Q3 2010 Investors Presentation The Global Solution with Electric Machines
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The Global Solution with Electric Machines and Automation for Industry and Energy Systems Q3 2010 Investors Presentation 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. Page 1 WEG key facts About WEG Market leader in Latin America and among top 5 electric motor players in the world Over 21thousands employees (2.5 thousands outside Brazil) Around 35% of business outside Brazil Revenues CAGR of 19% over past 15 years 2009 Revenues: US$ 2.8 billion 19.537 employees worldwide EBITDA: US$ 465 million Net earnings: US$ 305 million Strong balance sheet Shareholding Structure Voigt 33.3% Silva 33.3% WEG Participações e Serviços S/A 51% Werninghaus 33.3% Controlling Families 14% WEG S.A. Page 3 Free Float 34% Our Business Units Motors Page 4 Automation Energy Transmission & Distribution Coatings Services Our business Speed Variation Power Generation Subestations Motors Transformers Electrical Components Electric Panels Generators Liquid and powder Coatings and industrial Varnishes Page 5 Industrial Automation Industrial segments Today, WEG offers solutions for a wide variety of industrial segments Oil & Gas Shipbuilding Mining, Cement and Aggregate Sugar & Ethanol Pulp & Paper Steel Infrastructure Energy Food & Beverage Page 6 Revenues by Business Area 6% 13% 47% 34% Industrial IndustrialEquipment Equipment GTD GTD Domestic DomesticUse Use Paints Paints&&Varnishes Varnishes Business areas Performance Drivers Page 8 ElectroElectronic Industrial Equipments Generation, Transmission and Distribution Motors for Domestic Use 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 Industrial Paints and Varnishes Brazilian GDP growth Strong Fundamental Trends Energy prices will continue to increase Cheaper energies are Electricity (Industrial tariff in US$) 300 becoming less available Concerns about sustainability 2 5 0 (climate change) 200 Cleaner energies are 150 technologically intensive 100 50 - 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: EPE BEN 2010 Page 11 Strong Fundamental Trends Energy Efficiency Industrial electric motors represent around 25% of global electricity consumption Most efficiency “bang” for the Capex “buck” Page 12 Renewable Energy Lower CO2 emissions Economic viable alternatives fuels Unique Product Characteristics Cost of O wnership Acquisitio n Maintain ance of a Elec tr ic Motor 1,4% 1,6% Energy Consupti on 97% Page 13 Specifications must be exact. Everything affects energy efficiency “Similar” motors are not economical, even if much cheaper Differences become more evident when energy prices go up Returns on energy efficiency investments are very attractive Harmonization of energy efficiency regulations 100,0% IE3 IE2 IE1 95,0% 90,0% 85,0% 80,0% Page 14 160 132 110 90 75 55 45 37 30 22 18,5 15 11 7,5 5,5 4 3 2,2 1,5 1,1 0,75 70,0% 200 up… 75,0% Brazil has clean electricity already… Biomass 5,4% Wind 0,2% Hydro 76,9% Natural Gas 2,6% Oil 2,9% Nuclear 2,5% Coal 1,3% Import 8,1% …but it can get cleaner Strong and Sustainable Competitive Advantages Production From our first motor manufactured in 1961 to over 10 million motors manufactured every year. Page 17 The world’s largest electric motor manufacturing plant is in Jaragua do Sul, Brazil Power of all generators manufactured by WEG equals over 32,000 MVA (twice Itaipu’s hydroelectric plant capacity) Over 1,250 tons of powder coatings and 800 tons of liquid coatings are produced each month Unique vertically integrated production footprint allows Customization of electric machines and Scale benefits from size Main vertically integrated activities Machinery and tools production Steel Stamping Iron casting Wire manufacturing Paints & Varnishes More than 2,500 different types of electric motors monthly Page 18 Manufacturing plants and branches From the first building to the current facilities Argentina Chile Colombia Venezuela Mexico United States Portugal Spain Italy France United Kingdom Germany Belgium Netherlands Sweden United Emirates Russia India China Singapore Brazil Japan Australia Argentina Mexico Portugal China India South Africa Page 19 Sales Agents, Distributors and Service in over 110 countries Technological innovation capacity Technology advances on a fast rhythm, WEG keeps leadership position CONSISTENT INVESTMENTS ON R&D 2,5% 2,5% 2,4% 2,3% 2,3% 1,7% 1,6% 1,8% 2,0% 1,5% 63 Page 20 Partnership with the best engineering schools in Brazil and the world Technology Committee to discuss innovations on electrical and electronic areas 21 16 18 18 1999 2000 2001 2002 Research & Development 30 34 2003 2004 2005 Net Revenue 86 89 2007 2008 73 2006 Technological Innovation Technology advances on a fast rhythm, WEG keeps leadership position OVER 1.000 ENGINEERS DEVELOPING PRODUCTS Page 21 Increase energy efficiency Reduce noise and temperature levels Reduce size Increase reliability Reduce total cost of ownership 837 1.026 504 487 25% 31% 37% 33% 37% 47% 44% 38% 23% 22% 16% 14% 220 176 125 82 98 58 41 31 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Page 22 31% 33% 379 308 403 CAGR 23% 327 207 146 135 106 Return on Equity 38% 548 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 503 Net Earnings (R$) 560 575 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 84 80 291 435 666 CAGR 18% 3.527 2.978 2.603 2.015 1.535 1.269 963 753 632 574 458 430 CAGR 19% EBITDA (R$) 923 4.551 Gross Revenues (R$) 5.111 5.471 Consistent and profitable growth 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Capex (R$ million) 457 Cap ex D ep r eci ati on 318 206 206 96 56 Page 23 2003 196 157 146 126 226 1 1 11 0 5 67 2004 2005 2006 2007 2008 2009 Dividend Pay-out Policy Net Earnings and Dividends (R$ million) 52% 44% 43% 35% 37% 39% 40% 575 57% 560 548 503 375 308 299 301 176 173 125 165 134 124 29 46 68 1999 2000 2001 300 235 229 220 89 2002 2003 Net Earnings Page 24 55% 45% 40% 403 82 54% 2004 2005 Dividends 2006 2007 Pay-out (%) 2008 2009 06M10 Highlights 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 2010 3.778.128 Growth 2009 3.803.683 -0,7% 2.539.463 1.238.665 2.500.008 1.303.670 1,6% -5,0% 700.290 3.133.544 990.109 626.962 3.133.651 1.008.339 11,7% 0,0% -1,8% 31,6% 32,2% 377.164 411.966 12,0% 13,1% 564.961 608.877 18,0% 19,4% -8,4% -7,2% Figures in R$ Thousands Page 25 Key takeaways Emerging economies driven global growth, with expanding infrastructure spending Harmonization of Minimum Energy Performance Standards (MEPS) regulations, with focus on electric motors Growing importance of renewable sources of energy and smart monitoring systems (smart grid) Brazilian pre-salt oil development will demand significant investment World Cup 2014 and Olympic Games 2016 will also increase economic dynamism Page 26 Growth Drivers / Opportunities New and improved products, focusing efficiency, reliability and features More integrated systems / complete solutions New markets, both in scope as in breath Page 27 Contacts Laurence Beltrão Gomes IRO +55 (47) 3276-7917 laurence@weg.net Luís Fernando M. Oliveira Investor Relations Manager +55 (47) 3276-6973 luisfernando @weg.net Page 28 The Global Solution with Electric Machines and Automation for Industry and Energy Systems “An invitation to grow together”
