Second Annual LatAm Transportation and Infrastructure
Conference – Goldman Sachs
London - January 2012
Disclaimer
“This presentation may include declarations about Mills’ expectations regarding future
events or results.
All declarations based upon future expectations, rather than
historical facts, are subject to various risks and uncertainties. Mills cannot guarantee
that such declarations will prove to be correct. These risks and uncertainties include
factors related to the following: the Brazilian economy, capital markets, infrastructure,
real estate and oil & gas sectors, among others, and governmental rules, that are
subject to change without previous notice. To obtain further information on factors
that may give rise to results different from those forecast by Mills, please consult the
reports filed with the Brazilian Comissão de Valores Mobiliários (CVM).”
2
Agenda
Executive Summary
Mills’ divisions
Financial performance
Growth plan
3
Mills at a Glance
Uncontested market leader in providing temporary concrete formwork and tubular structures in
the Brazilian market
One of the major players in the industrial services and motorized access equipment
Long-term relationship with the major companies in the sector
Superior capacity and scale, scope of services and market coverage
4 divisions:
Heavy
Construction
Jahu
Industrial
Services
Rental
4
Mills – Financial performance per division
3Q11 LTM1 Financial highlights per division
R$ million
% Total
638
24%
EBITDA
Margin (%)
ROIC (%)
51.2%
18.1%
10.9%
9.8%
39.5%
17.0%
39.7%
11.0%
32.4%
13.7%
35%
% Total
207
21%
37%
12%
26%
20%
1 3Q11
LTM – Last twelve months ended September 30, 2011
Total
25%
5
Agenda
Executive Summary
Mills’ divisions
Financial performance
Growth plan
6
Heavy Construction Division
Piloni – Rio de Janeiro, RJ
Heavy Construction division
Focus on large and complex infrastructure projects
Products:
Engineering solutions and equipment rental: formwork and shoring
Planning, design, technical supervision, equipment and related services
Market leader
Extensive track record with 59 years of experience
Critical success factor is reliability
Main clients are the Brazilian largest contractors, such as
São Paulo’s Subway – Yellow Line
Santo Antonio Hydroelectric Power Plant
Dutra Highway Overpass (São Paulo)
8
Heavy Construction – market outlook
Unparalleled infrastructure investments are expected for the next few years reinforced by major world
events.
Investments in Brazil should amount R$ 3.3 trillion in the 2011-2014 period
Industry: R$ 1.0 trillion, growth of 170% compared to the 2006-2009 period
Infrastructure: R$ 401 billion, growth of 62% compared to the 2006-2009 period
Other sectors: R$ 1.9 trillion
Industry investments 2011-2014
R$ 1,047 billion
Infrastructure investments 2011-2014
R$ 401 billion
Oil & Gas
378
Ports
18
Others
493
Roads
51
Mining
72
Pulp & Paper Chemical
28
40
Steel
36
Source: BNDES - “Visão do Desenvolvimento” Report No 95, June 20, 2011
Others
20
Energy
139
Railroads
60
Sanitation
41
Telecom
72
9
12 cities will host the 2014 World Cup in Brazil, demanding investments in urban mobility,
airports and stadiums
Planned investment for World cup
In R$ billion
Source: Mills, Ministry of Sports and Veja
10
PAC 2: R$ 143.6 billion, or 15% of the expected for the 2011-2014 period, realized by
September 30, 2011
:
¹States, OGU/Fiscal and Seguridade, and Counterpart of States and Municipalities
Source: PAC 2 Report “2º Balanço do PAC2” and O Globo
11
Large project pipeline remains robust
2005
In R$ Billion
0,2
0,3
Curitiba Stadium
Porto Alegre Stadium
Natal Stadium
Fortaleza Stadium
Cuiabá Stadium
Recife Stadium
Amazônia Stadium
Salvador Stadium
Brasília Stadium
Transoeste
Belo Horizonte Stadium
São Paulo Stadium
Rio de Janeiro Stadium
Highway Arch - RJ
Transcarioca Highway
Transolímpica Highway
Monorail Line 17 Gold - SP
Açu Superport
Beltway - Eastern Section
Subway Line 4 - RJ
Carajás Railroad
West-East Railroad
Transordestina Railroad
Beltway - Northern Section
North - South Railroad
Subway Line 5 - SP
Hydroelectric Powerplant Jirau
Hydroelectric Powerplant Santo Antônio
Premium 2 Ceará Refinery
Abreu e Lima Refinery - PE
Hydroelectric Powerplant Belo Monte
COMPERJ Refinery - RJ
Premium 1 Maranhão Refinery
0,4
0,5
0,5
0,5
0,5
0,6
0,7
0,7
0,7
0,9
0,9
1,2
