Investor Relations Presentation. Fernando de Noronha - PE

Transcription

1 Investor Relations Presentation Fernando de Noronha - PE

2 WEG is a global company headquartered in Brazil One of the world s largest manufacturers of electric-electronic equipment Stock exchange 53 % of the products sold in 2017 were released in the last 5 years R$ 9.5billion in net revenues (2017) WEGE3 WEGZY Indices R$ 38billion in market cap (March 2018) 1millionm² Largest manufacturing site for LV electric motors in the World Sales to 135 countries Distributors in 90countries 29,000 employees (2017) globally 60,000 motors produced per day 40 Manufacturing sites in 12 countries 5 continents 2,600 engineers 1

3 Best way to invest in fast growing global energy efficiency and renewable energy generation businesses n 1 2 n 3 n 4 n 5 n One of the highest growth capital goods companies; number one or number two in all product lines in Latin America Unique business model is based on vertical integration, production flexibility and technological innovation Diversified product lines allows strong growth across different market cycles We have a history of achieving CAGR of 17% over past 20 years through organic growth and accretive acquisitions WEG Long Term Strategic Plan aims for continuous and sustainable growth through international and product line expansion 2

4 Our industry is undergoing major shifts Megatrends are creating changes in demand patterns and new business opportunities Energy and industrial efficiency Renewable energy Smart grid Electrical mobility Electric motors represent around 70% of all industrial consumption of electricity, or 25% of worldwide general electricity consumption; Electricity consumption is by far the largest component of total cost of ownership of electric motors (may exceed 95%) for industrial clients; Clear regulatory trend towards minimum levels of electric motor energy efficiency (lower needs to expand generation); Industrial productivity and energy management drives investments Global drive to lower GHG emissions; Renewables allow distributed generation, closer to consumption and requiring lower T&D infrastructure; Economic viability is highly dependent on scale. With correct price incentives, technology catches up with economics; Diversity of sources increases systems stability and energy availability. No energy is the most expensive energy of all Electricity distribution grid is evolving and becoming smarter ; All nodes of the system, from generation to consumptions (and everything in between) must be aware of conditions and able to respond to changes; Every existing electric product must evolve. There will be more sensors, more automation, more efficient generation and use of electricity; New products are being developed and change is just now starting Increasing urbanization adds to congestions and need of alternatives; GHG and other pollutants emitted by internal combustion engines powered vehicles are well above sustainable levels; Electricity is clearly a more efficient use of energy to power vehicles. Pure electric, hybrids and alternative fuels will grow faster than the market; Powertrain solutions are scalable to all vehicle types and sizes and to other transportation modes (WEG has commercially available solutions in maritime powertrains) 3

5 End to end of the wire The global solution in electric machines and automation for the industry and energy systems Generation Transmission Distribution Industrial use Electric traction Building Automation WEG s strategic vision is to provide complete and efficient solutions with a complete line of electrical machines, from the generation all the way to the consumption. This means that we want to continue to be a competitive supplier of electrical equipment for typical applications. For example, WEG is one the world's largest supplier of industrial electric motors used by OEM in the manufacturing pumps, compressors and industrial fans, the typical uses of such products. We also can use this production competitiveness and flexibility and our broad product line to integrate those products into a complete solutions. We can combine electric motors of several types and sizes with the drives and controls to create complex industry automation systems. Or complete solutions for electricity generation from renewable sources. Or complete energy substations for just about any use. Important to note that these systems are basically comprised of WEG manufactured products. This integrated approach based on competitive manufacturing capabilities has been the basis of our market presence and how we present ourselves to our clients and to the general market. 4

6 Strategic positioning WEG offers a complete range of electric products and systems with an integrated one-stop solution 5 Fractional Industrial High voltage Gear boxes Alternators Thermal Wind Solar Small hydro Power trafos Dry trafos Distribution trafos Substations Drives Controls Panels Motors Energy T&D Automation

7 Clear competitive advantages Unique business model creates important and defensible competitive advantages Vertical Integration Vertical integration allows production flexibility to competitively supply small batches of highly customized products that are matched to perfection to our customers needs. We do mass customization, not mass production. Financial Flexibility Financial flexibility allows WEG to pursue growth opportunities as they become available. These opportunities range from trivial, like raw materials procurement at attractive conditions, to strategic, like acquisitions. Innovation Diversification Our production flexibility allows us to target the markets (geographies, segments and products) that offer the best growth perspectives. It also allows us to target markets based on returns, not on our needs to occupy specialized production capacity. Modular Expansion Our production system is also based on modular expansion, avoiding idle capacity build up, maximizing returns on capital e lowering demand risks. Global Presence The diversity of our product offering also allows us to expand internationally, leveraging the expertizes we have developed into new markets and being a premier partner for our global customers 6

