2010 06 21 j.p. morgan latam corporate access days (london)

Motors | Automation | Energy | Transmission & Distribution | Paints

June 2010 J.P. Morgan LatAm Corporate Access Days

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

DisclaimerThe 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.


WEG key

facts

47%

34%

13%

6%

Industrial Equipment

GTD

Domestic Use

Paints & Varnishes

Revenue by business area

Employees

About WEG

Market leader in Latin America and among top 5 electric motor players in the world

Over 21thousands employees (2.5 thousands outside Brazil)

Around 35% of business outside Brazil

Revenues CAGR of 19% over past 15 years

2009

Revenues: US$ 2.8 billion

19.537 employees worldwide

EBITDA: US$ 465 million

Net earnings: US$ 305 million

Strong balance sheet, unaffected by financial crisis


Global Presence

Distributors & Agents in over 85 countries

Over 1100 Service Centers covering all 5 continents

Sales to over 110 countries

Factories in 5 countries

Commercial branches in 22 countries


Founded

on

September

16th, 1961

History of WEG


Shareholding

structure

ControllingShareholders

34.7%50.9% 14.4%

WEG S.A.

Voigt33.3%

Silva33.3%

Werninghaus33.3%

Other (Float)

WEG

Participações e

Serviços S/A

Founders’

Families(directly)

Clear and strong control group that knows the business but is not directly involved on day to day operations


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

Corporate Governance Practices


Diversification as Core Value

Motor

Generator

Transformer

Electronic Components

Electric Components

Motor Control Panel

Distribution Panel

Energy Generation

Energy Substations

Industrial Process Automation

Services

Industrial Application Paints and Varnishes

Integration allows for synergy gains and reduces business cycle risk


Products

ConsumerMarkets

Focus

PerformanceDrivers

Business areasIndustrial

Paints and Varnishes

Motors for Domestic Use

Generation, Transmission

and Distribution

Electro-Electronic Industrial

Equipments

Americas

Low and medium tension electric

motors, industrial automation

equipments and services

Hydro, thermal (natural gas, biomass and other) and wind

generators, transformers, control panels, automation

services

Single phase electric motors

Liquid and powdered

paints, electro-

isolating varnishes

Capital goods OEMs (pumps,

compressors, machines) and end-

users (steel, mining, pulp & paper, oil &

gas, ethanol)

Global

Generation, transmission and

distribution concessionaries, co-

generation, industrial

clients

Growing investments in energy generation

“White goods”

OEMs (washing machines,

HVAC*), water pumps, lawn mowers, etc

Disposable income, supply of credit and level of interest rates

Latin America

General industrial and

specialty applications

(shipbuilding, aggressive

environments)

Brazilian GDP growth

Brazil

Industrial Production growth and

Investments in Fixed Capital (capex)


Business Units

MOTORS ENERGYAUTOMATION

COATINGSTRANSMISSION

& DISTRIBUTION

Complete solutions that increase perceived value by the client


106

135

146 20

7 291 32

7

435 48

7

666

1.02

6

837

8480

504

923

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

CAGR 18%

430

458

574

632 753 96

3 1.26

9

1.53

5 2.01

5 2.60

3 2.97

8 3.52

7

5.11

1

4.55

1

5.47

11995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

CAGR 19%

41 58

98

82

125

176

220

308

403

379

503

575

548

31

560

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

CAGR 23%14

% 16%

22%

33%

23%

31%

38%

38%

44% 47

%

37%

31%

25%

33%

37%

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

Consistent and profitable growth

Net Earnings (R$)

Gross Revenues (R$) EBITDA (R$)

Return on Equity

Cycles are diversified away, allowing focus on profitable opportunities


Strong fundamental trendsEnergy prices will continue to increase

Cheaper energies are becoming less available

Concerns about sustainability (climate change)

Cleaner energies are technologically intensive

Oil prices (US$)

