BTG Pactual XIV CEO Conference 2013 February 2013 WEGE3 / WEGZY
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BTG Pactual XIV CEO Conference 2013 February 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 integration, production flexibility and technological innovation Diversified product lines allows strong growth across different market cycles We have a history y of achieving g CAGR of 18% over p 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 BTG Pactual XIV CEO Conference 2013 1 Overview Impressive growth track record Business model allows to find and explore growth opportunities even under unfavorable macroeconomic conditions 4,392 3,749 3,009 2,515 2,204 1,694 1,282 1,066 800 628 527 466 372 353 CAGR 18.3% 4,211 4,502 5,189 Revenues (R$ million) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 BTG Pactual XIV CEO Conference 2013 3 Resilient business model We are back on track on top line growth, growth despite challenging macro conditions 2007 2008 BTG Pactual XIV CEO Conference 2013 2009 2010 2011 21% 44.512 44.392 4% 4.2211 3.7499 20% 44.502 6% -6% 3.7211 18% 5.1889 Net Revenues (RS$ million) 2012 4 Diversification across markets We adapt and thrive under almost any condition Domestic & External markets 41% External Market 50% 59% Domestic Market 50% 2007 BTG Pactual XIV CEO Conference 2013 9M12 5 Broad and synergistic product portfolio Business areas revenue mix 5% 6% 12% 14% 23% 27% 57% 55% 2007 2008 Industrial Equipment BTG Pactual XIV CEO Conference 2013 6% 7% 12% 15% 34% 26% 48% 54% 2009 2010 GTD Domestic Use 6% 11% 7% 9% 24% 23% 59% 60% 2011 09M12 Paints & Varnishes 6 EBITDA and margins EBITDA (R$ million) and EBITDA Margin 22,8% 19,9% 18,0% 17,0% 2010 BTG Pactual XIV CEO Conference 2013 16,7% 882 2009 624 2008 789 1.026 2007 837 923 16,8% 2011 753 24,6% 2012 7 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 BTG Pactual XIV CEO Conference 2013 8 Industry y 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) di drives investments i t t 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” smarter More sensors, more automation, more efficient generation and use of electricity BTG Pactual XIV CEO Conference 2013 congestions and need of new solutions Electric vehicles, hybrids or alternative fuels will become more common 10 Electric equipment industry structure A perceived As i db by WEG Generation (into electric energy) Thermall Biomass Th Bi Thermal Natural Gas Small Hydroelectric Plants Wind Solar BTG Pactual XIV CEO Conference 2013 Components and integration AAutomation t ti (l(low & hi highh voltage switchgear, drives, controls) Critical power Conversion (from electric energy) Electric motors Transformers Gearboxes 11 “The final destination” Strategic integration of equipment into complete solutions Components and integration G Generation ti C Conversion i Typical Applications Valu ue Adde ed Ventilation Pumps Compressors Generation plants Substations Segments Oil & Gas Mining Sugar & Ethanol BTG Pactual XIV CEO Conference 2013 Ship building Steel Pulp & Paper Cement General Industry 12 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 BTG Pactual XIV CEO Conference 2013 13 Differentiated business model Our capabilities and characteristics are quite unique and enable us to make the best of market opportunities BTG Pactual XIV CEO Conference 2013 14 Clear competitive advantages Unique business model creates important and stable advantages Competitive Advantages WEG Business Model Large and synergistic portfolio Worldwide presence One-stop One stop shop concept Mass customization Production in low cost emerging g g markets Low financial leverage Focus on M&A enabling continuous future growth BTG Pactual XIV CEO Conference 2013 15 Strategic Planning WEG Strategic Plan 2020 Corporate aspiration of R$ 20 