Meetings with Investors
1st quarter, 2012
February / March 2012
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
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
p
or implied,
p
is made as to the accuracy,
y
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
op
o s e
expressed
p essed in thiss material
ae a a
are
e subjec
subject to
o c
change
a ge
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,
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
Brasil Road Show - 1T2012
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,
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.
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
y
our control.
1
WEG business:
The global solution with electric machines and
automation for industry and energy systems
Motors
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
Automation
Energy
T&D
Coatings
Founded in 1961, in Jaraguá do Sul, Santa Catarina;
Listed since 1971;
L ti A
Latin
America
i market
k t lleader
d and
d among top
t 5 electric
l t i motor
t players
l
in
i the
th world;
ld
In Brasil, leader or second all business lines in which it operates;
Net Revenue R$ 5,2 billion in 2011
25.000 employees around the world
Around 40% of business outside Brazil;
Unique vertically integrated production system, which allows great flexibility and efficiency in the
production
d i off electrical
l
i l equipment
i
(“
(“mass customization”);
i i ”)
Production footprint strategically located in large, fast growing, emerging economies.
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2
Shareholding structure
Voigt
33.3%
Founders’
Families
(directly)
14%
Silva
33.3%
WPA
Participações e
Serviços S/A
Werninghaus
33.3%
Treasury Shares
and
Administrators
51%
1%
Free Float
34%
WEG S.A.
SA
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3
Key information
Capital Market
Issuier
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 prices
ƒ In Dec 31, 2011: R$ 17,54
ƒ In Feb 24, 2012: R$ 19,37
Market value
ƒ In Dec 31,, 2011: R$$ 11.642 million
ƒ In Feb 24, 2012 R$ 12.008 million
Liquidity (average
daily volume)
ƒ In 2010: R$ 6.745 thousand / day
ƒ In 2011: R$ 7.406 thousand / day
Composition of
ƒ 15% - Foreign institutions
ƒ 7% - Brazilian institutions
ƒ 12% - Other (individuals, etc.)
Free Float
Brasil Road Show - 1T2012
620.905,029
500.000
620.405.029
4
Industry
y structure
and WEG’s business
model
Case of Investment
Megatrends cause changes in demand and create opportunities
Energy and
industrial efficiency
Renewable energy
Smart grid
Electric mobility
ƒElectric motors represent
ƒGlobal need to diversify
ƒElectricity distribution
ƒIncreasing urbanization
around 25% of world
p
electricityy consuption
ƒIndustrial productivity
increases and ISO 50.001
(energy management)
drives investments
energy sources and lower
GHG emissions
ƒScale and technological
development increases
viability
network has to
become”smarter”
ƒMore sensors, more
automation, more efficient
generation and use of
electricity
adds to congestions and
need of new solutions
ƒElectric vehicles, hybrids or
alternative fuels will
become more common
Strategic integration of equipments in efficient solutions in terms of energy, operational
and economic feasibility.
Differentiated
Diff
ti t d b
business
i
model:
d l
ƒ Verticalization, diversification and modular expansion capability increase
competitiveness and lower risks
ƒ Proximityy to customers,, creatingg strongg loyalty,
y y, cross selling
g opportunities
pp
for products
p
and services
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6
“The final destination”
Strategic integration of equipment into complete solutions
Power Generation
Energy Conversion
Components and
i t
integration
ti
Thermal Biomass
Thermal Natural Gas
Small Hydroelectric Plants
Wind
Solar
Electric motors and generators
Medium / High voltage
Transformers
Low voltage
Drives, inverters / converters
Automation
Gearboxes and gear motors
Critical power
Typical Applications
Ventilation
Pumps
Generation
plants
Compressors
Substations
Vertical Segments
Oil & Gas
Mining
Sugar &
Ethanol
Ship
building
Pulp &
Paper
Steel
Cement
General
Industry
Synergistic Opportunities
Monitoring of operation
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Energy efficiency
Parts
Technical
7
Differentiated business model
Verticalization, diversification,
Verticalization
diversification global distribution
distribution, strong balance
sheet and modular expansion enable WEG to make the best of
opportunities
Verticalization
Control of the intermediate
processes of manufacture
of electrical equipment
allows great production
flexibility
Modular
M
d l
expansion
Diversification
Production flexibility
allows to meet demands
in virtually any industrial
segment
Global
distribution
Ability to distribute
products throughout the
Capacity additions are
world, with direct
made in relatively small
presence in over 25
increases , in line with
countries and
Strong balance
demand.
representatives in over
sheet
100 countries.
