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Motors | Automation | Energy | Transmission & Distribution | Paints




June 2010
J.P. Morgan LatAm
Corporate Access Days
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                 J.P. Morgan LatAm Corporate Access Days                                                                              June 2010
WEG key facts
About WEG                                           Revenue by business area
    Market leader in Latin America and among                6%
    top 5 electric motor players in the world         13%

    Over 21thousands employees (2.5 thousands
                                                                 47%
    outside Brazil)
                                                                       Industrial Equipment
    Around 35% of business outside Brazil             34%              GTD
                                                                       Domestic Use
    Revenues CAGR of 19% over past 15 years                            Paints & Varnishes



2009
    Revenues: US$ 2.8 billion                       Employees
    19.537 employees worldwide
    EBITDA: US$ 465 million
    Net earnings: US$ 305 million
    Strong balance sheet, unaffected by financial
    crisis




3         J.P. Morgan LatAm Corporate Access Days                                 June 2010
Global Presence




                                                Distributors & Agents in over 85 countries
    Factories in 5 countries
                                         Over 1100 Service Centers covering all 5
    Commercial branches in 22 countries continents
                                         Sales to over 110 countries
4     J.P. Morgan LatAm Corporate Access Days                                       June 2010
History of WEG
    Founded on September 16th, 1961




5         J.P. Morgan LatAm Corporate Access Days   June 2010
Shareholding structure
    Clear and strong control group that knows the business but is not 
    directly involved on day to day operations
             Voigt                      Silva          Werninghaus    Controlling
             33.3%                     33.3%             33.3%       Shareholders


                                      WEG              Founders’
                                                                     Other 
                                 Participações e        Families
                                  Serviços S/A         (directly)    (Float)
                              50.9%                  14.4%               34.7%



                                              WEG S.A.

6          J.P. Morgan LatAm Corporate Access Days                                  June 2010
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




7         J.P. Morgan LatAm Corporate Access Days                      June 2010
Diversification as Core Value
    Integration allows for synergy gains and reduces business cycle risk


                                                   Services




                                                          Electronic
                         Energy                           Components   Energy
                        Generation                                     Substations



                                           Motor      Transformer
                                                                Distribution
                              Electric                                 Panel
                              Components       Generator


                                                         Motor
                                                         Control
                                                         Panel
                                           Industrial Process
                                              Automation
                                                                                     Industrial
                                                                                     Application Paints
                                                                                     and Varnishes
8          J.P. Morgan LatAm Corporate Access Days                                                        June 2010
Business areas
                     Electro-Electronic            Generation,              Motors for              Industrial
                         Industrial               Transmission             Domestic Use             Paints and
                        Equipments               and Distribution                                   Varnishes


    Focus                   Global                    Americas            Latin America                Brazil

                                                  Hydro, thermal
                       Low and medium          (natural gas, biomass                                 Liquid and
                        tension electric        and other) and wind                                  powdered
    Products           motors, industrial           generators,          Single phase electric     paints, electro-
                          automation           transformers, control            motors                 isolating
                        equipments and          panels, automation                                    varnishes
                           services                   services
                     Capital goods OEMs              Generation,                                       General
                           (pumps,                transmission and       “White goods” OEMs        industrial and
    Consumer            compressors,                 distribution        (washing machines,           specialty
                     machines) and end-         concessionaries, co-       HVAC*), water            applications
    Markets          users (steel, mining,                                  pumps, lawn            (shipbuilding,
                                                generation, industrial      mowers, etc              aggressive
                      pulp & paper, oil &              clients
                         gas, ethanol)                                                             environments)
                     Industrial Production
    Performance          growth and             Growing investments       Disposable income,       Brazilian GDP
                     Investments in Fixed       in energy generation      supply of credit and        growth
    Drivers                                                              level of interest rates
                        Capital (capex)

9           J.P. Morgan LatAm Corporate Access Days                                                        June 2010
Business Units
 Complete solutions that increase perceived value by the client

              MOTORS                              AUTOMATION              ENERGY




                              TRANSMISSION
                             & DISTRIBUTION                    COATINGS




10      J.P. Morgan LatAm Corporate Access Days                                    June 2010
Consistent and profitable growth
 Cycles are diversified away, allowing focus on profitable opportunities

 Gross Revenues (R$)                                                                                                   EBITDA (R$)




                                                                                                      5.471




                                                                                                                                                                                                                                 1.026
                                                                                                              5.111




                                                                                                                                                                                                                           923
                                                                                              4.551




                                                                                                                                                                                                                                         837
             CAGR 19%
                                                                                                                                  CAGR 18%



                                                                                      3.527




                                                                                                                                                                                                                     666
                                                                              2.978




                                                                                                                                                                                                              504
                                                                      2.603




                                                                                                                                                                                                       487
                                                                                                                                                                                                435
                                                              2.015




                                                                                                                                                                                         327
                                                                                                                                                                                 291
                                                      1.535
                                              1.269




                                                                                                                                                                         207
                                       963




                                                                                                                                                                 146
                                                                                                                                             106

                                                                                                                                                         135
                                 753
                          632
     430


            458


                   574




                                                                                                                       80

                                                                                                                                  84
 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009                                           1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009



 Net Earnings (R$)                                                                                                     Return on Equity
                                                                                              575




                                                                                                                                                                                                        47%
                                                                                                      560

