Roadshow Deutsche Bank 15ªConferêNcia Anual Citibank Latam(InglêS)

  • 271 views
Uploaded on

 

More in: Technology , Business
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
271
On Slideshare
0
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
1
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. Localiza Rent a Car S.A. 2006 Results presentation (R$ millions - USGAAP) 0
  • 2. Integrated business platform 145 agencies 15,265 cars 31,373 cars (635 managed) 1,000,000 individuals and 350 clients 14,000 corporations 156 employees 1.688 employees Synergies: cost reduction cross selling bargaining power Overhead = 124 employees 182 agencies 26 points of sale in 9 countries 79% sold to final consumer 6,730 cars 15 employees 350 employees This integrated business platform gives us superior performance As of December 31, 2006
  • 3. 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 2
  • 4. Growth opportunities and Competitive advantages 3
  • 5. Growth opportunities GDP elasticity Consolidation Air traffic Credit cards Fleet outsorcing Replacement 4
  • 6. 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 5
  • 7. 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: + Localiza is the absolute leader 102 96 83 in airport branches in Brazil 71 In 2006 Localiza Car Rental Division grew 2 times faster 2003 2004 2005 2006 than the number of passengers Source: infraero 6
  • 8. 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. 7
  • 9. 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 - 8
  • 10. 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 9
  • 11. Growth opportunities: Consolidation US Market share 2005 US airport segment* US off-airport segment* US$10BN - US$10BN Enterprise All others Other 7% DTG 19% 2% Avis Budget 11% Avis Budget 32% 7% Vanguard Hertz Enterprise 20% 9% 65% 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 10
  • 12. Growth opportunities: Consolidation Localiza’s market share – Car and Fleet - Brazil 2004 2005 2006E Avis Hertz Unidas 4% 7% 4% Local players 20% 18% 69% 16% Localiza corporation grew 30.2% in 2006. ABLA estimated the market growth in 12% Localiza grew more than 2x the market in 2006 Source: ABLA 11
  • 13. Growth opportunities: Off-airport market Airport and off airport market - Brazil BR on airport segment* BR off-airport segment* agencies agencies * Others Localiza ** * 203 Hertz 48 Localiza ** 86Avis 76 83 ** ** Unidas Others*** Unidas 31 ** ** 1960 74 Avis Hertz 31 33 Source: 1964 companies as of ABLA’s report * Localiza as of 12/31/06 **Each company website, 01/07/07 *** 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 1.960 small car rental companies Localiza is the consolidator in a fragmented industry! 12
  • 14. 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% -5 p.p. 27,2% 41% 46% 20,4% 14,3% 14,0% 12,3% 9,8% +5 p.p. 59% 54% 1,5% 0,2% 2005 2006 1T06 2T06 3T06 4T06 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 13
  • 15. Competitive advantages Bargaining Gains of power scale Integrated platform Geographical distribution Yield management Credit with lower interest rate Know-how Strong brand State of the art IT Bargaining power Depreciation Higher Market share competitiveness increase 14
  • 16. Competitive Advantages: Integrated business platform Fleet rental Car rental Franchising Used Car Sales This integrated business platform gives us superior performance 15
  • 17. Competitive Advantages: Largest distribution Nationwide Nationwide presence presence Strategic Strategic locations locations International International footprint footprint 327 agencies in 9 countries 16
  • 18. Competitive Advantages: Largest distribution (number of agencies in Brazil) 279* 243** 74 279 83 86 Localiza Hertz Avis Unidas Localiza network is larger than the second, the third and the fourth competitors combined. * As of December 31, 2006 ** As of January 29,2007 17
