WEG S.A.
4th Quarter 2011 Earnings Results Conference Call
February 16, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English CORPORATE PARTICIPANTS
Disclaimer
Mr. Harry Schmelzer Junior – Chief Executive
Officer
Mr. Sérgio
President
Schwartz
–
Executive
Vice
Mr. Laurence Beltrão Gomes – Finance and
Investor Relations Officer
Mr. Wilson Watzko – Controller Officer
Mr. Luís Fernando Oliveira – Investor Relations
Manager
PRESENTATION
Operator: Good morning and welcome to the
conference call of WEG on the results of 4Q11.
4Q11 Conference Call
February 16th, 2012
We would like to inform you that this conference call
is being recorded and that at this time all participants
are in listen-only mode. Later on we are going to
start a Q&A session when further instructions are to
be provided. Should you need any assistance during
the call please reach the operator by pressing star
zero.
To attain the quarter’s release or the press release or
the presentation that will be used during this
conference call please go to WEG’s Investor
Relations page at www.weg.net/ir.
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.
4Q11 Conference Call
Page 2
February 16, 2012
Before we proceed we would like to clarify that any
statements made during this conference call relative
to WEG’s business outlook, projections and
operating and financial goals and its potential future
growth or Management’s beliefs and assumptions
and they have relied on information that is currently
available.
Forward-looking
statements
involve
risks,
uncertainties and assumptions as they relate to
future events and therefore depend on
circumstances that may or may 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 materially differ from those
expressed in such considerations. We would like to
remind you that this conference call will be
conducted in Portuguese with simultaneous
translation into English.
With us today in Jaraguá do Sul are Mr. Harry
Schmelzer Jr., Chief Executive Officer of WEG S.A.;
Mr. Sérgio Schwartz, Executive Vice President; Mr.
Laurence Beltrão Gomes, Financial and Investor
Relations Officer; Mr. Wilson Watzko, Controller
Officer and Mr. Luis Fernando Oliveira, Investor
Relations Manager.
Please Mr. Harry Schmelzer, you may go on.
Agenda
„
Sérgio Schwartz – Executive Vice President
„ Growth
„ Revenues performance
„ Laurence Beltrão Gomes – Finance and Investor Relations Officer.
„ Costs, Expenses, EBITDA
„ Cash Flow
„ Capex
„ Harry Schmelzer – Chief Executive Officer
„ Strategic Planning WEG 2020
„ Questions and answers
4Q11 Conference Call
Page 3
February 16, 2012
Page 1 WEG S.A.
4th Quarter 2011 Earnings Results Conference Call
February 16, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English _________________________________________
Mr. Harry Schmelzer Junior – Chief Executive
Officer
Well everyone is. It is a pleasure to have you with us
on this conference call on the results of 4Q and the
year of 2011.
Mr. Sergio Schwartz, our executive VP, is going to
show the details of gross revenues and
performance.
Laurence Beltrão Gomes is going to talk about
costs, cash flows and investments.
We are using the opportunity that in addition to
traditional businesses we are going to talk about
WEG’s strategic planning for 2020. This is a result of
our strategic planning process that took place during
2011 and so in the end of the presentation I will
come back to talk about this.
Naturally after the presentation we are going to be
available to answer the questions that you might
have.
So without further ado I am going to turn it over to
Sergio to start the presentation and proceed. Please
Sergio.
Domestic Market
External Markets
External Markets in US$
Gross Operating Profit
Gross Margin
Quarterly Net Income
Net Margin
EBITDA
EBITDA Margin
EPS
4Q11 Conference Call
2011
6,130,291
5,189,409
2,902,958
2,286,451
1,361,689
1,556,051
2010
5,282,737
4,391,973
2,670,443
1,721,530
982,835
1,386,952
30.0%
31.6%
586,936
519,782
11.3%
11.8%
882,340
789,110
17.0%
18.0%
0.9461
0.8371
%
16.0%
18.2%
8.7%
32.8%
38.5%
12.2%
2009
%
5,110,596 3.4%
4,210,620 4.3%
2,526,430 5.7%
1,684,190 2.2%
849,655 15.7%
1,356,401 2.3%
32.2%
12.9%
550,543 -5.6%
13.1%
11.8%
837,424 -5.8%
13.0%
0.8914 -6.1%
Figures in R$ Thousands
19.9%
February 16, 2012
Page 4
_________________________________________
Mr. Sérgio
President
In Brazil we have also been growing with the
expansion of our portfolio and the development of
more complete solutions with higher technological
content. We have distribution network and technical
assistance that covers the whole country and they
have also been following those industrial segments
that are increasing their production capacity. For
example mining, cement, that are resuming
investments as well as businesses of oil and gas
that have had an important weight in our business.
