Earnings Results Conference Call
April 26, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English Going now to slide number 5 we can see likewise in
previous quarters throughout the whole year of 2011
growth of net revenues was stronger in the foreign
market with a growth of 32.7% in American dollars
and 40.7% in Brazilian reals. Also in revenues of the
foreign market organic growth is very high, even
adjusted by the consolidation of recent transactions
of Electric Machinery and Watt Drive we would have
grown 21.2% in dollars and 28.6% in Brazilian reals,
that is the ratio of approximately 2/3 of our growth
(organic growth) is also true for the foreign market as
it is true for the domestic market.
These very high growth rates in the foreign market
have been able because we are continuing our
strategy to expand internationally introducing new
products and services in the markets where we
already have a consolidated presence leveraging our
brand and the competitive advantages of
customization, productive flexibility and provision of
services to customers with an increase in market
share.
Also the development of products that are adapted
to local demand in markets of high growth has
enabled us to capture good businesses in addition
to our work in specific market niches with product of
high technological value, innovative products and
with high energy efficiency.
But we believe that to continue to recover profitability
in the future we have to continue to grow and
therefore we continue to invest in our position in the
market developing optimized solutions to the several
sources of energy generation in addition to
expanding our business with substations.
Also we are expanding our businesses in the North
American market seeking to optimize the capacity of
our transformers plants in Mexico. Also I would like
to remind you that we are now opening our
businesses in the domestic and the foreign market
as you can see on this slide.
Now I am going to ask Laurence to show the
numbers of the quarter.
Cost of Goods Sold
Other Costs
8%
Other Costs
9%
Depreciação
5%
Business Areas
Net Revenue breakdown
in R$ million
5%
5%
930
1Q12
6%
0,2%
2,2%
1Q11
Labor
22%
12%
Materiais
64%
14%
5%
Materials
64%
11%
9%
8%
0,2%
2,0%
0,5%
1,9%
1.124
Depreciation
5%
Labor
23%
1.363
6%
12%
We can see here a growth in the electric and
industrial…
electro-electronic
and
industrial
equipment. We have also invested in GTD with the
consolidation of Electric Machinery starting to have a
very well balanced profile domestically and
externally. It is also very important to mention that we
have a strong pressure on costs and prices on
distribution and transmission businesses, which has
prevented us to recover profitability so fast.
35%
21%
31%
7%
27%
1Q 2010
1Q12 Conference Call
1Q 2011
Industrial Equipment DM
GTD DM
Domestic Use DM
Paints & Varnishes DM
1Q12 Conference Call
29%
30%
27%
April 26, 2012
_________________________________________
1Q 2012
Industrial Equipment EM
GTD EM
Domestic Use EM
Paints & Varnishes EM
Page 6
Page 7
April 26, 2012
Another way of seeing this fast growth in the foreign
market is to see how this mix of products sold in 1Q
compares to previous quarters, which can be
observed on slide number 6. So we can see that
there was an increase in the share relative to the
business areas in which the foreign markets is more
important or that have received more investments
recently.
Mr. Laurence Beltrão Gomes – Finance and
Investor Relations Officer
Well good morning everyone. We are going to talk a
bit about the cost of goods sold. On slide 7 we have
our breakdown of production costs in 1Q12
compared to 1Q11. It is very important to mention
that the characteristic of 1Q is that seasonally it is
our weakest quarter and so we had an increase in
the cost of goods sold by 19.9% which is smaller
than the 21.6% growth in our net operating revenue
Page 3 WEG S.A.
1st Quarter 2012 Earnings Results Conference Call
April 26, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English and that enabled us to expand our growth margin
that reached 28.6% in 1Q12, and improvement of
100 bps compared to 1Q11. On the positive side
we have the expansion of our activities as a
response to market growth and ramp up of
production in the production units of greenfield in
Linhares that enabled us to have a better dilution of
transformation costs.
