Meetings with Investors 2 Quarter, 2012 nd
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Meetings with Investors 2nd Quarter, 2012 May 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 Meetings with Investors - 2nd quarter, 2012 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. WEG business The global solution with electric machines and automation for industry and energy systems Motors 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 Brazil, leader or second all business lines in which it operates; Net Revenue R$ 5,2 billion in 2011 25,000 employees worldwide Around 40% of business outside Brazil; Unique vertically integrated production system which allows great flexibility and efficiency in production of electrical l i l equipment i (“mass (“ customization”); i i ”) Production footprint strategically located in large, fast growing, emerging economies. Meetings with Investors - 2nd quarter, 2012 Shareholding structure Voigt 33.3% Founders’ Families (directly) Silva 33.3% WPA Participações e Serviços S/A 14% Werninghaus 33.3% Treasury Shares and Management 51% WEG S.A. SA Meetings with Investors - 2nd quarter, 2012 1% Free Float 34% Key information Capital Market Issuer WEG S.A. Ticker WEGE3 (BM&Fbovespa) / WEGZY (OTC – ADR Level 1). Listing Segment Novo Mercado (since 2007) Number of Shares Issued: In treasury: Ex-treasury: Share price On Dec 31, 2011: R$ 17.54 On Apr 30, 2012 : R$ 20.14 Market value On Dec 31,, 2011: R$$ 11,642 , million On Apr 30, 2012 : R$ 12,505 million Liquidity (average daily volume) In 2011: R$ 7,406 thousand / day In 2012: R$ 5,875 thousand / day Composition of 45% - Foreign institutions 20% - Brazilian institutions 35% - Others (individuals, etc.) Free Float Meetings with Investors - 2nd quarter, 2012 620,905,029 500,000 620,405,029 Industry y structure and WEG’s business model Investment Case Megatrends cause changes in demand and create opportunities Energy and industrial efficiency Renewable energy Smart grid Electrical mobility Electric motors represent Global need to diversify Electricity distribution Increasing urbanization around 25% of world p electricityy consumption Industrial productivity increases and ISO 50.001 (energy management) drives investments energy sources and lower GHG emissions Scale and technological development increases viability network has to become ”smarter” More sensors, more automation, more efficient generation and use of electricity adds to congestions and need of new solutions Electric vehicles, hybrids or alternative fuels will become more common Strategic integration of equipment into solutions that are energy and operationally efficient, as well as economically feasible. Differentiated Diff ti t d b business i model: d l Verticalization, diversification and modular expansion capability increase competitiveness and lower risks Proximityy to customers,, creatingg strongg loyalty, y y, cross selling g opportunities pp for products p and services Meetings with Investors - 2nd quarter, 2012 “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 Energy efficiency Meetings with Investors - 2nd quarter, 2012 Parts Technical 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 intermediate manufacturing processes of electrical equipment allows great production flexibility Diversification Production flexibility allows to meet demands in practically any industrial segment Modular expansion Global distribution Ability to distribute products throughout the Capacity additions are world with direct presence made at a progressive in over 25 countries and pace in line with demand Strong balancerepresentatives in more sheet than 100 countries Ability to maintain investments across the business cycle, strengthening competitive position in each cycle Meetings with Investors - 2nd quarter, 2012 Competitive Advantages Mass customization Large and synergistic portfolio One-stop shop concept Low financial leverage Focus F on M&A enabling