Investor Relations Presentation May 2013 WEGE3 / WEGZY
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Investor Relations Presentation May 2013 WEGE3 / WEGZY Best way to invest in fast growing global energy efficiency and renewable energy generation One of the businesses highest growth capital goods companies; is number one or number two in all product lines in Latin America Unique business model is based on vertical integration, production flexibility and technological innovation Diversified product lines allows strong growth across different market cycles We have a history of achieving CAGR of 18% over past 17 years through organic growth and accretive acquisitions WEG 2020 Strategic Plan aims for R$ 20 billion / 17% CAGR through international and product line expansion Investor Relations Presentation 1 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. Investor Relations Presentation 2 Overview Impressive growth track record Business model allows to find and explore growth opportunities even under unfavorable macroeconomic conditions 3.009 2.515 2.204 1.694 1.282 1.066 800 628 527 466 372 353 5.189 4.392 4.211 4.502 CAGR 18.3% 3.749 6.174 Revenues (R$ million) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Investor Relations Presentation 4 Resilient business model Net Revenues (RS$ million) 2008 Investor Relations Presentation 4% 4.392 2007 -6% 4.211 3.749 20% 4.502 18% 2009 2010 5.189 19% 6.174 We are back on track on top line growth, despite challenging macro conditions 2011 2012 5 Diversification across markets We adapt and thrive under almost any condition Domestic & External markets 41% External Market 51% 59% Domestic Market 49% 2007 Investor Relations Presentation 2012 6 Broad and synergistic product portfolio Business areas revenue mix 6% 5% 6% 7% 14% 12% 12% 15% 23% 27% 57% 55% 2007 2008 Equip.Industrais 34% 26% 48% 54% 2009 2010 GTD 6% 11% 7% 9% 11% 24% 24% 20% 59% 59% 62% 2011 2012 1T13 Uso Doméstico 7% Tintas e Vernizes 7 EBITDA and margins (New methodology) EBITDA (R$ million) and EBITDA Margin 2008 Investor Relations Presentation 19,5% 7,9% -2,8% 2009 2010 2011 16,5% 1.017 16,4% 851 -20,4% 18,0% 789 2007 19,3% 812 839 21,7% 22,7% 1.021 22,4% 2012 8 How to improve margins / increase competitiveness? Strong focus to improve competitiveness Internal productivity and continuous improvement Improve global manufacturing footprint Innovation and higher technological content Recovery of overall economic conditions Investor Relations Presentation 9 Industry structure and WEG’s business model Our industry is undergoing major change Megatrends cause changes in demand and create opportunities Energy and industrial efficiency Renewable energy Electric motors represent around 25% Global need to diversify energy of world electricity consumption Industrial productivity increases and ISO 50.001 (energy management) drives investments sources and lower GHG emissions Scale and technological development increases viability Smart grid Electrical mobility Electricity distribution network has to Increasing urbanization adds to become ”smarter” More sensors, more automation, more efficient generation and use of electricity Investor Relations Presentation congestions and need of new solutions Electric vehicles, hybrids or alternative fuels will become more common 11 Electric equipment industry structure As perceived by WEG Generation (into electric energy) Thermal Biomass Thermal Natural Gas Small Hydroelectric Plants Wind Solar Investor Relations Presentation Components and integration Automation (low & high voltage switchgear, drives, controls) Critical power Conversion (from electric energy) Electric motors Transformers