42
1 Localiza Rent a Car S.A. Confins airport branch – Belo Horizonte 24h reservation 0800 979 2000 www.localiza.com November, 2008 3Q08 Results (R$ million - USGAAP)
1
Localiza Rent a Car S.A.
Confins airport branch – Belo Horizonte
24h reservation0800 979 2000
www.localiza.com
November, 2008
3Q08 Results(R$ million - USGAAP)
2
Agenda
• Company
• Drivers of growth
• Competitive advantages
• Growth with profitability
• 3Q Financials
• Strategies for the current scenario
3
Integrated business platform
Date: 9M08
This integrated business platform gives Localiza superior performance
Synergies:
cost reduction
cross selling
bargaining power
9,348 cars213 agencies in 9 countries
137 agencies in Brazil
27,635 cars sold82% sold to final consumer33 points of sale
44,215 cars1.5 million clients194 agencies
22,481 cars568 clients
2,321 employees 205 employees
18 employees 468 employees
4
Cor
e B
usin
esse
sSu
ppor
tIncrease market leadership maintaining high return
Create value taking advantage of the integrated business platform synergies
Add value to the brand by expanding the network in Brazil and South America
Strategy by division
Add value to the businesses, reducing depreciation as a competitive advantage
5
* Used car results are alocated in the rental divisions
Breakdown per division
Revenues EBITDA Net income
Car rental 29% 49% 54%
Fleet rental 15% 39% 45%
Used car sales 55% 11% *
Franchising 1% 1% 1%
Total 100% 100% 100%
Car rental29%
Fleet rental15%
Used car sales55%
Franchising1%
49%
39%
11%
Franchising1%
Car rental63%
Fleet rental36%
Franchising1%
Net IncomeRevenues EBITDA
Date: 2007
6
Agenda
• Company
• Drivers of growth
• Competitive advantages
• Growth with profitability
• 3Q Financials
• Strategies for the current scenario
7
Growth opportunities
Air traffic
GDP elasticity
Consolidation
Credit cards
Replacement
Fleet outsourcing
8
Growth opportunities: GDP
Localiza’s revenue has been growing 5.9x the GDP.The Brazilian car rental market grew 2.4x the GDP in the same period.
Source: Bacen, Abla and Localiza
Revenues accumulated growth rate – rentals
5.9x
2.4x
Localiza
2004 2005 2006 2007
Sector
GDP
9
Growth opportunities: consolidation
Fonte: *Localiza em 30/06/08; **Site de cada empresa em 22/08/2008; ***Supondo que cada locadora local tenha uma agência
Airport agencies Off-airport agencies
Localiza*82
Hertz**32
Unidas**35
Avis**31
Others***32
Others1901
Localiza*240
Hertz**68
Avis**49
Unidas**60
Brazilian market 2008 (# of agencies)
Off-airport market is fragmented among almost 2,000 small local car rental companies
10
54% 59% 62% 66%
46% 41% 38% 34%
2005 2006 2007 Up to Sep/08
Off-airports Airports
100% 100% 100% 100%
Car rental revenues breakdown
Car rental division
2006 2007 Up to Sep/08
Airports 16% 14% 24%
Off-airport 47% 28% 49%
Off-airport revenues have grown 2x faster than on-airports.
Car rental revenues growth
Growth opportunities: airport x off-airport markets
11
Agenda
• Company
• Drivers of growth
• Competitive advantages
• Growth with profitability
• 3Q Financials
• Strategies for the current scenario
12
Highercompetitiveness
Market shareincrease
Gains of scale Integrated platform
Geographical distributionRating
Used car sales network Lower depreciation
Know-howStrong brand
Competitive advantages
13
International footprint
International footprint
Strategic locationsStrategic locations
Nationwidepresence
Nationwidepresence
Competitive advantages: largest distribution
407 agencies in 9 countriesDate: 9M08
14
229
68
62
54
Localiza Unidas Hertz Avis
Competitive advantages: largest distribution
Localiza network is larger than the second, the third and the fourth competitors combined in number of agencies and cities.
