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.
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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
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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
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5. History of WEG
Founded on September 16th, 1961
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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.
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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
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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
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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)
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10. Business Units
Complete solutions that increase perceived value by the client
MOTORS AUTOMATION ENERGY
TRANSMISSION
& DISTRIBUTION COATINGS
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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
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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
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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
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15. WEG is Uniquely Positioned
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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
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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)
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18. Global Presence
External Markets Revenues (US$ M)
1029
880
120
27
1980 1989 1998 2009
2007
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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
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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
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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
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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
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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
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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
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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
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31. Our Business
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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
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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
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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
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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
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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
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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
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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
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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)
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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
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47. Quality Certifications
ISO 9001:2008
Certificate Number: BR229182
ISO 14001:2004
Certificate Number: BR229183/A
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48. References - OEM Ventilation
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49. References - OEM Pumps
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50. References - OEM Compressors
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51. References: Oil & Gas
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