merrill lynch 2014 brazil conference

8/12/2019 Merrill Lynch 2014 Brazil Conference

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March 2014

Corporate Presentation


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Executive Summary


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Heavy

Cons

truc

tion

Market leader, extensive trackrecord, with more than 60 yearsof experience

Focus on: large and complexinfrastructure projects

Products: engineeringsolutions and rental offormwork and shoring

Services: planning, design,technical supervision,

equipment and related services

Main clients:

Rea

lEs

tate

Market leader; acquired in 2008

Focus on: residential and

commercial constructions

Products: engineering solutionsand rental of formwork, shoringand suspended access

Services: planning, design,technical supervision, equipmentand related services

Clients: real estate companies,such as:

Ren

tal

Market leader; started in2008

Focus on: civil construction,industry, retail e others

Products:rental and sale ofmotorized accessequipment, such as aerialwork platforms andtelescopic handlers

Cross-selling with all otherMills business units

Elected "Best Company forAccess of the Year" by theInternational Awards forPowered Access (IAPA

Awards) for the year of 2011

Mills - Business Units

2
http://www.pdgrealty.com.br/pdg/Capa.aspx


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357

201

258

94

217

108

832

403

Revenue EBITDA

Heavy Construction

Real Estate

Rental

3

Mills - 2013 Financial highlights per business unit

MargemEBITDA ROIC

49.8% 19.2%

36.4% 8.1%

56.3% 18.2%

48.4% 14.1%

27%

23%

50%

26%

31%

43%

Excluding the Industrial Services business unit.


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4

Mills - Financial Performance

Reclassified excluding the Industrial Services business unit, for comparison.

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 atheoretical 30% income tax rate.

4Q13/4Q12

4Q13/3Q13 2013/2012 CAGR 10-13Net Revenue +12% -5% +25% +33%

EBITDA +23% -4% +19% +34%

Net Earnings +9% +15% +14% +19%

187.5 188.4

211.8

222.0

210.1

83.395.7 98.9

106.1 102.4

41.7 39.348.1

39.645.6

44.4%

50.8%

46.7%

47.8% 48.7%

14.5% 14.9% 14.2% 13.9%13.4%

4Q12 1Q13 2Q13 3Q13 4Q13

Net Revenue EBITDA Net Earnings EBITDA Margin ROIC

354.5

462.8

665.5

832.3

168.4

217.4

339.0

403.1

103.3 92.2

151.5 172.6

47.5% 47.0%50.9%

48.4%

21.0%

12.3%

14.7% 14.1%

2010 2011 2012 2013


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Estamos presentes em 16 estados no Brasil com 56 unidades

MillsGeographic Presence

5

Branches locationAs of December 31, 2013

MinasGerais

Rio Grandedo Sul

Santa Catarina

So Paulo

Mato Grossodo Sul

Rio deJaneiro

(sede)

EspiritoSanto

Bahia

DistritoFederal

Goias

Sergipe

Paraiba

Rio GrandeCear

Piaui

Maranho

Tocantins

Par

Rondnia

Acre

Roraima Amap

Amazonas

Mato Grosso

Parana

Alagoas

States with Mills Presence

Rental

Heavy Construction

Real Estate

Pernambuco

do Norte

We are present in 17 states of Brazil with 51 branches


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Heavy Construction

Cinta costeira - Panam


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1.00

0.33

0.36

0.48

0.62

- 0.50 1.00

USA

Brazil

Russia

India

China

Infrastructure

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

1.00

0.42

0.93

0.97

0.99

- 0.50 1.00

USA

Brazil

Russia

India

China

Railways

1.00

0.33

0.36

0.48

0.62

- 0.50 1.00

USA

Brazil

Russia

India

China

Highways

Brazil is behind other BRIC countries quality of infrastructure

Source: World Economic Forum, The Global Competitiveness Report 2012-2013

7


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Oil and Gas458

Mining48

Steel10

Chemical25

Pulp and Paper19

Others

540

Industry investments 2014-2017R$ 1,100 billion

Energy176

Telecom125

Sanitation45

Railways59

Roads

62

Ports34

Airports8

Infrastructure investments 2014-2017R$ 510 billion

Source: BNDESOctober 2013

Growth compared to the 2009-2012 period (%)

