Earnings Release
„
Growth and recovery of operating margins in the third quarter of
2011
„ Net revenues grew by 11% over 3Q10 and external markets, with 17% growth, once
again showing strong performance;
„ EBITDA of R$ 243.7 million, with 17% growth and 18.5% margin
„ Net income of R$ 154.6 million, growing 9% and reaching 11.7% net margin
Jaraguá do Sul (SC), October 26th 2011: 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 third quarter of 2011 (3Q11). The following financial and operating data are presented in a
consolidated basis, except when otherwise indicated, in thousands of Brazilian Reais (R$) according to the current Brazilian generally
accepted accounting principles, as put forward by the Brazilian applicable laws. All growth rates comparisons relate, except when
otherwise indicated, to the same period of the previous year.
3Q11
Highlights
„ Net operating revenue in the third quarter of 2011 totaled R$ 1,317.5 million,
corresponding to an increase of 10.8% over the same period of last year;
„ EBITDA was of R$ 243.7 million, representing an increase of 16.5% in relation to the
previous year and of 13.1% in relation to the previous quarter. EBITDA margin showed a
sequential recovery, reaching 18.5%.
„ Net income totaled R$ 154.6 million, with net margin of 11.7%, corresponding to an
8.8% growth in relation to 3Q10 and remaining at the same level of the previous quarter.
„ Investments in fixed assets totaled R$ 124.8 million in the first nine months of 2011.
Gross Operating Revenue
Domestic Market
External Markets
External Markets in US$
Net Operating Revenue
Gross Operating Profit
Gross Margin
Net Income
Net Margin
EBITDA
EBITDA Margin
EPS
Q3 2011
1,552,044
953,515
598,529
364,730
1,317,483
418,266
Q2 2011 Growth % Q3 2010 Growth % 09M11
1,510,276
2.8% 1,419,160
9.4% 4,405,457
936,061
1.9%
906,954 5.1%
2,752,439
574,215
512,207 16.9%
1,653,018
4.2%
360,639 1.1%
298,020 22.4%
1,013,580
1,277,258
3.1% 1,188,622 10.8% 3,720,858
381,437
377,227 10.9% 1,110,365
9.7%
31.7%
29.9%
154,567
154,557
11.7%
12.1%
243,743
215,579
18.5%
16.9%
0.2491
0.2491
31.7%
0.0%
142,106
8.8%
12.0%
13.1%
209,196
16.5%
17.6%
0.0%
0.2289
8.9%
09M10
Growth %
3,778,127
16.6%
2,539,463
8.4%
1,238,665
33.5%
700,290 44.7%
3,133,544
18.7%
995,652
11.5%
29.8%
31.8%
430,688
378,273
11.6%
12.1%
624,130
564,961
16.8%
18.0%
0.6942
13.9%
10.5%
0.6092
13.9%
Figures in R$ Thousands
Conference Call with simultaneous translation into English
October 26, Wednesday 11:00 a.m (Brasilia time)
Dial–in in the US: +1 888 700-0802
Webcasting (simultaneous translation in English): www.ccall.com.br/weg/3q11.htm
Comments from Laurence Beltrão Gomes,
WEG’s Investor Relations Officer
On September 16, 2011, WEG celebrated 50 years of history. During this half century, WEG grew
from a small manufacturer of electric motors in the inland area of Santa Catarina state to one of the
largest Brazilian-owned multinational companies, with operations in the five continents and assuming
the leading position in the various markets and segments.
In this third quarter, we observed a continuous revenue growth and the gradual recovery in operating
margins. We continue to benefit from the growing importance of energy efficiency in the industrial
sector, where electricity is a significant production cost, as well as the strengthening of the trend
towards renewable sources for power generation.
In the Brazilian market, we highlight the “Programa Brasil Maior” launched by the Federal Government,
a set of industrial policy measures that aims to increase the competitiveness of the Brazilian industrial
sector in three main areas: stimulus for capacity expansion and innovation, foreign trade and
measures against unfair trade practices.
Overseas, WEG continues seeking to grow by gaining market share and expanding the product
portfolio, executing a strategy based on flexibility, timing and proximity to our customers. Our future
growth relies on our ability to continue expanding access to markets and adding new technologies
and new products to our portfolio. This can occur either by organic growth, technological innovation,
acquisition of companies or through formation of joint ventures.
Economic
Activity and
Industrial
Production
The economic activity continued to show very different situations in the various
markets throughout the third quarter of 2011. In Brazil, the economic activity showed
signs of settling down, albeit at relatively high levels. In the foreign markets, we
observed, in some cases, situations that are similar to that in Brazil, with economic
activities at relatively high levels, particularly in the so-called emerging markets. In
more mature markets, especially in Europe, the situation is generally far less dynamic.
