2. Agenda
1. Company overview
2. Main business divisions
Car Rental
Fleet Outsourcing
Seminovos
3. Consolidated
4. Debt and cash
5. Appendix
Earnings release 3Q13
2
3. Company: milestones
Phase I – Rise to #1
Phase II – Expansion
Phase III – Reaching Scale
1973 – Founded in Belo Horizonte/MG
1984 – Expansion strategy by
adjacencies: Franchising
2005 – IPO: market cap of US$ 295 mm
Late 70’s - Acquisitions in the
Northeast of Brazil
1981 – Brazilian car rental leader in #
of branches
1991 – Expansion strategy by
adjacencies: Seminovos
2011 – Rated as investment grade by
Moody’s, Fitch and S&P in 2012
2012 – ADR level I
1997 – PE firm DL&J enters at a market
cap of US$ 150 mm
09/30/2013 – Market cap of US$2.8 bi
with ADTV of R$42.7 million
1997 – Expansion strategy by
adjacencies: Fleet Outsourcing
1973
1982
1983
2004
2005
2013
3
4. Company: integrated business platform
70,406 cars
3.7 million clients
286 locations
4,374 employees
32,809 cars
755 clients
350 employees
Synergies:
bargaining power
cost reduction
cross selling
13.985 cars
191 locations in Brazil
62 locations in South America
38 employees
61.6 % sold to final consumer
74 stores
1,000 employees
This integrated business platform gives Localiza flexibility and superior performance.
Based on the 3Q13
4
5. Company: Business platform divisions
Car Rental
Franchising
Fleet Outsourcing
Used car sales
Localiza car rental rents to
individuals or businesses
at airports and other
locations.
Supplementary business,
with the purpose to expand
the brand’s network.
Total Fleet, offering
customized fleet for 2-3
years terms.
Support area, with the
objective to sell the
Company’s used cars and
add know-how in buying
cars and estimating the
residual value.
The traditional backbone of
Localiza. With its giant fleet
that gets renewed annually,
it lays the foundation for all
scale effects captured by
the group as a whole.
Franchising is seen as a
primarily strategic business
by management – the
revenues generated are
low, however brand and
network expand at
minimum capital
expenditure.
Total Fleet is seen as an
additional business that
generates value by
leveraging synergies
created by the integrated
platform approach.
As a support business
activity, Seminovos enables
the sell roughly 70% of
used cars directly to the
final customer, thereby
maximizing the residual
value of used rental cars.
5
6. 2012 - Car Rental Financial Cycle
Net car sale
revenue
R$24.4
1 year cycle
Revenue
1
2
3
4
5
6
Expenses, interest and tax
7
8
9
10
11
12
R$28.4
Car acquisition
R$26.4
without IPI (7%)
Car Rental
per operating car
R$
%
20.4
100.0%
(8.9)
-43.6%
(3.2)
-15.6%
2012
Net revenues
Costs
SG&A
Net car sale revenue
Book value of car sale
EBITDA
NET INCOME
8.3
40.9%
(0.4)
Depreciation (vehicle)
Depreciation (non-vehicle)
Interest on debt
Tax
-1.8%
(2.4)
5.6
-11.7%
27.3%
Seminovos
per operating car
R$
%
27.1
100.0%
(2.7)
24.4
(23.2)
1.2
(1.9) (*)
(0.2)
(1.7)
0.8
(1.9)
NOPAT
ROIC (**)
Cost of debt (average CDI + 1.19%) after tax
-10.0%
90.0%
-85.5%
4.5%
-7.0%
-0.9%
-6.4%
2.9%
-6.9%
Total
1 year
R$
47.5
(8.9)
(5.9)
24.4
(23.2)
9.6
(1.9)
(0.6)
(1.7)
(1.6)
3.7
4.9
17.4%
6.3%
Spread
11.1p.p.
