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Localiza Rent a Car S.A.1T06 – Public meeting
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Integrated business platform
Competitiveadvantages
Growthopportunities
Businessesstrategies
Objectives
Integratedbusinessplatform
123 agencies 20,096 cars
13,116 cars
13 points of sale 78.4% sold to final consumer
195 agencies in 9 countries 7,076 cars
Synergies:
cost reduction,
cross selling,
bargaining power
Data-base: 03/31/2006
2
Businesses strategies
Cor
e B
usin
esse
sSu
ppor
tIncrease market leadership maintaining high return on investment
Create value through fleet management market opportunities, taking advantage of the synergies generated by the integrated business platform
Add value to the brand by expanding the network in Brazil and Latin America
Add value to the businesses of the platform as a competitive advantage, reducing depreciation costs
Competitiveadvantages
Growthopportunities
Businessesstrategies
Objectives
Integratedbusinessplatform
3
Objectives
Short-term:
Maintain profitability (Net margin, ROE and EBITDA margin)
Long-term:
Increase business volume through organic growth and horizontal expansion, taking advantage of growth and consolidation opportunities to expand market share and gains of scale
Competitiveadvantages
Growthopportunities
Businessesstrategies
Objectives
Integratedbusinessplatform
4
Bargainingpower
CompetitivenessMarket shareincrease
Gains ofscale
Strong brandGeographic footprintIntegrated platformYield management
Know-how
Competitive advantages
Competitiveadvantages
Growthopportunities
Businessesstrategies
Objectives
Integratedbusinessplatform
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Growth opportunities
Airtraffic
GDP elasticity
Consolidation
Creditcards
Replacement
Fleet rentalmarket
Competitiveadvantages
Growthopportunities
Businessesstrategies
Objectives
Integratedbusinessplatform
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1Q06 Results presentation(R$ million - USGAAP)
Localiza Rent a Car S.A.
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1Q06 Highlights
42,6% increase in car rental business volume
31,8% increase in fleet rental business volume
23,2% increase in car rental EBITDA (excluding used car sales)
37,3% increase in fleet rental EBITDA (excluding used car sales)
2.2 p.p utilization rate increase in car rental business
68,6% increase in the trading volume of RENT3 (R$ 7,1 million in the 1Q06)
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Car rental performance(R$ millon, USGAAP)
Daily rentals (thousands)
Used car sales Car rental
343 410
641162
190+17.8%
155 197 271 64 87188 213
37098 103
2003 2004 2005 1Q05 1Q06
Net revenue
1,8392,413
3,411
7611.085
2003 2004 2005 1Q05 1Q06
+42.6%
+36.4%
EBITDA
74117
17948 47
-1.4%
59 91139
344213
26
40
14 5
2003 2004 2005 1Q05 1Q06
+23.2%39
5789 21 29
(4) (12) (2) (11)
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2003 2004 2005 1Q05 1Q06
Net income
+36.5%
-9.2%
1820
51 53
77
+5.6%
9
120 128 14934
45
64 90 7824 22
2003 2004 2005 1Q05 1Q06
Net revenue
(R$ millon, USGAAP)
Fleet rental performance
Daily rentals (thousands)
Used car sales Fleed rental
184218 227
5867
+31.8% +15.7%3,119 2,806
3,351
7631.006
2003 2004 2005 1Q05 1Q06
+31.1%
EBITDA
91103 +28.4%
83 92 10325
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(5) (1) (0)
1
(1)
2003 2004 2005 1Q05 1Q06
+37.3%
7834
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Net income
58 63 6917
25
(4)(26) (42)
(11) (13)
2003 2004 2005 1Q05 1Q06
