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Localiza institucional eng final
1. Localiza Rent a Car S.A.
Institutional Presentation
February, 2014
2. Agenda
1. Company overview
2. Main business divisions
Car Rental
Fleet Outsourcing
Seminovos
3. Consolidated
4. Debt and cash
5. Appendix
Earnings release 4Q13
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
12/31/2013 – Market cap of US$3.0 bi
with ADTV of R$40.8 million
1997 – Expansion strategy by
adjacencies: Fleet Outsourcing
1973
1982
1983
2004
2005
2013
3
4. Company: integrated business platform
70,717 cars
3.8 million clients
286 locations
4,394 employees
32,809 cars
760 clients
350 employees
Synergies:
bargaining power
cost reduction
cross selling
14.233 cars
193 locations in Brazil
63 locations in South America
35 employees
61.6% sold to final consumer
74 stores
1,020 employees
This integrated business platform gives Localiza flexibility and superior performance.
Based on the 4Q13
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 65% of
used cars directly to the
final customer, thereby
maximizing the residual
value of used rental cars.
5
6. Spread (ROIC minus cost of debt after taxes)
18.7%
7.8p.p.
Financial crisis effect
21.3%
17.0%
12.9p.p.
10.9%
8.4%
2006
2007
16.9%
17.1%
16.1%
16.5%
11.5%
8.2p.p.
4.0p.p.
8.8%
2008
9.6p.p.
8.5p.p.
9.8p.p.
10.5p.p.
7.6%
7.3%
8.6%
6.3%
6.0%
2009
2010
2011
2012
2013
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.
6
7. Rental revenues evolution
Localiza’s rental revenues at constant prices
1,382.1
505.9
608.2
2004
2005
745.2
2006
883.1
2007
1,605.4
1,703.0
1,087.1
1,096.3
2008
2009
2010
2011
2012
Sector’s revenue at constant prices (ex- Localiza)
3.585,6
2004
GDP
3.520,6
2005
5.7%
3.2%
4.045,4
4.381,8
4.527,0
3.510,5
3.884,6
4.433,3
3.659,4
2006
2007
2008
2009
2010
2011
2012
4.0%
6.1%
5.2%
-0.3%
7.5%
2.7%
1.0%
Average GDP growth: 3.9%
The Company grew at an average of 4.2x GDP and 5.5x the sector.
Source: ABLA (Brazilian Car Rental Association) and Localiza.
7
8. 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
8
9. Competitive advantages: raising money
Raising
money
National Scale
Global Scale
Buying
cars
brAAA S&P
Aa1.br Moody’s
AAA(bra) Fitch
BBB Fitch
Baa3 Moody’s
BBB- S&P
Selling
Cars
Renting Cars
brAA- S&P
A+ (bra) Fitch
BBB+ S&P
brA S&P
A (bra) Fitch
B+ S&P
brA+ S&P
A (bra) Fitch
B+ Fitch
A(bra) Fitch
B1 Moody's
Localiza raises money with lower spreads when compared to Brazilian competitors.
As of January, 2014.
9
10. 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 - 2013
*
15,376
9,522
2.6%
Localiza
Unidas
Locamerica
* Includes Franchising
Localiza buys cars with better conditions due to the volume of purchases.
Source: each company website
10
11. 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)
11
12. 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.
12
13. 2012 Industry overview
Gross Rental Revenues
(R$ million)
435.6
336.9
807.5
151.1**
109,194
33,187
29,252
22,200
15,836
17.3%
3.9%
6.9%
6.9%
8.9%
Net Debt/ EBITDA
1.4x
1.7x
2.9x
3.7x
3.3x
Net Debt/ Equity
0.9x
0.6x
1.4x
2.3x
4.0x
Fleet (End of period )
ROIC (NOPAT/
Investment***)
1,703.0
Source: ABLA, Companies’ Financial Statements. **Ouro Verde: Net Rental Revenue, operates only fleet rental
***Investiment = Average shareholders’ Equity + Average Net Debt
13
14. Agenda
1. Company overview
2. Main business divisions
Car Rental
Fleet Outsourcing
Seminovos
3. Consolidated
4. Debt and cash
5. Appendix
Earnings release 4Q13
14
18. 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)
18
19. 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.
19
20. Agenda
1. Company overview
2. Main business divisions
Car Rental
Fleet Outsourcing
Seminovos
3. Consolidated
4. Debt and cash
5. Appendix
Earnings release 4Q13
20
22. 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
ze
ch
Re
pu
b
ra
zi
l
C
279,042
B
Rented (outsourced) fleet:
5.4%
13.3%
8.9%
Po
la
nd
500,000
16.5%
32,809
*Estimated
Approximately 50% of targeted fleet is not outsourced.
Source: ABLA 2012 Yearbook and Datamonitor
22
23. 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.