‐

10

20

30

40

50

60

70

80

90

100

1970 1980 1990 2000 2010 Partial


Strong fundamental trends

Energy efficiency

Cleaner Energy Sources

Industrial electric motors represent around 25% of global electricity consumption

Most efficiency “bang” for the Capex “buck”

Lower CO2emissions

Economic viable alternatives fuels

Secular trend of increasing energy prices is shifting industrial electric equipment environment


Unique Product Characteristics

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

Cost of ownership of an electric motor throughout its useful life


WEG is Uniquely Positioned


Diversified and Synergistic Offering

Product integration in systems and solutions

ClientOne Supplier,

Several Products

Several Suppliers, one product each

Product diversification increases competitiveness and added value…

Strong worldwide after sales support

(services and parts)

From the client’s perspective

One-stop shop (largest electric motor line from a single manufacturer)

Several Products, Markets, Industries and

Clients

Several Products, One Salesperson

Greater synergy and efficiency of sales effort

Reduced risk exposure (product, segment and client)

…while reduces costs and diversify risks

From WEG’s perspective


Technological Innovation Capabilities

Consistent R&D spending Partnerships with best engineering schools in Brazil and in the world Technical Committee meets semi-annually to review latest developments in electrical theory and applications

+Innovative use of technology for general purpose motorsHigher energy efficiency (lower consumption per output)Lower working temperature and noise levelsSmaller size (lower material consumption)

Technology advances at fast pace, with WEG at the forefront

More than 1.000 engineers developing products, such as Wmagnet

16 18 18 21

6373

86 8983

30 34

2,4%2,3%

2,0% 2,0%

2,5%2,3%

1,7% 1,6%1,8%

1,5%

2,5%

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


27

120

1980 1989 1998 20072009

Global PresenceExternal Markets Revenues (US$ M)

880

1029


Global PresenceHigh-growth emerging markets represent almost 80% of business

66%

Brasil

10%

América do Norte

5%

América do Sul e Central

11%

Europa

5%

Ásia e Oceania

3%

África

Revenue breakdown by region (2009)


Scale and CustomizationCustomization is characteristic of the industry and specifications are very diverse. Most production is built to order

Main Manufacturing Plant in Jaraguá do Sul, SC

Integrated and synergetic production allows for large scale of production, with:

Lower costsHigher operating efficiency

Vertical integration allows for:Customized productsFastest to the market

Paints & Varnishes

Steel Shop

Foundry / Cast Machine

Wires Manufacturing

More than 2,500 different types of electric motors

monthlyTooling

Engi

neer

ing

Incoming Orders

Assembly Line

Largest integrated motor site in the world


1026

837

394

487 504

666

923

23% 23%

20%

22%

20%

22%

25%

2003

2004

2005

2006

2007

2008

2009

EBITDA EBITDA Margin

ProfitabilityNet Earnings (R$ million) EBITDA (R$ million)

548

308

403 375

503575 560

18%17%

13%

18%

15% 15%

12%

2003

2004

2005

2006

2007

2008

2009

Net Income Net Margin


Capex and Depreciation (R$ million)

Capacity Expansion Program

126

206

146111

457

226

56 6796 105

157

206 196

318

2003 2004 2005 2006 2007 2008 2009

CapexDepreciation


Net Earnings and Dividends (R$ million)

Dividend Pay-out Policy

82125

176220

375

575 560 548

68 89124

173 165

229

299 301 300308

403

503

29 46

45%

52% 54%

35%37%

39% 40% 40%43% 44%

55%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Net Earnings Dividends Pay-out (%)


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


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


Operating cash flow trends continue favorableCapex 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 partnerNegotiating first transaction with IFCTrade finance at very attractive termsForeign subs financed locally but considering consolidated balance sheet

Virtually no net foreign currency exposureExtending average maturities of debt at lower costs

Financing Policies

March 2010 December 2009 March 2009CASH & 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)


Evolution of Gross Revenues –

Domestic Market(in R$ million) Gross Operating Revenues

decreasing by 11%. Net Revenues down by 11.1%

FX appreciation of 27% negatively impacts comparisons

Product mix continues to shift towards short cycle products

Lower order intake during 2009 is now apparent in revenues

Recovery continues driven by the Brazilian consumer

Long cycle and external (mature) markets continue soft.