                                                                                                              548




                                                                                                                                                                                                 44%
                                                                                      503




                                                                                                                                                                                          38%
                                                                                                                                                                                   38%




                                                                                                                                                                                                                           37%
                                                                                                                                                                                                                     37%
            CAGR 23%



                                                                                                                                                           33%




                                                                                                                                                                                                               33%
                                                                       403




                                                                                                                                                                           31%




                                                                                                                                                                                                                                 31%
                                                                              379




                                                                                                                                                                                                                                         25%
                                                               308




                                                                                                                                                                   23%
                                                                                                                                                   22%
                                                       220




                                                                                                                                       16%
                                                176




                                                                                                                            14%
                                        125
                            98

                                  82
                     58
              41
       31




     1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009                                         1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

11                        J.P. Morgan LatAm Corporate Access Days                                                                                                                                                          June 2010
Strong fundamental trends
Energy prices will continue to increase
 Cheaper energies are becoming less available
 Concerns about sustainability (climate change)
 Cleaner energies are technologically intensive

                                                   Oil prices (US$)
                                          100 
                                            90 
                                            80 
                                            70 
                                            60 
                                            50 
                                            40 
                                            30 
                                            20 
                                            10 
                                             ‐
                                                  1970       1980     1990   2000   2010 Partial


12      J.P. Morgan LatAm Corporate Access Days                                       June 2010
Strong fundamental trends
 Secular trend of increasing energy prices is shifting
 industrial electric equipment environment


     Energy efficiency
     Industrial electric
     motors represent
     around 25% of
     global electricity
                                                                      Lower CO2
     consumption
                                                                       emissions
     Most efficiency
                                                                Economic viable
     “bang” for the
                                                                alternatives fuels
     Capex “buck”



                                                   Cleaner Energy Sources

13       J.P. Morgan LatAm Corporate Access Days                             June 2010
Unique Product Characteristics
      Cost of ownership of an electric motor throughout its useful life




     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
14    J.P. Morgan LatAm Corporate Access Days                             June 2010
WEG is Uniquely Positioned




15   J.P. Morgan LatAm Corporate Access Days   June 2010
Diversified and Synergistic Offering
      Product diversification increases                  …while reduces costs and diversify risks
     competitiveness and added value…

     From the client’s perspective                           From WEG’s perspective

        One Supplier,
           Several          Client
          Products

                                Several Suppliers, one         Several               Several Products,
                                    product each            Products, One          Markets, Industries and
                                                             Salesperson                  Clients

        One-stop shop (largest electric motor line
                                                              Greater synergy and efficiency of sales effort
        from a single manufacturer)

        Strong worldwide after sales support                  Reduced risk exposure (product, segment
        (services and parts)                                  and client)


        Product integration in systems and solutions




16          J.P. Morgan LatAm Corporate Access Days                                               June 2010
Technological Innovation Capabilities
 Technology advances at fast pace, with WEG at the forefront
 Consistent R&D spending
 2,5%
          2,3%
                                               2,5%     2,4%
                                                                2,3%
                                                                                       Partnerships with best engineering
                 1,7%            1,8%
                                                                       2,0%   2,0%     schools in Brazil and in the world
                         1,6%                                          89
                                        1,5%                    86            83       Technical Committee meets semi-
                                                        73
                                                63                                     annually to review latest
                                                                                       developments in electrical theory and
                                  30
                                        34                                             applications
          18     18       21
     16


 1999     2000   2001    2002    2003   2004   2005    2006     2007   2008   2009
                        R&D Spending           % Net Revenues



               More than 1.000 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)


17               J.P. Morgan LatAm Corporate Access Days                                                                      June 2010
Global Presence
  External Markets Revenues (US$ M)

                                                             1029
                                                                   880




                                                     120

                                   27


1980                         1989                  1998       2009
                                                           2007
 18      J.P. Morgan LatAm Corporate Access Days            June 2010
Global Presence
 High-growth emerging markets represent almost 80% of business

  Revenue breakdown by region (2009)



                                                11%
                           10%
                                               Europa
                    América do Norte


                                                                      5%

                                                                  Ásia e Oceania
                                             66%

          5%                                              3%

América do Sul e Central                                 África
                                             Brasil




19             J.P. Morgan LatAm Corporate Access Days                             June 2010
Scale and Customization
 Customization is characteristic of the industry and specifications are
 very diverse. Most production is built to order

     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 of
                                                                            Line
                                                        Steel Shop                     electric motors
                                                     Paints & Varnishes                    monthly
                                                          Tooling


20      J.P. Morgan LatAm Corporate Access Days                                                       June 2010
Profitability
 Net Earnings (R$ million)                                    EBITDA (R$ million)
                                                                                                   25%
                                                                   23%                                    23%
                                                                          22%             22%
                                                                                                          1026
                                                                                   20%                              20%
                                                                                                   923
     18%    18%
                                                                                                                    837
                              17%        15%
                        15%
                                                 12%    13%                               666
                                      575      560     548
                              503                                         487      504
            403                                                    394
                      375
     308


