WEG (WEGE3) Q3 2024 earnings summary

Executive summary

• Net operating revenue reached R$9,856.9 million in 3Q24, up 22.1% year-over-year, driven by strong T&D and industrial equipment performance in Brazil and internationally, as well as recent acquisitions.

• EBITDA rose to R$2,224.6 million, a 27.9% increase year-over-year, with a margin of 22.6%, up 1.1 percentage points.

• ROIC reached 37.1%, up 1.7 percentage points year-over-year; adjusted ROIC excluding non-recurring tax incentives is 34.3%.

• Recent acquisitions (Marathon, Rotor, Cemp) and the acquisition of Volt Electric Motors in Turkey for US$88 million are supporting growth and operational synergies.

• Net income increased 20.4% year-over-year to R$1,578.7 million, with a net margin of 16.0%.

Financial highlights

• External market revenue grew 40.6% year-over-year, while domestic market revenue rose 1.5%, with strong T&D and industrial activity in North America and Brazil.

• Gross margin improved to 34.5%, up 210 bps from 3Q23, supported by favorable product mix and productivity gains.

• SG&A expenses increased 31.6% year-over-year, mainly due to consolidation of acquired businesses and higher freight costs.

• Investments totaled R$434.9 million in the quarter, with 65% in Brazil and 35% abroad, focused on expanding motor and transformer production capacity.

• Net operating profit after taxes grew 19.8% year-over-year.

Outlook and guidance

• Positive operating momentum expected to continue, supported by a strong order book in T&D and solar, and improved short-cycle equipment dynamics.

• Wind business contribution is expected to decline, but solar and T&D are set to offset this with new large projects starting deliveries in Q4.

• Margins are expected to remain stable, with ongoing integration of acquisitions and focus on operational efficiencies.