bli continuous future growth Production in low cost emerging markets Growth Strategy Consistent growth Robust business model allows to find and explore growth opportunities even under unfavorable macroeconomic conditions Real Estate Crisis 1,282 1,066 800 8 62 28 52 27 46 66 37 72 rates, overvalued exchange rate 1,694 4 5,189 4,392 3,749 3,009 9 High interest 2,204 economy 2,515 Election ec o ((2002/03) 00 /03) Stabilization of 4,211 Brazilian Crisis Energy Crisis (2000/01) PT (Worker’s Party” Real Plan (R$) 35 53 4,50 02 Emerging Markets Asia (1997) Russia (1998) Argentina (2001) CAGR 18.3% Bursting of bubble Lehman Bros. 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Meetings with Investors - 2nd quarter, 2012 WEG 2020 Strategic Planning Corporate aspirations for 2020 Pursue continuous g growth with: Defense of leadership positions in several markets and segments; Introduction of new products and technologies; Introduction of products and solutions in new places. Reach annual revenue of R$ 20 billion in 2020. Meetings with Investors - 2nd quarter, 2012 Future growth Attractive future growth prospects worldwide 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% CAGR 2011‐2020* Meetings with Investors - 2nd quarter, 2012 WAU WTI 19.5% 19 5% 83.9% 16.0% 16 0% 58.9% WEG 2020 Growth drivers Example: WEG Linhares “More and Better” Better Growth of operations in markets and segments where WEG is currently present and holds a leading position Example: ZEST International Expansion Expansion into foreign markets by leveraging existing strengths and conquering relative positions similar to those in Brazil Example: p Gearboxes New Businesses Expansion into synergistic and complementary businesses, creating integrated product offers Meetings with Investors - 2nd quarter, 2012 Global production platform Production outside Brazil is expanding and will exceed 20% of total over medium term BRAZIL ARGENTINA MEXICO 10% PORTUGAL 34% 2011 CHINA 56% INDIA SOUTH AFRICA Produced and sold in Brazil Produced in Brazil and exported Produced and sold abroad UNITED STATES AUSTRIA Meetings with Investors - 2nd quarter, 2012 WEG 2020 Strategic Planning Major trends and opportunities Energy efficiency: Electric motors;; Gearboxes and gear motors; Frequency inverters, motor starters and switching devices, control and protection of electrical circuits and industrial automation; Electrical-electronic industrial systems; Renewable energy Generators and transformers; Solutions for renewable and distributed energy, exploring all opportunities in small hydroelectric power plants, biomass, wind and solar; Mobility Electric traction solutions for urban (public) transportation and maritime vehicles; Smart Grid Devices for control, maneuver and protection of electrical circuits and automation; Critical Power, UPS (Uninterruptable Power Supply), No-breaks and alternators for gensets; P Power substations; b t ti Smart meters Meetings with Investors - 2nd quarter, 2012 Motors Strategic Positioning Appliance Industrial Hi h V lt High Voltage Energy Generators Biomass Systems Small Hydro Small Hydro Wind T&D Power Dry Distribution Automation Substations Drives Controls Panels N New Business Gearboxes Gensets Hydro Turbines Steam Turbines Steam Turbines Gas Turbines Meetings with Investors - 2nd quarter, 2012 Portfolio Strategy Clear vision of attractiveness of opportunities November 2011 May 2010 Market Acc cess October 2011 November 2011 May 2010 May 2011 March 2011 June 2010 Technology Meetings with Investors - 2nd quarter, 2012 December 2010 Operating and financial highlights Performance in 2011 Year marked by recovery 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 Depreciation and amortization 8% Other accounts payable 4% Meetings with Investors - 2nd quarter, 2012 Capex -8% 1. Growth was stronger in 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 4Q11. Acquisition -10% Other / Adjustments Decrease in Working 