11th annual latin america conference santander
DESCRIPTION
TRANSCRIPT
0
Localiza Rent a Car S.A.11th Annual Latin America Conference - Santander
1
Integrated Business Platform
Synergies:
cost reduction,
cross selling,
bargaining power
179 agencies in 8 countries6,816 cars
23 points of sales79% directly sold to consumers
133 agencies25,138 cars
14,250 cars
2
Cor
e B
usin
esse
sSu
ppor
tIncrease market leadership maintaining high return on investment
Create value through fleet management market opportunities, taking advantage of the synergies generated by the integrated business platform
Add value to the brand by expanding the network in Brazil and South America
Add value to the businesses of the platform as a competitive advantage, reducing depreciation costs
Strategy by segment
3
Revenue per car sold** 102,20SG&A (7%) (7,15)Safety Margin (3%) (3,06) Book value after 12 months 91,99
Car rental financial cycle
115Financial payment
Financing
100
Car Sales Revenue
102
** Depreciation over list price: 100-(102.2/125)x100 = 18,2%
100Car acquisition
(List price net of dealers discount = 125)
Holding cost of cars after tax with 3% margin = depreciation + financial cost.Either the leverage is through third party financing or shareholder’s capital.
Principal 100,00Interest (CDI + 1 p.p.) 15,00Financial payment 115,00
Depreciation = estimated price of selling after one year, net of SG&A and safety margin minus price of purchase. Depreciation rate: 100-(102.2*0.9) = 8.02%
4
Car rental financial cycle
115Financial payment
Financing
100
Car Sales Revenue
102
Revenues = 114,58
Expenses = 62,84
100Car acquisition
(List price net of dealers discount = 125)
* Car analysis of LTM over the average price of cars purchased of the previous year.
*R$ %
Car rental revenue 114,58 100,0%Costs (46,00) -40,1%SG&A (16,84) -14,7%
EBITDA 51,75 45,2%
Tax (30%) (15,52) -13,5%NET INCOME 36,22 31,6%
% over car rental revenue
Car Rental
31,6%
*EBITDA margin of 45.2% reflects high fixed cost and the utilization rate between 65% and 70%.
Net margin of 31,6% necessary to cover car holding cost.
Revenue per car sold** 102,20SG&A (7%) (7,15)Safety Margin (3%) (3,06) Book value after 12 months 91,99
** Depreciation over list price: 100-(102.2/125)x100 = 18,2%
Principal 100,00Interest (CDI + 1 p.p.) 15,00Financial payment 115,00
5
Car rental financial cycle
115Financial payment
Financing
100
Car Sales Revenue
102
Revenues = 114,58
Expenses = 62,84
100Car acquisition
(List price net of dealers discount = 125)
* Car analysis of LTM over the average price of cars purchased of the previous year.
R$ % R$ %
Car rental revenue 114,58 100,0% 102,20 100,0%Costs (46,00) -40,1%SG&A (16,84) -14,7% (7,15)Book value of car resale (91,99) -90,0%
EBITDA 51,75 45,2% 3,06 3,0%Depreciation (8,20) -8,0%Interest (15,00) -14,7%Tax (30%) (15,52) -13,5% 6,04 5,9%
NET INCOME 36,22 31,6% (14,10) -13,8%% over car rental revenue
Car Rental Car Resale (Seminovos)
31,6% -12,3%
*
Car holding cost is 12.3%of car rental revenues.
Revenue per car sold** 102,20SG&A (7%) (7,15)Safety Margin (3%) (3,06) Book value after 12 months 91,99
** Depreciation over list price: 100-(102.2/125)x100 = 18,2%
Principal 100,00Interest (CDI + 1 p.p.) 15,00Financial payment 115,00
6
Car rental financial cycle
115Financial payment
Financing
100
Car Sales Revenue
102
Revenues = 114,58
Expenses = 62,84
100Car acquisition
(List price net of dealers discount = 125)
*
Consolidated net margin is 19,3% of car rental revenues (if 100% leveraged).
