Company presentation
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
Company presentation
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
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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 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.
Company presentation
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
Management
51%
1%
Free Float
34%
WEG S.A.
SA
Company presentation
3
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 31, 2011: R$ 18.78
ƒ On July 23, 2012 : R$ 17.97
Market value
ƒ On Dec 31,, 2011: R$$ 11,651
,
million
ƒ On July 23, 2012 : R$ 11,149 million
Liquidity (average
daily volume)
ƒ In 2011: R$ 7,406 thousand / day
ƒ In 2012: R$ 5,565 thousand / day
Composition of
ƒ 45% - Foreign institutions
ƒ 20% - Brazilian institutions
ƒ 35% - Others (individuals, etc.)
Free Float
Company presentation
620,905,029
500,000
620,405,029
4
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
ƒElectric motors represent
ƒGlobal need to diversify
ƒElectricity distribution
ƒIncreasing urbanization
around 25% of world
p
electricityy consumption
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 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
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
Company presentation
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
Company presentation
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 intermediate
manufacturing processes
of electrical equipment
allows great production
flexibility
Diversification
Production flexibility
allows to meet demands
in practically any industrial
segment
Global
distribution
Modular
expansion
Capacity
additions are
made at a
progressive pace
in line with
demand
Strong balance
sheet
Ability to maintain
investments across the
business cycle,
strengthening competitive
position in each cycle
Company presentation
Ability tto di
Abilit
distribute
t ib t
products throughout
the world with direct
presence in over 25
countries and
representatives in
more than 100
countries
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 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
ƒHigh interest
2,204
economy
2,515
Election
ec o (2002/03)
( 00 /03)
ƒStabilization of
4,211
Brazilian Crisis
ƒEnergy Crisis (2000/01)
ƒPT (Worker’s Party”
Real Plan (R$)
35
53
4,50
02
Emerging Markets
ƒAsia (1997)
ƒRussia (1998)
ƒArgentina (2001)
CAGR 18.3%
ƒ Bursting of bubble
ƒ Lehman Bros.
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Company presentation
10
WEG 2020 Strategic Planning
Corporate aspirations for 2020
ƒ
ƒ
Pursue continuous g
growth with:
ƒ Defense of leadership positions in several markets and
segments;
ƒ Introduction of new products and technologies;
ƒ Introduction of products and solutions in new places.
Reach annual revenue of R$ 20 billion in 2020.
Company presentation
11
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%
aa
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*
Company presentation
12
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
Company presentation
Expansion into synergistic and
complementary businesses, creating
integrated product offers
13
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
Company presentation
14
WEG 2020 Strategic Planning
Major trends and opportunities
ƒ Energy efficiency:
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
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
ƒ
ƒ
Generators and transformers;
Solutions for renewable and distributed energy, exploring all opportunities in small
hydroelectric power plants, biomass, wind and solar;
Mobility
ƒ
Electric traction solutions for urban (public) transportation and maritime vehicles;
Smart Grid
ƒ
ƒ
ƒ
ƒ
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
Company presentation
15
Motors
Strategic Positioning
Appliance
Industrial
Hi h V
High
Voltage
lt
Energy
Generators
Biomass Systems
Small Hydro
Wind
T&D
Power
Dry
Distribution
Automation
Substations
Drives