8 Innovation Products launched in the last 5 years (% of Net Revenues) Electric Motor Evolution 52,6% 55,7% 61,7% 63,2% 69,1% 65,1% 49,5% 50,2% 55,6% 53,4% Evolution Efficiency of the W22 Platform Ref: Motor 60HP 4p Research/Test laboratories BRAZIL 21 ABROAD 11 Research & Development Employees 1, *20% less losses compared to IE4 (IE5 is not yet included in the IEC standard) Full-time Part time 7

9 WEG business Diversified product line allows for strong growth across different market cycles External Markets 15% Domestic Market 54% 35% 4Q17 6% 4% 46% 6% 1% 12% 21% Industrial Electro- Electronic Equipment Energy Generation, Transmission, and Distribution (GTD) Motors for domestic use Paints and Varnishes 8

10 Solid growth track record Business model allows us to find and explore growth opportunities, even under unfavorable macroeconomic conditions 30% 25% Domestic Market External Markets 9,760 9,367 9,524 20% 15% 10% 5% y = x R² = % 0% 10% 20% 30% 40% 50% 60% 70% 2, ,066 1,282 1,694 45% 24% 25% 28% 34% 34% 38% 40% 44% 76% 75% 72% 66% 66% 62% 60% 56% 55% CAGR 16.7% 2,515 3,009 3,749 42% 44% 58% 56% 59% 4,502 4,211 4,392 41% 41% 40% 5,189 39% 44% 6,174 6,829 51% 50% 7,841 51% 57% 57% 56% 59% 60% 61% 56% 49% 50% 49% 43% 43% 44% EBITDA (R$ million) and EBITDA Margin Net Income (R$ million) and Net Margin 23.5% 22.5% 24.1% 22.8%22.5% 20.7% 21.2% 21.5% 22.4%22.7% 20.5% 19.3% 18.1% 18.4% 18.0%16.4%16.5% 18.0% 17.2% 15.1%15.0%15.4% CAGR 15.8% , ,017 1,230 1,345 1,478 1,407 1, % 12.6% % % 16.5%17.2%18.2%18.3% 14.9%16.7% 15.3% 13.1% 12.4% 13.0% 11.8% 11.3%10.6% 12.4%12.2%11.8%11.9%12.0% CAGR 17.2% ,156 1,118 1,142 9

11 Strong operating returns and disciplined capital allocation Resulting in stable above average ROIC over time 13,5% 14,7% 15,9% 14,3% 13,6% 13,5% 13,7% 15,4% 12,1% 11,8% 10,4% 10,0% 10,3%

12 Margin dynamics Margins are the result of product mix and product pricing conditions, and tend to track global economic cycle Average Margin Product Pricing Product Mix 11

13 WEG long term strategic Plan Corporate aspiration of continuous and sustainable growth, aiming for historical growth rates with a disciplined approach to organic and non organic expansion CAGR 17.9% Non Organic & Organic 24% -4% 2% 18% 19% 11% 15% 4,392 5,189 6,174 6,829 7,841 9,760 9,367 9,524 20,

14 Growth drivers The growth opportunities identified can be separated into three distinct categories/growth strategies Our products / markets enjoy fairly healthy organic growth trends. For example, the global market for industrial use electric motors is independently estimated to grow 5% to 10% per year. If we are able to maintain our market positions, either leadership and / or strong brand recognition, we will be in position that advantage of this healthy growth dynamics; More and Better We will continue to expand into new geographies, initially with industrial electric motors. As we have established market positions and/or recognized brands, we will leverage those to synergistically expand the product line. International Expansion New Businesses We will also continue to expand the product line into business / products that complement the offering and allows us to offer our clients more complete and efficient solutions. 13

15 Portfolio strategy Clear vision of attractiveness of opportunities and of the strategic fit Market Access CG Power USA June December Technology 14

16 Revenue profile Europe 11% 15% North America 10% 23% Asia & Oceania 4% 5% South & Central America 6% 8% Brazil 65% 44% Africa 3% 5% % Industrial plants Commercial brands 31% % % 65% 28% Produced and sold in Brazil Produced in Brazil and exported Produced and sold abroad 15

