WEG 4Q08 Earnings Conference Call

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WEG 4Q08 Conference Call Presentation

WEG 4Q08 Earnings Conference Call

  1. 1. Conference Call Results 4Q08 February 18th, 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. 2 3Q08 Conference Call October 28th, 2008
  3. 3. General Comments on 4Q08 2008 was a challenging year but with good results Expectations for the year were met: Gross Revenues growth of 20% over 2007; Both on the domestic and external markets; Margins suffering from specific factors: Cost increases (steel) and devaluation not passed-through; Lower copper prices still not reflected into costs Logistic problems with November strong rains Financial expenses with additional FX depreciation impact Change of accounting procedures makes net income comparisons difficult Fundamentals continue strong, but in 2009 we must go after: New markets New clients New products 3 3Q08 Conference Call October 28th, 2008
  4. 4. Quarterly Highlights 4Q08 4Q07 Growth % Gross Operating Revenue 1.551.639 1.242.204 24,9% Domestic Market 917.041 831.899 10,2% External Markets 634.598 410.305 54,7% External Markets in US$ 277.605 229.760 20,8% Net Operating Revenue 1.295.630 1.021.831 26,8% Gross Operating Profit 420.669 359.357 17,1% Gross Margin 32,5% 35,2% Quarterly Net Income 97.658 138.105 -29,3% Net Margin 7,5% 13,5% EBITDA 268.974 231.879 16,0% EBITDA Margin 20,8% 22,7% Figures in R$ Thousands 4 3Q08 Conference Call October 28th, 2008
  5. 5. Consolidated Gross Revenues Growth Evolution of Gross Revenues per Market (in R$ million) 1.552 External Market Domestic Market 1.242 Growth rate accelerating to 25% over 635 4Q07 410 962 Reached 20% growth rate in 2008, as expected 759 721 Strong competitive position in terms of: 404 Operational Flexibility 299 292 Revenues diversification 917 832 Costs advantage 7,9% Capital 1 Structure 558 460 429 Good comparative conditions to withstand lower growth environment 4Q04 4Q05 4Q06 4Q07 4Q08 5 3Q08 Conference Call October 28th, 2008
  6. 6. Gross Revenues Growth Evolution of Gross Revenues – Domestic Market (in R$ million) 10% Domestic Market continued 49% growing, but a slower pace 7% 21% Strong slowdown in Industrial 917,0 831,9 Production (Capital Goods +3% 557,6 during 4Q08 - IBGE) 459,8 429,1 Growth in all business areas but motors for domestic use 4Q04 4Q05 4Q06 4Q07 4Q08 Evolution of Gross Revenues – External Market (in US$ million) 2,7842 2,2860 2,2518 2,1524 1,7858 Diversification across markets / External Market in US$ segments / clients is beneficial 21% Quarterly Average FX 22% FX starts to help growth rate 41% 27% 277,6 measured in $ 229,8 187,9 Infrastructure maintains good 133,0 104,9 perspectives 4Q04 4Q05 4Q06 4Q07 4Q08 6 3Q08 Conference Call October 28th, 2008
  7. 7. WEG’s Global Presence Gross Revenues Breakdown – 3Q08 12% 12% Europe North America 6% 59% Asia & Oceania 4% 7% Brazil Africa South & Central America 1.552 7% 5% 11% 1.242 6% FX increases importance of external 962 32% 16% market to 41% 6% 759 16% 721 21% 7% Revenues spread across markets, 6% 16% 18% 20% with no particular exposures 15% 11% 52% 56% GTD continues strong and QoQ 62% 60% 63% changes are characteristics 4Q04 4Q05 4Q06 4Q07 4Q08 Industrial Equipment GTD Domestic Use Paints & Varnishes 7 3Q08 Conference Call October 28th, 2008
  8. 8. Cost of Goods Sold Steel prices increased towards year-end and lower cooper prices still not reflected into lower costs No pass-through of FX devaluation into domestic market prices These effects are expected to be temporary Steel & Coper 43% Other Costs Other Costs 28% 27% 4Q08 4Q07 Depreciation Depreciation Steel & Coper 5% 4% 43% Other Materials 24% Other Materials 26% 8 3Q08 Conference Call October 28th, 2008
  9. 9. Profitability 39% 36% 35% 33% 32% 32% 23% 23% 21% 21% 19% 17% 269 232 191 421 359 298 122 104 210 99 199 182 4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 EBITDA EBITDA Margin Gross Profit Gross Margin 18% 16% 16% 15% 14% 8% Gross Margin shows impacts from exchange rate and commodities Same impacts affecting EBITDA margin 138 133 Net income impacted by FX variations 98 97 96 86 (financial expenditures) and new accounting of foreign subs. 4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 Net Income Net Margin 9 3Q08 Conference Call October 28th, 2008
  10. 10. Financing Policies December 2008 December 2007 CASH & EQUIVALENT 1,849,477 2,174,972 DEBT 2,161,216 1,731,740 - Current 1,314,098 1,077,487 - Long Term 847,118 654,253 NET CASH (DEBT) (311,739) 443,232 Changes on net cash position explained by Capacity expansion program Increases of working capital Impact of devaluation over FX denominated debt Maximum FX Exposure continues in place: equivalent to 3 months of exports 10 3Q08 Conference Call October 28th, 2008
  11. 11. Capacity Expansion Program Outside Brazil 130,4 128,2 120,8 Brazil 20,5 24,8 24,0 87,6 R$ 457,2M capex for the year 77,8 9,6 70,3 Capex program was practically 11,8 accomplished at lower than 9,2 expected costs (FX outlays) 109,9 103,4 96,8 Expectation for 2009: R$ 375 M 78,0 Flexibility to adjust capacity 66,0 61,1 increases to demand 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 11 3Q08 Conference Call October 28th, 2008
  12. 12. Investor Relations Alidor Lueders www.weg.net/ri CFO and Investor Relations Officer alidor@weg.net Luís Fernando M. Oliveira Investor Relations Manager +55 (47) 3276-6973 luisfernando@weg.net 12 3Q08 Conference Call October 28th, 2008

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