Motors | Automation | Energy | T&D | Paints
WEG
Investor Presentation
August, 2011
WEGE3 / WEGZY
Disclaimer
The information contained herein has been prepared by WEG S.A. (“WEG” or the “Company”) solely for meetings held with investors and/or
potential investors. This material does not constitute offering material in whole or part, and you must obtain further information before making an
investment decision in respect of the common shares of the Company.
This material has been prepared solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any
securities and should not be treated as giving investment advice. It is not targeted to the specific investment objectives, financial situation or
particular needs of any recipient. No representation or warranty, either express or implied, is made as to the accuracy, completeness or reliability
of the information contained herein. It should not be regarded by recipients as a substitute for the exercise of their own judgment. Any opinions
expressed in this material are subject to change without notice and WEG is not under obligation to update or keep current the information
contained herein. In addition, WEG has been informed that their affiliates, agents, directors, partners and employees may make purchases and/or
sales as principals or may act as market makers or provide investment banking or other services to the Company. The Company and their
respective affiliates, agents, directors, partners and employees accept no liability whatsoever for any loss or damage of any kind arising out of the
use of all or any part of this material.
You should consult your own legal, regulatory, tax, business, investment, financial and accounting advisers to the extent that you deem
necessary, and you must make your own investment, hedging or trading decision based upon your own judgment and advice from such advisers
as you deem necessary and not upon any view expressed in this material.
This material includes forward-looking statements subject to risks and uncertainties, which are based on current expectations and projections
about future events and trends that may affect the Company’s business. These statements include projections of economic growth and energy
demand and supply, as well as information about competitive position, the regulatory environment, potential opportunities for growth and other
matters. Several factors may adversely affect the estimates and assumptions on which these statements are based, many of which are beyond
our control.
1
Business Units
Motors
Page 2
Automation
Energy
Transmission
& Distribution
Coatings
Our Business
Page 3
Revenues breakdown per
Production site
INDIA
2010
Manufactured
in Brazil, Sold
abroad; 32%
CHINA
MEXICO
Manufactured
& sold in Brazil;
61%
Manufactured
and sold
abroad; 7%
MEXICO
PORTUGAL
ARGENTINA
Revenues breakdown per
distribution channel
2010
OEM; 58%
Reseller;
14%
End user;
28%
Business areas
Business
Units
Performance
Drivers
Page 6
ElectroElectronic
Industrial
Equipments
Generation,
Transmission
and
Distribution
Motors for
Domestic Use
Industrial
Paints and
Varnishes
Motors +
Automation
Energy + T&D +
Automation
Motors
Coatings
Industrial Production
growth and
Investments in
Fixed Capital
(capex)
Growth in
investments in
electric enrgy
infrastructure
Disposable income,
supply of credit and
level of interest
rates
Brazilian GDP
growth
Highlights
Second Quarter, 2011
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
EPS
Page 7
Q2 2011
1,510,276
936,061
574,215
360,639
1,277,258
381,437
Q1 2010 Growth % Q2 2010 Growth %
1,343,137 12.4% 1,227,421 23.0%
862,863
831,210 12.6%
8.5%
480,274 19.6%
396,211 44.9%
288,211 25.1%
221,100 63.1%
1,126,117 13.4% 1,013,015 26.1%
310,662 22.8%
309,812 23.1%
29.9%
27.6%
154,557
121,564
12.1%
10.8%
215,579
164,808
16.9%
14.6%
0.2491
0.1958
30.6%
27.1%
116,522
32.6%
11.5%
30.8%
174,015
23.9%
17.2%
27.2%
0.1877 32.7%
Figures in R$ Thousands
Positioned to benefit
from mega trends
Renewable Energy
Energy Management
ƒ
ƒ
Industrial electricity consumption is the
largest portion of global consumption
Management systems (ISO 50.001)
already being implemented
ƒ
ƒ
Smart
ƒ Infrastructure
Electricity distribution network has to
ƒ
ƒ
ƒ
Page 8
Scale and technological development
increase viability
Mobility
become “smarter”
More sensors, more automation, more
efficient generation and use of electricity
Global need to diversify energy
sources and lower GHG emissions
Increasing urbanization adds to
congestions and need of new solutions
Hybrids, pure electric and alternative