Net Operating Revenue
Annual Evolution
in R$ million
5,189
4,502
3,749
20%
Schwartz
–
Executive
Vice
Thank you very much Harry, good morning
everyone. For me it is equally a pleasure to be part
of this conference call.
I would like to start with slide number 4 with the
highlights of our yearly figures. I would like to
highlight the growth of 18.2% in our net operating
revenues of 2011 over 2010.
-6%
4,211
4%
4,392
18%
2,286
1,842
1,684
1,722
2,202
2,660
2,526
2,670
2,903
2007
2008
2009
2010
2011
1,547
Highlights
Yearly Figures
Gross Operating Revenue
Net Operating Revenue
And then other highlights are a stronger growth in
the external market than in the Brazilian market and it
is very important to note that our performance in the
external market has continued to be strong because
of our expedition, good closeness to friends’
capacity of engineering and product customization.
All these projects really differentiate us in the market.
Comparisons in American dollars also show
consistency of this movement in recent years.
Domestic Market
4Q11 Conference Call
Page 5
External Market
February 16, 2012
On slide 5 we have the comparisons of our net
operating revenues in the last five years dividing the
numbers into domestic and external market.
It is very important to note that our growth was
achieved in the scenario of uncertainties with the
deepening of the crisis in Europe and low economic
activities in other developed countries. In Brazil we
have had fierce competition; appreciated exchange
rates and the restrictions to the amount of credit
because of the concerned with inflation.
We would like to reinforce that our growth is a direct
result of our business model based on operational
flexibility that enables us to focus efforts and
resources on those opportunities that offer great
attractiveness in the neat pointing time. We can very
fast but just our production competence sales and
distribution efforts to respond to changes in the
market.
That perhaps is the main fact of the year. We
resumed
growth
in
WEG
showing
our
competitiveness and capacity to find businesses
that are dynamic and attractive.
Page 2 WEG S.A.
4th Quarter 2011 Earnings Results Conference Call
February 16, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English Highlights
Quarterly Figures
Q4 2011
1,724,834
1,468,551
781,938
686,613
Q3 2011
1,552,044
1,317,483
737,350
580,133
%
11.1%
11.5%
6.0%
380,772
353,520
7.7%
445,686
418,266
6.6%
30.3%
31.7%
Net Income
156,248
154,567
Net Margin
10.6%
11.7%
258,210
243,743
EBITDA Margin
17.6%
18.5%
EPS
0.2518
0.2491
Gross Operating Revenue
Net Operating Revenue
Domestic Market
External Markets
External Markets in US$
Gross Operating Profit
Gross Margin
EBITDA
4Q11 Conference Call
Q4 2010
%
1,504,610 14.6%
1,258,429 16.7%
736,415 6.2%
522,014 31.5%
304,664 25.0%
391,300 13.9%
18.4%
31.1%
1.1%
141,509 10.4%
5.9%
224,149 15.2%
11.2%
17.8%
1.1%
0.2279 10.5%
Figures in R$ Thousands
Now on slide number 7 we have the comparisons of
our net operating revenues in the domestic market in
the fourth quarter is of the last five years with a
growth of 6% compared to 4Q10. We are
consolidating at a new business level.
The extension happens at different paces in different
segments, a result of a mix of products that is very
diverse and despite the decrease of the industrial
activity in the second half of the year we were able to
keep up our growth in the internal market in the area
of electric, electronic and industrial equipment;
transmission and distribution and also in paints.
February 16, 2012
Page 6
Now going to slide number 6 we would like to
highlight some points of 4Q11: a growth of net
operating revenue (again it is very robust rates with
16.7% against the previous year).
I would like to highlight that in this quarter we have a
bit of collaboration of the consolidation of
acquisitions of electric machinery and hi-fi that
amounted to 32.8 million to the gross revenues of
the quarter. Also important to say is that 4Q10 has a
very strong base of comparison.
The production of capital goods continues
expansion and our results make us confident that
the current cycle of investments and the increase of
production capacity in Brazil will be consistent in the
long-term.