1,3
2,2
2,9
Mills’ presence
3,4
4,0
4,0
4,5
5,3
5,4
6,1
6,7
6,9
13,1
16,0
22,0
25,7
26,2
29,2
40,2
2006
Source: Anuário Exame 2011-2012 - Infraestrutura
2007
2008
2009
2010
2011
2012
2013
2014
2015
Scheduled dates for start and end of construction jobs
2016
2017
2018
2019
2020
12
The evolution of the work from the contracts signed in 1H11 and the new contracts will
contribute to the growth of the utilization rate in the coming months
Newly hired
Contracts with
growing equipment
volumes
• Alcantara Launch Center
•Jacú Pessego Expansion
• EMBRAPORT
• São Paulo Beltway - Eastern Section
Revenue Index
(Basis 100= Maximum monthly revenue in the life of construction)
Important contracts per stage in the evolution of the monthly revenue from the Heavy Construction works
• Hydroelectric
Powerplant Jirau
• Comperj Refinery
• Mané Garrincha
Stadium
• Maracanã Stadium
• Fonte Nova Stadium
• Recife Stadium
Source: Mills
Contracts with high volume
of equipment
• São Paulo Monorail Line 2
• Suape Petrochemical
• Abreu e Lima Refinery
• Transnordestina
Time
Contracts in the
demobilization process
• BR 448
• Cable-Stayed Bridge (RJ)
13
Heavy Construction division – Financial performance
* ex ADD: Excluding the Allowance for Doubtful Debts effect of R$ 5.8 million.
1
ROIC: Return on Invested Capital. Until 4Q10, ROIC was calculated considering the effective income tax rate for the period, while in 1Q11 onwards ROIC
was calculated considering a theoretical 30% income tax rate.
14
Jahu - Residential and Commercial Division
Divisão Construção
Commercial building in downtown – São Paulo, SP
15
Jahu – Residential and Commercial division
Focus on residential and commercial construction
Products:
Engineering solutions and equipment sales and rental: formwork, scaffolding and shoring
Market leader with strong brand name: Jahu
Business acquired in 2008
Innovative product - Easy-Set aluminum formwork - to serve low income housing construction
Main clients are the Brazilian largest real estate companies, such as
16
Residential and Commercial – market outlook
Governmental programs and the increasing penetration of real estate financing indicate solid
growth potential for the residential and commercial real estate segment
Brazilian housing deficit is of at least 7.2 million houses
New 700,000 units per year are required to couple with the demographic growth of the Brazilian families
Housing financing has increased 5x in the last five years, driven by credit availability, lower inflation and
lower interest rate
Housing financing is very small compared to other countries. In 2009, the Brazilian total housing
financing/GDP was 3%, compared to 77% in England, 68% in USA, 28% in France and 20% in Chile.
In 2010, the Brazilian total housing financing/GDP was 4% and it is expected to reach 11% by 2014.
Government program for low income housing, “Minha Casa Minha Vida”, targets investments of R$ 278
billion in the 2011-2014 period.
Lack of labor, higher labor costs and need to shorten construction cycle will demand more industrialized
processes in the Brazilian residential and commercial construction market.
Source: Brazilian Central Bank , ABECIP Associação Brasileira das Entidades de Crédito Imobiliário e Poupança and PAC2 Report
17
The use of industrialized building processes in construction projects is still limited
89% of companies from the construction industry stated that lack of qualified labor is a problem for the company
94% of companies from the construction industry facing shortages of skilled manpower have difficulty finding workers for
basic construction activities, such as bricklayers and laborers
Only 7% of companies from the construction industry plan to deal with the shortage of skilled labor by changing the
building process to an industrial assembly model
Company facing lack of skilled labor?
no
11
yes
89
Source: Sondagem Especial Construção Civil, April 2011, CBIC and CNI
1
The percentages do not sum 100% because each entrepreneur could choose up to three options
18
Jahu – Residential and Commercial division – Financial performance
1
ROIC: Return on Invested Capital. Until 4Q10, ROIC was calculated considering the effective income tax rate for the period, while in 1Q11 onwards ROIC
was calculated considering a theoretical 30% income tax rate.