Evolution of Gross Revenues –

External Market (in US$ million)

Gross Operating Revenues

507623

761 802 801

23%22%

5% 0%

Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010

126,6 165,2 195,3 202,7 181,2

29%30%

18% -11%

2,1875 2,1066 1,7354 2,3117 1,8229

Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010

External Market in US$Quarterly Average FX


7%

Global PresenceGross Revenues Breakdown: Q1 2010

71%

Brazil

10%

North America

5%

South & Central America

9%

Europe

3%

Asia & Oceania

2%

Africa


Gross margin improving, despite little help from top line growth

EBITDA margin trending towards the floor of the historical interval

Net margin showing more modest improvement, benefiting from FX stability

Profitability

238293 320 312 307

36% 37% 36%30% 33%

Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010

Gross Profit Gross Margin

118 129 126 122 119

18% 16% 14% 12% 13%

Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010

Net Income Net Margin

149193 203 181 182

22% 24% 23%17% 20%

Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010

EBITDA EBITDA Margin


Growth and Margin Analysis

23,9%

5,1% 6,0%

9,6% 10,1%12,6%

‐4,2%

6,6%

2,6% 2,6%

‐10,0%

‐5,0%

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

WEG SIEMENS EMERSON ABB SCHNEIDER

2004‐2009 2009‐2012E

‐0,30

1,00 0,80

‐1,50

1,10

‐2,00

‐1,50

‐1,00

‐0,50

‐

0,50

1,00

1,50


0%

5%

10%

15%

20%

25%

30%

2004 2005 2006 2007 2008 2009


Revenues Growth (CAGR)

Financial Leverage (Net Debt / EBITDA 2009)

Profitability (EBITDA Margins)

Source: Morgan Stanley


Our Business


Electric 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

Fractional (commercial use) Motors


Electric 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

Low Voltage Industrial Motors


Automation

• Timers and electronic protectors

• Run capacitors for motors and light system

• Power factor correction capacitors

• Contactors and overload relays

• Motor circuit breaker

• Push buttons and signalling units

• D and NH fuses

• Thermoplastic and metal cased starters

• Molded case circuit breakers

Switch and Control Gear


Automation

• LV VFD’s in outputs up to 4000HP

• Servoconverters and Servomotors

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

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

• MV VFD’s in outputs upt to 8000HP

Drives and Soft Starters


Energy

• 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

Medium and High Voltage Motors


Energy

• Generator for generator sets up to 4200kVA

• 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

• LV/MV control and distribution boards, MV panels

Generators


Transmission & DistributionTransformers• 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


Manufacturing Plants: Brazil JARAGUÁ

DO SUL -

SC

MANAUS -

AM

GUARAMIRIM -

SC JARAGUÁ

DO SUL -

SC

ITAJAÍ

-

SC BLUMENAU -

SC

SÃO BERNARDO DO CAMPO -

SP HORTOLÂNDIA -

SP GRAVATAÍ

-

RS

JOAÇABA -

SC

*LINHARES -

ES

*New factory (from Nov. 2010 on)


MEXICO -

Huehuetoca

CHINA -

Nantong

MEXICO -

Tizayuca

PORTUGAL -

Maia

PORTUGAL -

Maia

INDIA -

Hosur -

Under construction

ARGENTINA -

Córdoba ARGENTINA -

San Francisco

MEXICO -

Huehuetoca

Manufacturing Plants: Outside Brazil


Certifications


Quality Certifications

ISO 14001:2004Certificate Number: BR229183/A

ISO 9001:2008Certificate Number: BR229182


References -

OEM Ventilation


References -

OEM Pumps


References -

OEM Compressors


References: Oil & Gas


References:OEM‘s and End Users


References -

Engineering Companies

2010 06 21 j.p. morgan latam corporate access days (london)

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