24% 25%

Investments in infrastructure and industry in Brazil shouldamount R$ 1.6 trillion in the 2014-2017 period


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2.031.48

0.63 0.621.0 0.8 0.7

0.80

0.43

0.73 0.640.4

0.5 0.6

2.13

1.47

0.760.67

1.00.8 0.8

0.46

0.24

0.150.19

5,4

3,6

2,32,2

2.4

2.1 2.2

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1971-80 1981-89 1990-2000 2001-10 2010 2011 2012

Sewage and Sanitation Energy Telecommunication Transport

19% 17%12%

42%36%

36%

39%

47% 52%

2010 2011 2012

Private PPP Public

Investments in Infrastructure% of GDP

Investments in InfrastructurePer source of funds

Higher participation of the private sector in infrastructureinvestments in recent years

9Source: Credit Suisse report The Brazilian Infrastructure: Itsnow or never , from July, 2013


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New logistic investment program

10

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 Logstica,August 2012 and O Globo newspaper

35.0

56.0

- 20 40 60

Colunas3

Colunas2

RailwaysIn R$ billion

$ $


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Of the R$ 106 billion planned, approximately R$ 62 billionhave been successfully auctioned, surpassing the projectsawarded to the private sector in the past ten years

11

Campinorte - Lucas do Rio Verde railway

Curitiba subway

So Paulo subway line 18

Tamoios

Ports - 2nd stage - 18 contracts

Ports - 1st stage - 31 contracts

BR 262 (MG/ES)

BR 116 (MG)

BR 153 (GO/TO)

BR 101 (BA)

BR 040 (DF-MG)

BR 163/267/262 (MS)

BR 060/153/262 (DF/GO/MG)

BR 163 (MT)

VLT Goinia

Confins airport

Galeo airport

So Paulo subway line 6

BR 262 (MG/ES)

BR 050 (MG/GO)

Salvador subway line 2

InvestmentsIn R$ billion

2013

2014

Source: Mills, Goldman Sachs, and Credit Suisse


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Vales S11D project

Subway lines 4 and 5SP*

North beltway*

Belo Monte

hydroelectric powerplant*

Norte-Sul railroad*

Duplication of BR-163and MT-364 highways*

Pulp mill expansion-RS

Goinia airport

Fortaleza subway

Salvador subway

Minas-Rio pipeline

E

volution

ofrevenue

ge

neration

(Bas

is100=

Max

imum

mon

thlyrevenue

inthe

lifeo

fcons

truc

tion

)

Length of time of Mills participation in the construction workaverage cycle duration is 24 months

Belo Monte hydroelectricpower plant

Norte-Sul railroad

Oeste-Leste railroad

Subway lines 4 e 5SP

Companhia Siderrgicado Pecm steel mill

Cais das ArtesParaguau shipyard

Confins airport

Jacu-Pssego highway

Colder and Teles Pires

hydroelectric power plantsComperjrefineryTransposition of the So FranciscoriverVale and Gerdau projectsEast beltway- SP

Gold monorail line- SPSubway line 4RJBRT TranscariocaFortaleza airport

Natal airportLibra terminal

Jirau eFerreira Gomeshydroelectric power plantsAbreu e Lima refineryViracoposand GuarulhosairportBraslia airportMetropolitan ArchRJSilver monorail line- SPSurroundings ofMaracan

Porto Maravilha

Newcontracts*

Contracts with growingvolume of equipment

Contracts with high volumeof equipment

Contracts in thedemobilization process

* New streches

Important contracts per stage1in the evolution of monthlyrevenue from the heavy construction projects

12

1In 4Q13


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1In 4Q13

13

Heavy Constructioncharacteristics of the major projects inprogress

Public-Private

Partnership17%

Public27%

Private56%

Source of Funds

Industry22%

Infrastructure69%

Others9%

Per Sector


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In R$ million

1ROIC: 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 atheoretical 30% income tax rate.

