Q3 2010 Results
„
WEG’s 2010 third quarter results confirms revenue growth
trend
„ Gross Revenues 11% higher than Q3 2009
„ EBITDA of R$ 209,2 million, for 17,6% margin
„ Net Income of R$ 142 million, for 11.9% net margin
Jaraguá do Sul (SC), October 27th, 2010: WEG S.A. (Bovespa: WEGE3), one of the largest manufacturers of electric motors
and related equipment in the world, announced today its results for the third quarter of 2010 (Q3 2010). The following financial
and operating data are, except when otherwise indicated, presented in a consolidated basis, in thousands of Brazilian Reais
(R$) according to the general accepted accounting principles in Brazil (BRGAAP) and as put forward by the Brazilian applicable
laws. All growth rates and other comparisons, except when otherwise indicated, relate to the same period of the previous year.
Q3 2010
Highlights
„ Gross Operating Revenues reached R$ 1,419.2 million in the third quarter of
2010, 10.7% higher year-on-year and 15.6% higher quarter-on-quarter.
„ EBITDA reached R$ 209.2 million, 17.9% lower in relation to Q3 2009, but
20.2% higher over the previous quarter. EBITDA margin stood at 17.6%.
„ Net Income reached R$ 142.0 million (net margin of 11.9%) in Q3 2010,
11.3% lower year-on-year and 22.2% higher quarter-on-quarter.
„ Investments on fixed assets amounted to R$ 188.9 million during the first
nine months of 2010.
Main Results
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
Q3 2010
1,419,161
Q2 2010
1,227,421
Growth %
15.6%
906,954
512,207
831,210
396,211
9.1%
29.3%
889,302
393,200
2.0%
30.3%
298,020
1,188,622
373,497
221,100
1,013,015
309,158
34.8%
17.3%
20.8%
210,840
1,055,465
402,210
41.3%
12.6%
-7.1%
22.2%
160,103
31.4%
30.5%
141,952
116,138
11.9%
11.5%
209,196
174,015
17.6%
17.2%
Q3 2009 Growth %
1,282,506
10.7%
38.1%
-11.3%
15.2%
20.2%
254,840
-17.9%
24.1%
Figures in R$ Thousands
Conference Calls
In Portuguese
In English
October 28th, Thursday - 11 AM (Brazil)
- from Brazil: (11) 4688-6361
Code: WEG
October 28th, Thursday – 01 PM (Brazil)
- from Brazil: (11) 4688-6361
- from USA: 1-888-700-0802
- other countries: 1-786-924-6977
Code: WEG
Comments from Laurence Beltrão Gomes,
WEG’s Investor Relations Officer
"In this third quarter of 2010 we achieved gross revenue growth above 10% in comparison with the
same period of the previous year and of 15.6% in relation to Q2 2010. Two aspects deserve
highlighting this performance (i) the contribution to this growth from the consolidation of the recent
acquisitions of Zest Group, in South Africa, and Voltran, in Mexico and; (ii) that we were able to show
growth despite the strong appreciation of the Brazilian Real, which has a negative impact on the
conversion of USD revenues into BRL. These two aspects show the strength of our business model
and of the management of foreign exchange exposure.
Moreover, it should be noted that an important part of our business is characteristically late cycle, as
the demand for our products is directly related to the industrial investment cycle, which occurs only as
production capacity approaches its limits, after the recovery in consumption is well underway.
An event marking this quarter was the result of the auction of renewable energies promoted by ANEEL
in the end of August, with expressive results for wind energy. This auction indicates, in our vision, this
source of renewable energy became reality in Brazil. We believe this event opens a new market
segment, one where we can supply our products and services, following our strategy for the offering
an integrated solution in an agile, flexible and simple way.
Over the medium and longer term, we see mega trends that continue to offer attractive opportunities
for growth.
„ The growth of the world economy indicates that emerging economies with high rates of expansion
will continue to demand strong investments in infra-structure. This creates opportunities for players
that have emerging markets specific expertise and know how to transfer this expertise to similar
markets.
„ International regulations for harmonization of electric motors energy efficiency levels will drive the
adoption of high performance products in the main industrial markets.
„ Simultaneous to the growing importance of renewable sources for energy generation, production
and usage of electric energy is undergoing profound transformations, resulting in a strong trend
towards fast growth in technological content in our products. We see growth opportunities in the
search for intelligent ways of dealing with and to transmit electricity, for example, through systems
known as "smart grid", in addition to ways to increase efficiency in energy consumption.