(*) Excluding additional depreciation effect related to IPI reduction
(**) ROIC over the car acquisition cost without IPI: 18.7%
6
7. 2012 - Fleet Outsourcing Financial Cycle
Net car sale
revenue
R$23.2
2 year cycle
Revenue
1
2
3
4
5
6
Expenses, interest and tax
19
20
21
22
23
24
R$36.1
Car acquisition
R$33.6
without IPI (7%)
Fleet Rental
per operating car
R$
%
35.3
100.0%
(9.6)
-27.3%
(2.2)
-6.3%
2012
Net revenues
Costs
SG&A
Net car sale revenue
Book value of car sale
EBITDA
NET INCOME
NET INCOME per year
23.4
66.4%
(0.1)
Depreciation (vehicle)
Depreciation (non-vehicle)
Interest on debt
Tax
-0.2%
(7.0)
16.3
-19.9%
46.3%
8.2
46.3%
Seminovos
per operating car
R$
%
25.6
100.0%
0.0%
(2.4)
-9.3%
23.2
90.7%
(22.5)
-88.0%
0.7
2.7%
(8.6) (*)
-33.7%
0.0%
(2.9)
-11.3%
3.2
12.7%
(7.6)
-29.6%
(3.8)
NOPAT
ROIC (**)
Cost of debt (average CDI + 1.19%) after tax
-29.6%
Total
2 years
R$
60.9
(9.6)
(4.6)
23.2
(22.5)
24.1
(8.6)
(0.1)
(2.9)
(3.8)
8.8
4.4
5.4
15.0%
6.3%
Spread
8.7p.p.
(*) Excluding additional depreciation effect related to IPI reduction
(**) ROIC over the car acquisition cost without IPI: 16.1%
7
8. Spread (ROIC minus cost of debt after taxes)
18.7%
7.8p.p.
10.9%
2006
Financial crisis effect
21.3%
17.0%
12.9p.p.
17.1%
16.9%
16.2%
16.1%
11.5%
8.2p.p.
8.4%
8.8%
2007
2008
8.5p.p.
9.6p.p.
4.0p.p.
9.8p.p.
10.9p.p.
7.6%
7.3%
8.6%
6.3%
5.3%
2009
2010
2011
2012
9M13
Annualized
ROIC
Cost of debt after taxes
(*) 2008 and 2012 ROIC were calculated excluding additional fleet depreciation that was treated as equity loss since they were
extraordinary non-recurring events caused by external factors (IPI reduction for new cars), following the concepts recommended
by Stern Stewart.
8
9. Rental revenues evolution
Localiza’s rental revenues at constant prices
1,382.1
505.9
608.2
2004
2005
745.2
2006
1,605.4
1,703.0
1,087.1
1,096.3
2007
2008
2009
2010
2011
2012
5,141.7
5,763.9
6,038.7
6,230.0
2009
2010
2011
2012
883.1
Sector’s revenue at constant prices
4,091.5
4,255.7
4,542.6
2004
GDP
4,128.9
4,971.7
2005
2006
2007
2008
4.0%
6.1%
5.2%
5.7%
3.2%
-0.3%
7.5%
2.7%
0.9%
Average GDP growth: 3.9%
In 2012 the Company grew 6.8x GDP and 3.6x the sector.
Source: ABLA (Brazilian Car Rental Association)
9
10. Competitive advantages: 40 years of experience in managing assets
Profitability comes from rental divisions
Raising
money
Renting cars
Buying
cars
Selling
cars
$
$
Cash to renew the fleet or pay debt
10
11. Competitive advantages: raising money
Raising
money
National Scale
Global Scale
Buying
cars
brAAA S&P
Aa1.br Moody’s
AA+(bra) Fitch
BBB- S&P
Baa3 Moody’s
BBB- Fitch
Selling
Cars
Renting Cars
brAA- S&P
A+ (bra) Fitch
BBB+ S&P
brA S&P
A (bra) Fitch
B+ S&P
B+ Fitch
brA S&P
A (bra) Fitch
B1 Moody's
Localiza raises money with lower spreads when compared to Brazilian competitors.
