Earnings Release
„
Growth is strong in the second quarter of 2011
„ Net revenues grew by 26% over 2Q10, with 45% growth of external markets being
the highlight
„ EBITDA of R$ 215.6 million, with 24% growth and 16.9% margin
„ Net income of R$ 154.6 million, growing 32.6% and reaching 12% net margin
Jaraguá do Sul (SC), July 22nd 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 second quarter of 2011 (2Q11). The following financial and operating data are presented in a
consolidated basis, except when otherwise indicated, in thousands of Brazilian Reais (R$) according to the current Brazilian generally
accepted accounting principles, as put forward by the Brazilian applicable laws. All growth rates comparisons relate, except when
otherwise indicated, to the same period of the previous year.
2Q11
Highlights
„ Net Operating Revenue in the second quarter of 2011 was R$ 1,277.3 million, 26%
higher than that achieved in 2Q10;
„ EBITDA reached R$ 215.6 million, up 23.9% in relation to prior year and up 30.8% in
relation to prior quarter. EBITDA was 16.9%, evidencing recovery in relation to 1Q11.
„ Net income totaled R$ 154.6 million, with net margin of 12.1%, up 27.1% as compared
to 1Q11 and up 32.6% as compared to 2Q10.
„ Investments in fixed assets totaled R$ 74.9 million in the first half of 2011.
„ In May 2011, we announced the acquisition of the controlling interest in Pulverlux S.A.,
a company specialized in the production and sale of powder coatings in Argentina. We
also communicated opening of a new coatings production plant in Mauá (São Paulo
state) and a coatings distribution unit in Cabo de Santo Agostinho (Pernambuco state).
Gross Operating Revenue
Domestic Market
External Markets
External Markets in US$
Net Operating Revenue
Gross Operating Profit
Gross Margin
Quarterly Net Income
Net Margin
EBITDA
EBITDA Margin
Q2 2011
1,510,276
936,061
574,215
360,639
1,277,258
381,437
Q1 2010 Growth % Q2 2010 Growth % 06M11
1,343,137 12.4% 1,227,421 23.0% 2,853,413
862,863
8.5%
831,210 12.6%
1,798,924
480,274 19.6%
396,211 44.9%
1,054,489
288,211 25.1%
221,100 63.1%
648,850
1,126,117 13.4% 1,013,015 26.1% 2,403,375
310,662 22.8%
309,812 23.1%
692,099
29.9%
27.6%
154,557
121,564
12.1%
10.8%
215,579
164,808
16.9%
14.6%
30.6%
27.1%
116,522
32.6%
11.5%
30.8%
174,015
17.2%
23.9%
06M10
Growth %
2,358,967
21.0%
1,632,509
10.2%
726,458
45.2%
402,270 61.3%
1,944,922
23.6%
618,425
11.9%
28.8%
31.8%
276,121
236,167
11.5%
12.1%
380,387
355,765
15.8%
18.3%
16.9%
6.9%
Figures in R$ Thousands
Conference Call with simultaneous translation into English
July 22, Thursday 11:00 a.m (Brasilia time)
Dial–in in the US: +1 888 700-0802
Webcasting slides and English simultaneous translation: www.ccall.com.br/weg/2q11.htm
Comments from Laurence Beltrão Gomes,
WEG’s Investor Relations Officer
In the 2Q11, we attained high revenue growth rates, together with recovery in operating margins in
relation to 1Q11. The highlight continued to be the robust growth in the external market, i.e. of 63% in
the comparison in US dollars and 45% in Brazilian Reais, as compared to the same prior year period.
The evident good fundamentals and growth prospects of Brazilian economy have attracted financing
and productive capital. This situation brings new challenges for WEG, with the continuous appreciation
of the Brazilian real and the increase in competition in Brazil. We have succeeded in dealing with these
challenges with intensive cost and expense management and the permanent search for operating
efficiency and higher industrial productivity. Concurrently, we continue to pass through the recent cost
increases to sales prices.