„ In addition, events that are particular to the Brazilian market, such as the development of pre-salt oil
reserves and major events such as the FIFA World Cup and the Olympic Games, shall increase
Brazilian economic dynamism over the next years.
Our growth and profitability track record is solid. Currently, our business units are able to offer the
widest portfolio of electro-electronic products in the world, from generation, transmission and
distribution of electricity all the way to its efficient industrial use. We have ample growth potential
internationally, supported by our presence in the main countries and our manufacturing plants in the
larger emerging markets, such as China and India. The continuous and sustainable growth is our main
goal."
2 | WEG S.A. | Third Quarter 2010 Results
Economic
Activity and
Industrial
Production
After several months of strong economic activity recovery, with weak comparisons
basis at the beginning of the year, we seem to be entering an accommodation
phase. According to the analysis of the Organization for Economic Cooperation
and Development (OECD) Composite Leading Indicators (CLI), 3Q10 saw a
general decrease in speed of recovery of economic expansion in the main
economies of the world. It is important to note, however, that the decrease in the
pace of expansion does not mean interruption in the recovery process.
For WEG’s businesses, strongly linked to investments in productive capacity, it is
important that the economic expansion is consistent and long-lasting, going
beyond the simple occupation of idle capacity. In this sense, a long-lasting
expansion of activity, even at a moderate pace, is more consistent with a new
investment cycle.
In Brazil, the results of Gross Domestic Product for the 2Q10, the last available,
continued to indicate accelerated expansion, for 8.8% growth over the same
period of 2009. Similarly to the previous quarters, the highlight continued to be the
performance of Industry, with 13.8% growth. All industrial segments recorded
double digit growth. Seen from a different perspective, gross fixed capital
formation grew 26.5% in relation to 2Q09, maintaining practically the same
expansion pace observed during the previous quarter.
The most recent data on the Brazilian industrial production, released by the
Brazilian Institute of Geography and Statistics (IBGE in Portuguese), are consistent
with the moderation in growth rates trend, after the recovery peak. The industrial
production in August 2010 showed growth of 8.9% over August 2009, the tenth
consecutive positive result. In the first eight months of 2010, the cumulative
increase of industrial production is of 14.1% in relation to the same period of
2009. The comparison of the last twelve months is positive in 9.9%.
Industrial Indicators According to Categories of Use
August/2010
Change (%)
Categories of Use
Month/Month
Capital Goods
1.40
Intermediary Goods
(1.50)
Consumer Goods
(0.20)
Durable Goods
(0.10)
Semi-durable and non-durable
(0.80)
General Industry
(0.10)
Source: IBGE, Research office, Industry Coordination
(*) Series with seasonal adjustments
Monthly
28.00
8.70
4.40
4.70
4.30
8.90
Acummulated
On Year
12 months
28.30
14.20
15.30
11.00
8.70
7.00
15.70
15.50
6.70
4.50
14.10
9.90
The industrial production of capital goods showed significant growth of 28%
compared to August 2009, 28.3% in comparison with the accumulated index of
the eight months of each year and 14.2% for the accumulated index of the past
12 months. The convergence of growth rates at high levels shows both the
overcoming of the deep adjustment caused by the international crisis in 2009 and
the consistency of the current expansion.
Finally, the Brazilian Electric-Electronic Industry Association (ABINEE) survey of
business conditions shows that the majority of the responding companies in the
sector continued observing sales growth: 77% observed growth in relation to
September 2009 and 47% observed growth in relation to August 2010. Over 89%
of companies in the sector expect sales growth in 2010 compared to 2009.
3 | WEG S.A. | Third Quarter 2010 Results
Gross
Operating
Revenues
Gross Operating Revenues reached R$ 1,419.2 million during the third quarter of
2010 (3Q10), 10.7% higher than the third quarter of 2009 (3Q09) and 15.6%
higher than the second quarter of 2010 (2Q010). From July 2010 onwards, the
recently announced acquisitions of ZEST Group in South Africa, Voltran in Mexico,
and Instrutech in Brazil, started to be consolidated in the financial statements, with
net positive impact of R$ 85.8 million in the 3Q10 consolidated gross operating
revenues.
The expansion of 10.7% in Gross Operating Revenues was net result of two
events:
„ Increase of 14.1% as result of the changes in mix of products sold, volumes
and selling prices, the consolidation of revenues from the business acquired
throughout this year; and,
„ Decline of 3.4% due to the 8.5% appreciation of the average Brazilian Real /
U.S. Dollar exchange rate in the 3Q10 compared to the same period of 2009.
