Deutsche Bank Industrials Conference June 2010 Motors | Automation | Energy | Transmission & Distribution |...
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Motors | Automation | Energy | Transmission & Distribution | Paints June 2010 Deutsche Bank Industrials Conference 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. 2 Deutsche Bank Industrials Conference June 2010 History of WEG 3 Deutsche Bank Industrials Conference June 2010 Shareholding structure Clear and strong control group that knows the business but is not directly involved on day to day operations Voigt 33.3% Silva 33.3% WEG Participações e Serviços S/A 50.9% Werninghaus 33.3% Founders’ Families (directly) 14.4% Controlling Shareholders Other (Float) 34.7% WEG S.A. 4 Deutsche Bank Industrials Conference June 2010 Global Presence Worldwide presence, with Brazil as the base of a truly global player in electric capital goods Distributors & Agents in over 85 countries zFactories in 5 countries zCommercial branches in 23 countries Sales to over 110 countries Over 1100 service centers in all 5 continents 5 Deutsche Bank Industrials Conference June 2010 Business Units Complete solutions that increase perceived value by the client MOTORS AUTOMATION TRANSMISSION & DISTRIBUTION 6 Deutsche Bank Industrials Conference ENERGY COATINGS June 2010 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, unaffected by financial crisis 7 Deutsche Bank Industrials Conference June 2010 Consistent and profitable growth 837 1.026 923 504 487 25% 31% 37% 37% 47% 44% 33% 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 8 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 503 575 Net Earnings (R$) 560 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 84 80 291 435 666 CAGR 18% 3.527 2.978 2.603 2.015 1.535 1.269 963 753 632 574 458 430 CAGR 19% 5.111 4.551 5.471 Product, client and industry exposures are diversified, strong and clear focus on profitable opportunities Gross Revenues (R$) EBITDA (R$) Deutsche Bank Industrials Conference 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 June 2010 Strong fundamental trends Energy prices will continue to increase Cheaper energies are becoming less available Concerns about sustainability (climate change) Cleaner energies are technologically intensive Oil prices (US$) 100 90 80 70 60 50 40 30 20 10 ‐ 1970 9 Deutsche Bank Industrials Conference 1980 1990 2000 June 2010 2010 Partial Strong fundamental trends Increasing energy prices changes electric equipment industry Energy efficiency Industrial electric motors represent around 25% of global electricity consumption Most efficiency “bang” for the Capex “buck” Lower CO2 emissions Increased economic viability of alternative fuels and sources of energy Cleaner Energy Sources 10 Deutsche Bank Industrials Conference June 2010 Strong fundamental trends Increasing energy prices changes electric equipment industry Energy efficiency Industrial electric motors represent around 25% of global electricity consumption Most efficiency “bang” for the Capex “buck” Lower CO2 emissions Increased economic viability of alternative fuels and sources of energy Cleaner Energy Sources 11 Deutsche Bank Industrials Conference June 2010 Electric motor is a “different” machine Cost of ownership of an electric motor throughout its useful life Specifications must be exact. Everything affects energy efficiency “Similar” motors are not economical, even if much cheaper Becomes more evident when energy prices go up Returns on energy efficiency are very attractive 12 12 Deutsche Bank Industrials Conference June 2010 WEG is Uniquely Positioned 13 Deutsche Bank Industrials Conference June 2010 Scale and Customization Customization is characteristic of the industry and specifications are very diverse. Most production is built to order Integrated and synergetic Largest integrated motor site in the world Main Manufacturing Plant in Jaraguá do Sul, SC Foundry / Cast Machine Engineering Incoming Orders production allows for large scale of production, with: Lower costs Higher operating efficiency Vertical integration allows for: Customized products Fastest to the market Wires Manufacturing Steel Shop Paints & Varnishes Assembly Line More than 2,500 different types of electric motors monthly Tooling 14 Deutsche Bank Industrials Conference June 2010 Contacts Laurence Beltrão Gomes www.weg.net/ir Finance & IR Officer laurence@weg.net Luís Fernando M. Oliveira Investor Relations Manager +55 (47) 3276‐6973 luisfernando@weg.net ri@weg.net 15 Deutsche Bank Industrials Conference twitter.com/weg_ir June 2010 Our Business 16 Deutsche Bank Industrials Conference June 2010 Annex: Recent Financial