Best way to invest in fast growing global energy efficiency
and renewable energy generation businesses
1n One of the highest growth capital goods companies; number one or
number two in all product lines in Latin America
2n Unique business model is based on vertical integration, production
flexibility and technological innovation
3n Diversified product lines allows strong growth across different market
cycles
4n We have a history of achieving CAGR of 18% over past 17 years through
organic growth and accretive acquisitions
5n WEG 2020 Strategic Plan aims for R$ 20 billion / 17% CAGR through
international and product line expansion
BM&F Bovespa: WEGE3 / OTC: WEGZY
1
Sustainable growth
WEG’s revenue growth and margins are among the highest in the
industry
Revenues Growth (US$)
Profitability (EBITDA Margins)
CAGR 2005-2009
23,1%
CAGR 2010-2014
19,3%
23,0%
21,0%
E
19,0%
12,3%
WEG
17,0%
11,3%
9,4%
8,5% 9,1%
C
D
15,0%
4,6% 5,2%4,1%
B
2,9%
4,1%
13,0%
F
11,0%
9,0%
-0,9%
-2,2%
A
WEG
C
B
E
BM&F Bovespa: WEGE3 / OTC: WEGZY
D
F
A
7,0%
2010
2011
2012
2013
2014
2
Our industry is undergoing major shifts
Megatrends are creating changes in demand patterns and new business
opportunities
Energy and
industrial efficiency
Renewable energy
ƒElectric motors represent
ƒGlobal drive to lower GHG
around 70% of all industrial
consumption of electricity, or
25% of worldwide general
electricity consumption;
ƒElectricity consumption is by
far the largest component of
total cost of ownership of
electric motors (may exceed
95%) for industrial clients;
ƒClear regulatory trend towards
minimum levels of electric
motor energy efficiency (lower
needs to expand generation);
ƒIndustrial productivity and
emissions;
ƒRenewables allow distributed
generation, closer to
consumption and requiring
lower T&D infrastructure;
ƒEconomic viability is highly
dependent on scale. With
correct price incentives,
technology catches up with
economics;
ƒDiversity of sources increases
systems stability and energy
availability. No energy is the
most expensive energy of all
energy management drives
investments
BM&F Bovespa: WEGE3 / OTC: WEGZY
Smart grid
ƒElectricity distribution grid is
evolving and becoming
”smarter”;
ƒAll nodes of the system, from
generation to consumptions
(and everything in between)
must be aware of conditions
and able to respond to
changes;
ƒEvery existing electric product
must evolve. There will be
more sensors, more
automation, more efficient
generation and use of
electricity;
ƒNew products are being
developed and change is just
now starting
Electrical mobility
ƒIncreasing urbanization adds to
congestions and need of
alternatives;
ƒGHG and other pollutants
emitted by internal combustion
engines powered vehicles are
well above sustainable levels;
ƒElectricity is clearly a more
efficient use of energy to power
vehicles. Pure electric, hybrids
and alternative fuels will grow
faster than the market;
ƒPowertrain solutions are
scalable to all vehicle types
and sizes and to other
transportation modes (WEG
has commercially available
solutions in maritime
powertrains)
3
“End to end of the wire”
The global solution in electric machines and automation for the
industry and energy systems
Generation
WEG’s strategic vision is to provide
complete and efficient solutions with a
complete line of electrical machines,
from the generation all the way to the
consumption.
This means that we want to continue to
be a competitive supplier of electrical
equipment for typical applications. For
example, WEG is one the world's
largest supplier of industrial electric
motors used by OEM in the
manufacturing pumps, compressors
BM&F Bovespa: WEGE3 / OTC: WEGZY
Transmission Distribution
Industrial use
and industrial fans, the typical uses of
such products.
We also can use this production
competitiveness and flexibility and our
broad product line to integrate those
products into a complete solutions.
We can combine electric motors of
several types and sizes with the drives
and controls to create complex industry
automation systems. Or complete
solutions for electricity generation from
Electric
traction
Building
Automation
renewable sources. Or complete
energy substations for just about any
use. Important to note that these
systems are basically comprised of
WEG manufactured products.
This integrated approach based on
competitive manufacturing capabilities
has been the basis of our market
presence and how we present
ourselves to our clients and to the
general market.