From a more strategic perspective, we continue to look for new markets and expand our product
portfolio, both through own technological innovation initiatives, as well as the acquisition of companies
or the establishment of strategic partnerships. We identified certain macro-trends that will benefit those
companies that, like WEG, are committed to the development of complete and innovative solutions for
efficient energy generation and management. In this respect, the recent publication of ISO 50.001
standard, which regulates energy management, confirms the adequacy of our investments and brings
ample business opportunities for the near future.
Economic
Activity and
Industrial
Production
In the 2Q11, we noted economic activity stabilization in Brazil that, after the marked
recovery in 2010, has continued at relatively high levels. In the foreign markets in
which we operate, we continue facing different situations in various markets. In some
of these markets, we identified situations similar to those prevailing in Brazil, with
relatively high economic activity levels. Even so, inflationary pressures, mainly of basic
products, such as metal commodities, for instance, are being gradually neutralized.
At the same time there are building uncertainties about certain more developed
economies, which are still seeking to resolve the imbalances and excess
indebtedness accumulated in the last years of the last decade. In these cases,
economic recovery has been more difficult and our growth is through increase in our
market share.
Analysis of the purchasing manager indexes (PMI) provides certain indication about
industrial production solidity in certain selected markets. The monthly Manufacturing
ISM index in the USA for June 2011 increase for the twenty-third time in a row. The
expansion in the 2Q11, however, was lower than that in the 1Q11, both for
production and new orders.
The Markit/BME Germany Purchasing Managers’ Index (PMI) has shown decrease in
manufacturing activity expansion pace. Although the seasonal decrease is normal,
latest data evidence a decrease in inflationary pressures and stabilization at a lower
expansion pace
In China, figures from HSBC China Manufacturing PMI™ for June presented the
lowest levels in 11 months, and almost unaltered production level.
In Brazil, industrial activity also showed the trend of expansion decrease, after a
stronger quarter. The growth in Brazilian industrial production accumulated through to
May 2011 was 1.8% in relation to 2010. According to the Brazilian Central Bank
survey, expected industrial production growth in 2011 was 3.5% at the end of June,
thus below the expected expansion of 4.0% at the end of the 1Q11.
2 | WEG S.A. | 2011 Second Quarter Results
Industrial Indicators According to Categories of Use
May/2011
Change (%)
Categories of Use
Month/Month Monthly
Capital Goods
1,7
Intermediary Goods
1,5
Consumer Goods
1,0
Durable Goods
2,7
Semi-durable and non-durable
0,0
General Industry
1,3
Source: IBGE, Research office, Industry Coordination
(*) Series with seasonal adjustments
7,1
2,4
2,1
2,3
2,0
2,7
Acummulated
On Year
12 months
6,4
11,5
1,4
4,7
0,9
2,3
2,3
2,4
0,5
2,3
1,8
4,5
The expansion of production of capital goods continued to be prominent, as in
recent months, with an increase of 6.4% accumulated in 2011 and accumulated
increase of 11.5% in the past twelve months, again confirming the movement of
investment in production capacity expansion.
The Brazilian Association of Electrical and Electronic Industries (ABINEE) released its
cyclical survey conducted in May 2011, which also indicates a stabilization of growth
in orders and sales. Most of the companies surveyed indicated growth of sales in
relation to the previous year, but considered pace of business as below
expectations. It is important to consider the methodological limitations of this type of
survey.
Appreciation of Brazilian Real continued in this quarter, with 11.1% appreciation in the
average exchange rate of Brazilian currency to U.S. dollar in relation to the average
exchange rate for the 2Q10. Over the past few years, we have developed
management practices to minimize the negative effects of currency appreciation on
our business. This includes active policy of import of raw materials and production
abroad. These strategies, however, do not offer perfect protection and, as such we
are exposed to exchange variation within short-term.
Additionally, even when we manage to minimize the direct effects of currency
appreciation, we can observe indirect effects, such as the reduced competitiveness
of our industrial customers in Brazil.
Gross
Operating
Revenue
In the second quarter of 2011 (2Q11) Gross Operating Revenue reached R$
1,510.3 million, an increase of 23.0% compared to the second quarter of 2010
(2Q10) and of 12.4% in relation to the first quarter of 2011 (1Q11).
