1. Localiza Rent a Car S.A.
4Q08 Results
(R$ millions - USGAAP)
1
March, 2009
2. Agenda
• Company
• Drivers of growth
• Competitive advantages
• Growth with profitability
• 2008 Financials
2
3. Integrated business platform
39,112 cars 23,403 cars
1.6 million clients 622 clients
199 agencies 209 employees
2,516 employees
Synergies:
cost reduction
cross selling
bargaining power
9,526 cars 34,281 cars sold
223 agencies in 9 countries 83% sold to final consumer
147 agencies in Brazil 35 points of sale
21 employees 449 employees
This integrated business platform gives Localiza flexibility and superior performance
Date: 2008
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
Used car Franchising
Franchising Franchising
sales 1% Fleet rental
1% Car rental 3%
10% 21%
32%
Used car
Car rental
sales Fleet rental Car rental
52%
52% Fleet rental 37% 76%
15%
Revenues EBITDA Net income
Car rental 32% 52% 76%
Fleet rental 15% 37% 21%
Used car sales 52% 10% *
Franchising 1% 1% 3%
Total 100% 100% 100%
* Used cars losses are allocated in the rental divisions Date: 2008
5
6. Agenda
• Company
• Drivers of growth
• Competitive advantages
• Growth with profitability
• 2008 Financials
6
7. Growth opportunities
GDP elasticity
Rental divisions 5.8x GDP
Source: Localiza and Central Bank
Consolidation Air traffic
US market: 4 players 95%
BR market: 4 players 40% 8.7% CAGR (2004/2008)
1,901 players 60% Growth forecast between 5% - 8%
Source: Auto Rental News and estimates Source: Infraero, Gol and Tam
Fleet outsourcing Credit cards
Corporate target fleet of 500,000 cars 23.7% CAGR (2004/2008)
Approximately 25% rented 41 mm holders (estimated)
Replacement
Source: Company estimates Source: Abecs and estimates
Around 10 million cars insured
Accident frequency of 15% p.a.
Source: Susep, Denatran and estimates
7
8. Growth opportunities: GDP
Rental revenues accumulated growth rate – rentals
Localiza
5.8x
GDP
2005 2006 2007 2008
Localiza’s revenues have been growing 5.8x the GDP.
Source: Central Bank and Localiza
8
9. Growth opportunities: consolidation
Brazilian market 2008
(# of agencies)
Airport agencies Off-airport agencies
Localiza*
Hertz**
262
68 Unidas**
Others*** 66
63 Localiza*
84
Avis**
48
Avis**
31 Hertz**
Unidas**
32 32 Others
1901
Off-airport market is fragmented among almost 2,000 small local car rental companies
Source: Each company website as of January 26th , 2009
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 2008 38% 34%
46% 41%
Airports 16% 14% 19%
54% 59% 62% 66%
Off-airport 47% 28% 41%
2005 2006 2007 2008
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
• 2008 Financials
11
12. Competitive advantages
Gains of Higher
scale Integrated platform competitiveness
Geographical footprint
Rating
Used car sales network
Lower depreciation
Know-how
Strong brand
Market share
increase
12
13. Competitive advantages: geographical footprint
Nationwide
Nationwide
presence
presence
Strategic
Strategic
locations
locations
International
International
footprint
footprint
422 agencies in 9 countries
Date: 2008
13
14. Competitive advantages: largest distribution
Agencies in Brazil Cities in Brazil
346
277 246
186
79
346 51
98 246
63
100
72
Localiza* Unidas Hertz Avis Localiza Unidas Hertz Avis
Localiza network is larger than the second, the third and the fourth competitors combined
