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2010 06 23 Deutsch Industrials Conference (Chicago)
 

2010 06 23 Deutsch Industrials Conference (Chicago)

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Presentation used during the Deutsch Bank Industrials Conference event in Chicago, June 23, 2010.

Presentation used during the Deutsch Bank Industrials Conference event in Chicago, June 23, 2010.

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    2010 06 23 Deutsch Industrials Conference (Chicago) 2010 06 23 Deutsch Industrials Conference (Chicago) Presentation Transcript

    • Motors | Automation | Energy | Transmission & Distribution | Paints June 2010 Deutsche Bank Industrials Conference
    • Disclaimer The information contained herein has been prepared by WEG S.A. (“WEG” or the “Company”) solely for meetings held with  investors  and/or  potential  investors.  This  material  does  not  constitute  offering  material  in  whole  or  part,  and  you  must  obtain further information before making an investment decision in respect of the common shares of the Company. This material has been prepared solely for informational purposes and is not to be construed as a solicitation or an offer to  buy or sell any securities and should not be treated as giving investment advice. It is not targeted to the specific investment  objectives, financial situation or particular needs of any recipient. No representation or warranty, either express or implied, is  made  as  to  the  accuracy,  completeness  or  reliability  of  the  information  contained  herein.  It  should  not  be  regarded  by  recipients  as  a  substitute  for  the  exercise  of  their  own  judgment.  Any  opinions  expressed  in  this  material  are  subject  to  change  without  notice  and  WEG  is  not  under  obligation  to  update  or  keep  current  the  information  contained  herein.  In  addition, WEG has been informed that their affiliates, agents, directors, partners and employees may make purchases and/or  sales  as  principals  or  may  act  as  market  makers  or  provide  investment  banking  or  other  services  to  the  Company.  The  Company and their respective affiliates, agents, directors, partners and employees accept no liability whatsoever for any loss  or damage of any kind arising out of the use of all or any part of this material.  You should consult your own legal, regulatory, tax, business, investment, financial and accounting advisers to the extent that  you deem necessary, and you must make your own investment, hedging or trading decision based upon your own judgment  and advice from such advisers as you deem necessary and not upon any view expressed in this material. This  material  includes  forward‐looking  statements  subject  to  risks  and  uncertainties,  which  are based  on  current  expectations  and  projections  about  future  events  and  trends  that may  affect  the  Company’s  business.    These  statements  include projections of economic growth and energy demand  and  supply,  as  well  as  information  about  competitive  position,  the regulatory environment, potential opportunities for growth and other matters.  Several factors may adversely affect the  estimates and assumptions on which these statements are based, many of which are beyond our control.  2 Deutsche Bank Industrials Conference June 2010
    • History of WEG 3 Deutsche Bank Industrials Conference June 2010
    • Shareholding structure Clear and strong control group that knows the business but is not  directly involved on day to day operations Voigt Silva Werninghaus Controlling 33.3% 33.3% 33.3% Shareholders WEG  Founders’ Other  Participações e  Families Serviços S/A (directly) (Float) 50.9% 14.4% 34.7% WEG S.A. 4 Deutsche Bank Industrials Conference June 2010
    • Global Presence Worldwide presence, with Brazil as the base of a truly global player  in electric capital goods Factories in 5 countries Distributors & Agents in over 85 countries Commercial branches in 23 countries Sales to over 110 countries Over 1100 service centers in all 5 continents 5 Deutsche Bank Industrials Conference June 2010
    • Business Units Complete solutions that increase perceived value by the client   MOTORS AUTOMATION ENERGY TRANSMISSION  COATINGS & DISTRIBUTION 6 Deutsche Bank Industrials Conference June 2010
