WEG S.A. (BVMF:WEGE3)

WEG Day 2022

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Nov 8, 2022

[Foreign language] De ideias pensadas para os lares a ideias pensadas para as indústrias. Da geração de energia renovável a renovadas formas de gerar energia. De motores elétricos inteligentes a cidades inteligentes. De soluções para hidrelétricas a soluções que usam menos recursos. De armazenamento de energia em baterias de alta capacidade ao armazenamento de dados na nuvem. De redes de distribuição de energia à distribuição de informações através da Internet das Coisas. De produtos preparados para o solo a produtos preparados para a ação do tempo. Da presença no campo que alimenta à presença no campo que vibra. Da inovação à preservação. Nós vamos fundo em tudo o que fazemos, trazendo ideias cada vez mais inovadoras, eficientes e sustentáveis para o dia a dia das empresas, dos campos, das cidades e das pessoas. É essa vontade de ir além que o mundo precisa para continuar evoluindo. Hoje, amanhã e sempre. Good morning, everyone, and welcome to WEG Day 2022. For those of you who do not know me, I am André Menegueti Salgueiro, the Finance Director of WEG. On behalf of the company, I'd like to thank your attendance here today. Happily, we were able to carry out this event in a presential form after two years because of the pandemic. I'd also like to thank the presence of Décio da Silva, the President of our Board of Directors, Harry Schmelzer Jr., our CEO, and all our executive directors that are here today. I'd also like to thank for those of you who were not able to be here presentially today, but are following us online from your offices, from your houses. This is the first time that we are transmitting, streamlining this event in an online way. The event today was thought in a way to bring to you two details of the most important business units, the industrial motors and also the GTD area. The agenda today will be as follows. We are starting the presentations with Alberto Kuba, who is going to give us all the information on WEG industrial motors, followed by Manfred, who is going to present WEG Automation and the recently created WEG System Automation. Followed by that, we're gonna have João Paulo's presentation, who's going to bring to us the comments on the WEG Energy Business Unit. Lastly, Carlos Diether Prinz, who's going to present the WEG Transmission & Distribution. After these four presentations, we are going to have a first Q&A session in which we are going to address the business areas of the company, followed by an interval, a little coffee break. Right after that, we're going to have André Luís Rodrigues, our CFO, who is going to dwell on the financial performance. Finally, we are gonna have Harry Schmelzer Jr., our CEO, who is going to bring our perspectives for the following years to come. After Harry and André's presentation, we're gonna have another Q&A session in which you're gonna have the opportunity to ask your questions on the financial and the strategy aspects of the company. Some important information. The presentations which are going to be made here today, they are available on our site on the investor relations, which you can access through our QR code or through the link, ri.weg.net. As I said, this event has been streamlined on the internet, and it's going to be available after, should you miss a part, especially for those who are attending online. It's going to be available on our site for quite a field time. To start our presentation, I'd like to call Alberto Kuba to make the first presentation. Only to give you a context, everything that Kuba is going to present and in our vision and the vision of the market is within the industrial motors business unit. Have a good event, everyone. Good morning, everyone. It's a pleasure for me to welcome you here presentially and welcome for those of you who are online. For those of you who do not know me, I'm Alberto Kuba. I am responsible for the industrial motors division. I work in WEG for over 20 years, and since 2020, I'm working ahead of this business unit. To start with, I'd like to make a quick update on our numbers. We are present in eight countries. We have 13 plants around the world. We manufacture over 3 million industrial motors per year. Today we have about a little bit over 13,000 employees around the world. Out of this 13,000 employees, about 4,000 are outside of Brazil. It's a very internationalized operation. When we look at our revenues, basically 80% of our revenue from the industrial motors division comes from abroad, and the trend is for this number to grow, given our international expansion. We have a great distributors line with over 3,000 distributors around the world. That gives it a lot of capillarity, especially in places where WEG does not operate, and it also gives us an advantage in places where WEG is already strong with our dealerships. I think something important is to talk about the strategy of products. WEG is working very strongly to have general application products, niche products, I'd like to talk about the General Purpose. This is a line that we have generated in the last two years. When we started thinking about attacking more of the global world, we're talking about Southeast Asia, India, and Southeast Europe. When we launched this product, we've made a benchmark which was very intensive of these markets to guarantee that we could have a competitive product to be successful in opening these new markets. We've made this launch in March this year, here we have something very important to mention, that this aluminum line of products with these two motors here is manufactured in China, and the cast iron motors that we have up there is manufactured in Brazil. In the general way, we have brought together what's more competitive in the world, what's more competitive in Brazil, and we are taking to our assembly lines in India and Turkey to accelerate the gain in the markets. Here is also a very important view of the markets in which we want to attack, which is the medium voltage market. We've had a very intense work to have a medium voltage in cast iron motors that allows us to have competitiveness to work in key markets in the OEM market. Also this line here that we call the W60. For you to have an idea, about 10 years ago, when we were making motors for compressor, we would put it in a carcass, a 550, and all the technology that was developed, we made the same power with a much smaller carcass. We have a line of products that is very complete in general applications to work in markets, to operate in markets in which you need more competitive products or initial markets such as medium voltage manufacturing companies in which we didn't have so many serial and competitive products as we have today. We have a complete line of special products. We are increasingly having electronic-embedded products and what Harry mentioned in motion drives last year, he commented we're going to have this in the strategy as well as in products. In this product here, we have an incorporated drive, which is already part of the product. We have other lines of products that also have an incorporated and embedded drive, and our motion drive manufacturer companies are our main target. Other important aspects in our strategy that addresses the investments that we're making in the motors, electric traction rear for buses and delivery trucks. For that, we saw that launch in Jaraguá do Sul plant, and our idea is to be able to have higher volumes when the market is ready. We have a very big market now that we are investing a lot in products. Since WEG made the first acquisition in the reductor's drives, gearboxes, this product here specifically with that line of general-purpose motors are totally aligned because of this product here, specifically for machinery manufacturers. The W50 line was launched last year, which is industrial gearbox application. As the motors, the gearboxes in the unit have more complex products from small to big, for mining, sugar and alcohol, ethanol application. Our line of products is very much aligned with our view of target markets that we are working. What happened in the last few years? We have advanced in our market share during the pandemic in 2020. It was a very hard year in which the volume of sales of motors went down. 2021 was also a very hard year when we saw the product markets. There was a drop in the sale, but in these two last years, WEG was able to capture a very interesting number of clients. We advanced in markets. If we evaluate the IHS Markit research with Interact Analysis research, you'll see that volume of motors was smaller. However, we were able to capture a bigger market share. Many of the actions that were made, just for you to have an idea, in several different markets we have, still a lot to grow in Europe, Eastern Europe. Here there are certain actions that we've made in opening new branch offices. Actually, we restructured the Italian branch office, focusing on low voltage motors. We restructured our business in Malaysia looking for the Southeast Asia, so that to have a stronger action in motion drives. We recently opened the Poland branch light in our assembly line in Turkey to meet this market in Eastern Europe. We changed the reference now. We are making a Interact Analysis study because we want to focus on the Pacific Rim countries, in which we have more detailed datas in countries such as Indonesia, Thailand, Malaysia, in which we understand that we need to reinforce our presence because there are a lot of opportunities to be tapped there. In a general way that what we understand that we are marching in a very structured way in order to increase our market share, because we are now going to markets in which WEG has a limited participation, especially when I talk about Eastern Europe. Let me talk a little bit about what happened. Many questions that I answered yesterday were associated with the pandemic, the pandemic brought to the surface a big questioning about the resilience and flexibility of the supply chain of the companies. We have received a lot of potential clients or clients that already buy from WEG discussing how we can scale our partnership given the footprint of the company. When we analyze the way that we are organized, the view, the vision that for us to buy from global companies, not considering where it was produced, only analyzing the cost of the products, is being left behind. Companies are increasingly now looking for a nearshore location in order to buy things that are closer to where they are producing. Now, a global strategy for production has brought a great competitive advantage. I'm going to give you a few examples. We have an operation that is very strong in Mexico that is increasingly becoming more strategic because of the presence in the American market and because of the growth we had in the American market. Both the Mexican and the Brazilian market manufacturing plants have increasingly sold, as the Mexican plant has the NEMA products ready-made, they could have supplied the American market as the Brazilian were able to supply to Europe. When we manufacture to China, when Europe scaled the volume, we had a lot of clients with supply risks. What could we do? We transferred the production from China to Brazil because we could transfer the production from Brazil to Mexico. WEG today, when we analyze the footprint, we have a vast footprint for industrial motors in the world. These are products that you're able to interchangeability of plants because they are components, they have the similar components. When our competitors look at the production, they always looks locally. Because of our footprint, we are able to mitigate eventual risk, transferring the production from one plant to the other. How are we organized? China, the main focus is China to China and the rest of the Asian countries. We have an operation very strong in Mexico and increasingly stronger for the American market. There is another interesting point. A few years ago, you may remember that Trump has taxed in 25% imports from China. Given all this strategy that we had from between Mexico and Brazil, WEG was not affected by that. On the contrary, we were benefited because Chinese were not competitive anymore. Our view now is to prepare both Turkey as well as India for a future scenario that is increasingly more complex. We do not know what is going to happen in the future, but we understand that our great manufacturing plant for the future is going to be located in India. India, we are going to inaugurate at the end of this week on Friday. We are making cast iron products, and we understand that the Indian plant is also going to be an alternative for manufacturing, especially for this region here or for China Pacific Rim, when China does not meet the demand. Another factory is entering the circuit, another factory in Turkey, because we understand that increasingly we are growing in this Eastern European region, and it is very important to have a local manufacturing plant to supply the whole market. Turkey, we are talking about $500 million potential market, which is a very big market, much bigger than the Brazilian market. We are talking about India. We are talking about a potential market of over $350 million, we are talking about in a structure that we had in Italy for low tension. We are talking about $400 million market in which we are capturing a very little value. We are very well prepared for footprint, in terms of footprint to be closer to our clients with global products. A point of attention here is we have WGP, here we have GP, here we have GP. All these manufacturing and assembling plants are prepared to scale the general purpose products. This is what we are launching, looking for new opportunities in serial products. We are talking a little bit about our strategy. I think this is very interesting that it goes back to the very origins of WEG, which is the verticalization. Verticalization represented a very important aspect in the strategy in the difference of the results that we had in 2020 and 2021. The verticalization, when we look at the manufacturing plants in Brazil, in which we have 100% verticalization, and when we analyze a plant in Mexico, in which we have basically 100% verticalized as well, that brings us a lot of flexibility. Because with all the production of verticalized components manufacturing, we are able to meet all the assembly lines around the world. We had situations, for instance, in Brazil, we wanted to scale the volumes, we did not have cast iron, we brought a cast iron from Mexico. We had situations in which Portugal were not able to scale up the production because lack of production, we were able to shift from China to Portugal. We also had a situation in which the manufacturing, the reducers, the gearboxes manufacturing plant, were needing carcasses, we brought them from China. Our model of verticalization makes that WEG has less interactions with level 2 clients, with level 2 suppliers, which are parts suppliers. That brought us more domain of what our productions. That is a distinguishing point. I would like to talk about product strategy. If you take a look at the very beginning of motor manufacturing up to the state-of-the-art production, we have always increased our energy efficiency. WEG has been working ahead in terms of efficiency standards, which makes that as the efficiency laws change and increase, we gain competitiveness. We took a major leap when we launched this line, which was very successful, very early days in China. How is the world today? IE3 to IE4. This is what we're moving. These are solutions we've had for three, four years. What are we doing now? We have numerous products. For those who participated of yesterday's technical meeting, we're working with hybrid, where we have variation of products in function of the size of the carcass. We have just magnet or non-magnet, always trying to get higher power density. We're no longer seeking power density, but also the reduction of the amount of material used. This is a line in turn of sustainability, reduction of material. The more efficient the motor, the less carbon emission there is, and the less material we use, the more sustainable the product is because we need less natural resources to produce it. Just for the sake of comparison, these are product lines that already exist from. This is in this carcass, 355. This product weighs more than 1,400 kilos. Today, we have in the catalog, this option weighs 900 kilos, 2 carcasses less. Which is, we're able to produce twice as much relative to the active material we have in the 355. When we use new technology that we have already learned with e-mobility, now we are able to decrease in 4 carcasses. The hairpin is