1Q07 Analyst and Investors Meeting
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  • 1. Localiza Rent a Car S.A. 1Q07 Results presentation (R$ million - USGAAP) 0
  • 2. Integrated business platform 145 agencies 14,938 cars 23,825 cars (489 managed) 1,086,794 individuals and 350 clients 14,000 corporations 157 employees 1.828 employees Synergies: cost reduction cross selling bargaining power Overhead = 124 employees 30 points of sale 171 agencies 8, 870 cars sold in 9 countries 79% sold to final 6,319 cars consumer 17 employees 381 employees This integrated business platform gives us superior performance As of December 31, 2006
  • 3. Car rental financial cycle Financing Car Sales Revenue 100 102 Revenue per car sold** 102,20 SG&A (7%) (7,15) Safety Margin (3%) (3,06) Book value after 12 months 91,99 ** Depreciation over list price: 100-(102.2/125)x100 = 18,2% Principal 100,00 100 Interest (CDI + 1 p.p.) 15,00 Car acquisition 115 Financial payment 115,00 Financial payment (List price net of dealers discount = 125) Depreciation = estimated price of selling after one year, net of SG&A and safety margin minus price of purchase. Depreciation rate: 100-(102.2*0.9) = 8.02% Holding cost of cars after tax with 3% margin = depreciation + financial cost. Either the leverage is through third party financing or shareholder’s capital. 2
  • 4. Car rental financial cycle Financing Car Sales Revenue 100 102 Revenue per car sold** 102,20 SG&A (7%) (7,15) Safety Margin (3%) (3,06) Book value after 12 months 91,99 Revenues = 114,58 ** Depreciation over list price: 100-(102.2/125)x100 = 18,2% Expenses = 62,84 Principal 100,00 100 Interest (CDI + 1 p.p.) 15,00 115 Car acquisition Financial payment 115,00 Financial payment (List price net of dealers discount = 125) Car Rental Car Resale (Seminovos) Consolidated R$ % * R$ % R$ % Car rental revenue 114,58 100,0% 102,20 100,0% 216,78 100,0% Costs (46,00) -40,1% (46,00) SG&A (16,84) -14,7% (7,15) (23,99) Book value of car resale (91,99) -90,0% (91,99) -3,8% EBITDA 51,75 45,2% 3,06 3,0% 54,81 25,3% Depreciation (8,20) -8,0% (8,20) -3,8% Interest (15,00) -14,7% (15,00) -6,9% Tax (30%) (15,52) -13,5% 6,04 5,9% (9,48) -4,4% NET INCOME 36,22 31,6% (14,10) -13,8% 22,12 10,2% % over car rental revenue 31,6% -12,3% 19,3% Consolidated net margin is 19,3% of car rental revenues (if 100% leveraged). 3
  • 5. Fleet rental financial cycle Financing Car Sales Revenue Revenue per car sold** 102,20 100 102 SG&A (7%) (7,15) Safety Margin (3%) (3,06) Book value after 12 months 91,99 Revenues = 53,64 ** Depreciation over list price: 100-(102.2/125)x100 = 18,2% Expenses = 18,21 Principal 100,00 100 Interest (CDI + 1 p.p.) 15,00 Car acquisition 115 Financial payment 115,00 (List price net of dealers Financial payment discount = 125) Fleet Rental* Car Resale (Seminovos) Consolidated R$ % R$ % R$ % Fleet rental Revenue 53,64 100,0% 102,20 100,0% 155,84 100,0% Costs (14,24) -26,5% (14,24) -9,1% SG&A (3,97) -7,4% (7,15) (11,12) -7,1% Book value of car resale (91,99) -90,0% (91,99) -59,0% EBITDA 35,43 66,0% 3,06 3,0% 38,49 24,7% Depreciation (8,20) -8,0% (8,20) -5,3% Interest (15,00) -14,7% (15,00) -9,6% Tax (30%) (10,63) -19,8% 6,04 5,9% (4,59) -2,9% NET INCOME 24,80 46,2% (14,10) -13,8% 10,70 6,9% % over fleet rental revenue 46,2% -26,3% 20,0% Consolidated net margin is 20% of fleet rental revenues (if 100% leveraged). 4
