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
Automation
T&D
Motors
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$)
23,1%
CAGR 2005-2009
24,0%
CAGR 2009-2013
22,0%
19,3%
E
20,0%
WEG
18,0%
C
11,3%
16,0%
9,1%
6,6%
4,9%
6,3%
3,7%
3,0%
5,2%
14,0%
B
A
4,0%
12,0%
1,7%
F
D
10,0%
-0,1%
-3,0%
A
WEG
B
C
D
E
BM&F Bovespa: WEGE3 / OTC: WEGZY
8,0%
2009
2010
2011
2012
2013
F
6
Clear competitive advantages
Unique business model creates important and stable advantages
Competitive Advantages
WEG
Business
Model
ƒLarge and synergistic portfolio
ƒWorldwide presence
ƒOne-stop shop concept
ƒMass customization
ƒProduction in low cost emerging markets
ƒLow financial leverage
ƒFocus on M&A enabling continuous future
growth
BM&F Bovespa: WEGE3 / OTC: WEGZY
7
Solid growth track record
15,7%
16,5%
17,2%
1.230
851
789
812
1.017
1.021
839
617
462
475
381
293
256
188
133
119
96
67
ROIC
15,9%
15,3%
14,7%
12,4%
14,3%
10,6%
13,5%
656
587
843
BM&F Bovespa: WEGE3 / OTC: WEGZY
519
549
560
575
503
375
403
308
220
176
18,0%
18,0%
CAGR
18.4%
12,4% 13,0% 11,8%
11,3%
125
82
19,3%
18,4%
16,7%
14,9%
13,1%
98
58
20,5%
16,4% 16,5%
CAGR
20.4%
41
22,4% 22,7%
21,5%
18,2% 18,3%
10,9%
30
21,2%
18,1%
59
18,5%
23,5% 24,1% 22,8%
22,5%
22,5%
20,7%
Net Income and Net Margin (R$ million)
12,6%
EBITDA and EBITDA Margin (R$ million)
5.189
4.392
4.211
3.749
3.009
2.515
2.204
1.694
1.282
1.066
800
628
527
466
372
353
CAGR
17.9%
4.502
6.174
Revenues (R$ million)
6.829
Business model allows to find and explore growth opportunities even under
unfavorable macroeconomic conditions
12,1%
10,4%
11,8%
10,0%
10,3%
8
Growth rate
CAGR 10 years (2004-2013)
CAGR 5 years (2009-2013)
15,0%
7,9%
3,6%3,1%
3,4%
4,1% 3,7%
1,7%
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
20.000
6.829
11%
6.174
5.189
4.392
18%
19%
2/3
Organic
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
2008
2013
5,2%
6,4%
12,3%
10,6%
R$ 4.5 billion
55,3%
R$ 6.8 billion
21,8%
61,2%
27,2%
Industrial Equipment
BM&F Bovespa: WEGE3 / OTC: WEGZY
GT&D Equipment
Domestic Use
Paints & Varnishes
13
Revenue profile
2008
2013
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
15%
30%
PORTUGAL
2000
2013
70%
35%
50%
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
Working capital needs
(% of Net Revenues)
50,0%
40,0%
Working Capital
30,0%
Clientes
Inventories
20,0%
10,0%
Advances
Suppliers
0,0%
4Q06
4Q07
4Q08
BM&F Bovespa: WEGE3 / OTC: WEGZY
4Q09
4Q10
4Q11
4Q12
4Q13
16
Use of cash
Capex (R$ million)
Research & Development (R$ million)
10,2%
% of Net Revenues
9,3%
8,0%
8,1%
7,4%
6,8%
6,1% 6,1%
% of Net Revenues
2,5%
2,5% 2,4%
2,3%
6,5%
5,8%
2,5%
2,3%
2,3%
2,0% 2,0%
5,4%
1,7% 1,6% 1,8%
5,3%
457
3,6% 3,9%
131
3,6%
305
126
42
38
49
73
83
238 244
226 233
188
146
183
1,5%
148
3,7%
206
2,7%
2,4%
63
111
16
18
18
21
30
73
86
89
101
83
34
Net Earnings and Dividends (R$ million)
BM&F Bovespa: WEGE3 / OTC: WEGZY
17
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 Mar 13, 2014 : R$ 29.53
Market value
ƒ On Dec 30, 2013: R$ 19,347 million
ƒ On Jan 23, 2014 : R$ 18,335 million
Liquidity (average
daily volume)
ƒ In 2012: R$ 10,343 thousand / day
ƒ In 2013: R$ 15,193 thousand / day
Composition of
ƒ 56% - Foreign institutions
ƒ 03% - Brazilian institutions
ƒ 41% - Others (individuals, etc.)