19
Industrial Services Division
Paul Wolff Plataform, Estaleiro Mauá (shipyard) – Niterói, RJ
20
Industrial Services division
Focus on large industrial plants, both on construction and maintenance phases
Products offered during construction and maintenance:
access structures rental and erection/dismantling services
industrial painting and surface treatments
thermal insulation
Cross-selling with Heavy Construction division
Recurring and less volatile revenue base
Labor intensive, instead of capital intensive, as the other divisions
Industries served: oil & gas, petrochemicals, pulp & paper, steel, among others
Unique exposure to Brazilian industrial capacity growth and oil & gas industry
21
Industrial Services – market outlook
Recent oil field discoveries have taken Brazil into a new level within the Oil & Gas scenario, while
other basic industries are also due to receive significant new investments
Driven by the recent pre-salt discoveries, Brazil oil & gas reserves have the potential to increase by more
than 3x, from 15 to 51 billion boe, transforming Brazil into the world’s 9th hydrocarbons reserves holder
Total investment in Oil & Gas in Brazil is expected to be R$ 378 billion in the period 2011-2014, of which
R$ 303 billion, or 80%, from Petrobras
Total investment in the Brazilian industry should amount R$ 1.0 trillion in the period 2011-2014
Fixed investments in Brazil is expect to range from 19% to 22% of GDP in the next 3 years
Source: Department of Energy of the US, Petrobras, ANP and BNDES
22
Petrobras has announced its 2011-2015 business plan with investments totaling US$ 224.7
billion in this period
Petrobras total investment plan for 2011-2015 period: US$ 224.7 billion
Petrobras pre-salt investment plan for 2011-2015 period: US$ 53.4 billion
US$ 117.7 billion will be invested in E&P in Brazil, with the aim of increasing domestic oil production from
2.1 million bpd in 2010 to 3.1 million bpd in 2015, with 0.5 million bpd related to pre-salt
Critical resources needed up till 2013:
26 drilling rigs
53 production platforms
465 special support vessels
US$ 70.6 billion will be invested in refining, of which 50% to expand the refining facilities, the major
refinery projects being Abreu e Lima (PE), Comperj (RJ) and Premium I (MA)
Source: Petrobras – 2010-2014 Business Plan and 2011-2015 Business Plan
23
Industrial Services division – Financial performance
1
ROIC: Return on Invested Capital. Until 4Q10, ROIC was calculated considering the effective income tax rate for the period, while in 1Q11 onwards ROIC
was calculated considering a theoretical 30% income tax rate.
24
Rental Division – Motorized Access Equipment
Energia Eólica de Praia Formosa – Camocim, CE
Rental division - Motorized Access Equipment Rental
Serves all Mills’ divisions as well as the automotive, retail and logistics sectors, among others
Products:
Rental and sale of motorized access equipment, such as aerial work platforms and
telescopic handlers, to lift people or cargo, respectively
Market leader
Business started in 2008
Cross-selling with all other Mills’ divisions
26
Motorized Access Equipment Rental – market outlook
Current underutilization of motorized access equipment in Brazil and favorable regulation
indicate significant growth potential in this market.
The Brazilian aerial platforms and telehandler fleet is very small compared to the US fleet; less than
2%
Modest rental penetration of 15% in Brazil. Rental penetration is approximately 40% in the USA,
60% in Japan and 80% in England
Recent regulation obliges the use of aerial platforms to lift people, increasing safety and productivity
in the work site
Brazilian fleet should increase at average annual rate of 22% in the next few years and reach
25,000 units by 2014
Source: Terex and Mills
27
In 2010, the Brazilian fleet of motorized access equipment grew 40.6% compared to
2009
Fleet profile
Telescopic
Telescopic
handlers
handlers
+22.1% p.a.