billion by 2020 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% WAU WTI 19.5% 19 5% 83.9% 16.0% 16 0% 58.9% WEG 2020 CAGR 2011‐2020* BTG Pactual XIV CEO Conference 2013 17 Growth drivers “More More and Better” Better International Expansion p New Businesses BTG Pactual XIV CEO Conference 2013 18 Growth comes from diverse base Disciplined approach to organic and non-organic non organic expansion 20,00 0 73 0,73 2,60 1/3 Non Organic 2,40 3,60 5,48 17 0% a a 17.0% a.a. 2/3 Organic O i 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* BTG Pactual XIV CEO Conference 2013 19 Portfolio Strategy Clear vision of attractiveness of opportunities November 2011 May 2010 Market Acc cess October 2011 November 2011 May 2010 May 2011 December 2012 June 2012 October 2012 June 2010 March 2011 December 2010 Technology BTG Pactual XIV CEO Conference 2013 20 Financial performance 21 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% 4.805,7 4.016,6 5.688,0 4.815,0 4.515,2 3.900,6 3.119,2 2.459,5 2 749 9 2.749,9 2.093,1 1.365,2 670,3 1.169,9 503,7 2005 2006 2007 2008 Accumulated Cash Flow from Operations BTG Pactual XIV CEO Conference 2013 2009 2010 2011 Accumulated EBITDA 22 Working capital needs (% of Net Revenues) 50,0% Working Capital 40 0% 40,0% 30 0% 30,0% Clients Inventories 20 0% 20,0% Suppliers Advances from Clients 10 0% 10,0% 0 0% 0,0% 4T05 3T06 2T07 1T08 4T08 3T09 2T10 1T11 4T11 3T12 BTG Pactual XIV CEO Conference 2013 23 Organic Capex (R$ million) 10,2% 9,3% 8,0% 9,3% , 7,4% 6,8% 6,1% 6,1% 6,5% 5,8% 457 3,7% 349 42 38 49 73 83 3,6% 226 206 126 5,4% 5,3% , 146 233 188 111 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 12M1012M11 Organic Capex BTG Pactual XIV CEO Conference 2013 Capex as % of Net Revenues 24 Solid capital structure WEG has room to increase leverage Net Debt to EBITDA 2011 WEG 0,3 Brazilian Iochpe Industrial A 1,35 Brazilian Randon Industrial B LLarge Electrical El t i ABB l Multinational A 0,7 0,3 Large Electrical Schneider Multinational B Large g Electrical Siemens Multinational C BTG Pactual XIV CEO Conference 2013 1,3 0,9 25 Selling, General & Administrative Expenses (R$ million) 14,9% 14,2% 14,3% 14,5% 15,1% 15,8% 14,8% 768 652 634 2008 2009 695 536 374 2005 428 2006 2007 SG&A BTG Pactual XIV CEO Conference 2013 2010 2011 % Net Revenues 26 Research & Development (R$ million) 2,5% 2,4% 2,5% 2 3% 2,3% 2 3% 2,3% 2,0% 131 2,0% 101 86 89 2007 2008 83 73 63 2005 2006 R&D Spending BTG Pactual XIV CEO Conference 2013 2009 2010 2011 % Net Revenues 27 Dividend Pay-out Policy Net Earnings and Dividends (R$ million) 55% 52% 37% 35% 39% 40% 40% 43% 44% 54% 587 560 548 520 503 375 308 299 176 173 125 46 68 301 300 306 339 229 220 82 29 58% 45% 5% 575 403 59% 89 165 124 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Net Earnings BTG Pactual XIV CEO Conference 2013 Dividends Pay-out (%) 28 Recent capital markets related activities Sponsored level 1 ADR (JP Morgan) M k tM Market Maker k att BM&F Bovespa B (C dit S (Credit Suisse) i ) New web site, with intensive use on social media tools G d ll iimprove iinformation Gradually f i disclosure di l Increase sell side coverage More intense investor contact Increase sustainability communications BTG Pactual XIV CEO Conference 2013 29 Liquidity – WEGE3 07 0 2 08 0 2 09 0 2 10 0 2 11 0 2 10.3227 7.406 66.745 6.060 7.693 9.8822 Average Daily Traded Volume (R$$ th) 12 0 2 07 0 2 08 0 2 BTG Pactual XIV CEO Conference 2013 09 0 2 10 0 2 11 0 2 1.075 7793 5999 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 integration, production flexibility and technological innovation Diversified product lines allows strong growth across different market cycles We have a history y of achieving g CAGR of 18% over p 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 BTG Pactual XIV CEO Conference 2013 31
