Investor Relations Presentation
WEGE3 / WEGZY
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
Electric equipment industry structure
As perceived by WEG
Generation
(into electric energy)
Components and
integration
Small Hydro Turbines
Automation (low & high
voltage switchgear,
drives, controls))
Wind Turbines
Critical power
Generators / alternators
Solar inverter
BM&F Bovespa: WEGE3 / OTC: WEGZY
Conversion
(from electric energy)
Electric motors
Transformers
Gearboxes
2
“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
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
Differentiated business model
Our capabilities and characteristics are quite unique and enable us to make the
best of market opportunities
BM&F Bovespa: WEGE3 / OTC: WEGZY
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
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
BM&F Bovespa: WEGE3 / OTC: WEGZY
8
Resilient business model
Net Revenues (R$ million)
2008
BM&F Bovespa: WEGE3 / OTC: WEGZY
2011
2012
3.177
2010
10%
2.899
2009
5.189
4%
4.392
2007
-6%
18%
4.211
3.749
20%
4.502
19%
6.174
We are back on track on top line growth, despite challenging macro conditions
1H13
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
2/3
Organic
20.000
6.174
5.189
4.392
18%
19%
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
November 2011
May 2010
Market Access
October 2011
November 2011
May 2010
May 2011
December 2012
June 2012
October 2012
June 2010
December 2010
Technology
BM&F Bovespa: WEGE3 / OTC: WEGZY
12
Diversification across markets
We adapt and thrive under almost any condition
Domestic & External markets
41%
External
Market
51%
59%
Domestic
Market
49%
2007
BM&F Bovespa: WEGE3 / OTC: WEGZY
2012
13
Broad and synergistic product portfolio
Business areas revenue mix
14%
5%
12%
23%
27%
57%
55%
2007
2008
6%
6%
7%
12%
15%
6%
11%
7%
9%
11%
24%
24%
20%
7%
34%
26%
59%
59%
62%
48%
54%
2009
2010
2011
2012
2Q13
Industrial Equipment
BM&F Bovespa: WEGE3 / OTC: WEGZY
GTD
Domestic Use
Paints & Varnishes
14
Selling, General & Administrative Expenses
(R$ million)
14,2%
14,3%
14,5%
15,0%
15,9%
14,8%
15,0%
15,2%
BM&F Bovespa: WEGE3 / OTC: WEGZY
2011
484
2010
768
2009
441
2007
697
2008
536
633
2006
652
2005
428
374
927
14,9%
2012
1H13
15
EBITDA and margins
(New methodology)
EBITDA (R$ million) and EBITDA Margin
22,7%
19,5%
7,9%
-2,8%
2009
2010
24,2%
452
2007
2008
BM&F Bovespa: WEGE3 / OTC: WEGZY
2011
17,7%
16,5%
2012
561
16,4%
1.017
-20,4%
789
1.021
839
21,7%
18,0%
851
19,3%
812
22,4%
1H13
16
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
1.365,2
670,3
2.749,9
2.093,1
1.169,9
503,7
2005
2006
2007
2008
Accumulated Cash Flow from Operations
BM&F Bovespa: WEGE3 / OTC: WEGZY
2009
2010
2011
2012
Accumulated EBITDA (previous methodology)
17
How to improve margins / increase
competitiveness?
ƒ Strong focus to improve competitiveness
ƒ Internal productivity and continuous improvement
ƒ Improve global manufacturing footprint
ƒ Innovation and higher technological content
ƒ Recovery of overall economic conditions
BM&F Bovespa: WEGE3 / OTC: WEGZY
18
Working capital needs
(% of Net Revenues)
50,0%
40,0%
Working Capital
30,0%
Clients
20,0%
Inventories
10,0%
Advances
Suppliers
0,0%
2Q06
2Q07
2Q08
BM&F Bovespa: WEGE3 / OTC: WEGZY
2Q09
2Q10
2Q11
2Q12
2Q13
19
Organic Capex
(R$ million)
Capex
10,2%
% of Net Revenues
9,3%
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
BM&F Bovespa: WEGE3 / OTC: WEGZY
20
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
BM&F Bovespa: WEGE3 / OTC: WEGZY
% of Net Revenues
21
Dividend Pay-out Policy
Net Earnings and Dividends (R$ million)
BM&F Bovespa: WEGE3 / OTC: WEGZY
22
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
23
Liquidity – WEGE3
BM&F Bovespa: WEGE3 / OTC: WEGZY
2.071
1.076
796
599
465
452
373
Average Daily Trades
14.859
10.343
7.442
6.750
6.062
7.697
9.833
Average Daily Traded Volume (R$ th)
24
24
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
25