Information 17 Deutsche Bank Industrials Conference June 2010 Profitability Net Earnings (R$ million) EBITDA (R$ million) 25% 23% 23% 22% 22% 1026 20% 18% 18% 20% 923 837 17% 15% 15% 12% 575 560 13% 548 666 503 403 504 487 394 375 Net Income 18 Net Margin Deutsche Bank Industrials Conference EBITDA 20 09 08 20 07 20 20 06 05 20 04 20 03 20 20 09 08 20 07 20 06 20 05 20 04 20 20 03 308 EBITDA Margin June 2010 General Comments on Q1 2010 Quarter confirms that recovery is going to be gradual Economic dynamisms spreads from the Brazilian consumer towards other segments: Consumer goods continue strong, tied to fundamentals Industrial products doing better the closer they are to the consumer Longer cycle products is still in early stages of recovery Other emerging countries faring better than mature economies We are resuming some investment plans as demands picks up 19 Production of HT motors in India by 2H of 2010; Production of commercial motors in Linhares by year end Deutsche Bank Industrials Conference Page 19 June 2010 Quarterly Highlights Gross Operating Revenue Domestic Market External Markets External Markets in US$ Net Operating Revenue Gross Operating Profit Q1 2010 1.131.546 871.619 435.299 -8,1% -24,1% 802.351 468.632 -0,1% -29,5% 181.170 931.907 307.454 250.328 1.076.969 344.226 -27,6% -13,5% -10,7% 202.726 1.048.241 311.954 -10,6% -11,1% -1,4% 33,0% 32,0% 119.074 136.426 12,8% 12,7% 181.750 228.548 19,5% 21,2% Net Margin EBITDA Q1 2009 Growth % 1.270.984 -11,0% 801.299 330.247 Gross Margin Quarterly Net Income Q4 2009 Growth % 1.306.913 -13,4% EBITDA Margin 29,8% -12,7% 122.193 -2,6% 11,7% -20,5% 181.112 0,4% 17,3% Figures in R$ Thousands 20 Deutsche Bank Industrials Conference Page 20 June 2010 Financing Policies March 2010 CASH & EQUIVALENT 1.962.538 DEBT 1.782.466 - Current 814.274 - Long Term 968.192 NET CASH (DEBT) 180.072 December 2009 2.127.117 1.872.533 895.885 976.648 254.584 March 2009 1.815.164 2.099.941 1.171.587 928.354 (284.777) Operating cash flow trends continue favorable Capex program picking up where demand is stronger Strong capital structure allows access to low cost sources of funding BNDES (Brazilian development bank) is the main partner Negotiating first transaction with IFC Trade finance at very attractive terms Foreign subs financed locally but considering consolidated balance sheet Virtually no net foreign currency exposure Extending average maturities of debt at lower costs 21 Deutsche Bank Industrials Conference Page 21 June 2010 Gross Operating Revenues Evolution of Gross Revenues – Domestic Market (in R$ million) 0% 5% 22% 23% 623 507 761 802 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Evolution of Gross Revenues – External Market (in US$ million) External Market in US$ Quarterly Average FX 2,1875 2,1066 1,7354 2,3117 18% 801 Gross Operating Revenues decreasing by 11%. Net Revenues down by 11.1% FX appreciation of 27% negatively impacts comparisons Product mix continues to shift towards short cycle products Lower order intake during 2009 is now apparent in revenues Recovery continues driven by the Brazilian consumer Long cycle and external (mature) markets continue soft. Q1 2010 1,8229 -11% 30% 29% 126,6 Q1 2006 22 165,2 Q1 2007 195,3 202,7 181,2 Q1 2008 Q1 2009 Q1 2010 Deutsche Bank Industrials Conference Page 22 June 2010 Global Presence Gross Revenues Breakdown: Q1 2010 9% 10% Europe North America 3% 7% Asia & Oceania 71% 2% 5% South & Central America 23 Brazil Deutsche Bank Industrials Conference Africa Page 23 June 2010 Profitability 36% 37% 36% 30% 33% 22% 238 Q1 2006 293 320 Q1 2007 Q1 2008 16% Q1 2009 Q1 2010 12% Q1 2007 118 122 119 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 17% 20% 203 181 182 Q1 2008 Q1 2009 Q1 2010 EBITDA Margin Gross margin improving, despite little help from top line growth EBITDA margin trending towards the floor of the historical interval Net margin showing more modest improvement, benefiting from FX stability 13% 126 Net Income Net Margin Deutsche Bank Industrials Conference 193 EBITDA 129 24 Q1 2006 Gross Margin 14% 23% 307 149 Gross Profit 18% 312 24% Page 24 June 2010 Growth and Margin Analysis Profitability (EBITDA Margins) Revenues Growth (CAGR) 30,0% 25,0% 30% 23,9% 2004‐2009 2009‐2012E 25% 20,0% 15,0% 20% 12,6% 9,6% 10,0% 5,1% 15% 10,1% 6,0%6,6% 5,0% 10% 2,6% 2,6% 5% 0,0% 0% ‐5,0% ‐4,2% 2004 2005 2006 2007 2008 2009 ‐10,0% WEG SIEMENS EMERSON ABB WEG SCHNEIDER SIEMENS EMERSON ABB Financial Leverage (Net Debt / EBITDA 2009) 1,50 1,10 1,00 1,00 0,80 0,50 ‐ ‐0,50 ‐0,30 ‐1,00 ‐1,50 ‐1,50 ‐2,00 WEG Source: Morgan Stanley 25 Deutsche Bank Industrials Conference SIEMENS EMERSON ABB SCHNEIDER June 2010 SCHNEIDER