Concerns surrounding the tax situation in several Eurozone countries led to a new
bout in the risk aversion, with effects on the Brazilian currency.
We operate differently in each of these markets, either acting on opportunities to
penetrate new growth markets or exploring the strategy of expanding the product
line.
Analysis of the purchasing manager indexes (PMI) provides certain indication about
industrial production solidity in certain selected markets.
Manufacturing ISM
Markit/BME Germany Purchasing Managers’ Index (PMI)
HSBC China Manufacturing PMI ™
USA
Germany
China
September 2011 August 2011
51.6
50.6
50.3
50.9
49.9
49.9
In Brazil, the industrial activity continued expanding, but at a slower pace over the
year. Accumulated growth in the Brazilian industrial production until August 2011 was
of 1.4% in relation to 2010. Accumulated expansion over the 12 months until August
is of 2.3%, and analysis of the growth estimates compiled by the Central Bank of
Brazil through the Focus report evidences convergence towards growth rates of
close to 2.4% for 2011.
2 | WEG S.A. | 2011 Third Quarter Results
Industrial Indicators According to Categories of Use
May/2011
Change (%)
Categories of Use
Month/Month Year/Year
Capital Goods
0.90
Intermediary Goods
(0.20)
Consumer Goods
(1.30)
Durable Goods
(2.90)
Semi-durable and non-durable
(0.90)
General Industry
(0.20)
Source: IBGE, Research office, Industry Coordination
(*) Series with seasonal adjustments
8.60
0.60
2.00
1.50
2.10
1.80
Acummulated
On Year
12 months
5.60
6.80
0.60
1.90
0.90
1.40
1.80
1.50
0.60
1.30
1.40
2.30
Production of capital goods has been prominent throughout 2011, with a significantly
higher growth in relation to other categories of use. The growth of 5.6% accumulated
in 2011 and 6.8% accumulated in the past twelve months also shows a tendency to
reduce the growth pace, evidencing that investment in production capacity
expansion seems to be relatively preserved.
The survey conducted by the Brazilian Association of Electrical and Electronic
Industries (ABINEE) in August 2011 provides the indications in this regard. For most
companies in the electrical and electronic segment, sales continue rising in the
annual comparison, but monthly growth is less common.
Until the end of July, we observe the continuing trend of currency appreciation, with
the Real reaching the highest prices after many years in relation to the U.S. dollar.
However, from August onwards, particularly September, uncertainties surrounding
developed economies began to grow again, with increase in the risk aversion and
consequent rapid devaluation of the Real. Despite reaching R$ 1.85/US$ at the end
of 3Q11, with devaluation of 18.6% at the end of the previous quarter, the average
price of the Brazilian currency/US dollar appreciated by 4.7% in the quarter when
compared to 3Q10. In relation to 2Q11, there was a devaluation of 3.0%.
Although the currency changes partially reduce the pressure on short-term results,
we continue adopting the management practices developed in the past years, which
aim at minimizing the effects of foreign exchange appreciation on our business, such
as the strategy for global procurement and for production increase abroad. Any
positive impacts of such devaluation on the competitiveness of our industrial clients
in Brazil, however, depend on maintenance of the current exchange levels over a
longer period.
Gross
Operating
Revenue
Gross Operating Revenue reached R$ 1,552.0 million in the third quarter of 2011
(3Q11), corresponding to an increase of 9.4% in relation to 3Q10 and of 2.8% in
relation to 2Q11.
The growth of 9.4% was the result of a general rise in the business volume and
increase in the price of goods sold, in addition to consolidation of revenues from
businesses acquired during 2010.
In 3Q11, gross operating revenue are divided as follows:
„ Domestic Market: R$ 953.5 million, representing 62% of Gross Revenues, with
growth of 5% over 3Q10 and 2% compared to 2Q11;
„ External Markets: R$ 598.5 million, equivalent to 39% of Gross Revenues. The
comparison of figures in Reais shows growth of 17% over the same period last
year and of 4% over the previous quarter. Considering the average US
dollar/Brazilian Real exchange rate, the comparison shows growth of 22%
3 | WEG S.A. | 2011 Third Quarter Results
compared to 3Q10 and of 1% compared to 2Q11.