an advancement coming from electric traction products. We are able to produce fourfold motors with the same material that we would be doing with iron die casting. Now, axial flux motors with the power equivalent to the first one, we're able to reduce 28-29. That is to produce 28, 29 motors with the same amount of material. This is the niche market that we are going to be using evermore in high-tech solutions. WEG has been studying a lot this product for us to use it in the industrial segment. We want to increase the bar in that respect. Take a look at this actual picture of our sample at the laboratory compared to the traditional or conventional induction motors. You can easily see a difference from one product to the other. Obviously, this product here is a niche product because it's high priced. Our challenge now is to scale it up in production setting. We're going to refer to some of our plants overseas and the major investment we have. The India plant is almost ready. We're already producing some motors. We are going to inaugurate it officially now on Friday. India is a major strategic step for WEG Motors. WEG Energy has already broke ground there in the medium voltage field. We believe that the green field is the most intelligent way that we get a best ROIC. We are taking 100% verticalized plant to India. The India plant is an assembly plant. No, it's a very verticalized plant where we have all processes except stamping. Why not stamping yet? Because CapEx would be rather high. We have also identified that it makes more sense to produce all the stamping in China, than produce it locally in India. India has steel prices much more competitive. I mean China, more competitive than in India. We continue to invest in more automated products, verticalized processes, for us to be able to capture all this increase in demand that the country has been having over these years and will generate even more in the future. This is another major step that we took in Turkey. We're already exporting to Turkey, in fact. In Turkey, there's an interesting example, because market leaders are not the two largest WEG competitors. They are local manufacturers. For us to understand what happens in that country, we have to take advantage of assembly plants, because we are not able to export it because of the lead time. This is an assembly plant, low CapEx facility where we have all the facility ready. We are already assembling motors there. Now we're starting the localization process. Bearings, axles, coatings, and paints, locally manufactured axles, and also aluminum die casting. We are going to learn a lot of this process. Now we are moving fast. We are opening many dealers or distributors in Turkey. In GP products, our strategy is very well-designed. Once this plant grows, we are going to get ready to be a local alternative to larger motors. What's our strategy? Today in Europe, we have a plant in Portugal which manufactures special motors and supplies to OEMs, generals for 200-plus carcasses. This plant here is going to meet OEMs' needs for 200 lower carcasses. By using the Turkey operation, the Portugal operation with a larger volume is still in Brazil. In the future, if we understand that Turkey is really competitive, this is a very nice opportunity to build a plant, a fully-fledged plant, and reduce the China risk, because China has been losing competitiveness year after year because it's becoming more expensive. We will be able to share the Chinese volumes in case the European Union imposes a trade barrier to China. We are going to be able to supply it from Turkey. I was asked why Turkey and not Poland. The Turkish market is a $220-million market. This operation here makes a lot of sense for us to win the Turkish share. Poland is a $90-million market, much smaller. The other extremely important investment was made in the Portuguese plant. We are transferring our operations to Portugal. Those of you who had the opportunity to visit it, the low voltage one is a huge plant. We're building thousands of square meters now in this plant in Portugal. This site here has HVS, which is WEG Energy Services. This is a new strategy. This is where we're going to repair motors sold in Europe. This is a major step for us to consolidate medium-voltage motors. This plant here will take explosion-proof motors being produced there. Our major competitor was German and is having issues as far as cost and competitiveness and shut down its operation in Germany. We're trying to start this new phase by beefing up our competitiveness and investment there. CapEx, considerable CapEx. This plant will be ready by February next year. We're going to start transferring stuff there. This is the very last slide that we have, extremely important and a strategic investment in Brazil. For many years, we took a very interesting step by beefing up our capacity overseas, which allowed us to diversify the location plants being nearer the markets. With the strategic step we took with more assembly plants, we will be able to supply components as well. The Brazil plant is going to have considerable investment in the next three years to produce components And expand in better motors. In this pandemic period, WEG developed more value-added products, 200 plus 400 carcasses. A lot of projects are going on, and our capabilities and capacities are being exhausted. Our strategy is to build a new plant called Plant Number 8, where we are going to be ready to meet the e-mobility market as it grows. We are going to have this plant nearby, and we will be ready to meet the demands for 225, 250, 280 carcass motors, reorganizing our production footprint in our manufacturing plants. This is the vision. Considerable investment. Since we are using many existing facilities, this is an enabler for us, and costs are diluted here, so our risk and ROIC is much higher. This is it. Just to conclude and wrap it up, I understand that the verticalization model has shown to be really resilient in volatile scenarios. WEG has a competitive edge there through its verticalization model. The strategic location of plants are also a major advantage for our customers. We always invest, regardless of a crisis or not, because we have a long-term vision, and our portfolio diversification is a major competitive advantage for our customers during this period that we have more opportunities. This is it. Time is up. Thank you so much. Thank you, Kuba. Now I call Manfred for his presentation. As I said in the beginning, WEG Automation, recently in September, has split. We have WEG Automation and WEG Digital & Systems managed by Carlos Grillo. To provide some context, everything that Manfred will present here is within the electro electronic industrial, except for the solar equipment, which is part of the GTD line of business. Thank you. Let's start the automation presentation here. These are some highlights. The automation business today has more than 6,000 employees worldwide, 15 plants in nine countries. The largest manufacturers and market leaders in voltage inverters and protection equipment in Brazil, and leader also in major product lines. More than 100 patent holders. We export to more than 55 countries. More than 560 technicians worldwide. More than 2,600 dealerships and distribution operations worldwide. More than 400 integrators for distributed generation in Brazil. And we are the largest manufacturers of panels and e-houses in Brazil. Our portfolio is very extensive and could be subdivided into different categories, such as low and medium voltage drives, controls, and I will refer in more detail to each one of them. A specific line developed for infrastructure, solar energy, e-houses, e-mobility, and bringing it all together, we have digital business up there. Now, talking briefly about the drives. Our line is comprised by frequency inverters, both low and medium voltage soft starter. These are the two product line we operate in different geographies in Brazil. Complementing those product lines, logic programmable controllers, PLCs, servo drives, UPSs, and others. Control lines is very extensive. It could be subdivided into command switch gear, servo drives, no-breaks and rectifiers, electric circuit protection devoted to machine safety, complemented by devices for electric connections. In addition to our operations jointly to the industry, which is our most important market, we developed a line for infrastructure, starting with cubicles for medium voltage panels. Totally tested, used a lot in hospitals. Bus bars, shielded bus bars for energy distribution, mini circuit breakers and DRs, and surge protection equipment. We also finishing with power outlets and circuit breakers and switches. To complement our offerings, we are developing a specific line for comfort and safety, Wi-Fi and monitoring cameras devices. As far as solar energy is concerned, we are operating in distributed and centralized generation. In distributed generation, we have inverters for single-phase and three-phase facilities, hybrid with batteries. Someone asked me during dinner yesterday, this is just for the off-grid operations. We are not able to plug it onto the grid yet, this regulation is still going to be elaborated. Fixation structures, cables, and accessories. That is, we have all products to put together a full photovoltaic facility. Centralized generation, we have full EPCs projects, and we also provide equipment. Of course, we have central solar inverters, solar skids. We manufacture both the skid and the solar inverter. It could be also assembled on a solar skid where we have the panels and the transformer assembled on the skid. To complement this offering, we have the battery energy storage system that could be part of a solar or wind generation plant. Talking about the solar market. Now, installed power in Brazil, this is the source, ANEEL solar, compared to the power system that we supply. By adding up distributed and centralized generation, gives us a market share of 19.3% in Brazil. Analyzing the distributed generation figures this year, we are going to supply 33 solar kits through our integrators, with over 400 integrators all over Brazil. Analyzing here, once again, the power for the distributed generation with the value that we are going to supply in terms of power gives us a 22% market share. Here is a question. I also spoke with a few of you yesterday. What changes in the distributed generation from the moment on that the Law 14,300 comes into force? This law was discussed for a few years, finally was approved in all instances, it will be effective in January 2023. What changes in the actual rule from the moment that this law comes into force is that there will be a taxation fee from the wire B distribution. Remembering the fee on the energy distribution is composed by several parts. One part is the wire B distribution of low voltage, and this part represents 28% of the total cost of the distributed energy. From next year onwards, this share is going to be taxed. Trying to simplify, today, every unit of energy that you generate in the system and puts into the grid, you have as a credit, the same quantity of energy. The relation is 1 to 1. From the moment that this law comes into effect, for instance, for a system of about 500 kilowatts, you're going to have a fee of 100%, a tax of 100% of wire B. That is, for every unit that you input in the grid, your compensation is going to be 0.72% units of energy. 1.21% less. That's for the systems above 500 kilowatts. For systems which are under 500 kilowatts, there is going to be a transition rule. The first year is going to be 50% from this 28%. Second year, 30% of the 28%, successfully up to 100% in 2029. When you're going to finally have the compensation of 0.72% for every energy you input. It's worth mentioning the projects that already exist and whose access request are filed by the 7th of January of 2023 maintain the conditions of compensation at the actual up to December 2045. I was also asked about what I think about the market is going to go down. First, next year, basically, we are not going to feel the effect of this impact because all the projects that have already access request filed, they have at least one year deadline to be built. These projects are going to be built next year, generating a very considerable revenue. From 2024 onwards, I would say that perhaps the impact that we're going to feel is that the solar area comes back to normality. What we lived this year was an acceleration, a very accentuated growth in access requests from distributed generators up to 5 MW because of this change that is going to take effect from next year onwards. I think that the first impact is that we go back to normality in which we're going to have a growth that is not so accentuated as we had in this request of access for the distributed generation. Here I have a few simulations, that changes according to the region where you are, according to the solar irradiation or the power utility. Running a few simulations of the impact that is going to generate in a residential unit, for instance, in which the discounted payback is 4.8 years in 2023, with the new rule is going to be 4.9, and so successively up to 2029, in which you would reach 5.9 years for the payback. In a commercial system, it would go from 3.8 to 4.7, and a remote power plant is where you would feel the highest impact from 2023 onward. Again, here it depends a lot on, for instance, on the evolution of the photovoltaic module. Nowadays, the photovoltaic modules are with a lowering price. It also depends on the tariff on energy, whether it's going to go up or down. It depends on the exchange rate. It depends on a series of variables in order to actually see how this is going to evolve. Another important information is for the centralized generation from 2023 onwards. The entry barrier is going to be lowered to 500 kW so that companies may acquire energy from the free market. That opens up a very interesting and big market for the centralized generation power plants. Today, the barrier is 1 MW and is going to be halved. More companies will be able, from January 2023 onwards, acquire energy directly from the free market. The other line of products, motor control center. We manufacture a very big portfolio of products for industrial clients. We do all the stamping, all internal components. Most majority is also made by ourselves. Motor control center for lower voltage with medium voltage cubicles, e-houses, and load centers. Speaking a little bit about electric powertrains or electric mobility, we have two variations to focus of attention. First is the electric powertrain. Here we manufacture motors and inverters. To complement the offer, we also became assemblers of batteries. We acquire the cells. From the cells, we assemble the modules. From there, we assemble the whole pack, aggregating, adding the refrigeration system, which was developed by ourselves, fire extinguishing systems, and ending up with the housing. We already supply a variety of battery packs for buses. This is a picture of an electric bus, if I recall well, from the Espírito Santo state, which is running on our battery pack, motor and inverters also supplied by ourselves. As a complement, we also assemble auxiliary electric controls for buses and trucks. For instance, for the compressed air for the braking system. Here is an actual picture, is the e-Delivery truck for Volkswagen. It has our motor, our inverter, and it has our electric auxiliary control. Here is another application, which is a Marcopolo bus, which also is running with our powertrain. Also within this mobility electrification, we have a strong participation in the naval propulsion in the marine segment. Another variant of the electric mobility is the recharging stations for electric vehicles. Here we develop all kind of EV charging stations, slow, semi-rapid, and ultra-rapid models. We are the sole manufacturer that makes everything in Brazil. There are other startups that are basically working on the slow-charging stations, everything else is imported in Brazil. Apart from the hardware, which is those charging stations, which are manufactured by ourselves here in Brazil, we develop all the software that equip this equipment and the management system. We have also developed a smart charging system for both software and hardware. This is, for instance, when you have several charging stations installed in a condominium or in a shopping mall, and you have a demand that cannot be overpassed. You have installed capacity that cannot be overshot. It does the intelligent management of all these charging stations, limiting, therefore, the power to be supplied to vehicles according to the installed capacity. It is an intelligent demand control system. To wrap it up, the offer part of WEG Automation digital business, all our products are connected or prepared for connectivity. We have created and developed a line of hardware. The monitoring and connectivity layer, the PLCs and automation and control machinery, the manufacturing management system. Above everything else, artificial intelligence called WEGnology. All hardware and software also dedicated. WEG Smart Machine, for instance, a software that has been developed by ourselves specifically for machinery manufacturers and so on. Our industrial footprint. We manufacture all our line of products in Brazil. We have six manufacturing plants, panel and product manufacturing plants. We also assemble panels and inverters and soft starters of medium voltage in Colombia, Argentina, Mexico, the United States, Portugal, and South Africa. We have a company that is dedicated to the assembly of panels. Here, the focus is the machinery manufacturer that comes from a past acquisition. In China, we manufacture also inverse low and medium voltage drives and miniature circuit breakers, which are building division equipment. In Italy, we made recently an acquisition of an inverter for low voltage. Speaking about this line of products, that is very important within our strategy for the motion drive area, inverters, frequency inverters for lower voltage applications. These line of products, our revenue is very divided. 