R$ % R$ % R$ %
Car rental revenue 114,58 100,0% 102,20 100,0% 216,78 100,0%Costs (46,00) -40,1% (46,00)SG&A (16,84) -14,7% (7,15) (23,99)Book value of car resale (91,99) -90,0% (91,99) -3,8%
EBITDA 51,75 45,2% 3,06 3,0% 54,81 25,3%Depreciation (8,20) -8,0% (8,20) -3,8%Interest (15,00) -14,7% (15,00) -6,9%Tax (30%) (15,52) -13,5% 6,04 5,9% (9,48) -4,4%
NET INCOME 36,22 31,6% (14,10) -13,8% 22,12 10,2%% over car rental revenue
Car Rental Car Resale (Seminovos) Consolidated
31,6% -12,3% 19,3%
Revenue per car sold** 102,20SG&A (7%) (7,15)Safety Margin (3%) (3,06) Book value after 12 months 91,99
** Depreciation over list price: 100-(102.2/125)x100 = 18,2%
Principal 100,00Interest (CDI + 1 p.p.) 15,00Financial payment 115,00
7
Fleet rental financial cycle
Financing
100
115Financial payment
100Car acquisition
(List price net of dealers discount = 125)
Car Sales Revenue
102
Holding cost of fleet cars after tax with 3% margin = depreciation + financial cost.Either the leverage is through third party financing or shareholder’s capital.
Depreciation = estimated price of selling after one year, net of SG&A and safety margin minus price of purchase. Depreciation rate: 100-(102.2*0.9) = 8.02%
Revenue per car sold** 102,20SG&A (7%) (7,15)Safety Margin (3%) (3,06) Book value after 12 months 91,99
** Depreciation over list price: 100-(102.2/125)x100 = 18,2%
Principal 100,00Interest (CDI + 1 p.p.) 15,00Financial payment 115,00
8
Fleet rental financial cycle
Financing
100
115Financial payment
100Car acquisition
(List price net of dealers discount = 125)
Revenues = 53,64
Car Sales Revenue
102
Expenses = 18,21
* Car analysis of LTM over the average price of cars purchased of two years before.
*R$ %
Fleet rental Revenue 53,64 100,0%Costs (14,24) -26,5%SG&A (3,97) -7,4%
EBITDA 35,43 66,0%
Tax (30%) (10,63) -19,8%NET INCOME 24,80 46,2%
% over fleet rental revenue
Fleet Rental
46,2%
EBITDA margin of 66% reflects lower fixed costs and utilization rates around 97%.
Net margin of 46.2% necessary to cover fleet holding cost higher than car rental.
Revenue per car sold** 102,20SG&A (7%) (7,15)Safety Margin (3%) (3,06) Book value after 12 months 91,99
** Depreciation over list price: 100-(102.2/125)x100 = 18,2%
Principal 100,00Interest (CDI + 1 p.p.) 15,00Financial payment 115,00
*
9
Fleet rental financial cycle
Financing
100
115Financial payment
100Car acquisition
(List price net of dealers discount = 125)
Revenues = 53,64
*
Car Sales Revenue
102
Expenses = 18,21
* Car analysis of LTM over the average price of cars purchased of two years before.
R$ % R$ %
Fleet rental Revenue 53,64 100,0% 102,20 100,0%Costs (14,24) -26,5%SG&A (3,97) -7,4% (7,15)Book value of car resale (91,99) -90,0%
EBITDA 35,43 66,0% 3,06 3,0%Depreciation (8,20) -8,0%Interest (15,00) -14,7%Tax (30%) (10,63) -19,8% 6,04 5,9%
NET INCOME 24,80 46,2% (14,10) -13,8%% over fleet rental revenue
Fleet Rental Car Resale (Seminovos)
46,2% -26,3%
Car holding cost is the same as in the car rental (R$14.1) but represents 26.3% of fleet rental revenues.
Revenue per car sold** 102,20SG&A (7%) (7,15)Safety Margin (3%) (3,06) Book value after 12 months 91,99
** Depreciation over list price: 100-(102.2/125)x100 = 18,2%
Principal 100,00Interest (CDI + 1 p.p.) 15,00Financial payment 115,00
*
10
R$ % R$ % R$ %
Fleet rental Revenue 53,64 100,0% 102,20 100,0% 155,84 100,0%Costs (14,24) -26,5% (14,24) -9,1%SG&A (3,97) -7,4% (7,15) (11,12) -7,1%Book value of car resale (91,99) -90,0% (91,99) -59,0%
EBITDA 35,43 66,0% 3,06 3,0% 38,49 24,7%Depreciation (8,20) -8,0% (8,20) -5,3%Interest (15,00) -14,7% (15,00) -9,6%Tax (30%) (10,63) -19,8% 6,04 5,9% (4,59) -2,9%
NET INCOME 24,80 46,2% (14,10) -13,8% 10,70 6,9%% over fleet rental revenue
Fleet Rental Car Resale (Seminovos) Consolidated
46,2% -26,3% 20,0%
Fleet rental financial cycle
Financing
100
115Financial payment
100Car acquisition
(List price net of dealers discount = 125)
Revenues = 53,64
Car Sales Revenue
102
Expenses = 18,21
Consolidated net margin is 20% of fleet rental revenues (if 100% leveraged).