As of May, 2013.
11
12. Competitive advantages: buying cars
Raising
money
Buying
cars
Renting Cars
Number of cars purchased - 2012
67,492
Selling
Cars
Localiza’s share in the internal sales of the major
OEMs - 2012
*
15,376
9,522
2.1%
Localiza
Unidas
Locamerica
* Includes Franchising
Localiza buys cars with better conditions due to the volume of purchases.
Source: each company website
12
13. Competitive advantages: renting cars
Raising
money
Selling
Cars
Renting Cars
Brazilian distribution
Know How
# of cities
# of branches
Brand
Buying
cars
477
306
51
145
110
343
86
Localiza
Hertz
71
Unidas
38
Avis
The Company is present in 254 cities where the other largest networks do not operate.
Source: Brand Analytics and each company website (Localiza and Peers, as of September , 2013)
13
14. Competitive advantages: selling cars
Raising
money
Buying
cars
Sales to final consumer
Renting Cars
Selling
Cars
Buffer: additional fleet
Selling directly to final consumer reduces depreciation.
Cars available for sale are used by car rental division during peaks of demand.
14
15. Roland Berger*: 2012 Industry overview
Gross Rental Revenues
(R$ million)
1,703.0
Investment***)
807.5
151.1**
33,187
29,252
22,200
15,836
17.3%
ROIC (NOPAT/
336.9
109,194
Fleet (End of period )
435.6
3.9%
6.9%
6.9%
9.4%
•
•
•
•
•
Unrivaled local scale •
Strong footprint
Synergies
Stable management
Takes advantage of
•
synergies provided by •
the integrated platform
Capitalized by
•
three Private
Equity funds in
2011
•
Local expertise
Synergies with its
rental businesses
Brazil’s second •
player in the fleet
rental business •
Successful IPO
04/2012
•
•
Strenghts*
Weak global footprint •
Limited access to
•
international
customers
•
Weak footprint
•
Relatively weak
brand
Unclear priorities •
between rental and
fleet
Used car sales
retail network
Weaker score from
rating agencies
No synergy effects •
from major car
rental activities
•
Weaker score from
rating agencies
Weaknesses*
•
•
Strong local
footprint
Integrated
business model
with own used
car sales
The company was not
analised by Roland
Berger
Weak international
brand
The company was not
Limited scale when
analised by Roland
purchasing cars,
Berger
because other
divisions active in
other segments (e.g.
trucks)
Source: ABLA, Companies’ Financial Statements. *Roland Berger report on Brazilian car rental industry **Ouro Verde: Net Rental Revenue, operates only fleet rental
***Investiment = Averag shareholders’ Equity + AveragaNet Debt
15
16. Agenda
1. Company overview
2. Main business divisions
Car Rental
Fleet Outsourcing
Seminovos
3. Consolidated
4. Debt and cash
5. Appendix
Earnings release 3Q13
16
20. Car Rental Locations in Brazil
Airport locations
Off-airport locations
Off-airport market is still fragmented.
Source: Abla and each company’s website (September, 2013)
20
21. 2012 Share – Car Rental
Fleet
Rental Revenues
210,506 cars
R$2,781.2 million
30.9%
41.8%
Others
46.8%
35.5%
Others
53.8%
4.6%
2.5%
6.1% 2.8% Hertz
Unidas Avis
2.1%
2.1
Avis
Hertz
6.5%
Unidas
Characteristics of Car Rental network in Brazil:
Complex chain management
High fixed-cost structure
Market consolidated in airports and fragmented in off-airport locations
High barrier to entry
Capital intensive
Source: Euromonitor for revenue , ABLA for fleet and Companies’ Financial Statements.
