Motors | Automation | Transformers | Energy | Paints and Varnishes
Investor Relations Presentation
Best way to invest in fast growing global energy efficiency
and renewable energy generation businesses
1
2
n
One of the highest growth capital goods companies; is number one or
number two in all product lines in Latin America
n
Unique business model is based on vertical integration, production
flexibility and technological innovation
3n Diversified product lines allows strong growth across different market
cycles
4n We have a history of achieving CAGR of 18% over past 17 years through
organic growth and accretive acquisitions
5
n
WEG 2020 Strategic Plan aims for R$ 20 billion / 17% CAGR through
international and product line expansion
BM&F Bovespa: WEGE3 / OTC: WEGZY
1
WEG business
The global solution with electric machines and automation for
industry and energy systems
Industrial Electro-Electronic Equipment
Motors
Energy
Motors for domestic use
Automation
T&D
Motors
Automation
Energy Generation, Transmission and Distribution (GTD)
BM&F Bovespa: WEGE3 / OTC: WEGZY
Paints and
Varnishes
Paints and Varnishes
2
“The final destination”
Strategic integration of equipment into complete solutions
Generation
Conversion
Components and integration
Automation (low & high
voltage switchgear, drives,
controls)
Generators / alternators
Small Hydro Turbines
Wind Turbines
Electric motors
Transformers
Gearboxes
Critical power
Solar inverter
Typical Applications
Value Added
Ventilation
Pumps
Compressors
Generation
plants
Substations
Segments
Oil &
Gas
Mining
Sugar &
Ethanol
BM&F Bovespa: WEGE3 / OTC: WEGZY
Ship
building
Steel
Pulp &
Paper
Cement
General
Industry
3
Our industry is undergoing major change
Megatrends cause changes in demand and create opportunities
Energy and industrial efficiency
Renewable energy
ƒElectric motors represent around 25%
ƒGlobal need to diversify energy
of world electricity consumption
ƒIndustrial productivity increases and
ISO 50.001 (energy management)
drives investments
sources and lower GHG emissions
ƒScale and technological development
increases viability
Smart grid
Electrical mobility
ƒElectricity distribution network has to
ƒIncreasing urbanization adds to
become ”smarter”
ƒMore sensors, more automation, more
efficient generation and use of
electricity
BM&F Bovespa: WEGE3 / OTC: WEGZY
congestions and need of new solutions
ƒElectric vehicles, hybrids or alternative
fuels will become more common
4
Motors
Strategic Positioning
Appliance
Industrial
High Voltage
Energy
Generators
Biomass Systems
Small Hydro
Wind
T&D
Power
Dry
Distribution
Automation
Substations
Drives
Controls
Panels
New Business
Gearboxes
Gensets
Hydro Turbines
Steam Turbines
Gas Turbines
BM&F Bovespa: WEGE3 / OTC: WEGZY
5
Strategic Positioning
WEG’s revenue growth and EBITDA margins are among the highest
Profitability (EBITDA Margins)
Revenues Growth (US$)
23,1%
CAGR 2005-2009
24,0%
CAGR 2009-2013
22,0%
19,3%
E
20,0%
WEG
18,0%
C
11,3%
16,0%
9,1%
6,6%
4,9%
6,3%
3,7%
3,0%
5,2%
14,0%
B
A
4,0%
12,0%
1,7%
F
D
10,0%
-0,1%
-3,0%
A
WEG
B
C
D
E
BM&F Bovespa: WEGE3 / OTC: WEGZY
8,0%
2009
2010
2011
2012
2013
F
6
Clear competitive advantages
Unique business model creates important and stable advantages
Competitive Advantages
WEG
Business
Model
ƒLarge and synergistic portfolio
ƒWorldwide presence
ƒOne-stop shop concept
ƒMass customization
ƒProduction in low cost emerging markets
ƒLow financial leverage
ƒFocus on M&A enabling continuous future
growth
BM&F Bovespa: WEGE3 / OTC: WEGZY
7
Solid growth track record
15,7%
16,5%
17,2%
1.230
851
789
812
1.017
1.021
839
617
462
475
381
293
256
188
133
119
96
67
ROIC
15,9%
15,3%
14,7%
12,4%
14,3%
10,6%
13,5%
656
587
843