Ability to maintain
investments across the
business cycle,
strengthening competitive
position in each cycle
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Competitive Advantages
ƒMass customization
ƒLarge and synergistic portfolio
ƒOne stop shop concept
ƒLow financial leverage
ƒFocus
F
on M&A enabling
bli
continuous future growth
ƒProduction in low cost emerging
markets
8
Growth
Strategy
Consistent growth
Robust business model allows us to find and explore growth
opportunities even under unfavorable macroeconomic conditions
Real State Crisis
1,694
4
1,066
800
8
62
28
52
27
46
66
37
72
35
53
rates,
overvalued
exchange rate
1,282
ƒHigh interest
2,204
the economy
2,515
ƒStabilization of
5,189
3,009
9
Real Plan
3,749
ƒEnergy Crisis (2000/01)
ƒPT Election (2002/03)
4,392
Brasil Crisis
4,211
4,50
02
Emerging Markets
ƒAsia (1997)
ƒRussia (1998)
ƒArgentina (2001)
CAGR 18,3%
ƒ Bursting of bubble
ƒ Lehman
L h
B
Bros.
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
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10
WEG 2020 Strategic Planning
Corporate aspirations for 2020
ƒ
ƒ
Search for continuous g
growth with
ƒ Defense of leadership positions in several markets and
segments;
ƒ Introduction of new products and technologies;
ƒ Introduction of products and solutions in new
geographies
Reach annual revenues of R$ 20 billion in 2020;
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11
Future growth
Attractive future growth prospects
prospects, with potential in all units
and geographies
20,00
0 73
0,73
2,60
2,40
3,60
5,48
17 0% a a
17.0% a.a.
5,19
WEG
2011
WMO
15.3%
15
3%
15.5%
WEN
21.3%
21
3%
11.2%
WTD
15.2%
15
2%
17.4%
WAU
WTI
19.5%
19
5%
83.9%
16.0%
16
0%
58.9%
WEG
2020
CAGR 2011‐2020*
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12
Growth drivers
Example: WEG Linhares
“More and
Better”
Better
Growth of current operations in markets and
segments where WEG is currently present
position
and holds a leadership position.
Example: ZEST
International
Expansion
Expansion into foreign markets by leveraging
existing strengths and conquering in these
markets relative positions that are similar to
those held in Brazil
Brazil.
Example:
p Gearboxes
New
Businesses
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Expansion into synergistic and
complementary businesses, creating an
integrated product offering.
13
Global production platform
BRAZIL
Production outside Brazil tends to expand and exceed
20% of total
ARGENTINA
MEXICO
4%
7%
36%
32%
2009
60%
2010
PORTUGAL
10%
61%
34%
2011
CHINA
56%
INDIA
SOUTH AFRICA
Produced and sold in Brazil
Produced in Brazil and exported
Produced and sold abroad
UNITED STATES
AUSTRIA
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14
Strategic Planning WEG 2020
Major trends and opportunities
ƒ
ƒ
ƒ
ƒ
Energy efficiency:
ƒ
ƒ
ƒ
Electric motors;;
Gearboxes and gearmotors;
Frequency converter, motor starters and switching devices, control and protection
of electrical circuits and industrial automation;
ƒ
Electro/electronic industrial systems;
Renewable energy
ƒ
ƒ
Generators and transformers;
Solutions for renewable and distributed energy, exploring all opportunities in small
hydropower plants, biomass, wind and solar;
Mobility
ƒ
Electric traction solutions for urban transportation and maritime vehicles;
Smart Grid
ƒ
ƒ
ƒ
ƒ
D i
Devices
ffor control,
t l maneuver and
d protection
t ti off electrical
l t i l circuits
i it and
d automation;
t
ti
Critical Power, UPS (uninterruptable power supply), No-breaks and alternators for
gensets;
P
Power
substations;
b t ti
Smart meters
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15
Motors
Strategic Positioning
Appliance
Industrial
High Voltage
Pow
wer
Generators
Biomass Systems
Biomass Systems
Small Hydro
Wind
T&D
Power
Dry
Distribution
Autom
motion
Substations
Drives
Controls
Panels
New B
Biz
Gearbox
Gensets
Turbines
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16
Portfolio Strategy
Clear vision on the attractiveness of the opportunities
May 2010
November 2011
Market Acc
cess
October 2011
November 2011
May 2010
May 2011
March 2011
June 2010
December 2010
Technology
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17
Operating and
financial highlights
Performance in 2011
Year marked by the resumption of double digit growth
N R
Net
Revenue
4,502
3,749
-6%
20%
4,211
4%
4,392
18%
2,286
1,842
1,722
,
1 684
1,684
1,547
C t off goods
Cost
d sold
ld
5,189
Other Costs
10%
Depreciation
5%
Materials
63%
Other Costs
9%
Depreciation
4%
Labor
21%
2,202
2,660
2010
2,903
2,670
2,526
Labor
22%
2007
2008
2009
Domestic Market
2010
2011
Pre-tax income
32%
Increase in Debt
43%
Increase in Cash
-27%
Uses
Dividends/interest
on equity capital
-13%
Treasury stock
-0%
R$ 2.406
million
R$ 2.406
million
Other / Adjustments
Decrease in Working
2%
Capital
11%
payable
4%
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Capex
-8%
1. Growth was stronger in the external markets
than in Brazil.
2. Consolidation of acquisitions contributed to
g
(
growth (Zest
and Voltran in 1H11,, Watt Drive
and Electric Machinery in 2H11);
3. Weak margin in 1Q11 and sequential recovery
from then until the 4Q11.