Source: Each company website as of January 26th , 2009
14
15. Competitive advantages: rating
Moody’s debt rating as of January, 2009 (Global scale)
Baa2
Ba1
Ba2
Ba3
B2
Caa3
Enterprise Localiza Avis Budget Hertz Europcar Dollar Thrifty
Moody’s corporate rating as of January, 2009 (Local Currency)
Localiza Rent a Car S.A. Aa2.br
Braskem S.A. Aa2.br
Magnesita Refratarios S.A. Aa2.br
Gafisa S.A. Aa3.br
Companhia Energetica de Minas Gerais - CEMIG Aa1.br
Duke Energy Int. Geração Paranapanema S.A. Aa2.br
Lupatech A3.br
Localiza has one of the best rating among its international peers
15
16. Competitive advantages: used car sales network
35 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 is used as a buffer of the car rental division during peaks of demand
16
17. Competitive advantages: low depreciation
Car rental division
2 9 % 3.618,0 24% 3 8
. 0 0 ,
0
22%
2.640,0 19% 19% 2.546,0
18% 2 8
. 0 0 ,
0
2.142,0 17%
1.656,0 1.752,0 11%
8%
1 8
. 0 0 ,
0
9% 939,1
5% 4% 7% 492,3 6%
322,9 7% 332,9 8 0 0 ,
0
6% 3%
0% 0% -1% 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% 5.1%
Average depreciation Growth of purchase price (%) Growth of sale price (%)
Localiza 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Average purchase price (nominal) 13,788 14,575 14,586 15,600 16,140 19,960 24,350 25,840 25,650 27,740
Average sale price (nominal) 11,650 13,950 14,530 14,026 16,680 19,490 23,060 24,770 27,460 27,770
Average capex for renewal 2,138 635 56 1,574 (540) 470 1,290 1,070 (1,810) (30)
Average sold fleet age 13.7 15.5 14.1 14.1 12.8 11.6 11.0 14.7 12.2 12.3
Average depreciation 2,640 3,618 2,142 1,656 1,752 323 492 939 333 2,546
% over average purchase price 19.1% 24.8% 14.7% 10.6% 10.9% 1.6% 2.0% 3.6% 1.3% 9.2%
Average annualized depreciation per car in December totaled R$ 1,923.6
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
• 2008 Financials
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
31. Net debt reconciliation
FCF before Change in vehicle Capex Stock Dividends Interest on
growth suppliers growth repurchase equity
account (CAPEX)
205.7
-765.1 -1,254.5
Net debt Net debt
12/31/2007 12/31/2008
-43.6 -55.0
-107.7
-188.9
-299.9
- 343.5 - 162.7
Discretionary Dividends and
Investment Interest on equity
Capex for growth was the main reason for debt increase.
31
32. Net debt x fleet value
(R$ millions)
1,752.6
1,492.9
1,247.7 1,254.5
900.2
765.1
612.2 535.8 440.4
281.3
2004 2005 2006 2007 2008
Net debt Fleet value
End of period balance 2004 2005 2006 2007 2008
Net debt /Fleet value (USGAAP) 46% 60% 36% 51% 72%
Net debt / EBITDA (USGAAP) 1.4x 1.9x 1.4x 1.9x 2.5x
Net debt / EBITDA (BRGAAP) 1.1x 1.5x 1.0x 1.3x 1.8x
Net debt / Equity (USGAAP) 1.0x 1.4x 0.7x 1.3x 2.0x
Comfortable debt ratios.
32
33. Debt profile - principal
(R$ millions)
Debt profile on December (Principal)
500,0
335,0
195.6
112,7 109,6
66,8
2009 2010 2011 2012 2013 2014
R$176.1 millions - paid
R$ 19.5 millions – extended to sep/10
R$195.6 millions – debt from 2009
No new debt has been contracted
Sep/08 Feb/09* Var.
Net debt – R$ millions 1,201.0 1,172.4 (28.6)
Car suppliers – R$ millions 201.7 2.4 (199.3)
Net debt + car suppliers – R$ millions 1,402.7 1,174.8 (227.9)
* up to 2/12/2009.
2009 debt already prepaid.
