Earnings Release
„
First quarter of 2011 shows strong growth
„ Net revenue grew 21% over 1Q10. External market was the highlight, with 45% growth
„ Raw material price increases and currency appreciation reduced quarter’s profitability
„ Announcement of joint venture to manufacture wind turbines marked the quarter. First
units should be delivered in 2012
Jaraguá do Sul (SC), April 27th 2011: WEG S.A. (Bovespa: WEGE3, OTC WEGZY), one of the world’s largest manufacturer of electricelectronic equipment, with five main product lines: Motors, Power, Transmission and Distribution, Automation and Coatings,
announced today its results for the first quarter of 2011 (1Q11). The following financial and operating data are presented in a
consolidated basis, except when otherwise indicated, in thousands of Brazilian Reais (R$) according to the current Brazilian generally
accepted accounting principles, as put forward by the Brazilian applicable laws. All growth rates comparisons relate, except when
otherwise indicated, to the same period of the previous year.
1Q11
Highlights
„ Gross Operating Revenues reached R$ 1,343.1 million in the first quarter of 2011,
18.7% higher year-on-year. Net Operating Revenues reached R$ 1,126.1 million, 20.8%
above the 1Q10;
„ EBITDA reached R$ 164.8 million, 9.3% lower in relation to 1Q10. EBITDA margin
reached 14.6%. Net Income reached R$ 121.5 million (net margin of 10.8%) in the
quarter, 1.6% higher year-on-year.
„ Investments on fixed assets amounted to R$ 33.8 million in 1Q11;
„ The new high voltage electric motor manufacturing plant in Hosur, India, started
operations in February 2011;
„ The technology transfer agreement and joint venture with MTOI for manufacturing,
assembling, installing and marketing of wind turbines will leverage MTOI’s technology
and WEG’s renewable energy expertise in Brazil, opening new opportunities.
Main
Figures
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
Q1 2011
1,343,137
862,863
480,274
288,211
1,126,117
310,662
Q1 2010 Growth % Q4 2010 Growth %
1,131,546 18.7% 1,504,610 -10.7%
801,299
964,471 -10.5%
7.7%
330,247 45.4%
540,200 -11.1%
181,170 59.1%
315,278 -8.6%
931,907 20.8% 1,258,429 -10.5%
308,613
391,300 -20.6%
0.7%
27.6%
33.1%
121,564
119,645
10.8%
12.8%
164,808
181,750
14.6%
19.5%
31.1%
1.6%
141,508 -14.1%
-9.3%
224,149 -26.5%
11.2%
17.8%
Figures in R$ Thousands
Conference Call with simultaneous translation into English
April 28, Thursday 10:00 a.m (Brasilia time)
Dial–in in the US: +1 888 700-0802
Webcasting slides and English simultaneous translation:
www.ccall.com.br/weg/1q11.htm
Comments from Laurence Beltrão Gomes,
WEG’s Investor Relations Officer
"The 1T11 was characterized by robust sales growth, by the pressure on production costs caused by
the increasing prices of raw materials, especially steel and copper and by the appreciation of the
Brazilian Real, which mitigated the positive impact on net income of strong sales growth in external
markets. The combination of these factors was responsible for operating margins that were lower than
the ones of previous periods. The pass through of these increases in input prices into the selling
prices of our products are being negotiated, with positive impacts on margins in coming quarters. At
the same time, over the next quarters we shall see the positive impacts of the recent investments in
new manufacturing plants, such as WEG Linhares and WEG India, which are still in pre-operating
stage or just now beginning operations.
On the other hand, of the highlights of 1Q11 was our entry in the wind power business, with the
establishment of joint venture WEG-MTOI for manufacturing and marketing wind turbines, combining
technology that is once modern and competitive, but yet, simple, robust and easy to maintain,
essential to environmental performance and the management of operating costs. Therefore, we
believe that we will be able to increase our market share in this business in a short period to levels that
are consistent with WEG’s industrial and technological capabilities.
Energy demand is increasing worldwide. As developing countries industrialize and standards of living
rise, energy consumption intensity by households and industries also increases. Thus, power
generation, currently dependent on coal, gas and oil, turn to the expansion of renewable energy
sources.