Free Float
BM&F Bovespa: WEGE3 / OTC: WEGZY
620,905,029
473,515
620,431,514
18
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
19
WEGE3 performance
WEG’s shares achieved important indexes
34,00
32,00
Selected for
ISE 2014
30,00
28,00
Selected for
ISE 2013
Inclusion
Ibrx-100
WEGE3 share prices (R$)
26,00
24,00
Inclusion
MSCI Brazil
22,00
20,00
18,00
16,00
14,00
12,00
10,00
BM&F Bovespa: WEGE3 / OTC: WEGZY
20
20
Liquidity – WEGE3
15.193
14.479
2.165
2.181
10.343
7.442
6.750
6.062
7.697
9.833
Average Daily Traded Volume (R$ th)
BM&F Bovespa: WEGE3 / OTC: WEGZY
1.076
796
599
465
452
373
Average Daily Trades
21
21
Highlights
Yearly Figures
2013
Net Operating Revenue
Domestic Market
External Markets
2012
%
2011
%
6.828.896
3.432.040
3.396.856
6.173.878 10,6%
3.016.662 13,8%
3.157.216 7,6%
5.189.409 19,0%
2.902.958 3,9%
2.286.451 38,1%
External Markets in US$ 1.569.891
1.610.330 -2,5%
1.361.689 18,3%
1.880.856 18,9%
1.556.051 20,9%
Gross Operating Profit
2.236.766
Gross Margin
Quarterly Net Income
32,8%
843.467
Net Margin
EBITDA
12,4%
1.230.032
30,5%
30,0%
655.979 28,6%
10,6%
586.936 11,8%
11,3%
1.016.748 21,0%
851.155 19,5%
EBITDA Margin
18,0%
16,5%
16,4%
EPS
1,3595
1,0573 28,6%
0,9461 11,8%
Figures in R$ Thousands
BM&F Bovespa: WEGE3 / OTC: WEGZY
22
Highlights
Quarterly Figures
Q4 2013
1.893.299
913.388
979.911
Q3 2013
1.758.381
872.363
886.018
7,7%
4,7%
10,6%
Q4 2012
%
1.662.258 13,9%
774.533 17,9%
887.725 10,4%
428.229
387.197
10,6%
431.141 -0,7%
615.847
599.253
2,8%
528.641 16,5%
32,5%
34,1%
Net Income
237.439
228.761
Net Margin
12,5%
13,0%
341.653
326.934
EBITDA Margin
18,0%
18,6%
EPS
0,3827
0,3687
Net Operating Revenue
Domestic Market
External Markets
External Markets in US$
Gross Operating Profit
Gross Margin
EBITDA
%
31,8%
3,8%
183.157 29,6%
11,0%
4,5%
289.786 17,9%
17,4%
3,8%
0,2952 29,6%
Figures in R$ Thousand
BM&F Bovespa: WEGE3 / OTC: WEGZY
23
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
December 2013
(A)
R$
AV%
40
6.851.787
68%
3.373.799
33%
1.658.806
16%
1.445.927
14%
373.255
4%
123.866
1%
2.230
0%
60.376
1%
61.260
1%
3.165.640
31%
7.264
0%
2.614.556
26%
543.820
5%
10.141.293 100%
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%
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%
24
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
December 2013
(A)
R$
AV%
40
2.578.048
25%
216.553
2%
420.250
4%
139.570
1%
912.796
9%
87.723
1%
459.130
5%
34.191
0%
307.835
3%
2.920.978
29%
2.296.208
23%
95.031
1%
294.405
3%
235.334
2%
84.495
1%
4.557.772
45%
10.141.293 100%
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%
December 2011
(C)
R$
AV%
22
2.752.960
30%
161.436
2%
298.195
3%
88.473
1%
1.701.435
19%
2.804
0%
285.843
3%
26.314
0%
188.459
2%
2.446.312
27%
1.756.293
19%
122.485
1%
421.918
5%
145.616
2%
106.477
1%
3.800.112
42%
9.105.861 100%
25
Highlights
Balance sheet – Cash flow
Operating Activities
Net Earnings before Taxes
Depreciation and Amortization
Provisions:
Profit Sharing
Stock Options
Other 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
(R$ thousands)
12 Months
2013
12 Months
2012
1.084.879
218.279
379.359
142.728
567
236.064
(655.083)
(299.506)
187.409
(146.049)
(280.483)
(116.454)
1.027.434
864.102
208.337
320.765
108.466
519
211.780
(354.559)
(324.344)
187.545
92.326
(210.296)
(99.790)
1.038.645
(258.699)
(21.943)
2.030
83.761
261.046
(5.177)
(6.260)
54.758
(237.882)
(17.939)
14.730
78.521
17.359
(54.077)
(52.090)
(183.156)
(441.754)
1.890.267
(1.353.734)
(155.933)
738
(391.987)
(10.649)
1.071.543
845.738
(1.578.739)
(174.827)
(318.422)
(1.226.250)
(629.359)
2.302.256
3.373.799
2.931.615
2.302.256
26
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)
December 2013
3.376.029
3.373.799
2.230
3.209.004
912.796
28%
462.336
450.460
2.296.208
72%
2.048.766
247.442
167.025
BM&F Bovespa: WEGE3 / OTC: WEGZY
December 2012
2.565.532
2.563.500
2.032
2.689.840
1.645.772
61%
1.067.683
578.089
1.044.068
39%
824.910
219.158
(124.308)
December 2011
3.212.250
2.931.615
280.635
3.457.728
1.701.435
49%
585.687
1.115.748
1.756.293
51%
1.560.712
195.581
(245.478)
27