  • 19. 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 18
  • 20. 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 19
  • 21. Competitive Advantages: Know-how Deep knowledge of the business State-of-the-art systems Operational excellence Adoption of best practices Stable management Experience in Name Responsibility 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 15 Roberto Mendes CFO 21 Silvio Guerra Investor relations 15 We believe this experienced team will run the business for the next ten years 20
  • 22. Competitive Advantages: Brand recognition Top of mind High quality of services Customer satisfaction Strong nationwide presence International franchising program High standards of ethical behavior 21
  • 23. Competitive Advantages: State of the art IT Speed in transaction time Better operational control Customer satisfaction On-line network Cost reduction 22
  • 24. 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 price and conditions due to its large scale 23
  • 25. Competitive Advantages: Depreciation When car prices go up more than inflation, depreciaton decreases 4.000,0 9,8p.p. 3.617,7 10,0% 3.000,0 2.000,0 4,7p.p. 6,0% 2.142,5 1.656,2 3,7p.p. 1.000,0 2,0% 939,1 1.752,3 492,3 0,9p.p. 322,9 - -1,0p.p. -2,0% 2000 2001 2002 2003 2004 2005 2006 (1.000,0) -4,1p.p. -5,1p.p. (2.000,0) -6,0% Average depreciation Real decrease in the Real increase in the per car new car price new car price Average depreciation per year (R$1 thousand) over average price of purchased car in 2005 and 2006 (R$25 thousand) = 4% depreciation Depreciation cost over the car rental revenue % over rental revenue 2000 2001 2002 2003 2004 2005 2006 5.2% Localiza (car rental division) 13.8% 11.9% 9.3% 9.2% 1.8% 2.9% Hertz (USA) - - - - 22% 23% 23% * National / Alamo (USA) - - - - 22% 23% 23% * Avis / Budget (USA) - - - - 26% 29% 31% Source: National/Alamo prospectus, Sep 20, 2006, p.11 Hertz prospectus, Nov 21,2006, p.12 and 17, Avis 2006 10K * Until Set/06 24
  • 26. Financials 25
  • 27. 2006 highlights (R$ million. USGAAP) Consolidated net revenues Consolidated EBITDA CAGR: 27% CAGR: 29% 313 1,145 286 877 210 634 152 532 2003 2004 2005 2006 2003 2004 2005 2006 EVA Net income CAGR: 30% CAGR: 26% 75,6 138,2 57,4 106,5 44,5 90,6 69 1,8 2003 2004 2005 2006 2003 2004 2005 2006 26
  • 28. 2006 highlights: Footprint expansion Owned car rental agencies Used car points of sales 32* 24% 145 26 100% 41% 117 17% 15 83 13 13 71 2003 2004 2005 2006 2003 2004 2005 2006 24% increase in the number of owned car rental agencies 100% increase in the number of used car points of sales * Until the end of 1H07 27
  • 29. EBITDA margin per segment (R$ milhlion. USGAAP) 2003 2004 2005 2006 Car Rental Car Rental 38,1% 42.6% 46.3% 42.3% Car Resale 6,6% 15.3% 14.4% 4.6% TOTAL 20,7% 28.4% 27.9% 21.2% Fleet Rental Fleet Rental 69,4% 65.2% 63.6% 69.3% Car Resale -9,2% 8.2% 10.5% 4.6% TOTAL 43,5% 41.7% 45.3% 42.4% Rentals 51,8% 51.5% 52.5% 51.7% Consolidated Car Resale 2,9% 13.2% 13.7% 4.6% Franchising 43,6% 41.5% 47.6% 39.0% TOTAL 28,6% 33.1% 32.6% 27.3% See addendum 1 28
  • 30. 2006 cash generation +313.7 (R$ million. USGAAP) 957.0 60.1 70.8 30.1 Cash and cash Cash and cash -127.5 equivalents in equivalents in 01/01/06: 12/31/06: -287.0 -643.3 -930.3 Investment in Financing and Operating Acquisitions Acquisitions other activities to renew to growth Liquid securities activities 23,174 cars 10,346 cars in short-term The cash generation of R$ 957 MM was larger than the needs to renew 23,174 cars (R$643.3MM) and also to grow 28.8% = 10,346 cars (R$287.0MM) See addendum 2 29