  • 6. Breakdown per segment 2006 Revenue EBITDA Profit Franchising Franchising 1% Car rental Semino vo s F ranchising 1% 2% 31% 9% C ar rental Fleet rental 48% 45% Seminovos Car rental 52% F leet rent al 54% Fleet rental 42% 17% Revenues Ebitda Profit Car rental 31% 48% 54% Fleet rental 17% 42% 45% Seminovos 52% 9% * Franchising 1% 1% 2% Total 100% 100% 100% *Profit (loss) alocated in the rental divisions
  • 7. Strategy by segment Increase market leadership maintaining high return Core Businesses Add value to the brand by expanding the network in Brazil and South America Create value taking advantage of the synergies of the integrated business platform Support Add value to the businesses of the platform as a competitive advantage, reducing depreciation costs 6
  • 8. Growth opportunities GDP elasticity Consolidation Air traffic Fleet outsorcing Credit cards Replacement 7
  • 9. Growth opportunities: GDP Accumulated growth rate – car rental 7.7x 2003 2004 2005 2006 Localiza – Daily volume GDP The average car rental division volume growth was 7.7 x GDP over the last 3 years Source: Bacen, Localiza 8
  • 10. Growth opportunities: Air traffic Air traffic evolution Number of travellers has (Millions of passengers per year) increased 13% on the last 3 years 13% CAGR: + 96 102 Localiza is the absolute leader 83 71 in airport branches in Brazil In 2006 Localiza Car Rental 2003 2004 2005 2006 Division grew 2 times faster than the number of passengers Source: infraero 9
  • 11. Growth opportunities: Credit cards # of credit cards (million) 18% CAGR: + 78 68 53 48 2003 2004 2005 2006 78 million credit cards in Brazil 35.5 million potential Localiza customers 37% of car rental revenues came through credit cards in 2006 Source: www.abecs. 10
  • 12. Growth opportunities: Replacement market Replacement is a growing market in Brazil Brazil has 34 million cars but only 9.2 million insured The accident rate is 16.5% / year The potential market is 10.6 million of daily rentals (2.5 x the car rental division in 2006) Localiza is very well positioned to capture this growth due to its geographic footprint Source: FENASEG - 11
  • 13. Growth opportunities: Fleet outsourcing Large potential market with low penetration due to lack of habit Large potential market with low penetration due to lack of habit Focus of corporations on their core businesses Focus of corporations on their core businesses Fixed asset reduction by companies (increase their asset turnover) Fixed asset reduction by companies (increase their asset turnover) Renting a fleet is more economic than owning it Renting a fleet is more economic than owning it 12
  • 14. Growth opportunities: Consolidation US Market share 2005 US airport segment* US off-airport segment* US$10BN - US$10BN Enterprise Other All others 7% DTG Avis Budget 2% 19% 11% Avis Budget 32% 7% Vanguard Hertz 20% Enterprise 65% 9% Hertz 28% USA: 5 companies hold 92% of market share Europe: 6 companies hold 74% of market share** Source:*Avis presentation nov/06 - local segment share amounts are company estimates ** National/Alamo prospectus, NYSE/SEC, September 20, 2006 13
  • 15. Growth opportunities: Off-airport market Airport and off airport market - Brazil BR on airport segment* BR off-airport segment* agencies agencies Others Localiza* ** 204 48 Localiza * Hertz 74 56 Avis 51 ** ** ** Unidas Unidas 42 31 *** Avis ** Hertz ** Others 31 1948 33 Source: 1948 companies as of ABLA’s report * Localiza as of 03/31/07 **Each company website, 04/16/07 *** Assuming that each local player has one agency In the airports the market is concentrated in the hands of the networks Off-airport market is fragmented mainly among 1.952 small car rental companies 14
