WEG, Star Performer of Brazil’s Stock Exchange in 2020, Prepared to Attract More Investors

RIO DE JANEIRO, BRAZIL – While the pandemic destroyed thousands of companies, a few gained prominence through a strong performance. Among them is WEG, manufacturer of electric engines, generators, and automation equipment, whose shares soared 119% in 2020 on the B3 Brazilian stock exchange.

In the decade, the Santa Catarina State-based company led the profits in the B3, with a valuation of over 1,200%. For the post-pandemic, the company continues focusing on innovation to attract investors and maintain a sustainable growth.

“Whatever the scenario, WEG’s investors are not afraid. We have long-term plans and the market knows this,” says André Luis Rodrigues, the company’s financial director.

Established in the electric engines business, with a 90% share of the Brazilian market, WEG has also invested in so-called intelligent products, which will not only collect data but also process them for productivity and efficiency gains.

In addition to its obsession with innovation, the executive mentions the company’s management as a factor contributing to the success achieved in recent years in the B3.

The ongoing internationalization process has also attracted investors. The company has been exporting since its very beginning, in the mid-1960s and 1970s, but this has been growing in the last decade, mainly because the strategy has been to produce locally to serve the markets more assertively. “Today, nearly 60% of the company’s revenue is generated outside Brazil.”

As one of WEG’s competitive advantages, the executive points out financial flexibility. “We have a strong financial balance, with no net debt. In the pandemic, several companies had to turn to the market and we spent the whole year with no capital raised.”

Between January and September 2020 (the company’s most recent data), operating cash flow reached R$2.5 billion (US$ 500 million), a hike of 137.5% over the same period the year before. WEG credits the performance mainly to the operational result improvement and to the lower working capital needs in the period.

In this respect, Rodrigues points out that having a strong cash flow is an advantage in times of crisis when business opportunities arise. “We are investing to increase the production capacity of transformers for renewable energy in the United States, which should be ready by April. We are leaders in this segment in the American market and, with President Joe Biden, this trend should grow.”

The renewable energy sector is also one of WEG’s commitments to ensure long-term sustainable growth. One of the company’s projects involves the generation of energy through gasification and burning of waste in a joint venture in Germany. The company is also developing, jointly with Volkswagen, the first fully electric truck to be produced on a large scale in Brazil.

WEG culture

According to Rodrigues, investing in innovation entails searching for the best technology available, wherever it may be. He mentions as an example the company’s project in Germany, a country that has become a reference in solar energy generation: there, WEG has set up a research center with six scientists dedicated to developing equipment for the area before spreading this know-how around the world.

Moreover, he states that the company has overcome the challenge of dealing with different cultures to grow on a daily basis. With sales across five continents and about 45 plants in 12 countries, the manufacturer needs to adjust to the circumstances of each location. “Each country has a different scenario and, as a global company, the challenge is to unfold our culture locally.”

The broad global presence turned out to be an asset during the pandemic. With its operation in China, WEG had contact with the novel coronavirus before it spread worldwide. “We quickly learned the necessary protocols and deployed them to each country where we operate. We were very responsible and diligent.”

Long-term perspective

WEG’s CFO says that in 2020, part of the investments planned for the year had to be deferred because of Covid-19, albeit not canceled. “With or without a pandemic, we have already mapped out where we want to go, and we expect increased investments to continue growing. We will continue making acquisitions irrespective of the moment,” says Rodrigues.

According to the executive, investors trust the company’s long-term strategy. “We are not worried with the result of the current quarter. WEG always looks at the long-term, with great discipline in its planning execution.”

Rodrigues says that the vaccine against Covid-19 is a global solution to the current crisis and, therefore, the company is “cautiously optimistic”, also in the Brazilian market. “The projections show a rebound for Brazil. After vaccination, we can say that we have room for continued growth.”

For the post-pandemic, the executive believes that digitalization is a one-way path. “The world has learned much with the pandemic. Processes have become even more digital and, from now on, there will be a greater need for products and services that attend to these changes. We will offer increasingly more digital solutions.”

Source: Exame