  • 31. Investment in fleet (R$ million. USGAAP) Number - thousand Net investment - million 340.0 241.8 33.520 930.3 26.105 190.1 23.174 22.182 690.0 18.763 590.3 15.715 493.1 448.2 303.0 2004 2005 2006 2004 2005 2006 Sales Purchases Net investment per car (R$ ‘000) Fleet growth (thousand) 2004 2005 2006 2004 2005 2006 Average price purchased cars 22,2 26,4 27,7 +6.5 +7.3 +10.3 Average price sold cars 19,3 23,9 25,4 Net 2,9 2,5 2,3 % over purchase price 13.1% 9.5% 8.3% Net investment per car to renew the fleet is declining from 13.1% to 8.3% due to Net investment per car to renew the fleet is declining from 13.1% to 8.3% due to the fact that new car prices are increasing in line with inflation the fact that new car prices are increasing in line with inflation 30
  • 32. Indebtness (R$ million. USGAAP) Net debt (R$ million) USGAAP Rating S&P – BrAA- / Stable 2006 operating 539 443 cash flow was 58% of the debt 281 at the end of 87 2005 2003 2004 2005 2006 2003 2004 2005 2006 Net debt / fleet market value 22% 46% 60% 36% Net debt / equity 27% / 73% 33% / 67% 50% / 50% 42% / 58% Net debt / EBITDA (USGAAP) 0.57x 1.34x 1.89x 1.42x Net debt / EBITDA (BRGAAP) 0.61x 1.1x 1.5x 1.0X After the extraordinary dividend, the debt/equity leverage will return After the extraordinary dividend, the debt/equity leverage will return to a level (estimated 53% // 47%) that maximizes value for the shareholders to a level (estimated 53% 47%) that maximizes value for the shareholders See addendum 3 31
  • 33. WACC R$ / million 100,0 35,0% 29,3% 24,6% 24,1% 75,0 25,0% 19,8% 24,1% 18,4% 15,8% 11,8% 50,0 15,0% -4 p.p. 25,0 5,0% 75,6 57,4 44,5 1,8 - -5,0% 2003 2004 2005 2006 EVA WACC nominal ROIC 2003 2004 2005 2006 2007E* WACC 24.1% 18.4% 15.8% 11.8% 11.2% Third party cost of capital 16.6% 11.5% 13.5% 10.7% 8.7% Cost of own capital 26.9% 21.8% 18.1% 12.6% 14.0% Third party’s capital x equity 27% / 73% 33% / 67% 50% / 50% 42% / 58% 53% / 47% The 4 p.p. WACC decrease was offset by the reduction of 4 p.p. in ROIC The 4 p.p. WACC decrease was offset by the reduction of 4 p.p. in ROIC * 2007 Estimate considering the R$ 196.7 million extraordinary dividend 32
  • 34. ROIC R$ / million -4 p.p. 100,0 35,0% 29,3% 24,6% 24,1% 75,0 25,0% 19,8% 24,1% 18,4% 15,8% 11,8% 50,0 15,0% 25,0 5,0% 75,6 57,4 44,5 1,8 - -5,0% 2003 2004 2005 2006 EVA WACC nominal ROIC 2003 2004 2005 2006 ROIC 24.5% 29.3% 24.1% 19.8% Average increase in the car price 14,0% 17,4% 9,4% 4,0% IPCA – inflation index 9.3% 7.6% 5.7% 3.1% The 4 p.p. decrease in the ROIC in 2006 was mainly due to the slow down of the asset turnover: The 4 p.p. decrease in the ROIC in 2006 was mainly due to the slow down of the asset turnover: • Stable tariffs in the car rental • Stable tariffs in the car rental • 4% increase in the new car prices in 2006 • 4% increase in the new car prices in 2006 • Impact of inflation in operating costs • Impact of inflation in operating costs 33
  • 35. Spread and EVA R$ / million 100,0 35,0% 29,3% 24,6% 24,1% 75,0 25,0% 19,8% 24,1% 18,4% 15,8% 11,8% 50,0 15,0% 32% 25,0 5,0% 75,6 57,4 44,5 1,8 - -5,0% 2003 2004 2005 2006 EVA WACC nominal ROIC 2003 2004 2005 2006 Average invested capital – R$ million 323.5 410.8 689.4 937.8 Spread (ROIC – WACC) percentage points 0.55 10.83 8.32 8.06 EVA – R$ million 1.8 44.5 57.4 75.6 Localiza continues to present low spread volatility Localiza continues to present low spread volatility In 2006 EVA grew 32% in accordance with the 31% growth in rented fleet In 2006 EVA grew 32% in accordance with the 31% growth in rented fleet 34
  • 36. Localiza and peers spread 2006 8.0p.p. -2.2p.p -3.4p.p. -6.9p.p. Localiza Hertz* Avis* DTG* *Source: Morgan Stanley reports - Hertz 12/26/2006, Avis 09/05/2006 and DTG 09/28/2006 35
  • 37. ROE – return on equity 39% 39% 37% 29% 2003 2004 2005 2006 OBS: ROE was calculated dividing net income by average equity of the year. excluding the income of the year In 2006 Localiza equity grew R$ 156 MM due to the follow-on Localiza was the 13th among the largest 500 companies in Brasil Localiza was the 13th among the largest 500 companies in Brasil with consistent ROE in the last 5 years, by 2006 FGV ranking with consistent ROE in the last 5 years, by 2006 FGV ranking 36