The expertise in renewable energy developed by WEG in recent years, alongside the growing interest
in efficient use of electricity, another area of excellence for the Company, make us confident in our
ability to leverage these mega-trends to continue growing sustainably. "
Economic
Activity and
Industrial
Production
The continued robust economic activity in the Brazilian economy and the more
gradual recovery in other foreign markets where we operate have marked the
beginning of 2011. Overall, this has been the environment since the current
economic recovery began even in mid-2009.
The International Monetary Fund points out in its April 2011 World Economic Outlook
that the global economic recovery continued to strengthen, but new risks are
emerging, citing specifically the inflation in commodities and the problems in oil supply
growth. The IMF's expectations are for global growth of 4.5% in 2011, slightly below
the figures for 2010, with emerging economies growing 6.5% and mature economies
advancing 2.5%;
The data on industrial activity in developed countries continue to show relatively
continuous expansion, as can be seen in the purchasing managers' index (PMI). The
ISM Manufacturing index showed U.S. in March its twentieth consecutive month of
expansion, with positive readings for both the production and for new orders.
The situation is similar in Germany, with the indicator Markit / BME Purchasing
Managers’ Germany Index showing expansion of 18 months until March. The survey
shows growth of employment, inventories, lead-times and cost inflation, classic signs
of prolonged periods of expansion.
In China, the latest figures from HSBC China Manufacturing PMI ™ show that
industrial growth is finding a new level, more moderate, after some adjustment at the
beginning of the year. The Chinese authorities have acted to curb the inflationary
pressures on costs.
The Brazilian industrial activity showed a recovery of the growth rate in this first few
months of 2011:
2 | WEG S.A. | 2011 First Quarter Results
Industrial Indicators According to Categories of Use
February/2010
Change (%)
Categories of Use
Month/Month
Capital Goods
0.90
Intermediary Goods
1.30
Consumer Goods
0.50
Durable Goods
(2.30)
Semi-durable and non-durable
(0.20)
General Industry
1.90
Source: IBGE, Research office, Industry Coordination
(*) Series with seasonal adjustments
Monthly
17.90
4.10
6.90
17.40
3.60
6.90
Acummulated
On Year
12 months
13.10
19.80
2.40
8.80
4.60
5.30
11.70
8.10
2.40
4.40
4.60
8.60
Brazilian Institute of Geography and Statistics (IBGE in Portuguese) data showed 4,6%
growth in industrial production accumulated during the first two months of 2011 in
relation to 2010. Once again, similarly to what has occurred over recent months,
growth of 13.1% in two months and 19.8% accumulated in the past twelve months in
the capital goods category was the positive highlight. This performance confirms and
makes us confident in the continuous investment in industrial capacity expansion.
Data from the situation survey conducted by Brazilian Association of Electrical and
Electronics Industry (ABINEE) for March 2011 show significant growth in orders and
sales, even though the data must be adjusted for seasonal patterns and one has to
consider the intrinsic limitations of such kind of survey. Nevertheless, the vast majority
of companies surveyed indicated growth in sales over the previous year and the pace
of business according to or surpassing expectations, both in the local and in foreign
markets.
On par with this greater dynamism of the Brazilian economy, we also observed an
increased rate of appreciation of the currency, with the known negative effects on the
Brazilian industrial sector. The average exchange rate of the Brazilian currency against
the U.S. dollar this quarter was 9.4% higher than the one observed in 2010. Although
the effects of currency appreciation on the WEG are minimized over time by our
exposure to external markets and by our active policy of importing raw materials, the
impacts on our customers in the Brazilian market are significant.
The measures adopted by the Brazilian authorities to curb this rapid appreciation of
the currency and the damage caused by it in the Brazilian industrial segment have
been, so far, insufficient when compared to the strong inflow of funds directed
towards in fixed income, stocks and direct foreign investment, attracted by the good
relative performance of the Brazilian economy.
