Conferências e Non-deal Roadshow - Outubro 2008 (inglês)
1. Localiza Rent a Car S.A.
3Q08 Results
(R$ million - USGAAP)
Confins airport branch – Belo Horizonte
24h reservation
0800 979 2000
www.localiza.com
1
November, 2008
2. Agenda
• Company
• Drivers of growth
• Competitive advantages
• Growth with profitability
• 3Q Financials
• Strategies for the current scenario
2
3. Integrated business platform
44,215 cars 22,481 cars
1.5 million clients 568 clients
194 agencies
2,321 employees 205 employees
Synergies:
cost reduction
cross selling
bargaining power
9,348 cars 27,635 cars sold
213 agencies in 9 countries 82% sold to final
137 agencies in Brazil consumer
33 points of sale
18 employees 468 employees
This integrated business platform gives Localiza superior performance
Date: 9M08
3
4. Strategy by division
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 integrated business
platform synergies
Support
Add value to the businesses, reducing depreciation as a
competitive advantage
4
5. Breakdown per division
Revenues EBITDA Net Income
Franchising
Franchising Franchising
1%
1% Car rental 11% 1%
29% Fleet rental
36%
49%
Used car
Car rental
sales 39%
Fleet rental 63%
55%
15%
Revenues EBITDA Net income
Car rental 29% 49% 54%
Fleet rental 15% 39% 45%
Used car sales 55% 11% *
Franchising 1% 1% 1%
Total 100% 100% 100%
* Used car results are alocated in the rental divisions Date: 2007
5
6. Agenda
• Company
• Drivers of growth
• Competitive advantages
• Growth with profitability
• 3Q Financials
• Strategies for the current scenario
6
7. Growth opportunities
GDP elasticity
Consolidation Air traffic
Fleet outsourcing Credit cards
Replacement
7
8. Growth opportunities: GDP
Revenues accumulated growth rate – rentals
Localiza
5.9x
Sector
2.4x
GDP
2004 2005 2006 2007
Localiza’s revenue has been growing 5.9x the GDP.
The Brazilian car rental market grew 2.4x the GDP in the same period.
Source: Bacen, Abla and Localiza
8
9. Growth opportunities: consolidation
Brazilian market 2008
(# of agencies)
Airport agencies Off-airport agencies
Localiza*
Hertz**
Others*** 240 68 Unidas**
32
Localiza* 60
Avis**
82
31 Avis**
49
Unidas**
Hertz**
35
32 Others
1901
Off-airport market is fragmented among almost 2,000 small local car rental companies
Fonte: *Localiza em 30/06/08; **Site de cada empresa em 22/08/2008; ***Supondo que cada locadora local tenha uma agência 9
10. Growth opportunities: airport x off-airport markets
Car rental division
Car rental revenues growth Car rental revenues breakdown
100% 100% 100% 100%
2006 2007 Up to Sep/08 41% 38% 34%
46%
Airports 16% 14% 24%
54% 59% 62% 66%
Off-airport 47% 28% 49%
2005 2006 2007 Up to Sep/08
Off-airports Airports
Off-airport revenues have grown 2x faster than on-airports.
10
11. Agenda
• Company
• Drivers of growth
• Competitive advantages
• Growth with profitability
• 3Q Financials
• Strategies for the current scenario
11
12. Competitive advantages
Gains of Higher
scale Integrated platform competitiveness
Geographical distribution
Rating
Used car sales network
Lower depreciation
Know-how
Strong brand
Market share
increase
12
13. Competitive advantages: largest distribution
Nationwide
Nationwide
presence
presence
Strategic
Strategic
locations
locations
International
International
footprint
footprint
407 agencies in 9 countries
Date: 9M08
13
14. Competitive advantages: largest distribution
Agencies in Brazil Cities in Brazil
322 229
275
184
80 54
322 95 229
62
100 68
Localiza Hertz Unidas Avis Localiza Unidas Hertz Avis
Localiza network is larger than the second, the third and the fourth competitors combined
in number of agencies and cities.