Gross Revenues per Market (R$ million)
External Market
Domestic Market
1.419,2
1.131,5
1.227,4
29%
32%
71%
68%
Q1 10
Q2 10
1.504,6
1.510,3
1.552,0
38%
39%
1.343,1
36%
36%
64%
64%
64%
62%
61%
Q3 10
Q4 10
Q1 11
Q2 11
Q3 11
36%
2011
2010
Evolution and Distribution of Consolidated Gross Revenues per
Geographic Market (R$ Million)
Gross Operating Revenues
- Domestic Market
- External Markets
In US$
North America
South and Central America
Europe
Africa
Australasia
Q3 2011
1,552.0
953.5
598.5
Q2 2011
1,510.3
936.1
574.2
Change
2.8%
1.9%
4.2%
Q3 2010
1,419.2
907.0
512.2
Change
9.4%
5.1%
16.9%
364.7
360.6
1.1%
298.0
22.4%
34%
18%
23%
15%
10%
33%
17%
24%
17%
10%
1 pp
1 pp
-1 pp
-2 pp
0 pp
36%
15%
22%
17%
10%
-2 pp
3 pp
1 pp
-2 pp
0 pp
Distribution of Consolidated Gross Revenues per Business Area
ingles
Electro-electronic Industrial Equipments
Energy Generation , Transmission and Distribution
Electric Motors for Domestic Use
Paints and Varnishes
Industrial
ElectroElectronic
Equipment
Q3 2011 Q2 2011
58.4%
60.1%
24.6%
22.8%
10.5%
10.7%
6.5%
6.4%
%
Q3 2010
-1.7 pp 59.8%
1.8 pp 21.7%
-0.1 pp 12.0%
0.1 pp 6.6%
%
-1.4 pp
2.9 pp
-1.4 pp
-0.1 pp
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 the major world 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.
In the beginning of August, the “Plano Brasil Maior” was launched, setting out several
industrial policy initiatives to increase competitiveness in the Brazilian industry,
segregated into three comprehensive areas: fostering of investments and innovation,
foreign trade and defense against unfair trade practices. Among the main incentives
4 | WEG S.A. | 2011 Third Quarter Results
provided to our clients, the Plan includes expansion of the Investment Support
Program (PSI) of the Brazilian Development Bank (BNDES), which offers loan facilities
at attractive conditions for purposes of investment in capacity increase.
For some quarters already, the Brazilian industrial environment has been marked by
the stability of industrial production in all categories of use, except production of
capital goods. As previously mentioned, production of capital goods grew 7% in the
past 12 months, whereas all other categories of use recorded growth of less than
2%. In our understanding, such performance arises from the increase in investments
concentrated on certain industrial segments, with specific conditions and dynamism.
We have sought to concentrate our efforts to meet such demand, using our
operating and industrial flexibility to adjust to market conditions.
Similarly, in our expansion strategy in the various foreign markets, which is being
applied aggressively, we seek to focus our activities on the most evident
opportunities.
From the regional markets standpoint, this means operating in two distinct ways:
„ Seeking expansion in fast-growing markets in which our share is still relatively
small, such as Asia.
„ Gaining additional share in markets where our presence is already established and
our brand recognized, such as North America and certain European countries.
From the product standpoint, this expansion occurs in the following manners:
„ Introduction of new lines and models of electric motors that facilitate entry into
foreign markets, taking advantage of the growing importance of the energy
efficiency issue;
„
Energy
Generation,
Transmission
and
Distribution
(GTD)
Expansion of the product line offered, beyond the electric motor, to markets in
which WEG is already consolidated, with additional investments in the capacity to
provide services and customization.
Products and services included in this area are electric generators for hydraulic and
thermal power plants (biomass), hydro turbines (small hydroelectric plants or PCH),
transformers, substations, control panels and system integration services. We have
made investments in productive capacity, such as our new units of transformers in
Mexico and high voltage motors in India, to expand our operations beyond the
Brazilian market, where we already have strong presence.
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.
Recent electricity auctions, denominated A-3 and reserve, were once again marked
by strong participation of wind power and thermal projects based on natural gas.
Such active participation led to a new round of fall in prices of electricity sold and to
an extensive predomination of these two sources of power. The energy sources in
which our presence is traditionally strong, such as thermal biomass and small
hydroelectric plants (SHP), had only marginal involvement.
We are working on the joint venture WEG MTOI in manufacturing wind turbines, and
first deliveries are planned for 2012. We also observed the consistent, although
gradual, recovery of inflow of orders (sales) for projects involving thermal generation
with biomass.
The Transmission & Distribution area continues with a good sales performance,
which is already showing reflections on revenue growth. Such good sales
performance is the result of more diversified client base and markets, once the
transformers and transmission systems offer a wider range of potential clients.