The growth of 23% was the result of general growth in business volume and increase
of prices of products sold, as well as the consolidation of revenues from businesses
acquired during 2010. Again, growth was hampered by the appreciation of Brazilian
currency. The average exchange rate of Brazilian Real accumulated appreciation of
11.1% against the U.S. dollar in the 2Q11.
In the 2Q11 Gross Operating Revenues are divided as follows:
„ Domestic Market: R$ 936.1 million, representing 62% of Gross Revenues, with
growth of 12.6% over 2Q10 and 8.5% compared to 1Q11;
„ External Markets: R$ 574.2 million, equivalent to 38% of Gross Revenues. The
comparison of figures in Reais shows growth of 44.9% over the same period last
year and of 19.6% over the previous quarter. Considering the average quotation of
US dollar, the comparison shows growth of 63.1% compared to 2Q10 and of
25.1% compared to 1Q11.
3 | WEG S.A. | 2011 Second Quarter Results
Gross Revenues per Market (R$ million)
External Market
Domestic Market
1.131,5
1.419,2
1.227,4
29%
32%
71%
68%
Q1
Q2
1.510,3
1.504,6
1.343,1
36%
36%
64%
64%
64%
62%
Q3
Q4
Q1
Q2
38%
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
Q2 2011
1,510.3
936.1
574.2
Q1 2011
1,343.1
862.9
480.3
Change
12.4%
8.5%
19.6%
Q2 2010
1,227.4
831.2
396.2
Change
23.0%
12.6%
44.9%
360.6
288.2
25.1%
221.1
63.1%
33%
17%
24%
17%
10%
35%
14%
25%
16%
10%
-2 pp
3 pp
-1 pp
1 pp
0 pp
39%
17%
24%
8%
11%
-6 pp
0 pp
-1 pp
9 pp
-1 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
Q2 2011 Q1 2011
60.1%
56.7%
22.8%
23.7%
10.7%
12.9%
6.4%
6.7%
%
Q2 2010
%
3.5 pp 51.5%
8.7 pp
-0.8 pp 24.5% -1.7 pp
-2.2 pp 17.1% -6.5 pp
-0.5 pp
-0.4 pp 6.9%
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.
As mentioned heretofore, Brazilian industrial production has shown growth
stabilization. The incentives provided by the Investment Support Program (PSI) of the
Brazilian Development Bank (BNDES), fostering investments and production capacity
increase, have been important for this result.
In line with our expansion strategy in foreign markets, we continue seeking to extend
4 | WEG S.A. | 2011 Second Quarter Results
aggressively our presence. In relation to regional markets, our expansion
encompasses two drives:
„ Actions aiming at expansion in fast growing markets in which our presence is still
relatively small, such as in Asia. These actions have moderate short-term impacts,
but promising prospects within medium and long term;
„ Secure of additional share in markets in which we are already established and our
brand is already recognized.
As regards products, this expansion takes place as follows:
„ Introduction of new lines and models of electric motors, which are traditionally our
products with greater penetration in external markets. This move takes advantage
of the trend of increasing importance of energy efficiency, with the regulation of
minimum levels of efficiency in various countries and the introduction in late June
2011, of ISO 50001 standard specific for energy management;
„ Similarly, we have advanced in several markets with the expansion of the product
line, adding to the electric motors. We have invested in regional service teams and
in the introduction of local product customization capabilities, with assembly of
electrical panels for industrial automation. This is more common in markets where
the WEG brand is already recognized.
Energy
Generation,
Transmission
and
Distribution
(GTD)
This business area includes the following products and services: generators for
hydro and thermal (biomass) power plants, water turbines (small hydro or PCH),
transformers, substations, control panels, and system integration services. We have
made investments in production capacity, as our new units of transformers in Mexico
and high voltage motors in India, to expand our presence beyond the Brazilian
market, where we have strong significant presence.
It is always important to note that in the GTD area in general and specifically in power
generation, investment maturing terms are longer, with slower investment decisions
and longer project and manufacture lead times. In view of this, new orders are only
recognized as revenue after a few months. Thus, the gradual improvement in new
orders (sales), which we have more clearly noted in 2011, will be converted into a
gradual increase in revenues as these orders are delivered.