Source: Each company website as of August 22nd , 2008
14
15. Competitive advantages: rating
Moody’s debt rating as of August, 2007 (Global scale)
Baa2
Ba1
Ba2
Ba3 Ba3
B1 B1
Enterprise Localiza Avis Budget Hertz Europcar Dollar Vanguard
Thrifty
Moody’s corporate rating as of September, 2008 (Local Currency)
Localiza Rent a Car S.A. Aa2.br
Braskem S.A. Aa2.br
Magnesita Refratarios S.A. Aa2.br
Companhia Siderurgica Nacional - CSN Aa1.br
Companhia Energetica de Minas Gerais - CEMIG Aa3.br
Duke Energy Int. Geração Paranapanema S.A. Aa2.br
Rio Grande Energia S.A. - RGE Aa2.br
Localiza has one the best rating among its international peers
15
16. Competitive advantages: lower depreciation
32 stores in Brazil
Logistic of distribution
Know-how of used car market
Selling to final consumers in order to
have higher revenue per sold car
Car sales inventory as a buffer of the car rental during peaks of demand
16
17. Competitive advantages: depreciation
3,618.0
24%
2 9 %
3 ,
8 0 0 .
0
22%
2,640.0 19% 19%
18% 2 ,
8 0 0 .
0
2,142.0 17%
1,656.0 1,752.0 11% 1 ,
8 0 0 .
0
9% 939.1 8%
4% 7% 777.0
5% 322.9 492.3 7% 6% 332.9 8 0 0.
0
6% 3%
2%
0% 0% -1%
1
- % 2
( 0 0. )
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
GDP 0.3% 4.3% 1.3% 2.7% 1.1% 5.7% 2.9% 3.7% 5.4 6.0
Average depreciation Growth of purchase price (%) Growth of sale price (%)
Localiza 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Average purchase price (nominal) 12,635 13,788 14,575 14,586 15,600 16,140 19,960 24,350 25,840 25,650 27,600
Average sale price (nominal 10,770 11,362 13,464 13,971 14,026 16,680 19,490 23,060 24,770 27,460 27,930
Average capex for renewal 1,865 2,426 1,111 615 1,574 (540) 470 1,290 1,070 (1,810) (330)
Average sold fleet age 16.4 13.7 15.5 14.1 14.1 12.8 11.6 11.0 14.7 12.2 12.2
Average depreciation 3,285 2,640 3,618 2,142 1,656 1,752 323 492 939 333 777
% over average purchase price 26.0% 19.1% 24.8% 14.7% 10.6% 10.9% 1.6% 2.0% 3.6% 1.3% 2.8%
The depreciation is calculated using the estimated sale price in the future, net of the sales expenses.
17
18. Agenda
• Company
• Drivers of growth
• Competitive advantages
• Growth with profitability
• 3Q Financials
• Strategies for the current scenario
18
19. Localiza has been increasing its market share
2004 2007
Localiza
33.0%
22.4% Hertz
6.0%
Car rental Others
Avis
50.0% 17.0%
Unidas 6.0%
5.0%
Total Fleet
10.2% 13.2%
Unidas
8.4%
Fleet rental
Others
78,4%
15.5%
22.1%
Consolidated
Localiza is gaining market share…
19
Source: ABLA e Company, based on revenue
21. Agenda
• Company
• Drivers of growth
• Competitive advantages
• Grow with profitability
• 3Q Financials
• Strategies for the current scenario
21
22. Average rented fleet evolution
Average rented fleet
38,517
33.4%
CAGR: 27.9% 30,232 28,877
17,069
24,477
Quantity
22.9% 22.2%
18,710 14,295 13,973
14,450 25.0%
19.4% 11,635
9,308 24.1% 43.9%
7,796 21,448
41.3% 36.6% 15,937
12,842 14,904
9,402
6,654
2004 2005 2006 2007 Up to sep/07 Up to sep/08
Car rental Fleet rental
Car rental Fleet rental
22,700
18,532
%
Quantity
Quantity
45.0
15,653 14,652
26.5%
3Q07 3Q08 3Q07 3Q08
3Q08 growth still strong...
