Download - Merrill Lynch ? Brazil Conference
March 2015
Corporate Presentation
Executive Summary
He
avy
Co
nstr
uctio
n
•
• Market leader, extensive track record, with more than 60 years of experience
• Focus on: large and complex infrastructure projects
• Products: engineering solutions and rental of formwork and shoring
• Services: planning, design, technical supervision, equipment and related services
• Main clients:
Re
al E
sta
te
•
• Market leader; acquired in 2008
• Focus on: residential and commercial constructions
• Products: engineering solutions and rental of formwork, shoring and suspended access
• Services: planning. design. technical supervision. equipment and related services
• Clients: real estate companies. such as:
Renta
l
• Market leader; started in 2008
• Focus on: civil construction. Industry, retail e others
• Products: rental and sale of motorized access equipment, such as aerial work platforms and telescopic handlers
• Cross-selling with all other Mills’ business units
• Elected "Best Company for Access of the Year" by the International Awards for Powered Access (IAPA Awards) for the year of 2011
Mills - Business Units
2
3
Mills – 3Q14LTM¹ Financial highlights per business unit
¹ Excluding the Industrial Services business unit.
In R$ million
384.0
219.5
221.2
61.1
217.1
101.9
822.3
382.4
Receita Líquida EBITDA
Heavy Construction
Real Estate
Rental
27%
47%
27%
16%
57%
26%
EBITDA margin ROIC
46.9% 13.3%
27.6% 2.1%
57.2% 14.5%
46.5% 9.4%
Estamos presentes em 16 estados no Brasil com 56 unidades
Geographic Presence
4
Branches locationAs of September 30. 2014
Minas Gerais
Rio Grande do Sul
Santa Catarina
São Paulo
Mato Grosso do Sul
Rio de Janeiro
(headquarters)
Espirito Santo
Bahia
Distrito
Federal
Goias
Sergipe
Paraiba
Rio Grande Ceará
Piaui
Maranhão
Tocantins
Pará
Rondônia
Acre
Roraima Amapá
Amazonas
Mato Grosso
Parana
Alagoas
States with Mills' presence
Pernambuco
do Norte
Rental
Heavy Construction
Real Estate
5Source: The Conference Board Total Economy Database, January 2014
Brazil presents a low level of productivity compared to other
developing countries
17.2%
34.0%
8.1%
17.1%
28.2%
34.5%
31.4%
Brazil Russia India China South Africa Chile Mexico
GDP per person employed. % of U.S. 2013
Productivity growth is essential for higher sustainable GDP growth
The potential penetration of our services for increasing
productivity enables us to grow more than the overall
economy
60%
35%
31%
44%
25%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
2009 2010 2011 2012 2013
Mills GDP Industrial GDP Civil Construction GDP
Source: Mills and Bacen
Mills revenue1 versus GDP
yoy variation (%)
6¹ Excluding the Industrial Services business.
354.5
462.8
665.5
832.3 822.3 822.3
168.4
217.4
339.0
403.1382.4 394.8
103.3 92.2
151.5172.6
116.1 124.1
47.5% 47.0%
50.9%
48.4%46.5%
48.0%
21.0%
12.3%
14.7% 14.1%
9.4% 9.9%
2010 2011 2012 2013 LTM3Q14 LTM3Q14¹
188.4
211.8222.0
210.1 207.8 213.0
191.5 191.5
95.7 98.9106.1 102.4 107.5 105.9
66.779.0
39.348.1
39.645.6
33.9 33.4
3.211.3
50.8%
46.7% 47.8% 48.7%51.7%
49.7%
34.8%
41.3%
14.7% 14.8% 14.4% 14.1% 13.8% 12.3%9.4% 9.9%
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 3Q14¹
Net revenue EBITDA Net earnings EBITDA margin (%) ROIC²
7
Financial Performance3
¹ Excluding Easy-set effect.
² ROIC: Return on Invested Capital. Until 2010, ROIC was calculated considering the effective income tax rate for the period, while from 2011 onwards ROIC was calculated considering a
theoretical 30% income tax rate.