Gross and Net
Operating
Revenues
In the first quarter of 2011 (1Q11) Gross Operating Revenues reached R$ 1,343.1
million, an increase of 18.7% compared to first quarter 2010 (1Q10) and a decrease
of 10.7% over the fourth quarter of 2010 (4Q10). The growth of 18.7% was the result
of overall growth in business volume and the consolidation of revenues from
businesses acquired during 2010. This growth was achieved despite the relative
deterioration of the product mix and appreciation of 9.4% in the average exchange
rate (real/U.S. dollar) of the first quarter of 2011 over the same period of 2010.
In the 1Q11 Gross Operating Revenues breaks down as follows:
„ Domestic Market: R$ 892.9 million, representing 64% of Gross Operating
Revenues, for a 7.7increase in relation to 1Q10 and 10.5% decrease compared to
4Q10;
„ External Markets: R$ 480.3 million, equivalent to 36% of Gross Operating
Revenues. The comparison in Brazilian Reais shows growth of 45.4% over the
3 | WEG S.A. | 2011 First Quarter Results
same period of the previous year and a decrease of 11.1% over the previous
quarter. Considering the average Brazilian Reais/ US Dollars exchange rates, gross
revenues measured in U.S. Dollars shows increase of 59.1% over 1Q10 and
decrease of 8.6% in relation to the 4Q10.
Gross Revenues per Market (R$ million)
External Market
Domestic Market
1.132
1.227
29%
32%
71%
68%
Q1
Q2
1.505
1.419
1.343
36%
36%
64%
64%
64%
Q3
Q4
Q1
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
Q1 2011
1,343.1
862.9
480.3
Q4 2010
1,504.6
964.5
540.2
Change
-10.7%
-10.5%
-11.1%
Q1 2010
1,131.5
801.3
330.2
Change
18.7%
7.7%
45.4%
288.2
315.3
-8.6%
181.2
59.1%
35%
14%
25%
16%
10%
31%
17%
22%
19%
10%
4 pp
-3 pp
3 pp
-3 pp
0 pp
35%
19%
30%
8%
9%
0 pp
-5 pp
-5 pp
8 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
ElectricalElectronic
Equipment
Q1 2011 Q4 2010
%
Q1 2010
56.7%
54.2%
2,5 pp 45.6%
23.7%
25.4% -1,7 pp 29.9%
12.9%
13.6% -0,7 pp 16.8%
6.7%
6.8%
-0,1 pp 7.7%
%
11,1 pp
-6,3 pp
-3,8 pp
-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.
As mentioned previously, Brazilian industrial production continues to maintain good
4 | WEG S.A. | 2011 First Quarter Results
performance, consistent with the expansion of economic activity and incentives
provided by the Investment Support Program (PSI) of BNDES, favoring investment in
production capacity expansion.
We have sought to expand our presence aggressively in the various overseas
markets we do business. This expansion can happen by either taking advantage of
favorable conditions for market growth in some emerging economies, or when these
growth conditions are not present, by targeting additional market share or by
introducing new product lines.
Our performance in the U.S. market, for example, has benefited from this focus. In
2010, we introduced with great success in the U.S. market the new W22 electric
motor platform, which uses an innovative design to reduce the total cost of ownership
(the total cost of an electric motor throughout its lifetime, including operating costs)
and maximize energy efficiency. The regulations in US have been amended recently,
increasing the minimum electric motors energy efficiency standards. An increasing
number of countries are adopting such regulations of minimum levels of energy
efficiency for motors. At the same time, we have invested in new service centers
(Regional Service Teams) and introduced local products customization capabilities
such as assembling electrical panels for industrial automation.
Equipment for
Generation,
Transmission
and
Distribution
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.
The longer maturity of investments in power generation, with slower investment
decision process and longer lead times for design and manufacturing, usually causes
a lag between the changes on the rate of incoming orders and the recognition of
revenues. This characteristic of long cycle products reflected in revenue growth in
2009, a period of weak demand, and in lower revenues in 2010. In 2011, we began
to see signs of market recovery, with the increase of incoming orders, although still at
lower pace and volumes than before the crisis.