                                                               03


                                                                         04


                                                                                05


                                                                                         06


                                                                                                07


                                                                                                         08


                                                                                                                 09
 03

           04


                   05

                            06

                                    07


                                            08

                                                     09




                                                              20


                                                                     20


                                                                              20


                                                                                     20


                                                                                              20


                                                                                                     20


                                                                                                               20
20

       20


                 20

                        20

                                 20


                                         20

                                                 20




                Net Income                    Net Margin                        EBITDA          EBITDA Margin
21              J.P. Morgan LatAm Corporate Access Days                                                       June 2010
Capacity Expansion Program
 Capex and Depreciation (R$ million)

                                                                            457
       Capex
       Depreciation

                                                                318


                                                                                        226
                206                                                               206         196
                                  146                                 157
126
                                                      111 105
                                           96
       56                67




     2003         2004               2005              2006      2007        2008        2009
22          J.P. Morgan LatAm Corporate Access Days                                      June 2010
Dividend Pay-out Policy
 Net Earnings and Dividends (R$ million)
                                                                                                         54%              55%
                                                                                             52%

                                                                                 45%
                                                         43%         44%
                                   40%       40%
                       39%                                                                  575
            37%                                                                                         560         548
     35%
                                                                                503

                                                        403
                                                                    375
                                            308                                                   299         301         300

                                 220                                                  229
                      176                                     173         165
           125                                    124
82 29                                  89
                 46         68

 1999      2000       2001        2002      2003        2004        2005        2006        2007        2008        2009
                                 Net Earnings            Dividends               Pay-out (%)
23          J.P. Morgan LatAm Corporate Access Days                                                                  June 2010
General Comments on Q1 2010
     Quarter confirms that recovery is going to be gradual

     Economic dynamisms spreads from the Brazilian consumer towards
     other segments:

        Consumer goods continue strong, tied to fundamentals

        Industrial products doing better the closer they are to the
        consumer

        Longer cycle products is still in early stages of recovery

        Other emerging countries faring better than mature economies

     We are resuming some investment plans as demands picks up

        Production of HT motors in India by 2H of 2010;

        Production of commercial motors in Linhares by year end

24       J.P. Morgan LatAm Corporate Access Days   Page 24            June 2010
Quarterly Highlights

                                     Q1 2010           Q4 2009 Growth %           Q1 2009 Growth %
Gross Operating Revenue               1.131.546       1.306.913 -13,4%           1.270.984 -11,0%
 Domestic Market                           801.299        871.619       -8,1%       802.351       -0,1%
 External Markets                          330.247        435.299      -24,1%       468.632      -29,5%
 External Markets in US$                  181.170        250.328        -27,6%      202.726      -10,6%
Net Operating Revenue                    931.907      1.076.969        -13,5%    1.048.241      -11,1%
Gross Operating Profit                    307.454        344.226        -10,7%      311.954       -1,4%
Gross Margin                                 33,0%         32,0%                     29,8%
Quarterly Net Income                     119.074         136.426       -12,7%     122.193        -2,6%
Net Margin                                   12,8%         12,7%                     11,7%
EBITDA                                   181.750         228.548       -20,5%     181.112         0,4%
EBITDA Margin                                19,5%             21,2%                 17,3%
                                                                                 Figures in R$ Thousands




25        J.P. Morgan LatAm Corporate Access Days    Page 25                                   June 2010
Financing Policies
                  March 2010                                  December 2009   March 2009
CASH & EQUIVALENT  1.962.538                                   2.127.117       1.815.164
DEBT               1.782.466                                   1.872.533       2.099.941
- Current             814.274                                     895.885       1.171.587
- Long Term           968.192                                     976.648         928.354
NET CASH (DEBT)      180.072                                     254.584        (284.777)

     Operating cash flow trends continue favorable
     Capex program picking up where demand is stronger
     Strong capital structure allows access to low cost sources of funding
          BNDES (Brazilian development bank) is the main partner
          Negotiating first transaction with IFC
          Trade finance at very attractive terms
          Foreign subs financed locally but considering consolidated balance
          sheet
     Virtually no net foreign currency exposure
     Extending average maturities of debt at lower costs
26        J.P. Morgan LatAm Corporate Access Days   Page 26                       June 2010
Gross Operating Revenues
Evolution of Gross Revenues – Domestic Market
(in R$ million)
                                 5%           0%                               Gross Operating Revenues
                     22%                                                       decreasing by 11%. Net Revenues
          23%
                                                                               down by 11.1%
                                  761           802            801             FX appreciation of 27% negatively
                     623
      507                                                                      impacts comparisons
                                                                               Product mix continues to shift
   Q1 2006       Q1 2007     Q1 2008    Q1 2009              Q1 2010           towards short cycle products
Evolution of Gross Revenues – External Market
(in US$ million)                                                               Lower order intake during 2009 is
       External Market in US$                                                  now apparent in revenues
      Quarterly Average FX
                                                                               Recovery continues driven by the
     2,1875         2,1066                   2,3117
                                1,7354                      1,8229
                                                                               Brazilian consumer

                         30%
                                     18%              -11%                     Long cycle and external (mature)
            29%                                                                markets continue soft.
                                 195,3       202,7          181,2
                    165,2
      126,6


     Q1 2006       Q1 2007     Q1 2008      Q1 2009     Q1 2010
27                J.P. Morgan LatAm Corporate Access Days            Page 27                                    June 2010
Global Presence
Gross Revenues Breakdown: Q1 2010




                                                 9%
                           10%
                                                Europe
                       North America


                                                                                  3%
      7%
                                                                             Asia & Oceania
                                              71%