    • WEG key facts About WEG Market leader in Latin America and among top 5 electric motor players in the  world  Over 21thousands employees (2.5 thousands outside Brazil) Around 35% of business outside Brazil Revenues CAGR of 19% over past 15 years 2009 Revenues: US$ 2.8 billion 19.537 employees worldwide EBITDA: US$ 465 million  Net earnings: US$ 305 million Strong balance sheet, unaffected by financial crisis  7 Deutsche Bank Industrials Conference June 2010
    • Consistent and profitable growth  Product, client and industry exposures are diversified, strong and  clear focus on profitable opportunities  Gross Revenues (R$) EBITDA (R$) 5.471 1.026 5.111 923 4.551 837 CAGR 19% CAGR 18% 3.527 666 2.978 504 2.603 487 435 2.015 327 291 1.535 1.269 207 963 146 106 135 753 632 430 458 574 80 84 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Net Earnings (R$) Return on Equity 575 47% 560 548 44% 503 38% 38% 37% 37% CAGR 23% 33% 33% 403 31% 31% 379 25% 308 23% 22% 220 16% 176 14% 125 98 82 58 41 31 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 8 Deutsche Bank Industrials Conference June 2010
    • Strong fundamental trends Energy prices will continue to increase Cheaper energies are becoming less available Concerns about sustainability (climate change)  Cleaner energies are technologically intensive  Oil prices (US$) 100  90  80  70  60  50  40  30  20  10  ‐ 1970 1980 1990 2000 2010 Partial 9 Deutsche Bank Industrials Conference June 2010
    • Strong fundamental trends Increasing energy prices changes electric equipment industry Energy efficiency Industrial electric  motors represent  around 25% of global  Lower CO2 electricity consumption emissions  Most efficiency “bang” Increased economic  for the Capex “buck” viability of  alternative fuels  and sources of  energy Cleaner Energy Sources 10 Deutsche Bank Industrials Conference June 2010
    • Strong fundamental trends Increasing energy prices changes electric equipment industry Energy efficiency Industrial electric  motors represent  around 25% of global  Lower CO2 electricity consumption emissions  Most efficiency “bang” Increased economic  for the Capex “buck” viability of  alternative fuels  and sources of  energy Cleaner Energy Sources 11 Deutsche Bank Industrials Conference June 2010
    • Electric motor is a “different” machine Cost of ownership of an electric motor throughout its useful life  Specifications must be exact. Everything affects energy efficiency “Similar” motors are not economical, even if much cheaper Becomes more evident when energy prices go up Returns on energy efficiency are very attractive 12 Deutsche Bank Industrials Conference June 2010
    • WEG is Uniquely Positioned 13 Deutsche Bank Industrials Conference June 2010
    • Scale and Customization Customization is characteristic of the industry and specifications are  very diverse. Most production is built to order  Integrated and synergetic  Largest integrated motor site in the world production allows for large scale  of production, with: Lower costs Higher operating efficiency Vertical integration allows for: Customized products Main Manufacturing Plant in Jaraguá do Sul, SC Fastest to the market Incoming  Foundry /  Cast Machine Orders More than 2,500  Engineering Wires  Manufacturing Assembly  different types of  Line electric motors  Steel Shop Paints & Varnishes monthly Tooling 14 Deutsche Bank Industrials Conference June 2010
    • Contacts www.weg.net/ir  Laurence Beltrão Gomes Finance & IR Officer laurence@weg.net Luís Fernando M. Oliveira Investor Relations Manager +55 (47) 3276‐6973 twitter.com/weg_ir  luisfernando@weg.net ri@weg.net 15 Deutsche Bank Industrials Conference June 2010
    • Our Business 16 Deutsche Bank Industrials Conference June 2010
    • Annex:  Recent Financial Information  17 Deutsche Bank Industrials Conference June 2010
    • Profitability Net Earnings (R$ million) EBITDA (R$ million) 25% 23% 23% 22% 22% 1026 20% 20% 923 18% 18% 837 17% 15% 15% 12% 13% 666 575 560 548 503 487 504 403 394 375 308 03 04 05 06 07 08 09 03 04 05 06 07 08 09 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Net Income Net Margin EBITDA EBITDA Margin 18 Deutsche Bank Industrials Conference June 2010