21
22. Agenda
1. Company overview
2. Main business divisions
Car Rental
Fleet Outsourcing
Seminovos
3. Consolidated
4. Debt and cash
5. Appendix
Earnings release 3Q13
22
24. Drivers
Outsourced fleet penetration
Brazilian Market
World
58.3%
Corporate fleet:
46.9%
5,000,000*
37.4%
24.5%
Targeted fleet:
ol
la
nd
H
k
U
Sp
ai
n
Fr
an
ce
G
er
m
an
y
lic
C
ze
ch
Po
la
nd
B
279,042
ra
zi
l
5.4%
Rented (outsourced) fleet:
13.3%
8.9%
Re
pu
b
500,000
16.5%
32,104
*Estimated
Approximately 50% of targeted fleet is outsourced.
Source: ABLA and Datamonitor
24
25. 2012 Share – Fleet Outsourcing
Rental Revenues
Fleet
R$3,448.8 million
279,042 cars
12.4%
17.6%
11.5%
0.9%
16.0%
7.0%
1.6%
7.1%
Unidas
Others
65.5%
9.8%
Others
70.1%
10.5%
Unidas
Locamérica
Locamérica
Characteristics of the Fleet Outsourcing business in Brazil:
Scale of little relevance after initial scale (10,000 cars)
Risk of forecast of car residual value by the end of the contract (depreciation)
Low entry barrier
Source: Euromonitor for revenue , ABLA for fleet and Companies’ Financial Statements.
25
26. Agenda
1. Company overview
2. Main business divisions
Car Rental
Fleet Outsourcing
Seminovos
3. Consolidated
4. Debt and cash
5. Appendix
Earnings release 3Q13
26
27. Car sales – operating data
# of points of sale
+1
73
74
2012
9M13
66
49
26
2006
32
2008
2009
2010
35
2007
55
2011
Combining Localiza’s brand with a growing network of stores
enables the Company to continuously sell thousands of cars at market prices.
27
28. Used car sales drivers: affordability and penetration
# of inhabitants per car (2012)
USA
United Kingdon
Germany
France
Japan
South Korea
Russia
Argentina
Brazil
# of inhabitants per car - Brazil
1.2
8.0
1.8
7.9
7.4
6.9
1.9
6.5
5.9
5.5
5.2
2.0
2.1
3.6
4.0
2005 2006 2007 2008 2009 2010 2011 2012
4.2
5.2
Income increase and credit availability are the major drivers for car sales.
Source: O Estado de São Paulo, as of 08/16/13 (based on researches of Sindipeças).
28
29. Brazilian car market: new x used car market and affordability
Individuals with
affordability to
buy a car*
12.9
10.7
9.9
8.9
8.0
7.1
7.0
6.7
7.3
2.9
4.4x
1.6
2005
3.1x
7.1
2.7x
2.4x
2.5x
2006
2.5x
2.6x
3.7x
1.8
Used cars
8.4
5.8
6.0
3.8
9.0
New cars
2.3
2007
2.7
2008
3.0
2009
3.3
2010
3.5
2011
3.6
2012
* Population with affordability to buy a new compact car (R$25,000) with 20% downpayment, prices as of December 2012
29
Source: FENABRAVE (Autos + light commercial) and Bradesco
30. Car sales – operating data
0.6%
13.9%
1.6%
2012 Brand new
3,634,421
2012 Used cars
9,011,470
2012 Up to 2 years
409.121
# of cars sold (Quantity)
47,285
30,093
34,281
2009
2010
2011
56,644
42,880
44,642
9M12
9M13
34,519
2008
50,772
23,174
2006
2007
Source: Fenabrave 2012 Yearbook.