22
23. Revenues evolution
Net revenue
28.3%
4.2%
R: 3 1,531.7
CAG 1,433.3
1,145.4
R$ million
1,117.5
8 5 3 .2 7 9 4 .7
876.9
5 9 0 .3 6 3 2 .8 38.6%
634.4
4 4 8 .2 530.4
3 0 3 .0 29.5% 22.2% 31.8% 382.8
29.4% 6 7 8 .5 6 3 8 .6 3 0 2 .9
5 5 5 .1 2 14 .5 %
3 3 1.4 4 2 8 .7 4 8 4 .7
35.2 2 2 7 .5
16 8 .3
2004 2005 2006 2007 Up to Sep/07 Up to Sep/08 3Q07 3Q08
Rental Used car sales
Fleet rental
Car rental
151.9
R$ million
%
40.6
R$ million
73.2
108.0
58.4
25.3%
3Q07 3Q08
3Q07 3Q08
...reflecting in the revenue increase...
23
24. EBITDA evolution
EBITDA
: 26.9% 403.5
C A GR % 378.3
46.4 31.2
311.3 51.3
288.3
277.9
R$ million
26.9
34.5
197.5 59.1
36.5 25.6% 357.1 28.8% 327.0
30.0% 284.4
35.9% 218.8 253.8
161.0
2004 2005 2006 2007 Up to Sep/07 Up to Sep/08
Rental Used car sales
EBITDA per quarter
8.3%
133.9
120.9 123.6
98.1 104.6
R$ million
85.5
28.0%
1Q 2Q 3Q
2007 2008
...maintaining strong profitability...
24
25. EBITDA margin per division
EBITDA Breakdown - 2007 EBITDA Breakdown – 2008 YTD
Car Rental
Car Rental Fleet Rental
Fleet Rental 50%
49% 35%
39%
Franchising
Franchising Used Car Sale
Used Car Sale 1%
1% 14%
11%
Divisions 2004 2005 2006 2007 Up to sep/07 Up to sep/08 3Q07 3Q08
Car Rental 39.3% 45.0% 41.9% 44.5% 43.7% 44.3% 46.0% 41.9%
Fleet Rental 63.4% 62.3% 69.1% 68.7% 68.7% 66.3% 71.9% 69.7%
Rentals consolidated 48.6% 51.0% 51.2% 52.6% 52.4% 51.2% 55.0% 50.8%
Used car salesSeminovos 12.0% 13.2% 4.6% 5.4% 5.5% 6.5% 5.6% 6.0%
Total EBITDA / rental revenues 59.6% 64.8% 56.1% 59.5% 59.5% 59.2% 62.2% 58.9%
...and consistent margins.
25
26. Net income evolution
Net income
190.2
157.2
138.2 134.3
R$ million
106.5
90.6 17.1%
28.0%
CAGR:
2004 2005 2006 2007 Up to Sep/07 Up to Sep/08
Net income per quarter
53.5 53.6
50.4 50.1
45.4
38.4
R$ million
1Q 2Q 3Q
2007 2008
26
27. Fleet: purchases and sales
7,957 13,864
10,346
7,342 (947)
6,467 41,499
38,050
33,520
Quantity
30,093
26,105 27,635
22,182 23,174 21,638 22,585
18,763
15,715
2004 2005 2006 2007 Up to Sep/07 Up to Sep/08
Purchases Sales
Purchases and sales per quarter
7,240
8,703
17,867
(2,079) 16,419
Quantity
10,627
9,292
7,213 7,716
1Q08 2Q08 3Q08
The growth of 7,240 cars in the 3Q08...
27
28. Fleet: net investment
Net investment *
207.7 443.6
340.0
241.8 (25.8) 1,238.3
190.1 1,060.9
930.3 853.2 794.7
690.0
R$ million
590.3 607,0 632,8
493.1 448.2
303.0
2004 2005 2006 2007 Up to Sep/07 Up to Sep/08
* Includes accessories
Purchases Sales
Net investment per quarter
235.1
252.9
538,0
(44.3) 475,7
302,9
268,9
224,6 222,8
1Q08 2Q08 3Q08
…demanded a net investment of R$ 235.1 million
28
29. Fleet: utilization rate
End of period fleet *
: 23.1% 3% 66.696
CAGR 49.