Gearboxes 12 “The final destination” Strategic integration of equipment into complete solutions Components and integration Generation Conversion Typical Applications Value Added Ventilation Pumps Compressors Generation plants Substations Segments Oil & Gas Mining Investor Relations Presentation Sugar & Ethanol Ship building Steel Pulp & Paper Cement General Industry 13 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 Investor Relations Presentation 14 Differentiated business model Our capabilities and characteristics are quite unique and enable us to make the best of market opportunities Investor Relations Presentation 15 Clear competitive advantages Unique business model creates important and stable advantages Competitive Advantages WEG Business Model Large and synergistic portfolio Worldwide presence One-stop shop concept Mass customization Production in low cost emerging markets Low financial leverage Focus on M&A enabling continuous future growth Investor Relations Presentation Strategic Planning WEG Strategic Plan 2020 Corporate aspiration of R$ 20 billion by 2020 20.000 6.174 5.189 4.392 18% 19% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Investor Relations Presentation 18 Growth drivers “More and Better” International Expansion New Businesses Investor Relations Presentation 19 Growth comes from diverse base Disciplined approach to organic and non-organic expansion 20,00 0,73 2,60 1/3 Non Organic 2,40 3,60 5,48 17.0% a.a. 2/3 Organic 5,19 WEG 2011 WMO 15.3% 15.5% WEN 21.3% 11.2% WTD 15.2% 17.4% WAU WTI 19.5% 83.9% 16.0% 58.9% WEG 2020 CAGR 2011-2020* Investor Relations Presentation 20 Portfolio Strategy Clear vision of attractiveness of opportunities November 2011 May 2010 Market Access October 2011 November 2011 May 2010 May 2011 December 2012 June 2012 October 2012 June 2010 March 2011 December 2010 Technology Investor Relations Presentation 21 Financial performance 22 Selling, General & Administrative Expenses (R$ million) 14,2% 14,3% 14,5% 15,0% 15,9% 14,8% 15,0% 2007 Investor Relations Presentation 2009 2010 768 2008 697 633 2006 652 428 2005 536 374 927 14,9% 2011 2012 23 Strong cash flow conversion We can continue to rely on cash generation as primary source of growth financing Cash Flow from Operations vs. EBITDA 85% 6.741,6 5.688,0 4.805,7 5.741,9 4.848,3 4.016,6 4.515,2 3.119,2 3.900,6 2.459,5 670,3 2.749,9 2.093,1 1.365,2 1.169,9 503,7 2005 2006 2007 2008 Accumulated Cash Flow from Operations Investor Relations Presentation 2009 2010 2011 2012 Accumulated EBITDA (previous methodology) 24 Working capital needs (% of Net Revenues) 50,0% 40,0% Working Capital 30,0% Clients Inventories 20,0% 10,0% Suppliers Advances 0,0% 1Q06 1Q07 1Q08 Investor Relations Presentation 1Q09 1Q10 1Q11 1Q12 1Q13 25 Organic Capex Capex (R$ million) 10,2% 9,3% % of Net Revenues 8,1% 8,0% 7,4% 6,8% 6,5% 6,1% 6,1% 5,8% 457 5,4% 5,3% 3,6% 3,9% 305 3,7% 206 126 42 38 49 73 83 238 226 233 188 146 111 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Investor Relations Presentation 26 Research & Development (R$ million) 2,5% 2,5% 2,4% 2,3% 2,5% 2,3% 2,3% 2,4% 2,0% 2,0% 1,7% 1,6% 1,8% 148 1,5% 131 101 86 63 16 18 18 21 30 73 89 83 34 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Research & Development Investor Relations Presentation % of Net Revenues 27 Dividend Pay-out Policy Net Earnings and Dividends (R$ million) Investor Relations Presentation 28 Recent capital markets related activities Sponsored level 1 ADR (JP Morgan) Market Maker at BM&F Bovespa (Credit Suisse) New web site, with intensive use on social media tools Gradually improve information disclosure Increase sell side coverage More intense investor contact