* Excluding the positive effect of tax reversal in the amount of R$ 1.5 million in 3Q13.

4Q13/4Q12 4Q13/3Q13 2013/2012 CAGR 10-13

Net Revenue +24% +5% +25% +12%

EBITDA +45% -1% +28% +14%

Heavy ConstructionFinancial Performance

14

47.3 47.5

55.1 55.755.7

58.6

20.2

24.3 25.1

29.4 28.2 29.3

42.7%

51.3%

45.5%

52.8%

50.6%49.9%

14.8%

18.6% 17.8%20.9%

19.7% 19.1%

4Q12 1Q13 2Q13 3Q13 3Q13* 4Q13

Net Revenue EBITDA EBITDA Margin ROIC

154.3

131.6

174.1

217.0

73.6

57.8

84.3

108.1

47.7%43.9%

48.5% 49.8%

24.1%

12.1%

17.2%

19.2%

2010 2011 2012 2013


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Real Estate

Mast climbing platform


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Growth drivers of the residential market: housing financing

16

2.6%

3.5%

7.4%

11.5%

14.4%

24.0%

45.3%

76.1%

83.7%

Russia

India

Brazil

Chile

China

South Africa

Germany

USA

UK

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

In 2011; In 2010; In 2013.

Source: Valor EconmicoNewspaper, with data from Abecip and Secovi


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In million families% of families per social class Number of families per income range

Growth drivers of the residential market: higher purchasingpower

17

31.729.1

27.2

60.4

1.4

5.9

2007 2030E

< R$ 1,000

>= R$ 1,000 and R$ 8,000

-0.4%

+3.9%

+7.1%

+33.2 millionfamilies with income

betweenR$ 1,000 to 8,000

Growth rate(%, p.a.)

10.7 6.8 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


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Growth drivers of the residential market: industrialization ofthe construction process

18Source: Sondagem Especial Construo Civil, April 2011, CBIC , CNI, and Mills

The major challenge for the sector: labor

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


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Stages of industrialization of the construction process

19

1Approximately 800 m2

Source: Tchne Magazine, June 2012 and Mills

System Traditional with wood Traditional with steel Deck type Flying table

Cycle betweenconcreting activities

15 days 7-10 days 6-8 days 4-7 days

Labor required1 30 people 20 people 12 people 10 people


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Revenue Breakdown

Growth drivers in the residential market: geographic expansion

20

85%

61%

49% 45%

15%

39%

51% 55%

2009 2010 2011 2012 2013

New branches

Established branches

1Branches opened since November 2009


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21

18.3

30.6

23.4

19.8

23.3

67.4%

-23.5%

-15.4%

17.6%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

2009 2010 2011 2012 2013

YoY(%)

Launches(inR$billion)

1 Cyrela, Direcional,Even, Eztec, Gafisa, Helbor, MRV, PDG, Rodobens, Tecnisa and Trisul

Source: Operational reports from companies, Criactive and Mills

Total launches1

in R$ billion

24.6

28.231.0

38.9

43.1

14.6%

10.2%

25.5%

10.7%

0%

5%

10%

15%

20%

25%

30%

35%

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

2009 2010 2011 2012 2013

YoY(%)

Constructedarea(inmillion

m2)

Constructed area

in million m2

Launches in 2013 represent construction opportunities in2014


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1ROIC: Return on Invested Capital. Until 2010, ROIC was calculated considering the effective income tax rate for the period, while from 2011 onwards ROICwas calculated considering a theoretical 30% income tax rate.