³ Reclassified excluding the Industrial Services business unit, for comparison
In R$ million
3Q14¹/3Q13 3Q14¹/2Q14 LTM3Q14¹/LTM3Q13 CAGR 10-13
Net revenue -14% -10% 2% 33%
EBITDA -26% -25% 3% 34%
Net earnings -72% -66% -26% 19%
7447 51
106
35
104185
60
90
15
131
163
161
267
105
15
18
20
36
21
324
413
292
499
177
2010 2011 2012 2013 9M14
Rental
Real Estate
HeavyConstruction
In R$ million
Capex ¹
Realized 9M14 /
2014 Capex
budget (%)
96%
60%
62%
Mills invested R$ 155.3 million in rental equipment in 9M14, of
which R$ 13.8 million in 3Q14
8
¹ Reclassified excluding Industrial Services business unit, for comparison.
Total 76%
Rental equipment
Positive cash flow of R$ 74 million in 3Q14
9
(340)
(219)
(31)
(154)
(13)
11
74
(400)
(350)
(300)
(250)
(200)
(150)
(100)
(50)
-
50
100
2010 2011 2012 2013 1Q14 2Q14 3Q14
Free cash flow1
1 Net cash generated by the operating activities minus net cash applied in investment activities
72 5734 38
31 34
134 174
150106 106
31
161
205230
184
144 137
65
Cashposition
2015 2016 2017 2018 2019 2020
Interest Principal
92%
8%Debentures
Borrowings andfinancing
3%
83%
17% TJLP
CDI
IPCA
Debt Profile
Mills’ total debt was R$ 746.2 million and net debt was R$ 585.1 million in September 30, 2014.
Leverage, as measured by net debt/ LTM EBITDA, was 1.5x.
Debt amortization schedule, as of Sep 30, 2014
in R$ million
Debt profile (%)
By index
By type
10
Credit lines available¹ As of Sep 30, 2014
Used R$ 62.1 million
Not used R$ 486.9 million
¹ Unsecured overdraft account + Secured bank credit lines
1,0x
1,6x 1,6x
1,4x
1,3x
1,2x 1,2x 1,2x
1,4x
1,3x
1,5x 1,5x
1,6x
1,5x
2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
Debt indicators
11
Net debt-to-EBITDA
Debentures Covenants:
(1) EBITDA-to-net financial result equal to or more than two; and
(2) Net debt-to-EBITDA ratio equal to or less than three.
23,0x
9,6x
7,5x6,8x 6,9x
8,3x
10,4x9,8x
10,2x9,6x
8,5x7,6x
5,1x5,9x
2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
EBITDA-to-net financial result
Business Units
Castelão stadium – Fortaleza. CE
Rental
14
Growth drivers in the motorized access equipment market:
safety and productivity
Source: Mills
Market penetration
through
substitution of less
secure and
efficient access
methods
Recent safety standards (NR-18 and NR-35) oblige the use of aerial platforms to lift people,
increasing safety and productivity in the work site
Modest rental penetration of 15% in Brazil. Rental penetration is approximately 50% in the USA,
60% in Japan and 80% in England.
Rental penetration in the USA increased to approximately 50% in 2014 from 5% in 1993: 20
years of continuous penetration growth.
Growth drivers in the motorized access equipment market:
low penetration
15Source: Goldman Sachs and United Rentals
20%
35%
40%43%
50%
-20%
0%
20%
40%
60%
1993 1998 2004 2009 2011 2014E
Rental penetration in the USA
16
21%
13%
28%
24%
0%
5%
10%
15%
20%
25%
30%
2010 2011 2012 2013
Penetration of use has enabled the branches opened prior to the IPO to have an average annual
growth of 22% in the last four years¹.