  • 38. 2007 Perspectives 37
  • 39. 2007 perspectives minimum 25% growth in volume minimum 15% growth in volume minimum 25 new agencies EBITDA margin of 65% EBITDA margin of 42% utilization rate of 70% Utilization rate - car rental division 74% 74% 70% 67% 66% 63% 61% 59% 2000 2001 2002 2003 2004 2005 2006 2007 Increasing the utilization rate will allow the increase of the asset turnover 38
  • 40. 2007 perspectives: Management proposals for RENT3 Extraordinary distribution of dividends R$ 196.7 million that added to the sum already distributed of R$ 35.2 million (as of interests over own capital) reach R$ 3.45 per share or 12% over RENT3 quote beginning 2006 Split of the shares Each one will be converted into 3 for the increase of the negotiability index 39
  • 41. 2007 perspectives: Localiza’s strategies to add value ROIC – WACC = SPREAD Margin x Asset turnover Low volatility Capital structure optimization: • Optimize capital structure (own vs third parties capital) • To maintain proper leverage for fast growth Increase revenue: • Increase volume • Keep flat rates Revenue / asset Reduce assets: • Increase utilization rate Gains of scale: • Organic growth Operating income x (1- taxes) / revenue Reduce income tax: • Quarterly payment of interest on own capital 40
  • 42. Strategies Short-term: To maintain fast growth volume To increase our geographical footprint To maintain profitability through scale and productivity Long-term: To expand business scale mainly through organic growth To add value to the shareholders through new dividend policy Localiza’s compensation system is aligned with the short-term (variable remuneration) and long-term strategies (stock option with 3 to 11 years vesting) 41
  • 43. Localiza’s recent recognition 42
  • 44. Recognition Standard & Poor’s rating upgraded to ‘brAA-’ in national scale and ‘BB’ in global scale. same as sovereign risk. with stable outlook Included in IBrX (between the 100 most traded shares) Included in ISE – Corporate Sustainability Index (34 companies) “Best Company for Shareholders” by Capital Aberto magazine. between Companies of up to R$ 5 BI market share The best subsequent public offer among the listed companies by Infomoney, in a survey among the brokers registered in BOVESPA 43
  • 45. Price 23 -M 10 15 20 25 30 35 40 45 50 55 60 65 70 7- ay J 21 un -J u 5- n J 19 ul -J IPO: 2- ul A R$ 11.50 16 ug -A 30 u g -A 14 u g -S 28 e p -S 13 e p -O 27 ct -O 11 c -N t 28 ov -N 12 ov -D 26 ec -D 10 ec -J 24 an -J a 8- n Fe 22 b -F 10 eb -M RENT3 2006 Performance: RENT3 2005 24 ar -M a 7- r Ap 25 r - 10 Apr RENT3 since IPO -M Volume RENT3 24 ay -M 7- ay J 22 un -J u RENT3 RENT3 X IBOV 6- n Ju R$ 41.00 20 l -J Follow-on: 3- ul Au 17 g -A 31 u g -A 15 u g IBOVESPA -S 29 e p -S 16 e p -O 30 ct - 14 O c -N t 30 ov -N Average daily trading volume in 2006: R$ 10,5 million 14 ov -D e 2- c Ja 16 n -J 31 an -J 14 an -F e + 124% X IBOV + 33% 2- b + 149% X IBOV + 38% + 403% X IBOV + 80% M ar R$57.80 03/08/07 0 20 40 60 80 100 120 44 From IPO until 03/08/2007. Volume-R$ thousand Performance - RENT3
  • 46. RENT3 performance Average daily traded volume (R$ million) 19,2 +111% 10,6 +130% 9,1 4,6 2005 2006 jan/07 feb/07 Localiza was the Best Company for Shareholders in 2006 Localiza was the Best Company for Shareholders in 2006 (companies up to R$ 5 bi market cap) (companies up to R$ 5 bi market cap) Research by Economática. Stern & Stewart, IBGC, FEA/USP and Capital Aberto Magazine Research by Economática. Stern & Stewart, IBGC, FEA/USP and Capital Aberto Magazine Source: Capital Aberto magazine 45
  • 47. Thank you! Localiza’s IR: www.localiza.com/ri Phone: 55 (31) 3247-7039 46
  • 48. 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. 47
  • 49. Addendum 1: Financial Cycles 48