Acquisition
-10%
Depreciation and
amortization
8%
Other accounts
Materials
66%
External Market
Sources and uses of cash
Sources
2011
Increase in Working
Capital
-42%
19
Highlights
Yearly Figures
Gross Operating Revenue
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
2011
6 130 291
6,130,291
5,189,409
2,902,958
2,286,451
1,361,689
1 556 051
1,556,051
2010
5 282 737
5,282,737
4,391,973
2,670,443
1,721,530
982,835
1 386 952
1,386,952
30.0%
31.6%
586,936
519,782
11.3%
11.8%
882,340
789,110
17.0%
18.0%
0.9461
0.8371
%
16 0%
16.0%
18.2%
8.7%
32.8%
38.5%
12 2%
12.2%
2009
%
5 110 596 3.4%
5,110,596
3 4%
4,210,620 4.3%
2,526,430 5.7%
1,684,190 2.2%
849,655 15.7%
1 356 401 2.3%
1,356,401
2 3%
32.2%
12.9%
550,543 -5.6%
13.1%
11.8%
837,424 -5.8%
19.9%
13.0%
0.8914 -6.1%
Figures in R$ Thousands
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20
Highlights
Quarterly Figures
Q4 2011
1 724 834
1,724,834
1,468,551
781,938
686,613
Q3 2011
1 552 044
1,552,044
1,317,483
737,350
580,133
%
11 1%
11.1%
11.5%
6.0%
380,772
353,520
7.7%
445 686
445,686
418 266
418,266
6 6%
6.6%
30.3%
31.7%
Net Income
156,248
154,567
Net Margin
10.6%
11.7%
258,210
243,743
EBITDA Margin
17.6%
18.5%
EPS
0.2518
0.2491
Gross Operating Revenue
Net Operating Revenue
Domestic Market
External Markets
External Markets in US$
Gross Operating Profit
Gross Margin
EBITDA
Brasil Road Show - 1T2012
18.4%
Q4 2010
%
1 504 610 14
1,504,610
14.6%
6%
1,258,429 16.7%
736,415 6.2%
522,014 31.5%
304,664 25.0%
391 300 13.9%
391,300
13 9%
31.1%
1.1%
141,509 10.4%
11.2%
5.9%
224,149 15.2%
17.8%
1.1%
0.2279 10.5%
Figures in R$ Thousands
21
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
I t ibl
Intangibles
TOTAL ASSETS
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December 2011
AV%
R$$
December 2010
AV%
R$$
5.867.061
2.931.615
1.307.692
1.362.314
265.440
432.469
280.635
111.488
40.346
2 806 331
2.806.331
349
2.445.760
360 222
360.222
9.105.861
4.794.009
2.552.996
1.044.712
1.008.952
187.349
136.984
78.810
58.174
2 580 171
2.580.171
601
2.395.575
183 995
183.995
7.511.164
64%
32%
14%
15%
3%
5%
3%
1%
0%
31%
0%
27%
4%
100%
64%
34%
14%
13%
2%
2%
0%
1%
1%
34%
0%
32%
2%
100%
22
Highlights
Balance sheet - Liabilities
CURRENT LIABILITIES
Social and Labor Liabilities
pp
Suppliers
Fiscal and Tax Liabilities
Short Term Debt
Dividends Payable
Advances from Clients
Profit Sharring
Other Short Term Liabilities
LONG TERM LIABILITIES
Long Term Debt
Other Long Term Liabilities
Deferred Taxes
Contingencies Provisions
MINORITIES
STOCKHOLDERS' EQUITY
TOTAL LIABILITIES
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December 2011
AV%
R$$
December 2010
AV%
R$$
2.752.960
161.436
298.195
88.473
1.701.435
2.804
285.843
26.314
188.459
2.446.312
1.756.293
122.485
421.918
145.616
106.477
3.800.112
9.105.861
1.938.803
141.797
242.300
72.204
1.018.995
63.440
271.949
23.583
104.535
2.028.525
1.399.948
86.875
415.318
126.384
89.229
3.454.607
7.511.164
30%
2%
3%
1%
19%
0%
3%
0%
2%
27%
19%
1%
5%
2%
1%
42%
100%
26%
2%
3%
1%
14%
1%
4%
0%
1%
27%
19%
1%
6%
2%
1%
46%
100%
23
WEG's investment case
ƒ
ƒ
ƒ
ƒ
ƒ
Opportunity to gain broad exposure to Brazilian and
global industrial sector
Direct exposure to renewable energy generation
business
Strong position in the Brazilian market and global
consolidator in a segment with rising technical barriers
of entry
Internationalization strategy
gy and g
global manufacturing,
g,
supported by strong cash generation and solid financial
position
Unique business model based on vertical integration
and production flexibility
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24
For information
Contact Investor Relations WEG
ƒLaurence Beltrão Gomes
Investor Relations Officer
laurence@weg.net
ƒ Luís Fernando M. Oliveira
Investor Relations Manager
+55 (47) 3276
3276-6973
6973
luisfernando@weg.net
twitter.com/weg_ir
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25
Our Business