localiza completa 2 q10 eng
TRANSCRIPT
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Localiza Rent a Car S.A.2Q10 Results - R$ million, USGAAP
July, 2010
Guarulhos International Airport Brach - Sao Paulo - BrazilOpened: 06/11/2010
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Localiza started its business in 1973…
…with 6 used beetles, 100% financed.
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Timeline: growth by adjacencies
IPO
80,832 cars9 countries
458 locations
80,832 cars9 countries
458 locations
19991973 1984 1990 1997 200720062005 2008 2009
Private Equity
DLJ
US$ 100MM Bonds
R$ 350MM Debenture1st Localiza
Follow onR$ 200MM Debenture2nd Localiza
R$ 300MM Debenture3rd Localiza
R$ 400MM Debenture1st Total Fleet
1Q10
R$ 370MM Debenture4th Localiza
2Q10
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Ownership breakdown
* Includes 4.226.300 shares in Treasury
100%100%100%
EugenioMattar
AntonioClaudio Resende
FlavioResende Free-Float *
11.1% 8.6% 12.0% 8.6% 59.7%
SalimMattar
Founders
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Company’s structure
BOARD OF DIRECTORS
CEO
COO
Car Acquisition
Legal
Financial ITHuman Resources Administration
Localiza has a very lean and efficient structure
The supporting areas assist all four businesses’ divisions.
Salim Mattar
Eugenio Mattar
The succession process is already planned.
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Integrated business platform
This integrated business platform gives Localiza flexibility and superior performance
Synergies:bargaining powercost reductioncross selling
Revenue: 32.7%EBITDA: 56.2%Net income: 68.6%
Revenue: 15.2%EBITDA: 39.4%Net income: 28.5%
Revenue: 0.5%EBITDA: 1.1%Net income: 2.8%
Revenue: 51.5%EBITDA: 3.3%Net income: -
9,777 cars168 locations in Brazil71 locations in South America29 employees
Capacity to sell 50,000 cars/year73.4% sold to final consumer48 stores650 employees
47,727 cars2.1 million clients219 locations2,918 employees
23,328 cars614 clients242 employees
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Strategy by divisionC
ore
Bus
ines
ses
Supp
ort
Increase market leadership maintaining high return
Create value taking advantage of the fleet rental market, leveraging the synergies from the integrated business platform
Add value to the brand by expanding the network in Brazil and South America, with profitability
Add value to the businesses optimizing fleet renewal and reducing depreciation
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Car rental financial cycle
$29.7Funding (FV)
Funding (PV)$26.6
Net car sale revenue$24.7
$26.6Car acquisition
1 2 3 4 5 8 9 10 11 12Expenses: (10.8)
1-year cycle
Revenue: 18.7
Total1 year
R$ % R$ % R$Revenues 18.7 100.0% 26.8 100.0% 45.5 Cost (8.2) -43.8% (8.2) SG&A (2.6) -13.6% (2.1) -7.9% (4.7) Net car sale revenue 24.7 92.1% 24.7 Book value of car sale (24.1) -90.0% (24.1)
EBITDA 8.0 42.6% 0.6 2.1% 8.5 Depreciation (vehicle) (1.5) -5.6% (1.5) Depreciation (non-vehicle) (0.4) -2.0% (0.4) Interest on debt (1.7) -6.5% (1.7) Tax (2.3) -12.2% 0.8 3.0% (1.5)
NET INCOME 5.3 28.4% (1.9) -7.0% 3.5 ROIC 17.5%
Car rental Used car salesPer operational car Per operational car
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33.8Car acquisition
42.0Funding (FV)
Funding (PV)33.8
Net car sale revenue 26.6
1 2 3 4 5 20 21 22 23 24
2-year cycle
Expenses: (11.5)
Revenue: 32.0
Fleet rental financial cycle
Total2 years