4
Strategic positioning
WEG offers a complete range of electric products and systems with an
integrated one-stop solution
Motors
Fractional
Industrial
High Voltage
Gear boxes
Energy
Alternators
Thermal (Biomass)
Small Hydro
Wind
Solar
T&D
Power Trafos
Dry Trafos
Distribution Trafos
Automation
Substations
Drives
Controls
Panels
BM&F Bovespa: WEGE3 / OTC: WEGZY
5
Clear competitive advantages
Unique business model creates important and defensible competitive
advantages
Vertical Integration
Vertical integration allows
production flexibility to
competitively supply small batches
of highly customized products that
are matched to perfection to our
customers’ needs. We do mass
customization, not mass
production.
Diversification
Our production flexibility allows us
to target the markets
(geographies, segments and
products) that offer the best
growth perspectives. It also
allows us to target markets based
on returns, not on our needs to
occupy specialized production
capacity.
Modular Expansion
Financial Flexibility
Financial flexibility allows WEG to
pursue growth opportunities as
they become available. These
opportunities range from trivial,
like raw materials procurement at
attractive conditions, to strategic,
like acquisitions.
BM&F Bovespa: WEGE3 / OTC: WEGZY
Our production system is also
based on modular expansion,
avoiding idle capacity build up,
maximizing returns on capital e
lowering demand risks.
Global Presence
The diversity of our product offering also allows us
to expand internationally, leveraging the expertizes
we have developed into new markets and being a
premier partner for our global customers
6
WEG business
Diversified product line allows for strong growth across different
market cycles
External Markets
Domestic Market
16,5%
36,4%
3Q15 Revenues
R$ 2.5 billion
17,9%
4,8%
12,4%
7,5%
3,5%
0,9%
ƒ Energy Generation, Transmission
ƒ Industrial Electroand Distribution (GTD)
Electronic Equipment
BM&F Bovespa: WEGE3 / OTC: WEGZY
ƒ Motors for domestic use
ƒ Coatings
7
Solid growth track record
Business model allows us to find and explore growth opportunities,
even under unfavorable macroeconomic conditions
15,7%
16,5%
17,2%
1.230
851
789
812
1.017
1.021
839
617
462
475
381
293
256
188
133
119
96
67
1.345
6.829
17,2%
ROIC
15,9%
656
587
519
549
14,7%
14,3%
13,6%
13,5%
955
843
BM&F Bovespa: WEGE3 / OTC: WEGZY
560
575
503
375
403
308
220
176
18,0%
18,0%
CAGR
17.9%
12,4% 13,0% 11,8%
12,4% 12,2%
11,3% 10,6%
125
82
19,3%
15,3%
13,1%
98
58
20,5%
16,4% 16,5%
16,7%
14,9%
CAGR
20.0%
41
22,4% 22,7%
21,5%
18,4%
18,2% 18,3%
10,9%
30
21,2%
18,1%
59
18,5%
23,5% 24,1% 22,8%
22,5%
22,5%
20,7%
Net Income (R$ million) and Net Margin
12,6%
EBITDA (R$ million) and EBITDA Margin
5.189
4.392
4.211
3.749
3.009
2.515
2.204
1.694
1.282
1.066
800
628
527
466
372
353
CAGR
17.7%
4.502
6.174
7.841
Revenues (R$ million)
12,1%
10,4%
11,8%
10,0%
10,3%
8
Average
Margin
Product Mix
BM&F Bovespa: WEGE3 / OTC: WEGZY
Product Pricing
Margin dynamics
Margins are the result of product mix and product pricing
conditions, and tend to track global economic cycle
WEG strategic planning process
We adopted a bottom–up approach, selecting the individual
opportunities that offered the best fit to clear strategic guidelines
Opportunities
Discovery
The process started with the
involvement of management at
all levels, from market-facing
mid-level managers to senior
C-level officers, that discussed
recent evolution, trends and
growth opportunities, current
and future, in all our core and
adjacent markets.
Business
analysis
The ideas were developed into
business plans, including
market assumptions, earnings
and cash flow projection
models, so each opportunity
could be assessed in terms of
its expected results and
margins.
BM&F Bovespa: WEGE3 / OTC: WEGZY
Capital Requirement
analysis
Risk adjusted ROIC
analysis
The analysis then considered
the capital intensity of each
opportunity. The results and
margins are not necessarily
good or bad, they must be
considered within the context
of the capital required to
pursue the growth opportunity.
The net result is ROIC.