53.476
46.003 44.680 22,481
Quantity 35.865 21.6% 17,790
35.4%
28.699 24.4% 14,630
28.3% 16,600
11,762 %
9,168 13.7% 5 7 .5 44,215
30.2% 31,373 35,686
% 28,080
19,53123.4 24,103
2004 2005 2006 2007 Up to Sep/07 Up to Sep/08
Car rental Fleet rental
Utilization rate evolution
Car Rental Division
69.3% 68.3% 70.5%
66.1%
Up to Sep/07 Up to Sep/08 3Q07 3Q08
The purchases will be reduced in the 4Q08 so the utilization rate returns to previous level.
* Losses from theft and accidents are deducted from the fleet at the end of period 29
30. Net debt reconciliation
+ 136.4
FCF before growth
Rental Capex Capex Working Taxes Capex growth Stock Dividends Interest
EBITDA renewal other capital repurchase
288.4
-767.9 -1.201.1
Net debt -30.0 -34.7 -35.5 -30.1 -46.7 Net debt
12/31/2007 -51.8 -86.9 09/30/2008
-405.9
- 436.0 - 133.6
Discretionary Dividends and
investments Interests on equity
Debt increased due to the strong growth in fleet.
30
31. Net debt x fleet value
1,956.9
1,492.9
R$ million
1,247.7 1.201,0
900.2
767.9
612.2 539.3 443.1
281.3
2004 2005 2006 2007 Up to Sep/08
Net debt Fleet value
SALDOS EM FINAL DE PERÍODO 2004 2005 2006 2007 Up to Sep/08
Net debt /Fleet value 46% 60% 36% 51% 61%
Net debt / EBITDA (USGAAP) 1.4x 1.9x 1.4x 1.9x 2.4x*
Net debt / EBITDA (BRGAAP) 1.1x 1.5x 1.0x 1.4x 1.7x*
* Annualized
31
32. Debt on September 30th, 2008 (Principal)
R$ millions
Start Type Currency Interest rate Principal Due date
September-08 Guaranteed Account Real CDI + 157bps 33.8 November-08
February-08 Resolution 2770 Real* CDI + 130bps 2.2 January-09
February-08 Resolution 2770 Real* 105,2% CDI 15.0 February-09
September-08 Working Capital Real CDI + 95bps 169.5 March-09
March-08 Compror Real CDI + 99bps 33.3 April-09
January-08 Resolution 2770 Real* CDI + 115bps 74.5 May-09
Short term subtotal 328.3
April-05 1st Debentures Real 108,5% CDI 350.0 April-10
April-08 NCC - Commercial Banking Note Real 106,9% CDI 35.0 April-11
September-08 3rd Debentures Real CDI + 180bps 300.0 September-11
June-07 BNDES Real TJLP + 380bps 3.5 May-12
April-08 CCB - Commercial Credit Note Real CDI + 150bps 86.0 April-13
July-07 2nd Debentures Real CDI + 44bps 200.0 July-14
Long term subtotal 974.5
Gross Debt 1,302.8
Cash Equivalent 140.4
Net Debt 1,162.4
Short term debt (R$328.3) – Cash equivalent (R$140.4) = Short term net debt (R$187.9)
32
34. Free cash flow - FCF
250.7
R$ milliion
136,5
118.2
52.0 58.2
2004 2005 2006 2007 Up to Sep/08
Free cash flow – FCF (R$ million) 2004 2005 2006 2007 Up to Sep/08
EBITDA Consolidated 197.5 277.9 311.3 403.5 378.3
Used car sales revenue (303.0) (448.2) (590.3) (853.2) (794.7)
Cost of used car sales 248.7 361.2 530.4 760.0 704.8
EBITDA provided by rental operating activities, before tax 143.1 190.9 251.4 310.3 288.4
(‐) Tax on income – current (40.9) (32.7) (42.7) (63.4) (51.8)
Working capital variation (1) 6.2 (24.2) (4.8) 13.3 (35.5)
Cash provided by rental operating activities 108.4 134.0 204.0 260.3 201.2
Used car sales revenue 303.0 448.2 590.3 853.2 794.7
Capex of vehicles ‐ renovation (349.3) (496.0) (643.3) (839.0) (824.6)
Net car capex ‐ renewal (46.3) (47.8) (53.0) 14.2 (30.0)
Capex ‐ other (10.2) (28.0) (32.7) (23.7) (34.7)
Free cash flow before growth 52.0 58.2 118.2 250.7 136.5
Net capex for vehicles ‐ growth (143.8) (194.0) (287.0) (221.9) (413.7)
Change in amount payable to cars suppliers (capex) (1) (21.9) (25.5) 222.0 (51.0) 7.8
Free cash flow after growth (113.7) (161.3) 53.2 (22.3) (269.4)
Capex for growth in 2008 will be reduced by decreasing of 4,000 cars in the fleet.