50% is made in Brazil, 50% of the revenue of this line of product comes from foreign operations. In Brazil, we have above 40% market share. In South America, we have 10% market share. In Africa, 17%, actually. In other regions, our participation, our market share is small, which gives us a great opportunity to increment our revenues. Within this strategy of motion drives to accelerate the process of internationalization of inverter productions, one of the strategy was exactly to acquire the Gefran Drive and Motion, GDM, which the headquarter is based in Italy. It is not an assembly plant, it is a manufacturing plant. It has all the stages of the manufacturing process. You assemble as well the electric cars. You do all the steps of the manufacturing in this factory that is based in Italy. Besides, it has operations in Germany, Chile, and India, 182 employees, it brings us an increase in our portfolio. Our actual portfolio is more dedicated to WEG General Purpose inverters, it brings an extended portfolio with dedicated solutions for lifts, for conveyor belts, plastic industry, metallurgy, among other applications. Here is worth mentioning that we have made strong investments, very heavy investments. In the last year, we invested over BRL 100 million. In 2023, we are going to invest even more in order to increase our productive capacity. So much so in our Gitá in Ji'an Tan in China plant, the enlargement of our plant here in Brazil as well, also a very heavy investment in machinery, fully automated machinery in our manufacturing process in order to increase our production capacity. To wrap up my presentation, I am nearly out of time. The main strategy for the expansion of the automation area is to expand the low-voltage drives through new developments and acquisition of the Gefran Drive and Motion. The acceleration of the internationalization process through the synergic action of motion drives, to use our installed plants to join forces for selling the motor and inverters. To continue to advance in industrial market with all the line of products, but increasingly to increase our portfolio in the electrification area, in the building and infrastructure area. To advance in electric mobility, in the electric powertrain, as well as in the EV charging station, a constant expansion of our portfolio, be it hardware or software, for digital solutions. That was all. Thank you very much. Thank you, Manfred. I would like to now call João Paulo to present WEG Energy. The same as I mentioned in the other presentation, WEG Energy in the market division, all the motors, high and medium voltage, is within the industrial electric electronics, and the rest of the energy in the GTD area. Please, João Paulo, the floor is yours. Good morning, everyone. Can you hear me? I think you have to reset the timer here. Thanks. One minute's not enough for me. Well, it's a pleasure for me to be here in a physical presence. I'd like to thank your presence here as well, your attendance. I'll make a quick presentation on WEG Energy. Our product portfolio and some generic numbers. I'm not going to dwell on all of them, but perhaps the strongest point here is that WEG Energy makes medium-voltage motors on the carcasses of 400 and above, which is a bigger machine. We go up to the 2,000 carcass with 145 MW motors, which is the biggest that we have already produced. Also, we have another portfolio of products, which is a hydroelectric power generation, water hydroelectric power turbines. We do not do the civil engineering. We do part of the construction. We concentrate only on the turbine and the generator and some valves. Also, we have about one GW of wind turbines, installed wind turbines. The biomass generation with steam turbines, with a considerable presence in the American countries. Something that has been very interesting for WEG Energy in the last few years, the growth of the service area, in which I'm going to dwell a little deeper. Here is a brief picture of the products that we supply. As I mentioned, the hydropower generators with something very important for us in India. We do not make the turbine, the hydraulic turbines. We do not participate in this market, but it is the main participator of hydro generators for the Indian market. The line of turbines, the three models, Pelton, Francis, and Kaplan. Thank you. A product that has represented an important part of our revenue is the synchronous condenser, specifically in the U.S. We have already taken two orders there. We have now two more good perspectives. For Canada, we already have some projects in Brazil. Later on, I'm going to delve into this because this line of products may represent much more businesses for WEG in the future. Our industrial footprint. Evidently, our largest plant is here in Brazil, in Jaraguá do Sul. We have another plant in Minneapolis, which was an acquisition that took place 11 years ago from GE. We have a small area in Portugal, but good possibility for growth. We don't have manufacture of those items in Europe because we recently started that. Now in Portugal, we are expanding this plant in Portugal for us to be able to capture more market share in the services area, both WEG Motors and Generators and competitors as well. A small assembly of steam turbines and generation kits in Nuremberg, Germany. An acquisition with TGM Kanis, that designs urban solid waste facilities for England, Turkey, and also for generation from industrial waste biomass. Our plant in India was built 10 years ago, almost 11 years ago. Greenfield, you've seen a picture of it. It's been growing a lot in terms of market share. It's a full plant. We have to do a lot of maintenance there and our opportunity for growth. China accounts for 35% of these items worldwide. If we are outside China, is not an option. Being outside China is not an option. We've been growing a lot, we're a rather small market share yet, and our objective is to grow there. Medium voltage motors. In the Americas, we have a good market share as well as in Europe, in the Asia Pacific region, where we have the largest market, China, requires a lot of focus and attention there. For larger motors, carcass 550 and upwards, our market share is 10%, because our more specific motors, they are not sold to OEMs. The specs are more demanding. Probably, this is one of the slides I'm going to dwell a little bit more. The blue bar are the product lines that we are offering up to August this year, two, three months ago. These are our European competitors, and this is our new line in terms of power per carcass. For example, this carcass over here, our offer was not competitive. Thanks to this new product line that we launched in August, it practically doubles our power density, which will allow us to achieve much better margins or more market share or a combination of both. We have already launched carcass 450, 500 and 560. It's ready for sale. By March next year, we'll release 610, next year, we're going to work with larger carcasses. This is crucial for us to be able to enhance our competitiveness and increase market share in numerous markets. In the case of medium voltage motors, medium and high voltage motors, where do we apply these markets? Some of the most traditional markets, such as in mining, oil and gas, but we've seen a lot of growth. Here we talk about motors and generations. A large scale motor and generations are practically the same in terms of technology. There are some specific things, of course, this is a market that's been growing a lot. We've been designing lots of projects with Ormat, Israel, also projects. Many projects with them, new opportunities are coming up. This is a very strong market for us. For offshore oil and gas, Europe, U.S. Carbon capture is a project we have in Sweden. Concrete plant that captures CO2 and mixes it all on the concrete for us to do carbon sequestration forever. Capturing carbon, there is technology for that, but sequestration is something different, is for good. It's just like catching a fly. If you open your hand, it will fly again. You have to kill the fly somehow. Another project in South Korea for export of green hydrogen to Europe. We are supplying all the motors there, compression motors there. Notably, in China, we enhance our product lines being offered there, still limited to carcass 900. We don't have the whole line there in terms of size. We are starting to dedicate this plant for medium and high-voltage motors to enhance our productivity and offer to win market share in China. This is an interesting line. Maybe we haven't paid much attention to it's becoming ever more important. It's kind of an old line, a 20-year-old line, which in WEG made us wonder, are we going to acquire a company in Europe, especially? In our assessment, this is a market that is going to face a lot of competition from battery storage segment. We are, through this line, going to face strong competition, especially for those applications that are not critical. For instance, grocery store is not critical, hotel is not critical. Hospitals, telecommunications, major refinery plants cannot rely on battery storage. Can you imagine an ICU at a hospital? It has to continue to operate. It cannot rely on battery power. Instead of investing through inorganic growth by acquisition, for instance, in a market that tends not to grow so much, since we have a small share worldwide, we're going to create a new, more compact line with smaller alternator powers, without carcass. This is going to be an altogether new line, extremely competitive, without acquiring external companies, and two came up over the last month. We want to grow organically instead. This is our plan for this line. There's a lot of market share out there. Steam power generation. These are complete solutions that provide not only the turbine, but also the reducer, the generator, or excuse me, the gearbox and so on and so forth. This acquisition took place in 2018 in Sertãozinho, which has a branch office in Germany, as I told you. These are the applications, I won't dwell on it. This is a business that has grown considerably, especially the services side. This machine needs constant maintenance, extremely specialized maintenance. Therefore, we have been generating a lot of revenue with excellent bottom lines. We want to take this type of services that are extremely successful already in the U.S., that also provide repair services, maintenance service of steam turbines jointly with the gearbox and generator. We have already struck interesting deals there. Hydropower plants. This is a picture of the largest hydropower plant we supplied equipment for, 500-megawatt equipment. São Roque Power Plant, hydropower plant, that had a major delay in the construction, but it was concluded earlier this year. We have already delivered a 50-megawatt generator. We didn't supply the turbine, just the generator for hydropower, low rotation. Despite the power is not so big, the piece of machinery is big, and it's a relatively small piece of machinery. This is just to mention what we've been doing as far as hydropower plants. We're going to enhance our services and products through consultants from Austria, Germany to increase our competitiveness. There are smaller competitors in Brazil that make very aggressive offerings. Therefore, we need cutting-edge technology here. Wind power turbines. This is a product. This is the number of equipment we installed from 2014 to 2018, 2019, where there was a hiatus between this product and this product here launched. We have a full plant, full of orders. By mid-2024, is all taken to provide the service. More recently, you've heard that WEG announced in August, the largest offshore wind turbine worldwide, a 7 MW. A European manufacturer announced a 7.2 MW wind turbine. This is going to be a change in technology. The generator is a very heavy piece of machinery, expensive one. We are here making a technology shift from direct drive to medium speed, which is the technology of the future for wind turbines this big. There are two medium speed and high speed technology ones. The high-speed ones have smaller reliability because of mechanical issues. This development's been done jointly with engineering teams in the U.S., our engineering team here in Brazil, and the numerous WEG divisions, our engineering team in Germany. We signed an agreement with Baywind, a small wind power engineering firm, very fully fledged and highly skilled engineers in wind turbines, and our India team as well. This is just a rendering of how this machine looks like. This is the speed multiplier, an extremely compact generator, permanent magnets, and the rest is similar to the current technology ones. In India, this is the expansion that Kuba has shown us, this is the new WEG Motors plant to be inaugurated on Friday, and this is the WEG Energy, inaugurated in February 2011. That is 11 years old, therefore. Now we are expanding. This plant is 300 meters long. This is going to be the boilers for the new wind turbines. The 4.2 that we are launching in India. In fact, there's a prototype running there, an operation under test. Two weeks ago, we started that. This is the boilers part, and this is the assembly part of the generators. We are now going to launch a seven generator in India. This is the largest wind turbine ever installed in India. This is a BRL 18 million investment worth. This is a new business that WEG helped develop, which is energy storage, gravitational energy storage. These are train tracks, 330 tons each. At dawn, we take energy upwards, uphill, and during peak hours, we bring them down again. This is the discharge area. This is the charging area. Each one of these carts or lines are 5 megawatts each. We provided the first system in July. It's been installed near Las Vegas by a company called ARES, which is our partner in this project. We are making the proof of concept. The difference from this system to a battery storage system is that we're able to store a lot of energy for a utility scale. That is a GTD with a relatively low cost compared to battery storage system. 