According to the destination market, 3Q10 Gross Operating Revenues breaks
down as follows:
„ Domestic Market: R$ 907.0 million, representing 64% of Gross Operating
Revenues, increasing 2.0% in relation to Q3 2009 and 9.1% compared to Q2
2010;
„ External Markets: R$ 512.2 million, representing 36% of Gross Operating
Revenues. The comparison in Brazilian Reais is 30.3% higher than the 3Q09,
and 29.3% higher quarter over quarter. Considering gross revenues measured
in U.S. Dollars, converted by using average exchange rates, shows increases
of 41.3% when compared to the 3Q09 and of 34.8% in relation to the 2Q10.
Gross Revenues per Market (R$ million)
External Market
Domestic Market
1.271
1.250
1.283
1.307
37%
35%
31%
33%
63%
65%
69%
Q1
Q2
Q3
1.419
1.132
1.227
36%
29%
32%
67%
71%
68%
64%
Q4
Q1
Q2
Q3
2009
4 | WEG S.A. | Third Quarter 2010 Results
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 2010
1,419.2
907.0
512.2
Q2 2010
1,227.4
831.2
396.2
Change
15.6%
9.1%
29.3%
Q3 2009
1,282.5
889.3
393.2
Change
10.7%
2.0%
30.3%
298.0
221.1
34.8%
210.8
41.3%
36%
15%
22%
17%
10%
39%
17%
24%
8%
11%
-3 pp
-2 pp
-3 pp
9 pp
-1 pp
28%
15%
36%
5%
15%
8 pp
0 pp
-15 pp
12 pp
-5 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
Q3 2010 Q2 2010
%
Q3 2009
%
59.8%
51.5%
8.3 pp 45.8%
14 pp
21.7%
24.5% -2.8 pp 34.8% -13.1 pp
12.0%
17.1% -5.2 pp 13.6%
-1.6 pp
6.6%
6.9%
-0.3 pp 5.9%
0.7 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.
Performance in this business area has been positively affected by the Brazilian
industrial production growth and the increased investments in expansion of
production capacity. The continuation of the favorable credit conditions for
investment, under the Investment Support Program (PSI), extended by the
Brazilian development bank BNDES, has allowed the expansion of industrial
production move beyond the simple occupation of idle production capacity of
consumer goods.
On external markets, in which the recovery of economic activity and the
resumption of investments are less apparent, our growth has been made possible
through the additional of market positions and the consolidation of recent
acquisitions, as the ones in Mexico and Africa.
Equipment for
Generation,
Transmission
and
Distribution
This business area includes the following products and services: generators for
hydro and thermal power plants, water turbines, 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.
We have discussed, over the recent quarters, the characteristically long cycle of
business in this area, that is, the relatively long period from the moment a firm
order is closed and the effective conversion of this order into revenues. This
characteristic is due to, among other reasons, the longer maturation period of
investments in GTD, which leads to a slower investment decision process.
Additionally, equipment design and manufacturing lead times are also typically
longer in this area.
5 | WEG S.A. | Third Quarter 2010 Results
We also have stressed that this characteristic of long cycle products allowed this
business area to continue to show revenue growth through the best part of 2009,
fulfilling the orders’ backlog, even as new orders intake decreased. This slowdown
in orders intake, slower than the fulfillment of the existing orders, became evident
throughout 2010, with a slowdown in revenue growth in this business area.
However, the decision to split the GTD business area in two autonomous (albeit
synergic) business units, reached in 2009 and implemented at the beginning of
2010, has been very positive. The energy transmission and distribution (T&D)
business have shown more dynamism and this business unit has, with the
diversification of customers and markets, achieved good performance.
In the energy generation (G) business, still basically geared towards the Brazilian
market for renewable energy sources, the recent developments are also positive,
although with longer term effects. The results of the recent official auctions for
contracting energy from renewable sources have showed wind energy becoming
a viable new alternative. The viability is both from the point of view of its ability to
supply utilities’ demand at a competitive prices as for the conditions to
manufacture wind generation equipment in Brazil in competitive conditions and
with sufficient scale.
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 business cycle area, with fast adjustments to production following
changes of consumer demand levels. This market continues to show good
dynamics after the strong rebound from the financial crisis of 2009.
The sales performance of consumer durable goods continues to show growth,
within the seasonal variations in demand, responding to the retail promotional
calendar. The segment now is benefiting from favorable economic conditions,
such as improvements on employment and disposable income and expansion of
consumer credit.
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.
In business segment our approach is to cross-sell to customers from other
business areas. Examples of such an approach include initiatives to service the
shipbuilding and industrial maintenance industries. By doing so, we maximize the
development of new products and of scale of production, including new client
segments.