           5%                                                        2%

                                             Brazil                 Africa
South & Central America




28              J.P. Morgan LatAm Corporate Access Days   Page 28                             June 2010
Profitability
      36%        37%          36%                        33%
                                          30%
                                                                     22%            24%         23%
                                                                                                          17%         20%




                  293         320          312           307
      238                                                                            193        203       181         182
                                                                         149



     Q1 2006    Q1 2007     Q1 2008      Q1 2009    Q1 2010         Q1 2006        Q1 2007     Q1 2008   Q1 2009    Q1 2010

                   Gross Profit     Gross Margin                                      EBITDA      EBITDA Margin

     18%        16%
                                                                               Gross margin improving, despite little
                             14%          12%            13%
                                                                               help from top line growth
                                                                               EBITDA margin trending towards the
                                                                               floor of the historical interval
                                                                               Net margin showing more modest
     118         129          126         122            119                   improvement, benefiting from FX
                                                                               stability
 Q1 2006       Q1 2007     Q1 2008      Q1 2009     Q1 2010

                 Net Income          Net Margin
29             J.P. Morgan LatAm Corporate Access Days         Page 29                                             June 2010
Growth and Margin Analysis
Revenues Growth (CAGR)                                                                            Profitability (EBITDA Margins)
     30,0%
                                                                                                  30%
             23,9%                    2004‐2009          2009‐2012E
     25,0%
                                                                                                  25%
     20,0%
                                                                                                  20%
     15,0%      12,6%
                                                        9,6%            10,1%                     15%
     10,0%
                                     6,0%6,6%
                          5,1%
                                                                                                  10%
     5,0%                                                  2,6%             2,6%

     0,0%                                                                                          5%

     ‐5,0%                                                                                         0%
                             ‐4,2%
                                                                                                            2004      2005      2006    2007         2008       2009
 ‐10,0%
               WEG        SIEMENS    EMERSON              ABB           SCHNEIDER                          WEG        SIEMENS     EMERSON      ABB          SCHNEIDER



                                        Financial Leverage (Net Debt / EBITDA 2009)
                                                1,50 
                                                                                                                     1,10 
                                                                                1,00 
                                                1,00                                      0,80 

                                                0,50 

                                                  ‐

                                            ‐0,50              ‐0,30 

                                            ‐1,00 

                                            ‐1,50 
                                                                                                        ‐1,50 
                                            ‐2,00 
                                                                WEG         SIEMENS     EMERSON         ABB        SCHNEIDER
Source: Morgan Stanley
30                   J.P. Morgan LatAm Corporate Access Days                                                                                                June 2010
Our Business




31   J.P. Morgan LatAm Corporate Access Days   June 2010
32   J.P. Morgan LatAm Corporate Access Days   June 2010
Electric Motors
 Fractional (commercial use) Motors

 • NEMA Motors, Single and Three Phase up to 3.7kW (5HP)


 Applications: * Pumps
               * Compressors
               * General Purpose
               * Air Conditioning
                * Explosion Proof
               * Pool and Spa
               * Others




33       J.P. Morgan LatAm Corporate Access Days           June 2010
Electric Motors
 Low Voltage Industrial Motors

 • Three phase TEFC / ODP motors / output ratings up to 1200kW (1650HP)
     Types: * General Purpose
            * Explosion Proof
            * Brake Motors
            * Inverter Duty
            * Saw Arbor
            * Pump Motors
            * Others

 • Single Phase TEFC / ODP motors /
    output up to 9.2kW (12.5HP)

     Types: * General Purpose
            * Farm Duty
            * Multi-Mounting Aluminum frame motors
            * Appliance Motors
            * Ventilation / Others

34       J.P. Morgan LatAm Corporate Access Days                      June 2010
35   J.P. Morgan LatAm Corporate Access Days   June 2010
Automation
 Switch and Control Gear

 • Molded case circuit breakers

 • Contactors and overload relays

 • Motor circuit breaker

• Push buttons and signalling units

• D and NH fuses

• Timers and electronic protectors

• Thermoplastic and metal cased starters

• Run capacitors for motors and light system

• Power factor correction capacitors



36       J.P. Morgan LatAm Corporate Access Days   June 2010
Automation
 Drives and Soft Starters

• LV VFD’s in outputs up to 4000HP

• MV VFD’s in outputs upt to 8000HP

• LV & MV Soft-starters in outputs up to 3000HP

• Servoconverters and Servomotors

• Converters and AC/DC drives, outputs up to 3000HP




37       J.P. Morgan LatAm Corporate Access Days      June 2010
38   J.P. Morgan LatAm Corporate Access Days   June 2010
Energy
 Medium and High Voltage Motors

 • Three Phase TEFC / ODP Induction Motors

     - Master Line, frames from 280 to 1800, voltages up to 15kV;
     - H Line, enclosed, frames from 315 to 630, voltages from 220V to 11kV;
     - DC Motors, frames up to 1800.