50% of storage costs relative to battery storage. This is the synchronous compensator. We have already supplied 100 MVA to Electra Sol. We are now providing or supplying two more in a deal that was struck three weeks ago. This is a Versant Power solution, a utility from Maine, and we are providing the whole EPC. The accelerator within the compensator, which is nothing but a hugely 50 megawatts power machine. We accelerate with a small motor, and it starts its nameplate rotation, and it supplies transient energy to the grid. Why both the battery storage and the gravitational storage system are important? Until then, energy was considered firm. That is, we had a major hydroelectric power plant, a 500-megawatt turbine constantly operating with high inertia or a gas turbine or a steam turbine, a carbon-fired turbine, and energy supply was steady. As we add wind power and solar power, we inject a lot of instability to the grid because the harmonics and the fast supply of power. As the grid becomes ever more reliant or dependent upon the transient energy sources. We have to find ways to stabilize frequency and voltage. This guy here is extremely important for small microseconds of power supplied. This is a graph that depicts what I mean here. What's the difference between each one of these systems? BESS or battery energy storage is charged early in the morning, 1, 2, 3 megawatts. For the grid, this amount of energy is nothing. This is a medium-sized company. For power and voltage control, this is extremely important. We charge it from 1:00 A.M. to 4:00 A.M., and at peak time of energy consumption, we discharge it. In the meantime, it controls frequency and voltage. This is a very simplified explanation, but I just wanted to show you the difference between those 2 systems. This is the loading time or charging time, frequency and time, and during peak time, it discharges or unloads. The gravitational compensators takes a long time to charge, but also are much more resilient, and the synchronous condenser provides a lot of energy. This is a graph where I'm going to compare the most important features of the 3 of them that are totally different but extremely important for the grid. Charging time, discharging time. So battery storage is for short periods of time, 3, 4 hours. GES are for long periods of time. Synchronous condenser, very short periods of time, microseconds, but every single time. Why? Because when the generator or the condenser decelerates, it starts losing frequency. It doesn't have much time, and it creates a different frequency from 50 or 60 hertz. These are the 3 technologies that WEG provides solutions to, that are going to be extremely important for the grid. To conclude, right on time. WEG Energy. Capacity and global manufacturing capability and flexibility, minimizing uncertainty. Some important segments such as mining and wastewater, driving demand for high-voltage motors. SEP Mega is a wind turbine platform that we intend to launch in Brazil but move elsewhere to other markets. Important markets such as the U.S. and occasionally India. Hydropower generation. We have done some business overseas, especially in generators. Our renewable energy solutions. WEG today has a generation portfolio based on renewables solely. Some new business lines. Green hydrogen, and we've been studying some solutions but are yet to define what to do precisely. Pump storage, solid waste, and geothermal. We are doing now the proof of concept of pump storage and services. Opta, we invested recently in TGM Kanis to expand a building to provide turbine services, especially non-WEG turbines. Maintenance and services and repair. Same thing in the U.S., and this has been generating a lot of revenues, considerable revenues for WEG, and we will continue to invest on this business. Thank you so much. Thank you, João Paulo. Now, transmission, distribution, Carlos Diz. Here, Carlos is within the GTD as well. Please, Carlos. Good morning, everyone. Let's start this presentation on our transmission and distribution unit. I'd like to start my presentation Supplying you with an overview of our business unit for the generation and transmission in a world concept. We have 13 plants, five of them located in Brazil and eight abroad. Today, we are the largest transformer manufacturer in Latin America. We are a manufacturer that produces about 75 MVA a year. For you to have an idea, that is to produce transformers for about six times the Itaipu Power Plant every year. We are certified with the main utilities in the Americas. I can tell you that we have advanced a lot in the U.S. utilities. Nowadays we are certified in all of them. We are accredited by all of them, also now in the U.S. We have about 4,600 employees, and about 1,700 are working abroad. We are the Brazilian leader in mobile solutions, speaking both about skids as well as the portable substations. We have over 550 substations, up to 500 kilowatts under operation, and most of them outside Brazil. I'm going to show you later our portfolio and our strategy for operation, where we are also building substations abroad. We have a very wide service network. When I speak about the service network, besides our dealers, our commercial representatives, our commercial structure, I always repeat that we are the only Brazilian and Latin American manufacturer that has a technical service network that is trained by the company under its own technology for both emergency and transformer, but also in the assembly, supervision, or bring into operation within good operations our own products. Now I'd like to present a little bit about our strategy and our line of products. Again, WEG has a complete transformer line from very small one from the pole transformers for distribution, going through all the industrial applications. The compact ones, it's a line of products that serves the industry in a general way. We have the dry type transformer. This is a technology today we're going to see that we are not only present in Brazil, but it's a technology that is growing with its participation in the market. For you to have an idea, WEG is the leader in this segment in Brazil, is also a leader in Colombia, has a very important participation in the Mexican market. Without doubts, this is a technology that is very environmentally friendly, has a very low cost of maintenance, but also has a very strong environmental appeal. For you to have an idea, in Brazil, about 50% of the transformer, industrial performance, and special purpose applications are dry type transformers. WEG doubtless is a leader in this market. We also have the submersible underground. Submersible transformers are a very important line of products for the big cities because we want to see a clean environment without all the wires going around in the skies. WEG is very strong in this segment. We also have the pedestal transformer line. This is a line of products that is used in residential condominiums, in urban centers, in public squares. It's an equipment that is normally supplied with vegetable plant oil, which is also very environmentally friendly. We also have two very important applications. When John shown the application and the influence of renewables in the grid, he always say transformer for solar application and wind application is more or less like having a car, an automated car, which requires every minute for you to start and brake. If it's not very well designed, it's not going to work well. This is a technology that we have recently improved. We brought from the U.S., from our acquisition from WEG Transformers USA. It's a distinguished product, very reliable, and I would say, unheard of in terms of the Brazilian market. Great part of the manufacturers of this kind of equipment that has a mean power higher are not making with the technology and the required reliability. To complement our line of products, we have the medium voltage transforms up to 145 kW. Here, WEG has a very important market share, very significant. In Brazil, WEG is the leader of the market and also the grade transformer up to 550 kW. We can see that we make all the line of transformers. We are the only manufacturer in Brazil that has this complete line of products. All others have segmented in different segments, different areas. WEG offers a whole and complete line of products, which is very important in terms of technology, in terms of product portfolio. It is much more important for our clients, because clients that buy the distribution transformers are the energy distributors. They buy our power transformer. We have a very complete line of products in terms of transformer to supply our clients wherever, in whatever market they are. Now addressing some more specific purpose equipments. We have the shunt reactors. These are products to equilibrate the reactive energy in the line of distribution. This shunt reactors was developed specifically for the energy auctions that was launched about four years ago. We have all the special transformers for furnace applications, especially for foundries. We have the disconnectors, steel mills. We have the complete line for the renovation and repowering of grade capacity transformers. This is growing in our portfolio. Everyone knows the shelf life of equipment in Brazil. It's a line of product that we dedicate a lot of attention. Afterwards, we have all the solutions in turnkey solution regime. We offer conventional substation, mobile substation. WEG is also a leader in this market, in our protection systems and substation control systems. Moving on an update of our industrial footprint. I am going to take advantage of this slide here to show you a little bit of our strategy. In the U.S., I'd like to tell you how we are structured. We have three manufacturing plants. There we manufacture transformers up to 60 MVA, 161 kW. Here, the strategy is distinguished. We have in the U.S. market, these three plants, and one of which, the most recent one, is dedicated to supply the big utilities in the United States in the powers that we call the distribution power. That is an extremely automated manufacturing plant. It makes transformers up to 3,000 kVA. For you to have an idea, we manufacture in this plant about 150 transformers per week. In talking about 1,000 kVA, it's about possibly one of the manufacturing plants with the highest capacity of production in the United States. As I mentioned, it supplies the utilities with this line of products. We have the second plant, which we call the specialty transformers, in which we produce all the transformers for renewable energy. It's a dedicated plant for transformers to be used in solar and wind energy generation. This line of transformer is helped by one of the Mexico plants. We have a line of production dedicated to wind and solar energy generation, all with the technology of WTU, WEG Transformers USA, to meet the demands of dedicated to the renewable energy production. The third plant in the U.S. makes mid-power transformers up to 60 MVA, 161 kW. Meeting basically the utilities and the municipal distributors in the U.S. In Mexico, we have two plants. One of them, as I mentioned, it meets partially the demands of the U.S. market on the renewable energy generation, and this part also supplies the power market in Mexico. The second plant in Mexico, which is the high load transformer, it supplies the U.S. market, especially for the big utilities. If the question has not come up yet, it will, because with all you speak about the U.S. and the future grid that is going to be built in order to distribute all this solar generation from the West Coast to the great urban centers. WEG in the U.S. today, as you can see. Example of WEG in Brazil. In Brazil, we participate in all energy auctions. We are present in all the distribution business, in the U.S., we still participate in what's called the sub-transmission of energy, which is the transformers, the lines or transmission of 138 kW and 230 kW. We are now supplying in 450 kW. WEG within its strategy, it's getting ready for an effective business in the transmission sector also in the U.S. For that, perhaps, I'm going to show you next. For that, perhaps WEG is the best prepared maker or manufacturer because we have plants in the U.S. We are an American company with all the technical support, with the competitiveness of Mexico. Moving on in our industrial footprint, we have a plant in Colombia as well, which makes transformers up to 30 MVA in 72 kV. Here, basically, to supply Colombia and the Andean region. In Brazil, we have five plants with transformers, making transformers up to 500 MVA with 550 kW. In South Africa, we have two plants. One for smaller transformers for the distribution area, the other one for transformers up to 45 MVA, 145 kW. Our main client is Eskom, which is one of the greatest generators in the world that has recently launched a plan which is very important to develop the electric sector in South Africa. Moving on. Our market share. WEG today is number 1 in the Brazilian market. It has a leadership role that also plays in Latin America as a whole. I divided the Americas into two regions. In South America, today, we hold 23% of the market share. We are market leaders in Brazil. In Colombia, we are market leaders in dry type transformers. In North America, we hold approximately 6% of the market share. I'd like to underscore something here. I wrote it in the upper side of the market. When we assess the market, we're considering all the manufacturing plant and sites of all transformers, not always where WEG plays an active role. When we talk about 23%, 6%, we refer to all the transformer manufacturers in a given market. We have a huge opportunity there in North America for growth, where we already have an expressive market share in renewables. As I told you, for us, the time has come for energy transmission, power transmission for 345, 440 and 550 kV, which are the voltages where the new grid is going to develop. WEG has the technology for that. Up next, I'm going to show you the investment we've been making in that area This is the time for us to do that. In Mexico, up to 145 kV, we're leaders. We have an expressive share also in that market, as I said. I'd like to show you now some investment we've been making in Blumenau, here in Santa Catarina state. We are about to finish a transformer production line fully dedicated to renewables. They grew their medium power a lot, so we have this dedicated line. We're investing heavily on the verticalization method within Brazil with boilers expansion, with the radiators plant. In Betim, Minas Gerais State, we are investing heavily as well. We are doubling the assembly line capacity in our laboratory for high voltage applications. We are also implementing our eMobile solutions. We're going to have both in Blumenau and Betim to provide more competitive services in southeastern and northern Brazil. We're also, in Betim, renovating, overhauling transformers. Blumenau strategically takes care of southern Brazil and Betim takes care of overhauling and repowering of southeastern and mid-center Brazil. Itajaí, which is a port nearby, we are doubling the capacity for dry type transformer, investing heavily on dry type transformers in Brazil. Overseas. Well, in the U.S., to start with, as I told you, we've just finished the distribution transformer line there with the third plant, and now we are doing capacity building for people in our renewables energy transformer line there. The U.S. plant is getting the last investment. It's going to be ready for the U.S. market by March, April 2023. Mexico, I detail here in this picture. Our planning is quite aggressive. This is our manufacturing site for 550 kV transformers. We are expanding the site, and we are building a new boiler facility here and a silicon cutting part there. We're going to expand this manufacturing site with two major goals. Number one, to manufacture transmission transformer, 550 kV transformers. Secondly, to feed the manufacturing sites with radiators, transformer cores, and tanks to make them ever more competitive. That's why I told you that we have a very privileged situation there to provide products and services in the U.S. market, thanks to the synergy we are building between Mexico and the U.S. Here, also very briefly, I'm going to show you Balteau, which is an acquisition we made early 2022. It manufactures current and power transformers up to 550 kV. Balteau is a brand that is owned by WEG. It's known worldwide, and our strategy is clear. We are making considerable investment on this plan to internationalize Balteau and WEG in power transformer or instrument transformer, if you will. Very briefly, this is the development of new products. We're working on all digital production lines in asset management for industrial transformers, monitoring of transformers, large size transformers, and also working on pole, light pole transformers for monitoring and reduction of non-technical energy losses. We develop another dry type transformer that is boosted by WEG Automation, and we piggybacked on the solar solutions with this dry type transformer that is vacuum impregnated. These are the Balteau measuring instruments of Balteau. With that, we conclude this cycle in the transformer lines with complete solutions. To conclude, our most important growth strategies in the foreign market is to keep focus on the Americas and Sub-Saharan Africa, taking advantage of opportunities that I told you about. Intensify synergy between North American plants, focusing on verticalization as a strategy and to become ever more competitive, to expand our share both in the renewable energy markets and power transmission market. In the domestic market, we continue to develop our portfolio of products, a diversified product, to pay attention to the auctions of renewables, paying attention on the renewable energy market, and increase our market share there, and to consolidate the Betim plant to expand our footprint in the power transformer market, reactors, shunt reactors and other mobile solutions. This was my