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CS Conference 2012
The document discusses WEG S.A., a Brazilian manufacturer of electric motors, generators, transformers, and gearboxes. It provides an overview of WEG's business units and key markets. It also summarizes the company's financial performance between 2004-2010, with revenues growing at a CAGR of 17% and EBITDA growing at 16%. The document highlights opportunities for WEG in areas like energy management, renewable energy, smart infrastructure, and electric vehicles.
CS Conference 2012
- 1. Motors | Automation| Energy | T&D | Paints Credit Suisse Equity Ideas Conference 2012 January, 2012 WEGE3 / WEGZY
- 2. Disclaimer The information containedherein 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. 1
- 3. Business Units Transmission Motors Automation Energy Coatings & Distribution Page 2
- 4. Our business Services Speed Variation Power Motors Transformers Subestations Generation Generators Electric Electrical Panels Components Industrial Automation Liquid and powder Coatings and industrial Varnishes Page 3
- 5. Business areas Electro- Generation, Motors for Industrial Electronic Transmission Domestic Use Paints and Industrial and Varnishes Equipments Distribution Business Motors + Energy + T&D + Units Automation Automation Motors Coatings Industrial Production Growth in Disposable income, Performance growth and investments in supply of credit and Brazilian GDP Investments in electric enrgy level of interest growth Drivers Fixed Capital (capex) infrastructure rates Page 4
- 6. Industrial segments Today, WEGoffers solutions for a wide variety of segments Oil & Gas Shipbuilding Mining, Cement and Aggregate Sugar & Ethanol Pulp & Paper Steel Infrastructure Energy Food & Beverage Page 5
- 7. Revenues breakdown per Productionsite INDIA 2010 Manufactured CHINA in Brazil, Sold abroad; 32% MEXICO MEXICO Manufactured Manufactured and sold & sold in Brazil; abroad; 7% 61% PORTUGAL ARGENTINA
- 8. Revenues breakdown perdistribution channel 2010 OEM; 58% Reseller; 14% End user; 28%
- 9. Revenues by Business Area 5.471 5.111 5.283 5% 6% 7% 4.551 12% 4.405 6% 12% 15% 7% 14% 11% 3.527 27% 6% 26% 2.978 34% 24% 2.603 6% 15% 23% 6% 18% 18% 21% 14% 10% 59% 55% 54% 62% 61% 57% 48% 63% 2004 2005 2006 2007 2008 2009 2010 9M2011 Equipamentos Eletro-eletrônicos Industrais Energia Geração, Transmissão e Distribuição Motores para Eletrodomésticos Tintas e Vernizes Page 8
- 10. Shareholding structure Voigt Silva Werninghaus 33.3% 33.3% 33.3% WPA Members of Treasury Participações Free Float Control Group Shares e Serviços S/A 14.4% 50.9% 0.1% 34.6% WEG S.A. Page 9
- 11. 1995 353 Page 10 1996 372 1997 466 1998 527 1999 628 2000 800 CAGR 17% 2001 1.066 growth 2002 1.282 2003 1.694 2004 2.204 Net Revenues (R$) 2005 2.515 2006 3.009 2007 3.749 2008 4.502 2009 4.211 2010 4.392 1995 80 23% 1996 84 1997 106 Consistent and profitable 1998 135 1999 146 23% 23% 2000 207 26% 26% CAGR 16% EBITDA (R$) 2001 291 27% 2002 327 26% 2003 435 2004 487 2005 504 20% 2006 666 2007 923 25% 2008 1.026 22% 22% 23% 2009 837 20% 2010 789 18%
- 12. Highlights Third Quarter, 2011 Q3 2011 Q2 2011 Growth % Q3 2010 Growth % Gross Operating Revenue 1.552.044 1.510.276 2,8% 1.419.160 9,4% Domestic Market 953.515 936.061 1,9% 906.954 5,1% External Markets 598.529 574.215 4,2% 512.207 16,9% External Markets in US$ 364.730 360.639 1,1% 298.020 22,4% Net Operating Revenue 1.317.483 1.277.258 3,1% 1.188.622 10,8% Gross Operating Profit 418.266 381.437 9,7% 377.227 10,9% Gross Margin 31,7% 29,9% 31,7% Net Income 154.567 154.557 0,0% 142.106 8,8% Net Margin 11,7% 12,1% 12,0% EBITDA 243.743 215.579 13,1% 209.196 16,5% EBITDA Margin 18,5% 16,9% 17,6% EPS 0,2491 0,2491 0,0% 0,2289 8,9% Figures in R$ Thousands Page 11
- 13. Positioned to benefit from mega trends Energy Management Renewable Energy Industrial electricity consumption is the Global need to diversify energy largest portion of global consumption sources and lower GHG emissions Management systems (ISO 50.001) Scale and technological development already being implemented increase viability Smart Infrastructure Mobility Electricity distribution network has to Increasing urbanization adds to become “smarter” congestions and need of new solutions More sensors, more automation, more Hybrids, pure electric and alternative efficient generation and use of electricity fuels vehicles will become more important Page 12
