Marketing Management Business Plan_My Sweet Creations
Localiza completa 2 q11 eng
1. Localiza Rent a Car S.A.
2Q11 Financial Results - R$ million, IFRS
July / 2011 1
2. 1. Business Platform
2. Growth Opportunities
3. Competitive Advantages
4. Long Term Results
5. 2Q11 Financials
6. Summary
2
3. Integrated business platform
63,500 cars 28,654 cars
2.5 million clients 698 clients
236 locations 290 employees
3,641 employees
Synergies:
bargaining power
cost reduction
cross selling
11,363 cars
188 locations in Brazil 75.8% sold to final consumer
43 locations in South America 56 stores
30 employees 787 employees
This integrated business platform gives Localiza flexibility and superior performance.
3
Based on the 2Q11
4. Car rental financial cycle
1-year cycle
Car sale revenue
$27.9
Revenue
1 2 3 4 5 Expenses, interest and tax 8 9 10 11 12
$2.3
$26.6 SG&A
Car acquisition
Car Rental Seminovos Total
per operating car per operating car 1 year
R$ % R$ % R$
Revenues 19.5 100.0% 27.9 100.0% 47.4
Cost (8.2) -42.2% (8.2)
SG&A (2.8) -14.5% (2.3) -8.4% (5.2)
Net car sale revenue 25.5 91.6% 25.5
Book value of car sale (24.7) -90.0% (24.7)
EBITDA 8.5 43.4% 0.8 2.9% 9.3
Depreciation (vehicle) (1.5) -5.5% (1.5)
Depreciation (non-vehicle) (0.4) -1.8% (0.1) (0.5)
Interest on debt (2.0) -7.2% (2.0)
Tax (2.4) -12.1% 0.7 2.5% (1.6)
NET INCOME 5.8 29.5% (2.2) -7.7% 3.6
NOPAT 5.1
ROIC * 17.7% Spread
Cost of debt after tax 7.9% 9.8p.p.
* Investment in cars and PP&E (8%) 4
5. Fleet rental financial cycle
2-year cycle Net car sale revenue
29.0
Revenue
1 2 3 4 5 Expenses, interest and tax 20 21 22 23 24
$2.2
33.8 SG&A
Car acquisition
Fleet Rental Seminovos Total
per operating car per operating car 2 anos
R$ % R$ % R$
Revenues 32.7 100.0% 29.0 100.0% 61.7
Cost (9.4) -28.9% (9.4)
SG&A (1.8) -5.6% (2.2) -7.7% (4.1)
Net car sale revenue 26.8 92.3% 26.8
Book value of car sale (26.5) -90.0% (26.5)
EBITDA 21.4 65.6% 0.3 1.0% 21.7
Depreciation (vehicle) (7.0) -24.2% (7.0)
Depreciation (non-vehicle) (0.1) -0.2% (0.1)
Interest on debt (3.8) -12.9% (3.8)
Tax (6.2) -19.0% 3.1 10.8% (3.1)
NET INCOME 15.2 46.4% (7.3) -25.3% 7.8
NET INCOME per year 7.6 46.4% (3.7) -25.3% 3.9
NOPAT (annualized) 5.1
ROIC 15.2% Spread
Cost of debt after tax 7.9% 7.3p.p.
5
6. Managing assets
Pricing strategy
Consumer price
(-) Operating costs
(-) Depreciation
Equity (-) Taxes
(-) Interest
= Spread
Assets (cars)
Funding
Assets (cash)
Debt Profitability comes from Cash to renew the fleet
rental divisions
Flexible and liquid assets.
6
7. 1. Business Platform
2. Growth Opportunities
3. Competitive Advantages
4. Long Term Results
5. 2Q11 Financials
6. Summary
7
8. Growth opportunities
Consolidation
US market: 4 players 95%
BR market: 4 players 45%
2,004 players 55%
Source: Auto Rental News, ABLA and Company’s
estimates
Outsourcing
GDP: Corporate fleet : 2MM cars
Targeted market 500,000 cars
Income / Consumption 28, 654 cars
Source: The Boston Consulting Group as of
November, 2010
GDP:
Investments
Strong drivers of growth.