6 | WEG S.A. | Third Quarter 2010 Results
Operating Results (R$ Thousands)
(EBITDA according to methodology established by CVM’s Ofício Circular 01/07)
Net Operating Revenues
Cost of Goods Sold
Gross Operating Profit
(-) Selling Expenses
(-) General & Administrative
(-) Profit Sharing
Result from Activities
(+) Depreciation & Amortization
EBITDA
EBITDA Margin
Cost of Goods
Sold
Q3 2010
1,188,623
(815,124)
373,498
(121,149)
(68,538)
(22,242)
161,569
47,628
209,196
Q2 2009
1,013,015
(703,857)
309,158
(100,298)
(65,313)
(15,315)
128,232
45,783
174,015
17.6%
17.2%
Change
17.3%
15.8%
20.8%
20.8%
4.9%
45.2%
26.0%
4.0%
20.2%
Q3 2009
1,055,466
(653,256)
402,210
(99,753)
(74,113)
(22,113)
206,231
48,609
254,840
Chang
12.6
24.8
-7.1
21.4
-7.5
0.6
-21.7
-2.0
-17.9
24.1%
Cost of Goods Sold (COGS) totaled R$ 815.1 million in 3Q10, 24.8% higher than
the 3Q09 and up by 15.8% compared to 2Q10. Gross margin was 31.4%,
decreasing 6.7 percentage points compared to 3Q09, but 1 percentage point
higher than the previous quarter.
The gross margin comparison against 3Q09 is undermined by better mix of
products obtained in that quarter, when the revenue was strongly concentrated in
systems and products with better margin, as a result of the fulfillment of the GTD
backlog. On the other hand, the comparison with 2Q10 shows gradual and
consistent recovery of gross margin, due to the actions to control costs, the
continuous improvement and production capacity adequacy programs and from
better usage of production capacity.
This gross margin recovery is important when taken into consideration the fact that
the sales recovery has been driven by the short cycle product lines, which
typically command smaller gross margins per unit.
Costs of Raw
Materials
The average prices for copper at London Metal Exchange (LME), considering the
spot quote, went up by 24% in relation to 3Q09 and only by 3% in relation to
2Q10. Steel prices in the international market, according to the index
CRUspiGlobal, increased 15% over the 3Q09, but were 10% down when
compared to the 2Q10.
Selling,
General &
Administrative
Expenses
Consolidated selling, general and administrative expenses (SG&A) represented
16.0% of Net Operating Revenues in the 3Q10, 0.5 percentage points lower in
relation to the 3Q09 and 0.3% in relation to the 2Q10.
The comparison of operating expenses in absolute terms shows an increase of
9.1% over 3Q10 and of 14.5% over the previous quarter, showing smaller growth
rates, in both cases, when compared to the operating revenues growth.
7 | WEG S.A. | Third Quarter 2010 Results
Main impacts on EBITDA
180,2
(43,6)
(3,5)
FXImpacto Impact on
Cambial sobre Gross
Revenues
receita bruta
(161,4)
Deduction
Deductionon
on
Deduction
on
Gross
Gross
Gross
Revenues
Revenues
Revenues
254,8
Volumes,
Aumento de Prices &
volumes & Product
Mix
preços e mix Changes
de produtos (20,6)
3,4
COGS
CPV (ex depreciação)
Selling
Expenses
General and
Administrative
Expenses
(0,1)
209,2
Profit Sharing
Program
EBITDA Q3 10
EBITDA Q3 09
EBITDA
As a result of the previously mentioned effects, EBITDA in the Q3 2010 (calculated
according to the methodology established by the CVM Ofício Circular 01/07)
reached R$ 209.2 million, a decrease of 17.9% over 3Q09 and an increase of
20.2% in relation to the previous quarter. EBITDA margin stood at 17.6%, 6.5
percentage points lower year-on-year and 0.4 percentage point higher quarter on
quarter.
Net Financial
Results
In the 3Q10, financial income reached R$ 92.1 million (R$ 85.2 million in 3Q09
and R$ 87.4 million in 2Q10). Financial Expenses, net of interest on stockholders
capital declared in the period, reached R$ 51.9 million (R$ 73.6 million in 3Q09
and R$ 59.3 million in 2Q10).
In this quarter, Net Financial Results were positive in R$ 40.2 million (positive in R$
11.6 million during 3Q09 and R$ 28.1 million in 2Q10). The net positive financial
result was due to the impact of exchange rate variation on liabilities denominated
in other currencies and also caused by the impact of Euro appreciation over the
Brazilian Real on the receivables denominated in that currency.