Net Operating Revenue
External Market
in US$ million
1,7858
That our sequence of quarters with recovery of
operational margins has become: gross margin was
30.3%, 0.7 p.p. below for 4Q10; Ebitda margin
17.6% - it was slightly below 4Q of the previous
year; and several factors influenced the behavior of
margins including, and we can highlight, that the
adoption of commercial strategies that are more
aggressive; more competitive prices; the ramp-up of
production of the new units of India and Linhares
and on the other hand the good control of operating
expenses partially set off negative effects.
Net Operating Revenue
Domestic Market
in R$ million
6%
13%
-4%
8%
627
679
654
Q4 2007
Q4 2008
Q4 2009
4Q11 Conference Call
Page 7
736
782
Q4 2010
Q4 2011
1,7389
Quarterly Average FX
1,7134
1,8032
25%
25%
-10%
22%
Like in previous quarters and throughout the year of
2011 growth was stronger in the external market
than in the domestic market.
External Market in US$
2,2860
381
221
Q4 2007
4Q11 Conference Call
305
270
243
Q4 2008
Q4 2009
Page 8
Q4 2010
Q4 2011
February 16, 2012
Outside Brazil going to slide number 8 the growth of
our net operating revenues speeded up again. Our
quarterly operating revenue was the highest of any
other quarter in WEG’s history, both if you measured
it in dollars or in Brazilian reals.
As we say we had a scenario of accelerated growth
throughout the year despite make economic
activities in several markets and of the fact that
sometimes we had an overvaluation of the Brazilian
currency.
We have increased creates our market share in
markets where we already have a consolidated
presence and are incorporating new products and
services, leveraging our brand and competitive
advantages of customization, production flexibility
and the provision of services to customers. In
addition we are increasing our presence in markets
with larger growth in developing new products and
services adapted to the local demands.
February 16, 2012
Page 3 WEG S.A.
4th Quarter 2011 Earnings Results Conference Call
February 16, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English Business Areas
Gross Revenue breakdown
Cost of Goods Sold
in R$ million
1.242
6%
16%
1.552
5%
11%
1.307
6%
15%
32%
21%
24%
25%
52%
Depreciation
5%
Materials
63%
Labor
21%
2010
2011
Labor
22%
60%
54%
47%
Other Costs
10%
Other Costs
9%
Depreciation
4%
31%
7%
56%
1.725
6%
10%
1.505
7%
14%
Materials
66%
4Q 2007
4Q 2008
Industrial Equipment
4Q11 Conference Call
4Q 2009
GTD
4Q 2010
Domestic Use
Page 9
4Q 2011
Paints & Varnishes
February 16, 2012
Going now to slide number 9 that shows the
product mix sold in 4Q.
As we mentioned our growth has been driven by the
area of electric, electronic and industrial equipment
and that continues to increase in relative importance
and showing good absolute growth. We grew based
on our efforts to capture opportunities created by
investments in expansion and production capacity in
Brazil and with our expansion more distributed
overseas.
In the area of GTD we are already observing an
improvement in our T&D business especially
substations, electric substations and in the area of
generation we are still having the market dominated
by wind energy and others areas we are just starting;
and a little bit less in small hydroelectric plants.
As for the consumer goods market we are going
through a moment of accommodation of growth, a
reduction of demand adopted by measures that
reduced credit a long the year but in December new
measures to foster credit were adopted in this
business should be favored in the coming months.
In the areas of paints and furnishes basically we
continue with sales in synergy with other WEG’s
businesses and maintained consistent growth.
Now I would like to ask Laurence to show some
details on our quarter numbers.
4Q11 Conference Call
Page 10
February 16, 2012
_________________________________________
Mr. Laurence Beltrão Gomes – Finance and
Investor Relations Officer
Well good morning everyone. I would like you to
please go to slide number 10 where we have our
cost breakdown. As it has been highlighted
throughout the year of 2011 we had some peculiar
situations.
In the first quarter we had a strong increase of costs
and a very fast exchange rate valuation that
decreased our gross margin because of the
impossibility of increasing prices at the same pace.
In addition to that we had two new important
production units being opened with negative effect
on the dilution of fixed costs since they were in the
ramp-up of capacity.
Along the year we had a gradual normalization of
cost of raw materials with the trend of stabilization.
