- WEG reported Q2 2009 revenues of R$1.25 billion, down 1.6% year-over-year, with domestic market revenues up 0.7% and external markets down 5.7%.
- Net income for Q2 2009 was R$129.7 million, up 6.1% from Q1 2009 but down 23.7% year-over-year. EBITDA was R$172.9 million, down 4.5% from Q1 2009 and 31.8% year-over-year.
- Gross margin was 28.6% in Q2 2009 compared to 29.8% in Q1 2009 and 35.8% in Q2 2008 as
2. Disclaimer
The information contained herein 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.
2 Q2 2009 Investor Presentation
3. Diversification as Core Value
Services
Energy Electronic Energy
Generation Components Substations
Motor Transformer
Electric Distribution
Components Panel
Generator
Motor
Control
Panel
Industrial Process
Automation
Industrial Application
Paints and Varnishes
3 Q2 2009 Investor Presentation
4. Business Areas
Electro-Electronic Generation, Motors for Domestic Industrial Paints
Industrial Equipments Transmission and Use and Varnishes
Distribution
Focus Global Americas Latin America Brazil
Low and medium Hydro, thermal (natural
tension electric motors, gas, biomass and other) Liquid and
industrial automation and wind generators, Single phase electric powdered paints,
Products equipments, electro- transformers, control motors electro-isolating
electronic components panels and automation varnishes
and services services
Capital goods OEMs Generation, General industrial
(pumps, compressors, transmission and “White goods” OEMs and specialty
Consumer machines) and end- distribution (washing machines, applications
users (steel, mining, concessionaries, small HVAC*), water pumps, (shipbuilding,
Markets hydro power plants
pulp & paper, oil & gas, (PCH), co-generation, lawn mowers, etc aggressive
ethanol) industrial clients environments)
Performance Industrial Production Growing investments in Disposable income, Brazilian GDP
growth and Investments energy generation supply of credit and growth
Drivers in Fixed Capital (capex) level of interest rates
* Heating, Ventilation and Air Conditioning
4 Q2 2009 Investor Presentation
8. Corporate Governance Practices
Strong accountability and transparency culture
Ingrained into Company’s core values, beliefs and mission
Practices are “all that matter.” Formalization comes afterwards
Early adopter of best practices formalizations and codes
“Novo Mercado” conversion of PN shares at 1:1 ratio
2001 2002 2003 2004 2005 2006 2007
Adhesion to PN shares Change of Secondary Creation of Bylaws make Adhesion to
Bovespa’s granted 80% Independent offering on PN Investor Fiscal Council Bovespa’s
“Nível 1” Tag Along Auditor shares to Relations permanent “Novo
Corporate rights increase Department Mercado”
Governance liquidity Corporate
Guidelines Governance
8 Q2 2009 Investor Presentation
9. Uniquely Positioned
WEG is at the intersect of strong long-term trends
Energy
Energy Cleaner Energy
Cleaner Energy
efficiency
efficiency Sources
Sources
9 Q2 2009 Investor Presentation
10. 10
G
lo Sy Di
ba
l ne ve
Pr rg r s i
is fie
t
es
Q2 2009 Investor Presentation
en L i ic P d a
ce ne r nd
od
uc
t
In
no
va
WEG is Uniquely Positioned
Sc
C
Te t i o
u s ale ch n
to a no C a
m nd lo p a
iz gi b i
at
io
ca l i t
n
l ies
11. Diversified and Synergetic Offering
Product diversification increases competitiveness and added value…
From the client’s perspective
One Supplier, Several
Several Client Suppliers, one
Products product each
One-stop shop (largest electric motor line from a single manufacturer)
Strong worldwide after sales support (services and parts)
Product integration in systems and solutions
11 Q2 2009 Investor Presentation
12. Diversified and Synergetic Offering
…while reduces costs and diversify risks
From WEG’s perspective
Several
Several Products,
Products, One Markets,
Salesperson Industries and
Clients
Greater synergy and efficiency of sales effort
Reduced risk exposure (product, segment and client)
12 Q2 2009 Investor Presentation
13. Technological Innovation Capabilities
Technology advances at fast pace, with WEG at the forefront
Consistent R&D spending Partnerships with best
2,5%
2,3%
2,5% 2,4%
2,3%
engineering schools in Brazil
1,7% 1,6%
1,8%
2,0%
and in the world
1,5% 89
86
73
Technical Committee meets
63 semi-annually to review latest
34
developments in electrical
30
16 18 18 21 theory and applications
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
R&D Spending % Net Revenues
More than 800 engineers developing products, such as Wmagnet
Innovative use of technology for general
purpose motors
Higher energy efficiency (lower consumption per
+ output)
Lower working temperature and noise levels
Smaller size (lower material consumption)
13 Q2 2009 Investor Presentation
14. Global Presence
Gross Revenues Breakdown (1S09)
11%
10% Europe
North America
5%
64% Asia & Oceania
5% 5%
Brazil Africa
South & Central America
14 Q2 2009 Investor Presentation