  • 16. Growth opportunities: On airport and off-airport growth 2006 Domestic deplanements increase x Localiza (rentals on airports) Of f- airport x On - airport share 100% 100% 100% 39,0% 46,4% 40,6% 40,5% 24,0% 17,0% 17,0% 17,0% 12,6% 8,2% 53,6% 59,4% 59,5% 5,8% 2004 2005 2006 1Q07 2005 2006 1Q07 Domestic deplanement Daily rental volume on airports Off-airport agencies On-airport agencies Elasticity on airport in 2006 was 2 times the growth of domestic deplanements 2006 / 2005 Growth (Car rental division) Volume growth Revenue growth Airport 17.2% 16.0% Off-airport 49.6% 46.7% Consolidation is happening mainly on the off-airport agencies 15
  • 17. Growth opportunities: Consolidation Localiza’s market share – Car and Fleet - Brazil 2004 2005 2006 Avis Hertz Unidas 4% 7% 4% Local players 15,5% 69% 17,9% 20,5% Localiza corporation grew 30.2% in 2006. The market grew 8.9%% Localiza grew more than 2x the market in 2006 Source: ABLA 16
  • 18. Competitive advantages Gains of Bargaining scale Integrated platform power Geographical distribution Yield management Credit with lower interest rate Know-how Strong brand State of the art IT Bargaining power Depreciation Market share Higher increase competitiveness 17
  • 19. Competitive Advantages: Integrated business platform Car rental Fleet rental Franchising Used Car Sales This integrated business platform gives us superior performance 18
  • 20. Competitive Advantages: Largest distribution Nationwide Nationwide presence presence Strategic Strategic locations locations International International footprint footprint 316 agencies in 9 countries 19
  • 21. Competitive Advantages: Largest distribution (number of agencies in Brazil) 278* 244** 73 278 82 89 Localiza Hertz Avis Unidas Localiza network is larger than the second, the third and the fourth competitors combined. * As of March 31, 2006 ** As of April 16,2007 20
  • 22. Competitive Advantages: Yield management Localiza adjusts its prices based on supply & demand Month of the year Month of the year Day of the week Day of the week City City Events Events Volume per customer Volume per customer Competitors’ monitoring Competitors’ monitoring Yield management allows Localiza to be more competitive and profitable 21
  • 23. Competitive Advantages: credit with lower interest rate Standard & Poor’s as of January 2007 Global Scale Localiza Rent a Car S.A. BB / Stable /-- Hertz Corp. BB-/ Stable /-- Vanguard (National / Alamo) B+/ Stable /-- Avis Budget Car Rental BB+/ Stable /-- Enterprise Rent-Car Co. A-/ Stable / A-2 Local Currency Localiza Rent a Car S.A. brAA-/ Stable /-- TAM S.A. brA+/ Stable /-- Gerdau S.A. brAA+/ Positive /-- CPFL Energia S.A. brA+/ Positive /-- Banco Bradesco S.A brAA+/ Positive /brA-1 Banco Citibank S.A. brAA/ Positive /brA-1 Banco Itaú S.A. brAA+/ Positive /brA-1 Localiza has the best rating among its international peers considering the debt currency 22
  • 24. Competitive Advantages: Know-how Deep knowledge of the business State-of-the-art systems Operational excellence Adoption of best practices Stable management Name Responsibility Experience in Localiza Salim Mattar (Founder) CEO and Chairman of the Board 33 Antonio Resende (Founder) Vice-president 33 Eugênio Mattar (Founder) Vice-president 33 Aristides Newton Franchising 24 Gina Rafael Car rental 26 Daltro Barbosa Total Fleet 22 Marco Guimarães Seminovos 16 Roberto Mendes CFO and IR 21 Silvio Guerra Investor relations 15 We believe this experienced team will run the business for the next ten years 23