33
34. Debt status (principal)
(R$ millions)
Start Type Due date Principal 12/31/2008 Principal 02/28/2009
Feb-08 Resolution 2770 Jan-09 2.2 Paid
Feb-08 Resolution 2770 Feb-09 15.0 Paid
Jan-08 Resolution 2770 Apr-09 39.5 Paid
Oct-08 Overdraft Apr-09 30.0 Paid
Apr-08 Compror Apr-09 11.4 Paid
Jan-08 Resolução 2770 May-09 35.0 Paid
Nov-08 Working capital May-09 43.0 Paid
Jun-07 BNDES up to Dec/09 1.0 0.7
Apr-05 1st Debentures Apr-10 350.0 350.0
Sep-08 Working capital Sep-10 169.5 169.5
Apr-08 Working capital Apr-11 35.0 35.0
Sep-08 3st Debentures Sep-11 300.0 300.0
Apr-08 Working capital Apr-12 43.0 43.0
Jun-07 BNDES up to May/12 2.2 2.2
Jul-07 2st Debentures Jul-12 66.6 66.6
Apr-08 Working capital Apr-13 43.0 43.0
Jul-07 2st Debentures Jul-13 66.6 66.6
Jul-07 2st Debentures Jul-14 66.8 66.8
Gross debt 1,319.7 1,143.4 -13.4%
Cash and equivalents 129.9 70.8
Net debt 1,189.8 1,072.6 -9.8%
* Operations in foreign currency are swapped at the same issuance day to CDI (R$) 34
35. Free cash flow - FCF
250.7
(R$ millions)
205.7
118.2
52.0 58.2
2004 2005 2006 2007 2008
Free cash flow - R$ millions 2004 2005 2006 2007 2008
EBITDA 197.5 277.9 311.3 403.5 504.1
Used car sales revenues (303.0) (448.2) (590.3) (853.2) (983.2)
Cost of used car sales 248.7 361.2 530.4 760.0 874.5
EBITDA without used car sales revenues and costs 143.2 190.9 251.4 310.3 395.4
Income tax and social contribution – current (40.9) (32.7) (42.7) (63.4) (52.8)
Working capital variation 6.2 (24.2) (4.8) 13.3 (44.8)
Cash provided before capex 108.5 134.0 203.9 260.2 297.8
Used car sales revenues 303.0 448.2 590.3 853.2 983.2
Capex of car – renewal (349.3) (496.0) (643.3) (839.0) (1,035.4)
Net capex for renewal (46.3) (47.8) (53.0) 14.2 (52.2)
Capex - Property and equipment (10.2) (28.0) (32.7) (23.7) (39.9)
Free cash flow before growth 52.0 58.2 118.2 250.7 205.7
Capex of car – growth (143.8) (194.0) (287.0) (221.9) (299.9)
Change in amounts payable to car suppliers (capex) (21.9) (25.5) 222.0 (51.0) (188.9)
Free cash flow (113.7) (161.3) 53.2 (22.2) (283.1)
35
36. EVA
1 4 0 .
0
3 1 . %
0
24.6% 24.8% 114.3
100.0
1 00 .
0
18.7% 50.0% 2 1 . %
0
21.3%
37.3% 76.2 17.0%
16.9% 15.7%
6 0 .
0
41.6% 1 1 . %
0
55.5 11.0% 11.2% 10.9%
39.2
2 0 .
0 1 . %
0
2004 2005 2006 2007 2008
EVA (in R$ millions) Nominal WACC ROIC
2004 2005 2006 2007 2008
Average investment capital R$ millions 507.4 606.3 986.2 1,137.5 1,642.3
NOPAT margin (over rental revenue) 37.8% 35.2% 33.4% 35.6% 32.1%
Turnover of average investment capital (over rental revenue) 0.65x 0.71x 0.56x 0.60x 0.53x
ROIC 24.6% 24.8% 18.7% 21.3% 17.0%
Cost of debt 11.6% 13.6% 10.9% 8.4% 8.2%
Cost of equity 20.0% 16.2% 11.0% 11.5% 11.3%
Nominal WACC 16.9% 15.7% 11.0% 11.2% 10.9%
Spread (ROIC - WACC) - p.p. 7.7 9.2 7.7 10.1 6.1
EVA R$ millions 39.2 55.5 76.2 114.3 100.0
EVA increase (decrfease) R$ millions 16.3 20.7 38.1 (14.3)
Loss in fleet value was considered as a loss in equity, since it’s a non-recurring event.