 Applications: * Mining
               * Sanitation
               * Steel Plants
               * Cement
               * Pulp and Paper
               * Petrochemical
               * Cooling Systems



39        J.P. Morgan LatAm Corporate Access Days                              June 2010
Energy
 Generators

 • Large size generators
     - Turbogenerators, outputs up to 80,000 kVA, voltages up to 15kV
     - Hydrogenerators, outputs up to 200,000 kVA, voltages up to 15kV
 • Generator for generator sets up to 4200kVA

 • LV/MV control and distribution boards, MV panels




40       J.P. Morgan LatAm Corporate Access Days                         June 2010
41   J.P. Morgan LatAm Corporate Access Days   June 2010
Transmission & Distribution
 Transformers
 • Oil:
     Power - Outputs up to 300 MVA, voltage classes up to 550 kV
     Industrial - Outputs from 500 to 5000 kVA, voltage classes 15; 24.2 or 36.2 KV
     Distribution - Outputs from 30 to 300 kVA, voltage classes 15 or 24.2 kV
 • Dry: Outputs from 300 to 15,000 kVA, voltage classes 15; 24.2 or 36.2 kV


 Substations
 • Stationary - Up to 550 kV
 • Mobile - Up to 145 kV




42          J.P. Morgan LatAm Corporate Access Days                                   June 2010
43   J.P. Morgan LatAm Corporate Access Days   June 2010
Manufacturing Plants: Brazil
     JARAGUÁ DO SUL - SC                 JARAGUÁ DO SUL - SC                                GUARAMIRIM - SC




BLUMENAU - SC                     ITAJAÍ - SC                  JOAÇABA - SC                 MANAUS - AM




GRAVATAÍ - RS                     HORTOLÂNDIA - SP             SÃO BERNARDO DO CAMPO - SP   *LINHARES - ES




                                                                                            *New factory (from Nov. 2010 on)
44              J.P. Morgan LatAm Corporate Access Days                                                        June 2010
Manufacturing Plants: Outside Brazil
          ARGENTINA - San Francisco            ARGENTINA - Córdoba                PORTUGAL - Maia
                                                                                      PORTUGAL - Maia




     MEXICO - Huehuetoca                            MEXICO - Huehuetoca                  MEXICO - Tizayuca




        CHINA - Nantong                                                   INDIA - Hosur - Under construction




45            J.P. Morgan LatAm Corporate Access Days                                                          June 2010
Certifications




46   J.P. Morgan LatAm Corporate Access Days   June 2010
Quality Certifications




                                       ISO 9001:2008
                                  Certificate Number: BR229182



                                      ISO 14001:2004
                                Certificate Number: BR229183/A



47   J.P. Morgan LatAm Corporate Access Days                     June 2010
References - OEM Ventilation




48   J.P. Morgan LatAm Corporate Access Days   June 2010
References - OEM Pumps




49   J.P. Morgan LatAm Corporate Access Days   June 2010
References - OEM Compressors




50   J.P. Morgan LatAm Corporate Access Days   June 2010
References: Oil & Gas




51   J.P. Morgan LatAm Corporate Access Days   June 2010
References:OEM‘s and End Users




52   J.P. Morgan LatAm Corporate Access Days   June 2010
References - Engineering Companies




53   J.P. Morgan LatAm Corporate Access Days   June 2010

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2010 06 21 J.P. Morgan LATAM Corporate Access Days (London)

