Companhia Weg presents good forecasts for wind energy for this year and a strong presence in the foreign market

Although the prospects are positive for wind power, high interest rates and a drop in GDP may hamper Weg's internal market

On February 17, André Rodrigues, financial administrative superintendent director at Weg (WEGE02), declared in a conference call with analysts that the increase in interest rates and the lower growth of the Brazilian GDP may affect short-cycle products during the year, even if the prospects for the domestic market are good, especially in the wind area. However, the best forecasts for Weg are in the global market. "We must present another year of income due to the positive portfolio in the long cycle equipment", said the director.

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The site InfoMoney explained that long-cycle products are industrial electrical and electronic equipment and power generation and distribution devices. The short cycle ones are electric motors, reducers and automation equipment manufactured by Weg.

For André Rodrigues, it is still too early to discuss the acceleration of the external market, which is better than expected. He mentioned mining and gas sectors with high international demand for high-cycle products. Furthermore, there are also negotiations for energy transmission and distribution equipment, wind and others, in North America, and generation equipment in Europe and India.

In 1 year, investments total R$ 1,5 billion. According to the managing director, the funds will be used in projects to expand production in countries such as Brazil, China, United States, India, Mexico and Portugal. 

Weg invests in the development of an electric power train

Other Weg executives said, at the event with the analysts, that they see business opportunities in energy storage (wind or other sources), digital businesses and electric mobility, such as power trains for heavy vehicles and charging stations.

In the domestic market, the energy generation, transmission and distribution (GTD) sector increased by more than 60% between 4Q20 and 4Q21. Externally, growth in 4Q21 was 33,1% compared to the same period in 2020.

Weg's important area of ​​wind turbines and other wind power equipment is in the GTD. According to Weg's Director of Finance and Investor Relations, André Salgueiro, wind energy revenues returned at the end of 3Q21 and have been growing ever since. According to him, orders for 2022 are almost complete.

In the external context, Salgueiro said that the supply of wind turbines in India is in the certification process. This is a country with great potential for the use of wind energy in the coming years.

 Regarding solar energy equipment, which also advanced, Weg will start selling the sector from Latin countries.

Pressure on product margins 

According to a Weg report, the global supply chain is facing challenges and rising raw material prices, which resulted in a decrease in operating margins in the last quarter.

Thus, the margin obtained fell by 1,3 percentage points in 4Q21 compared to 3Q21, and 2,9 percentage points compared to 4Q20.

Regarding margins, Rodrigues stated that Weg works in the long term, but the issues that bring pressure on the margin remain the same: “Increase in cost and the mix of products, with the return of wind power having more relevance in revenue”. For him, the positive point is the acceleration in foreign trade and the restoration of sales values.

“We do not give guidance on margins, but we continue to deliver (the margin) above the market average. And from what we have already seen at the beginning of 2022, we do not expect that the margin for the year will show an additional reduction than what was presented at the end of 2021”, he added.

Weg balance sheet study

According to Credit Suisse, a further contraction in margins is impossible. The pressure matrix remains the resource chain and product mix. 

However, the great demand in foreign markets, together with the increase in prices, can balance these effects. The growth process continues, with the company expanding internationally.

In addition, Bradesco BBI analyzed that the company started the year with large GTD projects. He also highlighted the forecast for the recovery of the foreign market, which makes the act of accelerating Capex in 2022 a good decision, to accommodate capacity according to demand.

“We hope that the company continues to successfully explore its growth opportunities in the domestic and international markets, although we signal that Weg's lack of investments in offshore wind technology could become a bottleneck in the medium and long term”, says BBI. 

Learn more about Weg: WEG – Institutional video