Growth drivers in the motorized access equipment market:
low penetration
¹ Growth rates considering only branches which were opened until 2010
Revenue Breakdown
69%
42%38%
31%
31%
58%62%
69%
2009 2010 2011 2012 2013
New branches¹
Established branches
Growth drivers in the motorized access equipment market:
geographic expansion
17
1 Branches opened since January 2010
Revenues per type of use
Construction sector is the major user of motorized access in
Brazil
18Source: Mills – 2013. United Rental – 2011 and Ramirent – 1Q14
58%69% 73%
60% 63%
25%
23% 16%35%
19%
17%8% 11%
5%18%
Brazilian Market Mills United Rentals(pre-merger RSC)
United Rentals(post-merger RSC)
Ramirent
Others
Spot
Industry
Construction
Rental – Financial Performance
19
1 ROIC: Return on Invested Capital. Until 2010. ROIC was calculated considering the effective income tax rate for the period. while from 2011 onwards ROIC was calculated considering a
theoretical 30% income tax rate.
In R$ million
3Q14/3Q13 3Q14/2Q14 LTM3Q14/LMT3Q13 CAGR 10-13
Net revenue -3% -8% 15% 55%
EBITDA -4% -9% 21% 58%
95.1
175.4
253.5
357.3
384.0
51.0
93.6
141.2
201.2219.5
53.6% 53.4%55.7%
56.3%
57.2%
19.2%16.5% 18.2% 18.2%
14.5%
2010 2011 2012 2013 LMT3Q14
76.1
90.193.9
97.2 97.3 98.6
91.0
43.649.3
52.356.0 58.4
55.150.0
57.3%54.7% 55.7%
57.7%60.1%
55.8%54.9%
18.0%18.5% 18.1% 18.2% 17.8% 16.2%
14.5%
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
Net revenue EBITDA EBITDA margin (%) ROIC¹
Heavy Construction
Cinta costeira - Panamá
1.00
0.33
0.36
0.48
0.62
- 0,50 1,00
USA
Brazil
Russia
India
China
Infrastructure
0.50 1.00
Infrastructure quality ranking for BRIC countries (2011-12)Index EUA = 1.0
1.00
0.11
0.38
0.51
0.73
- 0,50 1,00
USA
Brazil
Russia
India
China
Ports
0.50 1.00
1.00
0.42
0.93
0.97
0.99
- 0,50 1,00
USA
Brazil
Russia
India
China
Railways
0.50 1.00
1.00
0.33
0.36
0.48
0.62
- 0,50 1,00
USA
Brazil
Russia
India
China
Highways
0.50 1.00
Brazil is behind other BRIC countries quality of infrastructure
Source: World Economic Forum. The Global Competitiveness Report 2012-2013
21
Investments in infrastructure and industry in Brazil should
amount R$ 1.5 trillion in the 2015-2018 period, with 24%
growth compared to the 2010-2013 period
22
358
44 20 22 20
303
767
191
10253 62 23 15 11
111
457509
4012 22 21
307
911
192141
87 8045 36 16
177
598
Oil
an
d G
as
Min
ing
Ste
el
Ch
em
ica
l
Pulp
an
d P
ape
r
Oth
ers
Tota
l In
du
str
y
Ele
tric
ity
Tele
com
Sanitation
Ro
ads
Ra
ilways
Port
s
Airpo
rts
Tota
l L
ogis
tics
Tota
l In
frastr
uctu
re
2010-2013 2015-2018
Investment per sectorR$ billion
2015-2018 / 2010-2013 Growth rate(%)
42,2% -9,1% -40% 0,0% 5% 1,3% 18,8% 0,5% 38,2% 64% 29% 95,7% 140% 45,5% 59,5% 30,8%
Source: BNDES – December 2014
1
1 Logistics is the sum of roads, railways, ports and airports
New logistic investment program
23
18.5
23.5
- 20 40 60
Up to 20 years
In the first 5 years
HighwaysIn R$ billion
53.5
133.7
- 30 60 90 120 150
Up to 20 years
In the first 5years
TotalIn R$ billion
Total: R$ 42 billion
(7,500 km)
Total: R$ 91 billion
(10,000 km)
Total: R$ 187 billion
54.2
- 20 40 60
Colunas2
Colunas3
PortsIn R$ billion