BM&F Bovespa: WEGE3 / OTC: WEGZY
519
549
560
575
503
375
403
308
220
176
18,0%
18,0%
CAGR
18.4%
12,4% 13,0% 11,8%
11,3%
125
82
19,3%
18,4%
16,7%
14,9%
13,1%
98
58
20,5%
16,4% 16,5%
CAGR
20.4%
41
22,4% 22,7%
21,5%
18,2% 18,3%
10,9%
30
21,2%
18,1%
59
18,5%
23,5% 24,1% 22,8%
22,5%
22,5%
20,7%
Net Income and Net Margin (R$ million)
12,6%
EBITDA and EBITDA Margin (R$ million)
5.189
4.392
4.211
3.749
3.009
2.515
2.204
1.694
1.282
1.066
800
628
527
466
372
353
CAGR
17.9%
4.502
6.174
Revenues (R$ million)
6.829
Business model allows to find and explore growth opportunities even under
unfavorable macroeconomic conditions
12,1%
10,4%
11,8%
10,0%
10,3%
8
Growth rate
CAGR 10 years (2004-2013)
CAGR 5 years (2009-2013)
15,0%
7,9%
3,6%3,1%
3,4%
4,1% 3,7%
1,7%
WEG's Revenue
GDP Brazil
BM&F Bovespa: WEGE3 / OTC: WEGZY
Industrial Production
Capital Goods
Brazil
Industrial Production
Brazil
9
Growth drivers
1 “More and Better” – maintain our competitive position in those
markets where we enjoy market leadership and / or strong brand
recognition, making sure we are able to keep up with the
markets’ organic growth;
2 International Expansion – penetrate new geographic markets
and use our strong position / recognized brand in some
products to synergistically expand the product line;
3 New Businesses – expand the product line into
business / products that complement the
offering
BM&F Bovespa: WEGE3 / OTC: WEGZY
10
WEG Strategic Plan 2020
Corporate aspiration of R$ 20 billion by 2020. Growth comes from diverse base,
with a disciplined approach to organic and non-organic expansion
1/3
Non Organic
20.000
6.829
11%
6.174
5.189
4.392
18%
19%
2/3
Organic
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
BM&F Bovespa: WEGE3 / OTC: WEGZY
11
Portfolio Strategy
Clear vision of attractiveness of opportunities
2010
2011
Market Access
2010
2011
March 2014
2011
September 2013
2011
2012
2012
February 2014
2012
2010
2010
Technology
BM&F Bovespa: WEGE3 / OTC: WEGZY
12
Revenue profile
2008
2013
5,2%
6,4%
12,3%
10,6%
R$ 4.5 billion
55,3%
R$ 6.8 billion
21,8%
61,2%
27,2%
Industrial Equipment
BM&F Bovespa: WEGE3 / OTC: WEGZY
GT&D Equipment
Domestic Use
Paints & Varnishes
13
Revenue profile
2008
2013
BM&F Bovespa: WEGE3 / OTC: WEGZY
14
Global production platform
Production outside Brazil is expanding and will exceed
20% of total over medium term
BRAZIL
ARGENTINA
MEXICO
15%
30%
PORTUGAL
2000
2013
70%
35%
50%
CHINA
INDIA
SOUTH AFRICA
Produced and sold in Brazil
Produced in Brazil and exported
Produced and sold abroad
UNITED STATES
AUSTRIA
BM&F Bovespa: WEGE3 / OTC: WEGZY
15
Working capital needs
(% of Net Revenues)
50,0%
40,0%
30,0%
Working Capital
20,0%
Clients
Inventories
10,0%
Advances
Suppliers
0,0%
1Q06
1Q07
1Q08
1Q09
BM&F Bovespa: WEGE3 / OTC: WEGZY
1Q10
1Q11
1Q12
1Q13
1Q14
16
Use of cash
Capex (R$ million)
Research & Development (R$ million)
10,2%
% of Net Revenues
9,3%
8,0%
8,1%
7,4%
6,8%
6,1% 6,1%
% of Net Revenues
2,5%
2,5% 2,4%
2,3%
6,5%
5,8%
2,5%
2,3%
2,3%
2,0% 2,0%
5,4%
1,7% 1,6% 1,8%
5,3%
457
3,6% 3,9%
131
3,6%
305
126
42
38
49
73
83
238 244
226 233
188
146
183
1,5%
148
3,7%
206
2,7%
2,4%
63
111
16
18
18
21
30
73
86
89
101
83
34
Net Earnings and Dividends (R$ million)
BM&F Bovespa: WEGE3 / OTC: WEGZY
17
Key information
Capital market
Issuer
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 price
ƒ On Dec 30, 2013: R$ 23.97
ƒ On Apr 23, 2014 : R$ 26.54
Market value
ƒ On Dec 30, 2013: R$ 19,347 million
ƒ On Apr 23, 2014 : R$ 21,422 million
Liquidity (average
daily volume)
ƒ In 2013: R$ 15,193 thousand / day
ƒ In 2014: R$ 15,465 thousand / day
Composition of
ƒ 56% - Foreign institutions
ƒ 03% - Brazilian institutions
ƒ 41% - Others (individuals, etc.)
