2Q09 Investor Presentation

Motors | Automation | Energy | Paints

Investor PresentationQ2 2009

2 Q2 2009 Investor Presentation

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.


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


Industrial Paints and Varnishes

Motors for Domestic Use

Generation, Transmission and

Distribution

Electro-Electronic Industrial Equipments

Products

ConsumerMarkets

Focus

PerformanceDrivers

Business Areas

* Heating, Ventilation and Air Conditioning

Industrial Production growth and Investments in Fixed Capital (capex)

Americas

Low and medium tension electric motors, industrial automation equipments, electro-

electronic components

and services

Hydro, thermal (natural gas, biomass and other)

and wind generators, transformers, control

panels and 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, small

hydro power plants (PCH), 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


Revenues Breakdown

2.6032.978

3.527

4.551

5.471

50%56%

55%57%61%

63% 62%

34%26%

27%

23%

18%14%

10%10%13%

12%

14%

15%

18%21%

6%5%

5%

6%

6%

6%6%

2.5212.431

2004 2005 2006 2007 2008 06M08 06M09Industrial Equipment GTD Domestic Use Paints & Varnishes


Consistent and Profitable Growth

Net Earnings (R$)

Gross Revenues (R$) EBITDA (R$)

Return on Equity

41 58

98

82

125

176

220

308

403

379

503

575

31

560

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

CAGR 25%80 84 10

6

135

146 20

7 291 32

7

435 48

7

666

1.02

6

504

923

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

CAGR 22%

14% 16

%

22%

33%

23%

31%

38%

38%

44% 47

%

37%

31%33

%

37%

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

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

4.55

1

5.47

1

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

CAGR 20%


ControllingShareholders

31.4%51.1%14.5% 3.0%

Free Float

WEG S.A.

Founders’

Families(directly)

WEG Participações e Serviços S/A

Management

Voigt33.3%

Silva33.3%

Werninghaus33.3%

Shareholding Structure


2001 2002 2003 2004 2005 2006 2007

Adhesion to Bovespa’s “Nível

1”

Corporate

Governance Guidelines

PN shares granted 80%

Tag Along rights

Change of Independent

Auditor

Secondary offering on PN

shares to increase liquidity

Creation of Investor Relations

Department

Bylaws make Fiscal Council

permanent

Adhesion to Bovespa’s

“Novo Mercado”Corporate

Governance

Corporate Governance PracticesStrong 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


Uniquely Positioned WEG is at the intersect of strong long-term trends

Cleaner Energy Sources

Cleaner Energy Sources

Energy efficiency

Energy efficiency


WEG is Uniquely Positioned

Global Presence

Scale

and

Custo

miza

tion

Divers

ified a

nd

Syner

gistic

Produc

t

Line

Technological

Innovation Capabilities


Diversified and Synergetic Offering

Product integration in systems and solutions

One Supplier, Several

ProductsClient

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

Diversified and Synergetic Offering

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 motors

Higher energy efficiency (lower consumption per output)

Lower working temperature and noise levels

Smaller size (lower material consumption)

Technology advances at fast pace, with WEG at the forefront

More than 800 engineers developing products, such as Wmagnet

16 18 18 21

63

73

86 89

30 34

2,4%2,3%

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 2008R&D Spending % Net Revenues


Global PresenceGross Revenues Breakdown (1S09)

64%

Brazil

10%

North America

5%

South & Central America

11%

Europe

5%

Asia & Oceania

5%

Africa


External Markets Revenues (US$ M)

Develop market knowledge

Exports to more than 100 countries: Canada, South Africa

Own commercial and distribution structures in large and growing markets

US, Chile, Colombia, Venezuela; England, France, Belgium, Germany, Italy, Spain, Sweden, Australia, India, Japan, Singapore, UAE and Russia

Service fast growing regional markets

Mexico, Portugal, Argentina and China

Local Reps and Distributors

Sales Subsidiaries

Production Facilities

1029

27

120

1980 1989 1998 20072008

Global Presence


Unique Product Characteristics Hours of Daily Use 12 16 24 24

Days of Monthly Use 22 22 22 30

Nominal Power Hp 50,0 50,0 50,0 50,0

Nominal Power kilowatts 37,3 37,3 37,3 37,3

Energy Efficiency % 92,5% 92,5% 92,5% 92,5%

Energy Consumption Kilowatts 40,3 40,3 40,3 40,3

Monthly Use Hours 264 352 528 720

Monthly Energy Consumption kW/h / month 10.641 14.188 21.283 29.022

Cost of Electricity R$ / kW/h 0,15 0,15 0,15 0,15

Energy Operating Cost R$ per Month 1.596 2.128 3.192 4.353

List Price R$ 5.358 5.358 5.358 5.358

Price / Operating Cost Ratio Months 3,36 2,52 1,68 1,23

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

1,4% 1,6%

97,0%

Acquisition Maintenance EnergyConsuption

Costs during useful life


Customization is characteristic of the industry and specifications are very diverse