2% Capital 11% Materials 66% External Market Sources and uses of cash Sources 2011 Increase in Working Capital -42% Highlights Yearly Figures Gross Operating Revenue Net Operating Revenue Domestic Market E External l Markets M k External Markets in US$ Gross Operating p g Profit Gross Margin Quarterly Net Income Net Margin EBITDA EBITDA Margin EPS 2011 6,130,291 5,189,409 2,902,958 2 286 451 2,286,451 1,361,689 1,556,051 , , 2010 5,282,737 4,391,973 2,670,443 1 721 530 1,721,530 982,835 1,386,952 , , 30.0% 31.6% 586,936 519,782 11 3% 11.3% 11 8% 11.8% 882,340 789,110 17.0% 18.0% 0.9461 0.8371 % 16 0% 16.0% 18.2% 8.7% 32 8% 32.8% 38.5% 12.2% 2009 % 5,110,596 3.4% 3 4% 4,210,620 4.3% 2,526,430 5.7% 1 684 190 2.2% 1,684,190 2 2% 849,655 15.7% 1,356,401 , , 2.3% 32.2% 12.9% 550,543 -5.6% 13 1% 13.1% 11.8% 837,424 -5.8% 19.9% 13.0% 0.8914 -6.1% Figures in R$ Thousand Meetings with Investors - 2nd quarter, 2012 Highlights Quarterly Figures Net Operating Revenue Domestic Market External Markets External Markets in US$ Gross Operating Profit Gross Margin Q1 2012 1 369 762 1,369,762 714,268 655,494 Q4 2011 1 468 551 1,468,551 781,938 686,613 % -66.7% 7% -8.7% -4.5% 370,825 380,772 -2.6% 391,967 445,686 -12.1% 28.6% 30.3% Net Income 148,247 156,248 Net Margin 10.8% 10.6% EBITDA 208 638 208,638 15.2% 17.6% EPS 0.2390 0.2518 Meetings with Investors - 2nd quarter, 2012 27.6% -5.1% 121,564 21.9% 10.8% 258 210 -19.2% 258,210 19 2% EBITDA Margin Q1 2011 % 1 126 117 21 1,126,117 21.6% 6% 660,322 8.2% 465,795 40.7% 279,522 32.7% 310,662 26.2% 164 808 26.6% 164,808 26 6% 14.6% -5.1% 0.1958 22.0% Figures in R$ Thousand Highlights Balance sheet - Assets December 2011 R$ AV% 22 December 2010 R$ AV% 13 CURRENT ASSETS 5,867,061 64% 4,794,009 64% Cash & cash equivalents Receivables Inventories Other current assets LONG TERM ASSETS Long term securities Deferred taxes Other non-current assets FIXED ASSETS 2,931,615 1 307 692 1,307,692 1,362,314 265,440 432,469 , 280,635 111,488 40,346 2 806 331 2,806,331 32% 14% 15% 3% 5% 3% 1% 0% 31% 2,552,996 1 044 712 1,044,712 1,008,952 187,349 136,984 , 78,810 58,174 2 580 171 2,580,171 34% 14% 13% 2% 2% 0% 1% 1% 34% 349 0% 601 0% 2,445,760 27% 2,395,575 32% 360,222 360 222 9,105,861 4% 100% 183,995 183 995 7,511,164 2% 100% Investment in Subs Property, Plant & Equipment Intangibles TOTAL ASSETS Meetings with Investors - 2nd quarter, 2012 Highlights Balance sheet - Liabilities December 2011 R$ AV% CURRENT LIABILITIES December 2010 R$ AV% 2,752,960 30% 1,938,803 26% Social and Labor Liabilities 161,436 2% 141,797 2% Suppliers 298 195 298,195 3% 242 300 242,300 3% 88,473 1% 72,204 1% 1,701,435 19% 1,018,995 14% 2,804 285,843 26,314 188,459 2,446,312 0% 3% 0% 2% 27% 63,440 271,949 23,583 104,535 2,028,525 1% 4% 0% 1% 27% 1,756,293 19% 1,399,948 19% Other Long Term Liabilities 122,485 1% 86,875 1% Deferred Taxes 421,918 5% 415,318 6% Contingencies Provisions 145,616 2% 126,384 2% 106,477 1% 89,229 1% STOCKHOLDERS' EQUITY STOCKHOLDERS 3 800 112 3,800,112 42% 3 454 607 3,454,607 46% TOTAL LIABILITIES 9,105,861 100% 7,511,164 100% Fiscal and Tax Liabilities Short Term Debt Dividends Payable Advances from Clients Profit Sharring Other Short Term Liabilities LONG TERM LIABILITIES Long Term Debt MINORITIES Meetings with Investors - 2nd quarter, 2012 WEG's Investment Case Opportunity to gain broad exposure in Brazilian and global industrial sector Direct exposure to renewable energy generation business Strong position in Brazilian market and global consolidator in segment with rising technical entry barriers 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 Meetings with Investors - 2nd quarter, 2012 For information: Contact WEG Investor Relations Laurence Beltrão Gomes Investor Relations Officer laurence@weg.net Luís Fernando M. Oliveira Investor Relations Manager +55 (47) 3276 3276-6973 6973 luisfernando@weg.net twitter.com/weg_ir Meetings with Investors - 2nd quarter, 2012 Our Business