Finally, each opportunity was
assessed in terms of
identifiable, business-related,
non-systemic risks. This was
then used to adjust the ROIC,
or ROIC’
10
WEG strategic Plan 2020
Corporate aspiration of R$ 20 billion by 2020. Growth comes from
diverse base, with a disciplined approach to organic and non organic
expansion
CAGR
17.9%
CAGR
17%
7.841
6.829
20.000
2/3
Organic
15%
11%
6.174
5.189
4.392
18%
19%
1/3
Non Organic
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
BM&F Bovespa: WEGE3 / OTC: WEGZY
11
Growth drivers
The growth opportunities identified can be separated into
three distinct categories/growth strategies
Our products / markets enjoy fairly healthy
organic growth trends. For example, the global
market for industrial use electric motors is
independently estimated to grow 5% to 10% per
year. If we are able to maintain our market
positions, either leadership and / or strong brand
recognition, we will be in position that advantage
of this healthy growth dynamics;
“More and
Better”
We will continue to expand into
We will also continue to
new geographies, initially with
expand the product line into
industrial electric motors. As
business / products that
we have established market
positions and/or recognized
brands, we will leverage those
to synergistically expand the
product line.
complement the offering and
International
Expansion
BM&F Bovespa: WEGE3 / OTC: WEGZY
New
Businesses
allows us to offer our clients
more complete and efficient
solutions.
12
Portfolio strategy
Clear vision of attractiveness of opportunities and of the
strategic fit
2010
2011
Market Access
2010
September 2015
2011
2014
2013
2011
May 2015
2011
2014
April 2015
2014
2012
2012
2014
2014
2012
2010
2010
Technology
BM&F Bovespa: WEGE3 / OTC: WEGZY
13
Revenue profile
2008
2014
BM&F Bovespa: WEGE3 / OTC: WEGZY
14
Global production platform
4%
19%
31%
2014
2008
65%
49%
32%
Produced and sold in Brazil
Produced in Brazil and exported
Produced and sold abroad
BM&F Bovespa: WEGE3 / OTC: WEGZY
15
Use of cash
Capex (R$ million)
Research & Development (R$ million)
% of Net Revenues
10,2%
9,3%
8,0%
% of Net Revenues
2,5%
8,1%
7,4%
6,8% 6,5%
6,1%6,1%
2,5% 2,4%
2,3%
5,4%
5,4%
5,3%
3,7%
1,7% 1,6% 1,8%
73
83
126
224
148
425
226 233
206
49
2,9%
183
131
305
38
2,4%
1,5%
3,6% 3,9% 3,6%
457
42
2,3%
2,3%
2,7%
2,0% 2,0%
5,8%
146
2,5%
238 244
63
188
111
73
86 89 83
101
34
16 18 18 21 30
Working Capital (% of Net Revenues)
Net Earnings and Dividends (R$ million)
50,0%
40,0%
Working Capital
30,0%
Clients
Inventories
20,0%
10,0%
Advances
Suppliers
0,0%
4Q06
4Q07
4Q08
4Q09
4Q10
4Q11
4Q12
BM&F Bovespa: WEGE3 / OTC: WEGZY
4Q13
4Q14
16
Capital markets information
Issuer
ƒ WEG S.A.
Ticker
ƒ WEGE3 (BM&FBovespa) / WEGZY (OTC – ADR Level 1)
Listing Segment
ƒ Novo Mercado (since 2007)
Number of Shares
ƒ Issued:
ƒ In treasury:
ƒ Ex-treasury:
Share price
ƒ On Dec 30, 2014 : R$ 15.30
ƒ On Oct 30, 2015 : R$ 14.40
Market value
ƒ On Dec 30, 2014 : R$ 24.7 billion
ƒ On Oct 30, 2015 : R$ 23.2 billion
Liquidity (average
daily volume)
ƒ In 2014: R$ 18,838 thousand / day
ƒ In 2015: R$ 25,630 thousand / day
Composition of
ƒ 52% - Foreign institutions
ƒ 04% - Brazilian institutions
ƒ 43% - Others (individuals, etc.)
Free Float
BM&F Bovespa: WEGE3 / OTC: WEGZY
1,614,353,076
1,519,786
1,612,833,290
17
Shareholding structure
Voigt
33.3%
Founders’
Families
(directly)
Silva
33.3%
WPA
Participações e
Serviços S/A
14%
Werninghaus
33.3%
Treasury and
Management
50%
1%
Free Float
35%
WEG S.A.