Agencies in Brazil Cities in Brazil
Source: Each company website as of August 22nd , 2008
275322
184229
322
100
95
80
Localiza Hertz Unidas Avis
15
Enterprise Localiza Avis Budget Hertz Europcar DollarThrifty
Vanguard
Moody’s debt rating as of August, 2007 (Global scale)Baa2
Ba1Ba2
Ba3 Ba3
B1 B1
Competitive advantages: rating
Aa2.brRio Grande Energia S.A. - RGE
Aa2.brMagnesita Refratarios S.A.
Aa2.brLocaliza Rent a Car S.A.
Aa3.brCompanhia Energetica de Minas Gerais - CEMIG
Aa2.brDuke Energy Int. Geração Paranapanema S.A.
Aa1.brCompanhia Siderurgica Nacional - CSN
Aa2.brBraskem S.A.
Moody’s corporate rating as of September, 2008 (Local Currency)
Localiza has one the best rating among its international peers
16
Competitive advantages: lower depreciation
32 stores in Brazil
Car sales inventory as a buffer of the car rental during peaks of demand
Logistic of distribution
Know-how of used car market
Selling to final consumers in order to have higher revenue per sold car
17
322.9 492.3939.1
332.9777.0
2,640.0
3,618.0
1,752.01,656.02,142.0
24% 22%
8%4%
11%
-1%
6%6%
9% 7%3%
0% 2%7%
18%17%19%
5%
0%
19%
-1 %
2 9 %
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008(2 0 0 .0 )
8 0 0 .0
1 ,8 0 0 .0
2 ,8 0 0 .0
3 ,8 0 0 .0
Average depreciation Growth of purchase price (%) Growth of sale price (%)
GDP 0.3% 4.3% 1.3% 2.7% 1.1% 5.7% 2.9% 3.7% 5.4 6.0
Competitive advantages: depreciation
The depreciation is calculated using the estimated sale price in the future, net of the sales expenses.
Localiza 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Average purchase price (nominal) 12,635 13,788 14,575 14,586 15,600 16,140 19,960 24,350 25,840 25,650 27,600Average sale price (nominal 10,770 11,362 13,464 13,971 14,026 16,680 19,490 23,060 24,770 27,460 27,930Average capex for renewal 1,865 2,426 1,111 615 1,574 (540) 470 1,290 1,070 (1,810) (330)Average sold fleet age 16.4 13.7 15.5 14.1 14.1 12.8 11.6 11.0 14.7 12.2 12.2Average depreciation 3,285 2,640 3,618 2,142 1,656 1,752 323 492 939 333 777% over average purchase price 26.0% 19.1% 24.8% 14.7% 10.6% 10.9% 1.6% 2.0% 3.6% 1.3% 2.8%
18
Agenda
• Company
• Drivers of growth
• Competitive advantages
• Growth with profitability
• 3Q Financials
• Strategies for the current scenario
19
Others78,4%
Total Fleet13.2%
Unidas8.4%
Consolidated
Fleet rental
Source: ABLA e Company, based on revenue
2004
Car rental
2007
22.4%
10.2%
15.5% 22.1%
Localiza has been increasing its market share
Localiza is gaining market share…
Others50.0% Avis
6.0%
Hertz6.0%
Unidas5.0%
Localiza33.0%
17.0%
20
Growth with strong results
134 154 150 152198
278311
403
856242
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
331 429 555 679191 251 303448
590853
127 145 160 221 270 286 281151898586 90
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
CAGR: 27.6%
CAGR: 23.9%
EBITDA evolution
Revenue evolution
CAGR: 16.5%CAGR: 30.3%
Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007GDP% 3.4 0.0 0.3 4.3 1.3 2.7 1.1 5.7 2.9 3.7 5.4Average 1.9 4.4
… without loosing profitability.
Car sold / EOP fleet 77% 74% 50% 31% 42% 57% 69% 55% 52% 50% 56% 45%
21
Agenda
• Company
• Drivers of growth
• Competitive advantages
• Grow with profitability
• 3Q Financials
• Strategies for the current scenario
22
Average rented fleet
6,654 9,402 12,842 15,937 14,90421,4487,796
9,30811,635
14,295 13,973
17,069
2004 2005 2006 2007 Up to sep/07 Up to sep/08
Qua
ntity
24,47718,710
14,450
41.3% 36.6%
19.4%24.1%
25.0%
30,232
38,517
22.9%
43.9%
22.2%
33.4%CAGR: 27.9% 28,877
Average rented fleet evolution
3Q08 growth still strong...