8
9. Growth opportunities: Infrastructure
Investments in Brazil 2011-2014: R$886 billion
+ 66% 6.3%
6.3%
886
23.3%
23.3%
533 339
R$ billion
3.3%
3.3%
206 210
131 53.4%
53.4%
337
196 North: 6.3%
Northeast: 23.3%
2006-2009 2001-2014 Midwest: 3.3% 8.6%
8.6%
Southeast: 53.4%
Construction Infrastructure Industry South: 8.6%
Source: BNDES 2010-2014, Ernani Torres (Deputy Director) Source: Brasil Econômico Journal as of October 15-17, 2010.
Strong investments programmed for the next years.
9
10. Growth opportunities: Income and Consumption
Consumption (million) Rent a Car Affordability
Middle class
51% 510
% 113 465
98
15.3 380
415
38% 350
66 37% 35% 300
260
. 5%
48 151 180 200
240
31%
27%
22% 20%
2003 2009 2014e 18% 16% 15%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
# of air traffic passengers
Monthly m inim um salary (R$) Daily rental price over m inim um salary (%)
% 154
128 20.3
71
. 3%
80
2003 2009 2010 Unemployment rate (%)
12,3
11,5 11,5
Credit card holder 9,9 10,0
9,3
51 7,9 8,1
45 % 6,7
13.3
%
15 0. 0
20
2002 2003 2004 2005 2006 2007 2008 2009 2010
2003 2009 2010
Source: Infraero, Gol, Abecs and Exame magazine (Dec/2010)
Source: website Portal Brasil and Bradesco (Macroeconomic scenario)
The growth of middle class is impacting in the consumption.
10
11. Growth opportunities: Income and Consumption
Car purchase affordability # of inhabitants per car
148 510
128
1 6 0 6 00
1 4 0
115 465
97 104 415 5 00
1 2 0
93 380
1 00
80 4 00
8 0 3 00
350
300 75
6 0
260 68
2 00
4 0
240 58 56
180 200
Brazil 6.9
1 00
2 0
151
0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Mexico 4.0
Number of minimum wages to buy a new car Monthly minimum salary (R$)
Germany 1.9
England 1.7
GDP per capita
(R$ thousands) France 1.7
16.0 16.6
14.2 Italy 1.5
12.8
11.7
10.7
9.5 USA 1.2
8.4
6.9 7.5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Bradesco presentation, GDP per capita: IPEADATA. Source: Bradesco report as of 2010.
The growth of middle class is impacting also in the car market.
11
12. Growth opportunities: GDP
Rental revenues accumulated growth rate – rentals
Localiza
5.5x
Sector
GDP 2.8x
2005 2006 2007 2008 2009 2010
GDP annual growth estimated for the next 5 years between 4 and 5% (Brazilian Central Bank).
Source: Central Bank, Localiza and ABLA 12
Based on the revenues of Localiza, Total Fleet and Franchisees, net of inflation
13. Growth opportunities: Consolidation
Brazilian car rental agencies
Airport locations Off-airport locations
Localiza
Others
326 Hertz
Avis 30 Localiza 67 Unidas
33 98 73
Avis
31
*
Unidas
18 Hertz Others *
30 2004
Off-airport market is an opportunity to Localiza since it is still fragmented.
*Source: ABLA, 2011 13
Source: Each company website as of June , 2011 and Localiza’s estimates
14. 1. Business Platform
2. Growth Opportunities
3. Competitive Advantages
4. Long Term Results
5. 2Q11 Financials
6. Summary
14
15. Competitive advantages
38 years of experience…
Raising Buying Renting Selling
money cars cars cars
…gives Localiza know-how and superior performance
in all links of the business process
15
16. Competitive advantages in Raising Money
Raising Buying Renting Selling
money cars cars cars
Localiza is rated Investment Grade
Global scale BBB- Fitch
BBB+ S&P B+ S&P B+ Fitch B3 Moody's
Baa3 Moody’s
National scale Aa1.br Moody’s
A (bra) Fitch BBB+ (bra) Fitch BBB (bra) Fitch
AA(bra) Fitch
Localiza raises money with lower spreads compared to all Brazilian players.
16
17. Competitive advantages in buying cars
Raising Buying Renting Selling
money cars cars cars
Localiza’ share in national sales of the three Purchases by brand
largest automakers: GM, FIAT, VW
Ford Renault Others
4.3% 3.1% 2.8%
Fiat
2.8% GM 25.6%
37.0%
VW
27.2%
Localiza purchases cars with better prices and conditions.