Income Tax
and Social
Contribution
Provision for Income Tax and Social Contribution on Net Income in the 3Q10
reached R$ 50.4 million (R$ 56.6 million on 3Q09 and R$ 40.8 million in 2Q10).
Additionally, we also accounted for R$ 6.5 million in Deferred Income Taxes.
Net Income
As a result of the previously mentioned effects, Net Earnings during the Q3 2010
amounted to R$ 142.0 million, 11.3% lower year-on-year and 22.2% higher
quarter on quarter. Net margin for the quarter stood at 11.9%.
8 | WEG S.A. | Third Quarter 2010 Results
Debt and Cash Position (R$ Thousands)
CASH & EQUIVALENT
DEBT
- Current
- Long Term
NET CASH (DEBT)
Net Cash
September 2010
2,399,773
2,345,147
841,311
1,503,836
54,626
December 2009
2,127,117
1,872,533
895,885
976,648
254,584
September 2009
2,003,241
1,932,624
943,532
989,092
70,617
On September 30th, 2010, cash and cash equivalents totaled R$ 2,399.8million
and gross financial debt amounted to R$ 2,345.1 million, resulting in a net cash
position of R$ 54.6 million (net debt of R$ 70.6 million on September 30th, 2009).
Cash funds are invested mostly in Brazilian currency denominated instruments,
such as banks certificates of deposit (CBD), at interbank deposit rates, in first-tier
banks.
The gross debt is divided in:
„ Short-term debt, to the total of R$ 841.3 million (36% of total debt), represented
by the current portion of short-term debt with the Brazilian National
Development Bank (BNDES) and other development agencies, largely
denominated in Brazilian Reais, and by trade finance related debt denominated
in currencies other than the Brazilian Real.
„ Long-term debt, to the total of R$ 1,503.8 million (64% of total debt), mainly
represented by loans contracted with BNDES and other development
institutions, mostly denominated in Brazilian Reais, and by the long-term portion
of working capital financing of overseas subsidiaries, denominated in their
respective domestic currencies.
According to the currency of denomination, the breakdown of total debt is as
follows:
„ In Brazilian Reais, totaling R$ 1.714,3 million (accounting for 73% of total debt)
represented mainly by loans with BNDES and development agencies. The
average cost of debt denominated in Brazilian Reais is around 4.8% for the
fixed rate portion and 2.0% for floating rate portion. Floating rate contracts are
indexed mainly to the Brazilian long term interest rate TLJP, implying current
costs around 8% per year;
„ In other currencies, totaling R$ 630.8 million (accounting for 27% of total debt)
mainly represented by trade finance operations (Advances on Foreign
Exchange Contracts or ACC) and working capital financing contracted by
overseas subsidiaries in their respective domestic currencies.
Investments
Investments in fixed assets for modernization and expansion of production
capacity totaled R$ 188.9 million during the first nine months of 2010, of which
52% were allocated to industrial complexes and other facilities in Brazil and 48% to
production units abroad. We highlight the investments in the commercial motors
plant in Linhares-ES (Northeast of Brazil) and the medium voltage motors and
generators plant in Hosur, India.
WEG Linhares
The construction of WEG’s new manufacturing plant in Linhares, in the Brazilian
state of Espirito Santo continues on schedule to start up production of commercial
motors during the last quarter of 2010.
The new industrial park has a total area of 530 thousand square meters and will
follow the same modular concept used in other WEG units, allowing for the
gradual and continuous increase in capacity, in line with the expansion needs.
9 | WEG S.A. | Third Quarter 2010 Results
In this initial phase, some new 180 jobs are being created, both at the technical
and operational level. All considered, around 1,000 direct jobs should be created
by WEG throughout the project over the next four years. The investment projected
during this first phase of the project is approximately $ 180 million.
WEG Índia
The construction of WEG India manufacturing plant, in Hosur, is practically
completed and most of all equipment is already installed and operating.
The start up of production in this new unit is scheduled for the fourth quarter of
2010, supplying medium and high voltage motors and generators for the Indian
market and exports. The investment for the first phase of the project is
approximately US$ 65 million. The productive capacity of this unit may also be
expanded in the future.
Investments in Fixed Assets (R$ million)
Outside Brazil
Brazil
91,9
20,1
73,8
63,5
61,4
15,7
71,8
47,8
Q1 09
Share Price
Performance
32,7
38,2
13,7
13,8
19,1
24,3
27,2
Q4 09
Q1 10
Q2 09 Q3 09
2009
34,2
53,7
43,7
13,0
30,1
40,7
Q2 10 Q3 10
2010
WEG’s common share price went from R$ 16.88 on the last trading section of the
3Q09 to R$ 18.50 on September 30th, 2010, for a nominal increase of 9.6%.