Under these conditions strategies to protect
exposure or hedging work better.
We adopted a strategy to re-price products
transferring price increases on the year, passing
them on to our prices. And also we had a more
aggressive pricing in some markets and segments.
We observed a gradual but consistent recovery of
product mix sold to more engineering products.
Page 4 WEG S.A.
4th Quarter 2011 Earnings Results Conference Call
February 16, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English Revenues of trading activities represented by pretax
income.
Main effects on EBITDA
in R$ million
35,4
10,1
FX Impact on
Gross
Revenues
The main uses of cash were:
151,2
184,8
Deductions on
Gross Revenues
21,2
COGS (ex
depreciation)
224,1
Selling
Expenses
Volumes, Prices
& Product Mix
Changes
5,7
2,0
General and
Administrative
Expenses
Profit Sharing
Program
258,2
In investments and working capital that basically
increased with our stock and accounts receivable
that were necessary to finance the stronger growth
in the external market;
The payout of dividends and interest on equity
capital at levels close to the previous year;
EBITDA Q4 10
EBITDA Q4 11
4Q11 Conference Call
February 16, 2012
Page 11
On slide 11 we have an analysis of our Ebitda
variation on 4Q11 and what we described before is
very clear.
An increase of product mix of R$184,8 million and in
exchange depreciation that shows a positive effect
of R$ 35,4 million.
Capex and acquisitions, another way of using our
cash that we would like to highlight. We are
confident that investments in expansion and
modernization of the production capacity and
acquisitions completed in the last quarter of the year
will mean continuous growth for future.
Finally an increase in our cash position including a
long-term financial investment.
Capex Program
An increase of CPV of 151 million excluding
differentiation as we can see all the effects said
before: degrees of material, of costs and the cost of
transformation of new units.
In addition we show our discipline and containing
operating expenses that has been shown in other
quarters; small variations in general and
administrative expenses and selling expenses have
enabled us to adopt a competitive strategy without
decreasing our Ebitda margin.
Outside Brazil
Brazil
73,8
61,4
34,2
63,1
53,7
44,1
13,0
2,0
40,7
42,1
Q3
Q4
43,7
27,2
30,1
Q1
Q2
41,1
33,8
Q1
2010
The net effect was a growth of 15.2% in Ebitda with
an absolute variation of 34 million reaching R$ 258.2
million within Ebitda margin of 17.6%.
Sources and Uses of Cash
in R$ million
Sources
Increase in Cash
-27%
Pre-tax income
32%
Increase in Debt
43%
Uses
Dividends/interest
on equity capital
-13%
Treasury stock
-0%
R$ 2.406
million
R$ 2.406
million
Depreciation and
amortization
8%
4Q11 Conference Call
Page 12
Capex
-8%
62,1
42,6
Q2
Q3
Q4
2011
in R$ million
4Q11 Conference Call
Page 13
February 16, 2012
Going to slide 13 we see the evolution of our Capex
Program along the last quarters.
As we announced before, in 2011 we had a relative
deceleration of investments in expansion of capacity
seems efforts were directed to the ramp-up of
production in a recently opened units especially in
the area of India.
We reached limits that were very close to our budget
of R$ 193 million.
Acquisition
-10%
Other accounts
Other / Adjustments
Decrease in Working
payable
2%
Capital
4%
11%
38,8
1,0
7,3
2,4
8,2
25,6
49,9
Increase in Working
Capital
-42%
For 2012 we expect that investments are of R$ 294
million.
February 16, 2012
Now I am going to turn the call back to Harry so that
he can talk about WEG’s strategic planning 2020.
On slide 12 we have the graphic presentation of
sources and uses of cash for 2011.
We can see that the main source of cash was:
An increase in debt with taking advantage of
moments of higher currency devaluation in the
beginning of the year to have new raising of funding
trade finance to protect exports;
Page 5 WEG S.A.
4th Quarter 2011 Earnings Results Conference Call
February 16, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English Strategic Planning WEG 2020
Corporate aspirations for 2020
Strategic Planning WEG 2020
Major trends and opportunities
„
„
„
Search for continuous growth with:
„ Defense of leadership positions in several markets and
segments;
„ Introduction of new products and technologies;
„ Introduction of products and solutions in new geographies
dominated.
