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 rose 15.7% year-over-year to R$2,120.8 million, with a margin of 22.9%, reflecting improved product mix and operational efficiency.

• Net income for 2Q24 was R$1,441.7 million, a 5.4% increase over 2Q23, with a net margin of 15.5%.

• ROIC reached 37.4%, up 300 bps year-over-year, positively impacted by tax incentives; excluding non-recurring effects, 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 boosting industrial, electro-electronic, and GTD lines.

Financial highlights

• Gross margin held steady at 33.7% in 2Q24 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 in 2Q24 totaled R$391.5 million, focused on expanding production in Brazil and Mexico.

• CapEx for 2024 is expected between R$1.7–1.9 billion, higher than last year but likely below the approved R$1.9 billion.

Outlook and guidance

• Management remains confident in long-term growth, citing product diversification, global presence, and opportunities in electrification and infrastructure.

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

• Margins anticipated to remain resilient and above historical averages, with some volatility possible due to FX, commodity prices, and integration of acquired businesses.

• Solar segment expected to recover in the second half as price normalization occurs.

• Forward-looking statements note sensitivity to market, economic, and sector conditions.