As in prior periods, businesses with power substations stood out, for both industrial
5 | WEG S.A. | 2011 Third Quarter Results
clients and for concessionaires and power generators.
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
throughout the chain, with almost immediate impacts on production and revenue.
The slowdown in the pace of growth of sales and revenues in this business area,
already highlighted in the previous quarter, was confirmed this quarter. The
macroprudential measures implemented by the Central Bank of Brazil directly impact
demand for durable consumer goods, main use of motors in this segment.
Despite the slower growth rate, this business still maintains a relatively high sales and
production levels. We believe that should economic conditions such as employment,
disposable income and consumer credit availability, remain favorable in the medium
and long terms, the perspectives will remain favorable.
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 business 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 develop new products and new segments.
This business area has shown a good performance, taking advantage of its position
in high value added products for industrial applications. Our investments in
production capacity and improvements to the logistics structure have improved our
share in important markets, such as shipbuilding and oil & gas.
Operating Results (R$ Thousands)
(EBITDA according to methodology established by CVM’s Ofício Circular 01/07)
Q3 2011
1.317,5
(899,2)
418,3
Q2 2011
1.277,3
(895,8)
381,4
Gross Margin
31,7%
29,9%
(-) Selling Expenses
(-) General & Administrative
(-) Profit Sharing
Result from Activities
(+) Depreciation & Amortization
EBITDA
(129,5)
(66,5)
(24,7)
197,6
46,2
243,7
(122,7)
(64,3)
(24,6)
169,8
45,7
215,6
EBITDA Margin
18,5%
16,9%
Net Operating Revenues
Cost of Goods Sold
Gross Operating Profit
Change
3,1%
0,4%
9,7%
Q3 2010
1.188,6
(811,4)
377,2
Change
10,8%
10,8%
10,9%
31,7%
5,6%
3,4%
0,1%
16,3%
0,9%
13,1%
(121,6)
(71,1)
(22,2)
162,3
46,9
209,2
6,5%
-6,5%
11,0%
21,8%
-1,6%
16,5%
17,6%
Cost of Goods
Sold
Cost of goods sold (COGS) totaled R$ 899.2 million in 3Q11, up 10.8% over 3Q10
and 0.4% over 2Q11. Gross margin was 31.7%, which is the same level observed in
3Q10 and an increase of 1.9 percentage points in relation to 2Q11.
Gross Margin
We continue to execute our efforts to reprice our products in accordance to the new
current conditions for costs and prices of the major raw materials, such as copper
and steel. Although such efforts are partially reflected in the recovery of the gross
margin in relation to 2Q11, they are still not sufficient to fully recover the cost
differences in relation to 3Q10.
Furthermore, gross margin benefited from the growing dilution of transformation costs
in the greenfield production units (India, Linhares and transformers in Mexico).
Recent economic turmoil in the global financial markets and related impacts on
currencies and prices of certain more liquid metal commodities, such as copper,
6 | WEG S.A. | 2011 Third Quarter Results
have not yet significantly impacted results for this quarter.
Cost of Raw
Materials
Average copper prices on the London Metal Exchange (LME) spot market rose 24%
in 3Q11 over the 3Q10 average, but fell by 2% in relation to the 2Q11 average.
According to the CRUspiGlobal index, steel prices in the international market grew
14.3% over 3Q10 and fell 4.5% over 2Q11.
The pass-through of price increases of these inputs, such as steel and copper, to
sales prices takes place naturally and gradually. This fact stems from two
characteristics of our business: (i) our products are usually customized according to
certain specifications; and (ii) prices of raw materials, such as copper and steel, tend
to be the same or, at least, follow similar trends in the different global markets. As
such, sales prices are constantly recalculated to reflect current market conditions.
Selling, General
and
Administrative
Expenses
The consolidated selling, general and administrative expenses (SG&A) represent
14.9% of Net Operating Revenue in 3Q11, a decrease of 1.3 percentage point
compared to 3Q10 and an increase of 0.2 percentage point over 2Q11. In absolute
terms, operating expenses showed growth of 1.7% over 3Q10 and 4.8% over the
previous quarter.
