WEG 2Q09 Earnings Conference Call Presentation

Conference Call Results 2Q09

July 27th, 2009

July 27th, 20092Q09 Conference Call

Disclaimer

The statements that may be made during this conference call relating to WEG’s business perspectives, projections and operating and financial

goals

and to WEG’s potential future growth are management beliefs and expectations, as well as information that are currently available.

These statements involve risks, uncertainties and the use of assumptions, as they relate to future events and, as such, depend on circumstances that may or may not be present.

Investors should understand that the general economic conditions, conditions of the industry and other operating factors may affect WEG’s future performance and lead to results that may differ materially from those expressed in such future considerations.


General Comments on 2Q09 Very difficult market conditions

Revenue growth for the semester, but quarterly comparison shows decline:

“White goods” with strong reboundIndustrial equipment with no recoveryGTD with order backlog

Gross margin impacted by:Lower capacity occupancyRevenue mixPricing pressuresRemaining effect of raw materials costs

Growth estimates seem out of reach

Positive highlights Administrative expenses control Working capital and cash management


Quarterly Highlights

2Q09 2Q08 Growth %Gross Operating Revenue 1,250,193 1,331,012 -6.1% Domestic Market 808,355 924,701 -12.6% External Markets 441,838 406,311 8.7%

External Markets in US$ 213,396 245,822 -13.2%

Net Operating Revenue 1,029,945 1,095,815 -6.0%Gross Operating Profit 294,175 392,025 -25.0%Gross Margin 28.6% 35.8%Quarterly Net Income 129,670 169,855 -23.7%Net Margin 12.6% 15.5%EBITDA 172,925 253,729 -31.8%EBITDA Margin 16.8% 23.2%

Figures in R$ Thousands


Evolution of Gross Revenues –

Domestic Market(in R$ million)

Gross and Net Operating Revenues decreasing by 6%

Quarter had a stronger comparison base, without the distortions of the 1T08

FX favors R$ denominated growth comparisons

Industrial production slowing down and capital goods production slowing even faster

Global crises impacts across all markets

Diversification across markets / segments / clients minimizes but does not eliminate recession

Evolution of Gross Revenues –

External Market (in US$ million)

Gross Operating Revenues

481,1

701,0

924,7808,4

525,1

34%

32%

9%

-13%

2Q05 2Q06 2Q07 2Q08 2Q09

115,9154,2

210,8245,8 213,4

-13%17%

37%

33%

2,4774 2,1902 1,9807 1,6529 2,0705

2Q05 2Q06 2Q07 2Q08 2Q09

External Market in US$

Quarterly Average FX


7%

Global Presence and Business Areas

Gross Revenues Breakdown –

2Q09

Domestic market grew in importance again, despite FX rate (end of strong R$ distortion)

Rest of the World grows faster than North America and Europe

GTD continues strong with order backlog. Industrial equipment impacted by crises

65%

Brazil

10%

North America

5%

South & Central America

12%

Europe

5%

Asia & Oceania

4%

Africa

629768

8631.331

48%

57%58%

61%62%

33%25%

21%

18%12%

9%12%13%

17%21%

5%5%

6%

6%6%

1.119

2Q05 2Q06 2Q07 2Q08 2Q09Industrial Equipment GTD Domestic Use Paints & Varnishes


Cost of Goods Sold

Lower capacity occupancy

Revenue mix

Pricing pressures

Remaining effect of raw materials costs

Depreciation5%

Other Costs29%

Steel & Coper46%

Other Materials20%

2T09

Other Materials18%

Steel & Coper45%

Other Costs31%

Depreciation6%

2T08


Lower gross margin with lower occupancy, product mix, pricing pressures and raw material costs

EBITDA margin shows smaller decline

Net income benefits from more stable FX rate

Profitability

200254

368 392

294

31%35%

40%36%

29%

2Q05 2Q06 2Q07 2Q08 2Q09

Gross Profit Gross Margin

118

154

238254

173

18% 21%26% 23%

17%

2Q05 2Q06 2Q07 2Q08 2Q09EBITDA EBITDA Margin

79

120

151170

130

12%16% 16% 16% 13%

2Q05 2Q06 2Q07 2Q08 2Q09

Net Income Net Margin


Working capital shows improving trend

Operating cash flow generation being used to pay down short term debt

Foreign currency exposure nearly eliminated (below maximum limit of 3 months of exports equivalent)

Financing Policies

June 2009 December 2008 June 2008CASH & EQUIVALENT 1,806,997 1,849,477 1,802,142 DEBT 1,811,906 2,161,216 1,634,459 - Current 1,044,633 1,314,098 1,009,095 - Long Term 767,273 847,118 625,364 NET CASH (DEBT) (4,909) (311,739) 167,683


Capacity Expansion Investments

66.0

96.8109.9 103.4

71.847.8

24.020.5 24.8

77.8

120.8130.4 128.2

91.9

63.511.820.1

15.7

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09

Outside Brazil

Brazil


Alidor Lueders

CFO & IRO

[email protected]

Luís Fernando M. Oliveira

Investor Relations Manager

+55 (47) 3276-6973

[email protected]

[email protected]

MSN Messenger

[email protected]

www.weg.net/ir

Contacts

twitter.com/weg_ir

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WEG 2Q09 Earnings Conference Call Presentation

Investor Relations

Transcript of WEG 2Q09 Earnings Conference Call Presentation