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
Motors
Automation
T&D
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$)
CAGR 2004-2008
CAGR 2008-2012
35,1%
24,0%
22,0%
C
29,4%
20,0%
18,0%
22,1%
10,4%
12,2%
11,9%
A
B
14,0%
A
D
7,6%
E
12,0%
6,3%
10,0%
2,0%
WEG
WEG
B
11,3%
6,2%
5,4%
16,0%
C
0,8%
D
E
BM&F Bovespa: WEGE3 / OTC: WEGZY
F
1,7%
8,0%
F
2008
2009
2010
2011
2012
6
Clear competitive advantages
Unique business model creates important and stable advantages
Competitive Advantages
WEG
Business
Model
ƒLarge and synergistic portfolio
ƒWorldwide presence
ƒOne-stop shop concept
ƒMass customization
ƒProduction in low cost emerging markets
ƒLow financial leverage
ƒFocus on M&A enabling continuous future
growth
BM&F Bovespa: WEGE3 / OTC: WEGZY
7
Solid growth track record
6.174
Business model allows to find and explore growth opportunities even under
unfavorable macroeconomic conditions
4.936
18,0%
18,0%
1.017
888
812
839
617
462
475
381
293
256
188
133
119
96
67
789
1.021
16,4% 16,5%
ROIC
15,3%
14,7%
12,3%
13,9%
13,5%
10,6%
12,1%
606
656
11,3%
587
11,8%
520
503
15,9%
13,0%
10,4%
11,8%
10,0%
10,3%
375
403
308
220
176
125
82
575
12,4%
549
CAGR
20.0%
8,4%
98
19,3%
18,4%
18,1%
CAGR
18.2%
560
13,1%
10,9%
58
20,5%
16,7%
14,9%
41
22,4% 22,7%
21,5%
16,8%
59
17,2%
15,7%
30
22,8% 22,5%
18,2% 18,3%
16,5%
12,6%
24,1%
21,2%
20,7%
Net Income and Net Margin (R$ million)
18,5%
23,5%
22,5%
851
5.189
4.392
3.749
EBITDA and EBITDA Margin (R$ million)
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
Revenues (R$ million)
BM&F Bovespa: WEGE3 / OTC: WEGZY
8
Growth rate
CAGR 10 years (2003-2012)
CAGR 5 years (2008-2012)
15,0%
10,2%
5,1%
3,5%3,2%
2,3%
0,2%
-0,9%
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
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
Revenue profile
2007
2012
5,9%
6,0%
8,5%
14,2%
R$ 3.7 billion
57,1%
24,1%
R$ 6.2 billion
61,4%
22,8%
Industrial Equipment
BM&F Bovespa: WEGE3 / OTC: WEGZY
GT&D Equipment
Domestic Use
Paints & Varnishes
13
Revenue profile
2007
2012
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
14%
30%
PORTUGAL
2012
2000
70%
37%
49%
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
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)
16
Working capital needs
(% of Net Revenues)
50,0%
40,0%
Working Capital
30,0%
Clients
Inventories
20,0%
10,0%
Advances
Suppliers
0,0%
3Q06
3Q07
3Q08
BM&F Bovespa: WEGE3 / OTC: WEGZY
3Q09
3Q10
3Q11
3Q12
3Q13
17
Use of cash
Capex (R$ million)
Research & Development (R$ million)
% of Net Revenues
10,2%
% of Net Revenues
9,3%
8,1%
8,0%
2,7%
2,5%
2,3%
7,4%
6,8%
6,1% 6,1%
1,7% 1,6% 1,8%
6,5%
5,8%
457 5,4%
3,7%
206
126
42
38
49
73
2,3%
2,3%
148
1,5%
3,6% 3,9% 3,7%
238
226 233
63
182
111
16
18
18
21
30
2,4%
2,0% 2,0%
131
188
146
2,5%
5,3%
305
83
2,5% 2,4%
73
86
89
135
101
83
34
Net Earnings and Dividends (R$ million)
BM&F Bovespa: WEGE3 / OTC: WEGZY
18
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$ 31.16
ƒ On Jan 23, 2014 : R$ 27.80
Market value
ƒ On Dec 30, 2013: R$ 19,347 million
ƒ On Jan 23, 2014 : R$ 17,261 million
Liquidity (average
daily volume)
ƒ In 2012: R$ 10,343 thousand / day
ƒ In 2013: R$ 15,193 thousand / day
Composition of
ƒ 57% - Foreign institutions
ƒ 04% - Brazilian institutions
ƒ 39% - Others (individuals, etc.)