2012
30
31. Main players
Examples
• Dealers
• Fiat, VW, Ford, GM most
successful
• Auto Brasil
• Rental operators
• Locamerica, Hertz
• Retailers
• “Loja do carro”
• “Auto malls” and
“Cidade do
automóvel”
Strengths*
• Brand and perceived
image/ experience
• Support often directly
from the OEM’s
• Flexibility in trade-in cars
• Strong media presence
• Tailored to popular
customer demand at
purchase, hence likely
to be an attractive value
proposition when for
sale
• Often appeal to lower
income classes, with
older cars
• Occasionally
specialized in niches
• Comfort and
convenience
• Variety of models
and brands
• Flexibility in
exchange
Weaknesses*
• Used cars not a core
business
• Cars often older than 2
years
• Stigma about heavy
usage during rental car
years
• Weak retail network
• Geographical
concentration (SP)
• Lower media presence
• No brand recognition
(lower reputation
market)
• Financing options with
higher interest rates
• Lower media
presence
• Cars often older than
2 years
• It hasn’t been
successful
Points of sale
• 3,714 (Anfavea)
• 25 (Unidas, Locamerica,
Avis and Hertz website).
• 45,600 (Fenauto)
• 71 (Fenauto)
31
*Source: Roland Berger
32. Agenda
1. Company overview
2. Main business divisions
Car Rental
Fleet Outsourcing
Seminovos
3. Consolidated
4. Debt and cash
5. Appendix
Earnings release 3Q13
32
33. 2012 Consolidated breakdown
R$ million
Net Revenues
17%
EBITDA
EBIT*
35%
41%
58%
52%
42%
48%
7%
Rental
Net revenues
Seminovos
EBITDA
EBIT
Net income
1,111.0
267.9
131.7
535.7
355.9
197.9
109.2
1,520.0
Consolidated
456.2
63.5
*
*
3,166.7
875.6
465.8
240.9
*Seminovos results recorded in the Car Rental and Fleet Outsourcing Division.
Company’s profitability comes from Car Rental and Fleet Outsourcing Divisions.
33
37. Consolidated net income
R$ million
Record
291.6
336.3 *
294.4
250.5
190.2
138.2
2006
240.9
127.4
2007
116.3
2008
2009
237.0 *
154.8
2010
2011
2012
9M12
9M13
* Pro forma 2012 net income excluding additional depreciation, net of income tax.
Net income for 9M13 was higher than the net income of all previous years.
37
38. Agenda
1. Company overview
2. Main business divisions
Car Rental
Fleet Outsourcing
Seminovos
3. Consolidated
4. Debt and cash
5. Appendix
Earnings release 3Q13
38
39. Free cash flow
2011
2012
9M13
EBITDA
311.3
403.5
504.1
469.7
649.5
821.3
875.6
680.5
Used car sale revenue, net from taxes
(588.8)
(850.5)
(980.8)
(922.4)
(1,321.9)
(1,468.1)
(1,520.0)
(1,241.8)
Depreciated cost of cars sold (*)
530.4
760.0
874.5
855.1
1,203.2
1,328.6
1,360.2
1,091.7
(-) Income tax and social contribution
(42.7)
(63.4)
(52.8)
(49.0)
(57.8)
(83.0)
(100.9)
(73.2)
(4.8)
13.3
(44.8)
(11.5)
54.5
(83.9)
37.1
(5.1)
205.4
262.9
300.2
341.9
527.5
514.9
652.0
452.1
588.8
850.5
980.8
922.4
1,321.9
1,468.1
1,520.0
1,241.8
Car investment for renewal
(643.3)
(839.0)
(1,035.4)
(947.9)
(1,370.1)
(1,504.5)
(1,563.3)
(1,284.9)
Net investment for fleet renewal
(54.5)
11.5
(54.6)
(25.5)
(48.2)
(36.4)
(43.3)
(43.1)
23,174
30,093
34,281
34,519
47,285
50,772
56,644
44,642