In the power generation segment, we have a clear focus in distributed generation of
renewable energy in the Brazilian market. We recently announced our entry in wind
power, signing with M. Torres, from Spain, a technology transfer agreement and
setting up a joint venture to manufacture wind turbines in our manufacturing facilities in
Jaraguá do Sul. We expect to start producing the first units soon and we estimate
that the first deliveries occurring in 2012.
The outlook is positive for the renewable energies auction, initially scheduled for July
2011, both for the wind energy business, which will continue to dominate the energy
offer at the auction, and for the more traditional renewable sources such as biomass
and small hydro hydroelectricity. Renewable sources are increasingly important part of
the mix of energy used in Brazil and, with the expansion of global energy demand, the
Brazilian case is increasingly used as a reference.
The Transmission & Distribution (T & D) segment continues to have good performance
with the diversification of clients and markets. Businesses with power substations,
both for industrial clients as well as for the utilities and power generators, are still
performing well. We celebrate during the 1Q11 the 100th unit manufactured unit in our
WEG Transformadores de Mexico plant, which continues to expand its production
and increasing its penetration in the U.S. market.
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 business area has a shorter business cycle, i.e., changes in consumer demand
5 | WEG S.A. | 2011 First Quarter Results
are quickly transferred by production chain and adjustments are rather quick as well.
The economic conditions continue favorable, even if there is some discomfort of
Brazilian monetary authorities with an eventual overheating of consumption.
It is important that the Brazilian Central Bank, seeking to moderate the growth and to
forestall inflationary pressures, preserve employment, disposable income growth and
the access to consumer credit over the medium and long term. The conduction of the
economic policies has so far managed to separate what is supply shock, such as
increases in commodity prices, from what is the excess consumption.
In any case, variations in production and sales this quarter were due primarily to
normal seasonal variations in demand for consumer durables.
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.
This is the area with greater diversity of markets and customers as we have adopted
the strategy of cross-selling to customers from other business areas, always with high
value added products. The target markets range from the shipbuilding industry to the
manufacturers of white goods. We seek to maximize the scale of production and our
efforts to develop new products and new segments.
Operating Results (R$ Thousands)
(EBITDA according to methodology established by CVM’s Ofício Circular 01/07)
Q1 2011
1,126.1
(815.5)
310.7
Q4 2010
1,258.4
(867.1)
391.3
EBITDA Margin
27.6%
31.1%
(-) Selling Expenses
(-) General & Administrative
(-) Profit Sharing
Result from Activities
(+) Depreciation & Amortization
EBITDA
(116.0)
(58.5)
(18.8)
117.3
47.5
164.8
(119.3)
(68.7)
(27.2)
176.1
48.1
224.1
EBITDA Margin
14.6%
17.8%
Net Operating Revenues
Cost of Goods Sold
Gross Operating Profit
Change
-10.5%
-6.0%
-20.6%
Q1 2010
931.9
(623.3)
308.6
Change
20.8%
30.8%
0.7%
33.1%
-2.8%
-14.8%
-30.7%
-33.4%
-1.2%
-26.5%
(93.1)
(57.9)
(20.1)
137.6
44.1
181.7
24.7%
1.1%
-6.2%
-14.7%
7.6%
-9.3%
19.5%
Cost of Goods
Sold
Cost of Goods Sold (COGS) totaled R $ 815.5 million in 1Q11, an increase of 30.8%
over 1Q10 and a decrease of 6.0% over the 4Q10. Gross margin was 27.6%, down
5.5 percentage points compared to 1Q10 and 3.5 percentage points compared to
4T10.
Gross Margin
The decrease in gross margin is related to three main impacts: (i) the high volatility of
prices of major raw materials, especially commodities such as copper and steel, in
comparison with 1Q10; (ii) the lower dilution of manufacturing costs in comparison to
4Q10, due to fewer working days; and (iii) the rapid exchange rate appreciation
observed in the quarter, both in relation to 1Q10 as to 4Q10, which hindered the
hedge management through the balance between revenue and costs denominated in
foreign currencies.
Besides these main factors, other effects that contributed to the decrease in gross
margin were the mix of products sold, still relatively concentrated in lower value added
products and the greater participation of the businesses outside Brazil in consolidated
revenue.