+50.6%
53 37 276
12+105.3%
-6.7%
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(R$ milhões, USGAAP)
EBITDA margin per segment
2003 2004 2005 1Q05 1Q06
Margin Margin Margin Margin Margin
Rentals 38.1% 45.9% 51.2% 53.7% 48.5%
Used car sales 6.6% 12.3% 10.8% 14.2% 5.0%
TOTAL 20.7% 28.4% 27.9% 29.8% 25.0%
Rentals 69.4% 71.9% 69.2% 73.5% 76.9%
Used car sales -9.2% -1.4% -0.2% 3.8% -5.0%
TOTAL 43.5% 41.6% 45.3% 44.9% 49.9%
Rentals 51.8% 56.2% 57.6% 60.6% 58.2%
Used car sales 2.9% 9.9% 8.9% 12.2% 3.3%
Franchising 43.6% 48.6% 47.2% 47.1% 29.4%
TOTAL 28.6% 33.1% 32.6% 33.9% 31.4%Con
solid
ated
Flee
tren
tal
Car
rent
al
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Net revenue
Consolidated performance(R$ million, USGAAP)
EBITDA
Daily rentals+17.1%
CAGR: + 28%
+13.9%CAGR: +25%*+8.5%
CAGR: + 37%
69*
CAGR: +17% +37.2%
Net income
532634
877 222 260
2003 2004 2005 1Q05 1Q06
100134+34%
+3.2%4,959 5,219
6,762
1,524
2,091
2003 2004 2005 1Q05 1Q06
152
210286
7581
2003 2004 2005 1Q05 1Q06
10691
107
26 30
2003 2004 2005 1Q05 1Q06
122126
154
60 77+29%
-72%
•Pro forma result disregarding mark-to-market (MTM)of derivatives contracts
Margin 13.0% 14.,3% 12.2% 11.8% 11.4%
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(R$ millon, USGAAP)
Net income evolution
Net income1Q05
Net income1Q06
26.0
+37.9Revenues
-23.4Costs
-8.1SG&A
Depreciations+1.4 -3.8
+34.0 -9.8
InterestsTaxes
29.6
+0.5
+13.9%
+3.9
-13.6
Rentals = + 17.1 milionUsed car sales = - 10.7 million
-1.0
-7.1
EBITDA variation = + 6.4 million
-0.9Stock option
Other itens variation = - 2.8 million
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(R$ millon, USGAAP)
Cash flow
Synthetic cash flow 1Q05 1Q06 Variation
Net income adjusted to reconcile net income to net cash 50.3 56.2 5.9
Increase in working capital (client, accounts payable, etc) (16.6) (9.4) 7.2
Car purchase (64.8) (51.1) 13.7
Cost of used cars sold 95.1 106.9 11.8
102.6
(104.1)
(1.5)
70.7
69.2
Net cash generated by operational activities 64.0 38.6
Net cash generated by investment and financing activities 385.3 (489.4)
Increase (reduction) of net cash 449.3 (450.7)
Availabilities at the beginning of the period 129.3 58.6
Availabilities at the end of the period 578.6 509.4
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Net debt (R$ millon) USGAAP
(R$ millon, USGAAP)
Indebtedness
Rating S&P - Positive BrA 2003 2004 2005 1T05 1T061Q06*
pro forma
Net debt / fleet 22% 46% 60% 44% 58% 39%
Net debt / equity 0.36 0.96 1.37 0.8 1.2 0,.6
322,8*
* Pro forma considering R$ 156.8 million of the primary offer
87
281
539
250.3
479.6
2003 2004 2005 1Q05 1Q06
322.8*
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RENT3 performance
Average daily volume traded in 1Q06 of R$ 7,1 MM
1Q06 RENT3 performance: +28.5%
1Q06 RENT 3 x IBOVESPA performance: +15.1%
R EN T 3 X IB OV ESPA
10
15
20
25
30
35
40
45
50
0
20
40
60
80
100
120
Volume RENT3 RENT3 IBOVESPA
31/12/0528,63
31/03/0636,8+ 28,5%
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Perspectives
Utilization rate above 65% in car rental business
25% increase in car rental business volume
15% increase in fleet rental business volume
EBITDA margin in car rental business of 45% (excluding used car sales)
EBITDA margin in fleet rental business of 70% (excluding used car sales)
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1Q06 Results Analysis
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Rental results analysis – % over revenue
(*) pro-form numbers (excluding stock options and bonus expenses).