We have developed over the years a strong expertise in the Brazilian power
generation market with renewable distributed energy. We have mastered power
generation technology for thermal biomass and small hydroelectric power plants. In
1Q11, we announced the agreement with the Spanish company M. Torres for the
transfer of technology and creation of a joint venture to manufacture wind turbines in
Jaraguá do Sul. We are working to start production of the first units soon, with first
deliveries planned for 2012.
We have promising prospects for investments in power generation in connection with
the energy auctions scheduled for August 2011, which should define important price
parameters and competitiveness for investors in power generation. These auctions
will include traditional renewable energy sources for delivery from 2014 onwards.
Some 582 projects were present for the auctions, representing 27,567 MW. The
highlights are the wind energy projects (40% of total), natural gas (39%), biomass
(16%), small hydroelectric (3%) and large hydroelectric plants (2%).
The business of Transmission & Distribution (T & D), however, has maintained good
sales performance, resulting from greater diversity of clients and markets, especially
businesses with power substations for both industrial customers and for utilities 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.
5 | WEG S.A. | 2011 Second Quarter Results
This business area has a shorter business cycle, i.e., changes in consumer demand
are quickly transferred by the chain of production, with almost immediate impacts on
production and revenue.
This quarter we noted a certain slowdown in this segment as a result of restrictive
credit (macro prudential) measures implemented by the Brazilian Central Bank.
Despite this reduction, business production pace continued relatively high.
We believe, however, that economic conditions in the medium and long terms will
remain favorable, with the expansion in employment, disposable income and
consumer credit availability. After the current cycle of monetary tightening, the trend
is that demand for durable goods using our motors (washing machines, for example)
will once again increase, since there is ample room for increase in penetration of
these goods in Brazil.
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.
In this area, we operate with the strategy of cross selling to customers from other
operating areas, always with high value added products. 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.
In this sense, we announced in this quarter the acquisition of Pulverlux, an Argentine
manufacturer of powder coatings, which will increase our presence in that market,
expanding the product line and improving the production scale. We also announced
a manufacturing unit in Maua (SP) and one product distribution unit in Cabo de Santo
Agostinho (PE), to improve the logistics services in Brazil.
Operating Results (R$ Thousands)
(EBITDA according to methodology established by CVM’s Ofício Circular 01/07)
Q2 2011
1,277.3
(895.8)
381.4
Q1 2011
1,126.1
(815.5)
310.7
EBITDA Margin
29.9%
27.6%
(-) Selling Expenses
(-) General & Administrative
(-) Profit Sharing
Result from Activities
(+) Depreciation & Amortization
EBITDA
(122.7)
(64.3)
(24.6)
169.8
45.7
215.6
(116.0)
(58.5)
(18.8)
117.3
47.5
164.8
EBITDA Margin
16.9%
14.6%
Net Operating Revenues
Cost of Goods Sold
Gross Operating Profit
Change
13.4%
9.9%
22.8%
Q2 2010
1,013.0
(703.2)
309.8
Change
26.1%
27.4%
23.1%
30.6%
5.7%
9.9%
30.8%
44.8%
-3.7%
30.8%
(100.3)
(65.1)
(15.3)
129.2
44.8
174.0
22.4%
-1.2%
60.9%
31.5%
2.0%
23.9%
17.2%
Cost of Goods
Sold
The Cost of Goods Sold (COGS) totaled R$ 895.8 million in 2Q11, up 27.4% over
2Q10 and 9.9% over 1Q11. Gross margin was 29.9%, down 0.7 percentage point
compared to 2Q10, but with recovery of 2.3 percentage points in relation to 1Q11.
Gross Margin
After the high volatility in costs, mainly related to the prices of major raw materials like
copper and steel, we have been able to manage the pass through of these cost
increases into sales prices. This led to a reasonable gross margin expansion over the
previous quarter.