Cost of Raw
Materials
The 1Q11 average spot market price of copper in the London Metal Exchange (LME)
rose 33% over the 1Q10 average and the 12% over the 4T10 average. According to
the index CRUspiGlobal, steel prices in international market rose 29.4% over 1Q10
and 21% compared to 4T10.
6 | WEG S.A. | 2011 First Quarter Results
The majority of the products we offer are customized to some extent and their selling
prices are constantly recalculated. Likewise, prices of raw materials like steel and,
especially, copper are internationally set or at least follow similar trends in different
markets. This allows us and other industry participants to pass through cost increases
of raw materials into selling prices gradually.
Despite this ability of the sector to pass through costs, the high volatility of these
costs is particularly negative as it hinders the planning of purchases and increases our
exposure to raw material prices in the short term. During this quarter, we began to
implement these price increases, but they have not affected gross margin in the short
term, as previously described. Our expectation is that these already announced price
increases will have their impact perceived over the coming quarters.
Selling,
General &
Administrative
Expenses
Selling, general and administrative (SG&A) expenses represented 15.5% of
consolidated Net Operating Revenues in 1Q11, a decrease of 0.7 percentage points
compared to 1Q10 and an increase of 0.6 percentage points compared to 4Q10. In
absolute terms, operating expenses grew by 15.6% over 1Q10 and declined 7.2%
over the previous quarter.
Main impacts on EBITDA
256,7
45,1
17,4
189,6
FX Impact on
Gross
Revenues
Deduction
on Gross
Revenues
22,1
181,8
0,7
Volumes,
Prices &
Product Mix
Changes
COGS
EBITDA Q1 10
Selling
Expenses
1,2
164,8
General and
Administrative
Expenses
EBITDA Q1 11
EBITDA and
EBITDA Margin
As a result of negative effects on gross margin (i) the increase in raw material
costs, (ii)the relative increase in processing costs and (iii) the rapid currency
appreciation, 1Q11EBITDA (calculated using the methodology defined by the CVM
Ofício Circular 01/07) reached R$ 164.8 million, down 9.3% over the 1Q10 and
down 26.5% over the previous quarter. EBITDA margin was 14.6%, 4.9
percentage points lower compared to 1Q10 and 3.2 percentage points lower
compared to 4Q10.
Net Financial
Results
Financial Income totaled R $ 93.5 million in 1Q11 (R$ 97.7 million in 4Q10 and R$
71.3 million in 1Q10). Financial Expenses totaled R $ 53.7 million (R$ 61.5 million
in 4Q10 and R$ 52.7 million in 1Q10).
In this quarter, net financial result was R$ 39.8 million (positive R$ 36.2 million in
4Q10 and positive R$ 18.6 million in 1Q10).
Income Tax and
Social
Contribution
Provision for Income Tax and Social Contribution on Net Income for the 1Q11
reached R$ 40.1 million (R$ 25.5 million in 1Q10 and R$ 16.4 million in 4Q10).
Additionally, we also accounted for R$ 39.7 million credit in deferred income tax.
7 | WEG S.A. | 2011 First Quarter Results
Net Income
As a result of the previously mentioned impacts, Net Income reached R$ 121.6
million, 1.6% higher than 1Q10 and 14.1% lower than the previous quarter. Net
margin for the quarter was 10.8%, 2 percentage points lower in comparison to
1Q10 and 0.4 percentage points lower in comparison to 4Q10.
Operating Cash
Flows
Cash flow from operating activities was R $ 189.2 million in 1Q11, an increase of
25.7% over 1Q10. The higher operating cash flow was obtained with better
management of working capital, primarily inventories, which accounted for less
investment even with the expansion of activities. The smaller amounts paid as
income tax, social contribution and profit sharing also contributed to the increase.
Investing Cash
Flows
The investment activities consumed R$ 34.6 million, the highlight being on
investments in fixed assets, as previously discussed. This amount is 45.6% lower
than 1Q10. We anticipate that in 2011, we will focus on the occupation of
productive capacity of new units and the additional investment required to
manufacture wind turbines in Jaraguá do Sul.