Car rental Fleet rental
Car rental
15,653
22,700
3Q07 3Q08
Qua
ntity
Fleet rental
14,65218,532
3Q07 3Q08
Qua
ntity45.0%
26.5%
23
Revenues evolution
...reflecting in the revenue increase...
Fleet rental
58.473.2
3Q07 3Q08
R$
mill
ion
Car rental
108.0
151.9
3Q07 3Q08
R$
mill
ion 40.6%
25.3%
Rental Used car sales
Net revenue
331.4 428.7 555.1 678.5484.7 638.6
168.3 227.5
794.7
214.5302.9
632.8
853.2
590.3
303.0
448.2
2004 2005 2006 2007 Up to Sep/07 Up to Sep/08 3Q07 3Q08
R$ m
illio
n
29.4% 29.5% 22.2% 31.8%634.4
876.9
1,145.4
1,531.7
1,117.5
1,433.3
28.3%
CAGR: 34.2%
382.8530.4
38.6%
35.2%
24
EBITDA per quarter
98.1 85.5104.6
120.9 123.6 133.9
1Q 2Q 3Q
R$
mill
ion
2007 2008
EBITDA evolutionEBITDA
161.0 218.8284.4
357.1253.8
327.036.559.1
26.9
46.4 51.3
34.5
2004 2005 2006 2007 Up to Sep/07 Up to Sep/08
R$ m
illio
n
197.5
277.9311.3
403.5
288.3
378.3
35.9% 30.0% 25.6% 28.8%
31.2%CAGR: 26.9%
28.0%
8.3%
...maintaining strong profitability...
Rental Used car sales
25
EBITDA margin per division
Divisions 2004 2005 2006 2007 Up to sep/07 Up to sep/08
44.3%
66.3%
51.2%
6.5%
59.2%
43.7%
68.7%
52.4%
5.5%
59.5%
41.9%
69.1%
51.2%
4.6%
56.1%
3Q083Q07
44.5% 46.0%
71.9%
55.0%
5.6%
62.2%
68.7%
52.6%
5.4%
59.5%
Car Rental 39.3% 45.0% 41.9%
Fleet Rental 63.4% 62.3% 69.7%
Rentals consolidated 48.6% 51.0% 50.8%
Used car salesSeminovos 12.0% 13.2% 6.0%
Total EBITDA / rental revenues 59.6% 64.8% 58.9%
Car Rental49% Fleet Rental
39%
Franchising1%
Used Car Sale11%
...and consistent margins.
EBITDA Breakdown - 2007
Car Rental50% Fleet Rental
35%
Franchising1%Used Car Sale
14%
EBITDA Breakdown – 2008 YTD
26
2007 2008
Net income per quarter
45.438.4
50.453.5 53.6 50.1
1Q 2Q 3Q
R$
mill
ion
Net income evolutionNet income
138.2
106.590.6
190.2
134.3157.2
2004 2005 2006 2007 Up to Sep/07 Up to Sep/08
R$
mill
ion
CAGR: 28.0%
17.1%
27
22,18226,105
33,52038,050
21,638
41,499
15,71518,763
23,17430,093
22,58527,635
2004 2005 2006 2007 Up to Sep/07 Up to Sep/08
Purchases Sales
Fleet: purchases and salesQ
uant
ity
The growth of 7,240 cars in the 3Q08...