BM&F Bovespa: WEGE3 / OTC: WEGZY
18
WEGE3 performance
20,00
19,00
18,00
Selected for
ISE 2015
WEGE3 share prices (R$)
17,00
16,00
Selected for
DJSI-EM
15,00
14,00
13,00
12,00
11,00
Selected for
ISE 2013
Inclusion
Ibrx-100
Selected for
ISE 2014
10,00
9,00
Inclusion
MSCI Brazil
8,00
7,00
6,00
5,00
4,00
BM&F Bovespa: WEGE3 / OTC: WEGZY
19
Investor Relations Contacts
Paulo Polezi
Investor Relations
Officer
+55 (47) 3276-6354
ppolezi@weg.net
Luis Fernando
Oliveira
Investor Relations
+55 (47) 3276-6367
luisfernando@weg.net
https://www.facebook.com/ri.weg
twitter.com/weg_ir
plus.google.com/113035339542615065006/posts
www.linkedin.com/company/weg-investor-relations
www.weg.net/ir
Highlights
Yearly Figures
Net Operating Revenue
Domestic Market
External Markets
External Markets in US$
Gross Operating Profit
Gross Margin
Quarterly Net Income
Net Margin
EBITDA
EBITDA Margin
EPS (adjusted for splits)
2014
7.840.757
3.876.757
3.964.000
1.684.894
2.484.497
31,7%
954.726
12,2%
1.344.829
17,2%
1,18365
2013
6.828.896
3.432.040
3.396.856
1.569.891
2.236.766
32,8%
843.467
12,4%
1.230.032
18,0%
1,04577
%
14,8%
13,0%
16,7%
7,3%
11,1%
13,2%
9,3%
13,2%
2012
6.173.878
3.016.662
3.157.216
1.610.330
1.880.687
30,5%
655.979
10,6%
1.016.748
16,5%
0,81334
%
10,6%
13,8%
7,6%
-2,5%
18,9%
28,6%
21,0%
28,6%
Figures in R$ Thousands
BM&F Bovespa: WEGE3 / OTC: WEGZY
21
Highlights
Quarterly Figures
Net Operating Revenue
Domestic Market
External Markets
External Markets in US$
Gross Operating Profit
Gross Margin
Net Income
Net Margin
EBITDA
EBITDA Margin
EPS (adjusted for splits)
Q3 2015
Q2 2015
2.546.349
1.087.388
1.458.962
411.211
724.802
28,5%
265.409
10,4%
395.093
15,5%
0,16459
2.349.432
1.051.525
1.297.906
422.464
671.727
28,6%
260.881
11,1%
352.148
15,0%
0,16170
%
Q3 2014
8,4%
3,4%
12,4%
-2,7%
7,9%
1,7%
12,2%
1,8%
2.055.972
994.061
1.061.912
466.737
638.533
31,1%
258.569
12,6%
350.699
17,1%
0,16028
%
23,9%
9,4%
37,4%
-11,9%
13,5%
2,6%
12,7%
2,7%
Figures in R$ Thousand
BM&F Bovespa: WEGE3 / OTC: WEGZY
22
Highlights
Balance sheet – assets
CURRENT ASSETS
Cash & cash equivalents
Receivables
Inventories
Other current assets
LONG TERM ASSETS
Long term securities
Deferred taxes
Other non-current assets
FIXED ASSETS
Investment in Subs
Property, Plant & Equipment
Intangibles
TOTAL ASSETS
September 2015
December 2014
September 2014
(A)
(B)
(C)
R$
%
R$
%
R$
%
9.679.358
68% 8.063.213
68% 7.273.013
67%
4.288.962
30%
4.149.437
35%
3.437.845
32%
2.576.676
18%
1.867.864
16%
1.747.503
16%
2.248.834
16%
1.704.919
14%
1.672.573
15%
564.886
4%
340.993
3%
415.092
4%
569.135
4%
161.644
1%
139.456
1%
0%
1.047
0%
907
0%
108.749
1%
55.864
0%
59.208
1%
460.386
3%
104.733
1%
79.341
1%
4.041.424
28% 3.557.773
30% 3.490.341
32%
1.463
0%
8.224
0%
8.222
0%
3.255.878
23%
2.877.942
24%
2.794.224
26%
784.083
5%
671.607
6%
687.895
6%
14.289.917 100% 11.782.630 100% 10.902.810 100%
(A)/(B) (A)/(C)
20%
33%
3%
25%
38%
47%
32%
34%
66%
36%
252% 308%
-100%
95%
84%
340% 480%
14%
16%
-82% -82%
13%
17%
17%
14%
21%
31%
Figures in R$ thousands
BM&F Bovespa: WEGE3 / OTC: WEGZY
23
Highlights
Balance sheet – liabilities
CURRENT LIABILITIES
Social and Labor Liabilities
Suppliers
Fiscal and Tax Liabilities
Short Term Debt
Dividends Payable
Advances from Clients
Profit Sharring
