1 q07 analystand investors meeting
TRANSCRIPT
0
1Q07 Results presentation(R$ million - USGAAP)
Localiza Rent a Car S.A.
Integrated business platform
As of December 31, 2006
This integrated business platform gives us superior performance
Synergies:
cost reduction
cross selling
bargaining power
171 agenciesin 9 countries6,319 cars
30 points of sale8, 870 cars sold79% sold to final consumer
145 agencies23,825 cars1,086,794 individuals and14,000 corporations
14,938 cars(489 managed)350 clients
1.828 employees 157 employees
17 employees 381 employees
Overhead = 124 employees
2
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%
3
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
4
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
*
Revenues Ebitda Profit
Car rental 31% 48% 54%
Fleet rental 17% 42% 45%
Seminovos 52% 9% *
Franchising 1% 1% 2%
Total 100% 100% 100%
2006
*Profit (loss) alocated in the rental divisions
Breakdown per segment
Revenue
Car rental31%
Fleet rental17%
Seminovos52%
Franchising1%
Profit
Car rental54%
Fleet rental45%
Franchising2%
EBITDA
C ar rental48%
F leet rental42%
F ranchising1%
Semino vo s9%
6
Cor
e B
usin
esse
sSu
ppor
t
Increase market leadership maintaining high return
Create value taking advantage of the synergies of the integrated business platform
Add value to the brand by expanding the network in Brazil and South America
Strategy by segment
Add value to the businesses of the platform as a competitive advantage, reducing depreciation costs
7
Growth opportunities
Air traffic
GDP elasticity
Consolidation
Credit cards
Replacement
Fleet outsorcing
8
Source: Bacen, Localiza
Accumulated growth rate – car rental
Growth opportunities: GDP
Source: Bacen, Localiza
Localiza – Daily volume GDP
7.7x
The average car rental division volume growth was 7.7 x GDP over the last 3 years
2003 2004 2005 2006
9
Number of travellers has increased 13% on the last 3 years
Localiza is the absolute leader in airport branches in Brazil
In 2006 Localiza Car Rental Division grew 2 times faster than the number of passengers
Air traffic evolution(Millions of passengers per year)
CAGR: +13%
Growth opportunities: Air traffic
7183
96 102
2003 2004 2005 2006
Source: infraero
10
Source: www.abecs.
CAGR: +18%
# of credit cards (million)
Growth opportunities: Credit cards
48 5368
78
2003 2004 2005 2006
78 million credit cards in Brazil
35.5 million potential Localiza customers
37% of car rental revenues camethrough credit cards in 2006
11
Localiza is very well positioned to capture this growth due to its geographic footprint
Growth opportunities: Replacement market
Replacement is a growing market in Brazil
Brazil has 34 million cars but only 9.2 million insured
The accident rate is 16.5% / year
The potential market is 10.6 million of daily rentals (2.5 x the car rental division in 2006)
Source: FENASEG -
12
Growth opportunities: Fleet outsourcing
Focus of corporations on their core businesses Focus of corporations on their core businesses
Fixed asset reduction by companies (increase their asset turnover)Fixed asset reduction by companies (increase their asset turnover)
Renting a fleet is more economic than owning itRenting a fleet is more economic than owning it
Large potential market with low penetration due to lack of habit Large potential market with low penetration due to lack of habit
13
DTG11%
Vanguard20%
Hertz28%
Avis Budget32%
Other2%
Enterprise7%
All others19%
Avis Budget7%
Hertz9%
Enterprise65%
US airport segment* US$10BN
US off-airport segment* - US$10BN
Source:*Avis presentation nov/06 - local segment share amounts are company estimates** National/Alamo prospectus, NYSE/SEC, September 20, 2006
USA: 5 companies hold 92% of market shareEurope: 6 companies hold 74% of market share**
US Market share 2005
Growth opportunities: Consolidation
14
Hertz33
Avis31
Unidas31
Localiza 74
Others48
Growth opportunities: Off-airport market
In the airports the market is concentrated in the hands of the networksOff-airport market is fragmented mainly among 1.952 small car rental companies
Source: 1948 companies as of ABLA’s report* Localiza as of 03/31/07**Each company website, 04/16/07*** Assuming that each local player has one agency
BR on airport segment* agencies
BR off-airport segment*agencies
*
******
Airport and off airport market - Brazil
Others1948
Localiza204
Hertz56
Unidas42
Avis51
*
** **
**
***
15