  • 25. Competitive Advantages: Brand recognition Top of mind High quality of services Customer satisfaction Strong nationwide presence International franchising program High standards of ethical behavior Most consumed car rental brand in the ranking of America Economia Magazine 24
  • 26. Competitive Advantages: State of the art IT Speed in transaction time Better operational control Customer satisfaction On-line network Cost reduction 25
  • 27. Competitive Advantages: Bargaining power 33.520 26.105 22.182 15.062 2003 2004 2005 2006 Localiza purchased more than US$1,2 billion worth of cars from 2003-2006* Localiza and its Franchisees represented in 2006 3.9% of FIAT internal car sales 2.7% of GM internal car sales 1.8% of the Brazilian internal car sales *96.9 thousand cars between 2003-2006 calculated on average purchase price of 2006 Localiza enjoys better conditions due to its large scale 26
  • 28. Competitive Advantages: Depreciation When car prices go up more than inflation, depreciaton decreases 4.000,0 12,0% 3.617,7 9,8% 10,0% 3.000,0 8,0% Reais 2.000,0 2.142,5 4,7% 6,0% 1.656,2 3,7% 4,0% 1.000,0 510,1 1.752,3 939,1 2,0% 322,9 492,3 0,9% - -1,0% -0,4% 0,0% 2000 2001 2002 2003 2004 2005 2006 1T07 -2,0% (1.000,0) -4,0% -4,1% -5,1% (2.000,0) -6,0% Average depreciation Real decrease in the Real increase in the per car new car price new car price Depreciation cost over the car rental revenue % over rental revenue 2000 2001 2002 2003 2004 2005 2006 Localiza (car rental division) 13.8% 11.9% 9.3% 9.2% 1.8% 2.9% 5.2% Hertz (USA) - - - - 22% 23% 23% * National / Alamo (USA) - - - - 22% 23% 23% * Avis / Budget (USA) - - - - 26% 29% 31% Sixt (Europa) - - - - - 18.6% 20.5% Source: National/Alamo prospectus, Sep 20, 2006, p.11 Hertz prospectus, Nov 21,2006, p.12 and 17, Avis 2006 10K * Until Set/06 27
  • 29. Recognition Standard & Poor’s rating upgraded to ‘brAA-’ in national scale and ‘BB’ in global scale. same as sovereign risk. with stable outlook IBrX (between the 100 most traded shares) ISE – Corporate Sustainability Index (34 companies) “Best Company for Shareholders” by Capital Aberto magazine. between Companies of up to R$ 5 BI market cap The best subsequent public offer among the listed companies by Infomoney, in a survey among the brokers registered in BOVESPA 28
  • 30. Financials 1Q07 29
  • 31. 1T07 highlights: Net income Net income : 23.5% CAGR 138 107 91 69 53.4% 45 30 2003 2004 2005 2006 1T06 1T07 30
  • 32. 1Q07 highlights: EBITDA per segment (R$ million, USGAAP) Ebitda - Rental Ebitda - Consolidated +30.0% % C AGR: : +22.1 282.8 + 14.9 million CAGR + 16.6 million 220.6 313.1 285.8 131,8 167.3 210.1 20.3% 94,9 21.8% 3,0 98.2 3,9 83,3 2,7 61,3 27,3 81.6 68.5 83.4 151,0 40,1 1,2 125,7 34,7 282,8 0,5 13,6 84,0 31,3 167,3 220,6 48,7 12,6 83,4 37,2 68,5 2004 2005 2006 1T06 1T07 2004 2005 2006 1T06 1T07 Car rental Fleet rental Rentalsl Car Resale Franchising Margin per segment 2004 2005 2006 1T06 1T07 Car rental 42.6% 46.3% 42.3% 42.6% 46.6% Fleet rental 65.2% 63.6% 69.3% 69.4% 65.2% Consolidated - Rental 51.5% 52.5% 51.7% 51.7% 52.9% Car Resale 13.2% 13.7% 4.6% 10.0% 5.6% Franchising 41.5% 47.6% 39.0% 29.4% 70.6% TOTAL 33.1% 32.6% 27.3% 31.4% 24.3% 31