6,4677,342
10,3467,957
(947)
13,864
Purchases and sales per quarter
7,213
16,419 17,867
9,292 7,71610,627
1Q08 2Q08 3Q08
Qua
ntity
(2,079)
8,7037,240
28
493.1690.0
930.31,060.9
1,238.3
303.0448.2
590.3853.2 794.7
607,0 632,8
2004 2005 2006 2007 Up to Sep/07 Up to Sep/08
R$
mill
ion
Purchases Sales* Includes accessories
190.1241.8
340.0207.7
(25.8)
443.6
Fleet: net investment
Net investment *
…demanded a net investment of R$ 235.1 million
Net investment per quarter
224,6
475,7538,0
268,9 222,8302,9
1Q08 2Q08 3Q08
(44.3)
252.9235.1
29
19,531 24,103 31,373 35,686 28,08044,2159,168
11,76214,630
17,79016,600
22,481
2004 2005 2006 2007 Up to Sep/07 Up to Sep/08
Qua
ntity
57.5%
Fleet: utilization rate
End of period fleet *
Utilization rate evolutionCar Rental Division
* Losses from theft and accidents are deducted from the fleet at the end of period
The purchases will be reduced in the 4Q08 so the utilization rate returns to previous level.
28.69935.865
46.00353.476
44.680
66.696
23.4% 30.2% 13.7%
49.3%CAGR: 23.1%
Car rental Fleet rental
68.3% 70.5% 66.1%69.3%
Up to Sep/07 Up to Sep/08 3Q07 3Q08
28.3% 24.4% 21.6% 35.4%
30
-86.9-46.7-30.1
-405.9
-51.8-35.5-34.7-30.0
288.4
-767.9 -1.201.1
Rental EBITDA
Capexrenewal
InterestDividendsWorkingcapital
Capexother
Taxes Capex growth Stockrepurchase
FCF before growth
+ 136.4
- 436.0 - 133.6Discretionaryinvestments
Dividends andInterests on equity
Net debt reconciliation
Net debt12/31/2007 Net debt
09/30/2008
Debt increased due to the strong growth in fleet.
31
281.3539.3 443.1
767.9612.2
900.2
1,247.71,492.9
1,956.9
1.201,0
2004 2005 2006 2007 Up to Sep/08
R$ m
illio
n
Net debt x fleet value
SALDOS EM FINAL DE PERÍODO 2004 2005 2006 2007 Up to Sep/08
Net debt /Fleet value 46% 60% 36% 51% 61%
Net debt / EBITDA (USGAAP) 1.4x 1.9x 1.4x 1.9x 2.4x*
Net debt / EBITDA (BRGAAP) 1.1x 1.5x 1.0x 1.4x 1.7x*
* Annualized
Net debt Fleet value
32
Debt on September 30th, 2008 (Principal)
Short term debt (R$328.3) – Cash equivalent (R$140.4) = Short term net debt (R$187.9)
R$ millionsStart Type Currency Interest rate Principal Due date
September-08 Guaranteed Account Real CDI + 157bps 33.8 November-08February-08 Resolution 2770 Real* CDI + 130bps 2.2 January-09February-08 Resolution 2770 Real* 105,2% CDI 15.0 February-09
September-08 Working Capital Real CDI + 95bps 169.5 March-09March-08 Compror Real CDI + 99bps 33.3 April-09
January-08 Resolution 2770 Real* CDI + 115bps 74.5 May-09328.3
April-05 1st Debentures Real 108,5% CDI 350.0 April-10April-08 NCC - Commercial Banking Note Real 106,9% CDI 35.0 April-11
September-08 3rd Debentures Real CDI + 180bps 300.0 September-11June-07 BNDES Real TJLP + 380bps 3.5 May-12April-08 CCB - Commercial Credit Note Real CDI + 150bps 86.0 April-13July-07 2nd Debentures Real CDI + 44bps 200.0 July-14
974.5
Gross Debt 1,302.8
Cash Equivalent 140.4
Net Debt 1,162.4
Short term subtotal
Long term subtotal
33
Debt profile
335.0
113.1 109.766.7
350.0
420,1
33.8
2008 2009 2010 2011 2012 2013 2014
Debt profile on 09/30/2008
(R$ mm)
35.0
300.0
$420.1-300.0+174.4294.5
$35.0+300.0335.0
420.1
294.5
34
118.2
52.0 58.2
250.7
136,5
2004 2005 2006 2007 Up to Sep/08
R$ m
illiio
n
Free cash flow - FCF