R$ % R$ % R$Revenues 32.0 100.0% 28.8 100.0% 60.8 Cost (9.7) -30.4% (9.7) SG&A (1.8) -5.5% (2.2) -7.6% (3.9) Net car sale revenue 26.6 92.4% 26.6 Book value of car sale (25.9) -90.0% (25.9)
EBITDA 20.6 64.1% 0.7 2.4% 21.2 Depreciation (vehicle) (6.5) -22.6% (6.5) Depreciation (non-vehicle) (0.1) -0.2% (0.1) Interest on debt (4.6) -16.0% (4.6) Tax (6.1) -19.2% 3.1 10.8% (3.0)
NET INCOME 14.3 44.8% (7.3) -25.3% 7.1 NET INCOME per year 7.2 44.8% (3.6) -25.3% 3.5
ROIC 15.2%
Fleet rental Used car salesPer operational car Per operational car
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Growth opportunities
ConsolidationUS market: 4 players 95% BR market: 4 players 45% 1.951 players 55%
InfrastructurePre salt – R$30bn/year until 2015 Automakers R$23bn until 2013 World Cup 2014 – R$ 71bnOlympic Games in RJ – R$ 31bn
Income / ConsumptionAir traffic 2010: 12 to 18% Credit cards: 45 mm of holdersIncome growth:
Middle class in Brazil 2009 – 98MM
OutsourcingCorporate fleet : 2MM of carsTargeted market 500.000 cars
30% rented
Source: Auto Rental News and Company’s estimates
Source: Petrobras, Santander Equity Market
Source: Gol, Tam, Abecs and Company’s estimates
Source: Company’s estimates
Strong drivers of growth
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2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9
P I B Loc a l i z a S e c t or
GDP annual growth estimated for the next 5 years between 4 and 5% (Brazilian Central Bank)
Source: Central Bank, Localiza and ABLA
Growth opportunities: GDP
6.5x
Localiza
GDP
Sector
3.3x
Rental revenues accumulated growth rate – rentals
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Others*1,951
Avis 53
Hertz 73
Unidas 74
Localiza 296
Avis29
Unidas29
Hertz30
Others49
Localiza91
Growth opportunities: consolidation
Airport locations Off-airport locations
Brazilian car rental agencies
*Source: ABLA, 2009Source: Each company website as of June 30th , 2010
Off-airport market is an opportunity to Localiza since it is still fragmented
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Market share - Revenues
Localiza32.2%
Hertz2.6%
Others57.4%
Unidas4.9%
Avis2.9%
Source: Euromonitor International
Growth opportunities: consolidation
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Highercompetitiveness
Market shareincrease
Gains of scale
ScaleKnow-how
Strong brandStrong values
Integrated platformGeographical footprint
High corporate governance standardsUsed car sales network
Management model Lower depreciation Stable Management
Owners involvedFacilities
Rating
Competitive advantages
Localiza reached the virtuous circle
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37 years of experience…
Raising money
Buyingcars
Renting cars
Selling cars
Competitive advantages
…gives Localiza know-how and superior performance in all chains of the business process
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Competitive advantages in funding
Raising money
Buyingcars
Renting cars
Selling cars
Moody’s corporate rating as of Mar/10 (Local Currency)
Localiza Rent a Car S.A Aa2.br
Braskem S.A. Aa2.br
Cyrela Brazil Realty Aa2.br
CEMIG Aa2.br
Duke Energy Aa2.br brATam
brAA-Duke EnergybrAACEMIG
brA+Cyrela Brazil RealtybrAA+Braskem S.AbrAA-Localiza Rent a Car S.A
Standard & Poors as of Mar/10 (Local Currency)
Rating
Localiza raises money with lower spreads
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Competitive advantages in buying cars
Raising money
Buyingcars
Renting cars
Selling cars
* Includes Localiza, Total Fleet and Franchisees purchases.