53,6% 59,4% 59,5%
46,4% 40,6% 40,5%
2005 2006 1Q07
Growth opportunities: On airport and off-airport growth
Consolidation is happening mainly on the off-airport agencies
Volume growth Revenue growth
Airport 17.2% 16.0%
Off-airport 49.6% 46.7%
2006 / 2005 Growth (Car rental division)
Elasticity on airport in 2006 was 2 times the growth of domestic deplanements
Domestic deplanements increase x Localiza (rentals on airports)
Daily rental volume on airportsDomestic deplanement
Of f- airport x On - airport share
On-airport agenciesOff-airport agencies
100% 100% 100%
2006
17,0% 17,0%
8,2% 5,8%
24,0%
39,0%
17,0%12,6%
2004 2005 2006 1Q07
16Source: ABLA
Growth opportunities: Consolidation
Localiza’s market share – Car and Fleet - Brazil
2004 2005
15,5% 17,9%
7% 4% 4%Local
players69%
Unidas Avis Hertz
2006
20,5%
Localiza corporation grew 30.2% in 2006. The market grew 8.9%%
Localiza grew more than 2x the market in 2006
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Bargainingpower
Highercompetitiveness
Market shareincrease
Gains of scale Integrated platform
Geographical distributionYield management
Credit with lower interest rateKnow-how
Strong brandState of the art ITBargaining power
Depreciation
Competitive advantages
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Competitive Advantages: Integrated business platform
Franchising
Car rental Fleet rental
Used Car Sales
This integrated business platform gives us superior performance
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International footprint
International footprint
Strategic locationsStrategic locations
Nationwidepresence
Nationwidepresence
Competitive Advantages: Largest distribution
316 agencies in 9 countries
20
Competitive Advantages: Largest distribution
278
89
82
73
Localiza Hertz Avis Unidas
244**278*
Localiza network is larger than
the second, the third and the fourth competitors combined.
(number of agencies in Brazil)
* As of March 31, 2006 ** As of April 16,2007
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Yield management allows Localiza to be more competitive and profitable
Month of the yearMonth of the year
Day of the weekDay of the week
EventsEvents
CityCity
Volume per customerVolume per customer
Competitors’ monitoringCompetitors’ monitoring
Localiza adjusts its prices based on supply & demand
Competitive Advantages: Yield management
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Competitive Advantages: credit with lower interest rate
Global ScaleLocaliza Rent a Car S.A. BB / Stable /--Hertz Corp. BB-/ Stable /--
Vanguard (National / Alamo) B+/ Stable /--
Avis Budget Car Rental BB+/ Stable /--
Enterprise Rent-Car Co. A-/ Stable / A-2
brAA-/ Stable /--Localiza Rent a Car S.A.
brAA/ Positive /brA-1Banco Citibank S.A.
brAA+/ Positive /brA-1Banco Itaú S.A.
brAA+/ Positive /brA-1Banco Bradesco S.A
brA+/ Positive /--CPFL Energia S.A.
brAA+/ Positive /--Gerdau S.A.
brA+/ Stable /--TAM S.A.
Local Currency
Standard & Poor’s as of January 2007
Localiza has the best rating among its international peers considering the debt currency
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Deep knowledge of the businessState-of-the-art systemsOperational excellenceAdoption of best practicesStable management
Competitive Advantages: Know-how
16SeminovosMarco Guimarães
33Vice-presidentAntonio Resende (Founder)
21CFO and IRRoberto Mendes
22Total FleetDaltro Barbosa
26Car rentalGina Rafael
33
33
Eugênio Mattar (Founder)
CEO and Chairman of the Board Salim Mattar (Founder)
Experience in Localiza
ResponsibilityName
Vice-president
15Investor relationsSilvio Guerra
24Aristides Newton Franchising
We believe this experienced team will run the business for the next ten years
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Top of mindTop of mind
High quality of services
Customer satisfaction
Strong nationwide presence
International franchising program
High standards of ethical behavior
Competitive Advantages: Brand recognition
Most consumed car rental brand in the ranking of America Economia Magazine
25
Speed in transaction timeBetter operational controlCustomer satisfactionOn-line networkCost reduction
Competitive Advantages: State of the art IT
26
Localiza enjoys better conditions due to its large scale
Localiza purchased more than US$1,2 billion worth of cars from 2003-2006*
Localiza and its Franchisees represented in 2006