Investment,other property and intangibles
investments
(32.7)
(23.7)
(39.9)
(21.0)
(51.1)
(63.0)
(80.2)
(42.4)
Free cash flow before growth and before interest
118.2
250.7
205.7
295.4
428.2
415.5
528.5
366.6
Investment on cars for fleet (growth) /reduction
(287.0)
(221.9)
(299.9)
(241.1)
(540.3)
(272.0)
(55.5)
(187.5)
222.0
(51.0)
(188.9)
241.1
111.3
32.7
(116.9)
(10.8)
Fleet growth
(65.0)
(272.9)
(488.8)
0.0
(429.0)
(239.3)
(172.4)
(198.3)
Fleet increase / (reduction) – quantity
10,346
7,957
9,930
8,642
18,649
9,178
2,011
6,514
53.2
(22.2)
(283.1)
295.4
(0.8)
176.2
356.1
168.3
Cash provided before investment
Used car sale revenue, net from taxes
Fleet renewal – quantity
Change in accounts payable to car suppliers
Free cash flow after growth and before interest
2008
2010
2006
Change in working capital
2007
2009
Free cash flow - R$ million
(*) Without the technical discount up to 2010
39
40. Changes in net debt
R$ million
FCF after financial
expenses
96.1
FCF
168.3
Net debt
09/30/2013
Net debt
12/31/2012
- 1,222.9
-1,231.2
(72.2)
(51.0)
(36.8)
Financial
expenses
Interest on own
capital and
dividends
Company’s
share buybacks
Net debt was reduced by R$8.3 million in 9M13, even after the
Company’s share buybacks in the amount of R$ 36.8 million.
40
41. Debt - ratios
Net debt vs. Fleet value
2,681.7
2,446.7
1,492.9
1,247.7
1,907.8
1,752.6
1,254.5
2,759.7
2,547.6
1,078.6
1,363.4
1,281.1
1,231.2
1,222.9
765.1
440.4
2006
2007
2008
2009
2010
Net debt
BALANCE AT THE END OF
PERIOD
2011
2012
9M13
Fleet value
2006(*)
2007(*)
2008(*)
2009(*)
2010(*)
2011
2012
Until
Sep/13
Net debt / Fleet value
36%
51%
72%
57%
52%
51%
48%
44%
Net debt / EBITDA (**)
1.4x
1.9x
2.5x
2.3x
2.0x
1.7x
1.4x
1,3x
Net debt / Equity
0.7x
1.3x
2.0x
1.5x
1.4x
1.2x
0.9x
0.8x
EBITDA / Net financial expenses
4.8x
5.4x
3.8x
4.2x
5.0x
4.6x
6.3x
9.4x
(*) From 2006 to 2010, ratios based on USGAAP financial statements.
(**) Annualized
Comfortable debt ratios.
41
42. Debt maturity profile (principal)
R$ million
As of September 30,2013:
534.5
592.3
270.3
209.6
2014
2015
54.6
2013
Cash
462.0
146.0
2016
2017
172.0
2018
2019
2020
2021
791.0
After 7th debenture issuance:
426.5
24.6
2013
641.3
231.3
2015
221.0
170.6
2014
511.0
2016
2017
247.0
2018
2019
100.0
100.0
2020
2021
Cash
1,131.0
The Company continues presenting a strong cash position and comfortable debt maturity profile.
42
43. Localiza Level I ADR
Ticker Symbol: LZRFY
CUSIP: 53956W300
ISIN: US53956W3007
Ratio: 1 Common Share : 1 ADR
Exchange: OTC
Depositary bank: Deutsche Bank Trust Company Americas
ADR broker helpline: +1 212 250 9100 (New York)
+44 207 547 6500 (London)
E-mail: adr@db.com
ADR website: www.adr.db.com
Depositary bank’s local custodian: Banco Bradesco S/A, Brazil
43
44. Disclaimer
Roberto Mendes
CFO and IR
Website: www.localiza.com/ir
Nora Lanari
Head of IR
E-mail: ri@localiza.com
Phone: 55 31 3247-7024
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 any underwriters we may appoint in connection with an offering of securities in future.
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