presentation. Thank you for your attention. Right on time. Thank you, Carlos. You can stay here because we're going to start the Q&A session right now. I'm going to invite Kuba, Manfred, João Paulo, for us to start the Q&A session. I would kindly ask those who are going to ask questions, please raise your arms. We have the roving mics here. We're going to take the microphones there for you. During the questions, please identify yourself, giving your name and the company or organization you work for. That would be fine. Let's get ready, mics are ready. We're going to start. Hello. Good morning. This is Lucas Marquiori. Thank you for your presentation. I'm going to ask about the circuit breakers. Kuba mentioned that we have a doubt, but trying to understand what is permanent and what is provisional in this competitiveness world where competitors have suffered logistic bottlenecks, and we see a lot of loss of competitiveness having verticalized production like yours. In a conference call, they started mentioning they are getting more components and the logistic bottleneck is fading away. I understand that you are at a different level, totally different competitiveness level, but the world gets back to business as usual. How far is production flexibility now you can have the same competitive levels like the ones in Europe? Okay. Thank you for your question. I think that in general terms, what we have to understand are the following. The speed in which the commercial area is moving, especially in Europe. We have markets in Europe like Germany, where it is extremely different for WEG, for a new entrant to knock at the doors and open up this market. Our engineering and engineering teams are reluctant to admit new entrants, new incumbents. New opportunities came up during the pandemic because our competitors were unable to provide the products. This helped us open up new markets. We are working for this to consolidate. All the customers, the new customers that we had the opportunity to capture during the pandemic, have tested our product. They're applying our products. We're going to be able to transform an opportunity into a solid market in the future. As you said, the supply chain is getting back to normal. Deliveries will be normalized, regular. One thing that is going to happen, and is happening as we speak, is we have more business with OEMs. We are talking with major global players where WEG had a relatively small market share, and many of them are looking for us, and they are not asking if we have an operation in China or India. They want operations nearer the U.S. or Europe. Even if our competitors are able to meet this demand, under normal situation, our footprint is more flexible and resilient for future logistic issues. With the capacity building that we are having worldwide, we will be able to capture more business opportunities as we have been doing over the last years. As the pandemic is overcome, we are going to reduce the pace in which we were capturing new customers. Good morning, everyone. Pedro Fontana from BTG Pactual. I would like to explore e-mobility and what is the strategy that WEG has concerning that. Will you continue to operate in a specific niche? Is this a natural pathway for this business line that you have? E-mobility, we have two variants, so to speak. One is the electric powertrain, and the other one is the recharge stations. The electric powertrain, we have the inverter, the motor, and the battery packs. On this segment, the electric powertrain, specifically our focus right now is on buses and trucks, especially. This is the demand we have in Brazil, and the focus is the Brazilian market right now. There are other applications in marine applications or naval applications, which are a new line or revenue line. Can we do it for other vehicles? Yes. The demand we have right now is for buses and trucks, therefore, we are focusing on them. Other geographies might come up, yes, but this is our focus right now. We are testing this here in Brazil and then check other opportunities out there. As far as recharge stations are concerned, we have already sold in other countries, small numbers of those recharge stations in South America, in addition to Brazil. This is a product line that we are preparing our service to be able to sell worldwide, except Asia. They have a different connector standard. The product is getting ready. We are certified for the European Union, and up next, we are going to have the certification for selling it in the U.S., IEEE. My question has to do with verticalization. It is nice to see how you are verticalized in Mexico and India. For instance, pre-COVID, nobody followed this strategy or lean manufacturing. The companies were following that. You were doing things differently, and now during the pandemic, you have proven to be right. You had less supply chain issues. Do you think that competitors will converge to this more verticalized model like you did here in Jaraguá and in other geographies? If they do it, how are you going to keep your competitive edge? Thank you. What we have seen is a trend in major plays to move towards markets where market growth is higher. The motors market has very small organic growth possibilities. We understand that our major competitors allocate a lot of CapEx, but on those that have much higher growth rates. We do not understand these movements are going to impact us. We do understand, however, that WEG is very well-positioned, both in Asia and in Mexico to meet the demands of China, Southeast Asia, and other markets. Now with the expansion of our operations in Brazil, in Turkey, and Portugal, we'll be even stronger to supply and provide products and services in Europe. What we see is regional competitive. Our concern is not verticalization and lower cost, but to have optimized product, to have low cost enough and competitive to sell in Turkey, to sell in Poland with good bottom line. Let me understand that. Even though you want to verticalize, this is something that takes years. See what happened in China. We had a high CapEx invested in China. When I moved to China in 2010, a lot of outsourcing of components was out there, which is the Chinese model. That was in 2014, the Rugao was built. To verticalize has to be long-term strategy that takes years and years. We are very well-positioned, both with an interesting manufacturing strategy- Worldwide and competitive levels that allow us to pay fairly with any competitors worldwide. Hello. Good morning. Lucas Varg from XP. Thank you so much, and congratulations for this WEG Day being held face-to-face. I'd like to explore the distributed generation business. In 2022, '21, big part of the growth came from domestic distributed generation. By your presentation, we've seen market share of 32%. I'd like to understand how that is positioned in projects below 500 kV and above 500 kV that are more impacted by the new regulation. How do you see a potential strategy shift migrating towards a smaller project that would be less impacted by the new legislation to think on the maintenance or keeping of the growth of this segment that allowed you to grow your revenues? What's the current positioning? I mean, larger projects versus smaller projects, what's the way to go between both subsegments of distributed generation. Thank you. Excellent question. In distributed generation, our most important market has always been the sales of solar kits, not the distributed generation power plants up to 5 MW. For us, that accounted for 10% of our business. In the last years, this changed because of changes in legislation, therefore, now we are in 30%. There is an increase, a significant one in this DG power plants because of the alteration in the law that is going to come in effect in January. The strategy to maintain our revenue from 2024, when we believe that we are going to start feeling the effects of the law, is to participate more in the monophase, single-phase market. Actually, our integrators, the most participation of them is in the three-phase market of solar kits. for that, we are developing a line of products that are more dedicated to the single-phase market. We have a specific inverter for that. We are going to briefly launch a solar module also for the single-phase modules. besides the solar integrators, we are developing some in distributors specific to operate in the single-phase market. these people are going to be distributors to sell to small installers. That is the strategy. I think we have two questions from the front here. Good morning. Lucas Barbosa from Santander. I'd like to explore a little bit more the strategy of India that you commented that you see as the main manufacturing part in the future. I'd like to understand whether you already have a CapEx strategy, as Kuba commented that the verticalization there takes a longer time. What would be the time schedule for the CapEx so that we can have more numbers on that? Well, in regards to WEG Motors, we've made an operation there with a capacity for us to reach 2,500 motors. That's the estimated volume that we can put in that factory. We have structured a whole base of technical support, distribution. We restructured our commercial area to supply the short-cycle product, which is different than the WEG Energy that is long cycle. we understand that we're going to take about three years to understand the market, to scale this volume. after that, we are going to have to see a new manufacturing part. WEG Energy is also increasing, and we do not have more room in that plant. when WEG Motors designed the India project, we understood at a time that we should go there and start an operation on the same plant in which WEG Energy operates, and we have everything ready there. from the moment that we are going to scale, we have to move on to a new park to have a higher verticalization with the stamping, for instance. why not in the future, perhaps a foundry, having a foundry there. I think in the four years, five years, this is not going to happen because we have a good install capacity for to meet the demands of the Indian market. Good morning, everyone. Daniel Gasparete from Itaú BBA. I'd just like to explore a little bit of strategy on the transmission area. They were demonstrated the market share in the international market is relatively low, and I'd like to understand what are the competitive advantages. Who are the players? How do you compete with your competitors? What is the strategy to gaining market share in this sector? Well, first of all, thank you for your question. Well, we have first to understand how the transformer business works. Transformers is a business, is a product that because of the sheer size of them, they have a very complex logistics. The microphone's got some problems, some mic issues. Well, it's very difficult for you to have a strategy for exporting this product. Specifically for that target market, you have to have local plants. We have a strategy that is very well assembled for the Americas, in which we have the plants located in Brazil and Colombia, and I'm speaking about South America here. Later in North America, we complement that as I shown with the Mexican and the U.S. plants. Here, the different movement that WEG does in the market is to have the Mexico as a base for a production center. If in terms of components for the U.S. market, as I shown you, all the boilers, the core components we are going to produce, and we're already producing part of this in Mexico to supply the Mexican and the U.S. plants. You also asked about the movements in terms of competition, and we've had a few recent developments that were quite significant in terms of world market, with several changes in the playing field. I'm not going to dwell into this because these are public information that you are all aware of. These are developments that can bring a lot of opportunities to WEG in its focus, which is, as I mentioned before, the Americas, for all the opportunities that we foresee for the growth in the market, as well as in the African market. These are two markets that we see as a very good perspectives for the short term, especially in the renewables, in the U.S., you know, as well as in Africa. Today, our focus in the internationalization strategy in these specific markets. We have a question from the back of the room now. Hey, Tor from Lira Investment. Thank you very much for the invitation. There are three points I'd like to comment on. First, how is the opportunity for us to do a battery? We already export some to France, but from the vinculation with the wind generation, we'd have all the oscillation and the difficulties of maintenance in the distribution line. Why not transformers in India, where you have everything in place for making? You already have a foot there. Would be interesting to produce transformers there as well? Actually, two points that I'd like to raise. In regards to the intermittency of the renewables, both solar and wind generation, actually, there is a great opportunity for Brazil to become a supplier of green steel, especially in the northeast part of the country in which we have better wind conditions in the world, and the solar radiation that is stupendous. Eventually, we will be able to attract, and we were talking about this in the board of ABEEólica. We are going to be able to attract investments, but that has to go through industrial policy. It's not only the wind that is going to solve this problem to attract this kind of investment in the northeast region of the country so that we can have power plants to produce green hydrogen meant to be exported to Europe. That's happening in South Korea with U.S. investment, and I think that here our generation capacity to make green hydrogen is better than in any other country in the world because of our natural resources. I think that this is still a bit far off. There are some embryo projects. You also mentioned battery. Battery comes to firm the grids. This green, renewable energy or green steel, they can be isolated plants. They do not need to be connected to the national grid. For the interconnected national grid, battery and long-term storage is necessary in order to solve or mitigate this intermittency of this non-firm renewable supply. Besides the very important hydroelectric power plant is able to generate months on end. There is a whole many things to be studied in order for us to implement something, these green projects, and to be able to export green hydrogen. As I comment today, our focus is on the Americas and on Africa, where we can see a lot of short-term opportunities. We are following a verticalization project as well in our plants in Mexico in order to achieve higher competitiveness and become a very important player in this process and this coming, the development of the new grid. Now India is not part of that short-term strategy. We still have time for one more question. I am going to pass the floor to the back part of the room. Thank you. Here is Murillo from Vallia, and I think the question is for Kuba. In the beginning of the presentation, you mentioned about a BRL 660 million investment for the expansion of a capacity here in Jaraguá do Sul, and my question would be, what is the timeframe for that project? When should that be executed? A more generic question, when we look backwards, WEG had a CapEx on net revenue, because that is a measure that we used to do that was bigger than it is in the last few years. The impression that we get is that you gain a lot of market share and expanded your operations, and the investments have not grown in the same rhythm. So my question is, how is the utilization of the installed capacity? How do you see this? Are there any bottlenecks? Have you gained on productivity because of this investment, that's why you didn't have to invest that much? Well, this is what I mean is in terms of capacity or production capacity, because there's a lot of opportunities and you're still performing well in the growth area. Well, that is a very good question. I think that in the last few years, they were perfect years in which to do the plant management, because when you have a full order, you have better opportunities to identify bottlenecks. And when you identify this, you have a better notion of your production. In 2020, we had a drop, and then we started accelerating from 2021. And from 2022 onwards, we have all production taken. I mentioned that we have a lot of transition of components between plants going on, and we follow in 2022 with all production taken all over the world. So the first question that you asked was in regards to the timeline for the investment schedule. And Brazil's investment is BRL 660 million, involves the construction of new buildings and the acquisition of new machinery. So in 2022 and 