In comparison with the 2Q10, the decrease in gross margin is explained by the
continuity of the following negative factors: (i) lower dilution of processing costs due
to the startup of green field units (India, Linhares and transformers in Mexico), (ii)
negative impacts of currency appreciation, and (iii) the mix of products sold, with the
6 | WEG S.A. | 2011 Second Quarter Results
still slow recovery of energy generation business.
Cost of Raw
Materials
In the 2Q11, average prices of copper on the spot market on the London Metal
Exchange (LME) rose 31% over the average in 2Q10, however down 5% compared
to the average in 1Q11. According to the CRUspiGlobal index, steel prices in the
international market rose 7.4% over 2Q10 and remained almost stable compared to
1Q11.
Much of our product line is comprised of customized products, whose sales prices
are constantly recalculated. Likewise, prices of raw materials like steel and especially
copper, are international or at least follow similar trends in different markets.
As such, the pass through of cost increases of these inputs into sales prices takes
place naturally and at a gradual pace in all the markets and high cost volatility, such
as in the previous quarter, is particularly negative.
The pass through to price of cost increases that started to be made in 1Q11 has
already generated positive impacts on gross margin, which is expected to continue
in the next quarters.
Selling, General
and
Administrative
Expenses
The consolidated selling, general and administrative expenses (SG&A) represent
14.6% of Net Operating Revenue in 2Q11, a decrease of 1.7 percentage point
compared to 2Q10 and of 0.9 percentage point over 1Q11. In absolute value,
operating expenses showed growth of 13.1% over 2Q10 and 7.1% over the
previous quarter.
Main impacts on EBITDA
326,1
43,3
18,6
FX Impact
on Gross
Revenues
190,3
Deduction
on Gross
Revenues
21,7
1,4
COGS
Selling
Expenses
174,0
Volumes,
Prices &
Product Mix
Changes
EBITDA Q2 10
General and
Administrative
Expenses
9,3
215,6
Profit Sharing
Program
EBITDA Q2 11
EBITDA and
EBITDA Margin
As a result of the aforementioned effects, EBITDA in 2Q11 (calculated according to
the methodology defined by CVM Oficio Circular 01/07) totaled R$ 215.6 million, an
increase of 23.9% over 2Q10 and of 30.8% compared to prior quarter. EBITDA
margin was 16.9%, up 2.3 percentage points compared to 1Q11 and almost
unaltered in relation to 2Q10.
Net Financial
Results
Financial revenues totaled R$ 111.4 million in 2Q11(R$ 93.5 million in 1Q11 and R$
87.4 million in 2Q10). Financial expenses totaled R$ 69.3 million (R$ 53.7 million in
1Q11 and R$ 59.3 million in 2Q10).
In this quarter, net financial income was positive of R$ 42,1 million (positive of R$
39.8 million in 1Q11 and positive of R$ 28.1 million in 2Q10).
Income Tax
and Social
Contribution
The Income Tax and Social Contribution Tax on Net Profit provision in 2Q11 was R$
58.9 million (R$ 40.1 million in 1Q11 and R$ 40.8 million in 2Q10). Additionally, there
was accounting credit of R$ 10.9 million in Deferred Income Tax.
7 | WEG S.A. | 2011 Second Quarter Results
Net Income
As a result of the effects discussed above, net income for 2Q11 was R$ 154.6
million, an increase of 27.1% compared to 1Q11 and of 32.6% over the prior year.
The net margin of the quarter was 12.1%, an increase of 1.3 percentage point
compared to 1Q11 and of 0.6 percentage point over 2Q10.
Operating cash
flow
Cash flow from operating activities was R$ 356.6 million in the first half of 2011, a
decrease of 17.4% over the first half of 2010, due to higher need of working capital
for continuous expansion of activities. The smaller amounts paid as income tax and
CSLL and the increase in profit sharing have also contributed.
Cash flow from
investing
activities
The investment activities consumed R$ 325.3 million in the first half of 2011, with an
emphasis on investments in long-term securities. The amount is 31.3% higher than
that for the first half of 2010. Investments in fixed assets will probably be lower in
2011 than in 2010, since we will focus on use of the capacity of the new production
units (India and Linhares) and on additional investments for the production of wind
turbines in Jaraguá do Sul.