As the downside we have the consolidation of
operations recently acquired that still does not show
the same level of performance of other WEG’s
performance. Pressure on costs for T&D as Sérgio
mentioned before and in the point of view of raw
materials we see stability. Average prices of copper
still are going down. It is important to highlight that
our sales prices are constantly re-calculated and
tend to reflect current market conditions.
Another important point is that the annual
readjustment of wages for the employees of our
largest unit in Jaraguá do Sul was 7%, which was
implemented in January and is already reflected in
the cost of goods sold this quarter.
Main effects on EBITDA
in R$ million
37,6
158,9
206,1
FX Impact
on
Revenues
26,0
10,8
COGS (ex
depreciation)
4,1
208,6
Selling
Expenses
164,8
General and
Administrative
Expenses
Volumes,
Prices &
Product Mix
Changes
EBITDA Q1 11
1Q12 Conference Call
Profit Sharing
Program
Ebitda with an absolute variation of 43.8 million
reaching 208.6 million with Ebitda margin of 15.26%.
Again as it was mentioned 1Q is the weakest
because of seasonal effects; however, in 1Q12 we
improved our Ebitda margin if compared to the same
period of last year that was 14.6%. For the next
quarters of 2012 we expect a sequential recovery of
our Ebitda margin.
Sources and Uses of Cash
in R$ million
Decrease in Working
Capital
6%
Other accounts payable
4%
Other / Adjustments
1%
Dividends/interest on
equity capital
20%
Sources
Amortization of
Financing
45%
Depreciation and
amortization
6%
R$ 881
million
R$ 881
million
Uses
Increase in Working
Capital
1%
Income Taxes Paid
6%
Profit Sharing Paid
7%
Capex
7%
Pre-tax income
22%
Decrease in Cash
42%
Acquisition
15%
Long-term investments
1%
New Financing
20%
1Q12 Conference Call
Page 9
April 26, 2012
On slide 9 we have a chart showing our sources
and uses of cash in 1Q12. We can see the main
uses of cash that totaled R$ 881 million which are
the following: the payment of funds; amortization of
loans; payment of dividends and interest on equity
regarding the second half of 2011 that generally
takes place in March of every year; also the payment
of profit-sharing that happens on the same day as
the payout of dividends; payment of income tax and
social contribution on profit; acquisitions and
investment programs to expand our capacity. These
are the uses.
EBITDA Q1 12
Page 8
April 26, 2012
Going then to slide number 8 we have the analysis
of variations of each of the components of our
Ebitda. The effects on revenues that were discussed
on the previous slide can be seen in the variations of
net income with an increase in the volume of sales
that added 206 million; exchange devaluation with
the positive effect of 37.6 million; cost of goods sold
(ex depreciation) increased 158.9 million and once
more we would like to tell you about discipline in the
containment of operating expenses that has been
consistent in recent quarters; selling expenses
variation followed the variations in revenues; and
general and admin expenses showed even smaller
growth; the net effect was a growth of 26.6% of
As for sources 513 million. These are operating
activities shown by profit before tax; an increase in
our indebtedness through the raising of funds and
renewal of trade finance lines to protect exports
revenues; the net result was a reduction of cash by
R$ 367 million which resulted in a net debt of 382
million in 1Q12.
Page 4 WEG S.A.
1st Quarter 2012 Earnings Results Conference Call
April 26, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English Portuguese
English.
Capex Program
Outside Brazil
Brazil
63,1
33,8
8,2
49,9
41,1
2,4
25,6
38,8
Q1
Q2
1,0
7,3
42,6
Q3
2011
58,7
with
simultaneous
translation
into
If you want to ask a question just pressed star one
and to remove your question from the list pressed
star two.
5,0
62,1
53,7
Q4
Q1
2012
in R$ million
Our first question comes from Daniel Gewehr from
Santander.
_________________________________________
Mr. Daniel Gewehr – Santander
1Q12 Conference Call
Page 10
April 26, 2012
Going to slide 10 we have the evolution of our
investment program in fixed assets along the past
quarters. In this quarter the investments in expansion
of capacity reached 59 million approximately. This
amount does not include assets incorporated in
acquisitions, just organic investment alone.