3.9% of FIAT internal car sales
2.7% of GM internal car sales
1.8% of the Brazilian internal car sales
*96.9 thousand cars between 2003-2006 calculated on average purchase price of 2006
Competitive Advantages: Bargaining power
15.062
22.182
26.105
33.520
2003 2004 2005 2006
27
When car prices go up more than inflation, depreciaton decreases
% over rental revenue 2000 2001 2002 2003 2004 2005 2006
Localiza (car rental division) 13.8% 11.9% 9.3% 9.2% 1.8% 2.9% 5.2%
Hertz (USA) - - - - 22% 23% 23% *
National / Alamo (USA) - - - - 22% 23% 23% *
Competitive Advantages: Depreciation
Depreciation cost over the car rental revenue
* Until Set/06Source: National/Alamo prospectus, Sep 20, 2006, p.11 Hertz prospectus, Nov 21,2006, p.12 and 17, Avis 2006 10K
Average depreciationper car
Real decrease in thenew car price
Real increase in thenew car price
Avis / Budget (USA) - - - - 26% 29% 31%
Sixt (Europa) - - - - - 18.6% 20.5%
510,1
3.617,7
2.142,51.656,2
1.752,3322,9 492,3 939,10,9%
-0,4%
-4,1%
-1,0%
-5,1%
4,7%
9,8%
3,7%
(2.000,0)
(1.000,0)
-
1.000,0
2.000,0
3.000,0
4.000,0
2000 2001 2002 2003 2004 2005 2006 1T07
-6,0%-4,0%-2,0%0,0%2,0%4,0%6,0%8,0%10,0%12,0%
Rea
is
28
Recognition
Standard & Poor’s rating upgraded to ‘brAA-’ in national scale and ‘BB’in global scale. same as sovereign risk. with stable outlook
IBrX (between the 100 most traded shares)
ISE – Corporate Sustainability Index (34 companies)
“Best Company for Shareholders” by Capital Aberto magazine. between Companies of up to R$ 5 BI market cap
The best subsequent public offer among the listed companies by Infomoney, in a survey among the brokers registered in BOVESPA
29
Financials1Q07
30
1T07 highlights: Net income
6991
107138
3045
2003 2004 2005 2006 1T06 1T07
Net income
53.4%
CAGR: 23.5%
31
(R$ million, USGAAP)
1Q07 highlights: EBITDA per segment
Margin per segment 2004 2005 2006 1T06
42.6%
69.4%
51.7%
10.0%
29.4%
31.4%
42.3%
69.3%
51.7%
4.6%
39.0%
27.3%
1T07
Car rental 42.6% 46.3% 46.6%Fleet rental 65.2% 63.6% 65.2%
Consolidated - Rental 51.5% 52.5% 52.9%
Car Resale 13.2% 13.7% 5.6%
Franchising 41.5% 47.6% 70.6%
TOTAL 33.1% 32.6% 24.3%
Ebitda - ConsolidatedEbitda - Rental
84,0 125,7 151,0
37,2 48,7
83,394,9
131,8
31,3 34,7
2004 2005 2006 1T06 1T07
Car rental Fleet rental
210.1285.8 313.1
81.698.2
167.3
220.6282.8
68.5 83.421.8% 20.3%
CAGR: +30.0%CAGR: +22.1%
167,3 220,6 282,868,5 83,4
40,161,3
12,6
27,3
13,6
2,73,03,9
1,20,5
2004 2005 2006 1T06 1T07
Rentalsl Car Resale Franchising
+ 14.9 million + 16.6 million
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Highlights: Consolidation
Market share - 2004 Market share - 2005 Market share - 2006
Soucre: ABLA
Localiza Brazil has grown in revenues an average of 2,9x the market between 2004-2006Localiza CAGR: + 25,2%
Market CAGR: + 8,8%
Others84,5%
Localiza15,5%
Others82,1%
Localiza17,9%
Others79,5%
Localiza20,5%
+2.4 p,p, +2.6 p,p,
33
Highlights: RENT3
Extraordinary dividends of R$ 196.7 millions (refers to 2005 and 2006)
Interest on own capital of R$ 5.9 million (2007 anticipation)
Proposal of share split (each 1 share will be converted into 3)
Average daily traded volume of R$ 13.4 million 1Q07 (R$ 10.6 million in 2006)
RENT3 had the best performance among the main public offerings of the last3 years (Economática, 04/09/2007)
34
Highlights: Corporate governance
Board of Directors with 4 independent members (total of 9) Oscar BernardesPaulo GuedesStefano BonfiglioWilson Brumer
Internal committees of:Auditing (3 members being 2 independent )Disclosure (the main executives of each area of Localiza)Personal (3 members being 2 independent )
Definition of a succession plan for contingency
35
(R$ million, USGAAP)
Net income reconciliation
-1,0
1Q06Net income
1Q07Net income
29.6
+143.9Revenues
-123.4Costs
-3.9Depreciation
-1.9
+8.1SG&A
+25.2
-10.8Interests
Taxes
45.4
-7.9
+53.4%
+118.7-112.6
Rental Ebitda + 15.6 millionCar Resale Ebitda + 1.0 million
+1.2
Total Ebitda +16.6 millions - 0.8 million
+0.9
StockOptions
-5.1
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Cash generation
(R$ milllion. USGAAP)
R$ 228.5 million was the cash generated by operational activities in 1Q07, adjusted by the reduction of the automakers’ debt in the amount of R$ 223.2 millions
Cash and cash equivalents
12/31/06:
30.1 39.4
Operationalactivities
Interest on owncapital and
others
Fleet acquisition