34
35. EVA
1 4 0 .
0
9.1% 124.7 3 1 . %
0
24.6% 24.8% 114.3
50.0% 21.3%
1 0 0 .
0
18.7% 2 1 . %
0
37.3%
76.2 19.0%
6 0 .
0
16.9% 41.6% 15.7% 1 1 . %
0
11.0% 11.2% 10.9%
55.5
2 0 .
0
39.2 1 . %
0
2004 2005 2006 2007 2008 Annualized
EVA(*) (R$ million) Nominal WACC ROIC
2004 2005 2006 2007 2008 Annualized
Average investment capital– R$ million 507.4 606.3 986.2 1.137.5 1.547.9
NOPAT margin (1) 37.8% 35.2% 33.4% 35.6% 34.5%
Turnover of average investment capital (1) 0.65x 0.70x 0.56x 0.60x 0.55x
ROIC 24.6% 24.8% 18.7% 21.3% 19.0%
Cost of debt (2)(3) 11.6% 13.6% 10.9% 8.4% 8.2%
Cost of equity(3) 20.0% 16.2% 11.0% 11.5% 11.3%
Nominal WACC(3) 16.9% 15.7% 11.0% 11.2% 10.9%
Spread (ROIC ‐ WACC) ‐ p.p. 7.7 9.1 7.7 10.1 8.1
EVA ‐ R$ million 39.2 55.5 76.2 114.3 124.7
EVA increase – R$ million ‐ 16.3 20.7 38.1 10.3
(1) Margin and turnover calculated over rental revenue. (2) Cost of debt after taxes. (3) Calculated using long term premises
Rates increase and fleet reduction will contribute to the improvement of the ROIC.
35
36. Agenda
• Company
• Drivers of growth
• Competitive advantages
• Grow with profitability
• 3Q Financials
• Strategies for the current scenario
36
37. Strategies for the current scenario
1. To maintain a lean Company
2. To reduce the non-car capex, postponing investments
3. To raise fleet utilization in the car rental division to a minimum of 72%
4. To increase car and fleet rental rates to compensate the increase on
the interests rate and depreciation
5. To adjust the Company growth in line with cash generation
Concluding:
To maximize the use of resources searching the best results
37
38. Strategies for the current scenario: ownership breakdown
Long term management commitment
Position Name Years with the Co.
Founders Free-float*
CEO – Founder Salim Mattar 35
50.01% 49.99%
COO - Founder Eugênio Mattar 35
CFO Roberto Mendes 23
Managing Director – Gina Rafael 28
Car Rental
Managing Director – Daltro Leite 23
Fleet Rental
Managing Director – Marco Antonio 18
Used Car Sales
The main founders continue in the Company followed by a very stable management.