Controls
Panels
New Business
N
Gearboxes
Gensets
Hydro Turbines
Steam Turbines
Gas Turbines
Company presentation
16
Portfolio Strategy
Clear vision of attractiveness of opportunities
November 2011
May 2010
Market Acc
cess
October 2011
November 2011
May 2010
May 2011
June 2012
June 2010
March 2011
December 2010
Technology
Company presentation
17
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
Other / Adjustments
Decrease in Working
2%
Capital
11%
payable
4%
Company presentation
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%
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 O
G
Operating
ti R
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$ Thousand
Company presentation
20
Highlights
Quarterly Figures
Q2 2012
Gross O
G
Operating
ti R
Revenue
Net Operating Revenue
Q1 2012
%
11,776,300
776 300
1,528,791
729,235
799,556
11,607,331
607 331
1,369,762
714,268
655,494
10.5%
10
5%
11.6%
2.1%
22.0%
406,915
370,825
9.7%
461,661
391,967
17.8%
30.2%
28.6%
Net Income
139,819
148,247
Net Margin
g
9.1%
10.8%
260
208,638
EBITDA Margin
17.0%
15.2%
EPS
0.2254
0.2390
Domestic Market
External Markets
External Markets in US$
Gross Operating Profit
Gross Margin
EBITDA
Company presentation
Q2 2011
11,510,276
510 276
1,277,258
723,348
553,910
%
17.6%
17
6%
19.7%
0.8%
44.3%
347,886 17.0%
381,437
21.0%
29.9%
-5.7%
154,557
-9.5%
12.1%
24.6%
215,579
20.6%
16.9%
-5.7%
0.2491 -9.5%
Figures in R$ Thousand
21
Highlights
Balance sheet - Assets
Figures in R$ Thousands
June 2012
R$
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
Company presentation
6,020,120
2,878,475
1,350,250
1,459,793
331,602
82 267
82,267
657
35,441
46,169
3 00 66
3,007,665
349
2,513,061
494,255
9,110,052
AV%
66%
32%
15%
16%
4%
1%
0%
0%
1%
33%
0%
28%
5%
100%
December 2011
AV%
R$
5,867,061
2,931,615
1,307,692
1,362,314
265,440
432 469
432,469
280,635
111,488
40,346
2 806 331
2,806,331
349
2,445,760
360,222
9,105,861
64%
32%
14%
15%
3%
5%
3%
1%
0%
31%
0%
27%
4%
100%
June 2011
R$
5,069,586
2,674,637
1,095,847
1,086,034
213,068
132 357
132,357
226,057
89,776
42,581
2 1 09
2,551,509
931
2,375,903
174,675
7,753,452
AV%
65%
34%
14%
14%
3%
2%
3%
1%
1%
33%
0%
31%
2%
100%
22
Highlights
Balance sheet - Liabilities
Figures in R$ Thousands
June 2012
R$
CURRENT LIABILITIES
Social and Labor Liabilities
Suppliers
Fiscal and Tax Liabilities
Short Term Debt
Dividends Payable
y
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
Company presentation
3,230,080
226,231
349 350
349,350
85,137
1,935,177
84,507
,
325,175
20,485
204,018
1 96 9
1,965,957
1,325,811
142,261
331,370
166,515
84,185
3,829,483
9,109,705
AV%
35%
2%
4%
1%
21%
1%
4%
0%
2%
22%
15%
2%
4%
2%
1%
42%
100%
December 2011
AV%
R$
2,752,960
161,436
298 195
298,195
88,473
1,701,435
2,804
,
285,843
26,314
188,459
2 446 312
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%
2 %
27%
19%
1%
5%
2%
1%
42%
100%
June 2011
R$
2,179,394
188,147
295 775
295,775
94,022
1,111,282
78,682
,
265,356
22,309
123,821
2 192 908
2,192,908
1,567,111
86,317
411,203
128,277
94,100
3,513,107
7,979,509
AV%
28%
2%
4%
1%
14%
1%
3%
0%
2%
28%
20%
1%
5%
2%
1%
45%
103%
23
Highlights
Cash and Debt position
June 2012
December 2011
June 2011
Cash & Financial instruments
- Current
- Longg Term
2,879,132
2,878,475
657
3,212,250
2,931,615
280,635
,
2,900,694
2,674,637
226,057
,
Debt
- Current
3,260,988
1,935,177
3,457,728
1,701,435
2,678,393
1,111,282
- In Brazilian Reais
- In other currencies
- Long Term
998,122
998
122
937,055
1,325,811
585,687
585
687
1,115,748
1,756,293
500,774
500
774
610,508
1,567,111
- In Brazilian Reais
- In other currencies
Net Cash (Debt)
11,090,936
090 936
234,875
(381,856)
11,560,712
560 712
195,581
(245,478)
11,436,267
436 267
130,843
222,301
Company presentation
24
WEG's Investment Case
ƒ
ƒ
ƒ
ƒ
ƒ
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
Company presentation
25
For information:
Contact WEG Investor Relations
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
Company presentation
26
Our Business
Page 27