  • 1. Motors | Automation | Energy | Transmission & Distribution | Paints June 2010 J.P. Morgan LatAm Corporate Access Days
  • 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 J.P. Morgan LatAm Corporate Access Days June 2010
  • 3. WEG key facts About WEG Revenue by business area Market leader in Latin America and among 6% top 5 electric motor players in the world 13% Over 21thousands employees (2.5 thousands 47% outside Brazil) Industrial Equipment Around 35% of business outside Brazil 34% GTD Domestic Use Revenues CAGR of 19% over past 15 years Paints & Varnishes 2009 Revenues: US$ 2.8 billion Employees 19.537 employees worldwide EBITDA: US$ 465 million Net earnings: US$ 305 million Strong balance sheet, unaffected by financial crisis 3 J.P. Morgan LatAm Corporate Access Days June 2010
  • 4. Global Presence Distributors & Agents in over 85 countries Factories in 5 countries Over 1100 Service Centers covering all 5 Commercial branches in 22 countries continents Sales to over 110 countries 4 J.P. Morgan LatAm Corporate Access Days June 2010
  • 5. History of WEG Founded on September 16th, 1961 5 J.P. Morgan LatAm Corporate Access Days June 2010
  • 6. Shareholding structure Clear and strong control group that knows the business but is not  directly involved on day to day operations Voigt Silva Werninghaus Controlling 33.3% 33.3% 33.3% Shareholders WEG  Founders’ Other  Participações e  Families Serviços S/A (directly) (Float) 50.9% 14.4% 34.7% WEG S.A. 6 J.P. Morgan LatAm Corporate Access Days June 2010
  • 7. 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 7 J.P. Morgan LatAm Corporate Access Days June 2010
  • 8. Diversification as Core Value Integration allows for synergy gains and reduces business cycle risk Services Electronic Energy Components Energy Generation Substations Motor Transformer Distribution Electric Panel Components Generator Motor Control Panel Industrial Process Automation Industrial Application Paints and Varnishes 8 J.P. Morgan LatAm Corporate Access Days June 2010
  • 9. Business areas Electro-Electronic Generation, Motors for Industrial Industrial Transmission Domestic Use Paints and Equipments and Distribution Varnishes Focus Global Americas Latin America Brazil Hydro, thermal Low and medium (natural gas, biomass Liquid and tension electric and other) and wind powdered Products motors, industrial generators, Single phase electric paints, electro- automation transformers, control motors isolating equipments and panels, automation varnishes services services Capital goods OEMs Generation, General (pumps, transmission and “White goods” OEMs industrial and Consumer compressors, distribution (washing machines, specialty machines) and end- concessionaries, co- HVAC*), water applications Markets users (steel, mining, pumps, lawn (shipbuilding, generation, industrial mowers, etc aggressive pulp & paper, oil & clients gas, ethanol) environments) Industrial Production Performance growth and Growing investments Disposable income, Brazilian GDP Investments in Fixed in energy generation supply of credit and growth Drivers level of interest rates Capital (capex) 9 J.P. Morgan LatAm Corporate Access Days June 2010
  • 10. Business Units Complete solutions that increase perceived value by the client MOTORS AUTOMATION ENERGY TRANSMISSION & DISTRIBUTION COATINGS 10 J.P. Morgan LatAm Corporate Access Days June 2010
  • 11. Consistent and profitable growth Cycles are diversified away, allowing focus on profitable opportunities Gross Revenues (R$) EBITDA (R$) 5.471 1.026 5.111 923 4.551 837 CAGR 19% CAGR 18% 3.527 666 2.978 504 2.603 487 435 2.015 327 291 1.535 1.269 207 963 146 106 135 753 632 430 458 574 80 84 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Net Earnings (R$) Return on Equity 575 47% 560 548 44% 503 38% 38% 37% 37% CAGR 23% 33% 33% 403 31% 31% 379 25% 308 23% 22% 220 16% 176 14% 125 98 82 58 41 31 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 11 J.P. Morgan LatAm Corporate Access Days June 2010
  • 12. Strong fundamental trends Energy prices will continue to increase Cheaper energies are becoming less available Concerns about sustainability (climate change) Cleaner energies are technologically intensive Oil prices (US$) 100  90  80  70  60  50  40  30  20  10  ‐ 1970 1980 1990 2000 2010 Partial 12 J.P. Morgan LatAm Corporate Access Days June 2010
  • 13. Strong fundamental trends Secular trend of increasing energy prices is shifting industrial electric equipment environment Energy efficiency Industrial electric motors represent around 25% of global electricity Lower CO2 consumption emissions Most efficiency Economic viable “bang” for the alternatives fuels Capex “buck” Cleaner Energy Sources 13 J.P. Morgan LatAm Corporate Access Days June 2010
  • 14. Unique Product Characteristics Cost of ownership of an electric motor throughout its useful life 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 14 J.P. Morgan LatAm Corporate Access Days June 2010
  • 15. WEG is Uniquely Positioned 15 J.P. Morgan LatAm Corporate Access Days June 2010
  • 16. Diversified and Synergistic Offering Product diversification increases …while reduces costs and diversify risks competitiveness and added value… From the client’s perspective From WEG’s perspective One Supplier, Several Client Products Several Suppliers, one Several Several Products, product each Products, One Markets, Industries and Salesperson Clients One-stop shop (largest electric motor line Greater synergy and efficiency of sales effort from a single manufacturer) Strong worldwide after sales support Reduced risk exposure (product, segment (services and parts) and client) Product integration in systems and solutions 16 J.P. Morgan LatAm Corporate Access Days June 2010