* Includes 2,283,000 shares on treasury
38
40. 2007 Car rental financial cycle
Funding (PV)
1-year cycle Net car sale revenue
$25.8 $26.3
Revenue: 19.6
1 2 3 4 5 Expenses: (10.9) 8 9 10 11 12 Interest per car $3.1:
$2.0 - interest on debt
$1.1 - interest on equity
$25.8
$28.9
Car acquisition Funding (FV)
Car rental Used cars Total
Per operating car Per sold car 1 Year
R$ % R$ % R$
Revenues 19,6 100,0% 27,4 100,0% 47,0
Additional revenue 0,7 2,5% 0,7
Cost (8,1) -41,5% (8,1)
SG&A (2,8) -14,2% (1,8) -6,6% (4,6)
Net car sale revenue 26,3 95,9% 26,3
Book value of car sale (24,6) -89,7% (24,6)
EBITDA 8,7 44,3% 1,7 6,2% 10,4
Depreciation (non-vehicle) (0,6) -3,3% (0,1) -0,2% (0,7)
Depreciation (vehicle) (0,3) -1,2% (0,3)
Interest on debt (2,0) -7,1% (2,0)
Tax (2,4) -12,2% 0,2 0,9% (2,3)
NET INCOME 5,7 28,8% (0,5) -1,8% 5,1
Return on asset 19,9%
40
41. 2007 Fleet rental financial cycle
Funding (PV) Net car sale revenue
32.2 2-year cycle 27.5
Revenue: 30.7
1 2 3 4 5 Expenses: (9.6) 20 21 22 23 24
Interest per car $8.1:
$3.6 - interest on debt
$4.5 - interest on equity
32.2
Car acquisition
40.3
Funding (FV)
Fleet rental Used cars Total
Per operating car Per sold car 2 Years 1Year
R$ % R$ % R$ R$
Revenues 30,7 100,0% 28,5 100,0% 59,2 29,6
Additional revenue 0,5 1,9% 0,5 0,3
Cost (8,1) -26,3% (8,1) (4,0)
SG&A (1,5) -5,0% (1,5) -5,3% (3,0) (1,5)
Net car sale revenue 27,5 96,6% 27,5 13,8
Book value of car sale (26,7) -93,5% (26,7) (13,3)
EBITDA 21,1 68,7% 0,9 3,1% 22,0 11,0
Depreciation (non-vehicle) (0,2) -0,7% (0,2) (0,1)
Depreciation (vehicle) (4,8) -16,8% (4,8) (2,4)
Interest on debt (3,6) -12,7% (3,6) (1,8)
Tax (6,4) -20,7% 2,3 8,2% (4,0) (2,0)
NET INCOME 14,5 47,3% (5,2) -18,1% 9,3 4,7
Return on asset 14,5%
41
42. Financial cycle for 2009 scenario – Car rental
Increasing rates to face interest rate and depreciation
Funding (PV)
1-year cycle Net car sale revenue
$25,3
$25,8
Receita: 19,6
1 2 3 4 5 Expenses: (10,9) 8 9 10 11 12 Interest per car $ 4,1:
$3.0 – interest on debt
$1,1 – interest on equity
$25,8
$29,9
Car acquisition Funding (FV)
Car rental Seminovos Total
Per operating car Per sold car 1 year
R$ % R$ % R$
Revenues 21,2 100,0% 26,4 100,0% 47,6
Additional revenues 0,7 2,7% 0,7
Costs (8,1) -38,4% (8,1)
SG&A (2,8) -13,2% (1,8) -6,7% (4,6)
Net car sale revenue 25,3 96,0% 25,3
Book value of car sale (24,0) -90,9% (24,0)
EBITDA 10,3 48,4% 1,3 5,1% 11,6
Depreciation (non-vehicle) (0,6) -3,1% (0,1) -0,2% (0,7)
Depreciation (vehicle) (0,9) -3,4% (0,9)
Interest on debt (3,0) -11,4% (3,0)
Tax (2,9) -13,6% 0,8 3,0% (2,1)
Net income 6,7 31,8% (1,8) -6,9% 4,9
Return on asset 19,0%
42