Revenue per car sold** 102,20SG&A (7%) (7,15)Safety Margin (3%) (3,06) Book value after 12 months 91,99
** Depreciation over list price: 100-(102.2/125)x100 = 18,2%
Principal 100,00Interest (CDI + 1 p.p.) 15,00Financial payment 115,00
*
11
Growth opportunities
Air traffic
GDP elasticity
Consolidation
Credit cards
Replacement
Fleet outsorcing
12
Bargainingpower
Highercompetitiveness
Market shareexpansion
Scale gainsIntegrated platform
Geographical distributionYield managementBargaining power
Credit with lower interest rateKnow-how
DepreciationStrong brand
IT
Competitive advantages
13
(R$ million, USGAAP)
EBITDA Margin per Segment
2003 2004 2005 3Q05 3Q06Margin Margin Margin Margin Margin
Rentals 34.3% 42.6% 46.3% 45.3% 44.5%
Used Cars Sales 9.7% 15.3% 14.4% 12.5% 2.7%
Rentals 61.2% 65.2% 63.6% 64.2% 70.1%
Used car sales 7.3% 8.2% 10.5% 7.9% 2.9%
Rentals 46% 51.5% 52.5% 52.1% 53.4%
Used car sales 9.2% 13.2% 13.7% 11.7% 2.8%
Franchising 43.6% 41.5% 47.6% 47.4% 47.4%
TOTAL 28.6% 33.1% 32.6% 31.1% 28.0%
Con
solid
ated
Flee
tRen
tal
Car
Ren
tal
14
Economic Value Added (EVA)
2003 2004 2005 2006A Change
Average price per car R$ 16.4 19.5 23,4 *26.2 59.8%
IPCA (consumer inflation index) 9.3% 7.6% 5.7% *2.0% 26.9%
Average CDI (interbank rate) 23.3% 16.2% 19.0% 15.7% -7.6p.p.
Sovereign risk 8.4% 5.4% 4.0% 2.5% -5.9p.p.
Real WACC (excluding inflation) 14.3% 10.9% 10.5% 9.1% -5.2p.p.
Spread 0.6p.p. 10.8p.p. 8.3p.p. 9.1p.p. -
In the last 3 years the spread between ROIC and WACC has shown little volatilityIn the last 3 years the spread between ROIC and WACC has shown little volatility
R$ / thousand
* 9M06
1,781
44.486
57,384
82,736
12.0%
24.1%18.4%
15.8%
21.1%
24.1%29.3%24.6%
-
20,000
40,000
60,000
80,000
100,000
2003 2004 2005 20060.0%
10.0%
20.0%
30.0%
EVA Nominal WACC ROIC
15
(R$ million, USGAAP)
Cash Flow
70.8
Cash and cashequivalents at thebeginning of 2006:
193.6
Cah and cashequivalents on
09/30/06
Operatingactivities
Cost ofused car sale
Investment activities include fleet (renewal: 14,861 cars and growth: 2,853)
Newacquisitions
281,7
-506,2
12,9
334,4
Other financingand investment
activities
16
251 303448
348 377288
493
690
402506
2003 2004 2005 9M05 9M06
Fleet Investment
Fleet Growth (thousand)Net Investment
Sold Cars Bought Cars
Investments - (R$ million. USGAAP) Quantity - thousand
2003 2004 2005 9M05 9M06
(R$ million. USGAAP)
37.4 46.3 47.7 38.1 47.2
- 143.8 194.1 16.1 81.537.4 190.1 241.8 54.2 128.7
-0.4 +6.2 +7.3 +0.6 +2.8
2003 2004 2005 9M05 9M06
Renewal
Growth
15.7
14.8
22.2
15.515.5 15.1 17.7
14.9
18.8
26.1
2003 2004 2005 9M05 9M06
Net: 129
17
Net Debt (R$ million) USGAAP
(R$ million, USGAAP)
Indebtedness Profile
S&P Rating - BrA / Positive outlook
2003 2004 2005 9M05 9M06
Net debt / fleet 22% 46% 60% 49% 34%
Net debt / equity 0.36 0.96 1.37 0.95 0.57
87
281
539349.3 351.3
2003 2004 2005 9M05 9M06
The Company is prepared for a new growth cycle.The Company is prepared for a new growth cycle.