Free cash flow – FCF (R$ million) 2004 2005 2006 2007
EBITDA Consolidated 197.5 277.9 311.3 403.5
Cash provided by rental operating activities 108.4 134.0 204.0 260.3
Used car sales revenue 303.0 448.2 590.3 853.2
Capex of vehicles ‐ renovation (349.3) (496.0) (643.3) (839.0)
Used car sales revenue (303.0) (448.2) (590.3) (853.2)
Cost of used car sales 248.7 361.2 530.4 760.0
310.3
(‐) Tax on income – current (40.9) (32.7) (42.7) (63.4)13.3
14.2(23.7)
250.7(221.9)
Change in amount payable to cars suppliers (capex) (1) (21.9) (25.5) 222.0 (51.0)
(22.3)
EBITDA provided by rental operating activities, before tax 143.1 190.9 251.4
Working capital variation (1) 6.2 (24.2) (4.8)
Net car capex ‐ renewal (46.3) (47.8) (53.0)
Capex ‐ other (10.2) (28.0) (32.7)
Free cash flow before growth 52.0 58.2 118.2
Net capex for vehicles ‐ growth (143.8) (194.0) (287.0)
Free cash flow after growth (113.7) (161.3) 53.2
Up to Sep/08
378.3
(794.7)
704.8
288.4
(51.8)
(35.5)201.2
794.7(824.6)
(30.0)(34.7)
136.5
(413.7)7.8
(269.4)
Capex for growth in 2008 will be reduced by decreasing of 4,000 cars in the fleet.
35
114.3
55.5
76.2
39.2
124.7
11.2%16.9% 15.7%
11.0% 10.9%
21.3%18.7%24.8%24.6%
19.0%
2 0 .0
6 0 .0
1 0 0 .0
1 4 0 .0
2004 2005 2006 2007 2008 Annualized
1 .0 %
1 1 .0 %
2 1 .0 %
3 1 .0 %
EVA(*) (R$ million) Nominal WACC ROIC
41.6%
37.3%
50.0%
9.1%
EVA
2004 2005 2006 2007 2008 Annualized
Average investment capital– R$ million 507.4 606.3 986.2 1.137.5 1.547.9
NOPAT margin (1) 37.8% 35.2% 33.4% 35.6% 34.5%
Turnover of average investment capital (1) 0.65x 0.70x 0.56x 0.60x 0.55x
ROIC 24.6% 24.8% 18.7% 21.3% 19.0%
Cost of debt (2)(3) 11.6% 13.6% 10.9% 8.4% 8.2%
Cost of equity(3) 20.0% 16.2% 11.0% 11.5% 11.3%
Nominal WACC(3) 16.9% 15.7% 11.0% 11.2% 10.9%
Spread (ROIC ‐WACC) ‐ p.p. 7.7 9.1 7.7 10.1 8.1
EVA ‐ R$ million 39.2 55.5 76.2 114.3 124.7
EVA increase – R$ million ‐ 16.3 20.7 38.1 10.3
Rates increase and fleet reduction will contribute to the improvement of the ROIC.
(1) Margin and turnover calculated over rental revenue. (2) Cost of debt after taxes. (3) Calculated using long term premises
36
Agenda
• Company
• Drivers of growth
• Competitive advantages
• Grow with profitability
• 3Q Financials
• Strategies for the current scenario
37
Strategies for the current scenario
1. To maintain a lean Company
2. To reduce the non-car capex, postponing investments
3. To raise fleet utilization in the car rental division to a minimum of 72%
4. To increase car and fleet rental rates to compensate the increase on the interests rate and depreciation
5. To adjust the Company growth in line with cash generation
Concluding: To maximize the use of resources searching the best results
38
Strategies for the current scenario: ownership breakdown
* Includes 2,283,000 shares on treasury
Founders50.01%
Founders50.01%
Free-float*49.99%
Free-float*49.99%
Position Name Years with the Co.
CEO – Founder
COO - Founder Eugênio Mattar 35
CFO Roberto Mendes 23
Managing Director –Car Rental
Gina Rafael 28
Managing Director –Fleet Rental
Daltro Leite 23
Managing Director –Used Car Sales
Marco Antonio 18
Salim Mattar 35
The main founders continue in the Company followed by a very stable management.