  • 33. Highlights: Consolidation Market share - 2004 Market share - 2005 Market share - 2006 +2.4 p,p, +2.6 p,p, Localiza Localiza Localiza 15,5% 17,9% 20,5% O t he rs O t he rs O t he rs 8 4 ,5 % 8 2 ,1% 7 9 ,5 % Localiza Brazil has grown in revenues an average of 2,9x the market between 2004-2006 Localiza CAGR: + 25,2% Market CAGR: + 8,8% Soucre: ABLA 32
  • 34. Highlights: RENT3 Extraordinary dividends of R$ 196.7 millions (refers to 2005 and 2006) Interest on own capital of R$ 5.9 million (2007 anticipation) Proposal of share split (each 1 share will be converted into 3) Average daily traded volume of R$ 13.4 million 1Q07 (R$ 10.6 million in 2006) RENT3 had the best performance among the main public offerings of the last 3 years (Economática, 04/09/2007) 33
  • 35. Highlights: Corporate governance Board of Directors with 4 independent members (total of 9) Oscar Bernardes Paulo Guedes Stefano Bonfiglio Wilson Brumer Internal committees of: Auditing (3 members being 2 independent ) Disclosure (the main executives of each area of Localiza) Personal (3 members being 2 independent ) Definition of a succession plan for contingency 34
  • 36. Net income reconciliation (R$ million, USGAAP) Rental Ebitda + 15.6 million Car Resale Ebitda + 1.0 million Total Ebitda +16.6 millions - 0.8 million Revenues Costs +143.9 -123.4 -112.6 +118.7 SG&A Interests Stock Options Taxes -10.8 +8.1 -3.9 +0.9 -7.9 Depreciation -1,0 -5.1 -1.9 +25.2 +1.2 29.6 45.4 +53.4% 1Q06 1Q07 Net income Net income 35
  • 37. Cash generation Includes a reduction in the (R$ milllion. USGAAP) Automakers’ account of R$ 223.2 million 65.3 11.9 30.1 39.4 Cash and cash -3.9 Cash and cash equivalents equivalents 12/31/06: 03/31/07: -64.0 Operational Fleet Financial Interest on own activities acquisition application capital and others R$ 228.5 million was the cash generated by operational activities in 1Q07, adjusted by the reduction of the automakers’ debt in the amount of R$ 223.2 millions 36
  • 38. Indebtness (R$ million, USGAAP) Net debt X Market cap Rating S&P – BrAA- / Stable 4320 4239 1812 796 539 281 443 468 2004 2005 2006 1T07 Market cap Net debt EOP BALANCE 2004 2005 2006 1Q07 Net debt / fleet 46% 60% 36% 43% Net debt / equity 49% / 51% 58% / 52% 41% / 59% 41% / 59% Net debt / EBITDA (USGAAP) 1.34x 1.89x 1.42x 1.19x* Net debt / EBITDA (BRGAAP) 1.1x 1.5x 1.0X 0.8x* Net debt / Market cap 35.3% 29.7% 10.3% 11.0% * Annualized based on 1Q07 37
  • 39. Investment in fleet Quantity - Thousand Net investment – R$ million +7.3 +10.3 +340.0 +190.0 +242.0 +6.5 33,5 930 26,1 690 -183.0 22,2 23,2 -7.1 590 18,8 493 15,7 448 303 8,9 244 1,8 64 2004 2005 2006 1T07 2004 2005 2006 1T07 Purchased Sold Investment per car – R$ thousand 2004 2005 2006 Average purchase price 21.9 26.0 27.6 Average selling price 18.8 23.4 25.0 Net 3.1 2.6 2.6 % over average purchase price 14.2% 10.0% 9.4% In the 1Q07 the fleet was reduced in 7,458 cars to adjust off-peak demand after the high season 38
  • 40. Investment in cars x utilization rate Car rental division Daily rentals x utilization Buying and selling cars 2006 2006 12,862 600.000 160% 9,513 120% Utilization 400.000 6,599 Daily 71,8% 63,3% 80% 59,5% 68,4% 4,112 3,978 200.000 2,861 3,273 40% 158 0 0% Jan Fev Mar Abr Mai Jun Jul Ago Set Out Nov Dez 1Q06 2Q06 3Q06 4Q06 Daily rentals Utilization rate Purchased Sold 2007 E 2007 E 12,098 600.000 160% 120% 8,783 7,462 Utilization 7,423 400.000 6,461 7,178 6,879 Daily 64,9% 75,0% 75,0% 70,0% 80% 200.000 40% 25 0 0% Jan Fev Mar Abr Mai Jun Jul Ago Set Out Nov Dez 1Q07 2Q07 3Q07 4Q07 Daily rentals Utilization rate Purchased Sold In order to maximize the utilization rate in 2007 we will distribute the cars purchases through out the 2nd, 3rd and 4th quarters 39