23
24. Agenda
1. Company overview
2. Main business divisions
Car Rental
Fleet Outsourcing
Seminovos
3. Consolidated
4. Debt and cash
5. Appendix
Earnings release 4Q13
24
25. Car sales – operating data
# of points of sale
+1
73
74
2012
2013
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.
25
26. 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).
26
27. 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$25,000) with 20% downpayment, prices as of December 2012
27
Source: FENABRAVE (Autos + light commercial) and Bradesco
28. Car sales – operating data
0.7%
13.9%
1.8%
2013 Brand new
3,579,903
2013 Used cars
9,434,225
2012 Up to 2 years
409.121
# of cars sold (Quantity)
62.641
47.285
30.093
34.281
50.772
56.644
34.519
23.174
17.999
12.764
2006
2007
2008
2009
2010
2011
Source: Anfavea and Fenabrave
2012
2013
4Q12
4Q13
28
29. Main players
Examples
• Dealers
• Fiat, VW, Ford, GM most
successful
• Auto Brasil
• Rental operators
• Locamerica, Hertz
• Retailers
• “Loja do carro”
• “Auto malls” and
“Cidade do
automóvel”
Strengths*
• Brand and perceived
image/ experience
• Support often directly
from the OEM’s
• Flexibility in trade-in cars
• Strong media presence
• Tailored to popular
customer demand at
purchase, hence likely
to be an attractive value
proposition when for
sale
• Often appeal to lower
income classes, with
older cars
• Occasionally
specialized in niches
• Comfort and
convenience
• Variety of models
and brands
• Flexibility in
exchange
Weaknesses*
• Used cars not a core
business
• Cars often older than 2
years
• Stigma about heavy
usage during rental car
years
• Weak retail network
• Geographical
concentration (SP)
• Lower media presence
• No brand recognition
(lower reputation
market)
• Financing options with
higher interest rates
• Lower media
presence
• Cars often older than
2 years
• It hasn’t been
successful
Points of sale
• 3,714 (Anfavea)
• 25 (Unidas, Locamerica,
Avis and Hertz website).
• 45,600 (Fenauto)
• 71 (Fenauto)
29
*Source: Roland Berger
30. Agenda
1. Company overview
2. Main business divisions
Car Rental
Fleet Outsourcing
Seminovos
3. Consolidated
4. Debt and cash
5. Appendix
Earnings release 4Q13
30
31. 2013 Consolidated breakdown
R$ million
Net Revenues
16%
EBITDA
EBIT*
34%
41%
60%
48%
50%
40%
11%
Net revenues
EBITDA
EBIT
Net income
1,183.0
392.3
225.3
575.9
377.3
259.8
159.0
1,747.3
Consolidated
440.0
99.2
*
*
3,506.2
916.5
652.1
384.3
*Seminovos results recorded in the Car Rental and Fleet Outsourcing Division.
Company’s profitability comes from Car Rental and Fleet Outsourcing Divisions.
31
33. Consolidated EBITDA
R$ million
875.6
821.3
916.5
649.5
311.3
2006
403.5
2007
504.1
469.7
226.3
2008
2009
2010
2011
2012
2013
236.0
4Q12
4Q13
EBITDA margin excluding accessories and freight for new cars in 2012 and 2013:
Divisions
2006
2007
2008
2009
2010
2011
2012
2013
4Q12
4Q13
Car Rental
43.4%
46.0%
45.9%
41.9%
45.3%
46.9%
42.7%
39.3%
43.1%
39,9%
Fleet Outsourcing
71.4%
71.3%
69.1%
68.7%
68.0%
68.6%
67.2%
65.9%
67.8%
65,2%
Rental Consolidated
52.9%
54.5%
53.3%
51.1%
52.3%
53.8%
50.8%
48.2%
51.2%
48,0%
Used Car Sales
4.6%
5.5%
5.6%
1.1%
2.6%
2.8%
4.2%
5.7%
3.9%
4.9%
Excluding accessories and freight for new cars, recorded in the cost line,
Car Rental EBITDA margin would be 39.9% in 4Q13 and 39.3% in 2013.
33
34. Average depreciation per car
in R$
Financial crisis and
IPI reduction effect
Robust used-car market
939.1
2006
2,546.0
3,972.4
2,577.0
2,076.6
1,536.0
1,683.9
1,895.8
332.9
2007
1,452.4
2008
Depreciation
2009
2010
2011
2012
2013
Non recurring additional depreciation - IPI Effect
Financial crisis and
IPI reduction effect
Robust used-car market
2,383.3
5,083.1
5,408.2
4,371.7
3,509.7
4,133.0
1,096.9
4,592.3
2,395.8
4,311.3
2006
2007
2008
Depreciation
2009
2010
2011
2012
2013
Non recurring additional depreciation - IPI Effect
34
35. Consolidated net income
R$ million
336.3 *
250.5
138.2
291.6
190.2
127.4
384.3
Record
240.9
116.3
95.2 *
90.0
86.1
2006
2007
2008
2009
2010
2011
2012
2013
4Q12
4Q13
* Pro forma 2012 net income excluding additional depreciation, net of income tax.