Financialapplication
Includes a reduction in theAutomakers’ account
of R$ 223.2 million
65.3
-64.0
11.9
-3.9 Cash and cash equivalents
03/31/07:
37
(R$ million, USGAAP)
Indebtness
Net debt X Market cap Rating S&P – BrAA- / Stable
EOP BALANCE 2004 2005 2006 1Q07
Net debt / fleet 46% 60% 36% 43%
Net debt / equity 49% / 51% 58% / 52% 41% / 59%
1.42x
1.0X
10.3%
41% / 59%
Net debt / EBITDA (USGAAP) 1.34x 1.89x 1.19x*
Net debt / EBITDA (BRGAAP) 1.1x 1.5x 0.8x*
Net debt / Market cap 35.3% 29.7% 11.0%
281 539 443 4687961812
4320 4239
2004 2005 2006 1T07
Market cap Net debt
* Annualized based on 1Q07
38
493690
930
64
303448
590
244
2004 2005 2006 1T07
26,1
33,5
1,8
18,823,2
8,9
22,215,7
2004 2005 2006 1T07
Investment in fleet
Quantity - Thousand Net investment – R$ million
Purchased Sold
+6.5+7.3 +10.3
-7.1
+190.0 +242.0+340.0
-183.0
In the 1Q07 the fleet was reduced in 7,458 cars to adjust off-peak demand after the high season
Investment per car – R$ thousand 2004 2005 2006
Average purchase price 21.9 26.0 27.6
Average selling price 18.8 23.4 25.0
Net 3.1 2.6 2.6
% over average purchase price 14.2% 10.0% 9.4%
39
Investment in cars x utilization rate
In order to maximize the utilization rate in 2007 we will distribute the cars purchases through out the 2nd, 3rd and 4th quarters
Car rental division
2006
1582,861
9,513
12,862
4,112 3,273 3,978 6,599
1Q06 2Q06 3Q06 4Q06
Purchased Sold
2007 E
25
6,4618,783
12,098
7,462 7,178 7,423 6,879
1Q07 2Q07 3Q07 4Q07
Purchased Sold
2006
59,5% 68,4% 71,8% 63,3%
0
200.000
400.000
600.000
Jan Fev Mar Abr Mai Jun Jul Ago Set Out Nov Dez
Dai
ly
0%
40%
80%
120%
160%
Util
izat
ion
Daily rentals Utilization rate
2007 E
70,0%75,0%75,0%64,9%
0
200.000
400.000
600.000
Jan Fev Mar Abr Mai Jun Jul Ago Set Out Nov Dez
Dai
ly
0%
40%
80%
120%
160%U
tiliz
atio
n
Daily rentals Utilization rate
Daily rentals x utilization Buying and selling cars
40
10
15
20
25
30
35
40
45
50
55
60
65
70
23-M
ay7-J
un21
-Jun
5-Jul
19-Ju
l2-A
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-Aug
30-A
ug14
-Sep
28-S
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-Oct
27-O
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-Nov
28-N
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-Dec
26-D
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-Jan
24-Ja
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eb22
-Feb
10-M
ar24
-Mar
7-Apr
25-A
pr10
-May
24-M
ay7-J
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-Jun
6-Jul
20-Ju
l3-A
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-Aug
31-A
ug15
-Sep
29-S
ep16
-Oct
30-O
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-Nov
30-N
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-Dec
2-Jan
16-Ja
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-Jan
14-F
eb2-M
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-Mar
30-M
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Pric
e
0
20
40
60
80
100
120
Vol
ume-
R$
thou
sand
Volume RENT3 RENT3 IBOVESPA
RENT3 Performance
RENT3 X IBOV 448%
86%
From 05/23/05 (IPO) to 03/30/07.
RENT3 IBOVPerformance: 2005 + 149% +38%
2006 + 124% +33%since IPO + 448% + 89%
41
RENT3 Liquidity
Average daily traded volume(R$ thousand)
4.570
10.581
7.047
13.395
2005 2006 1T06 1T07
132% 90%
RENT3 was the 59th most traded share in Bovespa in the last 12 months1Q07 x 2006 = +26.6%
42
Disclaimer - Forward looking statements
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. This presentation is strictly confidential and may not be disclosed to any other person. 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.
Securities may not be offered or sold in the United States unless they are registered or exempt from registration under the Securities Act of 1933. Any offering of securities to be made in the United States will be made by means of an offering memorandum that may be obtained from the underwriters. Such offering memorandum will contain, or incorporate by reference, detailed information about LOCALIZA and its business and financial results, as well as its financial statements.
This presentation does not constitute an offer, or invitation, or solicitation of an offer, to subscribe for or purchase any securities. Neither this presentation nor anything contained herein shall form the basis of any contract or commitment whatsoever.
43
Thank you!
Localiza’s IR:www.localiza.com/riPhone: 55 (31) 3247-7039