* Includes Localiza, Total Fleet and Franchisees purchases in 2010. 17
18. Competitive advantages in renting cars
Raising Buying Renting Selling
money cars cars cars
Strong brand Geographical Brazilian distribution
footprint
# of rental locations
424
252
64
91
97
# of cities
289
64 72
46
Localiza Hertz Unidas Avis
18
Source: each Company’s website (June, 2011)
19. Competitive advantages: network footprint
Shuttle Service Uberaba Airport Branch - MG - Brazil
Curitiba International Airport - PR - Brazil Ribeirão Preto Off-airport Branch – SP - Brazil
Airport and off airport branches located in easy-access and intense traffic places.
19
20. Competitive advantages in used car sales
Raising Buying Renting Selling
money cars cars cars
Unique product Selling directly to final consumer Footprint
Low mileage
56 stores
Pre-owned flex fuel cars
Cars financed through third-party
financial institutions
Cash generated in used car sales is used to renew the fleet.
Selling directly to final consumer reduces depreciation.
20
21. Competitive advantages: used car sales network
Shopping Portal Store in Belo Horizonte - MG - Brazil
Francisco Morato Store - SP - Brazil
Sorocaba Store - SP - Brazil Belo Horizonte Store - MG - Brazil
Around 80% of used cars are sold directly to final consumers.
21
22. Competitive advantages: additional fleet
Curitiba International Airport Branch- PR - Brazil
Francisco Morato Store - SP - Brazil
Cars available for sale are used by the car rental division in peaks of demand.
22
23. Competitive advantages: stable management
BOARD OF DIRECTORS
CEO Salim Mattar – 38y
Car
Acquisition
Legal
COO Eugênio Mattar – 38y
Human Administration
Financial Resources IT
Gina Rafael – 30y
Bruno Roberto Mendes – 26y
Andrade – 19y
Daltro Leite – 26y
Localiza has a very lean and efficient structure.
Marco Antônio The succession process is already planned.
Guimarães – 21y
23
24. 1. Business Platform
2. Growth Opportunities
3. Competitive Advantages
4. Long Term Results
5. 2Q11 Financials
6. Summary
24
31. Net Investment
Fleet increase * (quantity)
18,649
7,957 9,930 8,642 65,934
7,342 10,346
44,211 47,285 1,182 4,608
43,161
38,050 644 8,124
33,520 30,093 34,281 34,519
26,105 28,667
23,174 22,809 21,627 24,059 20,602
18,763
11,323 10,679 12,478
2005 2006 2007 2008 2009 2010 1H10 1H11 2Q10 2Q11
Purchased cars Sold cars
Net investment (R$ million)
588.5
354.5 1,910.4
281.8
210.4
341.5 87.3 132.3
243.5 1,335.3 1,204.2 1,321.9 241.1
1,060.9 980.8 70.3
930.3 850.5 922.4 825.6
690.0 588.8 672.6 585.3 693.3 593.8
446.5 360.9 290.6 352.7
2005 2006 2007 2008 2009 2010 1H10 1H11 2Q10 2Q11
Purchases (accessories included) Used car sales revenues
R$132.7 million was spent in the addition of 4,608 cars to the fleet in 1H11.
31
32. Used car sales network
# of stores Footprint
55 56
49
32 35
26
13
2005 2006 2007 2008 2009 2010 1H11
The Company is still increasing its used car sales network in new markets.
32
33. End of period fleet
End of period fleet (quantity)
19.7% 7%
CAGR: 29.
88,060 92,154
70,295 71,055
62,515
46,003 53,476 26,615 28,654
35,865 22,778 23,328
23,403
14,630 17,790
11,762 61,445 63,500
35,686 39,112 47,517 47,727
24,103 31,373
2005 2006 2007 2008 2009 2010 1H10 1H11
Car rental Fleet rental
The Company ended 1H11 with 92,154 cars and a growth of 29.7%.
33
34. Consolidated net revenues
R$ million
3 ,9 %
CAGR: 2 2,497.2
24,4%
1,823.7 1,820.9
1,505.5 1,387.9 %
1,126.2 1,116.1 25,4
854.9
706.4
563.4
2005 2006 2007 2008 2009 2010 1H10 1H11 2Q10 2Q11
Net revenues are still growing above historical levels.