Financing Cash
Flows
Financing activities consumed R$ 220.5 million, with reduction of gross debt and
payment of $ 176 million in dividends and interest on stockholders equity declared
during the second half of 2010. The amount is 12.3% lower than in 1Q10.
Cash Flow
189,2
2.553,0
2.487,1
34,6
Operating
Investing
220,5
Financing
Cash 4Q10
Investments
Cash 1Q11
Investments in fixed assets for modernization and expansion of production
capacity totaled R$ 33.8 in the first three months of 2011, 76% of which where
allocated to industrial complexes and other facilities in Brazil and the remaining to
production units abroad. In 2011 we should see a reduction in the rate of
investment in relation to our previous pace, since our focus will be on our new
plants, including the high voltage electric motors and generators plant in Hosur,
India, recently opened, and commercial electric motors plant in Linhares (ES),
which will come into operation soon.
Investments in Fixed Assets (R$ million)
Outside Brazil
Brazil
61,4
34,2
73,8
43,7
27,2
30,1
Q1
Q2
53,7
44,1
13,0
2,0
40,7
42,1
Q3
Q4
2010
8 | WEG S.A. | 2011 First Quarter Results
33,8
8,2
25,6
Q1
2011
Debt and Cash Position (R$ Thousands)
CASH & EQUIVALENT
- Current
DEBT
- Current
- Long Term
NET CASH (DEBT)
Net Cash
March 2011
2,487,136
2,487,136
2,356,004
1,104,366
1,251,638
131,132
December 2010
2,552,996
2,552,996
2,418,943
1,018,995
1,399,948
134,053
March 2011
1,962,538
1,962,538
1,782,466
814,274
968,192
180,072
On March 31, 2011 the total cash (cash and short-term investments) totaled R$
2,487.1 million and gross financial debt totaled R$ 2,356.0 million, resulting in a
net cash position of R$ 131.1 million (net cash of $ 180.0 million at March 31,
2010). The cash is invested mainly in Brazilian currency denominated financial
instruments referenced to the CDI (interbank certificates of deposit), in first-tier
banks.
According to the maturity, gross debt is divided between:
„ Short-term debt, totaling R$ 1,104.4 million (47% of total), represented by shortterm portion of loans with BNDES and other development agencies, mostly in
Brazilian currency, other trade related financing denominated in foreign
currencies and to working capital financing of foreign subsidiaries, denominated
in the respective currencies of each country.
„ Long-term debt, totaling R$ 1,251.6 million (53% of total), mainly represented
by BNDES financing and other development agencies, mostly denominated in
Brazilian currency, and to a lesser extent, by the working capital financing of
foreign subsidiaries in the respective currencies of each country. The duration of
long-term debt is 29.5 months.
According to the reference currencies, the total debt can be divided into:
„ Denominated in Brazilian Reais, totaling R$ 1,648.2 million (70% of total), mainly
represented by the BNDES financing and other development agencies. The
weighted average cost of debt denominated in Brazilian Reais is approximately
6.34% per year. Floating rate contracts are indexed mainly to TLJP (the Brazilian
Long Term Interest Rate). The duration of the portion denominated in Brazilian
Reais is 20.7 months.
„ Denominated in U.S. dollars, Euros and other currencies, totaling R$ 707.8
million (30% of total), mainly for working capital loans contracted by foreign
subsidiaries in their local currencies and trade finance related transactions
(advances on exchange contracts or ACC), made in Brazil. The duration of the
debt denominated in foreign currencies is 13.1 months.
Share Price
Performance
The common shares issued by WEG, negotiated at BM&F Bovespa under the
ticker WEGE3, closed on the last trading section of March of 2011 quoted at R$
21.50, an 1.4% nominal decrease in share price for the quarter. Considering
dividends and interest on stockholders’ equity declared during the period, the total
return for the 1Q11 reached 0.3%.
The average daily traded volume during the 1Q11 reached R$ 8.8 million, 50%
above the average of the 1Q10. During the quarter, 50,599 trades took place
(31,484 during the 1Q10) involving 26.1 million shares (19.7 million shares during
1Q10), to a total amount of R$ 534.9 million (R$ 357.9 million during 1Q10).