    • General Comments on Q1 2010 Quarter confirms that recovery is going to be gradual Economic dynamisms spreads from the Brazilian consumer towards other  segments: Consumer goods continue strong, tied to fundamentals Industrial products doing better the closer they are to the consumer Longer cycle products is still in early stages of recovery Other emerging countries faring better than mature economies We are resuming some investment plans as demands picks up Production of HT motors in India by 2H of 2010; Production of commercial motors in Linhares by year end 19 Deutsche Bank Industrials Conference Page 19 June 2010
    • Quarterly Highlights Q1 2010 Q4 2009 Growth % Q1 2009 Growth % Gross Operating Revenue 1.131.546 1.306.913 -13,4% 1.270.984 -11,0% Domestic Market 801.299 871.619 -8,1% 802.351 -0,1% External Markets 330.247 435.299 -24,1% 468.632 -29,5% External Markets in US$ 181.170 250.328 -27,6% 202.726 -10,6% Net Operating Revenue 931.907 1.076.969 -13,5% 1.048.241 -11,1% Gross Operating Profit 307.454 344.226 -10,7% 311.954 -1,4% Gross Margin 33,0% 32,0% 29,8% Quarterly Net Income 119.074 136.426 -12,7% 122.193 -2,6% Net Margin 12,8% 12,7% 11,7% EBITDA 181.750 228.548 -20,5% 181.112 0,4% EBITDA Margin 19,5% 21,2% 17,3% Figures in R$ Thousands 20 Deutsche Bank Industrials Conference Page 20 June 2010
    • Financing Policies March 2010 December 2009 March 2009 CASH & EQUIVALENT 1.962.538 2.127.117 1.815.164 DEBT 1.782.466 1.872.533 2.099.941 - Current 814.274 895.885 1.171.587 - Long Term 968.192 976.648 928.354 NET CASH (DEBT) 180.072 254.584 (284.777) Operating cash flow trends continue favorable Capex program picking up where demand is stronger Strong capital structure allows access to low cost sources of funding BNDES (Brazilian development bank) is the main partner Negotiating first transaction with IFC Trade finance at very attractive terms Foreign subs financed locally but considering consolidated balance sheet Virtually no net foreign currency exposure Extending average maturities of debt at lower costs 21 Deutsche Bank Industrials Conference Page 21 June 2010
    • Gross Operating Revenues Evolution of Gross Revenues – Domestic Market (in R$ million) 5% 0% Gross Operating Revenues 22% decreasing by 11%. Net Revenues 23% down by 11.1% 761 802 801 FX appreciation of 27% negatively 623 507 impacts comparisons Product mix continues to shift Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 towards short cycle products Evolution of Gross Revenues – External Market (in US$ million) Lower order intake during 2009 is External Market in US$ now apparent in revenues Quarterly Average FX Recovery continues driven by the 2,1875 2,1066 2,3117 1,7354 1,8229 Brazilian consumer 30% 18% -11% Long cycle and external (mature) 29% markets continue soft. 195,3 202,7 181,2 165,2 126,6 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 22 Deutsche Bank Industrials Conference Page 22 June 2010
    • Global Presence Gross Revenues Breakdown: Q1 2010 9% 10% Europe North America 3% 7% Asia & Oceania 71% 5% 2% Brazil Africa South & Central America 23 Deutsche Bank Industrials Conference Page 23 June 2010
    • Profitability 36% 37% 36% 33% 30% 22% 24% 23% 17% 20% 293 320 312 307 238 193 203 181 182 149 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Gross Profit Gross Margin EBITDA EBITDA Margin 18% 16% Gross margin improving, despite little 14% 12% 13% help from top line growth EBITDA margin trending towards the floor of the historical interval Net margin showing more modest 118 129 126 122 119 improvement, benefiting from FX stability Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Net Income Net Margin 24 Deutsche Bank Industrials Conference Page 24 June 2010
    • Growth and Margin Analysis Revenues Growth (CAGR) Profitability (EBITDA Margins) 30,0% 30% 23,9% 2004‐2009 2009‐2012E 25,0% 25% 20,0% 20% 15,0% 12,6% 9,6% 10,1% 15% 10,0% 6,0%6,6% 5,1% 10% 5,0% 2,6% 2,6% 5% 0,0% 0% ‐5,0% ‐4,2% 2004 2005 2006 2007 2008 2009 ‐10,0% WEG SIEMENS EMERSON ABB SCHNEIDER WEG SIEMENS EMERSON ABB SCHNEIDER Financial Leverage (Net Debt / EBITDA 2009) 1,50  1,10  1,00  1,00  0,80  0,50  ‐ ‐0,50  ‐0,30  ‐1,00  ‐1,50  ‐1,50  ‐2,00  WEG SIEMENS EMERSON ABB SCHNEIDER Source: Morgan Stanley 25 Deutsche Bank Industrials Conference June 2010