Brazil - 2010
Total: 11,250
9%
Aerial work
platforms
91%
+40.6%
USA - 2010
Total: 789,000
Manipuladores
Telescopic
Telescopic
telescópicos
handlers
handlers
22%
Aerial work
platforms
78%
Source: Mills and Terex
28
Rental division – Financial performance
* ex ADD: Excluding the Allowance for Doubtful Debts effect of R$ 3.3 million.
1
ROIC: Return on Invested Capital. Until 4Q10, ROIC was calculated considering the effective income tax rate for the period, while in 1Q11 onwards ROIC
was calculated considering a theoretical 30% income tax rate.
29
Agenda
Executive Summary
Mills’ divisions
Financial performance
Growth plan
30
Mills – Financial performance
Mills has excellent financial track record with average revenue growth of 42% per year and average
EBITDA growth of 87% per year in the last four years.
Net Revenues (R$ million)
EBITDA (R$ million) and EBITDA Margin (%)
638
CAGR 07-10: 87%
CAGR 07-10: 42%
16%
30%
39%
35%
32%
550
207
Acquisition of Jahu
Start-up Equipment
Rental Division
195
404
Sales of Events Division
158
299
Entrance of
PE Funds
90
192
30
2007
1
2008
2009
2010
3Q11 LTM – Last twelve months ended September 30, 2011
3Q11 LTM¹
2007
2008
2009
2010
3Q11 LTM¹
31
Mills – Financial performance
Net earnings had an average annual growth of 114% p.a. in the last four years.
Net earnings (R$ millions)
Net debt (R$ millions) and Net debt/EBITDA
Net debt/EBITDA
CAGR 07-10: 114%
1
3Q11 LTM – Last twelve months ended September 30, 2011
1.0x
2.1x
1.2x
-0.1x
1.6x
32
EBITDA reached R$50,8 million in 3Q11
EBITDA (R$ millions) and EBITDA margin (%)
* ex ADD: Excluding the Allowance for Doubtful Debts effect of R$ 9.1 million.
33
Agenda
Executive Summary
Mills’ divisions
Financial performance
Growth plan
34
We invested R$ 316.0 million in organic growth in 9M11, 73% of our 2011 revised budget
Capex
in R$ million
433
Realized 9M11 /
2011 Budget
(%)
349
316
80%
53%
64%
76%
Total
73%
35
We will invest R$ 127 million in 2012, aiming to reduce leverage, as measured by net
debt/EBITDA, to 1.0x
Corporate
R$ 17 million
13%
Rental
R$ 53 million
42%
36
Our geographic expansion plan has been successful
Revenue Evolution (in R$ million)
Jahu division
Rental division
40%
60%
¹
Branches opened prior to November 2009
2
Branches opened after November 2009
³ Branches opened prior to 2010
⁴ Branches opened after January 2010
37
We are present in 13 states of Brazil with 43 branches
Branch locations
As of October 31, 2011
Amapá
Roraima
Amazonas
Pará
Ceará
Maranhão
Rio Grande
do Norte
Paraiba
Piaui
Pernambuco
Acre
Alagoas
Tocantins
Rondônia
Bahia
Sergipe
Mato Grosso
Distrito
Federal
Heavy Construction
Goias
Jahu
Minas
Gerais
Industrial Services
Rental
States with Mills’ Presence
Mato Grosso
do Sul
Espirito
Santo
São Paulo
Parana
Rio de
Janeiro
(sede)
Santa Catarina
Rio Grande
do Sul
38
Mills: The Best Way to Invest in Brazilian Infrastructure Sector
Forte e Sólido
Desempenho
Strong
and Solid
Financeiro
Financial
Performance
Fortes Barreiras
Strong
De Entrada
Barriers to Entry
Condições
Unprecedented
Macroeconômicas
Macro
Economic
Incomparáveis
Conditions
Equipe de Gestão
Experienced
Experiente
Management
Team
Modelo
de Negócio
Business
AttractiveSetorialUnique
Dinâmica
Único
com
fortes
Solid
Industry
Atraente
em todosModel with
Vantagens
Competitive
Dynamics
in
os Segmentos
competitivas
Advantages
Each Business
39
Mills – Investor Relations
Tel.: + 55 21 2123-3700
E-mail: [email protected]
www.mills.com.br/ri