Main impacts on EBITDA
161,2
28,3
4,0
FX Impact on
Gross
Revenues
88,3
Deductions on
Gross
Revenues
COGS (ex
depreciation)
209,2
Volumes, Prices
& Product Mix
Changes
EBITDA Q3 10
8,0
4,4
2,4
Selling
Expenses
General and
Administrative
Expenses
Profit Sharing
Program
243,7
EBITDA Q3 11
EBITDA and
EBITDA Margin
As a result of the aforementioned effects, EBITDA in 3Q11 (calculated according to
the methodology defined by CVM Oficio Circular 01/07) totaled R$ 243.7 million, an
increase of 16.5% over 3Q10 and of 13.1% compared to prior quarter. EBITDA
margin was 18.5%, up 0.9 percentage points compared to 3Q10 and of 1.6
percentage points in relation to 2Q11.
Net Financial
Results
Financial revenues totaled R$ 154.4 million in 3Q11(R$ 111.4 million in 2Q11 and
R$ 92.1 million in 3Q10). Financial expenses totaled R$ 162.4 million (R$ 69.3
million in 2Q11 and R$ 51.9 million in 3Q10). In this quarter, net financial income was
negative in R$ 8.0 million (positive of R$ 42.1 million in 2Q11 and positive of R$ 40.2
million in 3Q10).
The negative net financial result is a consequence of the exchange devaluation at the
end of the quarter, of 18.6% in relation to 2Q11, which had an impact on the portion
of the debt denominated in foreign currencies. Foreign exchange variation on foreign
currencies denominated debt, recorded in this quarter, arises mainly from advances
on exchange contracts (ACCs). These financial instruments are backed by export
receivables also denominated in foreign currencies.
7 | WEG S.A. | 2011 Third Quarter Results
Income Tax
and Social
Contribution
The Income Tax and Social Contribution Tax on Net Profit provision in 3Q11 was R$
37.4 million (R$ 58.9 million in 2Q11 and R$ 50.4 million in 3Q10). Additionally, there
was a R$ 12.2 million Deferred Income Tax credit.
Net Income
As a result of the effects discussed above, net income for 3Q11 was R$ 154.6
million, an increase of 8.8% compared to 3Q10 and at the same level.6% over the
previous quarter. The net margin of the quarter was 11.7%, a decrease of 0.2
percentage points compared to 3Q10 and of 0.4 percentage point over 2Q11.
Operating cash
flow
In the first nine-month of 2011, cash flows from operating activities was of R$ 290.8
million, corresponding to a decrease of 30.8% over the accumulated result of the
same period of the previous year. Such reduction was a consequence of the need
for investment in working capital due to expansion of activities. Payment of profit
sharing to employees also increased.
Cash flow from
investing
activities
Investing activities consumed R$ 319.7 million in the first nine-month period of 2011,
corresponding to a 5% decrease in relation to the same prior-year period. Distribution
of flows among the several components was, however, significantly different. We
observed a considerable decrease in investments in fixed assets in 2011, since
efforts this year are focused on use of the capacity of the new production units (India
and Linhares) and on additional investments for production of wind turbines in
Jaraguá do Sul. On the other hand, the Company made long-term financial
investments.
Cash flow from
financing
activities
Financing activities generated R$ 562.4 million, almost 200% above the accumulated
result in the same period of 2010, with new raising of short and long-term debts and
payment of dividends and interest on equity capital declared in the second half of
2010.
Cash Flows
2.553,0
290,8
Operating
319,7
Investing
Cash 4Q10
Investments
562,4
3.086,6
Financing
Cash 3Q11
Investments in fixed assets for expansion and modernization of production capacity
amounted to R$ 124.8 million in the first nine months of 2011, and 86% are going to
industrial units and other facilities in Brazil and the rest of the production units and
other subsidiaries abroad.
As previously mentioned, in 2011 investments in fixed assets will be lower than
usual, as we are focused on expanding production and using the capacity of the
new production units, the high and medium voltage motor and generator plant in
Hosur, India, and the commercial motor plant in Linhares (Espírito Santo State).
8 | WEG S.A. | 2011 Third Quarter Results
Investments in Fixed Assets (R$ million)
Outside Brazil
Brazil
61,4
34,2
73,8
43,7
53,7
44,1
13,0
2,0
27,2
30,1
40,7
42,1
Q1
Q2
Q3
Q4
41,1
33,8
8,2
25,6
Q1
2010
2,4
49,9
7,3
38,8
42,6
Q2
2011
Q3
Debt and Cash Position (R$ Thousands)
CASH & EQUIVALENT
- Current
- Long Term
DEBT
- Current
- Long Term
NET CASH (DEBT)
Cash Position
September 2011
3,319,834
3,086,568
233,266
3,288,987
1,797,222
1,491,765
30,847
December 2010
2,552,996
2,552,996
0
2,418,943
1,018,995
1,399,948
134,053
September 2011
2,399,773
2,399,773
0
2,345,147
841,311
1,503,836
54,626
At September 30, 2011, cash (cash and short and long term financial investments)
totaled R$ 3.319,8 million and gross financial debt totaled R$ 3.289.0 million,
resulting in a net cash position of R$ 30.8 million (net cash of R$ 54.6 million at
September 30, 2010). Cash is invested mainly in Brazilian currency denominated
financial instruments referenced to the Interbank Deposit Certificate (CDI), in first-tier
banks.