Percentages
Car Rental2003 2004 2005 1Q05 1Q06
1Q06 pro form* Difference (*)
Rental net revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% -Rental costs -43.9% -40.0% -36.4% -35.9% -37.3% -36.8% -0,9p,p,Gross profit 56.1% 60.0% 63.6% 64.1% 62.7% 63.2% -0,9p,p,Operating expenses (SG&A) -20.0% -18.5% -15.3% -12.2% -16.4% -13.2% -1,0p,p,Net financial expenses -0.6% -0.7% -1.3% -2.8% -0.3% -0.3% 2.5p.p.Operating profit after financial result 35.5% 40.8% 46.9% 49.1% 46.0% 49.7% 0,6p,p,Non-operating result 0.0% 0.1% 0.1% 0.0% 0.0% 0.0% -Income tax -10.8% -12.0% -14.2% -16.2% -13.0% -14.1% 2,1p,p,Net income of the period 24.8% 29.0% 32.8% 32.9% 33.0% 35.6% 2,7p,p,EBITDA margin 38.1% 46.0% 51.2% 53.7% 48.5% 49.7% -4,0p,p,
ALUGUEL2003 2004 2005 1Q05 1Q06
1Q06 pro form* Difference (*)
Rental net revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% -Rental costs -24.2% -21.9% -23.1% -19.8% -16.9% -16.9% 2,9p,p,Gross profit 75.8% 78.1% 76.9% 80.2% 83.1% 83.1% 2,9p,p,Operating expenses (SG&A) -6.7% -8.1% -9.2% -7.0% -7.1% -6.2% 0,8p,p,Net financial expenses -0.5% -0.5% -0.4% -0.3% -0.7% -0.7% -0,4p,p,Operating profit after financial result 68.7% 69.5% 67.4% 72.9% 75.3% 76.2% 3,3p,p,Non-operating result 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -Income tax -20.8% -20.3% -21.2% -24.5% -19.8% -20.0% 4,5p,p,Lucro líquido do período 47.9% 49.2% 46.1% 48.4% 55.6% 56.2% 7,8p,p,Margem EBITDA 69.4% 71.9% 69.2% 73.5% 76.9% 77.8% 4,3p,p,
Car Rental2003 2004 2005 1Q05 1Q06
1Q06 pro form* Difference (*)
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Rental results analysis – daily rental
(*) pro-form numbers (excluding stock options and bonus expenses).
R$ / Daily rentals
ALUGUEL2003 2004 2005 1Q05 1Q06
1Q06 pro form* Difference (*)
Rental net revenue 84.4 81.7 79.5 84.2 80.5 80.5 -4.4%Rental costs (37.1) (32.7) (29.0) (30.2) (30.0) (29.7) -1.8%Gross profit 47.4 49.0 50.6 54.0 50.5 50.9 -5.8%Operating expenses (SG&A) (16.9) (15.1) (12.2) (10.2) (13.2) (10.6) 3.4%Net financial expenses (0.5) (0.5) (1.1) (2.4) (0.3) (0.3) -88.3%Operating profit after financial result 30.0 33.4 37.3 41.4 37.0 40.0 -3.4%Non-operating result - 0.1 0.1 - - - -Income tax (9.1) (9.8) (11.3) (13.7) (10.5) (11.3) -17.1%Net income of the period 20.9 23.7 26.1 27.7 26.5 28.7 3.4%Net margin 24.8% 29.0% 32.8% 32.9% 33.0% 35.6% 2,7p,p,EBITDA 32.1 37.5 40.7 45.2 39.1 42.0 -7.0%EBITDA margin 38.1% 46.0% 51.2% 53.7% 48.5% 52.2% -1,5p,p,
ALUGUEL2003 2004 2005 1Q05 1Q06
1Q06 pro form* Difference (*)
Rental net revenue 38.6 45.5 44.5 45.0 44.7 44.7 -0.5%Rental costs (9.3) (10.0) (10.3) (8.9) (7.6) (7.6) -15.2%Gross profit 29.2 35.6 34.3 36.0 37.2 37.2 3.2%Operating expenses (SG&A) (2.6) (3.7) (4.1) (3.1) (3.2) (2.8) -11.5%Net financial expenses (0.2) (0.2) (0.2) (0.1) (0.3) (0.3) 127.6%Operating profit after financial result 26.5 31.6 30.0 32.8 33.7 34.1 4.1%Non-operating result 0.0 0.0 0.0 0.0 0.0 0.0 -Income tax (8.0) (9.2) (9.5) (11.0) (8.9) (8.9) -18.7%Net income of the period 18.5 22.4 20.5 21.8 24.9 25.2 15.6%Net margin 47.9% 49.2% 46.1% 48.4% 55.6% 56.2% 7,8p,p,EBITDA 26.8 32.7 30.8 33.0 34.4 34.8 5.4%Margem EBITDA 69.4% 71.9% 69.2% 73.5% 76.9% 77.8% 4,3p,p,
Car Rental2003 2004 2005 1Q05 1Q06
1Q06 pro form* Difference (*)
Car Rental2003 2004 2005 1Q05 1Q06
1Q06 pro form* Difference (*)
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Why did Seminovos EBITDA margins fall from 8.8% in
2005 to 3.3% in the 1Q06?
