WEG 2Q09 Earnings Conference Call Presentation

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WEG 2Q09 Earnings Conference Call Presentation, held on July 27, 2009

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WEG 2Q09 Earnings Conference Call Presentation

  1. 1. Conference Call Results 2Q09 July 27th, 2009
  2. 2. Disclaimer The statements that may be made during this conference call relating to WEG’s business perspectives, projections and operating and financial goals and to WEG’s potential future growth are management beliefs and expectations, as well as information that are currently available. These statements involve risks, uncertainties and the use of assumptions, as they relate to future events and, as such, depend on circumstances that may or may not be present. Investors should understand that the general economic conditions, conditions of the industry and other operating factors may affect WEG’s future performance and lead to results that may differ materially from those expressed in such future considerations. 2Q09 Conference Call Page 2 July 27th, 2009
  3. 3. General Comments on 2Q09 Very difficult market conditions Revenue growth for the semester, but quarterly comparison shows decline: “White goods” with strong rebound Industrial equipment with no recovery GTD with order backlog Gross margin impacted by: Lower capacity occupancy Revenue mix Pricing pressures Remaining effect of raw materials costs Growth estimates seem out of reach Positive highlights Administrative expenses control Working capital and cash management 2Q09 Conference Call Page 3 July 27th, 2009
  4. 4. Quarterly Highlights 2Q09 2Q08 Growth % Gross Operating Revenue 1,250,193 1,331,012 -6.1% Domestic Market 808,355 924,701 -12.6% External Markets 441,838 406,311 8.7% External Markets in US$ 213,396 245,822 -13.2% Net Operating Revenue 1,029,945 1,095,815 -6.0% Gross Operating Profit 294,175 392,025 -25.0% Gross Margin 28.6% 35.8% Quarterly Net Income 129,670 169,855 -23.7% Net Margin 12.6% 15.5% EBITDA 172,925 253,729 -31.8% EBITDA Margin 16.8% 23.2% Figures in R$ Thousands 2Q09 Conference Call Page 4 July 27th, 2009
  5. 5. Gross Operating Revenues Evolution of Gross Revenues – Domestic Market (in R$ million) -13% 32% Gross and Net Operating Revenues 34% decreasing by 6% 9% Quarter had a stronger comparison base, 924,7 808,4 without the distortions of the 1T08 701,0 481,1 525,1 FX favors R$ denominated growth comparisons 2Q05 2Q06 2Q07 2Q08 2Q09 Industrial production slowing down and capital goods production slowing even Evolution of Gross Revenues – External Market faster (in US$ million) Global crises impacts across all markets 2,4774 2,1902 1,9807 2,0705 Diversification across markets / 1,6529 External Market in US$ segments / clients minimizes but does 17% -13% Quarterly Average FX not eliminate recession 37% 33% 245,8 210,8 213,4 154,2 115,9 2Q05 2Q06 2Q07 2Q08 2Q09 2Q09 Conference Call Page 5 July 27th, 2009
  6. 6. Global Presence and Business Areas Gross Revenues Breakdown – 2Q09 12% 10% Europe North America 5% 65% Asia & Oceania 5% 4% Brazil Africa South & Central America 7% 1.119 1.331 5% 863 5% 12% 9% 6% Domestic market grew in importance 768 13% 25% 629 6% 33% again, despite FX rate (end of strong R$ 21% 6% 17% distortion) 21% 18% 12% 57% Rest of the World grows faster than North 58% 62% 48% America and Europe 61% GTD continues strong with order backlog. Industrial equipment impacted by crises 2Q05 2Q06 2Q07 2Q08 2Q09 Industrial Equipment GTD Domestic Use Paints & Varnishes 2Q09 Conference Call Page 6 July 27th, 2009
  7. 7. Cost of Goods Sold Lower capacity occupancy Revenue mix Pricing pressures Remaining effect of raw materials costs Other Costs Other Costs 31% 29% Steel & Coper 45% 2T09 2T08 Depreciation Depreciation 5% 6% Steel & Coper 46% Other Materials 18% Other Materials 20% 2Q09 Conference Call Page 7 July 27th, 2009
  8. 8. Profitability 26% 23% 40% 21% 35% 36% 18% 17% 31% 29% 254 238 173 392 154 368 294 118 254 200 2Q05 2Q06 2Q07 2Q08 2Q09 2Q05 2Q06 2Q07 2Q08 2Q09 Gross Profit Gross Margin EBITDA EBITDA Margin 16% 16% 16% 12% 13% Lower gross margin with lower occupancy, product mix, pricing 170 pressures and raw material costs 151 120 130 EBITDA margin shows smaller decline 79 Net income benefits from more stable FX rate 2Q05 2Q06 2Q07 2Q08 2Q09 Net Income Net Margin 2Q09 Conference Call Page 8 July 27th, 2009
  9. 9. Financing Policies June 2009 December 2008 June 2008 CASH & EQUIVALENT 1,806,997 1,849,477 1,802,142 DEBT 1,811,906 2,161,216 1,634,459 - Current 1,044,633 1,314,098 1,009,095 - Long Term 767,273 847,118 625,364 NET CASH (DEBT) (4,909) (311,739) 167,683 Working capital shows improving trend Operating cash flow generation being used to pay down short term debt Foreign currency exposure nearly eliminated (below maximum limit of 3 months of exports equivalent) 2Q09 Conference Call Page 9 July 27th, 2009
  10. 10. Capacity Expansion Investments Outside Brazil Brazil 130.4 128.2 120.8 20.5 24.8 24.0 91.9 77.8 20.1 11.8 63.5 109.9 103.4 15.7 96.8 66.0 71.8 47.8 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 2Q09 Conference Call Page 10 July 27th, 2009
  11. 11. Contacts www.weg.net/ir Alidor Lueders CFO & IRO alidor@weg.net Luís Fernando M. Oliveira Investor Relations Manager +55 (47) 3276-6973 luisfernando@weg.net twitter.com/weg_ir ri@weg.net MSN Messenger luisfernando@weg.com.br 2Q09 Conference Call Page 11 July 27th, 2009

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