9 | WEG S.A. | 2011 First Quarter Results
Share Price Performance and Traded Volume
30,00
3.000
Ações Negociadas (mil)
WEGE3
25,00
Cotação WEGE3
2.000
15,00
10,00
1.000
Ações Negociadas (mil)
20,00
5,00
0,00
Dividends
0
On March 22 the Board of Directors approved the payment to shareholders, as
interest on stockholders’ equity (JCP), totaling R$ 42.4 million (R$ 36.0 million net
of withholding income tax). Shareholders on 23 March 2011 will be entitled to
payment of R$ 0.058 per share, net of income tax, payable on August 17, 2011.
We maintain our policy of declaring quarterly interest on stockholders’ equity and
semiannual dividends based on profit for the period.
MTOI Joint
Venture for wind
turbines
manufacturing
On March 03, we announced that we had signed an Memorandum of
Understanding and a Technology Transfer Agreement of with the M. Torres Olvega
Industrial (MTOI).
The M Torres Group was founded in 1975 to design, develop and manufacture
systems for industrial and process automation solutions for the aerospace, paper
and energy sectors.
The technology agreement between WEG and MTOI will result in the creation of a
joint venture, with equal participation, for manufacturing, assembling, installing and
marketing of wind turbine generators, as well as operation and maintenance
services, in Brazil.
“This partnership, in addition to allowing a more direct presence in the wind power
generation business, will give us the agility to meet the growing domestic market
demand," explains Harry Schmelzer Jr., WEG’s CEO. "Furthermore, several of our
products, such as generators, transformers, drives, electric motors and coatings,
are part of the package that we will provide," he added.
The wind turbine generators will be initially manufactured at WEG’s main industrial
facilities in Jaraguá do Sul, State of Santa Catarina. The project should see the
delivery of the first units from 2012 onwards.
The technology developed by MTOI allows for the electric generator to be directly
coupled to the shaft of the turbine, without the need of gearboxes. This represents
a competitive advantage, as it reduces the number of components and hence the
possibility of operational problems and maintenance costs. "We are entering this
segment with a technology that is modern and comparable to the best in the
market. Our partner has wind turbine generators in operation in Europe for over 10
years" said Newton Idemori, Business Development Officer at WEG.
###
10 | WEG S.A. | 2011 First Quarter Results
Results
Conference Call
WEG will hold, on April 28 2011 (Thursday), webcasting of the results conference call,
which shall be conducted in Portuguese with simultaneous translation into English. The
schedule is the following:
10:00 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/1t11.htm
www.ccall.com.br/weg/1q11.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.
11 | WEG S.A. | 2011 First Quarter Results
Annex I
Consolidated Income Statement - Quarterly
Figures in R$ Thousands
GROSS REVENUES
Taxes and Deductions
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
1st Quarter
2011
R$
AV%
1st Quarter
2010
R$
AV%
4th Quarter
2010
R$
AV%
1,343,137
119%
-217,020
-19%
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%
1,131,546
121%
-199,639
-21%
931,907
100%
-623,294 -66.9%
308,613 33.1%