2023, we are taking a big step towards constructing new physical structures. And with this building done, we are going to buy the machinery. So we're talking about 2022, 2023, 2024, beginning of 2025, in which we're going to buy the machinery as we have an increase in the demand, both for industrial motors as well as for electric mobility, as was mentioned here. And what is happening in regards to CapEx? WEG Motors is still investing a great share of the percentage of the investment on raw as the same. When we look backwards, 10 years backwards, we see that we had an increase of revenues that were very significant. That somehow is marching together in lockstep. As we had this increase in revenues in the last few years, obviously, we were able to have a better utilization of our plants. We use as well with this, we have several programs that were implemented worldwide, WMS, in which we gain a lot of productivity in all our operations. Today, China operation, Mexican operation, Portugal, and then Brazil operations are all monitored in a remote way, and we can run benchmarks in the Brazilian plant with any other plant anywhere in the world. I think that that is something that distinguishes WEG with a vertical production, that is able to do that very few other manufacturers are able to do. There's better intelligent allocation of resources over the CapEx using just what makes sense in every country. I think that's it. Again, we are running out of time. Yes. For us, in order to keep on time, we are going to finish this Q&A session. I would like to thank again the executives here for their presentation. We are going to have a quick interval and back-- we're going to come back at 11:45 A.M. Thank you very much. Okay, let's resume our session, the second part now. I would like to invite André Rodrigues, who's going to talk-- our CFO, is going to talk about our financial performance. Hello. Good morning, everyone. It's a pleasure to be here to update you on our financial performance, convey some more information about our business units. Let's start then. Okay. Talking to you about our growth record. Over the last two years, we had a growth rate an average of 16%. I think it's important to convey the information that this growth rate in adversity, like the ones we faced with the downturn in Brazil, deceleration of global economy, the pandemic in early 2020, and now the Russia-Ukraine war. This growth rate, if we consider the last two years, we're growing a little above 30% in the first nine months of the year. Our growth rate is quite attractive, at 28.8%. Now, talking in further detail about our business unit. The first point in the fourth business lines that we divulge result is growth rate in three of them. The other thing to be mentioned is the breakdown between the external and domestic market. Growth in GTD Brazil, solar generation, wind turbines, and good performance of transmission and distribution has changed the profile of revenues relative to the past two years. The other point is our product diversification, market diversification, solution diversification has helped WEG try find new opportunities in different market cycles. For example, the continuity of a good portfolio of short cycle products, both in Brazil and overseas, has helped us in this growth process. Also, a good long cycle product portfolio, both in Brazil and overseas. Now, getting into the business lines, starting with the industrial electro electronic motors, which is the most important part, accounting for almost 50% of our revenues. Industrial electro electronic equipment, 33% foreign market. Here we're talking about industrial motors and industrial automation equipment. This excellent performance results from favorable conditions, economic condition, that is of our most important market, coupled with important segments that have been showing excellent performance: oil and gas, pulp and paper, water and wastewater, and also agribusiness. Now moving to the green part, GTD, Generation, Transmission, and Distribution, which has been standing out because of our strong position in providing renewable energy solutions, in addition to research and development, with full solution for wind, solar, thermal, and hydropower. When we examine the growth of 70% of the domestic market, it's really robust, thanks to the excellent performance of research and development, as Manfred showed, the solar and distributed generation business, and also the new wind turbines. In the external market, despite the good performance we're having in North America, particularly in some other countries, in 2011, we had very important growth in Colombia and South Africa that has raised the bar. Even a little below last year, this year, we are performing very well in the U.S. and now having our product portfolio been beefed up. Now, in the motors for the appliance industries, we had a performance a little below the expected one. During the pandemic on the second semester of 2020 and early 2021, we had huge demand for appliances. So this sharp drop was expected. Now we are picking up again and creating the conditions to improve the situation next year. In the external market, in countries like the U.S. and Mexico, where the improvement of economic conditions and our market share has allowed growth in those markets. When we talk about coatings and varnishes, and we're talking about liquid and power industrial coatings and varnishes for industrial purposes as well, the domestic market, a good performance of the markets where we operate and the excellent sales in Latin America has allowed us to have a 30% growth rate. Now, next slide, I'll show you our EBITDA performance, EBITDA margin. In the first nine months of this year, we have a margin of 18.5%, a little below what we had in the last two years. But definitely, this EBITDA margin delivered in the first nine months is above our expectations. I think it's also important to comment that we are delivering the solid EBITDA margin in an unstable scenario in issues in the global supply chain and also issues in the European economy. This is also the result of our productivity enhancement and cost reduction Programs. Kuba mentioned the WEG Day 2018. There was a presentation of this program that has been widely publicized, and also the enhancement of our operational capacities and long-cycle product improvements and operations overseas. Now I will talk to you about our working capital, where we had been following this historical series, but in 2020, we had an increase of the ratio of operational working capital relative to the revenues, and this happened to our stocks. This was due to a strategic decision made by the company to increase the stock of raw materials and stocks in this period of uncertainty in the supply chain, punishing our performance indicator. And what we showed you this morning proves that this decision brought positive results for the development of our business, such as market share gains. In this slide, I'm going to talk to you about our investment. In the first nine months of this year, we invested BRL 672 million of investment, an amount that is much higher than the amount we invested in the same period. If we consider the historical series, we invest from 3%-5% of our revenue. The focus of our investment, as you've seen, our focus is capacity, expansion, internationalization of that business, and also investment in modernization in Brazil and automation in Brazil and also overseas. Now moving on and showing you our most important performance indicator, which is ROIC. On the first nine months of this year, we finished the first nine months with 27.9%, a very expressive ROIC, which is the result of business development with excellent returns on investment, discipline in capital allocation, and CapEx programs optimization. Our message here is that we're going to work to deliver ROICs above the expectations consistently. Getting to the end of my presentation, I'd like to share with you our dividend distributions, which has been increasing year on year, that is to our more than 400,000 shareholders. The payout mean is incredible, keeping what we practice over the last years, the earning per stocks. The take-home message that I want to share with you, first off, we keep our long-term focus of continuous and sustainable growth. We're going to be able to achieve that thanks to the favorable scenarios we have and the markets where we operate through verticalization and financial viability has helped us deliver that consistently over the last years as shown. The other point to be mentioned are margin of EBITDA that are very attractive. Our competitive advantages here, such as verticalization, scaling of production as shown today, and the solid and clear industrial strategy coupled with our productivity gains program, cost and expense reduction program has helped us do that. To conclude, the moment we go through is to the normalization of supply chain, and we want to improve our KPIs. Thank you so much. Now I pass the floor back to Harry. Thank you, André. I'd like to call Harry now to continue. Show us the perspectives for the next quarters, the next few months ahead of us. Good morning, everyone. I'd also like to start by manifesting my gratitude, my pleasure to be here back to WEG Day in a presential form. WEG Day is a nice opportunity to show WEG's plans, what it's doing, but to know that we end up transmitting much more in our informal conversation, in the informal questioning because people ask more. That's why our being here presentially is very important because we have these opportunities as we had last night. Welcome, everyone. Good morning again. In my brief presentation here, it is not going to focus on the results of the next quarters because maybe you were expecting this, but I'm not going to dwell on that. I am going to make a brief presentation A summary of our last review of our strategic plan to see what were the business that we decided to place a special focus on. How is the scenario for our businesses and the macroeconomic scenario, the perspectives that we see, and then afterwards, a few drives, a few directions to show you how we are moving them about. to maintain this decision that is apparently simple, but is a very important decision. WEG wants, and this is a plan that we have from 2021 to 2026, and we had, as we always said, to place a focus somewhere in a very broad way, but there is a lot of important information. we put a focus on motion drive, electrification, automation, energy generation, and the grid, which is the transmission and distribution part of the business. you can see that here we are bringing a new name here within our market action, our product operation, which is the motion drive, which is a bit different from the strategy that we've been doing up to this moment. And I'm going to dwell on that later on. And with that, we are able to advance in the electrification for a new world of mobility. And you can see WEG going, marching towards that direction. The world of mobility is set within two of this business units, which is the power train and motion drive and electrification encompasses the systems, station, charging stations, focus of our investment. And also developing digital solutions as a complementary and integrated solution to all WEG businesses. these were the topics that we were rediscussing, reassessing, and decided to be our focus. from them, I'm going to speak about the scenarios, but before that, I'd like to make a comment on the macro scenario. Without a shadow of a doubt, if we start analyzing the economical aspects, which is too much macro, the signals tend to be not very positive. We're talking about inflation, we're talking about interest rate. So this is a simple theory. We can see that there is a war going on in Europe, and I was asked many times, how is that impacting WEG? The war by itself impacts businesses in a general way. But on the other hand, we have lots of things happening, not only in the macro trends that favors WEG businesses. And what are the perspectives? The perspectives are positive ones. We have to have a special attention to what may come out of all these political and geopolitical changes, and we have to be very attentive to that. And what we do is redirecting along the way. We have this capacity to redirect our focus, not on the businesses, but where we are investing, how we are investing, what sector we are investing in. I'm going to give you examples about the war again, that everyone here is supporting that this will end up soon. I think it's already gone too far. But at the same time that they are suffering with the lack of energy, higher price of energy, the world is also marching towards how to supply these demands in Europe because it is marching toward changes. this is a difficult balance to strike, but we have positive perspectives, especially because of the scenario of the businesses that WEG is involved in. what is this scenario? Every demand that stem from society, and it's a very strong demand to decarbonize the world, and this decarbonization movement is going to bring more electrification. Electricity is the most efficient way of using energy and the way to have clean energy for all applications. the world is going to be more electrified. You can perceive this all over the world in all moments because this takes more electrification, which leads to more investments in GTD. We were talking about the renewables in the U.S., the distribution, several things going on there, as well as in the world and in Brazil. throughout the world, these investments are going to be at higher levels than were the historical records in levels of energy, electricity generation. The generation is going to be predominantly renewables. And WEG, since a few years ago, has invested in this, wind, solar. And so this is something new, renewable, João Paulo has commented upon. There is a complementary need, which is the way to store this energy. So this demand is going to demand storage system. WEG is also very attent to this. We already decided to invest in the storing in batteries. But I'm going to give you just as an example about hydrogen. In my view, hydrogen is again a way to store energy because what is happening different than the gray hydrogen, we are talking about the green hydrogen here is wind turbines and solar generation are going to transform that in hydrogen to reuse that as a source of energy. It's not to produce hydrogen to use, as was commented, the green steel uses a lot energy to be produced, but this is something As with WEG is also attend to this, but much more as a supplier of electro-electronic equipment as something involved in the production of hydrogen in this power plants. There is the wind turbine and electrification of the transportation system. So all this movement of electrification of transports in the infrastructure of recharging batteries and mining of minerals or transformation, that is something very important. There is no way to make this transformation without mining. You know that we will have to mine for lithium, copper, silver. There is a lot of investment going on in mining, and there will be more than normal in order to make this all viable and reality. More companies are adhering to the commitment to reduce the emission of CO2 as a growing movement. Industries increasingly, when they take this commitment and within the global pact, they start actions within their companies to outsource renewables, to substitute types of polluting energies. And one that is very important is to consume less energy, because when we talk about energy, that is one of the problems of the world today. We have not only to transform the way we produce the energy, and all the associated pollutants, but we also have to bear in mind that also implies in a lot of investment and things run out, and the whole world will have to look for more efficiency. All of us, all the processes have to pursue more efficiency to use less energy and less resources. That is a great movement as when we are talking about decarbonizing our economies, not only substituting fossil fuels for non-fossil, is to be more efficient in all we do and make is to use less resources. The less resources you use, the more you are contributing to save energy and make it available for essential things and to keep on growing. this is going to demand is a business that you already are aware of. Those of you who follow WEG invest permanently in the search for better efficiency in all the products that we manufacture. It's a very important approach in the market. Kuba has shown how we are investing this, how our technological advancement is going on in the electric motors. We saw differences in the uses of the resources, the uses of the raw materials. That