Free Float
BM&F Bovespa: WEGE3 / OTC: WEGZY
620,905,029
473,515
620,431,514
19
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
20
WEGE3 performance
WEG’s shares achieved important indexes
30,00
28,00
Selected for
ISE 2013
Selected for
ISE 2014
Inclusion
Ibrx-100
WEGE3 share prices (R$)
26,00
24,00
Inclusion
MSCI Brazil
22,00
20,00
18,00
16,00
14,00
12,00
10,00
BM&F Bovespa: WEGE3 / OTC: WEGZY
21
21
Liquidity – WEGE3
15.193
10.343
7.442
6.750
6.062
7.697
9.833
Average Daily Traded Volume (R$ th)
BM&F Bovespa: WEGE3 / OTC: WEGZY
2.165
1.076
796
599
465
452
373
Average Daily Trades
22
22
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
23
Highlights
Quarterly Figures
Q3 2013
1,758,381
872,363
886,018
Q2 2013
1,699,639
873,354
826,285
3.5%
-0.1%
7.2%
387,197
399,171
-3.0%
401,460 -3.6%
599,253
558,031
7.4%
498,587 20.2%
34.1%
32.8%
Net Income
228,761
204,968
Net Margin
13.0%
12.1%
326,934
312,547
EBITDA Margin
18.6%
18.4%
EPS
0.3687
0.3304
Net Operating Revenue
Domestic Market
External Markets
External Markets in US$
Gross Operating Profit
Gross Margin
EBITDA
%
Q3 2012
1,613,067
798,626
814,441
%
9.0%
9.2%
8.8%
30.9%
11.6%
184,756 23.8%
11.5%
4.6%
274,739 19.0%
17.0%
11.6%
0.2978 23.8%
Figures in R$ Thousand
BM&F Bovespa: WEGE3 / OTC: WEGZY
24
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
September 2013
(A)
R$
AV%
38
6.306.860
66%
2.937.836
31%
1.562.243
16%
1.467.641
15%
339.140
4%
118.883
1%
2.077
0%
56.970
1%
59.836
1%
3.126.322
33%
7.584
0%
2.574.218
27%
544.520
6%
9.552.065 100%
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%
(R$ thousands)
September 2012
(C)
R$
AV%
29
5.657.018
65%
2.524.865
29%
1.411.747
16%
1.389.619
16%
330.787
4%
80.004
1%
670
0%
32.190
0%
47.144
1%
3.020.011
34%
349
0%
2.526.237
29%
493.425
6%
8.757.033 100%
25
Highlights
Balance sheet – Liabilities
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
September 2013
(A)
R$
AV%
38
2.709.593
28%
231.383
2%
362.428
4%
138.569
1%
1.114.526
12%
42.708
0%
477.696
5%
57.472
1%
284.811
3%
2.432.182
25%
1.773.632
19%
115.300
1%
295.173
3%
248.077
3%
82.578
1%
4.327.712
45%
9.552.065 100%
BM&F Bovespa: WEGE3 / OTC: WEGZY
December 2012
(B)
R$
AV%
31
3.012.824
34%
168.831
2%
331.037
4%
126.655
1%
1.645.772
19%
79.381
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%
91.277
1%
4.060.349
46%
8.873.550 100%
(R$ thousands)
September 2012
(C)
R$
AV%
29
2.876.077
33%
223.573
3%
321.473
4%
113.478
1%
1.617.387
18%
43.327
0%
316.697
4%
40.752
0%
199.390
2%
1.876.901
21%
1.256.575
14%
124.966
1%
322.296
4%
173.064
2%
86.084
1%
3.917.971
45%
8.757.033 100%
26
Highlights
Balance sheet – Cash flow
(R$ thousands)
9 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
9 Months
2012
775.591
161.504
178.252
(380.019)
(123.528)
216.998
(164.417)
(192.547)
(116.525)
735.328
625.627
154.365
126.057
(318.245)
(223.067)
150.126
3.940
(150.729)
(98.515)
587.804
(186.951)
(20.877)
12.448
38.894
261.199
(5.169)
(6.268)
93.276
(164.185)
(17.949)
6.111
74.054
23.332
(51.788)
(52.090)
(164.668)
(347.183)
1.337.629
(1.019.081)
(120.230)
717
(392.059)
(193.024)
635.580
834.218
(1.286.438)
(134.146)
(317.639)
(904.005)
(663.384)
2.302.256
2.937.836
2.931.615
2.268.231
27
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)
September 2013
2.939.913
2.937.836
2.077
2.888.158
1.114.526
689.217
425.309
1.773.632
1.527.412
246.220
51.755
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)
September 2012
2.525.535
2.524.865
670
2.873.962
1.617.387
868.994
748.393
1.256.575
1.044.603
211.972
(348.427)
28