Total: R$ 54 billion
Source: Programa de investimento em Logística, August 2012 and O Globo newspaper
35.0
56.0
- 20 40 60
Colunas3
Colunas2
RailwaysIn R$ billion
Of the R$ 104 billion investments planned, approximately R$
74 billion have been successfully auctioned
24
Lucas do Rio Verde railroad
Curitiba subway
Ports - 2th stage - 18 contracts
Ports - 1th stage - 31 contracts
BR 262 (MG/ES)
BR 116 (MG)
BR 101 (BA)
Tamoios highway
São Paulo subway line 18
BR 153 (GO/TO)
BR 040 (DF-MG)
BR 163/267/262 (MS)
BR 060/153/262 (DF/GO/MG)
BR 163 (MT)
Goiânia VLT
Confins airport
Galeão airport
São Paulo subway line 6
BR 262 (MG/ES)
BR 050 (MG/GO)
Salvador subway line 2
InvestimentsIn R$ billlion
2013
×
2014
Source: Mills, Goldman Sachs and Credit Suisse
• Cafezal mountain
• Tamoios highway
outline
• Fortaleza subway
• Joá Elevated road
duplication - RJ
• Comperj refinery*
•Transoceânica
highway - BA
• Sanitation projects–
CE
•BR-040 highway –
MG/MT/GO
•BR- 163 highway –
MT
•Gerdau expansion –
MG
• BR-381 highway
duplication – MGEvo
luti
on
of
reve
nu
eg
en
era
tio
n
(Ba
sis
10
0=
Ma
xim
um
mo
nth
ly r
eve
nu
e in t
he
life
of co
nstr
uctio
n)
Length of time of Mills participation in the construction work – average cycle is 24 months
• Belo Monte
hydroelectric power
plant
•Jirau hydroelectric
power plant*
• Vale’s S11D project
•Transnordestina
railroad
•Oeste-Leste railroad
• North beltway
• Subway line 5 – SP
• Salvador subway
• Olympic Park
• Reduc-Comperj
Pipeline
• Silver monorail line -
SP
• Colíder and Teles Pires
hydroelectric power plants
• Comperj refinery
• Companhia Siderúrgica do
Pecém steel mill
• Norte-Sul railroad
• Transposition of the São
Francisco river
• Vale projects
• Gold monorail line- SP
• Subway line 4 – RJ
• Olympic Park
• Subway line 4 – SP
• Cuiabá light rail
• Paraguaçu shipyard
• Jirau hydroelectric power plant
• Viracopos airport.
• Goiânia airport.
• BRT Transcarioca
• Metropolitan Arch – RJ
• Vale projects
• Pulp mill expansion- RS
New
contracts*
Contracts with growing
volume of equipment
Contracts with high volume
of equipmentContracts in the process of
demobilization
* New stretches
Important contracts per stage1 in the evolution of monthly
revenue from projects
25
1 In 3Q14
1 in 3Q14
26
Characteristics of the major projects in progress
Private54%
PPP15%
Public31%
Source of funds¹
Industry36%
Infrastructure
56%
Others8%
Per sector¹
47.5
55.1 55.7 55.758.6
51.0
55.551.9
24.3 25.1
29.4 28.2 29.325.6 25.6
21.4
51.3%
45.5%
52.8%50.6%
49.9%50.2%
46.2%41.2%
17.8% 17.7% 18.1% 18.1% 19.2%17.9%
16.3%13.3%
1Q13 2Q13 3Q13 3Q13* 4Q13 1Q14 2Q14 3Q14
Net Revenue EBITDA EBITDA Margin (%) ROIC¹
In R$ million
3Q14/3Q13 3Q14/2Q14 LTM3Q14/LTM3Q13 CAGR 10-13
Net Revenues -7% -7% 0% +12%
EBITDA -27% -17% -6% +14%
Heavy Construction – Financial Performance
27
* Excluding the positive effect of tax reversal in the amount of R$ 1.5 million in 3Q13.
1 ROIC: Return on Invested Capital. Until 2010.,ROIC was calculated considering the effective income tax rate for the period,while from 2011 onwards ROIC was calculated considering a
theoretical 30% income tax rate.