36
37. Measures taken by the Company
Suspend purchases of new cars up to fleet adjustment
Increase car rental and fleet rental rates to compensate the higher depreciation costs
Immediate recognition loss in fleet value in the amount of R$87.6 million
Increase monthly fleet depreciation from R$7.5 million in October to R$11.4 million in December
Increase promotions and advertising with the purpose of enhancing car sales
Prepay 2009 debt
Fast reaction: Management immediately took the right measures to face the crisis.
37
38. Strategies for the current scenario
Fleet strategies:
Keep 2009 end of period fleet at same levels of the end of 2008
Increase the utilization rate to at least 72% in car rental division
Debt strategy:
Contract debt only for extending debt profile
38
39. How is the business going?
Until February 2009
Car rental division
Average rented fleet 22,187
Revenues growth 11.2%
Fleet rental division
Average rented fleet 19,930
Revenues growth 22.8%
Used car sales division
Number of cars sold 4,992
39
40. Disclaimer
The material presented 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.
40
42. Car rental financial cycle
Funding (PV)
1-year cycle Net car sale revenue
$25.7 $26.0
Revenue: 19.4
1 2 3 4 5 Expenses: (10.1) 8 9 10 11 12
$25.7
$28.8
Car acquisition Funding (FV)
Car rental Used cars Total
Per operating car Per sold car 1 Year
R$ % R$ % R$
Revenues 19,4 100,0% 27,7 100,0% 47,1
Additional revenue 0,6 2,3% 0,6
Cost (7,8) -40,4% (7,8)
SG&A (2,3) -12,0% (2,5) -9,0% (4,8)
Net car sale revenue 25,9 93,3% 25,9
Book value of car sale (25,3) -91,3% (25,3)
EBITDA 9,2 47,7% 0,6 2,0% 9,8
Depreciation (non-vehicle) (0,5) -2,3% (0,1) -0,4% (0,6)
Depreciation (vehicle) (1,9) -6,9% (1,9)
Interest on debt (2,4) -8,6% (2,4)
Tax (1,2) -6,3% 1,2 4,4% (0,0)
NET INCOME 7,6 39,0% (2,7) -9,8% 4,9
Return on asset 19,3%
Cost based on 2008’s figures and new levels of SG&A for the used car sales division and vehicle depreciation 42
43. Fleet rental financial cycle
Funding (PV) Net car sale revenue
33.2 2-year cycle 27.3
Revenue: 30.7
1 2 3 4 5 Expenses: (9.6) 20 21 22 23 24
33.2
Car acquisition
41.7
Funding (FV)
Fleet rental Used cars Total
Per operating car Per sold car 2 Years 1Year
R$ % R$ % R$ R$
Revenues 29,1 100,0% 29,1 100,0% 58,2 29,1
Additional revenue 0,4 1,4% 0,4 0,2
Cost (7,9) -27,1% (7,9) (3,9)
SG&A (1,7) -6,0% (2,4) -8,3% (4,1) (2,1)
Net car sale revenue 27,1 93,1% 27,1 13,5
Book value of car sale (26,5) -91,2% (26,5) (13,3)
EBITDA 19,5 66,9% 0,6 2,0% 20,0 10,0
Depreciation (non-vehicle) (0,1) -0,3% (0,1) (0,0)
Depreciation (vehicle) (6,8) -23,4% (6,8) (3,4)
Interest on debt (6,0) -20,5% (6,0) (3,0)
Tax (1,2) -4,1% 4,6 15,9% 3,4 1,7
NET INCOME 18,2 62,6% (7,6) -26,0% 10,7 5,3
Return on asset 16,1%
Cost based on 2008’s figures and new levels of SG&A for the used car sales division and vehicle depreciation 43