Reach annual revenues of R$ 20 billion in 2020
Energy Efficiency:
„
„
„
„
„
Electric motors;
Gearboxes and gearmotors;
Frequency converter, motor starters and switching devices, control and protection of
electrical circuits and industrial automation;
Electro-electronic industrial systems;
Renewable Energy
„
„
Generators and transformers;
Solutions for renewable and distributed energy, exploring all opportunities in small
hydropower plants, biomass, wind and solar;
„
Mobility
„
Smart Grid
„
Electric traction solutions for urban transportation and maritime vehicles
„
Devices for control, maneuver and protection of electrical circuits and automation;
Critical power, UPS (uninterruptable power supply), alternators for gensets;
„ Power substations;
„ Smart meters
„
4Q11 Conference Call
February 16, 2012
Page 14
Well so now I am going to talk a bit about our
strategic planning. I am going to start with slide 14
that brings the results of WEG’s strategic planning
2020. Basically we have our corporate operations
that position the company for 2020. Based on the
opportunities that we identified these aspirations are
what we want to be and where we want to be in
2020.
In general lines we are going to seek growth by
means of defending our leadership positions in
several markets and segments; introduce new
products and technologies; introduce products and
solutions dominated in the new geography. With that
we want to reach annual revenues of R$ 20 billion in
2020.
Strategic Planning WEG 2020
Aspirations and strategic direction
20,00
0,73
2,60
4Q11 Conference Call
Page 16
February 16, 2012
We expect that the major trend that has been
influencing our market continues to be present and
will continue to be a source of growth. In this manner
we want to develop products and services to take
advantage of each one of these major trends as you
can see on slide 16. Energy efficiency; renewable
energy; mobility and the smart grid.
Some of these products and services that will cater
to the needs and to these major trends will be a
natural evolution of our current line and others will
demand investments, technological innovation and
additional efforts in research and development.
Others yet are to being corporative by means of
acquisitions of companies that do have these
technologies developed.
We intend to present in detail all our planning to you
by means of our first WEG Day in Jaraguá do Sul.
On this day you are going to have the opportunity of
getting to know all these items in detail, visit our
operations and talk to our executives. Very soon you
are going to receive further detail about this event,
but the invitation is already placed in here.
2,40
Well, with this we are going to close the presentation
and we are raised to open for the Q&A. Please
operator you may go on.
3,60
5,48
17.0% a.a.
5,19
WEG
2011
WMO
15.3%
15.5%
WEN
21.3%
11.2%
WTD
15.2%
17.4%
WAU
19.5%
83.9%
WTI
16.0%
58.9%
WEG
2020
Contacts
CAGR 2011‐2020*
4Q11 Conference Call
Page 15
February 16, 2012
On slide 15 we can see where opportunities are for
this growth. Opportunities are clear in all our current
business units.
We are absolutely sure that the greatest expansion is
going to take place in motors and engines. As you
see 5.480 million above the WMO indications. But in
relative numbers growth in energy and automation
are larger as you can also see under the acronym
WEN (21.3); WAU (an indication of 19.5% of growth
annually).
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
4Q11 Conference Call
Page 17
February 16, 2012
_________________________________________
Page 6 WEG S.A.
4th Quarter 2011 Earnings Results Conference Call
February 16, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English Q&A Session
Operator
Excuse me. Ladies and gentlemen we are now
going to start the Q&A session. Once again we
would like to remind you that this conference call is
conducted in Portuguese with simultaneous
translation into English. If you would like to ask the
question please press star one and to remove the
question from the list just press star two.
Our first question comes from Bruno Giardino from
Santander.
_________________________________________
Mr. Bruno Giardino – Santander
Hello good morning everyone. I would like to ask you
what is your outlook for 2012 especially in terms of
profitability considering that you have the ramp-up of
operations; recently opened a plant in India and
perhaps a more well behaved dollar scenario and if
you want to continue with this more aggressive
policy in terms of prices.
_________________________________________
Mr. Harry Schmelzer Junior – Chief Executive
Officer
Well we are very optimistic answering your question.
We see opportunities to continue a growth of two
digits and, again, a larger growth in the external
market than in Brazil.
Excuse me. Our next question comes from Lucas
Blender from Geração Futuro.
_________________________________________
Mr. Lucas Brendler – Geração Futuro
Good morning everyone. My question is a bit more
relative to page 12 of your presentation and the
sources and use of cash. You have in the source is
a reduction of working capital on the side of liabilities
and other site of assets you have an increase in the
working capital in 27% and 42%. Is there a
difference between these two increases in working
capital? I would like to understand that a bit.