Considering dividends and interest on stockholders’ equity declared during the
period, the total return was 12.4%.
The average daily traded volume during the 3Q10 reached R$ 5.9 million, 10%
below the average of the 3Q09. During the quarter, 36,461 trades took place
(35,007 during the 3Q09) involving 21.5 million shares (28.8 million shares during
3Q09), to a total amount of R$ 379.2 million (R$ 423.8 million during 3Q09).
10 | WEG S.A. | Third Quarter 2010 Results
Share Price Performance and Traded Volume
30,00
3.000
Shares Traded (thousands)
WEGE3
25,00
WEGE3 share prices
2.000
15,00
10,00
1.000
5,00
0,00
08
pSe
TRaded shares (thousands)
20,00
0
08
cDe
9
-0
ar
M
09
nJu
09
pSe
09
cDe
0
-1
ar
M
10
nJu
10
pSe
Performance adjusted by dividends and interest on stockholders’ equity
Market Maker
On September 21st, we announced that BTG PACTUAL CORRETORA DE
TÍTULOS E VALORES MOBILIÁRIOS S.A. was contracted to act as market maker
for WEG’s ordinary shares (ON – WEGE3) under the BM&FBOVESPA S.A. Bolsa
de Valores, Mercadorias e Futuros.
The market maker function, as per BM&F Bovespa’s regulations, is to place
purchase and sale orders on a daily basis with the objective to increase the
liquidity of company´s shares.
ADR level 1
On September 27th, we announced the establishment of a sponsored level 1
depositary receipt (DR) program representing the Company's shares ("Program").
Starting on September 28th, 2010, the ADRs started trading on the over-thecounter (OTC) market, in the United States of America, under the symbol WEGZY.
Each ADR represents one common share of WEG. JPMorgan Chase Bank, NA is
acting as depositary bank for the program. The program does not represent an
increase of the share capital or the issuance of new shares.
ADRs are certificates of deposit of shares that are tradable in the US securities’
markets and that represent the ownership in the shares of a company
incorporated outside the U.S. ADRs are quoted and traded in US dollars and
dividends are also paid in the same currency. ADRs were created to facilitate the
trading of shares of these non-U.S. companies by investors in the U.S. markets
Dividends
From August 11th onwards, we paid the dividends that were declared during the
first half of 2010, as below:
„ On March 23rd, as interest on stockholders’ equity, to the shareholders of
record on that date, to the total amount of R$ 31.0 million
„ On June 29th, as interest on stockholders’ equity, to the shareholders of record
on that date, to the total amount of R$ 36.5 million
„ On July 27th, as intermediate dividends related to the first half of 2010, to the
shareholders of record on that date, to the total amount of R$ 66.4 million.
11 | WEG S.A. | Third Quarter 2010 Results
The total value of the intermediate dividends and interest on stockholders’ equity
declared in the first half of 2010 was R$ 134.4 million, or the equivalent to 57.1%
of the net earning recorded during the period. After withholding of income tax, the
net value of the dividend was R$ 0.20 per share.
„ Additionally, on September 21st, the Board of Directors approved interest on
stockholders’ equity, to the shareholders of record on that date, to the total
amount of R$ 34.3 million.
Event
Board Meeting Date
Payment Date
Gross amount per share
Net amount per share
Interest on Stockholders’ Equity
23/3/2010
11/8/2010
R$ 0,050588235
R$ 0,043000000
Interest on Stockholders’ Equity
29/6/2010
11/8/2010
R$ 0,058823529
R$ 0,050000000
Dividends
27/7/2010
11/8/2010
R$ 0,107000000
R$ 0,107000000
Interest on Stockholders’ Equity
21/9/2010
16/3/2011
R$ 0,055294118
R$ 0,047000000
R$ 0,216411765
R$ 0,247000000
Total
We maintain our policy of declaring interest on shareholders’ equity quarterly and
dividends half-yearly, based on the profit for the period.
###
12 | WEG S.A. | Third Quarter 2010 Results
Conference Calls
WEG will hold conference calls, when Management will present the results.
Conference in English:
Date: October 28th, 2010 - Thursday
Schedule:
11 AM – EST (NYC)
01 PM – BRST (Brasilia)
04 PM – BST (London)
Connection Numbers:
„ Calling from Brazil: (11) 4688-6361
„ Calling from USA: 1-888-700-0802
„ Calling from Other Countries: 1-786-924-6977
Code: WEG
Conference in Portuguese:
Date: October 28th, 2010 - Thursday
Schedule: 11AM – BRST (Brasilia)
Connection Numbers:
„ Calling from Brazil: (11) 4688-6361
Code: WEG
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.