According to the maturity, gross debt is divided between:
„ Short-term debt, totaling R$ 1,797.2 million (55% of total), represented by shortterm portion of loans from BNDES and other development agencies, mostly in
local currency, and trade finance related transactions denominated in foreign
currencies and for working capital financing of subsidiaries abroad, denominated
in the respective currencies of each country.
„ Long-term debt, totaling R$ 1,491.8 million (45% of total), mainly represented by
financing from BNDES and other development agencies, mostly in local currency,
and, to a smaller extent, by working capital financing of subsidiaries abroad in
respective currency of each country. The duration of the long-term portion is 29.1
months.
According to the reference currencies, the total debt can be divided into:
„ Denominated in Reais, totaling R$ 2.060,8 million (63% of total), mainly
represented by financing from BNDES and other development agencies. The
weighted average cost of debt denominated in Reais is approximately 6.7% p.a.
Floating rate contracts are indexed mainly by the Long-Term Interest Rate (TLJP).
The duration of the portion denominated in Reais is 20.5 months.
„ Denominated in US dollars, Euros and other currencies, totaling R$ 1,228.2
million (37% of total), represented by working capital loans contracted by
subsidiaries abroad in local currencies and trade finance transactions (advances
9 | WEG S.A. | 2011 Third Quarter Results
on foreign exchange contracts or ACC), in Brazil. The duration of the portion in
foreign currencies is 12.5 months.
WEGE3 Share
Performance
The common shares issued by WEG, traded on BM&F Bovespa under the code
WEGE3, ended the last trading day of September 2011 quoted at R$ 18.70 with a
nominal decrease of 14.2% in the year. Considering the dividends and interest on
equity capital declared in the period, the total return in the first half of 2011 was –
negative in 12%.
The average daily volume traded in 3Q11 was R$ 7.2 million, 20.3% higher than in
3Q10. Throughout the quarter 48,934 stock trades were carried out (36,636 stock
trades in 3Q10), involving 26.4 million shares (21.6 million shares in 3Q10) and
totaling R$ 465.2 million (R$ 380.7 million in 3Q10).
Share Price Performance and Traded Volume
30,00
3.000
WEGE3
Ações Negociadas (mil)
25,00
Cotações WEGE3
2.000
15,00
10,00
1.000
Ações Negociadas (mil)
20,00
5,00
0,00
0
Dividend adjusted performance
Dividends
As of August 17, payments declared during the first half of 2011 were made to
shareholders, as below:
„ On March 22, as interest on stockholders’ equity (JCP), to shareholders on said
date, in the gross amount of R$ 42.4 million;
„ On June 21, as interest on stockholders’ equity (JCP), to shareholders on said
date, in the gross amount of R$ 47.4 million;
„ On July 21, as dividends referring to profit recorded in the first half of 2011 on July
21, in the total amount of R$ 60.2 million.
Interim dividends and interest on equity capital declared in the first half of 2011
totaled R$ 150.0 million, corresponding to 54% of net income for the period.
Earnings per share after withholding income tax was of R$ 0.22.
„ In addition, on September 20, the Board of Directors approved interest on
stockholders’ equity (JCP) to the shareholders of record on said date, in the gross
amount of R$ 51.1 million.
10 | WEG S.A. | 2011 Third Quarter Results
Event
Interest on Stockholders’ Equity
Interest on Stockholders’ Equity
Board Meeting
Gross amount per
Date
Payment Date
share
03/22/11
08/17/11
R$ 0.06823529
06/21/11
08/17/11
R$ 0.07647059
Net amount per
share
R$ 0.05800000
R$ 0.06500000
Dividends
07/21/11
08/17/11
R$ 0.09700000
R$ 0.09700000
Interest on Stockholders’ Equity
Total
09/20/11
03/14/12
R$ 0.08235294
R$ 0.32405882
R$ 0.07000000
R$ 0.29000000
We maintain the policy of declaring quarterly interest on equity, in addition to twiceannually declared dividends, based on profits for the period.