17 Use of cash Capex (R$ million) Net Earnings and Dividends (R$ million) 10.2% % of Net Revenues 54% 55% 59% 58% 57% 55% 55% 51% 52% 53% % 5.3% % % 4.8% % % ,156 1,118 1, % Working Capital (% of Net Revenues) Net Earnings Dividends Pay-out (%) Research & Development (R$ million) % of Net Revenues 40% 30% 20% 10% Working Capital Clients Inventories Suppliers Advances 2.0% 2.0% % % % % % 2.9% % 2.7% % 16

18 Capital markets information Issuer Ticker WEG S.A. WEGE3 (B3) / WEGZY (OTC ADR Level 1) Listing Segment Novo Mercado (since 2007) Number of Shares Share price Market value Liquidity (average daily volume) Composition of Free Float Issued: 1,614,353,076 In treasury: 1,310,021 Ex-treasury: 1,613,043,055 On Dec 28, 2017 : R$ On March 2, 2018 : R$ On Dec 28, 2017 : R$ 38.9 billion On March 2, 2018 : R$ 37.4 billion In 2017: R$ 36,638 thousand / day In 2018: R$ 45,750 thousand / day 55% - Foreign institutions 03% - Brazilian institutions 42% - Others (individuals, etc.) 17

19 Shareholding structure Voigt 33.3% Silva 33.3% Werninghaus 33.3% Founders Families (directly) WPA Participações e Serviços S/A Treasury and Management Free Float 14% 50% 1% 35% WEG S.A. 18

20 Investor Relations Contacts Paulo Polezi Finance and Investor Relations Officer 55 (47) André Salgueiro Investor Relations Manager 55 (47) twitter.com/weg_ir

21 Highlights Yearly Figures % 2015 % Return on Invested Capital 15.4% 13.7% 12.4% 13.5% 14.1% Net Operating Revenue 9,523,830 9,367, % 9,760, % Domestic Market 4,203,680 4,002, % 4,227, % External Markets 5,320,150 5,364, % 5,533, % External Markets in US$ 1,665,587 1,540, % 1,654, % Net Income 1,142,149 1,117, % 1,156, % Net Margin 12.0% 11.9% 11.8% EBITDA 1,466,287 1,406, % 1,477, % EBITDA Margin 15.4% 15.0% 15.1% EPS (adjusted for splits) % % Figures in R$ Thousands 20

22 Highlights Quarterly Figures Q Q % Q % Return on Invested Capital 15.4% 15.0% 2.7% 13.7% 12.4% Net Operating Revenue 2,673,747 2,435, % 2,377, % Domestic Market 1,231,995 1,008, % 1,069, % External Markets 1,441,752 1,426, % 1,308, % External Markets in US$ 444, , % 397, % Net Income 300, , % 323, % Net Margin 11.2% 12.8% 13.6% EBITDA 376, , % 400, % EBITDA Margin 14.1% 16.0% 16.9% EPS % % Figures in R$ thousands 21

23 Highlights Balance sheet assets December 2017 December 2016 December 2015 (A) (B) (C) R$ % R$ % R$ % (A)/(B) (A)/(C) CURRENT ASSETS 9,415,667 67% 9,127,483 68% 9,589,344 67% 3% -2% Cash & cash equivalents 4,573,731 33% 4,763,949 35% 4,434,759 31% -4% 3% Receivables 2,242,613 16% 2,251,922 17% 2,545,927 18% 0% -12% Inventories 1,852,266 13% 1,575,055 12% 2,009,254 14% 18% -8% Other current assets 747,057 5% 536,557 4% 599,404 4% 39% 25% LONG TERM ASSETS 443,844 3% 397,383 3% 619,206 4% 12% -28% Deferred taxes 148,284 1% 130,291 1% 131,327 1% 14% 13% Other non-current assets 295,560 2% 267,092 2% 487,665 3% 11% -39% FIXED ASSETS 4,126,476 30% 3,984,465 29% 4,052,991 28% 4% 2% Investment in Subs 268 0% 223 0% 1,379 0% 20% -81% Property, Plant & Equipment 3,160,111 23% 3,032,716 22% 3,264,898 23% 4% -3% Intangibles 966,097 7% 951,526 7% 786,714 6% 2% 23% TOTAL ASSETS 13,985, % 13,509, % 14,261, % 4% -2% Figures in R$ thousands 22