  • 17. Technological Innovation Capabilities Technology advances at fast pace, with WEG at the forefront Consistent R&D spending 2,5% 2,3% 2,5% 2,4% 2,3% Partnerships with best engineering 1,7% 1,8% 2,0% 2,0% schools in Brazil and in the world 1,6% 89 1,5% 86 83 Technical Committee meets semi- 73 63 annually to review latest developments in electrical theory and 30 34 applications 18 18 21 16 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 R&D Spending % Net Revenues More than 1.000 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) 17 J.P. Morgan LatAm Corporate Access Days June 2010
  • 18. Global Presence External Markets Revenues (US$ M) 1029 880 120 27 1980 1989 1998 2009 2007 18 J.P. Morgan LatAm Corporate Access Days June 2010
  • 19. Global Presence High-growth emerging markets represent almost 80% of business Revenue breakdown by region (2009) 11% 10% Europa América do Norte 5% Ásia e Oceania 66% 5% 3% América do Sul e Central África Brasil 19 J.P. Morgan LatAm Corporate Access Days June 2010
  • 20. Scale and Customization Customization is characteristic of the industry and specifications are very diverse. Most production is built to order 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 of Line Steel Shop electric motors Paints & Varnishes monthly Tooling 20 J.P. Morgan LatAm Corporate Access Days June 2010
  • 21. Profitability Net Earnings (R$ million) EBITDA (R$ million) 25% 23% 23% 22% 22% 1026 20% 20% 923 18% 18% 837 17% 15% 15% 12% 13% 666 575 560 548 503 487 504 403 394 375 308 03 04 05 06 07 08 09 03 04 05 06 07 08 09 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Net Income Net Margin EBITDA EBITDA Margin 21 J.P. Morgan LatAm Corporate Access Days June 2010
  • 22. Capacity Expansion Program Capex and Depreciation (R$ million) 457 Capex Depreciation 318 226 206 206 196 146 157 126 111 105 96 56 67 2003 2004 2005 2006 2007 2008 2009 22 J.P. Morgan LatAm Corporate Access Days June 2010
  • 23. Dividend Pay-out Policy Net Earnings and Dividends (R$ million) 54% 55% 52% 45% 43% 44% 40% 40% 39% 575 37% 560 548 35% 503 403 375 308 299 301 300 220 229 176 173 165 125 124 82 29 89 46 68 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Net Earnings Dividends Pay-out (%) 23 J.P. Morgan LatAm Corporate Access Days June 2010
  • 24. General Comments on Q1 2010 Quarter confirms that recovery is going to be gradual Economic dynamisms spreads from the Brazilian consumer towards other segments: Consumer goods continue strong, tied to fundamentals Industrial products doing better the closer they are to the consumer Longer cycle products is still in early stages of recovery Other emerging countries faring better than mature economies We are resuming some investment plans as demands picks up Production of HT motors in India by 2H of 2010; Production of commercial motors in Linhares by year end 24 J.P. Morgan LatAm Corporate Access Days Page 24 June 2010
  • 25. Quarterly Highlights Q1 2010 Q4 2009 Growth % Q1 2009 Growth % Gross Operating Revenue 1.131.546 1.306.913 -13,4% 1.270.984 -11,0% Domestic Market 801.299 871.619 -8,1% 802.351 -0,1% External Markets 330.247 435.299 -24,1% 468.632 -29,5% External Markets in US$ 181.170 250.328 -27,6% 202.726 -10,6% Net Operating Revenue 931.907 1.076.969 -13,5% 1.048.241 -11,1% Gross Operating Profit 307.454 344.226 -10,7% 311.954 -1,4% Gross Margin 33,0% 32,0% 29,8% Quarterly Net Income 119.074 136.426 -12,7% 122.193 -2,6% Net Margin 12,8% 12,7% 11,7% EBITDA 181.750 228.548 -20,5% 181.112 0,4% EBITDA Margin 19,5% 21,2% 17,3% Figures in R$ Thousands 25 J.P. Morgan LatAm Corporate Access Days Page 25 June 2010
  • 26. Financing Policies March 2010 December 2009 March 2009 CASH & EQUIVALENT 1.962.538 2.127.117 1.815.164 DEBT 1.782.466 1.872.533 2.099.941 - Current 814.274 895.885 1.171.587 - Long Term 968.192 976.648 928.354 NET CASH (DEBT) 180.072 254.584 (284.777) Operating cash flow trends continue favorable Capex program picking up where demand is stronger Strong capital structure allows access to low cost sources of funding BNDES (Brazilian development bank) is the main partner Negotiating first transaction with IFC Trade finance at very attractive terms Foreign subs financed locally but considering consolidated balance sheet Virtually no net foreign currency exposure Extending average maturities of debt at lower costs 26 J.P. Morgan LatAm Corporate Access Days Page 26 June 2010
  • 27. Gross Operating Revenues Evolution of Gross Revenues – Domestic Market (in R$ million) 5% 0% Gross Operating Revenues 22% decreasing by 11%. Net Revenues 23% down by 11.1% 761 802 801 FX appreciation of 27% negatively 623 507 impacts comparisons Product mix continues to shift Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 towards short cycle products Evolution of Gross Revenues – External Market (in US$ million) Lower order intake during 2009 is External Market in US$ now apparent in revenues Quarterly Average FX Recovery continues driven by the 2,1875 2,1066 2,3117 1,7354 1,8229 Brazilian consumer 30% 18% -11% Long cycle and external (mature) 29% markets continue soft. 195,3 202,7 181,2 165,2 126,6 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 27 J.P. Morgan LatAm Corporate Access Days Page 27 June 2010
  • 28. Global Presence Gross Revenues Breakdown: Q1 2010 9% 10% Europe North America 3% 7% Asia & Oceania 71% 5% 2% Brazil Africa South & Central America 28 J.P. Morgan LatAm Corporate Access Days Page 28 June 2010