###
11 | WEG S.A. | 2011 Third Quarter Results
Results Conference
Call
WEG will hold, on October 26 2011 (Wednesday), webcasting of the results
conference call, which shall be conducted in Portuguese with simultaneous translation
into English. The schedule is the following:
11:00 a.m – Brasília (BRT)
09:00 a.m. - New York (EDT)
02:00 p.m. – London (BST)
Connecting phone numbers:
Dial–in from Brazil:
Dial–in from outside Brazil:
Toll-free from USA:
+55 11 4688-6361
+1 786 924-6977
+1 888 700-0802
Code: WEG
Access to the webcast:
Slides and Portuguese audio:
Slides and English translation:
www.ccall.com.br/weg/3t11.htm
www.ccall.com.br/weg/3q11.htm
The presentation will be available in the Investor Relations page of WEG website
www.weg.net/ir. Please call approximately 10 minutes before the call is scheduled to
start.
The information contained in this report relating to the Company business perspectives, projections
and results and Company growing potential should be considered as only forecasts 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 change suddenly.
12 | WEG S.A. | 2011 Third Quarter Results
Annex I
Consolidated Income Statement - Quarterly
Figures in R$ Thousands
Net Revenues
Cost of Goods Sold
Gross Profit
Sales Expenses
Administrative Expenses
Financial Revenues
Financial Expenses
Other Operating Income
Other Operating Expenses
Earnings from Subs (Equity Method)
EARNINGS BEFORE TAXES
Income Taxes & Contributions
Deferred Taxes
Minorities
NET EARNINGS
3rd Quarter
2011
R$
AV%
2nd Quarter
2011
R$
AV%
3rd Quarter
2010
R$
AV%
1,317,483
100%
-899,217 -68.3%
418,266 31.7%
-129,536 -9.8%
-66,462 -5.0%
154,397 11.7%
-162,387 -12.3%
479
0.0%
-29,348 -2.2%
0
0.0%
185,409 14.1%
-37,444 -2.8%
12,225
0.9%
-5,623 -0.4%
154,567 11.7%
1,277,258
100%
-895,821 -70.1%
381,437 29.9%
-122,667 -9.6%
-64,282 -5.0%
111,387
8.7%
-69,273 -5.4%
1,995
0.2%
-31,814 -2.5%
0
0.0%
206,783 16.2%
-58,850 -4.6%
10,859
0.9%
4,235
0.3%
154,557 12.1%
1,188,622
100%
-811,395 -68.3%
377,227 31.7%
-121,602 -10.2%
-71,111 -6.0%
92,081
7.7%
-51,928 -4.4%
5,541
0.5%
-23,901 -2.0%
483
0.0%
206,790 17.4%
-50,430 -4.2%
-6,942 -0.6%
-7,312 -0.6%
142,106 12.0%
EBITDA
243,743
EPS
0.24914
13 | WEG S.A. | 2011 Third Quarter Results
18.5%
215,579
0.24912
16.9%
209,196
0.22887
17.6%
Changes %
Q3 11
Q3 11
Q2 11
Q3 10
3.1%
0.4%
10.8%
10.8%
9.7%
10.9%
5.6%
6.5%
3.4%
-6.5%
38.6%
67.7%
134.4%
212.7%
-76.0%
-91.4%
-7.8%
22.8%
#DIV/0!