24 Highlights Balance sheet liabilities December 2017 December 2016 December 2015 (A) (B) (C) R$ % R$ % R$ % (A)/(B) (A)/(C) CURRENT LIABILITIES 4,326,788 31% 3,278,855 24% 3,494,850 25% 32% 24% Social and Labor Liabilities 211,062 2% 199,543 1% 191,077 1% 6% 10% Suppliers 750,533 5% 562,851 4% 566,769 4% 33% 32% Fiscal and Tax Liabilities 102,944 1% 125,062 1% 121,461 1% -18% -15% Short Term Debt 2,014,530 14% 991,433 7% 1,284,633 9% 103% 57% Dividends Payable 160,892 1% 191,365 1% 172,484 1% -16% -7% Advances from Clients 429,258 3% 577,688 4% 486,225 3% -26% -12% Profit Sharring 138,788 1% 124,764 1% 143,897 1% 11% -4% Derivatives 12,845 0% 37,519 0% 1,438 0% -66% 793% Other Short Term Liabilities 505,936 4% 468,630 3% 526,866 4% 8% -4% LONG TERM LIABILITIES 2,815,892 20% 4,159,644 31% 4,610,631 32% -32% -39% Long Term Debt 2,041,912 15% 3,408,892 25% 3,868,335 27% -40% -47% Other Long Term Liabilities 150,390 1% 157,147 1% 159,632 1% -4% -6% Deferred Taxes 116,629 1% 159,203 1% 242,696 2% -27% -52% Contingencies Provisions 506,961 4% 434,402 3% 339,968 2% 17% 49% MINORITIES 122,381 1% 107,958 1% 126,680 1% 13% -3% STOCKHOLDERS' EQUITY 6,720,926 48% 5,962,874 44% 6,029,380 42% 13% 11% TOTAL LIABILITIES 13,985, % 13,509, % 14,261, % 4% -2% Figures in R$ thousands 23

25 Highlights Cash flow statement 12 Months 12 Months Operating Activities Net Earnings before Taxes 1,240,448 1,279,514 Depreciation and Amortization 283, ,257 Provisions: 505, ,671 Changes in Assets & Liabilities (739,360) 151,470 (Increase) / Reduction of Accounts Receivable (104,889) 89,449 Increase / (Reduction) of Accounts Payable (107,770) 219,710 (Increase) / Reduction of Investories (172,271) 276,537 Income Tax and Social Contribution on Net Earnings (167,250) (244,334) Profit Sharing Paid (187,180) (189,892) Cash Flow from Operating Activities 1,290,136 2,130,912 Investment Activities Fixed Assets (254,955) (325,504) Intagible Assets (10,822) (37,121) Results of sales of fixed assets 11,694 13,611 Results of sales of intangible 3,760 - Rescue of financial investments 144, ,948 Financial investments held to maturity - (923,039) Income on financial investments (182,690) (174,338) Cash Aquired from Subsidiaries 1,154 4,014 Aquisition of Subsidiaries (95,828) (292,301) Cash Flow From Investment Activities (382,756) (852,730) Financing Activities Working Capital Financing 1,161,890 1,142,860 Long Term Financing (1,403,289) (1,279,654) Interest paid on loans and financing (357,638) (405,540) Treasury Shares (5,468) 5,145 Dividends & Intesrest on Stockholders Equity Paid (548,502) (526,730) Cash Flow From Financing Activities (1,153,007) (1,063,919) Changes in Cash and Equivalents caused by FX Changes 17,650 (100,716) Change in Cash Position (227,977) 113,547 Cash & Cash Equivalents Beginning of Period 3,390,662 3,277,115 End of Period 3,162,685 3,390,662 Figures in R$ thousands 24

26 Highlights Balance sheet debt and cash position December 2017 December 2016 December 2015 Cash & Financial instruments 4,755,885 4,948,613 4,813,700 - Current 4,585,606 4,779,392 4,442,278 - Long Term 170, , ,422 Debt 4,110, % 4,489, % 5,170, % - Current 2,027,375 49% 1,028,952 23% 1,286,071 25% - In Brazilian Reais 1,300, , ,990 - In other currencies 727, , ,081 - Long Term 2,082,707 51% 3,460,746 77% 3,884,583 75% - In Brazilian Reais 457,386 1,925,350 1,751,352 - In other currencies 1,625,321 1,535,396 2,133,231 Net Cash (Debt) 645, ,915 (356,954) Figures in R$ thousands 25