Free Float
BM&F Bovespa: WEGE3 / OTC: WEGZY
807,176,538
615,564
806,560,974
18
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
50%
1%
Free Float
35%
WEG S.A.
BM&F Bovespa: WEGE3 / OTC: WEGZY
19
WEGE3 performance
WEG’s shares achieved important indexes
28,00
26,00
Selected for
ISE 2014
24,00
WEGE3 share prices (R$)
22,00
Selected for
ISE 2013
Inclusion
Ibrx-100
20,00
18,00
Inclusion
MSCI Brazil
16,00
14,00
12,00
10,00
8,00
6,00
BM&F Bovespa: WEGE3 / OTC: WEGZY
20
20
Liquidity – WEGE3
15.193
15.465
2.165
2.100
10.343
7.442
6.750
6.062
7.697
9.833
Average Daily Traded Volume (R$ th)
BM&F Bovespa: WEGE3 / OTC: WEGZY
1.076
796
599
465
452
373
Average Daily Trades
21
21
Highlights
Yearly Figures
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
2013
6.828.896
3.432.040
3.396.856
1.569.891
2.236.766
32,8%
843.467
12,4%
1.230.032
18,0%
1,35950
2012
6.173.878
3.016.662
3.157.216
1.610.330
1.880.856
30,5%
655.979
10,6%
1.016.748
16,5%
1,05730
%
10,6%
13,8%
7,6%
-2,5%
18,9%
28,6%
21,0%
28,6%
2011
5.189.409
2.902.958
2.286.451
1.361.689
1.556.051
30,0%
586.936
11,3%
851.155
16,4%
0,94605
%
19,0%
3,9%
38,1%
18,3%
20,9%
11,8%
19,5%
11,8%
Figures in R$ Thousands
BM&F Bovespa: WEGE3 / OTC: WEGZY
22
Highlights
Quarterly Figures
Q1 2014
Q4 2013
1.783.543
1.893.299
-5,8%
1.477.577
Domestic Market
895.446
913.388
-2,0%
772.935
External Markets
888.097
979.911
-9,4%
704.642
375.677
570.421
32,0%
204.887
11,5%
299.643
16,8%
0,33023
428.229
615.847
32,5%
237.439
12,5%
341.653
18,0%
0,38270
-12,3%
-7,4%
353.077
463.604
31,4%
172.299
11,7%
248.898
16,8%
0,27772
Net Operating Revenue
External Markets in US$
Gross Operating Profit
Gross Margin
Net Income
Net Margin
EBITDA
EBITDA Margin
EPS
%
-13,7%
-12,3%
-13,7%
Q1 2013
%
20,7%
15,9%
26,0%
6,4%
23,0%
18,9%
20,4%
18,9%
Figures in R$ Thousand
BM&F Bovespa: WEGE3 / OTC: WEGZY
23
Highlights
Balance sheet – Assets
(R$ thousands)
December 2013
(A)
R$
%
December 2012
(B)
R$
%
December 2011
(C)
R$
%
6.851.787
68%
5.710.017
64%
5.867.061
64%
Cash & cash equivalents
3.373.799
33%
2.563.500
29%
2.931.615
32%
Receivables
1.658.806
16%
1.472.839
17%
1.307.692
14%
Inventories
1.445.927
14%
1.306.273
15%
1.362.314
15%
Other current assets
373.255
4%
367.405
4%
265.440
3%
LONG TERM ASSETS
Long term securities
Deferred taxes
123.866
2.230
60.376
1%
0%
1%
88.833
2.032
36.891
1%
0%
0%
432.469
280.635
111.488
5%
3%
1%
61.260
1%
49.910
1%
40.346
0%
3.165.640
31%
3.074.700
35%
2.806.331
31%
7.264
0%
7.622
0%
349
0%
2.614.556
26%
2.537.094
29%
2.445.760
27%
543.820
5%
529.984
6%
360.222
4%
10.141.293
100%
8.873.550
100%
9.105.861
100%
CURRENT ASSETS
Other non-current assets
FIXED ASSETS
Investment in Subs
Property, Plant & Equipment
Intangibles
TOTAL ASSETS
BM&F Bovespa: WEGE3 / OTC: WEGZY
24
Highlights
Balance sheet – Liabilities
(R$ thousands)
December 2013
(A)
R$
%
December 2012
(B)
R$
%
December 2011
(C)
R$
%
2.578.048
25%
3.012.824
34%
2.752.960
30%
Social and Labor Liabilities
216.553
2%
168.831
2%
161.436
2%
Suppliers
420.250
4%
331.037
4%
298.195
3%