_________________________________________
Mr. Laurence Beltrão Gomes – Finance and
Investor Relations Officer
Well, that we have in both sides because these are
the accounts… we separated the accounts that
reduce the need of working capital on the one hand
and the accounts that increased the needs of
working capital on the other side. So then that would
be you compare both and then you have an
increase in working capital (so it is 42 minus 11) and
we thought that this would be clearer this way. But
we have a line suppliers that increased a bit and
other items that decreased. So what is important is
for you to think of the net amount, which is the
comparison between sources and uses.
_________________________________________
Mr. Lucas Brendler – Geração Futuro
Mr. Bruno Giardino – Santander
So as for the assets you would have 42% plus
27%?
_________________________________________
With regards to margins and improve compared to
2011 or do you consider it is going to be stable?
Mr. Laurence Beltrão Gomes – Finance and
Investor Relations Officer
_________________________________________
_________________________________________
Mr. Harry Schmelzer Junior – Chief Executive
Officer
Well, as for margins WEG has been working towards
improving its margins and reducing costs. Industrial
plants in places like China, India and Mexico that
can bring cost gains to WEG.
No. 42 minus 11.
_________________________________________
Mr. Lucas Brendler – Geração Futuro
And the 27%?
_________________________________________
Mr. Bruno Giardino – Santander
Ok thank you very much.
_________________________________________
_________________________________________
Mr. Laurence Beltrão Gomes – Finance and
Investor Relations Officer
Operator
Page 7 WEG S.A.
4th Quarter 2011 Earnings Results Conference Call
February 16, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English Where do you have 27%, sorry? Just a second…
we are going to check the number and until the end
of the call we can just get back to you. I apologize
both until the end of the call we are going to get it
right. Do you have any other question?
_________________________________________
_________________________________________
Mr. Laurence Beltrão Gomes – Finance and
Investor Relations Officer
Is it clear?
Mr. Lucas Brendler – Geração Futuro
_________________________________________
No no, this is the only down that I have.
_________________________________________
Mr. Sami Carlik – Banco Fator Corretora
Operator
Excuse me. I would like to remind you that if you
want to ask a question just press star one. Once
again to ask the question press star one.
Our next question comes from Sami Carlik from
Banco Fator Corretora.
_________________________________________
Mr. Sami Carlik – Banco Fator Corretora
Good morning everyone. I would like you to give us
a view about the outlooks for the segment of
generation, transmission of energy, new projects
and your ideas on the next energy auctions that are
going to be held this year. How do you see this
segment specifically? Thank you.
_________________________________________
Mr. Harry Schmelzer Junior – Chief Executive
Officer
Well the idle capacity of this product in developed
countries and the good price of equipment and the
consequence of energy gives us good outlook. We
had a change in the energy matrix - wind energy,
biomass and SHP we are leaders… have lost some
competitiveness. But now WEG has a whole solution
for wind energy. We already work with wind energy
but with substations and transformers and now we
are also going to start working with aero generators
and offers of complete wind funds where we want to
be an important player in the business.
Yes certainly, thank you.
_________________________________________
Operator
Well, our next question comes from Bruno Giardino
from Santander.
_________________________________________
Mr. Bruno Giardino – Santander
Good morning, thank you for the opportunity of
asking another question. My question is about your
strategic planning. For you to get the 20 billion
revenues of 2020 do you have an idea of the Capex
that is necessary, maybe a ratio of revenues? Is it
higher, lower? Do you have any idea of how we can
change that or turn that into numbers?
_________________________________________
Mr. Harry Schmelzer Junior – Chief Executive
Officer
Well this growth you see that we are talking about a
growth of 17%/year on average and historically WEG
had been growing at this level are even above that.
So investments are at the same historic levels that
WEG has been showing in recent years.
_________________________________________
Mr. Bruno Giardino – Santander
Ok thank you very much.
_________________________________________
Operator
And recently with the acquisition of a Electric
Machinery in the United States we are going to have
a technological leap in the area of generators,
generators of greater potency… power that is going
to extend this offer of products and also include
generation in oil and gas platforms. So these are
very important directions and in addition we believe
sugar and ethanol business and the generation of
biomass that has been and will continue to be an
important business to us because of our experience
in the area and this business is going to resume
growth. I think that biomass is going to be very
important to WEG.