Cash flow from
financing
activities
Financing activities generated R$ 90,3 million, a decrease of 40% compared to the
first half of 2010, with new raising of short and long term debts and payment of
dividends and interest on equity capital declared during the second half of 2010.
Cash Flows
2.553,0
356,6
Operating
325,3
90,3
Investing
Financing
Cash 4Q10
Investments
2.674,6
Cash 2Q11
Investments in fixed assets for expansion and modernization of production capacity
amounted to R$ 74.9 million in the first half of 2011, and 86% are going to industrial
and other facilities in Brazil and the rest of the production units and other subsidiaries
abroad.
With the recent start-up of two new production units, the high and medium voltage
motors and generators plant in Hosur, in India, as well as of commercial motors plant
in Linhares (ES), we estimate that investments in fixed assets in 2011 will be lower
than the usual level. We expect that investments in modernization and expansion of
production fixed assets will total R$ 193 million in 2011.
8 | WEG S.A. | 2011 Second 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
2,4
8,2
38,8
25,6
Q1
2010
Q2
2011
Debt and Cash Position (R$ Thousands)
CASH & EQUIVALENT
- Current
- Long Term
DEBT
- Current
- Long Term
NET CASH (DEBT)
Cash Position
Junho 2011
June 2011
2,900,694
2,674,637
226,057
2,678,393
1,111,282
1,567,111
222,301
Dezembro 2010
December 2010
2,552,996
2,552,996
0
2,418,943
1,018,995
1,399,948
134,053
Junho 2010
June 2011
2,463,531
2,463,531
0
2,187,124
741,233
1,445,891
276,407
At June 30, 2011, cash (cash and short and long term financial investments) totaled
R$ 2,900.7 million and gross financial debt totaled R$ 2,678.4 million, resulting in a
net cash position of R$ 222.3 million (net cash of R$ 276.4 million at June 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$ 1,111.3 million (41% 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$ 1,567.1 million (59% 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 27.4
months.
According to the reference currencies, the total debt can be divided into:
„ Denominated in Reais, totaling R$ 1,937.0 million (72% of total), mainly
represented by financing from BNDES and other development agencies. The
weighted average cost of debt denominated in Reais is approximately 6.0% p.a.
Floating rate contracts are indexed mainly by the Long-Term Interest Rate (TLJP).
The duration of the portion denominated in Reais is 20.9 months.
9 | WEG S.A. | 2011 Second Quarter Results
„ Denominated in US dollars, Euros and other currencies, totaling R$ 741.4 million
(28% of total), represented by working capital loans contracted by subsidiaries
abroad in local currencies and trade finance transactions (advances on foreign
exchange contracts or ACC), in Brazil. The duration of the portion in foreign
currencies is 13.1 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 June 2011 quoted at R$ 17.80 with a nominal
fall of 18.3% 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 -17.1%.
The average daily volume traded in 2Q11 was R$ 8.3 million, 93% higher than in
2Q10. Throughout the quarter 50,032 stock trades were carried out (25,976 stock
trades in 2Q10), involving 27.6 million shares (15.3 million shares in 2Q10) and
totaling R$ 515.3 million (R$ 266.4 million in 2Q10).
Share Price Performance and Traded Volume
30,00
3.000
Ações Negociadas (mil)
WEGE3
25,00
Cotação WEGE3
15,00
10,00
1.000
Ações Negociadas (mil)
2.000
20,00
5,00
0
0,00
Dividend adjusted performance
Dividends
In the first half of 2011, the Board of Directors approved the following compensation
to shareholders:
„ 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;
In addition, on July 21, the Board of Directors approved dividends related the net
income for the first half of 2011, in the total amount of R$ 60.2 million to the
shareholders of record on said date. These proceeds will be paid as from August 17,
2011.