4Q13/4Q12 4Q13/3Q13 2013/2012 CAGR 10-13

Net Revenue -18% -25% +8% +35%

EBITDA -35% -30% -17% +29%

Real EstateFinancial Performance

22

In R$ million

66.0 64.9 66.5

72.4

54.2

26.1 27.7 24.6 24.4

17.1

39.6%

42.8%

37.0%33.7%

31.5%

12.6% 12.8%9.3%

8.2%

3.2%

4Q12 1Q13 2Q13 3Q13 4Q13


105.1

155.8

238.0

258.0

43.9

66.0

113.4

93.8

41.7% 42.4%47.7%

36.4%

23.5%

14.3% 15.7%

8.1%

2010 2011 2012 2013


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Castelo stadiumFortaleza, CE

Rental


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Aerial workplatforms

95%

Telescopichandlers

5%

Brazil - 2013Total: 29,500

Growth drivers in the motorized access equipment market:low penetration

25Source: Mills and Yengst Associates

Aerial workplatforms

78%

Telescopichandlers

22%

USA - 2011Total: 785,000

Fleet Profile

The Brazilian aerial platforms and telehandler fleet is very small compared to the US fleet; less

than 5%.

Modest rental penetration of 15% in Brazil. Rental penetration is approximately 40% in the USA,

60% in Japan and 80% in England.


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Revenue Breakdown

69%

42%38% 31%

31%

58% 62%

69%

2009 2010 2011 2012 2013

New branches

Established branches

Growth drivers in the motorized access equipment market:geographic expansion

261Branches opened since January 2010


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In 2013, the Brazilian fleet of motorized access equipmentgrew 40% compared to 2012

27Source: Mills and Yengst Associates

8

11

16

21

30

35%

46%

33%

40%

20%

30%

40%

50%

60%

70%

80%

0

5

10

15

20

25

30

35

2009 2010 2011 2012 2013

Fleet size YOY (%)

Motorized access equipment fleet

In thousands of units


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RentalRecognition of our differentiation

28

2013

Nominated for Best Company for Access of the Year

Nominated for IPAF Training Center of the YearAward will be granted in April 2014

2011

Elected Best Company for Access of the Year


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4Q13/4Q12 4Q13/3Q13 2013/2012 CAGR 10-13

Net Revenue +31% +3% +41% +55%

EBITDA +52% +7% +43% +58%

RentalFinancial Performance

29

In R$ million

1ROIC: Return on Invested Capital. Until 2010, ROIC was calculated considering the effective income tax rate for the period, while from 2011 onwards ROICwas calculated considering a theoretical 30% income tax rate.

74.2 76.1

90.193.9

97.2

36.9

43.649.3

52.356.0

49.8%

57.3%

54.7% 55.7%

57.7%

16.9%19.1% 18.5% 18.1% 17.5%

4Q12 1Q13 2Q13 3Q13 4Q13


95.1

175.4

253.5

357.3

51.0

93.6

141.2

201.2

53.6% 53.4% 55.7% 56.3%

19.2%16.5% 18.2%

18.2%

2010 2011 2012 2013


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Growth Plan

The potential penetration of our services for increasing


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The potential penetration of our services for increasingproductivity enables us to grow independently of economicperformance

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 revenue1versus GDPyoy variation (%)

31 Excluding the Industrial Services business.


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7447 51

106

37

104185

60

90

25

131

163

161

267

169

15

18

20

36

324

413

292

499

231

2010 2011 2012 2013 2014 Capex Budget

Rental

Real Estate

Heavy Construction

In R$ million

Capex

2014 Capex Budget(%)

16%

11%

73%

We invested R$ 464 million in rental equipment in 2013

32 Reclassified excluding the Industrial Services business unit, for comparison.


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Capturing opportunities maintaining the commitment to lowleverage

33

0.7x

1.0x

1.6x 1.6x

1.4x

1.3x

1.2x 1.2x 1.2x

1.4x

1.3x

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13

Target = 1.0x


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5 6 6 6 6 68

5 6

14 15 1617

4 4

1416

17

26

5

15 16

34

3739

51

2007 2008 2009 2010 2011 2012 2013

Rental

Real Estate

Heavy Construction

Evolution of the number of branches

34

+12

Excluding the Industrial Services business unit branches, for comparison.


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MillsInvestor Relations

Tel.: +55 21 2123-3700

E-mail: [email protected]

www.mills.com.br/ri

merrill lynch 2014 brazil conference

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