18
ROE – Return on Equity
NB: The 2006 figure was annualized based on the results of the first nine months, already considering the proceeds from the shares offering. ROE was arrived at by dividing net income by average shareholders’ equity for the year’, excluding net profit from the respective year.In 2003, the mark-to-market of derivative contracts was excluded from net income.
Localiza is ranked 13th, among the 500 largest companies in Brazil, in terms of ROE. (FGV ranking)
Localiza is ranked 13th, among the 500 largest companies in Brazil, in terms of ROE. (FGV ranking)
38.6% 38.9%36.7%
30.4%
2003 2004 2005 2006
Localiza awarded
•Best Company for Shareholders Capital Aberto Ranking (companies worth up to R$5 billion)
•Cases of corporate governance Brazilian Corporate Governancein family-owned companies Institute book
•13ª most profitable Company Conjuntura Econômica (FGV)
•467ª largest Company in Brazil Exame magazine
•Best car rental franchisee Pequenas empresas grandesnegócios magazine
•Best IR team in an IPO IR Magazine
•Brazil’s Top CEO Institutional Investor magazine
•Outstanding CEO Capital Aberto Magazine
•Administrator of the Year ANEFAC
•Best at Service Rendering Hoje em Dia newspaper
20
10
15
20
25
30
35
40
45
50
55
60
65
23-M
ay7-J
un21
-Jun
5-Jul
19-Ju
l2-A
ug16
-Aug
30-A
ug14
-Sep
28-S
ep13
-Oct
27-O
ct11
-Nov
28-N
ov12
-Dec
26-D
ec10
-Jan
24-Ja
n8-F
eb22
-Feb
10-M
ar24
-Mar
7-Apr
25-A
pr10
-May
24-M
ay7-J
un22
-Jun
6-Jul
20-Ju
l3-A
ug17
-Aug
31-A
ug15
-Sep
29-S
ep16
-Oct
30-O
ct14
-Nov
30-N
ov14
-Dec
Pric
e
0
20
40
60
80
100
120
Vol
ume-
R$
thou
sand
Performance - RENT3
Average daily trading volume in 2006 R$ 10,6 million
Performance: RENT3 2006 + 116% X IBOV 2006: + 30%
RENT3 X IBOV RENT3: +438%
IBOV: +80%
From 05/23/05 (IPO) to 12/15/06.
21
Disclaimer – Information and Projections
The material that follows is a presentation of general background information about LOCALIZA as of the date of the presentation. It is information in summary form and does not purport to be complete. It is not intended to be relied upon as advice to potential investors. No representation or warranty. express or implied. is made concerning. and no reliance should be placed on. the accuracy. fairness. or completeness of the information presented herein.
This presentation contains statements that are forward-looking within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are only predictions and are not guarantees of future performance. Investors are cautioned that any such forward-looking statements are and will be. as the case may be. subject to many risks. uncertainties and factors relating to the operations and business environments of LOCALIZA and its subsidiaries that may cause the actual results of the companies to be materially different from any future results expressed or implied in such forward-looking statements.
Although LOCALIZA believes that the expectations and assumptions reflected in the forward-looking statements are reasonable based on information currently available to LOCALIZA’s management. LOCALIZA cannot guarantee future results or events. LOCALIZA expressly disclaims a duty to update any of the forward-looking statement.
It is not allowed to offer or sell in the United States securities not registered or exempted from registration. in accordance with the Securites Act of 1933. Any securities offering to be conducted in United States must be made through an offering memorandum. which can be obtained with the underwriters. The offering memo must contain or include reference to detailed information about LOCALIZA and its business and financial results. in addition to its financial statements.
This presentation does not constitute an offering. invitation or offering request or acquisition of any type of securities. Neither this presentation nor anything here included represent the terms of a contract or commitment of any kind.
The material that follows is a presentation of general background information about LOCALIZA as of the date of the presentation. It is information in summary form and does not purport to be complete. It is not intended to be relied upon as advice to potential investors. No representation or warranty. express or implied. is made concerning. and no reliance should be placed on. the accuracy. fairness. or completeness of the information presented herein.
This presentation contains statements that are forward-looking within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are only predictions and are not guarantees of future performance. Investors are cautioned that any such forward-looking statements are and will be. as the case may be. subject to many risks. uncertainties and factors relating to the operations and business environments of LOCALIZA and its subsidiaries that may cause the actual results of the companies to be materially different from any future results expressed or implied in such forward-looking statements.
Although LOCALIZA believes that the expectations and assumptions reflected in the forward-looking statements are reasonable based on information currently available to LOCALIZA’s management. LOCALIZA cannot guarantee future results or events. LOCALIZA expressly disclaims a duty to update any of the forward-looking statement.