34
36. Average depreciation per car
R$
Car rental
Financial crisis effect
Normal market conditions
Hot used car market 2,546.0 2,577.0
1,536.0 1,370.9 1,251.9
939.1
492.3 332.9
2005 2006 2007 2008 2009 2010 1H11* 2Q11*
* Annualized
Fleet Rental
5,083.1
4,371.7 4,112.9 3,990.6
3,509.7
2,981.3
2,383.3 2,395.8
2005 2006 2007 2008 2009 2010 1H11
* 2Q11
*
* Annualized
Depreciation is adequate to the current market conditions.
36
37. Consolidated net income
R$ million
250.5
%
190.2 29.6
%
106.5
138.2 127.4
116.3 137.6 28. 7
106.2
74.0
57.5
2005 2006 2007 2008 2009 2010 1H10 1H11 2Q10 2Q11
Reconciliation EBITDA x net income 2009 2010 Var. R$ 1H10 1H11 Var. R$ 2Q10 2Q11 Var. R$
EBITDA – Rentals and franchising 459.1 615.1 156.0 273.3 361.0 87.7 144.0 187.9 43.9
EBITDA – Used car sales 10.6 34.4 23.8 9.3 25.8 16.5 6.5 12.7 6.2
EBITDA Consolidated 469.7 649.5 179.8 282.6 386.8 104.2 150.5 200.6 50.1
Cars depreciation (172.3) (146.3) 26.0 (66.5) (89.7) (23.2) (35.8) (43.3) (7.5)
Other property and equipment depreciation (21.0) (21.1) (0.1) (10.2) (12.3) (2.1) (5.1) (6.3) (1.2)
Financial expenses, net (112.9) (130.1) (17.2) (57.4) (88.0) (30.6) (29.2) (45.2) (16.0)
Income tax and social contribution (47.2) (101.5) (54.3) (42.3) (59.2) (16.9) (22.9) (31.8) (8.9)
Net income 116.3 250.5 134.2 106.2 137.6 31.4 57.5 74.0 16.5
The growth of 28.7% in the net income was in line with rental revenues.
37
38. Free cash flow - FCF
Free cash flow - R$ million 2005 2006 2007 2008 2009 2010 1H11
EBITDA 277.9 311.3 403.5 504.1 469.7 649.5 386.8
Used car sales net revenues (446.5) (588.8) (850.5) (980.8) (922.4) (1,321.9) (693.3)
Depreciated cost of used car sales (*) 361.2 530.4 760.0 874.5 855.1 1,203.2 620.4
(-) Income tax and social contribution (32.7) (42.7) (63.4) (52.8) (49.0) (57.8) (40.7)
working capital variation (24.2) (4.8) 13.3 (44.8) (11.5) 54.5 (62.5)
Cash provided before capex 135.7 205.5 262.9 300.2 341.9 527.5 210.7
Used car sales net revenues 446.5 588.8 850.5 980.8 922.4 1,321.9 693.3
Capex of car - renewal (496.0) (643.3) (839.0) (1,035.4) (963.1) (1,370.1) (692.9)
Change in accounts payable to car suppliers (capex) - - - - 15.2 - -
Net capex for renewal (49.5) (54.5) 11.5 (54.6) (25.5) (48.2) 0.4
Capex – other property and equipment, net (28.0) (32.7) (23.7) (39.9) (21.0) (51.1) (23.3)
Free cash flow before growth and interest 58.2 118.2 250.7 205.7 295.4 428.2 187.8
Capex of car - growth (194.0) (287.0) (221.9) (299.9) (241.1) (540.3) (132.7)
Change in accounts payable to car suppliers (capex) (25.5) 222.0 (51.0) (188.9) 241.1 111.3 (49.6)
Free cash flow after growth and before interest (161.3) 53.2 (22.2) (283.1) 295.4 (0.8) 5.5
Fleet increase (decrease) - quantity 7,342 10,346 7,957 9,930 8,642 18,649 4,608
Cash generated in 1H11 supported the fleet growth and the reduction of the accounts payable to OEMs in 2010.