Localiza2.3%
Localiza’ share in national sales ofFiat, GM, VW and Renault*
GM44%
FIAT33%
VW16%
Others1%
RENAULT6%
Purchases by brand
Localiza purchases cars with better prices and conditions
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Competitive advantages in renting cars
Raising money
Buyingcars
Renting cars
Selling cars
Strong brand Geographical footprint Scale
103
102
70
Localiza Unidas Hertz Avis
Locations in Brazil
387
275
*Source: Each company website as of June 30th , 2010
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Competitive advantages: network footprint
Airport and off airport branches located in easy-access and intense traffic places
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Competitive advantages in used car sales
Raising money
Buyingcars
Rentingcars
Sellingcars
Footprint
Low mileage
Pre-owned cars
Automaker warranty
Cars financed through third-party financial institutions
Unique product Selling directly to final consumer
Cash generated in used car sales is used to renew the fleet
48 stores
Selling directly to final consumer reduces depreciation
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Competitive advantages: used car sales network
Around 80% of used cars are sold directly to final consumers
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Competitive advantages: additional fleet
Cars available for sale are used by car rental division in peaks of demand
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Salim Mattar – 37y
Eugênio Mattar – 37y
Roberto Mendes – 25y
Gina Rafael – 29y
Daltro Leite – 25y
Marco Antônio Guimarães – 20y
Bruno Andrade – 18y
BOARD OF DIRECTORS
CEO
COO
Car Acquisition
Legal
Financial ITHuman Resources Administration
Helvia Barcelos – 23y
Competitive advantages: stable management
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Execution
Management by results: execution with meritocracy
Competitive advantages:management model
Mgt.contract
Action plan Evaluation Reward
Yearlybonus
StockOptions
Variable
Actions
Objectives
Mission
Business
Values
Vision
Planning
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Results
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1,856.31,855.71,531.7
1,145.4876.9
634.4532.0476.9234.3212.9 244.7 310.1 420.4
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Net revenues consolidated
CAGR: 16.5%
CAGR: 30.8%
GDP 3.4 0.0 0.3 4.3 1.3 2.7 1.1 5.7 2.9 3.7 4.6 5.1 -0.2
Average 1.9 4.4 -0.2
Results: growth with profitability
504.1 469.7
134.3 154.0 149.9 152.1197.8
278.1 311.4403.5
85.262.042.0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
CAGR: 26.3%
CAGR: 23.9%
EBITDA consolidated
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18.9%20.6% 20.8% 21.8% 21.4%
2005 2006 2007 2008 2009
17.9%20.5%
22.1%24.8% 24.2%
2005 2006 2007 2008 2009
Fleet - consolidated Revenues - consolidated
Source: ABLA, 2009
Fleet
30.4% 13.2%
Results: market share
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Elected twice the best company in corporate governance(Capital Aberto Magazine)
Elected “the most shareholder-friendly” company(Institutional Investor Magazine - 2008)
Corporate governance
Recognitions & Rewards
Best IR officer – large cap(IR Magazine Awards, July 2010)
47th most valuable brand in Brazil among listed companies(Brand Analytics, May 2010)
The best in the transportation sector(Exame Magazine, July 2009)
Elected twice the best CEO of a small-cap(Institutional Investor Magazine)
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Financials2Q10
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2Q10 Highlights
Localiza is back to high levels of growth.
R$ millions 2Q09 2Q10 Variation
Consolidated ret revenue 416.5 575.6 38.2%
Net rental revenues 220.2 284.1 29.0%
EBITDA 109.1 150.5 37.9%
Net income 27.1 57.5 112.2%
Net income / Net rental revenues 12.3% 20.2% 7.9p.p
Record
Record
Record
Record
Quantity 2Q09 2Q10 VariationPurchased cars 4,946 11,323 128.9%
Sold cars 7,279 10,679 46.7%
End of period fleet 52,223 71,055 36.1%
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Car Rental Division
191.6140.8
372.9291.9
607.8585.7
442.7357.2271.3
2005 2006 2007 2008 2009 1H09 1H10 2Q09 2Q10
Net revenue (R$ million)
CAGR: 29.2%3.8%
In the 2Q10 revenue grew above volume due to an increase of 3.3% in the average daily rate.
36.1%
3,4114,668
5,793
7,940 8,062
3,8414,857
1,889 2,488
2005 2006 2007 2008 2009 1H09 1H10 2Q09 2Q10
CAGR: 32.5%1.5%
31.7%
# daily rentals (thousand)
27.7%
26.4%
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3,3514,188
5,1446,437 7,099
3,490 3,816
1,710 1,926
2005 2006 2007 2008 2009 1H09 1H10 2Q09 2Q10
CAGR: 24.3%
12.6%
Fleet Rental Division
# daily rentals (thousand)
149.2190.2
228.2276.9 313.4
152.1 173.5
76.2 89.1
2005 2006 2007 2008 2009 1H09 1H10 2Q09 2Q10
CAGR: 22.9%
16.9%
Net revenue (R$ million)
13.2%
10.3%
14.1%
9.3%
In the 2Q10 revenue grew above volume due to an increase of 4.1% in the average daily rate.
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Used car sales
Sale’s volumes are still presenting strong growth.
18,76323,174
30,09334,281 34,519
15,10721,627
7,27910,679
2005 2006 2007 2008 2009 1H09 1H10 2Q09 2Q10
CAGR: 22.3%
46.7%
0.7%
# of sold cars
43.2%
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The average age of the operating fleet returned to pre-crisis levels.
6.39.5
6.6
2008 2009 2Q10
Operating fleet(month)
Car Rental Division – Average age
12.316.6 15.3
2008 2009 2Q10
Sold cars (month)
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Consolidated net revenuesR$ million
Consolidated net revenues grew 38.2% in the 2Q10.