15. Global Presence
External Markets Revenues (US$ M) Production Facilities
Service fast growing
regional markets
Mexico, Portugal, Argentina 1029
Sales Subsidiaries and China
Own commercial and
distribution structures in
large and growing markets
US, Chile, Colombia,
Local Reps and Venezuela; England, France,
Distributors Belgium, Germany, Italy,
Develop market Spain, Sweden, Australia,
knowledge India, Japan, Singapore,
UAE and Russia
Exports to more than 100 120
countries: Canada, South
Africa
27
1980 1989 1998 2008
2007
15 Q2 2009 Investor Presentation
16. Unique Product Characteristics
Hours of Daily Use 12 16 24 24
Costs during useful life
Days of Monthly Use 22 22 22 30
Nominal Power Hp 50,0 50,0 50,0 50,0
97,0%
Nominal Power kilowatts 37,3 37,3 37,3 37,3
Energy Efficiency % 92,5% 92,5% 92,5% 92,5%
Energy Consumption Kilowatts 40,3 40,3 40,3 40,3
Monthly Use Hours 264 352 528 720
Monthly Energy Consumption kW/h / month 10.641 14.188 21.283 29.022
Cost of Electricity R$ / kW/h 0,15 0,15 0,15 0,15
Energy Operating Cost R$ per Month 1.596 2.128 3.192 4.353
List Price R$ 5.358 5.358 5.358 5.358 1,4% 1,6%
Price / Operating Cost Ratio Months 3,36 2,52 1,68 1,23
Acquisition Maintenance Energy
Consuption
Specifications must be exact. Everything affects energy efficiency
“Similar” motors are not economical, even if much cheaper
Becomes more evident when energy prices go up
Returns on energy efficiency investments are very attractive
16 Q2 2009 Investor Presentation
17. Scale and Customization
Customization is characteristic of the industry and
specifications are very diverse
Largest integrated motor site in the world
Integrated and synergetic production
allows for large scale of production,
with:
Lower costs
Higher operating efficiency
Vertical integration allows for:
Customized products
Main Manufacturing Plant in Jaraguá do Sul, SC
Fastest to the market
Incoming Foundry /
Orders Cast Machine
More than 2,500
Engineering
Wires
Manufacturing Assembly different types
Line of electric
Steel Shop
Paints & Varnishes motors monthly
Tooling
17 Q2 2009 Investor Presentation
18. Second Quarter 2009 Highlights
2T09 1T09 % 2T08 %
Gross Operating Revenue 1.250.193 1.270.984 -1,6% 1.331.012 -6,1%
Domestic Market 808.355 802.351 0,7% 924.701 -12,6%
External Markets 441.838 468.632 -5,7% 406.311 8,7%
External Markets in US$ 213.396 202.726 5,3% 245.822 -13,2%
Net Operating Revenue 1.029.945 1.048.241 -1,7% 1.095.815 -6,0%
Gross Operating Profit 294.175 311.954 -5,7% 392.025 -25,0%
Gross Margin 28,6% 29,8% 35,8%
Quarterly Net Income 129.670 122.193 6,1% 169.855 -23,7%
Net Margin 12,6% 11,7% 15,5%
EBITDA 172.925 181.112 -4,5% 253.729 -31,8%
EBITDA Margin 16,8% 17,3% 23,2%
Figures in R$ Thousands
June 2009 December 2008 June 2008
CASH & EQUIVALENT 1.806.997 1.849.477 1.802.142
DEBT 1.811.906 2.161.216 1.634.459
- Current 1.044.633 1.314.098 1.009.095
- Long Term 767.273 847.118 625.364
NET CASH (DEBT) (4.909) (311.739) 167.683
18 Q2 2009 Investor Presentation
19. Main impacts from financial crisis
Sales and Revenues Costs and Expenses
Late 2008 / early 2009: Late 2008 / early 2009:
Demand weakness in all segments, but at Costs suffered from
different intensities Further price increases for some
Domestic use: swift slowdown materials (late 2008)
Industrial use: took a while, but dales Weak demand prevents pass-
decrease was unprecedented around through of FX and higher costs
turn of year Lower occupancy affects productivity
Energy: focus on backlog stability and economies of scale
and client credit Logistic difficulties with heavy rains /
Mid 2009: flooding impacted expenses
Domestic use: responding to tax Mid 2009:
incentives
Working out the impacts of higher costs
Industrial use: no end of destocking under a weak demand environment
in sight
Low occupancy continues to be a
Energy: slower order intake
(“consuming” backlog) concern. Labor agreement to reduce
working hours and wages.
19 Q2 2009 Investor Presentation
21. Scenario and Assumptions
There is no predicting how long or deep Renewed focus on
the downturn will be ROIC under
Working hours and conservative
No indication of a quick recovery wage reduction assumptions
around the corner agreement
Reviewing all
Slowdown severe for the serial, less Hiring freeze processes for cost
customized part of the product line cutting and expense
reduction
Despite some good signals
Material costs declining
Destocking seems to be slowing Workforce
Rightsizing Continuous
Must plan and act under the following Improvement
assumptions: Production Program
Fairly long recession Consolidation (PMC)
(closing 1 plant)
Followed by a slow recovery
21 Q2 2009 Investor Presentation
22. Continuous Improvement Program
Before 1968 Olympics, high jump record 1,73m
Non linear
improvement
1968 Olympics, the “Fosbury Flop” high jump record 2,24m
22 Q2 2009 Investor Presentation