Long term management commitment
39
Thank you!
40
2007 Car rental financial cycle
$28.9Funding (FV)
Funding (PV)
$25.8
Net car sale revenue
$26.3
$25.8Car acquisition
1 2 3 4 5 8 9 10 11 12Expenses: (10.9)
1-year cycle
Interest per car $3.1:$2.0 - interest on debt $1.1 - interest on equity
Revenue: 19.6
Total1 Year
R$ % R$ % R$Revenues 19,6 100,0% 27,4 100,0% 47,0 Additional revenue 0,7 2,5% 0,7 Cost (8,1) -41,5% (8,1) SG&A (2,8) -14,2% (1,8) -6,6% (4,6) Net car sale revenue 26,3 95,9% 26,3 Book value of car sale (24,6) -89,7% (24,6)
EBITDA 8,7 44,3% 1,7 6,2% 10,4 Depreciation (non-vehicle) (0,6) -3,3% (0,1) -0,2% (0,7) Depreciation (vehicle) (0,3) -1,2% (0,3) Interest on debt (2,0) -7,1% (2,0) Tax (2,4) -12,2% 0,2 0,9% (2,3)
NET INCOME 5,7 28,8% (0,5) -1,8% 5,1 Return on asset 19,9%
Car rental Used carsPer operating car Per sold car
41
2007 Fleet rental financial cycle
32.2Car acquisition 40.3
Funding (FV)
Funding (PV)
32.2
Net car sale revenue
27.5
1 2 3 4 5 20 21 22 23 24
2-year cycle
Interest per car $8.1:$3.6 - interest on debt $4.5 - interest on equity
Expenses: (9.6)
Revenue: 30.7
2 Years 1YearR$ % R$ % R$ R$
Revenues 30,7 100,0% 28,5 100,0% 59,2 29,6 Additional revenue 0,5 1,9% 0,5 0,3 Cost (8,1) -26,3% (8,1) (4,0) SG&A (1,5) -5,0% (1,5) -5,3% (3,0) (1,5) Net car sale revenue 27,5 96,6% 27,5 13,8 Book value of car sale (26,7) -93,5% (26,7) (13,3)
EBITDA 21,1 68,7% 0,9 3,1% 22,0 11,0 Depreciation (non-vehicle) (0,2) -0,7% (0,2) (0,1) Depreciation (vehicle) (4,8) -16,8% (4,8) (2,4) Interest on debt (3,6) -12,7% (3,6) (1,8) Tax (6,4) -20,7% 2,3 8,2% (4,0) (2,0)
NET INCOME 14,5 47,3% (5,2) -18,1% 9,3 4,7 Return on asset 14,5%
TotalFleet rental Used carsPer operating car Per sold car
42
Total1 year
R$ % R$ % R$Revenues 21,2 100,0% 26,4 100,0% 47,6 Additional revenues 0,7 2,7% 0,7 Costs (8,1) -38,4% (8,1) SG&A (2,8) -13,2% (1,8) -6,7% (4,6) Net car sale revenue 25,3 96,0% 25,3 Book value of car sale (24,0) -90,9% (24,0)
EBITDA 10,3 48,4% 1,3 5,1% 11,6 Depreciation (non-vehicle) (0,6) -3,1% (0,1) -0,2% (0,7) Depreciation (vehicle) (0,9) -3,4% (0,9) Interest on debt (3,0) -11,4% (3,0) Tax (2,9) -13,6% 0,8 3,0% (2,1)
Net income 6,7 31,8% (1,8) -6,9% 4,9 Return on asset 19,0%
Car rental SeminovosPer operating car Per sold car
Financial cycle for 2009 scenario – Car rental
Increasing rates to face interest rate and depreciation
$29,9Funding (FV)
Funding (PV)
$25,8
Net car sale revenue
$25,3
$25,8Car acquisition
1 2 3 4 5 8 9 10 11 12Expenses: (10,9) Interest per car $ 4,1:$3.0 – interest on debt$1,1 – interest on equity
Receita: 19,6
1-year cycle