-93,055 -10.0%
-57,861 -6.2%
71,255
7.6%
-52,660 -5.7%
8,515
0.9%
-26,540 -2.8%
-68
0.0%
158,199 17.0%
-25,472 -2.7%
-12,268 -1.3%
-814 -0.1%
119,645 12.8%
1,504,610
120%
-246,181
-20%
1,258,429
100%
-867,129 -68.9%
391,300 31.1%
-119,335 -9.5%
-68,677 -5.5%
97,739
7.8%
-61,516 -4.9%
3,926
0.3%
-40,910 -3.3%
403
0.0%
202,930 16.1%
-16,477 -1.3%
-39,653 -3.2%
-5,292 -0.4%
141,508 11.2%
164,808
12 | WEG S.A. | 2011 First Quarter Results
14.6%
181,750
19.5%
224,149
17.8%
Changes %
Q1 11
Q1 11
Q1 10
Q4 10
18.7%
-10.7%
8.7%
-11.8%
20.8%
30.8%
-10.5%
-6.0%
0.7%
-20.6%
24.7%
-2.8%
1.1%
-14.8%
31.3%
-4.3%
2.0%
-12.7%
1.8%
120.9%
-14.1%
-44.3%
-100.0%
2.3%
-100.0%
-20.2%
57.4%
143.4%
n.m
n.m
231.1%
-49.1%
1.6%
-14.1%
-9.3%
-26.5%
Annex II
Consolidated Balance Sheet
Figures in R$ Thousands
CURRENT ASSETS
Cash & Cash Equivalents
Receivables
Inventories
Other Current Assets
LONG TERM ASSETS
Lawsuits Receivables
Deferred Taxes
Recoverable Taxes
Other Long Term Assets
FIXED ASSETS
Investment in Subs
Property, Plant & Equipment
Intangibles
TOTAL ASSETS
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
March 2011
R$
16
4,731,859
2,487,136
1,026,094
1,019,551
199,078
127,146
21,723
86,060
14,122
5,241
2,565,383
2,199
2,383,215
179,969
AV%
64%
33%
14%
14%
3%
2%
0%
1%
0%
0%
35%
0%
32%
2%
December 2010
R$
AV%
13
64%
4,794,009
34%
2,552,996
14%
1,044,712
13%
1,008,952
2%
187,349
2%
136,984
0%
21,697
1%
78,810
0%
31,661
0%
4,816
34%
2,580,171
0%
601
32%
2,395,575
2%
183,995
March 2011
R$
7
3,803,788
1,962,538
864,517
812,461
164,272
170,517
31,063
89,481
39,682
10,291
2,442,733
16,861
2,302,304
123,568
AV%
59%
31%
13%
13%
3%
3%
0%
1%
1%
0%
38%
0%
36%
2%
7,424,388
100%
7,511,164
100%
6,417,038
100%
2,013,822
134,958
259,762
68,362
1,104,366
39,575
278,978
24,380
103,441
1,882,071
1,251,638
89,435
415,682
125,316
93,487
3,435,008
27%
26%
46%
1,582,381
115,619
206,530
46,564
814,274
29,454
221,004
23,191
125,745
1,547,248
968,192
75,488
402,003
101,565
28,688
3,258,721
25%
46%
1,938,803
141,797
242,300
72,204
1,018,995
63,440
271,949
23,583
104,535
2,028,525
1,399,948
86,875
415,318
126,384
89,229
3,454,607
7,424,388
100%
7,511,164
100%
6,417,038
100%
2%
3%
1%
15%
1%
4%
0%
1%
25%
17%
1%
6%
2%
1%
13 | WEG S.A. | 2011 First Quarter Results
2%
3%
1%
14%
1%
4%
0%
1%
27%
19%
1%
6%
2%
1%
2%
3%
1%
13%
0%
3%
0%
2%
24%
15%
1%
6%
2%
0%
51%
Annex III
Consolidated Cash Flow Statement
Figures in R$ Thousands
3 Months
2011
10
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
3 Months
2010
6
161,883
47,499
-
158,199
44,146
68
18,845
(5,478)
20,692
59,352
(13,249)
(45,622)
(54,718)
20,093
(1,320)
59,643
34,044
(55,872)
(63,566)
(44,947)
Cash Flow from Operating Activities
189,204
150,488
Investment Activities
Fixed Assets
Intagible Assets
Asset Write Downs
Accumulated Conversion Adjustment
(33,800)
(3,365)
177
2,413
(61,392)
(792)
818
(2,191)
Cash Flow From Investment Activities
(34,575)
(63,557)
Financing Activities
Working Capital Financing
Long Term Financing
Dividends & Intesrest on Stockholders Equity Paid
80,132
(139,268)
(161,353)
(101,034)
10,967
(161,442)
(220,489)
(251,509)
(65,860)
(164,579)
2,552,996
2,487,136
2,127,117
1,962,538
Cash Flow From Financing Activities
Change in Cash Position
Cash & Cash Equivalents
Beginning of Period
End of Period
14 | WEG S.A. | 2011 First Quarter Results