(*) without technical discount deduction 38
39. Debt profile and costs
R$ million
514.0
372.0
226.6 284.8 238.0
207.7
1.3
2011 2012 2013 2014 2015 2016 2017
Cash
484,2
Contract rate Effective cost 2011 2012 2013 2014 2015 2016 2017 Total
108.7% to 114.7% of 111.1% to
Working capital - 15.0 35.0 55.0 75.0 190.0 - 370.0
CDI 115.0% of CDI
Debenture 2nd Issuance CDI + 0.44%pa CDI + 0.6%pa - 66.6 66.6 66.8 - - - 200.0
112.0% to 114.0% of
Debenture 4th Issuance 114.2% of CDI - 24.0 24.0 63.0 63.0 74.0 122.0 370.0
CDI
Debenture 5th Issuance 112.8% of CDI 114.5% of CDI - - - - - 250.0 250.0 500.0
Debenture 1st Issuance: Total Fleet CDI +1.95%pa CDI + 2.0%pa - 100.0 100.0 100.0 100.0 - - 400.0
TJLP + 3.8%pa / TJLP + 3.8%pa
Other 1.3 2.1 1.0 - - - - 4.4
CDI + 2.3%pa / CDI + 2.3%pa
Interests accrued until 06/30/2011,
- - 51.3 - - - - - - 51.3
net of interest paid
Cash and cash equivalents on
- - (484.2) - - - - - - (484.2)
06/30/2011
Net debt - - (431.6) 207.7 226.6 284.8 238.0 514.0 372.0 1,411.5
Comfortable debt profile.
39
40. Debt – ratios
R$ million
2,446.7 2,550.0
1,752.6 1,907.8
1,492.9 1,411.5
1,247.7 1,254.5 1,078.6 1,281.1
900.2 765.1
535.8 440.4
2005 2006 2007 2008 2009 2010 1H11
Net debt Fleet value
SALDOS EM FINAL DE PERÍODO 2005 2006 2007 2008 2009 2010 1H11
Net debt / Fleet value 60% 36% 51% 72% 57% 52% 55%
Net debt / EBITDA (*) 1.9x 1.4x 1.9x 2.5x 2.3x 2.0x 1.8x
Net debt / Equity 1.4x 0.7x 1.3x 2.0x 1.5x 1.4x 1.4x
EBITDA(*) / Net financial expenses (*) 3.3x 4.8x 5.4x 3.8x 4.2x 5.0x 4.4x
(*) annualized
Comfortable debt ratios.
40
41. Spread
24.8% 21.3%
18.7% 17.0% 16.6%
16.9% 15.1%
11.2 11.5%
7.8 12.9
8.8 9.1 7.3 7.7
13.6% 3.7
10.9% 8.4% 8.2% 7.8% 7.8% 8.9%
7.8%
2005 2006 2007 2008 2009 2010 1H10 1H11
Interest on debt after tax ROIC
2005 2006 2007 2008 2009 2010 1H10 1H11
Average capital investment - R$ million 606.3 986.2 1,137.5 1,642.3 1,702.3 1,984.6 1,913.2 2,375.0
NOPAT margin (over rental net revenues) 37.0% 34.5% 36.9% 32.1% 21.9% 28.6% 27.2% 28.3%
Turnover of average capital investment
(over rental net revenues) 0.67x 0.55x 0.58x 0.53x 0.53x 0.59x 0.55x 0.58x
ROIC 24.8% 18.7% 21.3% 17.0% 11.5% 16.9% 15.1% 16.6%
Interest on debt after tax 13.6% 10.9% 8.4% 8.2% 7.8% 7.8% 7.8% 8.9%
Spread (ROIC – Interest after tax) - p.p. 11.2 7.8 12.9 8.8 3.7 9.1 7.3 7.7
Localiza is still focus on results.
41
42. 1. Business Platform
2. Growth Opportunities
3. Competitive Advantages
4. Long Term Results
5. 2Q11 Financials
6. Summary
42
43. Virtuous circle
Gains of Higher
scale competitiveness
Localiza has an integrated business
platform and a flexible model
The drivers lead to a strong growth
The competitive advantages give
Localiza a superior performance
Strong growth with profitability:
Localiza has been doubling size
every 3 years
High levels of corporate governance
Market share
increase 43
44. Thank you!
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.
44