Good morning everyone. My first question would be
with regards to transmission and distribution. You
mentioned that you were not able to pass on costs. I
would like to know what is affecting that; are the
foreign competitors, local competitors? I would like
to hear a bit about the dynamics of the market.
We are going to see a lot 2012 and acceleration of
investments in line with our budget of R$ 294 million
for the year of 2012. This is a pace that is closer to
his usual pace after a year where he had a certain
deceleration and efforts were directly to the ramp up
of recently acquired units.
And secondly if you were to weigh these new
acquisitions and margins what comes from
acquisitions and what comes from seasonality.
Thank you.
Well we are now closing our presentation and will
now open for Q&A. I would ask the operator to go
on.
Contacts
ƒLaurence Beltrão Gomes
Investor Relations Officer
laurence@weg.net
ƒ Luís Fernando M. Oliveira
Investor Relations Manager
+55 (47) 3276-6973
luisfernando@weg.net
twitter.com/weg_ir
www.weg.net/ri
1Q12 Conference Call
Page 11
April 26, 2012
_________________________________________
Q&A Session
Operator
Ladies and gentlemen we are now starting the Q&A
session. Once again we would like to remind you
that this conference call is being conducted in
_________________________________________
Mr. Sérgio
President
Schwartz
–
Executive
Vice
This is Sérgio. With regards to transmission and
distribution prices we talked about market prices,
global market prices, not only Brazil but other
markets as well where we have our operations
where we can observe in fact we have seen in the
last three, four quarters a decrease in prices and we
believe that the recovery of prices is connected to a
decrease in demand - and I am talking about global
demand for this type of products.
So we do not really expect in the short-term that
these prices are going to change significantly, which
means that we will need from our part a very strong
movement to increase competitiveness by means of
gains in productivity; improving our products;
processes; reducing costs; rationalizing expenses
that will enable us to reach a better condition of
competitiveness and this is not exclusive for the
Brazilian market, but rather it is something that is
going on in the global market.
As for the second question that you asked?
Page 5 WEG S.A.
1st Quarter 2012 Earnings Results Conference Call
April 26, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English _________________________________________
_________________________________________
Mr. Daniel Gewehr – Santander
Operator
I would like to know the impact. You consolidated
acquisitions in 1Q, so a bit of a breakdown: what is
the margin, what is seasonality, just for me to
understand what is walked.
Our next question comes from Fernando Cunha
from Roya Corretora.
_________________________________________
Mr. Luís Fernando Oliveira – Investor Relations
Manager
I think that the major factor is seasonality. 1Q is a
quarter that seasonally has last working days and so
- we do not have the numbers here to give you - but
I would say the bulk of the differences if we were to
allocate proportions to the negative effects of the
margin I would say is seasonality would be ranked
first and the others would be accessory and we are
mentioning them all but clearly seasonality by far is
the most important effect. We have a lesser number
of working days and so the whole dynamics of the
market in a way conspires for the market to be
weaker.
We have a difference in the mix of products of the
4Q to 1Q. In 1Q our clients that have large projects
that have industrial automation systems, for instance,
they want to receive their equipment and complete
their investment programs in the end of the year,
which means that in 1Q we are starting almost - it is
not exactly that, iambic saturating the situation a bit but it is almost as if we started with our portfolio
fresh and new. Of course it is not exactly that but
there is an impact in the sales mix.
So you have a partner with the last working days
with more collective vacations and this effect of 4Q
is a problem. So of course that consolidation did not
help; but even if you add the two impacts in the
domestic and foreign markets consolidation has a
more limited impact. Compared to revenues I would
say that - and to margins - consolidation is not as
important. We just listed all impacts for you to have a
general idea of what it is.
_________________________________________
Mr. Fernando Cunha – Roya Corretora
Ok gentlemen good morning. Before I ask my
question congratulations on your results. I would like
to talk a bit about the foreign market that today
accounts for more than 45%, 48% of your revenues.
How can WEG grow in a market - except for the
emerging markets - but in a market that has been
shrinking?