  • 29. Profitability 36% 37% 36% 33% 30% 22% 24% 23% 17% 20% 293 320 312 307 238 193 203 181 182 149 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Gross Profit Gross Margin EBITDA EBITDA Margin 18% 16% Gross margin improving, despite little 14% 12% 13% help from top line growth EBITDA margin trending towards the floor of the historical interval Net margin showing more modest 118 129 126 122 119 improvement, benefiting from FX stability Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Net Income Net Margin 29 J.P. Morgan LatAm Corporate Access Days Page 29 June 2010
  • 30. Growth and Margin Analysis Revenues Growth (CAGR) Profitability (EBITDA Margins) 30,0% 30% 23,9% 2004‐2009 2009‐2012E 25,0% 25% 20,0% 20% 15,0% 12,6% 9,6% 10,1% 15% 10,0% 6,0%6,6% 5,1% 10% 5,0% 2,6% 2,6% 0,0% 5% ‐5,0% 0% ‐4,2% 2004 2005 2006 2007 2008 2009 ‐10,0% WEG SIEMENS EMERSON ABB SCHNEIDER WEG SIEMENS EMERSON ABB SCHNEIDER Financial Leverage (Net Debt / EBITDA 2009) 1,50  1,10  1,00  1,00  0,80  0,50  ‐ ‐0,50  ‐0,30  ‐1,00  ‐1,50  ‐1,50  ‐2,00  WEG SIEMENS EMERSON ABB SCHNEIDER Source: Morgan Stanley 30 J.P. Morgan LatAm Corporate Access Days June 2010
  • 31. Our Business 31 J.P. Morgan LatAm Corporate Access Days June 2010
  • 32. 32 J.P. Morgan LatAm Corporate Access Days June 2010
  • 33. Electric Motors Fractional (commercial use) Motors • NEMA Motors, Single and Three Phase up to 3.7kW (5HP) Applications: * Pumps * Compressors * General Purpose * Air Conditioning * Explosion Proof * Pool and Spa * Others 33 J.P. Morgan LatAm Corporate Access Days June 2010
  • 34. Electric Motors Low Voltage Industrial Motors • Three phase TEFC / ODP motors / output ratings up to 1200kW (1650HP) Types: * General Purpose * Explosion Proof * Brake Motors * Inverter Duty * Saw Arbor * Pump Motors * Others • Single Phase TEFC / ODP motors / output up to 9.2kW (12.5HP) Types: * General Purpose * Farm Duty * Multi-Mounting Aluminum frame motors * Appliance Motors * Ventilation / Others 34 J.P. Morgan LatAm Corporate Access Days June 2010
  • 35. 35 J.P. Morgan LatAm Corporate Access Days June 2010
  • 36. Automation Switch and Control Gear • Molded case circuit breakers • Contactors and overload relays • Motor circuit breaker • Push buttons and signalling units • D and NH fuses • Timers and electronic protectors • Thermoplastic and metal cased starters • Run capacitors for motors and light system • Power factor correction capacitors 36 J.P. Morgan LatAm Corporate Access Days June 2010
  • 37. Automation Drives and Soft Starters • LV VFD’s in outputs up to 4000HP • MV VFD’s in outputs upt to 8000HP • LV & MV Soft-starters in outputs up to 3000HP • Servoconverters and Servomotors • Converters and AC/DC drives, outputs up to 3000HP 37 J.P. Morgan LatAm Corporate Access Days June 2010
  • 38. 38 J.P. Morgan LatAm Corporate Access Days June 2010
  • 39. Energy Medium and High Voltage Motors • Three Phase TEFC / ODP Induction Motors - Master Line, frames from 280 to 1800, voltages up to 15kV; - H Line, enclosed, frames from 315 to 630, voltages from 220V to 11kV; - DC Motors, frames up to 1800. Applications: * Mining * Sanitation * Steel Plants * Cement * Pulp and Paper * Petrochemical * Cooling Systems 39 J.P. Morgan LatAm Corporate Access Days June 2010
  • 40. Energy Generators • Large size generators - Turbogenerators, outputs up to 80,000 kVA, voltages up to 15kV - Hydrogenerators, outputs up to 200,000 kVA, voltages up to 15kV • Generator for generator sets up to 4200kVA • LV/MV control and distribution boards, MV panels 40 J.P. Morgan LatAm Corporate Access Days June 2010
  • 41. 41 J.P. Morgan LatAm Corporate Access Days June 2010
  • 42. Transmission & Distribution Transformers • Oil: Power - Outputs up to 300 MVA, voltage classes up to 550 kV Industrial - Outputs from 500 to 5000 kVA, voltage classes 15; 24.2 or 36.2 KV Distribution - Outputs from 30 to 300 kVA, voltage classes 15 or 24.2 kV • Dry: Outputs from 300 to 15,000 kVA, voltage classes 15; 24.2 or 36.2 kV Substations • Stationary - Up to 550 kV • Mobile - Up to 145 kV 42 J.P. Morgan LatAm Corporate Access Days June 2010
  • 43. 43 J.P. Morgan LatAm Corporate Access Days June 2010
  • 44. Manufacturing Plants: Brazil JARAGUÁ DO SUL - SC JARAGUÁ DO SUL - SC GUARAMIRIM - SC BLUMENAU - SC ITAJAÍ - SC JOAÇABA - SC MANAUS - AM GRAVATAÍ - RS HORTOLÂNDIA - SP SÃO BERNARDO DO CAMPO - SP *LINHARES - ES *New factory (from Nov. 2010 on) 44 J.P. Morgan LatAm Corporate Access Days June 2010
  • 45. Manufacturing Plants: Outside Brazil ARGENTINA - San Francisco ARGENTINA - Córdoba PORTUGAL - Maia PORTUGAL - Maia MEXICO - Huehuetoca MEXICO - Huehuetoca MEXICO - Tizayuca CHINA - Nantong INDIA - Hosur - Under construction 45 J.P. Morgan LatAm Corporate Access Days June 2010
  • 46. Certifications 46 J.P. Morgan LatAm Corporate Access Days June 2010
  • 47. Quality Certifications ISO 9001:2008 Certificate Number: BR229182 ISO 14001:2004 Certificate Number: BR229183/A 47 J.P. Morgan LatAm Corporate Access Days June 2010
  • 48. References - OEM Ventilation 48 J.P. Morgan LatAm Corporate Access Days June 2010
  • 49. References - OEM Pumps 49 J.P. Morgan LatAm Corporate Access Days June 2010
  • 50. References - OEM Compressors 50 J.P. Morgan LatAm Corporate Access Days June 2010
  • 51. References: Oil & Gas 51 J.P. Morgan LatAm Corporate Access Days June 2010
  • 52. References:OEM‘s and End Users 52 J.P. Morgan LatAm Corporate Access Days June 2010
  • 53. References - Engineering Companies 53 J.P. Morgan LatAm Corporate Access Days June 2010