fuels vehicles will become more
important
Energy prices will
continue to increase
ƒ Traditional energies sources are
becoming ever more scarce and
difficult to obtain
ƒ Concerns about the impact of
energy generation on climate
change
ƒ Improving living standards in
emerging economies increase
energy intensity (consumption per
capita)
Brazilian industrial electricity tariff
(in US$ / MWh)
300
250
200
150
100
50
-
2000
2001
2002
Source: EPE BEN 2010
Page 9
2003
2004
2005
2006
2007
2008
2009
Conversion of energy (efficiency)
Harmonization of
energy efficiency
regulations
Page 10
IE 4
(Super premium)
IE 3
(Premium)
IE 2
(High)
IE 1
(Standard)
(NEMA Premium
efficiency)
No regulatory obligation as of today
(effective 2015)
NEMA Energy
Efficiency
Most developing markets
Brazil electricity is already clean,
but it can get cleaner
180.000 160.000 8% CAGR
140.000 120.000 Biomass - 5% CAGR
Small Hydro – 6% CAGR
Wind - 17% CAGR
100.000 80.000 60.000 4% CAGR
40.000 20.000 5% CAGR
‐
2010
2011
2012
Fossil Fuels
2013
2014
Large Hydro
2015
2016
Renewables
2017
2018
2019
Nuclear
Source: EPE - PDE 2019
Page 11
Power grid
must evolve
Demand management
SMART GRID: Applying sensing,
measurement and control devices with twoway communications to dynamically
respond to changes in grid conditions
Smart apliances
Use can be shifted to off
peak times to save money
Can shut off in response
to frequency fluctuations
Sensors
Detected fluctuations and
disturbances, and can signal
for areas to be isolated
Solar
panels
Houses
Storages
Offices
Disturbance
In the grid
Energy generated at off
peak times could be
stored in batteries for later
uses
Storage
Isolated
microgrid
Wind farm
Processors
Execute special protection
schemes in microseconds
Central power
plant
Generators
Industrial
plant
JP Morgan Transportation & Industrials
Conference - July 2011
Energy from small generators
and solar panels can reduce
overall demand on the grid
12
Solutions for electric &
hybrid vehicles
Complete power train solution
ƒ Electric motor (power train)
ƒ Auxiliary Genset (ethanol, biodiesel or natural gas)
ƒ Frequency inverter and components (system automation)
ƒ Batteries
Page 13
WEG solutions for
marine automation
Thrusters motors
Automation
Generators
Page 14
Transformers
Motors
Strategic Positioning
Appliances
Industrial
High Voltage
Power
Generators
Biomass Systems
Small Hydro
Wind
T&D
Power Trafos
Dry Trafos
Distrib. Trafos
Automation
Sub stations
Drives (4)
Controls (5)
Panels (6)
New Biz
Gearbox
Gensets
Turbines
Portfolio Strategy
May 2010
Market
Access
May 2010
May 2011
Mar 2011
June 2010
Technology
Page 16
December 2010
Growth Drivers &
Opportunities
ƒ New and improved products, focusing efficiency,
reliability and features
ƒ More integrated systems / complete solutions
ƒ New markets / products, R&D and acquisitions
and new geographies.
Page 17
Key takeaways
ƒ Global growth driven by emerging economies, with
massive infrastructure spending
ƒ Energy management will become more important, with
minimum performance standards (MEPS) regulations and
standardization
ƒ Growing importance of renewable sources of energy
ƒ Smart infrastructure systems will demand smarter
equipment
ƒ Brazilian pre-salt oil development will demand significant
investment
Page 18
Contacts
ƒLaurence Beltrão Gomes
Investor Relations Officer
laurence@weg.net
ƒ Luís Fernando M. Oliveira
Investor Relations Manager
+55 (47) 3276-6973
luisfernando@weg.net
twitter.com/weg_ir
www.weg.net/ri
Highlights
First semester of 2011
Gross Operating Revenue
Domestic Market
External Markets
External Markets in US$
Net Operating Revenue
Gross Operating Profit
Gross Margin
Net Income
Net Margin
EBITDA
EBITDA Margin
EPS
Page 20
06M11
2,853,413
1,798,924
1,054,489
648,850
2,403,375
692,099
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%
0.4451
16.9%
6.9%
0.3804
17.0%
Figures in R$ Thousands
Highlights
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
Page 21
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%
Highlights
Balance Sheet (cont.)
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
Page 22
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%
Highlights
Cash Flow Statement
6 Months
2010
7
Operating Activities
Net Earnings before Taxes
Depreciation and Amortization
Earnings from Subs (Equity Method)
Provisions:
Changes in Assets & Liabilities
368,666
93,239
42,782
(148,039)
316,031
88,997
(1,204)
41,651
(13,592)
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
Page 23
6 Months
2011
11
Beginning of Period
End of Period