154.3
131.6
174.1
217.0 217.1
73.6
57.8
84.3
108.1101.9
47.7%
43.9%
48.5% 49.8%46.9%
19.2%
13.3%
2010 2011 2012 2013 LTM3Q14
Real Estate
Mast climbing platform
Growth drivers of the residential market: housing financing
29
2.6%
3.5%
7.4%
11.5%
14.4%
24.0%
45.3%
76.1%
83.7%
Russia¹
India¹
Brazil³
Chile²
China¹
South Africa¹
Germany¹
USA¹
UK¹
Housing financing relative to GDP (%)
3.1%
4.1%
5.4%
6.8%
7.4%
2009 2010 2011 2012 2013
Housing financing relative to GDP (%)in Brazil
¹ In 2011; ² In 2010; ³ In 2013.
Source: Valor Econômico Newspaper, with data from Abecip and Secovi
In million families
% of families per social class Number of families per income range
Growth drivers of the residential market: higher purchasing
power
30
31.729.1
27.2
60.4
1.4
5.9
2007 2030E
< R$ 1,000
>= R$ 1,000 and<= R$ 8,000
> R$ 8,000
-0.4%
+3.9%
+7.1%
+33.2 million families with income
between
R$ 1,000 to 8,000
Growth rate
(%. p.a.)
10.76.8 3.6
38.2
28.0
20.1
37.0
49.7
58.4
8.1 9.8 11.7
6.0 5.7 6.2
2002 2009 2014E
Class A
Class B
Class C
Class D
Class E
Source: IBGE and FGV
The major challenge for the sector: labor
31Source: Sondagem Especial Construção Civil. April 2011. CBIC. CNI. and Mills
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
Solution: Industrialization of the construction process
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
Stages of industrialization of the construction process
32
1 Approximately 800 m2
Source: Téchne Magazine. June 2012 and Mills
System Traditional with wood Traditional with steel Deck type Flying table
Cycle between
concreting activities15 days 7-10 days 6-8 days 4-7 days
Labor required1 30 people 20 people 12 people 10 people
33
17.9
21.6
13.8 13.8 13.1
20.2%
-36.0%
0.2%
-5.4%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
0
5
10
15
20
25
9M10 9M11 9M12 9M13 9M14
Var.
(%
)
Lauunches
(In R
$ m
illio
n
1 PDG, Cyrela, MRV, EVEN, Helbor, Eztec, Direcional, Rodobens, Gafisa and Tecnisa
Source: Operational reports from companies and Mills
Total launches1
in R$ billion
Launches and sales declined 5.4% and 13.9% respectively in
9M14
18.2
19.9
16.7 16.8
14.5
9.3%
-15.8%
0.7%
-13.9%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
0
5
10
15
20
25
9M10 9M11 9M12 9M13 9M14
Var.
(%
)
Sale
s (
In R
$ m
illio
n)
Total sales1
in R$ billion
64.9 66.5
72.4
54.2
59.5 58.8
48.6 48.6
27.724.6 24.4
17.1
23.525.2
-4.7
7.7
42.8%
37.0% 33.7% 31.5%
39.4%42.8%
-9.6%
15.8%15.0% 13.4%10.6%
8.1% 6.7% 6.5%
2.1%3.8%
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 3Q14¹
Net revenue EBITDA EBITDA margin (%) ROIC²
Real Estate – Financial Performance
34
¹ Excluding Easy Set effect.
² ROIC: Return on Invested Capital, Until 2010. ROIC was calculated considering the effective income tax rate for the period. while from 2011 onwards ROIC was calculated considering a
theoretical 30% income tax rate.
In R$ million
105.1
155.8
238.0
258.0
221.2 221.2
43.9
66.0
113.4
93.8
61.173.4
41.7% 42.4%
47.7%
36.4%
27.6%
33,2%
23.5%
14.3% 15.7%
8.1%
2.1%2.1%
2010 2011 2012 2013 LTM3Q14 LTM3Q14¹
3Q14¹/3Q13 3Q14¹/2Q14 LTM3T14¹/LMT3T13 CAGR 10-13
Receita Líquida -33% -17% -18% 35%
EBITDA -69% -70% -29% 29%