Derivatives
Other Short Term Liabilities
LONG TERM LIABILITIES
Long Term Debt
Other Long Term Liabilities
Deferred Taxes
Contingencies Provisions
MINORITIES
STOCKHOLDERS' EQUITY
TOTAL LIABILITIES
September 2015
December 2014
September 2014
(A)
(B)
(C)
R$
%
R$
%
R$
%
4.597.696
32% 3.379.017
29% 2.840.667
26%
313.073
2%
173.382
1%
271.371
2%
671.967
5%
445.577
4%
512.394
5%
151.490
1%
148.335
1%
120.509
1%
2.107.029
15%
1.462.493
12%
916.734
8%
92.809
1%
111.707
1%
81.661
1%
578.720
4%
590.815
5%
520.966
5%
84.861
1%
111.173
1%
64.432
1%
3.107
0%
2.461
0%
1.646
0%
594.640
4%
333.074
3%
350.954
3%
3.702.273
26% 3.264.350
28% 3.185.051
29%
2.972.924
21%
2.615.049
22%
2.544.530
23%
168.922
1%
107.463
1%
116.729
1%
230.914
2%
282.989
2%
278.955
3%
329.513
2%
258.849
2%
244.837
2%
128.400
1%
82.878
1%
83.372
1%
5.861.548
41% 5.056.385
43% 4.793.720
44%
14.289.917 100% 11.782.630 100% 10.902.810 100%
(A)/(B) (A)/(C)
36%
62%
81%
15%
51%
31%
2%
26%
44% 130%
-17%
14%
-2%
11%
-24%
32%
26%
89%
79%
69%
13%
16%
14%
17%
57%
45%
-18% -17%
27%
35%
55%
54%
16%
22%
21%
31%
Figures in R$ thousands
BM&F Bovespa: WEGE3 / OTC: WEGZY
24
Highlights
Cash flow statement
9 Months
2015
9 Months
2014
Operating Activities
Net Earnings before Taxes
Depreciation and Amortization
Provisions:
Changes in Assets & Liabilities
(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
Cash Flow from Operating Activities
927.824
234.216
428.438
(1.608.124)
(1.285.098)
624.587
(552.594)
(235.308)
(159.711)
(17.646)
881.586
182.667
272.698
(444.952)
(122.894)
249.930
(205.126)
(218.669)
(148.193)
891.999
Investment Activities
Fixed Assets
Intagible Assets
Results of sales of fixed assets
Accumulated Conversion Adjustment
Long term securities bought
Goodwill in Capital Transactions
Acquisition of Stakes of non-controlling shareholders
Aquisition of Subsidiaries
Cash Flow From Investment Activities
(352.913)
(23.001)
13.202
575.220
(10.948)
(115.552)
89.737
(290.635)
(35.926)
4.641
(35)
(227.108)
(2.699)
(5.947)
(136.528)
(679.315)
Financing Activities
Working Capital Financing
Long Term Financing
Interest paid on loans and financing
Treasury Shares
Dividends & Intesrest on Stockholders Equity Paid
Cash Flow From Financing Activities
1.346.271
(580.619)
(182.272)
(8.814)
(519.127)
55.439
780.347
(590.725)
(129.286)
956
(436.692)
(375.400)
Change in Cash Position
127.530
(162.716)
Cash & Cash Equivalents
Beginning of Period
End of Period
3.284.275
3.411.805
3.372.130
3.209.414
BM&F Bovespa: WEGE3 / OTC: WEGZY
Figures in R$ thousands
25
Highlights
Balance sheet – debt and cash position
Cash & Financial instruments
- Current
- Long Term
Debt
- Current
- In Brazilian Reais
- In other currencies
- Long Term
- In Brazilian Reais
- In other currencies
Net Cash (Debt)
September 2015
4.630.389
4.316.136
314.253
5.095.869 100%
2.110.136
41%
1.144.511
965.625
2.985.733
59%
1.219.314
1.766.419
(465.480)
December 2014
4.194.224
4.158.203
36.021
4.092.150 100%
1.466.752
36%
779.146
687.606
2.625.398
64%
1.701.408
923.990
102.074
September 2014
3.452.955
3.439.837
13.118
3.472.489 100%
918.380
26%
573.337
345.043
2.554.109
74%
1.914.286
639.823
(19.534)
Figures in R$ thousands
BM&F Bovespa: WEGE3 / OTC: WEGZY
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