WEG (WEGE3) Q2 2024 earnings summary

Executive summary

• Net operating revenue reached R$9,274.4 million in 2Q24, up 13.5% year-over-year, driven by strong performance in long-cycle equipment and both domestic and external markets.

• EBITDA increased 15.7% year-over-year to R$2,120.8 million, with margin improving to 22.9%.

• ROIC rose to 37.4%, up 3 percentage points year-over-year; excluding non-recurring tax incentives, ROIC would be 34.4%.

• Consolidation of acquired businesses (Marathon, Rotor, Cemp) from Regal Rexnord began in May 2024, contributing R$407.2 million to revenue and enhancing industrial, electro-electronic, and GTD segments.

• Net income increased 5.4% year-over-year to R$1,441.7 million, with a net margin of 15.5%.

Financial highlights

• Gross margin held steady at 33.7% despite higher raw material costs, mainly copper.

• SG&A expenses rose 18.5% year-over-year, representing 10.9% of revenue.

• Cash flow from operations was R$3,078.8 million in 1H24, supporting investments and shareholder returns.

• CAPEX totaled R$391.5 million in 2Q24, focused on expanding production in Brazil and Mexico.

• Net funding of R$1,106.8 million after raising R$2,237.0 million and amortizing R$1,130.2 million in debt.

Outlook and guidance

• Healthy operational dynamics and positive returns expected, with strong product mix and ongoing efficiency gains supporting margins and ROIC.

• Positive demand for long-cycle equipment, especially in electrification and infrastructure projects; gradual recovery in short-cycle manufacturing activity.

• Solar segment expected to recover in the second half as price normalization occurs; wind revenue in Brazil to decline as backlog winds down.

• Integration of new businesses to strengthen synergies and operational efficiency.