Increase sustainability communications Investor Relations Presentation 29 Liquidity – WEGE3 09 0 2 08 0 2 07 0 2 10 0 2 11 0 2 10.327 7.406 6.745 6.060 7.693 9.882 Average Daily Traded Volume (R$ th) 12 0 2 07 0 2 08 0 2 09 0 2 10 0 2 11 0 2 1.075 793 599 464 452 378 Average Daily Trades 12 0 2 30 Best way to invest in fast growing global energy efficiency and renewable energy generation One of the businesses highest growth capital goods companies; is number one or number two in all product lines in Latin America Unique business model is based on vertical integration, production flexibility and technological innovation Diversified product lines allows strong growth across different market cycles We have a history of achieving CAGR of 18% over past 17 years through organic growth and accretive acquisitions WEG 2020 Strategic Plan aims for R$ 20 billion / 17% CAGR through international and product line expansion Investor Relations Presentation 31 Highlights Yearly Figures 2012 6.173.878 3.016.662 3.157.216 2011 5.189.409 2.902.958 2.286.451 19,0% 3,9% 38,1% 1.609.721 1.361.689 18,2% 1.880.856 1.556.051 20,9% 30,5% 30,0% 655.979 586.936 10,6% 11,3% 1.016.748 851.155 EBITDA Margin 16,5% 16,4% EPS 1,0573 0,9461 Net Operating Revenue Domestic Market External Markets External Markets in US$ Gross Operating Profit Gross Margin Quarterly Net Income Net Margin EBITDA % 2010 4.391.973 2.670.443 1.721.530 % 18,2% 8,7% 32,8% 982.835 38,5% 1.386.952 12,2% 31,6% 11,8% 519.782 12,9% 11,8% 19,5% 788.750 7,9% 18,0% 11,8% 0,8371 13,0% Figures in R$ Thousands Investor Relations Presentation 32 Highlights Quarterly Figures Q1 2012 % -11,1% -0,2% -20,6% 1.369.762 714.268 655.494 7,9% 8,2% 7,5% 431.141 -18,1% 370.825 -4,8% 463.635 528.641 -12,3% 391.967 18,3% 31,4% 31,8% Net Income 172.299 183.157 Net Margin 11,7% 11,0% 248.898 289.786 EBITDA Margin 16,8% 17,4% EPS 0,2777 0,2952 Net Operating Revenue Domestic Market External Markets External Markets in US$ Gross Operating Profit Gross Margin EBITDA Q1 2013 Q4 2012 1.477.577 772.935 704.642 1.662.258 774.533 887.725 353.077 % 28,6% -5,9% 148.247 16,2% 10,8% -14,1% 198.251 25,5% 14,5% -5,9% 0,2390 16,2% Figures in R$ Thousand Investor Relations Presentation 33 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 Intangibles TOTAL ASSETS Investor Relations Presentation March 2013 (A) R$ AV% 34 6.310.741 66% 3.279.518 35% 1.347.331 14% 1.316.606 14% 367.286 4% 107.528 1% 2.059 0% 43.337 0% 62.132 1% 3.078.166 32% 7.577 0% 2.544.242 27% 526.347 6% 9.496.435 100% December 2012 (B) R$ AV% 31 5.710.017 64% 2.563.500 29% 1.472.839 17% 1.306.273 15% 367.405 4% 88.833 1% 2.032 0% 36.891 0% 49.910 1% 3.074.700 35% 7.622 0% 2.537.094 29% 529.984 6% 8.873.550 100% December 2011 (C) R$ AV% 22 5.867.061 64% 2.931.615 32% 1.307.692 14% 1.362.314 15% 265.440 3% 432.469 5% 280.635 3% 111.488 1% 40.346 0% 2.806.331 31% 349 0% 2.445.760 27% 360.222 4% 9.105.861 100% 34 Highlights Balance sheet - Liabilities March 2013 (A) R$ AV% CURRENT LIABILITIES Social and Labor Liabilities 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 Investor Relations Presentation 2.852.160 172.007 365.492 103.069 1.526.274 36.718 306.889 38.260 303.451 2.528.789 1.878.432 123.063 319.621 207.673 80.931 4.034.555 9.496.435 30% 2% 4% 1% 16% 0% 3% 0% 3% 27% 20% 1% 3% 2% 1% 42% 100% December 2012 (B) R$ AV% 3.012.724 168.831 331.037 126.655 1.645.772 79.281 358.124 33.559 269.465 1.709.100 1.044.068 137.916 320.503 206.613 91.377 4.060.349 8.873.550 34% 2% 4% 1% 19% 1% 4% 0% 3% 19% 12% 2% 4% 2% 1% 46% 100% December 2011 (C) R$ AV% 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 30% 2% 3% 1% 19% 0% 3% 0% 2% 27% 19% 1% 5% 2% 1% 42% 100% 35