Strong net income growth even in lower-growth scenario.
35
36. Agenda
1. Company overview
2. Main business divisions
Car Rental
Fleet Outsourcing
Seminovos
3. Consolidated
4. Debt and cash
5. Appendix
Earnings release 4Q13
36
37. Free cash flow
Free cash flow - R$ million
2006
2007
2008
2009
2010
2011
2012
2013
EBITDA
311.3
403.5
504.1
469.7
649.5
821.3
875.6
916.5
Used car sale revenue, net from taxes
(588.8)
(850.5)
(980.8)
(922.4)
(1,321.9)
(1,468.1)
(1,520.0)
(1,747.3)
Depreciated cost of cars sold (*)
530.4
760.0
874.5
855.1
1,203.2
1,328.6
1,360.2
1,543.8
(-) Income tax and social contribution
(42.7)
(63.4)
(52.8)
(49.0)
(57.8)
(83.0)
(100.9)
(108.5)
(4.8)
13.3
(44.8)
(11.5)
54.5
(83.9)
37.1
2.9
205.4
262.9
300.2
341.9
527.5
514.9
652.0
607.4
588.8
850.5
980.8
922.4
1,321.9
1,468.1
1,520.0
1,747.3
Car investment for renewal
(643.3)
(839.0)
(1,035.4)
(947.9)
(1,370.1)
(1,504.5)
(1,563.3)
(1,818.7)
Net investment for fleet renewal
(54.5)
11.5
(54.6)
(25.5)
(48.2)
(36.4)
(43.3)
(72.4)
Fleet renewal – quantity
23,174
30,093
34,281
34,519
47,285
50,772
56,644
62,641
Investment, other property and intangibles
investments
(32.7)
(23.7)
(39.9)
(21.0)
(51.1)
(63.0)
(80.2)
(54.0)
Free cash flow before growth and before interest
118.2
250.7
205.7
295.4
428.2
415.5
528.5
481.0
Investment on cars for fleet (growth) /reduction
(287.0)
(221.9)
(299.9)
(241.1)
(540.3)
(272.0)
(55.5)
(209.4)
222.0
(51.0)
(188.9)
241.1
111.3
32.7
(116.9)
89.7
Fleet growth
(65.0)
(272.9)
(488.8)
0.0
(429.0)
(239.3)
(172.4)
(119.7)
Fleet increase / (reduction) – quantity
10,346
7,957
9,930
8,642
18,649
9,178
2,011
7,103
53.2
(22.2)
(283.1)
295.4
(0.8)
176.2
356.1
361.3
Change in working capital
Cash provided before investment
Used car sale revenue, net from taxes
Change in accounts payable to car suppliers
Free cash flow after growth and before interest
(*) Without the technical discount up to 2010
37
38. Changes in net debt
R$ million
FCF after financial
expenses
250.7
FCF
361,3
Net debt
12/31/2012
-1,231.2
(110.6)
(65.5)
(36.8)
Financial
expenses
Dividends (*)
Company’s
share buybacks
(250.0)
Extraordinary
dividends
Net debt
12/31/2013
- 1,332.8
315,5
(*) Includes interest own capital paid in the period
R$250 million extraordinary dividend paid in 2013.
38
39. Debt - ratios
Net debt vs. Fleet value
2,681.7
2,446.7
1,492.9
1,247.7
765.1
2,797.9
1,907.8
1,752.6
1,254.5
2,547.6
1,363.4
1,281.1
1,078.6
1,332.8
1,231.2
440.4
2006
2007
2008
2009
2010
Net debt
BALANCE AT THE END OF
PERIOD
2011
2012
2013
Fleet value
2006(*)
2007(*)
2008(*)
2009(*)
2010(*)
2011
2012
2013
Net debt / Fleet value
36%
51%
72%
57%
52%
51%
48%
48%
Net debt / EBITDA
1.4x
1.9x
2.5x
2.3x
2.0x
1.7x
1.4x
1.5x
Net debt / Equity
0.7x
1.3x
2.0x
1.5x
1.4x
1.2x
0.9x
1.0x
EBITDA / Net financial expenses
4.8x
5.4x
3.8x
4.2x
5.0x
4.6x
6.3x
8.3x
(*) From 2006 to 2010, ratios based on USGAAP financial statements.
Comfortable debt ratios.
39
40. Debt maturity profile (principal)
R$ million
1,073.0
641.4
511.0
245.9
185.7
221.0
247.0
100.0
2013
2014
2015
2016
2017
2018
2019
100.0
2020
2021
Cash
1,010.7
The Company continues presenting a strong cash position and comfortable debt maturity profile.
40
41. 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
41
42. Disclaimer
Eugênio Mattar
CEO
Website: www.localiza.com/ir
Roberto Mendes
CFO and IR
E-mail: ri@localiza.com
Nora Lanari
Head of IR
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.
42