And on the other hand how can the competition of
emerging companies be an obstacle, if it is?
_________________________________________
Mr. Sérgio
President
Schwartz
–
Executive
Vice
Well Fernando how has WEG been able to expand
its businesses abroad in a macroeconomic
environment that is unfavorable? Working in market
niches; with technological innovation; expanding its
product portfolio. In fact in the global market WEG’s
share is relatively small, which gives his margin for
growth in specific applications increasing added
value of our products and solutions in a gradual way
and occupying specific market spaces, that is not
directly competing for large volumes in the market
but rather working in market niches and expanding
our product and solutions portfolio.
Mr. Daniel Gewehr – Santander
Also geographic expansion we are gradually
reaching new geographies that we could not before.
With these new products WEG started its
international isolation project focused on electric
engines and it reached significant levels of share in
some markets with this product. But it has been
gradually expanding its portfolio adding new
products in these markets where we already have
some share and market recognition. So all of this
gives us conditions to grow even at an unfavorable
environment.
Ok thank you very much, I got it.
_________________________________________
_________________________________________
Mr. Fernando Cunha – Roya Corretora
Page 6 WEG S.A.
1st Quarter 2012 Earnings Results Conference Call
April 26, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English Ok. How about the Asian competitors? Are they a
problem?
Our next question comes from Cassio Lucin from
J.P. Morgan.
_________________________________________
_________________________________________
Mr. Sérgio
President
Mr. Cassio Lucin – J.P. Morgan
Schwartz
–
Executive
Vice
Well this competition in Asian markets would have
been more in the level of commodities, and this is a
segment where we do not work very strongly. We try
to work with products that have some technological
difference, some differentiation in performance and
the support structure that WEG has put up in the last
20, 25 years, gives us important advantages
compared to these players that were kept large
levels but with little differentiation technically and
solution wise.
_________________________________________
Mr. Fernando Cunha – Roya Corretora
Ok. Once again congratulations on your work and
thank you very much.
_________________________________________
Operator
Our next question comes from Lucas Brendler from
Geração Futuro.
_________________________________________
Mr. Lucas Brendler – Geração Futuro
Good morning. My question has to do with WEG’s
cost structure. In these 64% of materials I would like
to know how much - if you can have this breakdown
- is relative to demand for copper, steel and other
materials that are involved in production. Thank you.
_________________________________________
Mr. Laurence Beltrão Gomes – Finance and
Investor Relations Officer
Of material, Lucas, it is about two thirds. Two thirds
of materials are copper and steel. These are the
main materials, the most relevant ones. So of
materials to thirds are copper and steel.
_________________________________________
Operator
Good morning gentlemen. I have a fast question:
could you tell us about the quality of your backlog for
the next months? Just for us to have an idea of how
your operations are going to behave along the year.
Thank you.
_________________________________________
Mr. Luís Fernando Oliveira – Investor Relations
Manager
Hi Cassio. It is not only backlog; backlog is
important, it is something that we talk about. But for
some businesses, other businesses, it is not only
backlog but outlook and the outlook for the foreign
market is that we are going to continue producing
the strategies that have been working. We have
been finding opportunities for growth in the foreign
market, this is very clear and it has been so for some
quarters.
And in the domestic market we believe that we are
going to have a gradual improvement. The
government is adopting measures to incentivize
industry competition and this is very important for our
clients to be more competitive, they are going to
make more investments then; and if you have
decreasing interest rates and everything I believe that
in 2012 we are going to have the year that will
gradually speed up economic activity.
Likewise the exchange rate being a bit more stable
and less valued levels has helped us and as a whole
this is what it is. I think the outlook is that we are
going to have a gradual improvement in the
domestic market that will reflect in our revenues and
results. I think it will continue to be a year of
opportunity as we are going to continue to explore
opportunities. It is not here for us to sit down and
take orders rather to go to look for opportunities. But
I think it is going to be a year with a gradual
improvement in the backlog and where orders are
met faster and you do not have such a large
backlog.
_________________________________________
Page 7 WEG S.A.