  • 50. Car rental financial cycle Car Sales Revenue Financing 102 Revenue per car sold** 102,20 100 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.) 15,00 115 Financial payment 115,00 Car acquisition 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. 49
  • 51. Car rental financial cycle Car Sales Revenue Financing 102 Revenue per car sold** 102,20 100 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 Financial payment 115,00 Car acquisition 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). 50
  • 52. Fleet rental financial cycle Car Sales Revenue Financing Revenue per car sold** 102,20 102 SG&A (7%) (7,15) 100 Safety Margin (3%) (3,06) Book value after 12 months 91,99 ** Depreciation over list price: Revenues = 53,64 100-(102.2/125)x100 = 18,2% Expenses = 18,21 Principal 100,00 100 Interest (CDI + 1 p.p.) 15,00 Financial payment 115,00 115 Car acquisition Financial payment (List price net of dealers 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). 51
  • 53. Pro-forma cash flow and working capital 52
  • 54. Pro-forma cash flow: net cash provided by operating activities Year Ended Year Ended Year Ended Variation Variation 2.004 2.005 2.006 Acum 2006-2005 % CASH FLOWS FROM OPERATING ACTIVITIES: 90.568 106.519 138.233 29,8% Net income 31.714 Adjustments to reconcile net income to net cash provided by ( used in ) operating activities: 23.353 42.969 56.989 32,6% Depreciation and amortization (including goodwill) 14.020 2.609 4.275 5.159 20,7% Vehicles written off as a result of theft 884 248.651 361.171 530.439 46,9% Cost of used car sales 169.268 (179) 11.275 7.950 -29,5% Deferred income taxes (3.325) (236) 578 (446) -177,2% Provision for doubtful accounts (1.024) 8.414 284 (2.012) -808,5% Provision for contingencies (2.296) Realized gains on derivatives 25 1.706 - -100,0% (1.706) Exchange variation, net (17.428) (31.987) (8.153) -74,5% 23.834 49.030 504 23.016 4466,7% Unrealized (gain) loss on derivatives 22.512 12.404 7.828 1.704 -78,2% Compensation expense - Stock Options (6.124) 1.198 (2.465) (117) -95,2% Other 2.348 418.409 502.657 752.762 49,8% 250.105 (Increase) decrease in operating assets: (7.579) (39.091) (35.572) -9,0% Accounts receivable 3.519 (996) (3.498) (670) -80,8% Escrow deposits 2.828 - - (4.531) Accrued interest income on marketable securities (4.531) (1.830) (8.986) (2.019) -77,5% Recoverable taxes 6.967 6.169 (5.554) (7.879) 41,9% Other (2.325) (4.236) (57.129) (50.671) -11,3% 6.458 Increase (decrease) in operating liabilities: (22.917) (18.817) 220.256 -1270,5% Accounts payable 239.073 1.753 1.176 4.605 291,6% Payroll and related charges 3.429 2.108 (134) 5.343 -4087,3% Income tax and social contribution 5.477 (2.210) 481 387 -19,5% Taxes, other than on income (94) 732 1.740 (1.109) -163,7% Advances from customers (2.849) (483) (803) (334) -58,4% Reserve for contingencies 469 1.690 12.645 (6.766) -153,5% Loans and debt and debentures - accrued interest expense, net (19.411) - - 22.008 Deffered revenues 22.008 403 1.273 10.528 727,0% Other 9.255 (18.924) (2.439) 254.918 -10551,7% 257.357 513.920 116,0% Net cash provided by operating activities 395.249 443.089 957.009 53
  • 55. Pro-forma cash flow: investment and financing activities Year Ended Year Ended Year Ended Variation Variation 2.004 2.005 2.006 Acum 2006-2005 % CASH FLOWS FROM ( USED IN ) INVESTING ACTIVITIES: - - (140.674) Purchases of marketable securities (140.674) - - 13.146 Proceeds from sales of marketable securities (127.528) Sub-total (493.109) (690.040) (930.318) 34,8% Car purchase (240.278) - - Close out of derivatives contracts - (10.209) (27.974) (31.185) 11,5% Additions to property and equipment, net (3.211) (4.034) (66.160) (3.074) -95,4% Cash paid on settlement of derivatives contracts 63.086 - - (1.502) Acquisitions of former franchisees (1.502) (507.352) (784.174) (1.093.607) (309.433) 39,5% Net cash provided by investing activities CASH FLOWS FROM ( USED IN ) FINANCING ACTIVITIES: Long-term debt: 2.954 139.000 -100,0% Proceeds (139.000) - Short-term loans: 332.791 971.945 361.425 -62,8% Proceeds (610.520) (200.732) (1.177.803) (371.346) -68,5% Repayments 806.457 Debentures: - 350.000 -100,0% Captações (350.000) Transaction with related parties: - 16.030 15.372 150.126 876,6% Capital increase 134.754 (50.000) (4.000) (5.595) 39,9% Dividends (cash) (1.595) (18.859) (12.016) (38.665) 221,8% Dividends (interest on capital) (26.649) 282.498 95.945 (186.553) -66,0% Net cash used in financing activities 82.184 (29.919) (58.587) (40.653) 17.934 -30,6% NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING 159.264 129.345 70.758 -45,3% OF YEAR (58.587) CASH AND CASH EQUIVALENTS AT END OF 129.345 70.758 30.105 (40.653) -57,5% YEAR -30,6% (29.919) (58.587) (40.653) 17.934 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest 24.825 105.167 77.848 -26,0% (27.319) Income tax and social contribution 34.337 33.613 32.850 -2,3% (763) 59.162 138.780 110.698 -20,2% (28.082) 54
  • 56. Working capital WORKING CAPITAL Year Ended Year Ended Year Ended 2.004 2.005 2.006 ASSETS 54.821 93.334 134.786 Accounts receivable, net 2.043 2.890 2.173 Deferred income tax and social contribution 3.363 14.739 12.561 other 60.227 110.963 149.520 18.949 23.267 23.913 Escrow deposits 13.865 11.191 11.387 Deferred income tax and social contribution 83 83 83 Compulsory loans 254 2.820 2.034 other 33.151 37.361 37.417 93.378 148.324 186.937 subtotal LIABILITIES 58.753 39.398 264.156 Total accounts payable: 48.448 22.853 244.935 Accounts payable to automakers 10.305 16.545 19.221 Other accounts payable 13.315 14.491 22.397 Payroll and related charges - - 1.280 Deferred revenues 1.793 1.659 3.633 Income tax and social contribution 15.396 24.338 30.608 Deferred income tax and social contribution 2.380 4.693 5.476 Taxes other tha income 5.579 7.319 6.210 Advances from customers 1.511 13.171 12.463 other 98.727 105.069 346.223 52.371 53.210 47.533 Reserve for contingencies - - 11.369 Deferred revenues 5.734 6.246 7.402 Deferred income tax and social contribution 2.680 - 8.020 Taxes other tha income 60.785 59.456 74.324 159.512 164.525 420.547 subtotal WORKING CAPITAL (66.134) (16.201) (233.610) % OVER REVENUES -10,4% -1,8% -20,4% 55
  • 57. Working capital without account payable to automakers WORKING CAPITAL WITHOUT ACCOUNT PAYABLE TO AUTOMAKERS Year Ended Year Ended Year Ended 2.004 2.005 2.006 ASSETS 54.821 93.334 134.786 Accounts receivable, net 2.043 2.890 2.173 Deferred income tax and social contribution 3.363 14.739 12.561 other 60.227 110.963 149.520 18.949 23.267 23.913 Escrow deposits 13.865 11.191 11.387 Deferred income tax and social contribution 83 83 83 Compulsory loans 254 2.820 2.034 other 33.151 37.361 37.417 93.378 148.324 186.937 subtotal LIABILITIES 58.753 39.398 264.156 Total accounts payable: 10.305 16.545 19.221 Accounts payable excluding payable do automakers 13.315 14.491 22.397 Payroll and related charges - - 1.280 Deferred revenues 1.793 1.659 3.633 Income tax and social contribution 15.396 24.338 30.608 Deferred income tax and social contribution 2.380 4.693 5.476 Taxes other tha income 5.579 7.319 6.210 Advances from customers 1.511 13.171 12.463 other 50.279 82.216 101.288 52.371 53.210 47.533 Reserve for contingencies - - 11.369 Deferred revenues 5.734 6.246 7.402 Deferred income tax and social contribution 2.680 - 8.020 Taxes other tha income 60.785 59.456 74.324 111.064 141.672 175.612 subtotal WORKING CAPITAL (17.686) 6.652 11.325 % OVER REVENUES -2,8% 0,8% 1,0% 56
  • 58. Addendum 3: Third party x own capital cost 57
  • 59. Cost of third party capital R$ / million We estimated that the cost of third party capital will decrease 3 p.p. due to CDI rate decrease 58
  • 60. Cost of own capital R$ / million In 2007 the difference between the cost of own capital and third party capital cost will be 5.3 p.p. . In 2006 this difference was 1.9 p.p. 59
  • 61. Addendum 4: Earnings Release 60