13 | WEG S.A. | Third Quarter 2010 Results
Annex I
Consolidated Income Statement - Quarterly
Figures in R$ Thousands
GROSS REVENUES
Domestic Market
External Market
Taxes and Deductions
NET REVENUES
COST OF GOODS SOLD
GROSS PROFIT
Sales Expenses
Administrative Expenses
Financial Expenses
Financial Revenues
Other Operating Results
Earnings from Subs (Equity Method)
EARNINGS BEFORE TAXES
Participations
Income Taxes & Contributions
Cash Dividends Reversal
Deferred Taxes
Minorities
NET EARNINGS
EBITDA
3rd Quarter
2010
R$
AV%
2nd Quarter
2010
R$
AV%
3rd Quarter
2009
R$
AV%
1.419.161
119%
906.954
76%
512.207
43%
-230.539
-19%
1.188.622
100%
-815.125 -68,6%
373.497 31,4%
-121.148 -10,2%
-68.539 -5,8%
-86.274 -7,3%
92.081
7,7%
-17.500 -1,5%
483
0,0%
172.600 14,5%
-860 -0,1%
-50.430 -4,2%
34.347
2,9%
-6.472 -0,5%
-7.233 -0,6%
141.952 11,9%
1.227.421
121%
831.210
82%
396.211
39%
-214.406
-21%
1.013.015
100%
-703.857 -69,5%
309.158 30,5%
-100.299 -9,9%
-65.312 -6,4%
-95.793 -9,5%
87.396
8,6%
-15.680 -1,5%
1.272
0,1%
120.742 11,9%
-383
0,0%
-40.817 -4,0%
36.540
3,6%
410
0,0%
-354
0,0%
116.138 11,5%
1.282.506
122%
889.302
84%
393.200
37%
-227.041
-22%
1.055.465
100%
-653.255 -61,9%
402.210 38,1%
-99.753 -9,5%
-74.113 -7,0%
-102.679 -9,7%
85.246
8,1%
-27.803 -2,6%
1.893
0,2%
185.001 17,5%
-1.978 -0,2%
-56.633 -5,4%
29.080
2,8%
8.341
0,8%
-3.708 -0,4%
160.103 15,2%
209.196
14 | WEG S.A. | Third Quarter 2010 Results
17,6%
174.015
17,2%
254.840
24,1%
Changes %
Q3 10
Q3 10
Q2 10
Q3 09
15,6%
10,7%
9,1%
2,0%
29,3%
30,3%
7,5%
1,5%
17,3%
15,8%
12,6%
24,8%
20,8%
-7,1%
20,8%
21,4%
4,9%
-7,5%
-9,9%
-16,0%
5,4%
8,0%
11,6%
-37,1%
-62,0%
42,9%
124,5%
-74,5%
-6,7%
-56,5%
23,6%
-11,0%
-6,0%
18,1%
n.m
n.m
n.m
95,1%
22,2%
-11,3%
20,2%
-17,9%
Annex II
Consolidated Income Statement
Figures in R$ Thousands
9 Months
2010
R$
AV%
GROSS REVENUES
Domestic Market
External Market
Taxes and Deductions
NET REVENUES
COST OF GOODS SOLD
GROSS PROFIT
Selling Expenses
Administrative Expenses
Financial Expenses
Financial Revenues
Other Operating Results
Earnings from Subs (Equity Method)
EARNINGS BEFORE TAXES
Participations
Income Taxes & Contributions
Cash Dividends Reversal
Deferred Taxes
Minorities
NET EARNINGS
EBITDA
3,778,128
2,539,463
1,238,665
-644,584
3,133,544
-2,143,435
990,109
-314,544
-191,948
-266,151
250,732
-50,421
1,687
419,464
-2,027
-116,719
102,311
-17,548
-8,317
377,164
564,961
9 Months
2009
R$
AV%
12%
3,803,683
2,500,008
1,303,670
-670,032
3,133,651
-2,125,312
1,008,339
-304,958
-180,105
-291,219
280,034
-68,999
5,263
448,355
-3,488
-132,502
90,879
14,325
-5,603
411,966
18%
608,877
121%
81%
40%
-21%
100%
-68%
32%
-10.0%
-6.1%
-8%
8%
-2%
0%
13%
0%
-4%
3%
-1%
0%
15 | WEG S.A. | Third Quarter 2010 Results
2010
2009
121%
-0.7%
80%
1.6%
42%
-5.0%
-21%
-3.8%
100%
-68%
0.0%
0.9%
32%
-1.8%
-9.7%
3.1%
-5.7%
6.6%
-9%
-8.6%
9%
-10.5%
-2%
-26.9%
0%
14%
0%
-67.9%
-6.4%
-41.9%
-4%
-11.9%
3%
12.6%
0%
n.m
0%
48.4%
13%
-8.4%
19%