1st Quarter 2012 Earnings Results Conference Call
April 26, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English Mr. Cassio Lucin – J.P. Morgan
So you believe that a lot of the year the mix of
breakdown is going to be as it is, it is not going to
change much.
_________________________________________
Mr. Luís Fernando Oliveira – Investor Relations
Manager
Yes. You are going to have the maintenance of what
we have been observing in recent times. I do not
believe there is going to be a major change
anywhere. The positive points we have already
mentioned and the negative points we do not see
really any major change in the foreign market that is
going to really produce a complete turnaround. I
think that is where going towards into a positive
future. We are going to see improvements in the
next quarters.
_________________________________________
Mr. Cassio Lucin – J.P. Morgan
same. You get this engine that is being sold in Brazil
and in the European market prices are very similar,
generally if you exclude taxes prices are not going to
be significantly different.
What is different is that around this engine in Brazil
you are going to have other equipment, other
systems of value added that we will make this
supply in the Brazilian market a supply with higher
value added and that explains the difference in
margin. But as a whole if you are comparing apples
and apples they are very, very similar.
You have other differences in the Brazilian market.
You have some products that we only sell in Brazil:
engines and motors for home appliances for
instance they are the Brazilian product; others are
localized in other areas, for instance engines with
aluminum bodies. This is specific of the European
market and therefore this is how you explain some
differences or most of the differences that you are
going to see in the margins of the two markets.
_________________________________________
Ok thank you very much.
Mr. Augusto Ensiki – Morgan Stanley
_________________________________________
So when you are comparing equal products they are
very, very similar.
Operator
The next question comes from Augusto Ensiki from
Morgan Stanley.
_________________________________________
_________________________________________
Mr. Luís Fernando Oliveira – Investor Relations
Manager
Mr. Augusto Ensiki – Morgan Stanley
Yes, that is what I mean. They are very, very close.
Good morning everyone. Is there a major difference
between domestic and foreign margins?
_________________________________________
And the second question is as you mentioned that
you had this consolidation of consultations that
impacted the margin, how long does it take for the
ramp-up to happen and did you come back to
normal? Thank you.
_________________________________________
Mr. Luís Fernando Oliveira – Investor Relations
Manager
Thank you Augusto. Well, if you compare the same
product exactly because we have many international
clients and they are looking for opportunities in Brazil
and in the rest of the world the prices tend to be the
Mr. Augusto Ensiki – Morgan Stanley
Ok I got it thank you and how about the ramp-up of
acquisitions?
_________________________________________
Mr. Luís Fernando Oliveira – Investor Relations
Manager
Well that is going to vary from activity to activity. In
some of these transactions the ramp-up is a bit
faster, others it takes a bit longer, it demands a bit
effort from us. But that trend is that little by little we
are going to stop focusing on this business as we
are focusing in this quarter, because little by little
Page 8 WEG S.A.
1st Quarter 2012 Earnings Results Conference Call
April 26, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English they stop being a problem and start to be a
contribution.
attractive we are going to work on them more
frequently.
At first in the beginning they not only do not help as
they impair growth. After one year you do not feel
that negative impact any longer.
As to electric traction we have some solutions
already developed: naval transportation we already
have even supplies to this product. If you are going
to see all this supply boats for oil platforms they all
use an electric traction solution that was developed
by WEG (inaudible 36:08) generation and electric
engines. The automation of the process is a very
complete solution.
_________________________________________
Mr. Augusto Ensiki – Morgan Stanley
Ok thank you very much.
_________________________________________
Operator
Our next question comes from the webcast: Sérgio
Saraiva, private investor: as for wind energy and
electric cars how are these developments going on?
_________________________________________
Mr. Luís Fernando Oliveira – Investor Relations
Manager
Well thank you Sérgio for your question as for wind
energy we are developing the technology. We
closed a joint venture that we announced in March
last year and we are going through technological
transfers developing the product. We believe we
have a very interesting product to be offered to the
market with interesting competitive advantages.
We are developing an analog solution for collective
public transportation or passengers’ transportation.