It is not allowed to offer or sell in the United States securities not registered or exempted from registration. in accordance with the Securites Act of 1933. Any securities offering to be conducted in United States must be made through an offering memorandum. which can be obtained with the underwriters. The offering memo must contain or include reference to detailed information about LOCALIZA and its business and financial results. in addition to its financial statements.
This presentation does not constitute an offering. invitation or offering request or acquisition of any type of securities. Neither this presentation nor anything here included represent the terms of a contract or commitment of any kind.
22
Thank You!
Localiza IR:www.localiza.com/riPhone: +55 (31) 3247-7039
23
Depreciation rate evolutionx
Seminovos EBITDA margin
24
2000 2001 2002 2003 2004 2005 1Q06
New car priceincrease (Palio)
1.90% 6.72% 7.39% 13.95% 17.42% 9.40% 1.50%
IPCA inflation 5.97% 7.67% 12.53% 9.30% 7.60% 5.69% 1.44%
Real increase(decrease)
- 4.07% - 0.95% - 5.14% + 4.65% + 9.82% + 3.71% + 0.06%
Evolution of car prices increase
-4.1% -5.1%
-1,0%
4.7%
9.8%
3.7%
0.1%
-6.0%
-2.0%
2.0%
6.0%
10.0%
2000 2001 2002 2003 2004 2005 1Q06
25
Exemple 1 Exemple 2 Exemple 3 Exemple 4 Exemple 5 Exemple 6 Exemple 7
Car purchase price 100.00 100.00 100.00 100.00 100.00 100.00 100.00
Sale price 95.00 100.00 105.00 110.00 115.00 120.00 125.00
Depreciation rate 14.5% 10.0% 5.5% 1.0% 0% 0% 0%
Book Value 85.50 90.00 94.50 99.00 100.00 100.00 100.00
SG&A (7%) 6.65 7.00 7.35 7.70 8.05 8.40 8.75
EBITDA 2.85 3.00 3.15 3.30 6.95 11.60 16.25
EBITDA margin 3% 3% 3% 3% 6% 10% 13%
Average 3.0% 9.6%
Depreciation rate = {(sale price – 10% of sale price) / Car purchase price}-1where 10% = selling expenses (7%) + safety margin (3%)
Depreciation rate X Seminovos EBITDA margin
26
On-airport x off-airport marketUS, Brazil and Localiza
27
On-airport X off-airport market US – market share (2005)
DTG11%
Hertz28%
Avis Budget32%
Other2%
National/Alamo20%
Enterprise7%
Source:*Avis presentation nov/06 - local segment share amounts are company estimates
US airport segment* - US$10BN US local segment* - US$10BN
Airport (50%): Avis and Hertz (focused on business and services) were not affected by Enterprise Budget and Alamo (focused on leisure) lost market in the last years
Off-airport (50%): Hertz and Avis are fighting for the off-airport market
Hertz9%
Enterprise65%
All others19%
Avis/Budget7%
28
Source:** As of each company website, in Nov/06*** Assuming that each company has in average only one agency
BR airport segment** - agencies BR local segment** - agencies
***
LOCALIZA76
HERTZ33
AVIS31
UNIDAS30
OUTRAS49
• In the airports the market is concentrated in the hands of the networks• Off-airport market is fragmented mainly among the small car rental companies
OTHERS
Others
On-airport X off-airport market Brazil – number of agencies (2005)
1723
Unidas74
Avis83
Localiza267 Hertz
84
29
41
55
45
88
9/30/2005 9/30/2006
35%
65%
29%
71%
9M05 9M06
47%
53%
41%
59%
9M05 9M06
9.8%
60.0%96
133Owned agencies
On-airport X off-airport market Localiza – number of agencies
Off-airport agencies Airport agencies
6 p.p.
The share of the off-airport agencies is growing in volume and revenue
-6 p.p.
Volume100 100
-6 p.p.
6 p.p.
Revenue100 100
Off-airport agencies
Airport agencies
30
RetailX
Replacement and mini-lease
31
Retail Replacement Mini-lease
70,0 60,0
95%
57,0
2
0,50
80%
56,0
8
2,00
Rate index
Utilization rate
Revenue
Interactions (0.25 each)
Total fixed cost 5,00*
100,0
60%
60,0
20
Retail X Replacement and mini-lease
* It does not include 5% airport fees
Reservation
Pick up
Usage
After-salesCar return
Volume 36% 64%Revenue 58% 42%
100% 100%
Contribution margin 55,0 54,0 56,5