876.91,145.4
1,531.71,855.7 1,856.3
862.71,139.4
416.5575.6
2005 2006 2007 2008 2009 1H09 1H10 2Q09 2Q10
CAGR: 28.4%
38.2%
32.1%
Record
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277.9 311.3403.5
504.1 469.7
224.5282.6
109.1150.5
2005 2006 2007 2008 2009 1H09 1H10 2Q09 2Q10
- 6.8%
EBITDAR$ million
Divisions 2005 2006 2007 2008 2009 1H09 1H10
39.4%
67.1%
48.9%
1.1%
44.3% 42.6%
64.1%
49.5%
67.0%
51.5%
1.6%5.5%
2Q09 2Q10
44.5%
63.7%
Rental consolidated 51.0% 51.2% 52.6% 49.3% 48.8% 50.7%
2.2%
37.9%
68.8%
0.8%
40.3%
66.5%
1.1%
42.0%
69.1%
4.6%
44.5%
68.7%
5.4%
Car rental 45.3%
Fleet rental 62.3%
Used car sales 13.2%
CAGR: 22.0%
Localiza is still presenting consistent EBITDA margins.
37.9%25.9%
Record
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Average depreciation per carR$
1,448.5
332.9
2,546.0 2,577.0
939.1492.3
2005 2006 2007 2008 2009 1H10
Car Rental
Average depreciation per car showed a strong drop when compared to the one in 2009.
3,475.82,981.3
2,383.3
4,371.75,083.1
2,395.8
2005 2006 2007 2008 2009 1H10
Fleet Rental
- 20.5%
- 43.8%
annualized
annualized
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Net incomeR$ million
57.527.1
106.2
57.3
106.5
138.2
190.2
127.4 116.3
2005 2006 2007 2008 2009 1H09 1H10 2Q09 2Q10
112.2%
Record net income since IPO in 2005.
Reconciliation of EBITDA x Net Income 2008 2009 Var. R$ 1H09 1H10
219.8 273.3
9.3
282.6
(66.5)
(10.2)
(57.4)
(42.3)
106.2
4.7
224.5
(70.0)
(10.7)
(65.5)
(21.0)
57.3
Var. R$ Var. R$
53.5
4.6
58.1
3.5
0.5
8.1
(21.3)
48.9
36.5
4.9
41.4
4.3
0.3
(2.4)
(13.2)
30.4
449.6
54.5
504.1
(178.5)
(18.3)
(133.3)
2Q09 2Q10
EBITDA - Car rental and fleet rental
(46.6)
127.4
107.5 144.0
EBITDA - Used car sales
9.5459.1
10.6
469.7
(172.3)
(21.0)
(112.9)
1.6 6.5
EBITDA Consolidated
(47.2)
(43.9)
(34.4)
6.2
(2.7)
20.4
(0.6)
109.1 150.5
116.3
Depreciation of revenue-earning vehicles (40.1) (35.8)
Other depreciation (5.4) (5.1)
Financial expenses, net (26.8) (29.2)
Income tax and social contribution (9.7) (22.9)
Net income (11.1) 27.1 57.5
85.3%
Record
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Free cash flow - FCF
Free cash flow - R$ million 2005 2006 2007 2008 2009 1H10277.9 282.6
(586.9)
539.6
235.3
(31.0)
(12.8)
191.5
586.9
(637.7)
-
(50.8)
(12.8)
127.9(34.9)
(8.3)
84.7
Fleet increase (quantity) 7,342 10,346 7,957 9,930 8,642 1,182
(448.2)
361.2
190.9
(32.7)
(24.2)
134.0
448.2
(496.0)
-
(47.8)
(28.0)
58.2 (194.0)
(25.5)
(161.3)
311.3
(590.3)
530.4
251.4
(42.7)
(4.8)
203.9
590.3
(643.3)
-
(53.0)
(32.7)
118.2 (287.0)
222.0
504.1
53.2
469.7403.5
(853.2)
760.0
310.3
(63.4)
13.3
260.2
853.2
(839.0)
-
14.2
(23.7)
250.7
(983.2)
(221.9)
874.5
(51.0)
(924.5)
855.1
400.3
(49.0)
(11.5)
339.8
924.5
(963.1)
15.2
(23.4)
(21.0)
295.4(241.1)
241.1
395.4
(52.8)
(44.8)
297.8
983.2
(1,035.4)
Change in amounts payable to car suppliers (capex) -
295.4(22.2)
(52.2)
(39.9)
205.7 (299.9)
(188.9)
(283.1)
EBITDA
Used car sales revenues
Cost of used car sales
EBITDA without used car sales revenues and costs
(-) Income tax and social contribution – current
Working capital variation
Cash provided before capex
Used car sales revenues
Capex of car – renewal
Net capex for renewal
Capex - Property and equipment, net
Free cash flow before growthCapex of car – growth
Change in amounts payable to car suppliers (capex)
Free cash flow
Even with the addition of 1,182 cars, the Company still generated R$84.7 million in free cash flow in the 1H10.