is enormous with our technology, but a different way of cooling, refrigerating. Also, the use of drives is growing, is still a significant number of electric motors don't use drives. The gearboxes that you gain a lot of efficiency. You save on energy using with drives. automation and digitalization also. the motor markets, as I'd like to make a comment. Kuba made a comment here. The drives and automation and motors, the market is going to still grow more than the industrial activity. I just recall this because Sean made a comment on what happened to the motor engine, but historically, this is not so. Historically, this market grows more than the industrial GDP grows. World GDP. The market for this kind of motors, for drives and automation is a market that grows more than the industrial GDP. these are all positive signs in the scenario that we have regardless of the macroeconomic signal that many people wonder what is going to happen with the war. in fact, WEG is attempt to this certain sectors always will have a feel more or less. certain sectors in this transformation market that we have is going to migrate, is going to invest. We're going to have investments in other areas. our vision is of a positive scenario. These are our perspectives, and that is why WEG is still going on investing in these areas that has, or perhaps even a bit more because of the new businesses opportunities. Here are actions that I would like to highlight for the coming years that somehow is being commented here in the meeting. first is to accelerate, to advance with the transmission and distribution business in the Americas. It has been shown that we have with three transformer factories in the United States. We're still investing a lot in Mexico and Brazil. the United States, we participate in the market, which our participation is very small, and we are doing well in that market with all the support that we have from Mexico, from Brazil, in terms of fabrication and doing a work in conjunction. we have a lot of potential to go on growing. That is a highlight I'd like to make, to continue to advance in the renewable energy business and to invest in the battery energy storage. That is a decision of WEG today. There are several other systems to store energy, but we chose battery, and WEG is going to be analyzing all these other alternatives because it's part of our business. Today, it makes more sense to store in batteries because it has inverters, it has battery packs, automation. It has everything in the system. That is in our expertise. We have to have a special inverter and to become a specialist in battery applications. Electric power train, it was better already commented upon, and then if you charge an infrastructure solution, which has already been commented. To invest and master the most efficient motor and drives technologies, as has been shown. WEG has had a fabulous history in the evolution of these systems, and we are on the top of this technology. To incorporate globally the offer of digital solutions for asset management. And this in the digital area, we have two strategies. You've seen that WEG today works with software, but software for the industrial area. Our focus in this moment is the industrial area for digitalization energy distribution. Brazil has a lot to evolve in this, and we have several products. Besides this action in Brazil, WEG has already in the international market, is incorporating the asset management in all the product offer that it makes. When you're going to do a management of motor substations, it's already incorporated to it in the package that WEG offers internationally. To strengthen the motion drive strategy and to accelerate internationally the business of automation. I am going to comment this with this slide here. Just I'd like to make clear why WEG is using this motion drive and the internationalization of gearboxes or inverters. As the leader, we are second in Latin America because of the United States, but Brazil is the absolute leader. In the United States, we have a relevant participation. We are the second player with a relevant participation. In Europe, we also have a relevant participation. We are the third player there. In Asia, we are around fourth, fifth place, but we are investing a lot to grow in Asia. You can see our investments in China. You can see our investment in Asia as a whole. In India, in Southeast Asia, we are investing a lot in order to grow more rapidly in this region, which is our important focus of our strategy. This position, and WEG has conquered this. You always hear WEG speaking about oil and gas and mining segment, which is very strong areas. Countries that produce this, the market share of WEG is very important in these producing countries, and especially of more general applications of rotary machinery, ventilators, pumps. This is where WEG stands out in the international market. In Brazil, it's different. In Brazil, for you to have an idea, WEG has an important agricultural market. It's the second market for consumption of motors after oil and gas and pumps is machinery for agriculture. WEG needs now to establish the strategy to work in processes of food and beverages, food as a whole, management of materials. Why WEG wasn't so strong in these sectors? Because these segments normally demand motors and drives and gearboxes. WEG has started a plant in Austria, and here gearboxes. We have a factory, and it's a more aggressive strategy with more synergy that we classify here as the manufacturer of machines. Which is the manufacturer of machinery and equipment, machinery for processing food products, for cooling and refrigeration systems. These we're calling motion and drive. We have rotatory motion, oil, gas, mining, and we're starting to address this in a little bit different way, using all of the technologies that WEG has to increase the participation with machinery manufacturer. There's a lot of potential for us to do so. I was satisfied that was how Manfred and Kuba presented this because we need a lot of synergy. We need to work in conjunction in approaching the market, several different applications. We have two actions that we have here. These two points, these directions here that were first the separation of WEG Automation. I think Manfred has mentioned upon WEG Automation. We have created a new business unit called WEG Digital & Systems, and the system area itself that is going to be responsible for this new division. Digital and systems. Then you can see here that is highlighted in bold, digital solution system for industry, infrastructure, and energy systems, as Fred has mentioned, is number one in electromechanical construction for the industry. It's a leader in the market, and this is what we call systems, because apart from electromechanical construction, you have automation, you have several softwares, and WEG is an applicator of this. So this is what we used to call systems, and this is going to be under this new unit, along with the new systems that we have specific names for, which is the battery storage system and electric mobility systems. For us here is a motion drive, but each application is going to be a system, is going to be a specific development for each type of OEM for the automotive industry. So we need a lot of engineering, a lot of applications, so we are there as well. So also to say that I didn't have a focus is not correct, but we need to apply more focus on this in order to accelerate these actions, and this is the moment. So our new COO, Carlos Grillo, is here today. He is leading this digital solution within automation. So it's still with digital solutions now. The system area was transferred, and was transferred the battery storage energy in order to give more focus, and we grew faster in that way. And on this side, on the automation, you can see drives and control, and then we have products for company center of business, now WEG Automation. Here, drives and controls is what we have within the strategy of motion drive, along with gearboxes and motors. We want to strengthen our structure out there in order to work in synergy in conquering segments that did not have the participation as it has in pumps, oil, gas, and mining. We have to grow there and as a start. And for this new restructuring, I think Manfred commented, actually Gefran. For this restructuring, for example, our head office or chief office, the COO of the WEG Motors and Automation, the center is based here. The HQ is here in Jaraguá do Sul, and they are transferring this office. Manfred is transferring his office to Europe, in Italy, along with Gefran, and Kuba is transferring his office to the United States from January onwards. You can see there is Europe and the United States in order for us to implement and to study in conjunction to have more participation in the day-to-day of these countries to see eventual possible restructuring in order to make this strategy more successful and to be more aggressive and to look for machinery manufacturers to offer something in conjunction in this three motors, gearboxes. They're transferring their offices there, and it's the office itself that has been transferred so that we can strengthen this. This is a temporary solution. Because of Gefran, Manfred is one more executive that is going there to work in conjunction with all the offices in Europe to increase the synergy, as well as in the United States. Now I brought robotization and digitization of operations. Once I was asked about CapEx and investment. WEG has something really clear. We have to invest to grow. Do we have a continuous, sustainable growth rate? This is our flag. We have to grow. We invest in new businesses. We invest heavily, and we are investing evermore on robotization and digitization systems for productivity gains and enhancement of our competitiveness. A lot of was said about competitiveness and reduction of costs of our high voltage motors, et cetera. This is not for us to make more machines. The keyword here is competitiveness. If you are competitive, you're going to gain it. If you're not, you have to become competitive and increasing volume, and then you have this virtual cycle turning. This is an example. Those of you who attended the last WEG Day, this is an example of digitization within WEG. As we develop products for digitization of our customers, we are also taking this digitization journey within WEG and other actions to become ever more competitive. An example of robotization. In 2010, we had 10 years in a row growing four-fold, and four-fold, and four-fold. In five years' time, we have to have four times more than our base, and this has been speeding up. The other example of digitization, and we have this product to sell. You can see here that in 2018, we invested BRL 300,000. In 2019, we invested BRL 645,000, which is BRL 945,000. The result today in the effective use of equipment in the wire manufacturing plant evolved as such, and we are now saving BRL 21 million because of that. This is digitization, the collection of information, and by doing so, we have excellent performance. I usually say the following. When you are responsible for managing something, you have to list what are the indicators you want to achieve, you have to select them, and then you follow it. And you don't over-collect information, otherwise it gets in the way. Today, as a plant, we have to collect maximum information possible because you are not only going to learn, but IA is going to do the work for you, and it will tell you where you have to focus. You can have it all because the data collection and the analysis through IA is going to help you focus to prevent downtimes and so on and so forth. And as this evolves, you are improving over time. This is what WEG believes is offering in our platforms and the software management systems that we are offering our customers in Brazil, and this, we have 89%, and the world average of digitization is 7%. But worldwide. In Brazil, excuse me, is 7%. And WEG is an example that invests heavily. It's always using cutting-edge technology from 77% to 89%. So this is another piece of information of all the investment that we have. And yesterday, Kuba was asked about investment in India and CapEx and so on and so forth. It's the following. Historically, WEG has had an investment percentage, continuous and sustainable development. This has been our strategy. Of course, once in a while, you have to invest some more, but the average considers a longer cycle. Sometimes you need to invest more but this varies the percentage, but the average is kept at that percentage. Have you shown the percentage of investment? Have you shown it? 5%, right? Now it's a little more. And WEG is always reinvesting, either by automating or investing on a new technology or on innovation or on new business. This has been our history. A plant in India. So the faster we succeed, the better for everyone. With this whole exception of a foundry, these are modular investment. You create lines of investment. So we are going to invest on a business that will give us good ratio between investment and revenues. So this percentage of our investment is specifically for robotization, process improvement, and is a significant amount considered to what others invest elsewhere. To raise productivity levels, this is a compliment. We're working strongly on this. There's not this level of efficiency overseas as yet because we don't have the same resource levels supporting workers. That's why we are insisting to achieve the same level as the one in Brazil and to strengthen the WEG culture and ESG actions. Well, a lot has been discussed about WEG culture, and the best description or definition of what a company's culture is all about is the way the company does things WEG does it through co-management with the commitment of all workers, all stakeholders. And thanks to this engagement and commitment, we're able to overcome challenges. A company that grows and affords its employees and collaborators to grow as well is the desirable thing to do. The other thing that is really strong in our culture is that it insists on training all levels of operations. You may hire a lathe operator in the market. Okay? You can hire a lathe operator in the market, yes, but we are going to do capacity building to our own personnel to ensure this in the digital field, well, more so. We start a new business. Now we have a group, how many people are there? 