- 14. Energy Management Electric motors has unique characteristics Total Cos t of Owner ship of a Electric M o tor (*) Specifications must be exact. Acquisitio Everything affects energy n 1,4% efficiency Maintena “Similar” motors are not nce 1,6% economical, even if much cheaper to acquire Energy Consump Differences become more tion 97% evident when energy prices go up Return on energy efficiency (*) Consid investments are very attractive ering use ful life of 10 years Page 13
- 15. Energy Management Harmonization of energy efficiency regulations IE 4 Conversion of energy (efficiency) (Super premium) No regulatory obligation as of today IE 3 (NEMA Premium (effective 2015) (Premium) efficiency) IE 2 NEMA Energy (High) Efficiency IE 1 (Standard) Most developing markets Page 14
- 16. Renewable Energy Brazil’s electricityis already clean, but it can get cleaner 180.000 160.000 8% CAGR Biomass - 5% CAGR 140.000 Small Hydro – 6% CAGR Wind - 17% CAGR 120.000 100.000 80.000 60.000 4% CAGR 40.000 20.000 5% CAGR ‐ 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Fossil Fuels Large Hydro Renewables Nuclear Source: EPE - PDE 2019 Page 15
- 17. Power grid mustevolve and become smart Demand management SMART GRID: Applying sensing, Smart apliances Use can be shifted to off measurement and control devices with two- Can shut off in response peak times to save money way communications to dynamically to frequency fluctuations respond to changes in grid conditions Sensors Detected fluctuations and disturbances, and can signal Solar for areas to be isolated panels Houses Storages Offices Disturbance Energy generated at off peak times could be In the grid stored in batteries for later uses Storage Isolated microgrid Wind farm Processors Central power Execute special protection Generators plant schemes in microseconds Industrial Energy from small generators plant and solar panels can reduce overall demand on the grid 16
- 18. Solutions for electric& hybrid vehicles Complete power train solution Electric motor (power train) Auxiliary Genset (ethanol, biodiesel or natural gas) Frequency inverter and components (system automation) Batteries Page 17
- 19. WEG solutions for marine automation Automation Thrusters motors Transformers Generators Page 18
- 20. Strategic Positioning Appliance Motors Industrial High Voltage Generators Power Biomass Systems Small Hydro Wind Power Dry T&D Distribution Substations Drives Automotion Controls Panels Gearbox New Biz Gensets Turbines
- 21. Portfolio Strategy Market May 2010 November 2011 Access October 2011 November 2011 May 2010 May 2011 March 2011 June 2010 December 2010 Technology Page 20
- 22. EM gives WEGto key technologies 2 pole turbo generator technology allows WEG to increase the power range: Previously, up to 65 MVA, 4 poles technology Now, up 120 MVA, American Petroleum Institute (API) compliant machinery New opportunities in supplying for: Gas turbines Steam turbines 21
- 23. EM also allowsWEG to increase presence in two important segments Oil & gas Crude and natural gas exploration (up and downstream) Oil-prices driven growth, both in new opportunities (i.e. pre-salt) as improving existing equipment Power generation Generators and electric motors for fans, water pumps, etc. Modernization of aging infrastructure Recertification of nuclear power plants Technology, reputation and relationships can be transferred to other markets / geographies 22
- 24. WEG can leverageEM’s assets Sinergies from combining EM’s and WEG’s strenghts Brand recognition and reputation in Complete line of products, offering high-power rotating machines one stop shop solutions; (HPRM) Large commercial network across Deep and long standing key the world customer relationships Strong market presence in fast Oil and gas (in the vendor lists growing emerging economies, such of all majors) as Latin America Power generation Large installed base of more than 5,500 units in operation 23
- 25. Power Transmission fits intoefficiency theme Integration of different products and expertise Growing demand for integrated solutions Energy efficiency Operating performance Electric motor Gearbox Drives (electrical) (mechanical) (electronics) Page 24
- 26. Gearboxes market canbe divided in niches Commoditized Large volume, low margins Simple applications (conveyor belts, lathes, etc.) Up to 50 hp, with low efficiency and relatively simple engineering Customized Similar to WEG’s core industrial motors business (mass customization) More complex applications (mixers, extruders) All power ranges, higher efficiency and relatively higher engineering complexity Innovations One of a kind, similar to WEG’s HV core Highly complex applications (wind energy, mining) High efficiency, high engineering complexity Page 25
- 27. Capex 457 349 226 233 206 146 126 125 111 2003 2004 2005 2006 2007 2008 2009 2010 9M2011 (R$ million) Page 26