We have the support for this technological
development of foster agencies like Finep, BNDES,
and they have been funding this technological
development for collective transportation and so
these are things that… how can I put it… we have a
solution that has been developed and now this
solution is going to be adapted to the different
markets.
It became clear when we were designing our
strategic plan that some of these markets are very
interesting, others not that much; and so we have to
work on those that we are going to select.
_________________________________________
Operator
But at the same time this segment is going through
moment where prices are going down and this is
reflected in the prices that we see other electric
energy itself in the different auctions. So with this
regard we are being very careful and this is a
decision that we made.
We do not intend to go into a price war in this
business and why is that? Because our specific
investment in wind energy was relatively low thanks
to the industrial capacity, production capacity that
we have in Jaraguá do Sul we could hear this
capacity to other segments that are very interesting
and so we do not desperately have to occupy this
capacity as exclusive for wind energy. So we really
have the benefit of pick and choose and going into a
price war.
So we are observing the market, seeing how it
evolves in the following months to see gradually. As
prices are more stable and start to be more
Our next question… I am sorry. Just to remind you if
you want to ask a question just press star one.
Our next question comes from Cassio Lucin from
J.P. Morgan.
_________________________________________
Mr. Cassio Lucin – J.P. Morgan
Hi Luís I forgot to ask the question that goes along
the line of the previous question: in the investments
that are being made via have much going on
automation, upgrades? Is there anything directed to
that or not yet to have the backlog grow in this part?
Yes or no?
_________________________________________
Mr. Luís Fernando Oliveira – Investor Relations
Manager
Page 9 WEG S.A.
1st Quarter 2012 Earnings Results Conference Call
April 26, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English You are talking about research and development for
industrial automation?
Once again if you want to ask a question just press
star one.
_________________________________________
We are now closing our Q&A session. I would like to
turn the call over to Mr. Schwartz for these final
considerations. The user may go on.
Mr. Cassio Lucin – J.P. Morgan
Yes.
_________________________________________
Mr. Luís Fernando Oliveira – Investor Relations
Manager
Well automation when we released our strategic plan
the area of automation is the area that is going to
have the highest growth. It has always been an
important area for us in terms of research and
development, development of our products, and it is
clearly one of the areas in which we see the best
outlook for growth. If we are going to have more
automation around our engines in the Brazilian
market we have to continue developing - Brazilian
and foreign markets - we have to develop projects
that are in line with the other markets in the world.
So yes, it is going to be a focus.
_________________________________________
Mr. Cassio Lucin – J.P. Morgan
If you are going to think in terms of growth would you
say that this is one of the main items that is growing
in the developments that WEG has been making?
_________________________________________
Mr. Sérgio
President
Schwartz
–
Executive
Vice
Once again we would like to thank you for joining us
in this conference call and we would like to reinforce
some important aspects: WEG has picked up
growth. We are back to growth in our regular
standard. We are showing important organic growth
and in addition to that the acquisitions that were
made in the past quarter added new products, new
markets, new technologies to our businesses
contributing to expand our pace of growth despite
current market conditions being challenging and the
fact that there are uncertainties in the
macroeconomic scenario.
We are focused on increasing competitiveness;
seeking to improve productivity; reducing costs;
rationalizing expenses and continuing to innovate.
The outlook for the long term is very attractive and
the objectives and aspirations of the 2020 project
reinforce our confidence.
We wish you a very good day and excellent
businesses. Thank you very much.
Mr. Luís Fernando Oliveira – Investor Relations
Manager
Certainly. The two areas if you see from here to
2020 of the investment opportunities that we have,
that we have identified, that we have set out,
automation and energy are the two fastest-growing
areas and the others grow closer to that average of
17%/year that we released in the previous quarter.
_________________________________________
_________________________________________
Operator
WEG’s conference call is now closed. We thank you
very much for joining us, have a good day and thank
you for using Chorus Call Brasil.
_________________________________________
Mr. Cassio Lucin – J.P. Morgan
Ok thank you very much, very clear, thank you.
_________________________________________
Operator
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