  • 41. Price 23 -M 10 15 20 25 30 35 40 45 50 55 60 65 70 7- a y 21 Jun -J u 5- n 19 Jul -J 2- u l 16 g Au -A 30 ug - 14 Aug -S 28 ep -S 13 ep - 27 O c -O t 11 c - t 28 Nov - 12 No -D v 26 ec -D 10 ec -J Performance: 2005 2006 24 a n -J 8- a n 22 Feb -F since IPO 10 eb -M 24 a -M r 7- ar 25 Apr - 10 Ap -M r 24 a -M y Volume RENT3 7- a y 22 Jun -J RENT3 u + 149% + 124% + 448% 6- n 20 Jul -J RENT3 X IBOV RENT3 3- u l 17 g Au -A 31 ug - 15 Aug -S 29 ep -S +38% IBOVESPA 16 ep IBOV +33% - + 89% 30 O c -O t 14 c - t 30 Nov - 14 No -D v e 2- c 16 Jan -J 31 a n - 14 Jan -F e 2- b 1 6 Ma -M r 30 a 86% -M r 448% ar 0 20 40 60 80 100 120 40 From 05/23/05 (IPO) to 03/30/07. Volume-R$ thousand RENT3 Performance
  • 42. RENT3 Liquidity Average daily traded volume (R$ thousand) 13.395 90% 132% 10.581 7.047 4.570 2005 2006 1T06 1T07 RENT3 was the 59th most traded share in Bovespa in the last 12 months 1Q07 x 2006 = +26.6% 41
  • 43. Disclaimer - Forward looking statements The material that follows is a presentation of general background information about LOCALIZA as of the date of the presentation. It is information in summary form and does not purport to be complete. It is not intended to be relied upon as advice to potential investors. This presentation is strictly confidential and may not be disclosed to any other person. No representation or warranty, express or implied, is made concerning, and no reliance should be placed on, the accuracy, fairness, or completeness of the information presented herein. This presentation contains statements that are forward-looking within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are only predictions and are not guarantees of future performance. Investors are cautioned that any such forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the operations and business environments of LOCALIZA and its subsidiaries that may cause the actual results of the companies to be materially different from any future results expressed or implied in such forward-looking statements. Although LOCALIZA believes that the expectations and assumptions reflected in the forward-looking statements are reasonable based on information currently available to LOCALIZA’s management, LOCALIZA cannot guarantee future results or events. LOCALIZA expressly disclaims a duty to update any of the forward-looking statement. Securities may not be offered or sold in the United States unless they are registered or exempt from registration under the Securities Act of 1933. Any offering of securities to be made in the United States will be made by means of an offering memorandum that may be obtained from the underwriters. Such offering memorandum will contain, or incorporate by reference, detailed information about LOCALIZA and its business and financial results, as well as its financial statements. This presentation does not constitute an offer, or invitation, or solicitation of an offer, to subscribe for or purchase any securities. Neither this presentation nor anything contained herein shall form the basis of any contract or commitment whatsoever. 42
  • 44. Thank you! Localiza’s IR: www.localiza.com/ri Phone: 55 (31) 3247-7039 43