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
BM&F Bovespa: WEGE3 / OTC: WEGZY
26
Highlights
Quarterly Figures
Q2 2013
1,699,639
873,354
826,285
Q1 2013
1,477,577
772,935
704,642
15.0%
13.0%
17.3%
Q2 2012
%
1,528,791 11.2%
729,235 19.8%
799,556 3.3%
399,171
353,077
13.1%
406,915 -1.9%
558,031
463,635
20.4%
461,661 20.9%
32.8%
31.4%
Net Income
204,968
172,299
Net Margin
12.1%
11.7%
312,547
248,898
EBITDA Margin
18.4%
16.8%
EPS
0.3304
0.2777
Net Operating Revenue
Domestic Market
External Markets
External Markets in US$
Gross Operating Profit
Gross Margin
EBITDA
%
30.2%
19.0%
139,819 46.6%
9.1%
25.6%
253,972 23.1%
16.6%
19.0%
0.2254 46.6%
Figures in R$ Thousand
BM&F Bovespa: WEGE3 / OTC: WEGZY
27
Highlights
Balance sheet – Assets
(R$ thousands)
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
June 2013
(A)
R$
AV%
36
6.339.494
66%
3.034.080
32%
1.554.042
16%
1.368.012
14%
383.360
4%
98.741
1%
2.027
0%
40.762
0%
55.952
1%
3.104.687
33%
7.585
0%
2.570.042
27%
527.060
6%
9.542.922 100%
BM&F Bovespa: WEGE3 / OTC: WEGZY
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%
June 2012
(C)
R$
AV%
27
6.020.120
66%
2.878.475
32%
1.350.250
15%
1.459.793
16%
331.602
4%
81.920
1%
657
0%
35.584
0%
45.679
1%
3.007.665
33%
349
0%
2.513.061
28%
494.255
5%
9.109.705 100%
28
Highlights
Balance sheet – Liabilities
(R$ thousands)
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
June 2013
(A)
R$
AV%
36
2.840.488
30%
244.200
3%
362.605
4%
113.854
1%
1.327.078
14%
89.310
1%
395.904
4%
24.450
0%
283.087
3%
2.380.354
25%
1.721.686
18%
113.323
1%
310.429
3%
234.916
2%
81.513
1%
4.240.567
44%
9.542.922 100%
BM&F Bovespa: WEGE3 / OTC: WEGZY
December 2012
(B)
R$
AV%
31
3.012.724
34%
168.831
2%
331.037
4%
126.655
1%
1.645.772
19%
79.281
1%
358.124
4%
33.559
0%
269.465
3%
1.709.100
19%
1.044.068
12%
137.916
2%
320.503
4%
206.613
2%
91.377
1%
4.060.349
46%
8.873.550 100%
June 2012
(C)
R$
AV%
27
3.230.080
35%
226.231
2%
349.350
4%
85.137
1%
1.935.177
21%
84.507
1%
325.175
4%
20.485
0%
204.018
2%
1.965.957
22%
1.325.811
15%
142.261
2%
331.370
4%
166.515
2%
84.185
1%
3.829.483
42%
9.109.705 100%
29
Highlights
Balance sheet – Cash Flow (R$ thousands)
6 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
Cash Flow from Operating Activities
Investment Activities
Fixed Assets
Intagible Assets
Results of sales of fixed assets
Accumulated Conversion Adjustment
Long term securities bought
Goodwill in Capital Transactions
Acquisition of Stakes of non-controlling shareholders
Aquisition of Subsidiaries
Cash Flow From Investment Activities
Financing Activities
Working Capital Financing
Long Term Financing
Interest paid on loans and financing
Treasury Shares
Dividends & Intesrest on Stockholders Equity Paid
Cash Flow From Financing Activities
Change in Cash Position
Cash & Cash Equivalents
Beginning of Period
End of Period
BM&F Bovespa: WEGE3 / OTC: WEGZY
6 Months
2012
477.866
105.747
107.461
(282.634)
(163.450)
142.807
(64.721)
(128.334)
(68.936)
408.440
382.896
101.731
84.043
(197.874)
(140.355)
163.936
(65.298)
(95.186)
(60.971)
370.796
(118.040)
(1.483)
4.827
33.812
261.249
(5.169)
(6.268)
168.928
(113.749)
(15.742)
4.533
61.243
28.439
(51.788)
(52.090)
(164.668)
(303.822)
1.183.571
(736.534)
(88.114)
(204.467)
154.456
731.824
574.371
(683.207)
(90.504)
(172.314)
(371.654)
(304.680)
2.302.256
3.034.080
2.931.615
2.626.935
30
Highlights
Balance sheet – Debt and Cash Position
(R$ thousands)
Cash & Financial instruments
- Current
- Long Term
Debt
- Current
- In Brazilian Reais
- In other currencies
- Long Term
- In Brazilian Reais
- In other currencies
Net Cash (Debt)
June 2013
3.036.107
3.034.080
2.027
3.048.764
1.327.078
855.787
471.291
1.721.686
1.454.531
267.155
(12.657)
BM&F Bovespa: WEGE3 / OTC: WEGZY
December 2012
2.565.532
2.563.500
2.032
2.689.840
1.645.772
1.067.683
578.089
1.044.068
824.910
219.158
(124.308)
June 2012
2.879.132
2.878.475
657
3.260.988
1.935.177
998.122
937.055
1.325.811
1.090.936
234.875
(381.856)
31