Event
Interest on Stockholders’ Equity
Interest on Stockholders’ Equity
Dividends
Total
Board Meeting
Gross amount per
Date
Payment Date
share
22/03/2011
17/08/2011
R$ 0.06823529
21/06/2011
17/08/2011
R$ 0.07647059
21/07/2011
17/08/2011
R$ 0.09700000
R$ 0.24170588
Net amount per
share
R$ 0.05800000
R$ 0.06500000
R$ 0.09700000
R$ 0.22000000
We maintain the policy of declaring quarterly interest on equity, in addition to twiceannually declared dividends, based on profits for the period. Amounts declared as
10 | WEG S.A. | 2011 Second Quarter Results
remuneration to shareholders in the first half of 2011 represent 54.3% of net income
for the period.
1H11
Dividends
Interest on Stockholders' Equity
Gross Total
Per Share
Net Earnings
Total Dividends / Net Earnings
Pulverlux
Acquisition and
new WEG
Tintas plants
60.2
89.8
150.0
0.2417
276.1
54.3%
1H10
66.4
67.9
134.4
0.2164
236.2
56.9%
%
11.6%
11.7%
On May 11, we announced the acquisition of control of Pulverlux SA, a company
specializing in the manufacture and sale of powder coatings in Argentina.
Additionally, we announced the opening of a new manufacturing unit in Mauá (SP)
and a distribution unit in Cabo de Santo Agostinho (PE), units already included in
previously announced and approved capital budget.
Pulverlux operates in the architectural, aluminum profiles, electrical panels, electrical
home appliances, auto parts, machinery and equipment segments for over 10 years.
With 42 employees and manufacturing area of 10,000 square meters in Buenos
Aires, the company had annual revenues around U$ 7 million.
At the same time, the new coatings manufacturing unit in Mauá (SP) seeks, in
response to increased investment in exploration of oil reserves in the pre-salt layer, to
improve services logistics in the Southeast region as well as to increase the liquid
coatings production capacity. The unit of Cabo de Santo Agostinho (PE), located 25
km from the port of Suape and 17 km from Recife, will facilitate distribution in the
North and Northeast of Brazil.
These investments, in addition to increasing the production capacity, aim at
improving distribution in Brazil and expanding our operations in Latin America. WEG
Tintas, a leader in the national market for powder coatings, has manufactured and
traded liquid, industrial, anticorrosive and marine coatings for different market
segments since 1983. With headquarters in Guaramirim (SC), the unit has more than
600 employees in Brazil.
###
11 | WEG S.A. | 2011 Second Quarter Results
Results Conference
Call
WEG will hold, on July 22 2011 (Friday), 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)
10:00 a.m. - New York (EDT)
03:00 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/2t11.htm
www.ccall.com.br/weg/2q11.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 Second 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
EBITDA
2nd Quarter
2011
R$
AV%
1st Quarter
2011
R$
AV%
2nd Quarter
2010
R$
AV%
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%
1,126,117
100%
-815,455 -72.4%
310,662 27.6%
-116,019 -10.3%
-58,490 -5.2%
93,543
8.3%
-53,697 -4.8%
8,671
0.8%
-22,787 -2.0%
0
0.0%
161,883 14.4%
-40,104 -3.6%
2,480
0.2%
2,695
0.2%
121,564 10.8%
1,013,015
100%
-703,203 -69.4%
309,812 30.6%
-100,257 -9.9%
-65,075 -6.4%
87,396
8.6%
-59,253 -5.8%
2,116
0.2%
-18,179 -1.8%
1,272
0.1%
157,832 15.6%
-40,817 -4.0%
-59
0.0%
-434
0.0%
116,522 11.5%
215,579
13 | WEG S.A. | 2011 Second Quarter Results
16.9%
164,808
14.6%
174,015
17.2%
Changes %
Q2 11
Q2 11
Q1 11
Q2 10
13.4%
9.9%
26.1%
27.4%
22.8%
23.1%
5.7%
22.4%
9.9%
-1.2%
19.1%
27.5%
29.0%
16.9%
-77.0%
-5.7%
39.6%
75.0%
#DIV/0!