Excuse me. Our next question comes from Mr.
Samuel Eisner from William Blair.
_________________________________________
Mr. Samuel Eisner – William Blair
Thanks very much. I was wondering if you could talk
a little bit about the Capex growth year on year. It
seems to be up about 20%, so I was wondering
where that investment is going? Is it primarily
domestic, is it is going international, where do you
anticipate investing the additional.
Page 8 WEG S.A.
4th Quarter 2011 Earnings Results Conference Call
February 16, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English _________________________________________
Mr. Harry Schmelzer Junior – Chief Executive
Officer
Well, just to be clear it is an increase of investments
in the modernization, in seeking more productivity
and also to complement the projects that have in
Brazil in the project of the city of Linhares. So these
are the main investments that are being included in
the amounts that we have announced.
_________________________________________
Mr. Samuel Eisner – William Blair
Ok great thank you.
_________________________________________
Operator
are some advantages
investment in Linhares.
overall
of
having
this
_________________________________________
Mr. Lucas Brendler – Geração Futuro
This is something that we do have to take into
consideration. And if you were to use… I do not
know if you can get to this level of disclosure; but
the R$ 20 billion that you have planned as Capex for
2020 what percentage would be of sales in dollars,
exports, and what would be connected to the
internal market?
_________________________________________
Mr. Harry Schmelzer Junior – Chief Executive
Officer
Our next question comes from Lucas Blender from
Geração Futuro.
_________________________________________
Well, we are projecting WEG for 2020 having 50% of
revenues coming from the external market. But out
of this 50% of these revenues half (that is 25%) will
be manufactured outside Brazil.
Mr. Lucas Brendler – Geração Futuro
_________________________________________
Thank you again for the opportunity. I would like also
to understand a little better when you talk about the
gradually improve of company margins that should
be supported by the reduction of costs - whether
the opening of plants in the places that enable you
to have higher gains of efficiency.
Mr. Lucas Brendler – Geração Futuro
Ok thank you.
_________________________________________
Mr. Laurence Beltrão Gomes – Finance and
Investor Relations Officer
Parallel to that we take a look of the investments plan
that should reach 20 billion of revenues what is it
going to be like the investments of the plant of
Linhares with regards to a location outside Brazil that is what is the balance between imports, the
development of production in Brazil and production
outside the country?
Hi Bruno. This is Lucas from… remember there was
a question of page 12. I would like just to make a
correction: in the 27% this is an increase in cash. So
27% gain uses was an increase in cash and not an
increase in working capital. Do please make the
correction.
_________________________________________
Operator
Mr. Harry Schmelzer Junior – Chief Executive
Officer
Ok once more if you have a question press star one.
We are now closing the Q&A session. I would like to
turn the call over to Mr. Schmelzer for his final
considerations. Please you may go on.
_________________________________________
Well here you are talking about two things in
separate: WEG has a process of becoming
international or becoming more global, to be more of
a global player not only in the commercial, sales
areas, but also with industrial plants seeking an
emergency companies like China, India, Mexico,
investments so that business outside Brazil are also
supplied or even supplied with a larger quantity by
means of industrial plants outside the country.
In the case of Linhares WEG is not failing to invest in
Brazil; we want to grow internationally but we also
want to grow in Brazil and this plan of Linhares wants
to meet this objective. But also it is being built to
reduce costs; to have more competitiveness; there
_________________________________________
Mr. Harry Schmelzer Junior – Chief Executive
Officer
Well once again we would like to thank you for
joining us today and remind you of some important
aspects: WEG is on the path way to growth. We are
resuming growth at two-digit levels. We have made
strategic investments that added new market
product to us as well as new technologies. We are
growing but we are also focused in increasing our
competitiveness and productivity. Our strategic
planning (WEG 2020) gifts as visibility, long-term
Page 9 WEG S.A.
4th Quarter 2011 Earnings Results Conference Call
February 16, 2012 – 11:00 a.m. (Brasilia time)
Transcript of the simultaneous translation from Portuguese into English outlook is attractive and we have very clear
aspirations and objectives: we are confident about
the future. We wish you all a very good day and also
very good businesses. Thank you very much.
_________________________________________
Operator
WEG’s conference call is now closed. We thank you
all for joining us and have a good day. Thank you
very much.
_________________________________________
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