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 monthly

Tooling

En

gin

eeri

ng

Incoming Orders

Assembly Line

Largest integrated motor site in the world

Scale and Customization


Second Quarter 2009 Highlights

2T09 1T09 % 2T08 %Gross Operating Revenue 1.250.193 1.270.984 -1,6% 1.331.012 -6,1% Domestic Market 808.355 802.351 0,7% 924.701 -12,6% External Markets 441.838 468.632 -5,7% 406.311 8,7%

External Markets in US$ 213.396 202.726 5,3% 245.822 -13,2%

Net Operating Revenue 1.029.945 1.048.241 -1,7% 1.095.815 -6,0%Gross Operating Profit 294.175 311.954 -5,7% 392.025 -25,0%Gross Margin 28,6% 29,8% 35,8%Quarterly Net Income 129.670 122.193 6,1% 169.855 -23,7%Net Margin 12,6% 11,7% 15,5%EBITDA 172.925 181.112 -4,5% 253.729 -31,8%EBITDA Margin 16,8% 17,3% 23,2%

Figures in R$ Thousands

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


Main impacts from financial crisis

Late 2008 / early 2009:Demand weakness in all segments, but at different intensities

Domestic use: swift slowdown Industrial use: took a while, but dales decrease was unprecedented around turn of yearEnergy: focus on backlog stability and client credit

Mid 2009: Domestic use: responding to tax incentivesIndustrial use: no end of destocking in sightEnergy: slower order intake (“consuming” backlog)

Late 2008 / early 2009:Costs suffered from

Further price increases for some materials (late 2008)Weak demand prevents pass-through of FX and higher costs Lower occupancy affects productivity and economies of scale

Logistic difficulties with heavy rains / flooding impacted expenses

Mid 2009:

Working out the impacts of higher costs under a weak demand environment

Low occupancy continues to be a concern. Labor agreement to reduce working hours and wages.

Sales and Revenues Costs and Expenses


296252

560575503

375403

308

18%

15%

17%

12%12%

15%

18%

15%

2003

2004

2005

2006

2007

2008

06M

0806

M09

Net Income Net Margin

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

1026

457

354

923

666

504487

394

23% 23%

17%

23%22%

20%

22%

25%

2003

2004

2005

2006

2007

2008

06M

0806

M09

EBITDA EBITDA Margin


There is no predicting how long or deep the downturn will be

No indication of a quick recovery around the corner

Slowdown severe for the serial, less customized part of the product line

Despite some good signals

Material costs declining

Destocking seems to be slowing

Must plan and act under the following assumptions:

Fairly long recession

Followed by a slow recovery

Scenario and Assumptions

Working hours and wage reduction

agreement

Hiring freeze

Workforce Rightsizing

Production Consolidation

(closing 1 plant)

Renewed focus on ROIC under conservative assumptions

Reviewing all processes for cost

cutting and expense reduction

Continuous Improvement

Program(PMC)


Continuous Improvement Program

Before 1968 Olympics, high jump record 1,73m

1968 Olympics, the “Fosbury

Flop”

high jump record 2,24m

Non linear improvement


Capex and Depreciation (R$ million)

Capacity Expansion Program

126

206

146111

457

156

56 6796 105

157

206

97

306

2003 2004 2005 2006 2007 2008 06M9

CapexDepreciation


Net Earnings and Dividends (R$ million)

Dividend Pay-out Policy

82125

176220

375

575 560

252

68 89124

173 165

229

299 301

133

503

403

308

29 46

45%

52%54% 53%

44%43%40%40%

39%37%

35%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 6M09

Net Earnings Dividends Pay-out (%)


Alidor Lueders

CFO & IRO

[email protected]

Luís Fernando M. Oliveira

Investor Relations Manager

+55 (47) 3276-6973

[email protected]

[email protected]

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