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Net debt reconciliationR$ million
-1,074.6
(65.7)Interest
and others
(15.0)Interest on own
capital and dividends
Free cash flow84.7
Net debt 06/30/2010
-1,078.6
Net debt 03/31/2010
Net debt remained stable.
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Debt – profile and costsPrincipal on 6/30/10 - R$ million
Debt profile was stretched and the Company has enough cash to support its growth.
0.4 0.9
249.0268.6 284.8
396.5Cash and cash
equivalents
2010 2011 2012 2013 2014 2015 2016
238.0264.0
122.0
2017
Gross debt – principal Average effective cost 2010 2011 2012 2013 2014 2015 2016 2017 Total
Working capital 111.1% a 115.0% of CDI and CDI + 1.50%pa - - 58.0 78.0 55.0 75.0 190.0
-
74.0
-
-
264.0
-
264.0
456.0
Debenture 2nd Issuance CDI + 0.59%pa - - 66.6 66.6 66.8 -
-
-
122.0
-
-
122.0
-
200.0
Debenture 4th Issuance 114.2% of CDI - - 24.0 24.0 63.0 63.0 370.0
Debenture 1st Issuance:Total Fleet CDI + 2.02%pa - - 100.0 100.0 100.0 100.0 400.0
BNDES TJLP + 3.80%pa 0.4 0.9 0.4 - - - 1.7
Total gross debt – principal - 0.4 0.9 249.0 268.6 284.8 238.0 1,427.7
Cash and equivalents (396.5) - - - - - (396.5)
122.0Total net debt – principal - (396.1) 0.9 249.0 268.6 284.8 238.0 1,031.2
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Debt – ratiosR$ million
Every indebtedness ratios improved and have remained comfortable.
535.8 440.4765.1
1,254.5 1,078.6 1,074.6900.21,247.7
1,492.91,752.6 1,907.8 1,963.8
2005 2006 2007 2008 2009 1H10
Net debt Fleet value
BALANCE AT THE END OF THE PERIOD 2005 2006 2007 2008 2009 1H10
Net debt / Fleet value (USGAAP) 60% 36% 51% 72%
2.5x
1.8x
2.0x
55%
Net debt / EBITDA (USGAAP)* 1.9x 1.4x 1.9x
57%
2.3x
1.7x
1.9x
Net debt / EBITDA (BRGAAP)* 1.5x 1.0x 1.3x 1.3x
Net debt / Equity (USGAAP) 1.4x 0.7x 1.3x 1.5x 1.3x
* annualized
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Funding
Equity
DebtProfitability comes from
rental divisionsCash to renew the fleet
Pricing strategy• Operating costs• Depreciation• Financial expenses• Taxes• Spread
Managing assets
Flexible and liquid assets
Ass
ets
(car
s)
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RENT3 X IBOVESPA
0
5
10
15
20
25
23-M
ay5-J
ul16
-Aug
28-S
ep11
-Nov
26-D
ec8-F
eb24
-Mar
10-M
ay22
-Jun
3-Aug
15-S
ep30
-Oct
14-D
ec31
-Jan
16-M
ar30
-Apr
13-Ju
n26
-Jul
6-Sep
22-O
ct6-D
ec23
-Jan
10-M
ar23
-Apr
6-Jun
21-Ju
l1-S
ep13
-Oct
25-N
ov12
-Jan
25-Feb8-A
pr25
-May
7-Jul
19-A
ug1-O
ct16
-Nov
4-Jan
18-F
eb1-A
pr17
-May
29-Ju
n
Pric
e - R
$
0
20
40
60
80
100
120
140
160
180
200
Volume - R
$ thousand
RENT3 Vloume RENT3 IBOVESPA
447%
152%
RENT3 Performance
Average daily volume negotiated of R$13.3 million in 2Q10
Up to June 30th, 2010
2005 2006 2007 2008 2009
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Disclaimer
Thank you!
The material presented 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’smanagement, 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.