Fiscal and Tax Liabilities
139.570
1%
126.655
1%
88.473
1%
Short Term Debt
912.796
9%
1.645.772
19%
1.701.435
19%
87.723
1%
79.381
1%
2.804
0%
459.130
5%
358.124
4%
285.843
3%
34.191
0%
33.559
0%
26.314
0%
307.835
3%
269.465
3%
188.459
2%
LONG TERM LIABILITIES
2.920.978
29%
1.709.100
19%
2.446.312
27%
Long Term Debt
2.296.208
23%
1.044.068
12%
1.756.293
19%
95.031
1%
137.916
2%
122.485
1%
Deferred Taxes
294.405
3%
320.503
4%
421.918
5%
Contingencies Provisions
235.334
2%
206.613
2%
145.616
2%
84.495
1%
91.277
1%
106.477
1%
4.557.772
45%
4.060.349
46%
3.800.112
42%
10.141.293
100%
8.873.550
100%
9.105.861
100%
CURRENT LIABILITIES
Dividends Payable
Advances from Clients
Profit Sharring
Other Short Term Liabilities
Other Long Term Liabilities
MINORITIES
STOCKHOLDERS' EQUITY
TOTAL LIABILITIES
BM&F Bovespa: WEGE3 / OTC: WEGZY
25
Highlights
Balance sheet – Cash flow
(R$ thousands)
3 Months
2014
3 Months
2013
Operating Activities
Net Earnings before Taxes
Depreciation and Amortization
Provisions:
Changes in Assets & Liabilities
(Increase) / Reduction of Accounts Receivable
Increase / (Reduction) of Accounts Payable
(Increase) / Reduction of Investories
Income Tax and Social Contribution on Net Earnings
Profit Sharing Paid
269.317
58.805
88.495
(12.641)
118.511
50.259
(10.915)
(81.448)
(89.048)
221.413
52.136
67.655
(6.294)
91.360
46.754
(10.480)
(71.190)
(62.738)
Cash Flow from Operating Activities
403.976
334.910
Investment Activities
Fixed Assets
Intagible Assets
Results of sales of fixed assets
Accumulated Conversion Adjustment
Long term securities bought
Goodwill in Capital Transactions
(64.284)
(3.208)
490
(53.618)
132
(2.699)
(56.759)
(811)
903
(25.135)
(4.497)
(5.169)
(5.947)
(13.229)
(6.268)
-
Acquisition of Stakes of non-controlling shareholders
Aquisition of Subsidiaries
Cash Flow From Investment Activities
(142.363)
(97.736)
Financing Activities
Working Capital Financing
Long Term Financing
Interest paid on loans and financing
Treasury Shares
Dividends & Intesrest on Stockholders Equity Paid
16.382
(112.601)
(43.588)
(248.230)
827.186
(136.811)
(11.277)
(204.724)
Cash Flow From Financing Activities
(388.037)
474.374
Change in Cash Position
(126.424)
711.548
Beginning of Period
3.373.799
2.302.256
End of Period
3.247.375
3.013.804
Cash & Cash Equivalents
BM&F Bovespa: WEGE3 / OTC: WEGZY
26
Highlights
Balance sheet – Debt and cash position
(R$ thousands)
December 2013
December 2012
December 2011
Cash & Financial instruments
3.376.029
2.565.532
3.212.250
- Current
- Long Term
3.373.799
2.230
2.563.500
2.032
2.931.615
280.635
Debt
3.209.004
100%
2.689.840
100%
3.457.728
100%
912.796
28%
1.645.772
61%
1.701.435
49%
- In Brazilian Reais
462.336
14%
1.067.683
40%
585.687
17%
- In other currencies
450.460
14%
578.089
21%
1.115.748
32%
2.296.208
72%
1.044.068
39%
1.756.293
51%
2.048.766
64%
824.910
31%
1.560.712
45%
247.442
8%
219.158
8%
195.581
6%
- Current
- Long Term
- In Brazilian Reais
- In other currencies
Net Cash (Debt)
BM&F Bovespa: WEGE3 / OTC: WEGZY
167.025
(124.308)
(245.478)
27