-10.3%
-100.0%
-10.3%
-36.4%
-25.8%
12.6%
n.m
n.m
-23.1%
0.0%
8.8%
13.1%
16.5%
0.0%
8.9%
Annex II
Consolidated Income Statement
Figures in R$ Thousands
9 Months
2011
R$
AV%
Net Revenues
Cost of Goods Sold
Gross Profit
Sales Expenses
Administrative Expenses
Financial Revenues
Financial Expenses
Other Operating Income
Other Operating Expenses
Earnings from Subs (Equity Method)
EARNINGS BEFORE TAXES
Income Taxes & Contributions
Deferred Taxes
Minorities
NET EARNINGS
9 Months
2010
R$
AV%
3,720,858
-2,610,493
1,110,365
-368,222
-189,234
359,327
-285,357
11,145
-83,949
0
554,075
-136,398
25,564
-12,553
430,688
0%
11.6%
3,133,544
-2,137,892
995,652
-314,914
-194,047
250,732
-163,841
16,172
-68,620
1,687
522,821
-116,719
-19,269
-8,560
378,273
EBITDA
624,130
16.8%
564,961
EPS
0.69420
100%
-70%
30%
-9.9%
-5.1%
10%
-8%
0%
-2%
0%
15%
-4%
1%
14 | WEG S.A. | 2011 Third Quarter Results
0.60923
100%
-68%
2011
2010
18.7%
22.1%
32%
11.5%
-10.0%
16.9%
-6.2%
-2.5%
8%
43.3%
-5%
74.2%
1%
-31.1%
-2%
22.3%
0%
17%
-4%
-100.0%
6.0%
16.9%
-1%
n.m
0%
12.1%
46.6%
13.9%
18.0%
10.5%
13.9%
Annex III
Consolidated Balance Sheet
Figures in R$ Thousands
CURRENT ASSETS
Cash & cash equivalents
Receivables
Inventories
Other current assets
LONG TERM ASSETS
Long term securities
Deferred taxes
Other non-current assets
FIXED ASSETS
Investment in Subs
Property, Plant & Equipment
Intangibles
TOTAL ASSETS
September 2011
R$
AV%
20
5,742,007 66%
3,086,568 35%
1,162,056 13%
1,269,623 15%
223,760
3%
378,587
4%
233,266
3%
103,846
1%
41,475
0%
2,575,233 30%
933
0%
2,397,920 28%
176,380
2%
8,695,827 100%
December 2010
R$
AV%
13
4,794,009 64%
2,552,996 34%
1,044,712 14%
1,008,952 13%
187,349
2%
136,984
2%
0
0%
78,810
1%
58,174
1%
2,580,171 34%
601
0%
2,395,575 32%
183,995
2%
7,511,164 100%
September 2010
R$
AV%
11
4,628,280 63%
2,399,773 33%
1,026,652 14%
1,015,175 14%
186,680
3%
149,892
2%
0
0%
91,613
1%
58,279
1%
2,586,940 35%
222
0%
2,394,633 33%
192,085
3%
7,365,112 100%
CURRENT LIABILITIES
Social and Labor Liabilities
Suppliers
Fiscal and Tax Liabilities
Short Term Debt
Dividends Payable
Advances from Clients
Profit Sharring
Other Short Term Liabilities
LONG TERM LIABILITIES
Long Term Debt
Other Long Term Liabilities
Deferred Taxes
Contingencies Provisions
MINORITIES
STOCKHOLDERS' EQUITY
TOTAL LIABILITIES
2,818,379 32%
188,599
2%
317,125
4%
63,632
1%
1,797,222 21%
47,903
1%
239,143
3%
39,348
0%
125,407
1%
2,167,388 25%
1,491,765 17%
129,275
1%
411,545
5%
134,803
2%
98,709
1%
3,611,351 42%
8,695,827 100%
1,938,803 26%
141,797
2%
242,300
3%
72,204
1%
1,018,995 14%
63,440
1%
271,949
4%
23,583
0%
104,535
1%
2,028,525 27%
1,399,948 19%
86,875
1%
415,318
6%
126,384
2%
89,229
1%
3,454,607 46%
7,511,164 100%
1,795,005 24%
167,220
2%
273,823
4%
73,452
1%
841,311 11%
32,052
0%
233,844
3%
34,050
0%
139,253
2%
2,126,673 29%
1,503,836 20%
92,250
1%
417,304
6%
113,283
2%
85,991
1%
3,357,443 46%
7,365,112 100%
15 | WEG S.A. | 2011 Third Quarter Results
Annex IV
Consolidated Cash Flow Statement
Figures in R$ Thousands
9 Months
2011
12
9 Months
2010
8
Operating Activities
Net Earnings before Taxes
Depreciation and Amortization
Earnings from Subs (Equity Method)
Provisions:
Changes in Assets & Liabilities
554,075
139,393
92,160
(494,815)
524,849
135,920
(1,687)
73,387
(312,139)
Cash Flow from Operating Activities
290,813
420,330
Investment Activities
Fixed Assets
Intagible Assets
Asset Write Downs
Accumulated Conversion Adjustment
Long term securities bought
(124,813)
(2,462)
2,472
38,401
(233,266)
(248,847)
(81,274)
18,995
(25,050)
-
(319,668)
(336,176)
Financing Activities
Shares in Treasury
Working Capital Financing
Long Term Financing
Dividends & Intesrest on Stockholders Equity Paid
(10,055)
767,072
102,972
(297,562)
(44,289)
516,903
(284,112)
Cash Flow From Financing Activities
562,427
188,502
Change in Cash Position
Cash & Cash Equivalents
533,572
272,656
2,552,996
3,086,568
2,127,117
2,399,773
Cash Flow From Investment Activities
Beginning of Period
End of Period
16 | WEG S.A. | 2011 Third Quarter Results