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2000 2001 2002 2003 2004 2005 1Q06
New car priceincrease (Palio)
1.90% 6.72% 7.39% 13.95% 17.42% 9.40% 1.50%
IPCA inflation 5.97% 7.,67% 12.53% 9.30% 7.60% 5.69% 1.44%
Real increase(decrease)
- 4.07% - 0.95% - 5.14% + 4.65% + 9.82% + 3.71% + 0.06%
Evolution of car prices increase
-4.1% -5.1%
-1,0%
4.7%
9.8%
3.7%
0.1%
-6.0%
-2.0%
2.0%
6.0%
10.0%
2000 2001 2002 2003 2004 2005 1Q06
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2000 2001 2002 2003 2004 2005 1Q06
Depreciation per car 3,617.70 2.142.50 1,656.20 1,752.30 322.90 492.30 720.60
% over rental revenue 13.8% 11.9% 9.3% 9.2% 1.8% 2.9% 4.2%
Evolution of depreciation in the Car Rental segment
3,618
2,1431,656
1,752
323 492 721
4%
14%
12%
9% 9%
2%3%
-
1,000
2,000
3,000
4,000
2000 2001 2002 2003 2004 2005 1Q060%
4%
8%
12%
16%
Average depreciation per car % over rental revenue
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Exemple 1 Exemple 2 Exemple 3 Exemple 4 Exemple 5 Exemple 6 Exemple 7
Car purchase price 100.00 100.00 100.00 100.00 100.00 100.00 100.00
Sale price 95.00 100.00 105.00 110.00 115.00 120.00 125.00
Depreciation rate 14.5% 10.0% 5.5% 1.0% 0% 0% 0%
Book Value 85.50 90.00 94.50 99.00 100.00 100.00 100.00
SG&A (7%) 6.65 7.00 7.35 7.70 8.05 8.40 8.75
EBITDA 2.85 3.00 3.15 3.30 6.95 11.60 16.25
EBITDA margin 3% 3% 3% 3% 6% 10% 13%
Average 3.0% 9.6%
Depreciation rate = {(sale price – 10% of sale price) / Car purchase price}-1where 10% = selling expenses (7%) + safety margin (3%)
Depreciation rate X Seminovos EBITDA margin
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Conclusion
From 2003 to 2005 many Localiza cars presented zero depreciationrate, that resulted in an average EBITDA margin of 10%.
In ordinary conditions, by the sum of the years’ digit depreciation rate calculation method, the EBITDA margin will be around 3%.
We expect that the car prices in Brazil in 2006 increasejust a little above the inflation.
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The material that follows is a presentation of general background information about LOCALIZA
as of the date of the presentation. It is information in summary form and does not purport to be complete. It is not intended to be relied upon as advice to potential investors. No representation or warranty, express or implied, is made concerning, and no reliance should be placed on, the accuracy, fairness, or completeness of the information presented herein.
This presentation contains statements that are forward-looking within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are only predictions and are not guarantees of future performance. Investors are cautioned that any such forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the operations and business environments of LOCALIZA and its subsidiaries that may cause the actual results of the companies to be materially different from any future results expressed or implied in such forward-looking statements.
Although LOCALIZA believes that the expectations and assumptions reflected in the forward-looking statements are reasonable based on information currently available to LOCALIZA’s management, LOCALIZA cannot guarantee future results or events. LOCALIZA expressly disclaims a duty to update any of the forward-looking statement.
The material that follows is a presentation of general background information about LOCALIZA
as of the date of the presentation. It is information in summary form and does not purport to be complete. It is not intended to be relied upon as advice to potential investors. No representation or warranty, express or implied, is made concerning, and no reliance should be placed on, the accuracy, fairness, or completeness of the information presented herein.
This presentation contains statements that are forward-looking within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are only predictions and are not guarantees of future performance. Investors are cautioned that any such forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the operations and business environments of LOCALIZA and its subsidiaries that may cause the actual results of the companies to be materially different from any future results expressed or implied in such forward-looking statements.
Although LOCALIZA believes that the expectations and assumptions reflected in the forward-looking statements are reasonable based on information currently available to LOCALIZA’s management, LOCALIZA cannot guarantee future results or events. LOCALIZA expressly disclaims a duty to update any of the forward-looking statement.
Disclaimer - Forward Looking Statements
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Localiza Rent a Car S.A.1T06 – Public meeting