25. SENAI, which is the National Apprenticeship system, Industrial Apprenticeship system, trains people. We also continue training them, and we can give those people opportunity for them to take advantage of the opportunities that open up at WEG. This is our culture, and to strengthen our ESG actions. Maybe strengthening is not the right word, but I picked this word myself. Here, WEG is listed at all ESG levels and is faring well according to the assessments that are carried out by numerous magazines and awards. We are faring very well in ESG, but the world is changing, and we have to meet other demands by beefing up our ESG actions. The social component is really strong, and decarbonization is also one of the things that since we are in the business, we have to give our contribution and move in that direction. We defined and established our target, and this is part of the company bonus to achieve an ESG target. Very soon we're going to have one more, which is decarbonization being the second one. Now showing you how WEG is aligning itself to sustainable values, the search for new values in this world in transformation. We defined our purpose, our goal as to develop technology and solutions to contribute towards the construction or the building of a more efficient and sustainable world, driving efficiency and sustainability, and here repeating to strengthen that culture and to strengthen also our ESG actions. Take-home message. Our major goal is to continue to grow sustainably, and this is what we're doing to grow in Brazil, to keep market share and positions in mature business and invest in new businesses, for example, in energy storage, et cetera. I would like to mention something about WEG Automation. WEG Automation, the electrification part of the company in all the products it has, it stands out in the Brazilian market as a leader in some product lines. By using this position, we are little by little offering products in two direction, a technological synergy or a market synergy, foreign market to try and achieve two-digit organic growth in all regions by winning more shareholder participation in the U.S. We have transformers and generators and so on and so forth, but we're going to evolve to other products, invest in new technologies, in operational excellence. Competitiveness is part and parcel of that culture. We always have to do things best than what you did last time. This is part of our founding father's culture. This is part and parcel of our culture. This is permanent search for competitiveness to set ourselves apart in the way we relate to our customers and to strengthen our actions in general, ESG general. Now I'm ready for Q&A. I think I spent more than 30 minutes to make my presentation. We're going to start now the second Q&A session. I will ask Andre Rodrigues to come upstage again and to stick around. We're going to keep the same dynamics as the first Q&A session. Those of you who want to shoot a question, raise your hand, identify yourselves, and let us know what organization you work for. We appreciate. We have one back there. Hello. Good afternoon, everyone. Marcelo from Credit Suisse. Congratulations for the meeting. Excellent results this year. You mentioned something during your presentation, e-mobility and e-recharging stations, okay. My question is, what comes first, electric vehicle or recharging? Question number two is, how e-mobility or electrification is going to take place worldwide? Is California more aggressive, Brazil, India, where people have more resiliency in renewables, et cetera? This is just to see where you see the potential, how big the potential is, and what's the implementation or deployment timeline, five, 10, 15 years, or longer. Timeline is the most difficult question to answer, right? As you mentioned, timing will be different. In the U.S., you mentioned California. In principle, everything almost started there, a major boost in electric vehicle. This growth in electric vehicles is now incredibly growing in China and Europe. This is clearly the way to go in deadlines established by governments and the infrastructure to be built. The question is, what comes first, the chicken or the egg? They're doing that simultaneously because they have a clear-cut plan for those countries, in Europe as well as in China. Well, concerning Brazil, this is going to happen more slowly. You mentioned alcohol or ethanol. Brazil will have to use its assets, which is ethanol, corn ethanol, and for electric vehicles, for cars, okay. Electric vehicles will grow more slowly in Brazil. What about for buses and trucks? This is a different ball game. Urban buses, for example, our focus on truck. This is, in our opinion, in a very short-term, much, much faster because there are government municipalities, state governments, and urban buses are moving in that direction. Not probably at the same pace as things are taking place in China, because everything is electrical there or in Europe, but it will happen. Comes the recharging systems. Recharging stations will not be a business because there's not plenty of money or money enough to build infrastructure everywhere. In urban centers, they're going to be private investment. Companies will have to provide for their own vehicle fleets. This is how things are going to happen. All cars that will be imported, electric cars imported in five years' time, if they come from Europe, they will be electrical. What happens? If two electric vehicles get to a condominium at the same time, an argument starts because they have to recharge, and there's not enough infrastructure. They have to expand. They have to build, taking into account the growth in the EV fleet. There are going to be companies investing on recharging equipment, but growth rates will be much bigger in fleet owners. Just to conclude the powertrain strategy now. We are starting this in Brazil for urban buses and trucks. All companies, truck builders are international, and so this is the way to go for us to sell our powertrains. There's one question here in the front Good morning. Thank you for your presentation. I would like to understand how is the budget planned in WEG because of the different fronts that you can invest and being 3.5% of your revenues. These are three five-year cycles, or is by the expected level of return on invested capital WEG has? We had a strategic plan, and it was a 10-year plan. Now it's a five-year strategic plan because of the market volatility, because of pandemics and logistic issues. We list all initiatives we believe that are going to take off, and after discussing and providing inputs, all initiatives that make sense for WEG's strategies are shortlisted, and we show how much the investment it will require. WEG investment per region, okay, either in Turkey or in India or Elsa, is projected in the five-year plan, and we make estimates of that. As far as ROIC, we know that we have midterm or longer-term ROIC. Some products take a little longer than others. It depends on when things are going to happen. For example, the e-mobility market, when it is going to take off truly. For us not to miss out the opportunity and to build our position in that market. This is how we discuss new businesses and investment and implies in increasing our productive capacity. If it makes sense and it's growing more in a certain region, we invest more in that region and so on and so forth. We discuss the risk involved, et cetera. Let's see if everything is aligned. The return on investment is assessed on a project-by-project basis without knowing what is the actual things. There are some variables, numerous variables, by the way. We invest this percentage, and the investment that we've been making is linked to our strategic planning, and these are things that we at WEG continuously do it. We have one more question from the front here. Good morning, everyone. I am Renata Cabral from Citibank, and my question is in regards to automation. A lot was spoken about it, and I understand that this is an area which is a bit different to WEG in the sense that it is going to involve services. It does involve service software. My question in regards to what is the ambition of WEG and the markets in which it is inserting itself, in a different way, which I understand is Europe and the U.S. market, given the transfer of the offices to these places. What would be your ambitions in also analyzing the competitors in these markets? It seems to me that the CapEx investment is a bit bigger than this 3%-5% that you mentioned in general terms for WEG. Is it to be expected an increased CapEx for this focus in automation that you're going to give? Automation that you're referring to is the digitization or the inverters or both? Sensor with digitization, everything. Well, what I see is the strategy for inverters and automation in terms of what has been done so far. These investments are going to be within the natural cycle of investment in this around 5%-6% of our revenues. this is the digitization. It's still hard to tell, but I don't believe that is going to change the profile of WEG's, because our strategy, as we previously mentioned, for digitization we started with mass. It was not in the software. WEG was always an applicator of software. Now is we're manufacturing. We brought the mass, and our focus is now in Brazil. We have the digital platform, but it has to do with the actual business. software is something new in this strategy, the global strategy of WEG as a management system. we have the focus in Brazil. This focus in Brazil is not going to demand strategic changes that are very important. Depending on the success of this strategy, WEG may think about other mergers or acquisitions in the software area. There isn't an offer nowadays, and the digitization has to be inserted within our growth strategy in the automation It's in these percentages. I do not see anything that deviates from these standards. We have a question from the middle of the room. Thank you for the space and congratulations on this event. Igor, we know that the macro scenario is contributing. It's more difficult and new opportunities come up in such conditions. We know that you have always had a very clear mind about acquisitions, so to enter new markets or new sectors. I would like to understand what business unit of yours generates this opportunity to amplify the product portfolio in the tighter scenario that we have, because I believe still there is some space in these movements of migrating the management to Europe and the U.S. They actually will tap some opportunities, and I'd like to understand whether this is actually happening and what is your mind about this in the sense of new acquisitions? Specifically in terms of acquisitions. You have specifically said that WEG has done this or access new markets and technologies. Yes. WEG is permanently evaluating opportunities for businesses that may bring a technological fit or may open up access to new markets. It was asked why does WEG doesn't do more acquisitions? WEG's strategy, actually, as you can observe, has not been to pursue gigantic acquisitions. These are acquisitions in which you buy and incorporate into the company in which you don't have a shift in the strategy. WEG is, as in the example of Gefran, separating EUR 43 million in revenues. This is the intention that WEG has today with this kind of business in this M&A. It's a tool similar to what we are applying nowadays, so that's our mind. We have another question from the back of the room now. Gabriel Fidalgo from Citibank. Thank you for this event. I have a question, I think that in line of what my colleagues have already mentioned, thinking towards the end of the presentation, we're talking a lot about ESG, and at the end of the day, the company is putting commitments to that end. At the same time, some of the main clients of the company are working in the sectors that contribute a lot to generation of CO2. How does a company deal with these two movements? The segment that is trying to become more ESG and working with sectors that are not so much and work with investments in technologies geared toward the sectors consume less carbon. How can you help your clients improve that and what levels of investment should the company do in order to achieve that? Well, in terms of clients, the great thing that WEG does, one of the biggest consumers of electrical energy are electric motors. The role of WEG is to make these electric motors to become more efficient, to consume less and less energy and put out the same capacity, or that is to eliminate losses. Automation solution as with inverters, we can reach up to 30%, 40% perhaps is a little bit exaggerated, but 30% reduction in consumption. For example, inverters and pumps and automation as well, 6%, 7% efficiency gains is what is being offered to our clients. Our clients are able also to improve their consumption and reduce the resources needed. This is the movement that WEG is doing and its contribution to our clients. This is what I can answer, but all of this will happen in a gradual way. No one is able to or rapidly go to zero carbon or net zero from day to night, overnight. Have to also bear in mind that there is all over the world a movement towards the renewable. Our clients at the same time that are going to gain on efficiency are going to pursue themselves renewable sources of energy, and then you close the loops. If they have the consumption of renewables, be it solar, wind, whatever, and all the consumption is optimized, they're going to end up there. This is the movement that is taking place. We have another question here. Good morning. Thank you for the opportunity. Gabriel Hansen, CM Office. Is a company that invests in companies since 1971. The question is from the configurations that we're seeing yesterday, specifically about hardware and software aligned to the verticalization of the company, it seems to me that is designing a very important competitive edge along with all these opportunities for the growth opportunities out there. Within the company, how do you deal with this process? What is the percentage or the level that you are able to address a sale of a mining, for instance, but to embed in these products the digitization features? How mature is the company towards that? Well, depending on the sector, when we are talking about mining or oil and gas, these are companies that are very mature, so they're able to pursue more efficiency and efficiency gains towards their decarbonization goals. The approach that I think is easier, that is easier. The manufacturing sector is a bit harder. There are a lot of things that still need to be done in this sector, and that needs more work so that they can understand the offer of WEG, and by understanding this, to start calculating their returns on investment. This is how I see. Do we have any more questions? Well, we have one more here in the front. We still have time for a couple ones. Good morning, Tiago. Aldo Carcer from Onyx. The question comes from. As a compliment, actually. WEG is a rare case combining growth, accentuated growth, and high returns on investment. There is always this difficulty, this strategic difficulty to combine and align the strategy and rentability. I think that is a good problem, which is to raise the bar very, very high. We have 30% two digits growth. Is there this internal vision or that you from now on is increasingly harder to maintain this number? Up to what extent should you have any figures in mind? Up to where would you be willing to open one of the sides of the equation, be it growth or to have a high revenue or lower than you have today? What is your vision towards this ratio between growth and return on investment? Well, this question, it's a hard one to answer. Well, let me give you the example of the electric motors division. It historically brings good rentabilities, good revenues. WEG has the expertise, knowledge, technology. The margin that you are able to gain depend on the moments. For instance, if the demand has good demand, the margin increases. If there is lower demand, your margin decreases. If your inputs, your raw materials increase, your margins decrease. We do not see loss in margin percentages. Always, again, it depends on the cycle that you're working. If you are riding a bad patch, a bad cycle in terms of raw materials, you will lose a little bit of the margin. WEG in motors, just an example, again, the way forward is have more market share, is an attractive business. All businesses of WEG are attractive, but we haven't analyzed yet to give you a right answer, what would be the margin in three, five years, how it is going to be. One thing we know, though, we know that there will be new competitors out there. There will be more demands for price reduction, and you have to be ready for that all the time. We still have time for one more question. Sure, Debbie. Is it working? Yes. Thank you for allowing me this one last question. I think Brazil has many bottlenecks, and the most important one is we train just a few engineers. It's really hard to retain talent. When we look at WEG, everyone is 30 years in the company with rare exceptions. What do you do differently to be able to retain talent and to attract so much talent and to retain this talent for so long? Where does this? Is it possibility for growth, earnings? Compensation. How do you do it so well? There's one thing I'd like to say, that WEG invests at all levels of employee levels by delivering training, by affording opportunity to its employees. That's why people stay 20, 25 years at a company, because this has been the pathway, the professional pathway. This person is constantly learning, constantly applying knowledge, and the company is creating new opportunities all the time. The best way of retaining talent is to have a good performance, is to have a clear-cut plan for investment, and to open up new opportunities. In 2008, and I was telling, the mission of WEG is not the one that is on screen. It's what the company does. We discussed then, what are we going to do about WEG? Let's make the company continue growing, because if the company is to continue to grow, it's going to continue creating opportunities, it's going to account to the capital market that invests on WEG, that continues to grow and provides a good bottom line to the investors. As we work for the company, new opportunities will come up. this is a way of retaining talent at a company at all levels. This is strategy. This movement is of wanting to acquire more knowledge and market share and so on and so forth. Thank you so much. Once again, I'd like to express my appreciation to Harry and all the directors that made their presentations during the day today. I'd like to express my appreciation to all the organizers who put together this meeting, our IT team, all our service providers that have also helped us achieve the wonderful results we're having at this meeting, and for everyone who watched and joined us online. Thank you. See you next time.

Data Source: Quartr Last updated: Nov 8, 2022

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