27.7%
-100.0%
31.0%
46.7%
44.2%
337.9%
n.m
n.m
n.m
27.1%
32.6%
30.8%
23.9%
Annex II
Consolidated Income Statement
Figures in R$ Thousands
6 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
EBITDA
14 | WEG S.A. | 2011 Second Quarter Results
2,403,375
-1,711,276
692,099
-238,686
-122,772
204,930
-122,970
10,666
-54,601
0
368,666
-98,954
13,339
-6,930
276,121
380,387
6 Months
2010
R$
AV%
0%
11.5%
1,944,922
-1,326,497
618,425
-193,312
-122,936
158,651
-111,913
10,631
-44,719
1,204
316,031
-66,289
-12,327
-1,248
236,167
15.8%
355,765
100%
-71%
29%
-9.9%
-5.1%
9%
-5%
0%
-2%
0%
15%
-4%
1%
2011
2010
100%
-68%
23.6%
29.0%
32%
11.9%
-9.9%
23.5%
-6.3%
-0.1%
8%
29.2%
-6%
9.9%
1%
0.3%
-2%
22.1%
0%
16%
-3%
-100.0%
16.7%
49.3%
-1%
n.m
0%
12.1%
455.3%
16.9%
18.3%
6.9%
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
June 2011
R$
AV%
18
5,069,586 64%
2,674,637 34%
1,095,847 14%
1,086,034 14%
213,068
3%
358,414
4%
226,057
3%
89,776
1%
42,581
1%
2,551,509 32%
931
0%
2,375,903 30%
174,675
2%
7,979,509 100%
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%
June 2011
R$
AV%
9
4,591,996 63%
2,463,531 34%
960,353 13%
971,196 13%
196,916
3%
163,413
2%
0
0%
97,859
1%
65,554
1%
2,588,501 35%
776
0%
2,388,640 33%
199,085
3%
7,343,910 100%
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
2,179,394 27%
188,147
2%
295,775
4%
94,022
1%
1,111,282 14%
78,682
1%
265,356
3%
22,309
0%
123,821
2%
2,192,908 27%
1,567,111 20%
86,317
1%
411,203
5%
128,277
2%
94,100
1%
3,513,107 44%
7,979,509 100%
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%
1,883,425 26%
147,248
2%
289,674
4%
52,503
1%
741,233 10%
59,973
1%
259,979
4%
39,955
1%
292,860
4%
2,057,349 28%
1,445,891 20%
88,453
1%
413,449
6%
109,556
1%
80,672
1%
3,322,464 45%
7,343,910 100%
15 | WEG S.A. | 2011 Second Quarter Results
Annex IV
Consolidated Cash Flow Statement
Figures in R$ Thousands
6 Months
2011
11
Operating Activities
Net Earnings before Taxes
Depreciation and Amortization
Earnings from Subs (Equity Method)
Provisions:
Profit Sharing
Other Provisions
(Increase) / Reduction of Accounts Receivable
Increase / (Reduction) of Accounts Payable
(Increase) / Reduction of Investories
Income Tax and Social Contribution on Net Earnings
Profit Sharing Paid
6 Months
2010
7
368,666
93,239
-
316,031
88,997
(1,204)
43,493
(711)
(50,668)
118,094
(79,154)
(78,373)
(57,938)
35,409
6,242
(78,336)
421,453
(220,205)
(92,862)
(43,643)
Cash Flow from Operating Activities
356,648
431,882
Investment Activities
Fixed Assets
Intagible Assets
Asset Write Downs
Accumulated Conversion Adjustment
Long term securities bought
(74,938)
(8,426)
660
(16,547)
(226,057)
(218,617)
(12,676)
2,022
(18,446)
-
(325,308)
(247,717)
(10,055)
83,415
179,843
(162,902)
(139,120)
453,712
(162,343)
90,301
152,249
121,641
336,414
2,552,996
2,674,637
2,127,117
2,463,531
Cash Flow From Investment Activities
Financing Activities
Shares in Treasury
Working Capital Financing
Long Term Financing
Dividends & Intesrest on Stockholders Equity Paid
Cash Flow From Financing Activities
Change in Cash Position
Cash & Cash Equivalents
Beginning of Period
End of Period
16 | WEG S.A. | 2011 Second Quarter Results