-7.2%
Annex III
Consolidated Balance Sheet
Figures in R$ Thousands
CURRENT ASSETS
Cash & Cash Equivalents
Receivables
Inventories
Other Current Assets
LONG TERM ASSETS
Lawsuits Receivables
Deferred Taxes
Other Long Term Assets
FIXED ASSETS
Investment in Subs
Property, Plant & Equipment
Deferred Assets
TOTAL ASSETS
CURRENT LIABILITIES
Suppliers
Taxes & Contributions
Short Term Debt
Dividends Payable
Advances from Clients
Profit Sharing
Other Current Assets
LONG TERM LIABILITIES
Long Term Debt
Provisions
Other Long Term Liabilities
MINORITIES
NET WORTH
TOTAL LIABILITIES
September 2010
R$
AV%
76
4,628,280
75%
2,399,773
39%
1,026,652
17%
1,015,175
16%
186,680
3%
149,892
2%
20,855
0%
91,613
1%
37,424
1%
1,374,406
22%
222
0%
1,182,099
19%
192,085
3%
December 2009
R$
AV%
67
3,973,158
74%
2,127,117
40%
910,136
17%
758,116
14%
177,789
3%
193,814
4%
30,739
1%
101,739
2%
61,336
1%
1,206,635
22%
16,041
0%
1,061,734
20%
128,860
2%
September 2009
R$
AV%
64
3,979,320
74%
2,003,241
37%
909,473
17%
821,688
15%
244,918
5%
223,577
4%
53,369
1%
101,027
2%
69,181
1%
1,179,142
22%
14,690
0%
1,064,445
20%
100,007
2%
6,152,578 100%
5,373,607 100%
5,382,039 100%
1,795,005
273,823
240,672
841,311
32,052
233,844
34,050
139,253
1,728,490
1,503,836
113,283
111,371
82,417
2,546,666
29%
4%
4%
14%
1%
4%
1%
2%
28%
24%
2%
2%
1%
41%
6,152,578 100%
16 | WEG S.A. | Third Quarter 2010 Results
1,825,846
188,779
165,331
895,885
164,134
254,864
54,088
102,765
1,160,757
976,648
99,434
84,675
24,217
2,362,787
34%
4%
3%
17%
3%
5%
1%
2%
22%
18%
2%
2%
0%
44%
5,373,607 100%
1,814,479
196,701
223,849
943,532
26,507
286,343
37,695
99,852
1,207,229
989,092
176,535
41,602
45,627
2,314,704
34%
4%
4%
18%
0%
5%
1%
2%
22%
18%
3%
1%
1%
43%
5,382,039 100%
Annex IV
Consolidated Cash Flow Statement
Figures in R$ Thousands
9 Months
2010
14
9 Months
2009
10
Operating Activities
Net Earnings before Taxes
Depreciation and Amortization
Earnings from Subs (Equity Method)
Provisions:
Profit Sharing
Interest on Stockholders Equity
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
419,464
138,995
(1,687)
444,866
145,647
(5,263)
57,651
102,311
15,736
(89,994)
234,035
(260,135)
(124,255)
(71,791)
63,535
90,879
4,358
304,262
(226,016)
289,762
(98,072)
(72,051)
Cash Flow from Operating Activities
420,330
941,907
Investment Activities
Investments
Fixed Assets
Intagible Assets
Asset Write Downs
Accumulated Conversion Adjustment
(248,847)
(81,274)
18,994
(25,049)
(188,142)
(2,460)
7,956
(114,331)
(336,176)
(296,977)
Financing Activities
Working Capital Financing
Long Term Financing
Dividends & Intesrest on Stockholders Equity Paid
(44,289)
516,903
(284,114)
(370,887)
142,294
(262,473)
Cash Flow From Financing Activities
188,500
(491,066)
Change in Cash Position
272,654
153,864
2,127,117
2,399,771
1,849,477
2,003,341
Cash Flow From Investment Activities
Cash & Cash Equivalents
Beginning of Period
End of Period
17 | WEG S.A. | Third Quarter 2010 Results