- 28. Dividend Pay-out Policy Net Earnings and Dividends (R$ million) 59% 55% 54% 54% 52% 44% 45% 43% 40% 40% 39% 575 37% 560 548 35% 520 503 403 375 308 299 301 300 306 276 220 229 176 173 165 150 125 124 82 29 46 68 89 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 6M2011 Net Earnings Dividends Pay-out (%) Page 27
- 29. Growth Drivers & Opportunities New and improved products, focusing efficiency, reliability and features More integrated systems / complete solutions New markets / products, R&D and acquisitions and new geographies. Page 28
- 30. Key takeaways Globalgrowth driven by emerging economies, with massive infrastructure spending Energy management will become more important, with minimum performance standards (MEPS) regulations and standardization Growing importance of renewable sources of energy Smart infrastructure systems will demand smarter equipment Brazilian pre-salt oil development will demand significant investment Page 29
- 31. Contacts www.weg.net/ri §Laurence Beltrão Gomes Investor Relations Officer laurence@weg.net § Luís Fernando M. Oliveira Investor Relations Manager +55 (47) 3276-6973 luisfernando@weg.net twitter.com/weg_ir
- 32. Highlights Nine months of 2011 09M11 09M10 % Gross Operating Revenue 4.405.457 3.778.127 16,6% Domestic Market 2.752.439 2.539.463 8,4% External Markets 1.653.018 1.238.665 33,5% External Markets in US$ 1.013.580 700.290 44,7% Net Operating Revenue 3.720.858 3.133.544 18,7% Gross Operating Profit 1.110.365 995.652 11,5% Gross Margin 29,8% 31,8% Quarterly Net Income 430.688 378.273 13,9% Net Margin 11,6% 12,1% EPS EBITDA 624.130 564.961 10,5% EBITDA Margin 16,8% 18,0% Figures in R$ Thousands Page 31
- 33. Highlights Assets Figures in R$ Thousands September 2011 December 2010 September 2010 R$ AV% R$ AV% R$ AV% 20 13 11 CURRENT ASSETS 5.742.007 66% 4.794.009 64% 4.628.280 63% Cash & cash equivalents 3.086.568 35% 2.552.996 34% 2.399.773 33% Receivables 1.162.056 13% 1.044.712 14% 1.026.652 14% Inventories 1.269.623 15% 1.008.952 13% 1.015.175 14% Other current assets 223.760 3% 187.349 2% 186.680 3% LONG TERM ASSETS 378.587 4% 136.984 2% 149.892 2% Long term securities 233.266 3% 0 0% 0 0% Deferred taxes 103.846 1% 78.810 1% 91.613 1% Other non-current assets 41.475 0% 58.174 1% 58.279 1% FIXED ASSETS 2.575.233 30% 2.580.171 34% 2.586.940 35% Investment in Subs 933 0% 601 0% 222 0% Property, Plant & Equipment 2.397.920 28% 2.395.575 32% 2.394.633 33% Intangibles 176.380 2% 183.995 2% 192.085 3% TOTAL ASSETS 8.695.827 100% 7.511.164 100% 7.365.112 100% Page 32
- 34. Highlights Liabilities Figures in R$ Thousands September 2011 December 2010 September 2010 R$ AV% R$ AV% R$ AV% 20 13 11 CURRENT LIABILITIES 2.818.379 32% 1.938.803 26% 1.795.005 24% Social and Labor Liabilities 188.599 2% 141.797 2% 167.220 2% Suppliers 317.125 4% 242.300 3% 273.823 4% Fiscal and Tax Liabilities 63.632 1% 72.204 1% 73.452 1% Short Term Debt 1.797.222 21% 1.018.995 14% 841.311 11% Dividends Payable 47.903 1% 63.440 1% 32.052 0% Advances from Clients 239.143 3% 271.949 4% 233.844 3% Profit Sharring 39.348 0% 23.583 0% 34.050 0% Other Short Term Liabilities 125.407 1% 104.535 1% 139.253 2% LONG TERM LIABILITIES 2.167.388 25% 2.028.525 27% 2.126.673 29% Long Term Debt 1.491.765 17% 1.399.948 19% 1.503.836 20% Other Long Term Liabilities 129.275 1% 86.875 1% 92.250 1% Deferred Taxes 411.545 5% 415.318 6% 417.304 6% Contingencies Provisions 134.803 2% 126.384 2% 113.283 2% MINORITIES 98.709 1% 89.229 1% 85.991 1% STOCKHOLDERS' EQUITY 3.611.351 42% 3.454.607 46% 3.357.443 46% TOTAL LIABILITIES 8.695.827 100% 7.511.164 100% 7.365.112 100% Page 33
- 35. Highlights Cash Flow Statement 9 Months 9 Months 2011 2010 12 8 Operating Activities Net Earnings before Taxes 554.075 524.849 Depreciation and Amortization 139.393 135.920 Earnings from Subs (Equity Method) - (1.687) Provisions: 92.160 73.387 Changes in Assets & Liabilities (494.815) (312.139) Cash Flow from Operating Activities 290.813 420.330 Investment Activities Fixed Assets (124.813) (248.847) Intagible Assets (2.462) (81.274) Asset Write Downs 2.472 18.995 Accumulated Conversion Adjustment 38.401 (25.050) Long term securities bought (233.266) - Cash Flow From Investment Activities (319.668) (336.176) Financing Activities Shares in Treasury (10.055) - Working Capital Financing 767.072 (44.289) Long Term Financing 102.972 516.903 Dividends & Intesrest on Stockholders Equity Paid (297.562) (284.112) Cash Flow From Financing Activities 562.427 188.502 Change in Cash Position 533.572 272.656 Cash & Cash Equivalents Beginning of Period 2.552.996 2.127.117 End of Period 3.086.568 2.399.773 Page 34
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